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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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EASCO, INC.
(Name of Subject Company)
EASCO, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
27033E103
(CUSIP Number of Class of Securities)
NORMAN E. WELLS, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
706 South State Street
Girard, Ohio 44420
330-545-4311
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of the person(s) filing statement)
With a Copy to:
KENTON J. KING, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Four Embarcadero Center
San Francisco, California 94111
Telephone: 415-984-6400
Facsimile: 415-984-2698
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Easco, Inc., a Delaware corporation (the
"Company"), and the address of its principal executive offices is 706 South
State Street, Girard, Ohio 44420. The title of the class of equity securities to
which this statement relates is the common stock, par value $.01 per share, of
the Company (the "Common Stock").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a tender offer by E Acqco Inc., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Caradon Inc., a
Delaware corporation ("Parent"), disclosed in a Tender Offer Statement on
Schedule 14D-1, dated August 3, 1999 (the "Schedule 14D-1"), to purchase all
outstanding shares of Common Stock (the "Shares"), at a price of $15.20 per
Share, net to the seller in cash, without interest (such price or any higher
price that may be paid for each share in the Offer, the "Offer Price") upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
August 3, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal
(which together constitute the "Offer"). The Offer is being made pursuant to an
Agreement and Plan of Merger, dated as of July 28, 1999 (the "Merger
Agreement"), among Parent, the Purchaser and the Company.
As set forth in the Schedule 14D-1, the principal executive offices of the
Purchaser and Parent are located at 2 Corporate Drive, Office 210, Trumbull,
Connecticut 06611.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding and
actual or potential conflict of interest between the Company or its affiliates
and: (1) its executive officers, directors or affiliates or (2) the Purchaser,
its executive officers, directors or affiliates, is described in the attached
Schedule II (which information is incorporated herein by reference) or set forth
below.
Certain contracts, agreements, arrangements or understandings between the
Company and its affiliates and certain of its directors and executive officers
are described in the Company's Proxy Statement dated March 31, 1999, relating to
its May 7, 1999 Annual Meeting of Stockholders (the "Proxy Statement"). A copy
of the applicable portions of the Proxy Statement has been filed herewith as
Exhibit 8 and is incorporated by reference into this statement.
The Merger Agreement
On July 28, 1999, Parent, the Purchaser and the Company entered into the
Merger Agreement, pursuant to which Purchaser agreed to make the Offer. The
following description of the Merger Agreement does not purport to be complete
and is qualified by reference to the text of the Merger Agreement, a copy of
which is filed as Exhibit 1 hereto and is incorporated herein by reference.
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Merger Agreement.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered pursuant to the Offer. The obligation of the Purchaser to
accept for payment and pay for Shares tendered is subject to the Minimum
Condition, which is the valid tender and non-withdrawal prior to the expiration
of the Offer of at least a majority of the Shares then outstanding on a fully
diluted basis, and to the satisfaction of the conditions described in Annex A to
the Merger Agreement. The Merger Agreement provides that the Purchaser may not
amend or waive the Minimum Condition, decrease the Offer Price or change the
form of consideration payable in the Offer, decrease the number of Shares
sought, or otherwise amend any other condition of the Offer in any manner
adverse to the holders of the Shares without the prior written consent of the
Company; provided, that if on the initial scheduled expiration date of the
Offer, all conditions of the Offer shall not have been satisfied or waived,
Purchaser may, in its sole
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discretion, extend the expiration date. The Purchaser shall, on the terms and
subject to the prior satisfaction or waiver of the conditions of the Offer and
as promptly as practicable after the expiration of the Offer, accept for payment
Shares tendered, provided that if immediately prior to the initial expiration
date of the Offer (as it may be extended) the number of Shares tendered and not
withdrawn pursuant to the Offer is less than 90 percent of the outstanding
Shares, the Purchaser may, in its sole discretion, extend the expiration date of
the Offer for a period not to exceed ten business days, notwithstanding that all
conditions to the Offer are satisfied as of such expiration date. No Shares
owned directly or indirectly by the Company will be tendered in the Offer.
Designation of Directors. The Merger Agreement provides that, promptly
after the Purchaser acquires any Shares pursuant to the Offer, and from time to
time thereafter as the Purchaser acquires Shares, Parent will be entitled to
designate such number of directors, rounded up to the next whole number, on the
board of directors of the Company (the "Board of Directors") as is equal to the
product of the total number of directors on the Board of Directors (giving
effect to the directors designated by Parent) multiplied by the percentage of
outstanding Shares then beneficially owned by the Purchaser. However, until the
Effective Time, the Board of Directors of the Company will continue to have at
least one director who was a director as of the date of the Merger Agreement and
who is neither an officer of the Company nor a designee, stockholder, affiliate
or associate of Parent (each, an "Independent Director"). If no Independent
Directors remain on the Board of Directors, the other directors will designate
one person to fill such vacancy who meets the eligibility requirements for
Independent Directors. The Company has agreed either to increase (but not above
10 persons) the size of the Board of Directors of the Company or obtain the
resignation of such number of directors as is necessary to enable the
Purchaser's designees to be elected or appointed to the Board. The Company's
obligation to appoint Parent's designees to the Board of Directors of the
Company is subject to compliance with Section 14(f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and Rule 14f-1 promulgated
thereunder. Following the election of Parent's designees, the affirmative vote
of a majority of the Independent Directors shall be required to amend or
terminate the Merger Agreement on behalf of the Company, to exercise or waive
any of the Company's rights, benefits or remedies thereunder if such exercise or
waiver materially and adversely affects holders of Shares other than Parent or
the Purchaser, to extend the time for the performance of the Purchaser's
obligations thereunder or to take any other action by the Company under the
Merger Agreement required to be taken by the Board of Directors, if such action
materially and adversely affects stockholders other than Parent or the
Purchaser.
The Merger. The Merger Agreement provides that at the Effective Time the
Purchaser will be merged with and into the Company, and the Company will
continue as the Surviving Corporation. The Effective Time of the Merger will be
the time of filing with the Secretary of State of the State of Delaware of a
Certificate of Merger, or at such later time as may be specified in the
Certificate of Merger. The parties expect to file the Certificate of Merger as
soon as practicable following the closing of the Merger, which will take place
on the second business day after the conditions to the parties' obligation to
effect the Merger have been satisfied or waived, unless another date is
otherwise agreed.
At the Effective Time, each Share that is issued and outstanding (other
than Shares held (1) in the treasury of the Company or by Parent or any direct
or indirect wholly owned subsidiary of Parent immediately before the Effective
Time or (2) by stockholders, if any, who are entitled and properly exercise
appraisal rights under the General Corporation Law of the State of Delaware (the
"DGCL")) will be converted into the right to receive the Offer Price. Each share
of common stock of the Purchaser issued and outstanding immediately prior to the
Effective Time will be converted into one share of common stock of the Surviving
Corporation.
The Certificate of Incorporation of the Company, as in effect immediately
before the Effective Time, will be the Certificate of Incorporation of the
Surviving Corporation and will be amended to read as set forth in Exhibit A to
the Merger Agreement. The Bylaws of the Purchaser will be the Bylaws of the
Surviving Corporation. The directors of the Purchaser immediately before the
Effective Time will be the initial directors of the Surviving Corporation, and
the officers of the Company immediately before the Effective Time will be the
initial officers of the Surviving Corporation.
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Conditions to the Merger. The respective obligations of Parent and the
Purchaser, on the one hand, and the Company, on the other hand, to effect the
Merger are subject to the satisfaction on or prior to the Closing Date (as
defined in the Merger Agreement) of each of the following conditions:
(1) the Purchaser shall have made or caused to be made the Offer and
shall have purchased or caused to be purchased Shares pursuant to the
Offer, provided that such condition shall be deemed to have been satisfied
if the Purchaser fails to accept for payment or pay for Shares pursuant to
the Offer in violation of the terms of the Offer or the Merger Agreement;
(2) the Merger Agreement shall have been approved and adopted by the
requisite vote of the holders of Shares, if required by the DGCL; and
(3) no statute, rule or regulation shall have been enacted or
promulgated, no final, nonappealable judgment, writ, decree, order or
injunction shall have been entered or enforced, and no other legally
binding, final and nonappealable action shall have been taken by any
domestic or foreign government, governmental, administrative or regulatory
authority or agency or by any court or tribunal of competent jurisdiction,
domestic or foreign, that has the effect of making illegal, restraining,
restricting or precluding consummation of the Merger.
Recommendation. The Company represents in the Merger Agreement that the
Board of Directors of the Company has (1) duly approved and adopted the Merger
Agreement and the transactions contemplated by the Merger Agreement, including
the Merger and the Offer (the "Transactions"), (2) determined that the
Transactions are fair to and in the best interests of the stockholders of the
Company, and (3) resolved to recommend that the Company's stockholders accept
the Offer and approve and adopt the Merger Agreement. The Company has agreed to
file with the Securities and Exchange Commission (the "SEC") a Solicitation/
Recommendation Statement on Schedule 14D-9 containing such recommendations and
to mail such Schedule 14D-9 to the stockholders of the Company at the time the
Purchaser's Offer to Purchase and related documents are first mailed to the
stockholders.
Stock Options. At or immediately prior to the Effective Time, each
outstanding option to purchase Shares (the "Options") issued under the Company's
Stock Option Plan dated December 17, 1993, as amended, and any other stock-based
incentive plan or arrangement of the Company (collectively, the "Stock Plans")
will be canceled and, in consideration of such cancellation, the holders of such
Options will receive for each Share subject to such Options a cash payment
(subject to withholding taxes) equal to the product of (1) the excess, if any,
of the Offer Price over the per Share exercise price of the applicable Option
and (2) the number of Shares subject to such Option which have not theretofore
been exercised. The Company will take all actions necessary to (1) cause the
Stock Plans to terminate as of the Effective Time, (2) delete as of the
Effective Time the provision in any other benefit plan of the Company providing
for the issuance, transfer or grant of capital stock of the Company, and (3)
ensure that following the Effective Time no holder of Options or any participant
in any Stock Plan or other Company benefit plan shall have any right thereunder
to acquire any capital stock of the Company or the Surviving Corporation.
Interim Operations; Covenants. Pursuant to the Merger Agreement, the
Company has agreed that, except (1) as expressly contemplated by the Merger
Agreement, in compliance with applicable laws, (2) for the payment of remaining
amounts due to American Industrial Partners Management Company, Inc. pursuant to
a management services agreement, or (3) as agreed to in writing by Parent prior
to the time the designees of the Purchaser constitute a majority of the Board of
Directors of the Company (the "Appointment Date"), the business of the Company
will be conducted only in the ordinary and usual course consistent with past
practice and in compliance with applicable laws, and each of the Company and its
subsidiaries will use its reasonable best efforts to preserve and protect its
business organization, properties and assets intact and maintain its existing
relations with customers, suppliers, employees, creditors and business partners
to the end that its goodwill and business shall be unimpaired in any material
respect as of the Effective Time.
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The Company has also agreed that it will not, directly or indirectly:
(1) issue, sell, transfer or pledge or agree to sell, transfer or
pledge any capital stock of the Company or any of its subsidiaries
beneficially owned by the Company, except upon the exercise of Options or
other rights to purchase Shares pursuant to the Stock Plans;
(2) amend its Certificate of Incorporation or Bylaws or any similar
organizational documents of any subsidiary; or
(3) split, combine or reclassify the outstanding Shares.
The Company has also agreed that neither it nor any of its subsidiaries
will:
(1) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock except
for a cash dividend of $.01 per Share payable on September 30, 1999 to
recordholders as of September 15, 1999;
(2) issue, sell, pledge, dispose of or encumber any additional shares
of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of capital stock of any class of the Company or its subsidiaries, other
than Shares reserved for issuance on the date of the Merger Agreement
pursuant to the exercise of Options outstanding on such date, or enter into
any agreement or understanding with respect to the voting of any of the
Company's capital stock or the capital stock of any subsidiary;
(3) acquire, transfer, lease, license, sell, mortgage, pledge, dispose
of, or encumber any assets, other than the sale of inventory in the
ordinary and usual course of business and consistent with past practice, or
incur or modify any indebtedness, except for additional borrowings under
existing lines of credit in the ordinary and usual course of business and
consistent with past practice and in an amount not to exceed $100,000, or
other liability, except in the usual course of business and consistent with
past practice;
(4) redeem, purchase or otherwise acquire, directly or indirectly, any
of its capital stock;
(5) make or authorize any capital expenditure in excess of $100,000
individually or $400,000 in the aggregate;
(6) make any change in the compensation payable or to become payable
by the Company to any of its (or a subsidiary's) officers, directors,
employees, agents or consultants (other than general increases in wages to
employees who are not officers or directors or affiliates in the ordinary
course consistent with past practice) or to persons providing management,
consulting or similar services;
(7) enter into or amend any employment, severance, consulting,
termination or other agreement or employee benefit Plan (as defined below)
or other Plan or make loans to officers, directors, employees, affiliates,
agents or consultants;
(8) pay or make any accrual or arrangement for payment of any pension,
retirement allowance or other employee benefit pursuant to any existing
plan, agreement or arrangement to any officer, director, employee or
affiliate or pay or agree to pay or make any accrual or arrangement for
payment to any officers, directors, employees or affiliate of the Company
of any amount relating to unused vacation or sick days, except payments and
accruals made in the ordinary course consistent with past practice or as
required under the terms of any employment, bonus, deferred compensation,
incentive compensation, stock purchase, stock option, stock appreciation
right or other stock-based incentive, severance, change-in-control,
termination or similar pay, hospitalization or other medical, disability,
life or other insurance, supplemental unemployment benefits, profitsharing,
pension, or retirement plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by the
Company or any of its subsidiaries for the benefit of any current or former
employee or director of the Company or any of its subsidiaries (the
"Plans");
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(9) adopt or pay, grant, issue, accelerate or accrue salary or other
payments or benefits pursuant to any pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right or other stock-based incentive, group
insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or any employment or consulting agreement with or
for the benefit of any director, officer, employee, agent or consultant
whether past or present except for payments and accruals made in the
ordinary course of business and consistent with past practice or as
required under the terms of the Plans;
(10) amend in any material respect any such existing Plan, agreement
or arrangement in a manner inconsistent with the foregoing;
(11) modify, amend or terminate any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound (the "Company
Agreements"), enter into any Company Agreement other than in the ordinary
course of business and consistent with past practice, extend the term or
renew any Company Agreements, or waive, release or assign any rights or
claims, except for the waiver, release or assignment of immaterial rights
or claims in the ordinary course of business and consistent with past
practice, or waive or release any rights under any standstill,
confidentiality or similar agreements;
(12) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be cancelled or terminated or the coverages thereunder to
be reduced or deductibles increased;
(13) incur or assume any long-term debt, or, except as provided in the
provision described in clause (3) above, incur or assume any short-term
indebtedness or increase or modify the terms of any indebtedness;
(14) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person;
(15) make any loans, advances or capital contributions to, or
investments in, any other person, except the extension of customary trade
credit in the ordinary course of business and consistent with past
practice;
(16) enter into any material commitment or transaction (including, but
not limited to, any borrowing, capital expenditure or purchase, sale or
lease of assets or real estate);
(17) mortgage or pledge any of its assets of record or suffer to exist
any lien or encumbrance thereon;
(18) change any of the accounting methods used by it unless required
by generally accepted accounting principles and after consultation with
Parent;
(19) make any tax election or change any tax election already made,
adopt any tax accounting method, change any tax accounting method unless
required by applicable law, enter into any closing agreement, settle any
tax claim or assessment or consent to any tax claim or assessment or any
waiver of the statute of limitations for any such claim or assessment;
(20) revalue any of its assets;
(21) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction of any such claims, liabilities
or obligations, in the ordinary course of business and consistent with past
practice, or claims, liabilities or obligations reflected or reserved
against in, or contemplated by, the Company's March 31, 1999 balance sheet,
as filed with the SEC (the "Recent Balance Sheet"), or the notes thereto;
(22) settle or compromise any suit, action or claim relating to the
Transactions;
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(23) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Merger);
(24) acquire (by merger or acquisition of stock or assets) any
corporation, partnership or other entity, or division thereof, or equity
interest therein;
(25) take, or agree to commit to take, any action that would or is
reasonably likely to result in any of the conditions to the Merger
described above under "-- The Merger" or any of the conditions to the Offer
set forth in Annex A to the Merger Agreement not being satisfied, or would
make any representation or warranty of the Company contained in the Merger
Agreement inaccurate in any respect at, or as of any time prior to, the
Effective Time, or that would materially impair the ability of the Company
to consummate the Merger in accordance with the terms of the Merger
Agreement or materially delay such consummation; or
(26) enter into an agreement, contract, commitment or arrangement to
do any of the foregoing, or authorize, recommend, propose or announce an
intention to do any of the foregoing.
Company Stockholder Meeting. If required by applicable law, the Company has
agreed to (1) hold a special meeting of its stockholders (the "Special Meeting")
as soon as practicable following acceptance for payment of Shares pursuant to
the Offer for the purpose of approving the Merger and adopting the Merger
Agreement, (2) prepare and file with the SEC a preliminary proxy statement or
information statement relating to the Merger Agreement, and (3) use its best
efforts to obtain the necessary approvals of the Merger and the Merger Agreement
by its stockholders. Parent and the Purchaser have agreed to vote all Shares
owned by them in favor of approval of the Merger Agreement. However, if Parent
or the Purchaser acquire at least 90 percent of the outstanding Shares, the
parties will, at the request of Parent, cause the Merger to become effective as
soon as practicable after such acquisition without a meeting of stockholders of
the Company in accordance with the DGCL.
No Solicitation. In the Merger Agreement, the Company agreed to cease and
cause to be terminated any existing activities, discussions or negotiations, if
any, with any parties conducted prior to the date of the Merger Agreement with
respect to any Takeover Proposal. "Takeover Proposal" means any tender or
exchange offer involving the Company, any proposal for a merger, consolidation
or other business combination involving the Company, any proposal or offer to
acquire in any manner greater than a 20 percent equity interest in, or greater
than a 20 percent portion of the business or assets of, the Company, any
proposal or offer with respect to any recapitalization or restructuring with
respect to the Company or any proposal or offer with respect to any other
transaction similar to any of the foregoing with respect to the Company, other
than pursuant to the Transactions.
In addition, the Company will not, will cause its officers and directors
not to, and will use its reasonable best efforts to ensure that its employees
(other than its officers or directors), investment bankers, attorneys,
accountants and other agents and representatives do not, directly or indirectly:
(1) initiate, solicit or encourage, or take any action to facilitate the making
of, any offer or proposal which constitutes or is reasonably likely to lead to
any Takeover Proposal, (2) enter into any agreement with respect to any Takeover
Proposal, or (3) engage in any negotiations or discussions with, or provide any
information or data to, any person (other than Parent or any of its affiliates
or representatives) relating to any Takeover Proposal. However, the Company or
its Board of Directors is not prohibited from (1) taking and disclosing to the
Company's stockholders a position with respect to a tender or exchange offer by
a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange
Act or (2) making such other disclosure to the Company's stockholders as the
Board of Directors of the Company determines in good faith after consulting with
its counsel and determining that the failure to make such disclosure would
constitute a breach of the fiduciary duties of the Board of Directors of the
Company under applicable law.
Notwithstanding the foregoing, prior to the acceptance of Shares pursuant
to the Offer, the Company may, in response to an unsolicited written proposal
with respect to a Takeover Proposal from a financially capable third party that
contains no financing condition, furnish information to, and negotiate, explore
or
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otherwise engage in substantive discussions with, such third party, in each case
only if (1) the Board of Directors of the Company determines in good faith by a
majority vote, after consultation with its financial advisors and after receipt
of advice of the outside legal counsel of the Company, that failing to take such
action would constitute a breach of the fiduciary duties of the Board, and (2)
the Company obtains a confidentiality and standstill agreement no less favorable
to the Company than the Confidentiality Agreement entered into with Parent
described below under "-- Confidentiality Agreement." The Company agreed to
advise promptly Parent in writing of the receipt of any inquiries or proposals
relating to a Takeover Proposal, indicating the name of the person making such
inquiry or proposal, the terms and conditions thereof and any actions taken
pursuant to the foregoing sentence. The Company will also promptly furnish to
Parent a copy of any written inquiry or proposal relating to a Takeover
Proposal.
Indemnification and Insurance. Pursuant to the Merger Agreement, in the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including any such
claim, action, suit, proceeding or investigation by or in the right of the
Company or any of its subsidiaries, in which any of the present or former
officers or directors (the "Indemnified Parties") of the Company is, or is
threatened to be, made a party by reason of the fact that he is or was, prior to
the Effective Time, a director, officer, employee or agent of the Company or any
of its subsidiaries or is or was, prior to the Effective Time, serving as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise at the request of the Company or any of its
subsidiaries, whether such claim arises before or after the Effective Time, the
Company and, after the Effective Time, the Surviving Corporation, jointly and
severally, shall indemnify and hold harmless, as and to the same extent and on
the same terms and conditions provided for in the Company's Certificate of
Incorporation, Bylaws and certain indemnification agreements entered into
between the Company and the members of the special committee of the Board of
Directors formed in May 1999 in effect on the date of the Merger Agreement (to
the extent consistent with applicable laws) each such Indemnified Party against
any losses, claims, damages, liabilities, costs, expenses (including reasonable
attorneys' fees and expenses), judgments, fines and amounts paid in settlement
in connection with any such claim, action, suit proceeding or investigation.
After the Effective Time, Parent shall guarantee the performance of the
Surviving Corporation with respect to its obligations set forth in the first
sentence of this paragraph. For a period of six years after the Effective Time,
the Surviving Corporation will keep in effect in its Certificate of
Incorporation or Bylaws a provision providing for the indemnification of the
Indemnified Parties to the extent required under the obligation described in the
first sentence of this paragraph.
The Merger Agreement also provides that either Parent or the Surviving
Corporation will maintain the Company's existing officers' and directors'
liability insurance ("D&O Insurance") for a period of not less than six years
after the Effective Time; provided that Parent may substitute therefor policies
of substantially equivalent coverage and amounts containing terms no less
favorable to such former directors or officers; provided, further, if the
existing D&O Insurance expires, is terminated or canceled during such period,
Parent or the Surviving Corporation will use all reasonable efforts to obtain
substantially similar D&O Insurance; provided, further, Parent shall not be
required to pay aggregate premiums for such insurance in excess of 200% of the
average of the aggregate premiums paid by the Company in 1997, 1998 and 1999
(through the date of the Merger Agreement) on an annualized basis for such
purpose (the "Average Premium"); and provided, further, that if Parent or the
Surviving Corporation is unable to obtain the amount of insurance required by
the provision described in this sentence for such aggregate premium, Parent or
the Surviving Corporation shall obtain as much insurance as can be obtained for
an annual premium not in excess of 200% of the Average Premium.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company as to, among other things, corporate existence and good standing,
organization, capitalization, corporate authorization, financial statements,
public filings, conduct of business, employee benefit plans, intellectual
property, employment matters, compliance with applicable laws, tax matters,
litigation, environmental matters, material contracts, customers and suppliers,
brokers' fees, real property and assets, vote required to approve the Merger
Agreement, undisclosed liabilities, information in the Proxy Statement and the
absence of any material adverse effect on the Company since January 1, 1999. In
addition, Parent and the Purchaser represented as to, among other things,
corporate
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existence and good standing, corporate authorization, consents and approvals and
sufficiency of funds available to finance and consummate the Transactions. None
of the parties' respective representations and warranties will survive after the
Effective Time.
Termination. The Merger Agreement may be terminated and the Transactions
may be abandoned at any time before the Effective Time, whether before or after
stockholder approval:
(1) By mutual written consent of Parent and the Board of Directors of
the Company;
(2) By Parent if the Offer shall have expired or been terminated
without any Shares being purchased thereunder by the Purchaser as a result
of the failure to meet the conditions set forth in Annex A of the Merger
Agreement;
(3) By either Parent or the Company if any court, arbitral tribunal,
administrative agency or commission or other governmental or other
regulatory authority or agency shall have issued an order, decree or ruling
or taken any other action (which order, decree or ruling the parties to the
Merger Agreement shall use their reasonable best efforts to lift), in each
case permanently restraining, enjoining or otherwise prohibiting the
Transactions;
(4) By Parent if, without any material breach by Parent or the
Purchaser of its obligations under the Merger Agreement, the purchase of
Shares pursuant to the Offer shall not have occurred on or before October
31, 1999;
(5) By the Company if, without any material breach by the Company of
its obligations under the Merger Agreement, the purchase of Shares pursuant
to the Offer shall not have occurred on or before October 31, 1999;
(6) By the Company (a) if, prior to the purchase of Shares pursuant to
the Offer, there shall be a material breach of any of Parent or the
Purchaser's representations, warranties or covenants in the Merger
Agreement, which breach cannot be or has not been cured within ten days of
the receipt of written notice thereof or (b) to allow the Company to enter
into a definitive agreement to consummate a Superior Proposal (as defined
below); provided, that it has complied with all provisions thereof; and
provided further, that it furnishes a copy of the Superior Proposal,
containing all of the terms and conditions thereof, to Parent at least two
calendar days prior to terminating this Agreement pursuant to this clause;
(7) By Parent if, prior to the purchase of Shares pursuant to the
Offer, the Company shall have breached in any material respect (without
reference to any materiality qualification contained therein) any
representation, warranty or covenant or other agreement contained in the
Merger Agreement, which breach (a) would give rise to the failure of a
condition set forth in paragraph (f) or (g) of Annex A of the Merger
Agreement (which pertain to the representations and warranties of the
Company set forth in the Merger Agreement being true and correct and the
Company's performance of any obligation, or compliance with any agreement
or covenant to be performed or complied with by it, under the Merger
Agreement); and (b) cannot be or has not been cured within ten days of the
receipt of written notice thereof;
(8) By Parent if (a) the Board of Directors of the Company shall
withdraw, modify, or change its recommendation or approval in respect of
the Merger Agreement or the Offer in a manner adverse to the Purchaser or
(b) the Board of Directors of the Company shall have recommended any
proposal other than by Parent or the Purchaser in respect of a Takeover
Proposal; or
(9) By Parent if (a) the Company has exercised a right regarding a
Takeover Proposal described under the second paragraph of "-- No
Solicitation" above and, directly or indirectly (including through its
representatives), shall continue discussions or negotiations with a third
party for more than 20 business days after the date of receipt of such
Takeover Proposal or (b) a Takeover Proposal shall have been publicly
disclosed, commenced, proposed or communicated to the Company other than by
Parent or the Purchaser, and the Board of Directors of the Company shall
have not affirmatively rejected such
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<PAGE> 10
Takeover Proposal within 20 business days after the earlier of receipt or
the public disclosure of such Takeover Proposal.
A "Superior Proposal" is a bona fide written Takeover Proposal submitted by
any person other than Parent or the Purchaser on an unsolicited basis that the
Board of Directors of the Company determines in good faith, based on the advice
of its financial advisor, represents a transaction that is more financially
favorable to the stockholders of the Company than the Offer and the Merger.
Termination Fee and Expenses. If the Merger Agreement is terminated as
described above, written notice thereof shall forthwith be given to the other
party or parties specifying the provision of the Merger Agreement pursuant to
which such termination is made, the Merger Agreement will become null and void,
and there shall be no liability on the part of Parent, the Purchaser or the
Company, except as set forth in Section 6.5 of the Merger Agreement (pertaining
to confidentiality), the provisions described in this paragraph and Section 9.3
of the Merger Agreement (pertaining to expenses), and nothing in the Merger
Agreement shall relieve any party from liability for any material breach of the
Merger Agreement. If (1) the Company terminates the Merger Agreement pursuant to
the provision described in clause (6)(b) of the preceding paragraph, (2) Parent
terminates the Merger Agreement pursuant to the provision described in clause
(8) of the preceding paragraph, or (3) (A) Parent terminates the Merger
Agreement pursuant to the provision described in clause (2) (because the Minimum
Condition has not been satisfied), (7) (and the breach giving rise to such right
to terminate shall have been willful or in bad faith) or (9), each of the
preceding paragraph, and (B) in each case, the Company has consummated or
entered into a definitive agreement with respect to a Takeover Proposal within
twelve months following the date of such termination, then the Company shall pay
to Parent, (A) in the case of clause (1) or (2) above, at the time of such
termination, and, in the case of clause (3) above, upon the Company's
consummation of or entry into a definitive agreement regarding such Takeover
Proposal, an amount equal to $6,500,000 (which, in the case of a termination
pursuant to the provision described in clause (7) of the preceding paragraph,
shall constitute liquidated damages with respect to any breach giving rise to a
right to terminate under the Merger Agreement) plus an amount (not to exceed
$1,500,000) equal to Parent's and the Purchaser's actual out-of-pocket expenses
attributable to the Offer, the Merger, the Merger Agreement and the consummation
of the Transactions.
Fees and Expenses. Except as set forth in the provision described in the
preceding paragraph, fees, costs and expenses incurred in connection with the
Merger Agreement and the Transactions shall be paid by the party incurring such
fees, costs and expenses.
Amendments and Modifications. Subject to applicable law, the Merger
Agreement may be amended, modified or supplemented by a written agreement of
Parent, the Purchaser and the Company, provided, that after the approval of the
Merger Agreement by the stockholders of the Company, no such amendment,
modification or supplement shall reduce or change the consideration to be
received by the Company's stockholders in the Merger.
Stockholder Agreements
As a condition to Parent's willingness to enter into the Merger Agreement,
Parent and the Purchaser entered into stockholder agreements dated as of July
28, 1999 with each of American Industrial Partners Capital Fund, L.P. ("AIP Fund
I"), which holds 4,239,470 Shares, and each of the directors and executive
officers of the Company who hold Shares collectively hold 226,800 Shares.
Pursuant to its Stockholder Agreement, filed as Exhibit 2 hereto and
incorporated herein by reference, AIP Fund I has agreed, among other things, to
tender the Shares held by it in the Offer and granted the Purchaser an
irrevocable proxy to vote such Shares in connection with any meeting of the
stockholders of the Company in favor of the Merger and against any action that
would interfere with the Merger, including any proposal by a third party to
acquire the Company. Pursuant to his respective Stockholder Agreement, a form of
which is filed as Exhibit 3 hereto and incorporated herein by reference, each of
the referenced directors and executive officers has agreed, among other things,
to tender the Shares held by him in the Offer. The foregoing obligations of AIP
Fund I and the referenced directors and executive officers terminate upon the
termination of the Merger Agreement,
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<PAGE> 11
including pursuant to the provisions relating to fiduciary duties exercised by
the Board of Directors of the Company.
Confidentiality Agreement
The following summary of certain provisions of the Confidentiality
Agreement, dated June 10, 1999 by and between the Company and Parent (the
"Confidentiality Agreement"), does not purport to be complete and is qualified
by reference to the Confidentiality Agreement filed as Exhibit 5 hereto and
incorporated herein by reference. The Confidentiality Agreement contains
customary provisions pursuant to which, among other matters, Parent has agreed
to keep confidential all nonpublic, confidential or proprietary information
furnished to Parent relating to the Company, subject to certain exceptions
("Information"), and to use the Information solely in connection with the
evaluation of a possible business combination transaction between the parties.
Services Agreement
Pursuant to a management services agreement (the "Services Agreement"),
filed as Exhibit 6 hereto and incorporated herein by reference, American
Industrial Partners Management Company, Inc. and its affiliates ("AIPM") provide
certain financial and other advisory services to Easco Corporation, the wholly
owned operating subsidiary of the Company ("Easco"). AIPM is the indirect
general partner of AIP Fund I. Under the Services Agreement, Easco reimburses
AIPM for its out-of-pocket expenses and pays AIPM an advisory fee, which for
1998 was $900,000. The Services Agreement expires on April 12, 2000 with
automatic one-year renewals thereafter unless terminated by either party upon 90
days prior written notice. Pursuant to the Merger Agreement, the Company prior
to the effective time will pay $675,000 to AIPM, representing payment in full of
all remaining unaccrued amounts due to AIPM through the end of the term of the
Services Agreement.
Indemnification Agreements with Members of the Special Committee of the Board
of Directors
Pursuant to indemnification agreements, a form of which is filed as Exhibit
7 hereto and incorporated herein by reference, the Company has provided
contractual assurances to Raymond E. Ross and Gene E. Little (the
"Indemnitees"), as directors, that the indemnity protection promised by the
Certificate of Incorporation will be available to the Indemnitees regardless of,
among other things, any amendment to or revocation of the Certificate of
Incorporation or any change in the composition of the Board of Directors or an
acquisition transaction relating to the Company. The Company has agreed to
indemnify the Indemnitees against any and all expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement of any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any inquiry, hearing or investigation related to any
event or occurrence in connection to the fact that Indemnitee is or was a
director or fiduciary of the Company.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors
The Board of Directors has unanimously approved and adopted the Merger
Agreement and the transactions contemplated thereby and unanimously recommends
that all holders of Shares tender their Shares pursuant to the Offer.
(b) Background; Reasons for the Recommendation
From time to time, the Board of Directors and management have reviewed the
current and future state of the aluminum extrusion industry, the Company's
strategic position in that industry and the Company's near-and long-term
prospects. In connection with these periodic reviews, the Board of Directors had
come to believe that, since the acquisition of the Company by American
Industrial Partners Capital Fund, L.P. ("AIP Fund I") in 1992, the Company's
subsequent initial public offering in 1995 and following the initiatives led by
current management of the Company, operating improvements that could be achieved
with respect to the
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<PAGE> 12
Company in the near-term were largely complete, the current capital structure of
the Company was no longer efficient and that further strategic opportunities for
the Company would require a three- to five-year time horizon to implement and
achieve. However, the Board of Directors recognized that any long-term strategy
regarding the Company needed to be considered in view of the relatively short
remaining investment horizon of AIP Fund I, which remained the Company's largest
shareholder, which, subject to extension, was scheduled to wind-down by 2001.
These considerations suggested to the Board of Directors that it might now be
appropriate to consider a sale of the Company. At the same time, American
Industrial Partners Capital Fund II, L.P. ("AIP Fund II"), a private equity fund
affiliated with AIP Fund I, considered itself a logical potential participant in
any sales process involving the Company, because of its familiarity with the
business and current management of the Company, in which it had great
confidence, its more appropriate investment horizon and its perception of the
opportunity to create long-term value through strategic initiatives over a
period of years.
In a meeting of the Board of Directors of the Company held on April 30,
1999, representatives of AIP Fund II made a proposal to acquire all of the
outstanding equity interests in the Company, including all of the Shares owned
by AIP Fund I, for $11.75 per Share in cash. To evaluate AIP Fund II's offer,
the Board of Directors of the Company formed a special committee comprised of
two independent directors, Raymond E. Ross and Gene E. Little. The Board of
Directors authorized the special committee to retain its own financial and legal
advisors, to evaluate the AIP Fund II proposal, to solicit proposals from other
potential buyers for the Company and to negotiate the terms of any potential
transaction involving the Company. The special committee later retained
Wasserstein Perella & Co., Inc. ("Wasserstein") as its financial advisor and
Jones, Day, Reavis & Pogue ("Jones Day") as its legal counsel to assist the
special committee in its evaluation and deliberations.
On May 21, 1999, representatives of Wasserstein met with members of the
Company's senior management to discuss the Company's operations, business
strategy and other matters. During the weeks of May 24 and May 31,
representatives of Wasserstein conducted due diligence and reviewed business and
financial materials prepared by the Company.
On May 26 and again on June 2, representatives of Wasserstein and Jones Day
met with representatives of AIP Fund II to discuss in detail the terms of AIP
Fund II's proposal. In the course of these discussions, AIP Fund II declined to
improve its proposal to a level that Wasserstein was willing to recommend to the
special committee. After these discussions, the special committee formally
rejected the proposal and instructed Wasserstein, on behalf of the special
committee, to actively solicit from other parties indications of interest in
acquiring the Company.
Representatives of Wasserstein prepared a confidential offering memorandum
regarding the Company and approached twenty-two prospective buyers, comprised of
fourteen strategic and eight financial buyers, including Caradon plc, concerning
their interest in a potential acquisition of the Company. On June 10, 1999,
Parent and the Company entered into the Confidentiality Agreement, pursuant to
which Caradon plc and Parent agreed to treat as confidential certain information
provided to it by or on behalf of the Company, and Wasserstein furnished to
Caradon plc the confidential offering memorandum. In response to Wasserstein's
solicitation of interest and the confidential offering memorandum, in late June
the Company received indications of interest from seven parties, among which
four parties, including Caradon plc, were invited to participate in a second
round of bidding.
On June 30, 1999, the Company issued a press release stating that it had
engaged Wasserstein to assist the Company explore strategic alternatives to
maximize shareholder value.
During the week of June 28, 1999, senior management of the Company gave
presentations to the second round bidders and provided them access to a data
room. Representatives of Caradon plc and Parent received a management
presentation on June 30 and in the first two weeks of July engaged in a series
of plant tours, meetings and telephone conversations with senior and operating
management of the Company to further investigate the business, strategies and
prospects of the Company. Caradon plc and Parent simultaneously conducted an
independent due diligence review of the Company.
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<PAGE> 13
On July 6, 1999, Wasserstein distributed to the four second round bidders a
procedures letter, including a draft merger agreement, describing procedures for
submitting a formal bid. Between July 15 and July 19, the Company received four
bids in response to the procedures letter. On July 16, AIP Fund II, whose
proposal to acquire the Company had expired on May 31, 1999, advised the Company
that it would not pursue an offer for the Company at a price of $14 per Share or
greater and that if there were bids in excess of that amount, it would not
participate in the process as a potential buyer. Because a number of the bids
exceeded $14 per Share, the special committee determined that it would be in the
best interest of the Company and its stockholders for the full Board of
Directors to consider the bids that had been submitted and to obtain the benefit
of the views, experience and expertise of the members of the Board of Directors
associated with AIP Fund II in connection with a final phase of negotiations
with the second round bidders. Accordingly, upon motion made by the members of
the special committee, the Board of Directors determined to dissolve the special
committee. The Board of Directors then retained Wasserstein as the Company's
financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP as its special
counsel in connection with the proposed sale of the Company.
Caradon submitted its written proposal on July 19, including a markup of
the draft merger agreement, providing for a one-step merger, subject to
stockholder approval, in which each outstanding Share would be converted into
the right to receive cash, and proposed stockholder agreements providing for
grant of a proxy by certain stockholders of the Company, including AIP Fund I.
On July 21, 1999, a representative of Wasserstein, on behalf of the
Company, telephoned a representative of the financial advisor for Caradon plc
and Parent, advised him that the Company preferred Parent's proposal to be
structured as a tender offer with a back-end merger, and stated that the Company
was prepared to work with Caradon plc and Parent toward entering into a
definitive agreement and to recommend Parent's proposal to the Board of
Directors, subject to Parent's improving its offer and the satisfactory
negotiation of definitive documentation. Caradon plc and Parent indicated a
willingness to improve its offer on this basis.
From July 19 to July 23, representatives of Wasserstein and Skadden, Arps
held a number of telephone conversations with representatives of the other
bidders. The offers of all three bidders were lower than Caradon plc and
Parent's revised level of interest. In addition, all three bidders' offers were
subject to financing contingencies. The financing contingency applicable to one
offer appeared to be capable of being removed prior to entry into a definitive
agreement. One other offer was supported by a financing commitment letter, but
that offer was conditioned on the consummation of another transaction. The third
offer was not accompanied by a commitment letter, and none was ultimately
proffered.
On July 24, the Company agreed to enter into exclusive negotiations with
Caradon plc and Parent for a four-day period in order to induce Parent to
improve its offer. From July 24 to July 26, representatives of Caradon plc,
Parent and the Company met at the offices of Skadden, Arps in Chicago to
negotiate a definitive agreement and resolve several open issues, including
whether there would be any post-closing survival of representations and
warranties and related indemnification, the amount of the termination fee, the
circumstances under which the termination fee would become payable and the
circumstances under which the Board of Directors could enter into discussions
with another party regarding a Takeover Proposal.
At a meeting held on July 27, 1999, the Board of Directors unanimously
approved the Merger Agreement, the Offer and the Merger and deter mined that the
terms of the Offer and the Merger are fair to and in the best interests of the
holders of Shares, and unanimously recommended that the Company's stockholders
accept the Offer and tender their Shares pursuant to the Offer.
In reaching its conclusions and the recommendation described above, the
Board of Directors considered a number of factors, including without limitation
the following:
(1) the familiarity of the Board of Directors with the business,
results of operations, properties and financial condition of the Company
and the nature of the industry in which the Company operates, based, in
part, upon presentations by management of the Company, including the
prospects if the Company were to remain independent;
(2) the Company's competitive position and current trends in the
industry in which it operates;
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(3) the presentation of Wasserstein at the July 27, 1999 meeting of
the Board of Directors and the opinion of Wasserstein that, based upon and
subject to the assumptions, limited procedures and other limitations set
forth therein, the Offer Price to be received by the stockholders of the
Company pursuant to the Transaction is fair to such stockholders (other
than Shares held by Parent or the Purchaser and their respective
subsidiaries and affiliates) from a financial point of view. The opinion,
dated July 27, 1999, is attached as Schedule I hereto and is incorporated
herein by reference. Holders of Shares are encouraged to read the opinion
in its entirety;
(4) the terms of the Merger Agreement and Stockholder Agreements,
including the proposed structure of the Offer and Merger involving a cash
tender offer for all outstanding Shares to be followed by a merger for the
same consideration, thereby enabling all stockholders of the Company to
obtain cash for their Shares concurrently at the earliest possible time;
(5) the results of the process undertaken by an independent financial
advisor initially engaged by a special committee of independent directors
not affiliated with AIP Fund I to identify and solicit proposals from third
parties to enter into a transaction with Company;
(6) the offers received from other parties, including those with
financial contingencies in comparison with the Company's receipt of a fully
financed, binding proposal from Parent;
(7) the offer price of $15.20 per Share represented a premium of
approximately 84% over the closing sales price for the Shares as quoted on
the Nasdaq National Market on June 28, 1999, one trading day prior to the
Company's public announcement that it had engaged Wasserstein to explore
strategic alternatives to maximize shareholder value;
(8) the fact that AIP Fund I, as holder of approximately 44% of the
Shares (excluding Shares held directly or indirectly by the Company), was
prepared to tender its Shares and vote its Shares in favor of the Merger,
if needed, and that AIP Fund I's representatives on the Board of Directors
supported the Offer and the Merger and endorsed the terms of the Merger
Agreement and AIP Fund I's Stockholder Agreement, which provided that AIP
Fund I would receive the same consideration per Share with the same timing
of receipt as would all other holders of Shares, thereby ensuring that the
public stockholders would participate in any control premium realized in
connection with the Offer and the Merger;
(9) the termination provisions of the Merger Agreement, the
incorporation of which was a condition of the Parent's proposal, providing
that the Parent could be entitled to a termination fee of $6.5 million upon
the termination of the Merger Agreement under certain circumstances,
including as a result of the withdrawal of the recommendation of the Board
of Directors with respect to the Offer and the Merger;
(10) the other terms and conditions of the Merger Agreement, including
(a) the fact that the Offer and the Merger are not subject to a financing
contingency, (b) that under certain circumstances, the Company may respond
to an unsolicited written Takeover Proposal that contains no financing
condition from a financially capable third party, (c) that under certain
circumstances, the Company may terminate the Merger Agreement in order to
enter into a definitive agreement to consummate a Superior Proposal and (d)
the financial and other terms of the Offer, the Merger and the Merger
Agreement;
(11) the terms of the Stockholder Agreements, which provide that they
may be terminated by termination of the Merger Agreement, whether in
accordance with its terms by a party thereto or by mutual agreement of the
parties thereto;
(12) the representation and warranty of the Parent and the Purchaser
that they have sufficient funds available to them to consummate the Offer
and the Merger and the commitment the Company received from Caradon plc
that it will cause Parent to fulfill its obligations under the Merger
Agreement, including providing sufficient capital to Parent to allow for
the timely consummation of the Offer and the Merger; and
(13) the availability of appraisal rights under Section 262 of the
DGCL for Dissenting Shares.
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<PAGE> 15
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Wasserstein was engaged by the special committee of the Board of Directors
pursuant to the terms of a letter agreement dated May 25, 1999 (the "Engagement
Letter"), to advise the special committee with regard to the proposal received
by the Company from AIP Fund I, advise the special committee with respect to a
possible sale of the Company and to undertake an analysis to enable Wasserstein
to provide an opinion to the special committee as to the fairness to the Company
or its stockholders, from a financial point of view, of the consideration to be
received by the Company or its stockholders in a sale. Pursuant to a letter
agreement dated July 22, 1999, the Board of Directors retained Wasserstein for
the same purposes and on substantially the same terms. The Company has agreed to
pay Wasserstein a fee equal to 0.9% of the Aggregate Consideration (as defined
in the Engagement Letter) paid to stockholders of the Company in a sale of the
Company contingent upon the consummation of the sale. The fee is expected to be
approximately $2.25 million. The Company has also agreed to reimburse
Wasserstein for its reasonable travel and other reasonable out-of-pocket
expenses, including the fees and expenses of its legal counsel, and to indemnify
Wasserstein for certain liabilities in connection with the engagement.
In the ordinary course of its business, Wasserstein or its affiliates may
actively trade or otherwise effect transactions in the securities of the Company
for its own account and for the account of its customers and, accordingly, may
hold long or short positions in such securities.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the Company's knowledge, by any executive officer,
director, affiliate or subsidiary of the Company.
(b) To the Company's knowledge, to the extent permitted by applicable
securities laws, rules or regulations, each executive officer, director and
affiliate of the Company currently intends to tender all Shares over which he or
it has sole dispositive power as of the expiration date of the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) None
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) The Information Statement attached as Schedule II hereto and
incorporated herein by reference is being furnished in connection with the
possible designation by the Purchaser, pursuant to the Merger Agreement, of
certain persons to be appointed to the Board of Directors other than at a
meeting of the Company's stockholders as described in Item 3.
(b) Section 203 of the DGCL
Section 203 of the DGCL purports to regulate certain business combinations
of a corporation organized under Delaware law whose stock is publicly traded,
such as the Company, with a stockholder beneficially
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<PAGE> 16
owning 15% or more of the outstanding voting stock of such corporation (an
"Interested Stockholder"). Section 203 provides, in relevant part, that the
corporation shall not engage in any business combination for a period of three
years following the date such stockholder first becomes an Interested
Stockholder unless (i) prior to the date the stockholder first becomes an
Interested Stockholder, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an Interested Stockholder, (ii) upon becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, or (iii)
on or subsequent to the date the stockholder becomes an Interested Stockholder,
the business combination is approved by the board of directors and authorized at
an annual or special meeting of stockholders by the affirmative vote of at least
two-thirds of the outstanding voting stock which is not owned by the Interested
Stockholder. The Board of Directors has approved the Merger Agreement and the
transactions contemplated thereby, including the Offer, the Merger and the
Stockholder Agreements, for the purposes of Section 203 of the DGCL; therefore
the restrictions of Section 203 are inapplicable to the Offer, the Merger and
the related transactions.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of July 28, 1999, by
and among Caradon Inc., E Acqco Inc. and Easco, Inc.
Exhibit 2 Stockholder Agreement, dated as of July 28, 1999 by and
among American Industrial Partners Capital Fund, L.P.,
Caradon Inc. and E Acqco Inc.
Exhibit 3 Form of Individual Stockholder Agreement, dated as of July
28, 1999 by and among Parent, Purchaser and directors and
executive officers of the Company who own Shares
Exhibit 4 Letter to Easco, Inc. from Caradon plc dated July 28, 1999
Exhibit 5 Confidentiality Agreement, dated June 10, 1999, by and among
Easco, Inc. and Caradon Inc.
Exhibit 6 Services Agreement by and between Easco Corporation and
American Industrial Partners Management Company, Inc. and
its affiliates dated April 12, 1995
Exhibit 7 Form of Indemnification Agreement, dated as of May 7, 1999,
by and between the Company and each member of the special
committee of the Board of Directors
Exhibit 8 Pages 4 through 11 of Easco, Inc.'s Proxy Statement dated
March 26, 1999 relating to its Annual Meeting of
Stockholders
Exhibit 9 Joint U.S. Press Release issued by Easco, Inc. and Caradon
plc, dated July 28, 1999
Exhibit 10 UK Press Release issued by Caradon plc, dated July 28, 1999
Exhibit 11 Letter to Stockholders of Easco, Inc., dated August 3, 1999*
Exhibit 12 Opinion of Wasserstein Perella & Co., Inc. dated July 27,
1999*
</TABLE>
- ---------------
* Included in copies of the Schedule 14D-9 mailed to stockholders.
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<PAGE> 17
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
EASCO, INC.
By: /s/ NORMAN E. WELLS, JR.
------------------------------------
Norman E. Wells, Jr.
President and Chief
Executive Officer
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<PAGE> 18
SCHEDULE I
WASSERSTEIN PERELLA & CO. LETTERHEAD
July 27, 1999
Board of Directors
Easco, Inc.
706 South State Street
Girard, Ohio 44420
Members of the Board of Directors:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, par value $.01 per
share (the "Shares"), of Easco, Inc., a Delaware corporation (the "Company"),
(other than any Shares held by Parent (as defined below) or Sub (as defined
below) and their respective subsidiaries and affiliates) of the $15.20 per Share
cash consideration to be received by such holders pursuant to the terms of a
draft Agreement and Plan of Merger (the "Merger Agreement") among the Company,
Caradon Inc., a Delaware corporation ("Parent") and a wholly-owned subsidiary of
Caradon plc ("UK Parent"), and E Acqco Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Sub"). The Merger Agreement provides for,
among other things, (1) a tender offer by Sub (the "Tender Offer") to acquire
all of the outstanding Shares at a price of $15.20 per Share in cash (the "Offer
Price"), and (2) for a subsequent merger of Sub with and into the Company (the
"Merger" and, together with the Tender Offer, the "Transaction") pursuant to
which each remaining outstanding Share not purchased in the Tender Offer (other
than any Shares held in the treasury of the Company or owned by UK Parent,
Parent, Sub or their respective subsidiaries) will be converted into the right
to receive the Offer Price, without interest. The terms and conditions of the
Transaction will be set forth in more detail in the Merger Agreement.
In connection with rendering our opinion, we have reviewed a draft of the
Merger Agreement, dated July 26, 1999, and for purposes hereof we have assumed
that the final form of this document will not differ in any material respect
from the draft provided to us. We have also reviewed and analyzed certain
publicly available business and financial information relating to the Company
for recent years and interim periods to date, as well as certain internal
financial and operating information, including financial forecasts, analyses and
projections prepared by or on behalf of the Company and provided to us for
purposes of our analysis, and we have met with management of the Company to
review and discuss such information and, among other matters, the Company's
business, operations, assets, financial condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the aluminum products industry specifically, and in other
industries generally, that we believe to be reasonably comparable to the
Transaction or otherwise relevant to our inquiry. We have also performed such
other financial studies, analyses, and investigations and reviewed such other
information as we considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also assumed and relied upon the reasonableness and
accuracy of the financial projections, forecasts and analyses provided to us,
and we have assumed that such projections, forecasts and analyses were
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates
<PAGE> 19
Board of Directors
Easco, Inc.
July 27, 1999
Page 2
of the Company's management. We express no opinion with respect to such
projections, forecasts and analyses or the assumptions upon which they are
based. In addition, we have not reviewed any of the books and records of the
Company, or assumed any responsibility for conducting a physical inspection of
the properties or facilities of the Company, or for making or obtaining an
independent valuation or appraisal of the assets or liabilities of the Company,
and no such independent valuation or appraisal was provided to us. We also have
assumed that the transactions described in the Merger Agreement will be
consummated without waiver or modification of any of the material terms or
conditions contained therein by any party thereto. Our opinion is necessarily
based on economic and market conditions and other circumstances as they exist
and can be evaluated by us as of the date hereof.
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company and UK Parent 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.
We are acting as financial advisor to the Board of Directors of the Company
in connection with the proposed Transaction and will receive a fee for our
services, which is contingent upon the consummation of the Transaction. We
previously acted as financial advisor to the Special Committee of the Board of
Directors of the Company (the "Special Committee") with respect to, among other
things, its evaluation of an acquisition proposal dated April 30, 1999 by
American Industrial Partners Capital Fund, L.P. (together with its affiliates,
"AIP") to acquire the Company. We understand that AIP beneficially owns
approximately 45% of the Shares presently outstanding. We also understand that
AIP's proposal has expired, and the Special Committee has been disbanded.
Our opinion addresses only the fairness from a financial point of view to
the stockholders of the Company of the Offer Price, and we do not express any
views on any other terms of the Transaction. Specifically, our opinion does not
address the Company's underlying business decision to effect the transactions
contemplated by the Merger Agreement.
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in its consideration of the Transaction and, except
for inclusion in its entirety in any proxy statement required to be circulated
to stockholders of the Company relating to the Merger or tender offer
recommendation statement on Schedule 14D-9 from the Company to holders of Shares
relating to the Transaction, may not be quoted, referred to or reproduced at any
time or in any manner without our prior written consent. This opinion does not
constitute a recommendation to any stockholder with respect to whether such
holder should tender Shares pursuant to the Tender Offer or as to how such
holder should vote with respect to the Merger, and should not be relied upon by
any stockholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that, as of the date hereof,
the $15.20 per Share cash consideration to be received by the stockholders of
the Company pursuant to the Transaction is fair to such stockholders (other than
any Shares held by Parent or Sub and their respective subsidiaries and
affiliates) from a financial point of view.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC. SIG
<PAGE> 20
SCHEDULE II
EASCO, INC.
706 SOUTH STATE STREET
GIRARD, OHIO 44420
-------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about August 3, 1999 as a
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Easco, Inc. to the holders of record of shares of common
stock, par value $.01 per share, of the Company. Capitalized terms used herein
and not otherwise defined herein have the meaning set forth in the Schedule
14D-9. You are receiving this Information Statement in connection with the
possible election of persons designated by Parent to a majority of the seats on
the Board of Directors of the Company.
On July 28, 1999, the Company, the Purchaser and Parent entered into the
Merger Agreement in accordance with the terms and subject to the conditions of
which (1) Parent will cause the Purchaser to commence the Offer for any and all
outstanding Shares at a price of $15.20 per Share, net to the seller in cash,
without interest thereon, and (2) the Purchaser will be merged with and into the
Company in the Merger. As a result of the Offer and the Merger, the Company
would become an indirect wholly owned subsidiary of Parent.
The Merger Agreement provides that, promptly after the purchase of a
majority of the outstanding Shares pursuant to the Offer, Parent shall be
entitled to designate directors (the "Parent Designees") on the Board of
Directors as will give Parent representation proportionate to its ownership
interest. The Company has agreed either to increase (but not above 10 persons)
the size of the Board of Directors or obtain the resignation of such number of
directors as is necessary to enable the Parent Designees to be elected or
appointed to the Board of Directors. This Information Statement is required by
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
The information contained in this Information Statement concerning Parent,
the Purchaser and the Parent Designees has been furnished to the Company by
Parent, and the Company assumes no responsibility for the accuracy or
completeness of such information.
VOTING SECURITIES OF THE COMPANY
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of August 2, 1999 there were 9,673,244
Shares outstanding.
II-1
<PAGE> 21
BOARD OF DIRECTORS, ACQUISITION DESIGNEES
AND EXECUTIVE OFFICERS
DIRECTORS OF THE COMPANY
The following table sets forth certain information with respect to the
directors of the Company as of July 30, 1999.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
---- --- -------- --------------------
<S> <C> <C> <C>
Theodore C. Rogers...... 64 1992 Mr. Rogers is the current Chairman of the Board of
the Company. He co-founded American Industrial
Partners ("AIP") and has been a director and
officer of AIP since 1989. Since 1989, he has been
a general partner of American Industrial Partners,
L.P. ("AIP L.P."), the general partner of AIP Fund
I. 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, Derby
International, Great Lakes Carbon Corporation and
Steel Heddle Group, Inc.
Robert J. Klein......... 34 1993 Mr. Klein is a Managing Director 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 and Steel Heddle Group, Inc.
Kenneth J. Diekroeger... 37 1999 Mr. Diekroeger is a Managing Director of AIP. He
has been employed by AIP since 1996. From 1992 to
1996, he was employed by The Shansby Group, a
private equity investment firm. Mr. Diekroeger is
currently a director of Bucyrus International,
Inc., Steel Heddle Group Inc. and Stanadyne
Automotive Corp.
Samuel H. Smith, Jr..... 69 1993 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 AIP's executive officer
association since 1990.
Kim A. Marvin........... 37 1998 Mr. Marvin is a Managing Director of AIP. He has
been employed by AIP since 1997. Prior to that he
was employed in the Mergers and Acquisitions
Department of Goldman, Sachs & Co. after completing
his M.B.A. at Harvard Business School in 1994. Mr.
Marvin is a director of Bucyrus International,
Inc., Great Lakes Carbon Corporation and Sweetheart
Holdings, Inc.
</TABLE>
II-2
<PAGE> 22
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
---- --- -------- --------------------
<S> <C> <C> <C>
Gene E. Little.......... 56 1995 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.
Norman E. Wells, Jr..... 51 1997 Mr. Wells joined the Company in November 1996 as
President and Chief Executive Officer of the
Company and Easco. 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.
Raymond E. Ross......... 62 1998 Mr. Ross was President and Chief Operating Officer
and a member of the Board of Directors of
Cincinnati Milacron, Inc. ("CMI") from 1991 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.
</TABLE>
RIGHT TO DESIGNATE DIRECTORS; THE PARENT DESIGNEES
The Merger Agreement provides that promptly after the purchase of a
majority of the outstanding Shares pursuant to the Offer, Parent shall be
entitled to designate the number of directors, rounded up to the next whole
number, on the Board of Directors that equals the product of (1) the total
number of directors on the Board of Directors (giving effect to the directors
designated by Parent) and (2) the percentage of outstanding Shares then
beneficially owned by the Purchaser. However, until the Effective Time, the
Board of Directors will continue to have at least one director who was a
director as of the date of the Merger Agreement and who is neither an officer of
the Company nor a designee, stockholder, affiliate or associate of Parent (each,
an "Independent Director"). If no Independent Directors remain on the Board of
Directors, the other directors will designate one person to fill such vacancy
who meets the eligibility requirements for Independent Directors. The Company
has agreed either to increase (but not above 10 persons) the size of the Board
of Directors or obtain the resignation of such number of directors as is
necessary to enable the Parent Designees to be elected or appointed to the Board
of Directors.
Parent has informed the Company that it will choose the initial Parent
Designees from the persons set forth below. With respect to the Parent
Designees, the following table, prepared from information furnished to the
Company by Parent, sets forth the name, occupation and age of each such Parent
Designee. Parent has informed the Company that each of the directors and
executive officers listed below has consented to act as a director, if so
designated. If necessary, Parent may choose additional or other Parent
Designees, subject to the requirements of Rule 14f-1.
None of the Parent Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any directors
or executive officers of the Company or (iii) to the best of the Purchaser's
knowledge, beneficially owns any securities (or rights to acquire such
securities) of the Company. The Company has been advised by Parent that, to the
best of Parent's knowledge, none of the Parent Designees has been involved in
any transactions with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the SEC, except as may be disclosed herein or in the Schedule
14D-9.
II-3
<PAGE> 23
It is expected that the Parent Designees may assume office at any time
following the purchase by the Purchaser of a majority of the outstanding Shares
pursuant to the Offer, which purchase cannot be earlier than August 30, 1999,
and that, upon assuming office, the Parent Designees will thereafter constitute
at least a majority of the Board of Directors.
<TABLE>
<CAPTION>
DESIGNEES PRINCIPAL OCCUPATION: DIRECTORSHIPS (1)(2)
--------- ------------------------------------------
<S> <C>
</TABLE>
Ian Stuart (age 44)........... Mr. Stuart has served as Chief Executive
Officer -- Plumbing & Industrial Sectors of
Caradon plc since May 1998. From 1995 to 1998,
he served as President of Black & Decker
Corporation (a manufacturer of diverse
electrical and other products), and from 1993
to 1995, he was Vice President of Black &
Decker Corporation.
A. Joseph Neiner (age 49)..... Mr. Neiner has served as Group Director of
Caradon plc since April 1997. From January 1994
to April 1997, he served as Vice
President -- Finance and Chief Financial
Officer of Clarke American Checks, Inc. (a
supplier of checks and other financial
products, and indirect wholly owned subsidiary
of Parent).
Philip E. P. Bergqvist (age
36)........................... Mr. Bergqvist has served as Senior Corporate
Development Manager of Caradon plc since
November 2, 1998. From May 1997 to November
1998, he was Manager of Quinta de la Rosa (a
vineyard and wine maker). From October 1992 to
May 1997, he served as a consultant for LEK
Partnership (a management consulting firm).
Mark Emory (age 41)........... Mr. Emery has served as President and Chief
Executive Officer of Caradon Ltd. (aluminum
recycling, extruding, casting and fabricating
and manufacturer of engineered products for
military applications, and an indirect wholly
owned subsidiary (Canada) of Caradon plc) since
August 4, 1998. From 1997 to 1998, he served as
Programme Director of Caradon plc. From 1996 to
1997, he was Managing Director of Caradon plc.
From 1991 to 1996, he served as Managing
Director of Hubbard Group Services
(refrigeration equipment manufacturer).
Dennis Bamber (age 42)........ Mr. Bamber has served as Vice
President -- Finance and Administration of
Caradon Ltd. (described above) since July 1983.
Robert B. Leckie (age 51)..... Mr. Leckie is a director of Parent and has held
this position since September 28, 1998. Since
June 1, 1998, he has been Vice President,
Secretary, General Counsel and Chief
Executive -- North American Industrial Division
of Parent. From June 1, 1994 to June 1, 1998,
Mr. Leckie was Vice President, Deputy General
Counsel and Assistant Secretary of Parent. Mr.
Leckie is also the sole director, the Chairman
of the Board of Directors, President and
Secretary of the Purchaser.
II-4
<PAGE> 24
Pat M. Simmons (age 43)....... Mr. Simmons is a director of Parent and has
held this position since June 15, 1995. Mr.
Simmons is also Vice President -- Taxation,
Assistant Treasurer and Assistant Secretary of
Parent and has held these positions since
January 4, 1995, October 20, 1993 and September
29, 1998, respectively. He is also the Vice
President and Treasurer of the Purchaser.
- ---------------
(1) Except as noted, each person listed has been engaged in the same principal
occupation for over five years.
(2) No designee is a director of any other company which has a class of
securities registered pursuant to Section 12 of the Exchange Act or subject
to Section 15(d) of the Exchange Act, or any company registered as an
investment company under the Investment Company Act of 1940.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
There were eight meetings of the Board of Directors during the year ended
December 31, 1998. All incumbent directors attended at least 75% of the meetings
of the Board of Directors and the committees thereof on which they served.
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, Ross and Rogers. The Audit Committee met twice
during 1998.
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 recommend awards under the Stock Option Plan. The members of the
Compensation Committee during 1998 were Messrs. Klein (Chairman) and Lawrence A.
Ward, Jr., who resigned his board position in January 1999. The Compensation
Committee met twice during 1998. In January 1999, Mr. Diekroeger was appointed
to the Compensation Committee by resolution of the Board of Directors.
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 "-- 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. Directors are reimbursed for expenses incurred attending board
and committee meetings.
On July 1, 1999, Gene Little and Raymond Ross, as directors, were each paid
$85,000 as members of the special committee of the Board of Directors for
services relating to the potential sale of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of two non-employee directors, Mr.
Klein and Mr. Diekroeger. Messrs. Klein and Diekroeger are employees of AIP.
Pursuant to the Services Agreement, AIPM and its affiliates provide certain
financial and other advisory services to Easco. Under the Services Agreement,
the Company reimburses AIPM for its out-of-pocket expenses and pays AIPM an
advisory fee, which for 1998 was $900,000. The Services Agreement expires on
April 12, 2000 with automatic one-year renewals thereafter unless terminated by
either party upon 90 days prior written notice. Pursuant to the Merger
Agreement, the Company prior to the effective time will pay $675,000 to AIPM,
representing
II-5
<PAGE> 25
payment in full of all remaining unaccrued amounts due to AIPM through the end
of the term of the Services Agreement.
In addition, Easco paid AIPM an advisory fee of $250,000 in connection with
services rendered by AIPM regarding the sale of Easco's vinyl extrusion
operations in January 1998.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
current executive officers of the Company as of July 30, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY AND BUSINESS EXPERIENCE
---- --- ---------------------------------------------
<S> <C> <C>
Norman E. Wells, Jr. .............................. 51 Mr. Wells joined the Company as President and
Chief Executive Officer in November 1996.
From March 1993 to November 1996 he was
President and Chief Executive Officer of
CasTech Aluminum Group Inc. From 1989 to 1993
he held various executive positions with
CasTech. Prior to his working at CasTech, Mr.
Wells spent 14 years in various positions
with Kaiser Aluminum.
Terry D. Smith..................................... 45 Mr. Smith joined the Company as Executive
Vice President and Chief Financial Officer in
November 1996. Previously he was Vice
President, Chief Financial Officer and
Treasurer of CasTech Aluminum Group Inc.,
from 1994 to 1996 and CasTech's predecessor,
ABF Investors Inc., from 1987 to 1994.
Joseph M. Byers.................................... 54 Mr. Byers joined the Company as Vice
President, Sales and Marketing in November
1996. For more than five years previously, he
was Vice President, Sales and Marketing for
Barmet Aluminum Corporation, a producer of
continuous cast aluminum sheet which
subsequently became a subsidiary of CasTech
Aluminum Group Inc.
James R. McKeithan................................. 54 Mr. McKeithan joined the Company as Vice
President, Operations in November 1996.
Previously he was Vice President, Production
for Barmet Aluminum Corporation from 1992 to
1996. Prior thereto he held a similar
position with Ravenswood Aluminum Company, a
producer of aluminum sheet and plate.
Lawrence J. Sax.................................... 66 Mr. Sax joined the Company as Vice President,
Raw Materials in December 1996. From 1992 to
1996 he served as Vice President, Materials
Management for Barmet Aluminum Corporation.
From 1988 to 1992 he served as Vice
President, Recycling for WTE Corporation, a
materials recycler.
</TABLE>
II-6
<PAGE> 26
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY AND BUSINESS EXPERIENCE
---- --- ---------------------------------------------
<S> <C> <C>
Thomas H. DuFore................................... 45 Mr. DuFore joined the Company as Vice
President, Human Resources in April 1997.
From 1994 to March, 1997 he served as Vice
President, Human Resources for Columbia
National Group, Inc. from 1989 to 1994 he
served as Director, Human Resources for
Barmet Aluminum Corporation.
</TABLE>
The executive officers are annually elected and serve until their
successors are elected and have qualified, or until resignation or removal.
There are no family relationships between any of the executive officers or
directors of the Company.
There are no arrangements or understandings between any of the executive
officers of the Company and other persons relating to their selection as
officers.
There have been no events under any bankruptcy act, no original
proceedings, and no judgments or injunctions material to the evaluation of the
ability and integrity of any director or executive officer during the past five
years.
II-7
<PAGE> 27
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) the current directors of the
Company, Easco's Chief Executive Officer and each of Easco's four other most
highly compensated executive officers (collectively, the "Named Officers"), and
all directors and executive officers of the Company as a group, as of July 30,
1999 and (ii) each stockholder known by the Company to be a beneficial owner of
more than 5% of the Common Stock, as of July 30. The Company believes that,
except as otherwise noted, 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 43.8%
One Maritime Plaza
Suite 2525
San Francisco, CA 94111
Mellon Bank, N.A., Trustee for First Plaza Group Trust
(3)....................................................... 978,674 10.1%
One Mellon Bank Center
Pittsburgh, PA 15258
Wellington Management Company (2)........................... 723,600 7.5%
75 State Street
Boston, MA 02109
Dimensional Fund Advisors Inc. (4).......................... 666,500 6.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
W. Richard Bingham (5)...................................... 4,239,470 43.8%
Joseph M. Byers (6)......................................... 87,500 *
Robert J. Klein............................................. 2,300 *
Gene E. Little.............................................. 3,500 *
James R. McKeithan (6)...................................... 87,500 *
Theodore C. Rogers (5)...................................... 4,239,470 43.8%
Lawrence J. Sax (6)......................................... 87,500 *
Samuel H. Smith, Jr......................................... 1,000 *
Terry D. Smith (6).......................................... 87,500 *
Norman E. Wells, Jr. (6).................................... 300,000 3.1%
Directors and executive officers as a group (12 persons)
(6)....................................................... 4,921,270 48.7%
</TABLE>
- ---------------
* Less than one percent
(1) Unless otherwise indicated, the business address of each beneficial owner
listed is 706 South State Street, Girard, Ohio 44420.
(2) Based solely on the report of Wellington Management Company ("Wellington")
on Schedule 13-G, dated February 8, 1999, received by the Company. According
to this Schedule 13-G, these shares include (i) 162,600 shares as to which
Wellington has shared voting power and (ii) 723,600 shares as to which
Wellington has shared investment power.
(3) 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
II-8
<PAGE> 28
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 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.
(4) Based solely on the report of Dimensional Fund Advisors Inc. ("Dimensional")
on Schedule 13-G, dated February 12, 1999, received by the Company.
Dimensional, a registered investment advisor, is deemed to have beneficial
ownership of all of these shares which 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, for all of which Dimensional serves as
investment manager. Based on information provided the Company in the
Schedule 13-G, Dimensional disclaims beneficial ownership of all such
shares.
(5) All of such shares are held of record by AIP Fund I. Messrs. Bingham and
Rogers are general partners of AIP L.P., the general partner of AIP Fund I,
and may be deemed to share investment and voting power with respect to the
securities owned by AIP Fund I. 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.
(6) Includes options which are presently exercisable or will become exercisable
within 60 days of July 30, 1999, including options that will accelerate as
to exercisability pursuant to the Company's Stock Option Plan and stock
option agreements between each of the Named Officers and the Company. See
fiscal year-end option values table below.
II-9
<PAGE> 29
EXECUTIVE COMPENSATION
SUMMARY
The following table provides certain summary information concerning
compensation paid or accrued by Easco to or on behalf of the Named Officers for
the years ended December 31, 1998, 1997 and 1996.
Beginning in November 1996, the Company realigned its executive management
group when Mr. Wells joined the Company as its President and Chief Executive
Officer. Mr. Wells was joined by Terry D. Smith, the Company's 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.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------- ------------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL COMPENSATION STOCK UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS($)(1) ($)(2) AWARDS($)(3) OPTIONS/SARS(#) ($)(#)(4)
------------------ ---- --------- ----------- ------------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Norman E. Wells, Jr., 1998 306,731 500,000 -- -- -- 16,818
President and Chief 1997 290,000 61,625 -- -- -- 9,839
Executive Officer of 1996 28,628 597,500 574,000 420,000 300,000 322
the Company and Easco (5)
Terry D. Smith, 1998 166,153 50,000 -- -- -- 7,807
Executive Vice President, 1997 160,000 84,000 -- -- -- 4,735
Chief Financial Officer, 1996 15,795 100,000 71,750 -- 87,500 100
Secretary and Treasurer of
the Company and Easco (5)
Lawrence J. Sax, 1998 160,635 50,000 -- -- -- 20,757
Vice President of Raw 1997 158,000 83,575 -- -- -- 7,866
Materials of Easco (6) 1996 -- 100,000 90,500 -- 87,500 --
James R. McKeithan, 1998 144,375 70,000 -- -- -- 10,873
Vice President of 1997 137,500 99,219 -- -- -- 4,343
Operations of Easco (5) 1996 -- 100,000 71,750 -- 87,500 --
Joseph M. Byers 1998 144,994 50,000 -- -- -- 11,699
Vice President of Sales 1997 138,900 79,516 -- -- -- 5,487
and Marketing of Easco (5) 1996 13,712 100,000 71,750 -- 87,500 243
</TABLE>
- ---------------
(1) Represents (i) for Mr. Wells, a cash retention payment in 1998 (see section
entitled "Employment Agreements"), a performance bonus in 1997 and a cash
signing bonus in 1996 and (ii) for Messrs. Smith, Sax, McKeithan and Byers,
performance bonuses of $34,000, $33,575, $29,219 and $29,516, respectively,
in 1997, and the vesting and payment of a cash signing bonus installment of
$50,000 for Messrs. Smith, Sax and Byers in 1998 and 1997, and $70,000 and
$75,000 for Mr. McKeithan in 1998 and 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.
(2) Represents (i) in the case of Mr. Wells, 100,000 shares of Common Stock
granted by the Board of Directors 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 of Directors 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,
II-10
<PAGE> 30
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 a portion of his cash signing bonus in 1996 and which had a value
of $542,500 as of December 31, 1998. Mr. Wells is entitled to receive
dividends paid on these shares.
(4) Includes (i) contributions of $3,200 per executive in 1998, and $3,346,
$1,846, $1,603, $1,337 and $1,375 in 1997 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 $13,618, $6,493 and $322 for Mr. Wells for 1998, 1997
and 1996, respectively, premiums of $4,607, $2,889 and $100 for Mr. Smith
for 1998, 1997 and 1996, respectively, premiums of $8,499, $3,884 and $243
for Mr. Byers for 1998, 1997 and 1996, respectively, premiums of $7,673 and
$2,968 for Mr. McKeithan for 1998 and 1997, respectively, and premiums of
$17,557 and $6,529 for Mr. Sax for 1998 and 1997, respectively, for
Company-provided life insurance benefits.
(5) The Named Officer has been employed by the Company and/or Easco in the
indicated office since November 1996.
(6) Mr. Sax has served as Vice President of Raw Materials of Easco since
December 1996.
OPTION/SAR GRANTS IN 1998
No stock options or stock appreciation rights were granted to the Named
Officers during 1998.
FISCAL YEAR-END OPTION/SAR VALUES
During 1998, none of the Named Officers exercised any stock options or
SARs. The table below sets forth certain information for the fiscal year ended
December 31, 1998 concerning unexercised options and SARs held by each of the
Named Officers as of December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END(#)(2) AT FY-END($)(3)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Norman E. Wells, Jr.......................... 200,000 100,000 650,000 325,000
Terry D. Smith (4)........................... 41,667 45,833 114,583 107,292
Joseph M. Byers (4).......................... 41,667 45,833 114,583 107,292
Lawrence J. Sax (4).......................... 41,667 45,833 89,583 57,292
James R. McKeithan (4)....................... 41,667 45,833 114,583 107,292
</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) below, 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) $7.75, the closing price of the Common
Stock on The Nasdaq Stock Market on December 31, 1998, as reported by IDD
Information Services TradeLine and (ii) the applicable option exercise
prices.
(4) Includes 50,000 options exercisable on November 26, 2003, subject to
continued employment, the vesting of which may be accelerated in equal
one-third increments on January 1 of 1998, 1999 and 2000, provided that the
Company achieves certain specified earnings targets. The performance
criteria for 1998
II-11
<PAGE> 31
was not achieved and no vesting was accelerated on January 1, 1999. The
Company achieved the performance criteria for 1997 resulting in the
accelerated vesting of options covering 16,667 shares on January 1, 1998.
SALARIED EMPLOYEE PENSION PLAN
The Pension Plan table set forth below shows total estimated annual
benefits payable upon retirement 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 Plan") following various years of service upon normal retirement
at age 65.
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 33,275 44,367 55,458 66,550 66,550
$200,000 45,170 60,227 75,283 90,340 90,340
$250,000 57,065 76,087 95,108 114,130 114,130
$300,000 68,960 91,947 114,933 137,920 137,920
$350,000 80,855 107,807 134,758 161,710 161,710
$400,000 92,750 123,667 154,583 185,500 185,500
$450,000 104,645 139,527 174,408 209,290 209,290
$500,000 116,540 155,387 194,233 233,080 233,080
$600,000 140,330 187,107 233,883 280,660 280,660
$700,000 164,120 218,827 273,533 328,240 328,240
</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 ten 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 his or her 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
Plan provides to certain officers subject to these limitations unfunded
supplemental pension benefits equal to the difference between the Code limits
and the benefits which otherwise would be payable under the Pension Plan.
Each of Messrs. Wells, Sax, Smith, McKeithan and Byers has three credited
years of service at July 30, 1999.
EMPLOYMENT AGREEMENTS
Messrs. Wells, Smith, Sax, McKeithan and Byers serve in their respective
capacities pursuant to employment agreements. Each agreement has an indefinite
term, and upon 30 days written notice, may be terminated by either Easco or the
executive. Each agreement provides for an annual base salary, an annual
performance bonus, such health, dental, life and disability insurance coverage
as the Company provides to its
II-12
<PAGE> 32
senior executive employees generally, and severance benefits comprised of
continued salary and health benefits until the first anniversary of termination
without cause or until the executive commences other employment, whichever
occurs first. The agreements also provided 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 is required to return
such signing bonus previously received (or installment received thereof in the
case of Messrs. Smith, Sax, McKeithan and Byers) upon termination of his
employment (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.
In December 1998, the Compensation Committee, with approval of the Board of
Directors, amended these agreements to provide for supplemental retention
payments to further assure the continuity of the Company's management team. The
amended agreements provide for a retention payment of $500,000 to Mr. Wells in
December 1998 and $300,000 to each of Messrs. Smith, Sax, McKeithan and Byers in
January 1999. These retention payments must be repaid to the Company, in whole
or in part, if the executive's employment terminates (other than termination
without cause, death or disability or resignation with "good reason") according
to the following formula: Each executive must return 100% of the retention
payment if termination occurs prior to January 1, 2000 and 66 2/3% if
termination occurs between January 1, 2000 and December 31, 2001. No amounts are
subject to repayment if termination occurs on or after January 1, 2002.
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
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 to
achieve the Company's business and financial objectives. The Committee is
comprised of non-employee directors who, although affiliated with AIP, have no
"interlocking" relationships with other companies as defined by 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 also 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. As such, the Company believes that its
compensation policies should emphasize annual and long-term performance
incentives. 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.
Base Salary
The initial base salaries for the Company's executive officers were
established in their respective employment agreements. These salaries were
established by considering the qualifications of each executive and the base
salaries of similar positions in comparable companies. These salaries are
reviewed periodically by the Committee, considering the responsibilities of the
individual's position, the individual's overall job performance and market
conditions. 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 established, and the Board
approved, EBITDA targets for 1997 through 2000. The Committee believed that
these multi-year targets provided a better incentive for managers to focus on
steady, long-term growth. Annual
II-13
<PAGE> 33
performance bonuses 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) is used
for EBITDA results falling between the EBITDA targets. The Committee or the
Board may make equitable adjustments to the EBITDA targets to reflect future
acquisitions or divestitures or non-recurring or extraordinary items.
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 extrusion business. The Company's performance in 1998 was
below the Minimum EBITDA target and no payments were made under the plan,
however, retention payments were made as described in the section entitled
"Employment Agreements." These payments are subject to repayment obligations
should the executive leave the Company. The Committee believes that these
retention payments are in the best interests of the Company and its shareholders
and are intended to assure the continuity of management in the face of a very
competitive market for executive talent.
For 1999, the Committee and the Board of Directors have revised downward
the EBITDA levels which will determine the 1999 performance bonus payments
pursuant to the employment agreements.
Stock Options
The Committee believes that stock options provide additional incentive to
officers to work towards maximizing shareholder value. The Committee views stock
options as one of the more important components of the Company's long-term
performance-based compensation philosophy. The Company's grant of stock options
is designed to motivate the Company's executives to implement strategies and
initiatives that will contribute to an increase in the Company's stock price
over time. These options are provided through initial grants at or near the date
of hire and through subsequent periodic grants. Options granted by the Company
to its executives and employees have exercise prices equal to the fair market
value at the time of grant.
Under the Stock Option Plan, the Committee is authorized to select from
among the eligible employees those to whom options are to be granted, the number
of options to be granted 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 current management
team. These options are exercisable over three years.
All options under the Stock Option Plan vest over three years except for
200,000 options granted to the Named Officers (other than Mr. Wells) in 1996.
These options vest 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. The
Committee believes that such modified vesting motivates the Company's executives
to increase shareholder value in a shorter time frame while still maintaining a
focus on sustainable, long-term performance. 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 extrusion
business. Based on the Company's EBITDA, accelerated vesting was achieved in
1997, but was not achieved in 1998. The acceleration of vesting for these
options can be reinstated if specified EBITDA levels are attained in the
subsequent year.
Chief Executive Officer Compensation
During 1998, Mr. Wells' annual base salary was $290,000 as set by his
employment agreement. Effective June 1, 1998, the Compensation Committee
increased his annual base salary to $320,000 in recognition of the leadership
provided by Mr. Wells in improving the Company's financial and operational
performance since his employment in December 1996 and as a reflection of general
increases in competitive salary levels among peer executive positions in
comparable companies and industries. In December 1998, Mr. Wells received a cash
retention payment of $500,000 to help ensure his continued leadership of the
Company. No performance
II-14
<PAGE> 34
bonus was paid to Mr. Wells for 1998 pursuant to his employment agreement since
the Company's 1998 EBITDA did not meet the required threshold. A portion of the
retention payment must be repaid to the Company, as more fully described under
the section entitled "Employment Agreements", should Mr. Wells terminate his
employment prior to January 1, 2002. The Committee believes that Mr. Wells,
through his managerial efforts, has made a substantial contribution to the
improved performance of the Company in 1998 and to the long-term enhancement of
the Company's shareholder value.
Executive Compensation Deduction Limitations
Section 162(m) of the 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 1998 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).
COMPENSATION COMMITTEE
Robert J. Klein, Chairman
Kenneth J. Diekroeger
II-15
<PAGE> 35
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, 1998 with the
cumulative total return of the Standard & Poor's 500 Index and an index of
companies in a comparable line of business as the Company. 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
S&P 500 INDEX COMPANIES INDEX (A) EASCO, INC.
------------- ------------------- -----------
<S> <C> <C> <C> <C>
Apr-95 100 100 100
Dec-95 123.17 125.26 61.75
Dec-96 151.46 163.15 54.46
Dec-97 201.86 198.6 95.73
Dec-98 259.55 161.7 58.03
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
APRIL 1995 DECEMBER 1995 DECEMBER 1996 DECEMBER 1997 DECEMBER 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P 500 Index 100 123.17 151.46 201.86 259.55
- ---------------------------------------------------------------------------------------------------------------
Comparable Companies Index (a) 100 125.26 163.15 198.60 161.70
- ---------------------------------------------------------------------------------------------------------------
Easco, Inc. 100 61.75 54.46 95.73 58.03
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(a) As of April 1995, the 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 Industries,
Inc. in October 1996 and its shares are no longer publicly traded.
Accordingly, CasTech Aluminum Group Inc. is not included in the
Comparable Companies Index at December 1998, 1997 and 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Board of Directors, Acquisition Designees and Executive
Officers -- Compensation Committee Interlocks and Insider Participation."
II-16
<PAGE> 36
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 reports of beneficial
security ownership and changes in such ownership with the SEC. Executive
officers, directors and greater than ten percent stockholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. 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, 1998.
II-17
<PAGE> 37
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of July 28, 1999, by
and among Caradon Inc., E Acqco Inc. and Easco, Inc.
Exhibit 2 Stockholder Agreement, dated as of July 28, 1999 by and
among American Industrial Partners Capital Fund, L.P.,
Caradon Inc. and E Acqco Inc.
Exhibit 3 Form of Individual Stockholder Agreement, dated as of July
28, 1999 by and among Parent, Purchaser and directors and
executive officers of the Company who own Shares
Exhibit 4 Letter to Easco, Inc. from Caradon plc dated July 28, 1999
Exhibit 5 Confidentiality Agreement, dated June 10, 1999, by and among
Easco, Inc. and Caradon Inc.
Exhibit 6 Services Agreement by and between Easco Corporation and
American Industrial Partners Management Company, Inc. and
its affiliates dated April 12, 1995
Exhibit 7 Form of Indemnification Agreement, dated as of May 7, 1999
by and between the Company and each member of the special
committee of the Board of Directors
Exhibit 8 Pages 4 through 11 of Easco, Inc.'s Proxy Statement dated
March 26, 1999 relating to its Annual Meeting of
Stockholders
Exhibit 9 Joint U.S. Press Release issued by the Company and Caradon
plc, dated July 28, 1999
Exhibit 10 UK Press Release issued by Caradon plc, dated July 28, 1999
Exhibit 11 Letter to Stockholders of the Company, dated August 3, 1999*
Exhibit 12 Opinion of Wasserstein Perella & Co., Inc. dated July 27,
1999*
</TABLE>
- ---------------
* Included in copies of the Schedule 14D-9 mailed to stockholders.
<PAGE> 1
EXHIBIT 1
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
CARADON INC.,
E ACQCO INC.,
and
EASCO, INC.
dated as of
July 28, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I THE OFFER AND MERGER.......................................... 2
Section 1.1 The Offer..................................................... 2
Section 1.2 Company Actions............................................... 3
Section 1.3 Directors..................................................... 5
Section 1.4 The Merger.................................................... 6
Section 1.5 Effective Time................................................ 6
Section 1.6 Closing....................................................... 6
Section 1.7 Directors and Officers of the Surviving Corporation........... 7
Section 1.8 Effect of the Merger.......................................... 7
Section 1.9 Subsequent Actions............................................ 7
Section 1.10 Certificate of Incorporation; Bylaws.......................... 7
Section 1.11 Stockholders' Meeting......................................... 8
Section 1.12 Merger Without Meeting of Stockholders........................ 8
ARTICLE II CONVERSION OF SECURITIES...................................... 9
Section 2.1 Conversion of Securities...................................... 9
Section 2.2 Dissenting Shares............................................. 9
Section 2.3 Surrender of Shares; Stock Transfer Books.....................10
Section 2.4 Stock Plans...................................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................13
Section 3.1 Organization..................................................13
Section 3.2 Capitalization................................................14
Section 3.3 Authorization; Validity of Agreement; Company Action..........15
Section 3.4 Consents and Approvals; No Violations.........................15
Section 3.5 SEC Reports and Financial Statements..........................16
Section 3.6 Absence of Certain Changes....................................17
Section 3.7 No Undisclosed Liabilities....................................17
Section 3.8 Information in Proxy Statement................................17
Section 3.9 Opinion of Financial Advisor..................................17
Section 3.10 Brokers or Finders............................................17
Section 3.11 Litigation....................................................18
Section 3.12 Compliance with Applicable Law................................18
Section 3.13 Taxes.........................................................18
Section 3.14 ERISA.........................................................19
Section 3.15 Environmental Matters.........................................20
Section 3.16 Labor Matters.................................................21
Section 3.17 Intellectual Property.........................................21
Section 3.18 Year 2000 Matters.............................................21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 3.19 Customers and Suppliers.......................................22
Section 3.20 Title to and Condition of Assets..............................22
Section 3.21 Material Contracts............................................23
Section 3.22 No Other Representations or Warranties........................24
Section 3.23 Full Disclosure...............................................25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
PURCHASER.....................................................25
Section 4.1 Organization..................................................25
Section 4.2 Authorization; Validity of Agreement; Necessary Action........25
Section 4.3 Consents and Approvals; No Violations.........................25
Section 4.4 Information in Proxy Statement................................26
Section 4.5 Financing.....................................................26
Section 4.6 Brokers or Finders............................................26
Section 4.7 No Other Representations and Warranties.......................26
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER........................27
Section 5.1 Acquisition Proposals; No Solicitation........................27
Section 5.2 Interim Operations of the Company.............................28
ARTICLE VI ADDITIONAL AGREEMENTS.........................................31
Section 6.1 Proxy Statement...............................................31
Section 6.2 Meeting of Stockholders of the Company........................31
Section 6.3 Additional Agreements.........................................31
Section 6.4 Notification of Certain Matters...............................31
Section 6.5 Access; Confidentiality.......................................32
Section 6.6 Consents and Approvals........................................32
Section 6.7 Publicity.....................................................33
Section 6.8 Directors' and Officers' Insurance and Indemnification........33
Section 6.9 Purchaser Compliance..........................................34
Section 6.10 Reasonable Best Efforts.......................................35
Section 6.11 Employee Matters..............................................35
Section 6.12 Company Financial Statements and SEC Reports..................36
ARTICLE VII CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER........................................................36
Section 7.1 Stockholder Approval..........................................36
Section 7.2 Statutes; Court Orders........................................36
Section 7.3 Purchase of Shares in Offer...................................37
ARTICLE VIII TERMINATION...................................................37
Section 8.1 Termination...................................................37
Section 8.2 Effect of Termination.........................................38
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE IX MISCELLANEOUS.................................................39
Section 9.1 Amendment and Modification; Waiver............................39
Section 9.2 Non-survival of Representations and Warranties................39
Section 9.3 Expenses......................................................40
Section 9.4 Notices.......................................................40
Section 9.5 Interpretation................................................41
Section 9.6 Counterparts..................................................41
Section 9.7 Entire Agreement; No Third Party Beneficiaries................41
Section 9.8 Severability..................................................41
Section 9.9 Governing Law.................................................42
Section 9.10 Assignment....................................................42
Section 9.11 Enforcement of this Agreement.................................42
Annex A Conditions to the Offer
Exhibit A Certificate of Incorporation of Surviving Corporation
Exhibit B-1 Form of Stockholder Agreement (American Industrial Partners)
Exhibit B-2 Form of Stockholder Agreement (directors and officers)
</TABLE>
iii
<PAGE> 5
Index of Defined Terms
<TABLE>
<CAPTION>
Defined Term Page
- ------------- ----
<S> <C>
Agreement................................................................... 1
Appointment Date............................................................ 5
Average Premium.............................................................34
Board of Directors.......................................................... 1
Certificates................................................................10
Closing..................................................................... 6
Closing Date................................................................ 6
Common Stock................................................................ 1
Company..................................................................... 1
Company Agreements..........................................................16
Company Disclosure Schedule.................................................13
Company Intellectual Property...............................................21
Company Material Adverse Effect.............................................13
Company Multiemployer Plan..................................................19
Company Plan................................................................19
Company Real Property.......................................................22
Company SEC Documents.......................................................16
Company Permits.............................................................18
D&O Insurance...............................................................34
Delaware Law................................................................ 1
Dissenting Shares........................................................... 9
ERISA ......................................................................19
Effective Time.............................................................. 6
Environmental Laws..........................................................20
Exchange Act................................................................ 2
Exchange Agent..............................................................10
Financial Statements........................................................16
GAAP .......................................................................16
Governmental Entity.........................................................16
Hazardous Substances........................................................20
HSR Act.....................................................................15
Indebtedness................................................................15
Indemnified Parties.........................................................33
Independent Directors....................................................... 6
Major Customer..............................................................22
Major Supplier..............................................................22
Merger...................................................................... 6
Merger Consideration........................................................ 9
Millennium Compliant........................................................21
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
Minimum Condition........................................................... 2
Offer to Purchase........................................................... 2
Offer Documents............................................................. 3
Offer....................................................................... 1
Offer Price................................................................. 1
Option......................................................................12
Parent...................................................................... 1
Person......................................................................41
Plans.......................................................................29
Preferred Stock.............................................................14
Proxy Statement............................................................. 8
Purchaser................................................................... 1
Recent Balance Sheet........................................................17
Restricted Share............................................................12
Schedule 14D-9.............................................................. 4
Schedule 14D-1.............................................................. 3
SEC......................................................................... 2
Secretary of State.......................................................... 6
Securities Act..............................................................16
Shares...................................................................... 1
Special Meeting............................................................. 8
Stock Plans.................................................................12
Stockholder Agreement....................................................... 1
Subsidiary..................................................................13
Superior Proposal...........................................................38
Surviving Corporation....................................................... 6
Takeover Proposal...........................................................27
Tax.........................................................................18
Termination Fee.............................................................39
Transactions................................................................ 3
Transactions................................................................ 4
</TABLE>
v
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 28,
1999, by and among Caradon Inc., a Delaware corporation ("Parent"), E Acqco
Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent
("Purchaser"), and Easco, Inc., a Delaware corporation (the "Company").
WHEREAS, each of the boards of directors of Parent, Purchaser and the
Company has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof, it is proposed that Purchaser will
make a tender offer (the "Offer") to acquire any and all shares (the "Shares")
of the issued and outstanding common stock, $.01 par value (the "Common Stock"),
of the Company for $15.20 per Share, net to the seller in cash (such amount, or
any higher price per Share as may be paid in the Offer, the "Offer Price");
WHEREAS, in furtherance of such acquisition, the boards of directors of
the Company, Parent and Purchaser each have approved the Merger (as defined
herein) following the Offer in accordance with the General Corporation Law of
the State of Delaware ("Delaware Law") and upon the terms and subject to the
condition set forth herein;
WHEREAS, the board of directors of the Company (the "Board of
Directors") has determined that the consideration to be paid for each Share in
the Offer and the Merger and the transactions contemplated thereby are fair to
the holders of such Shares and has recommended to the Board of Directors that it
approve and adopt this Agreement and the transactions contemplated hereby and
recommend that the holders of such Shares accept the Offer and approve and adopt
this Agreement and each of the transactions contemplated hereby upon the terms
and subject to the conditions set forth herein, and the Board of Directors has
unanimously so resolved to recommend;
WHEREAS, as a condition to Parent's willingness to enter into this
Agreement, Parent and certain stockholders of the Company, which beneficially
own approximately 46% of the outstanding Shares, are simultaneously entering
into stockholder agreements, dated the date hereof, pursuant to which such
stockholders have irrevocably agreed, among other things, to tender all of the
Shares owned by them in the Offer (the "Stockholder Agreement"); and
WHEREAS, the Company, Parent and Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and Merger.
<PAGE> 8
NOW, THEREFORE, in consideration of the foregoing and the mutual
representation, warranties, covenants and agreements set forth herein, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 8.1 and none of the events set forth in
Annex A shall have occurred and are existing, as promptly as practicable (but in
no event later than five business days after the public announcement of the
execution of this Agreement), Purchaser shall commence (within the meaning of
Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) the Offer at the Offer Price and, subject to there being validly tendered
and not properly withdrawn prior to the expiration of the Offer that number of
Shares which represents at least a majority of the Shares then outstanding on a
fully diluted basis (the "Minimum Condition") and to the other conditions set
forth in Annex A hereto, shall use all reasonable efforts to consummate the
Offer in accordance with its terms as soon as legally permitted to do so under
applicable law. The obligations of Purchaser to accept for payment and to pay
for any Shares validly tendered and not withdrawn on or prior to the expiration
of the Offer shall be subject only to the Minimum Condition and the other
conditions set forth in Annex A. The Offer shall be made by means of an Offer to
Purchase (the "Offer to Purchase") containing the terms set forth in this
Agreement and shall be subject to the Minimum Condition and the other conditions
set forth in Annex A. Purchaser shall not (i) amend or waive the Minimum
Condition (ii) decrease the Offer Price or change the form of consideration
payable in the Offer (iii) decrease the number of Shares sought or (iv) amend
any other condition of the Offer in any manner adverse to the holders of the
Shares, in each case, without the written consent of the Company; provided, that
if on the initial scheduled expiration date of the Offer, which shall be twenty
(20) business days after the date the Offer is commenced, all conditions to the
Offer shall not have been satisfied or waived, Purchaser may, from time to time,
in its sole discretion, extend the expiration date. Purchaser shall, on the
terms and subject to the prior satisfaction or waiver of the conditions of the
Offer and as promptly as practicable after the expiration of the Offer, accept
for payment and pay for Shares tendered, provided, that if, immediately prior to
the initial expiration date of the Offer (as it may be extended), the number of
the Shares tendered and not withdrawn pursuant to the Offer equals less than 90%
of the outstanding Shares, Purchaser may extend the Offer for a period not to
exceed ten (10) business days, notwithstanding that all conditions to the Offer
are satisfied as of such expiration date of the Offer.
(b) As soon as practicable on the date the Offer is
commenced, Parent and Purchaser shall file with the United States Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer (together with all
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<PAGE> 9
amendments and supplements thereto and including the exhibits thereto, the
"Schedule 14D-1"). The Schedule 14D-1 will include, as exhibits, the Offer to
Purchase and a form of letter of transmittal and summary advertisement (which
documents, together with any amendments and supplements thereto, and any other
SEC schedule or form which is filed in connection with the Offer and related
transactions, are referred to collectively herein as the "Offer Documents"). The
Offer Documents will comply in all material respects with the provisions of
applicable federal securities laws and Delaware Law and, on the date filed with
the SEC and on the date first published, mailed or given to the Company's
stockholders, will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by Parent or
Purchaser with respect to information furnished by the Company to Parent or
Purchaser, in writing, expressly for inclusion in the Offer Documents. The
information supplied by the Company to Parent or Purchaser, in writing,
expressly for inclusion in the Offer Documents and by Parent or Purchaser to the
Company, in writing, expressly for inclusion in the Schedule 14D-9 will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) Parent and Purchaser will take all steps necessary to
cause the Offer Documents to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. Each of Parent and Purchaser and the Company agrees to
promptly (i) correct any information provided by it for use in the Schedule
14D-1 or the Offer Documents if and to the extent that such information shall
have become false or misleading in any material respect and (ii) supplement the
information provided by it specifically for use in the Schedule 14D-1 or the
Offer Documents to include any information that shall become necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Parent and Purchaser further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and to be disseminated to holders of the Shares, in each case as and to the
extent required by applicable federal securities laws. The Company and its
counsel shall be given the reasonable opportunity to review the Schedule 14D-1
before it is filed with the SEC. In addition, Parent and Purchaser will provide
the Company and its counsel, in writing, with any comments, whether written or
oral, Parent, Purchaser or their counsel may receive from time to time from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
of such comments.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer
and represents and warrants that (x) the Board of Directors, at a meeting duly
called and held on July 27, 1999, at which a majority of the directors was
present: (i) duly approved and adopted this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (collectively, the
"Transactions"); (ii) resolved to recommend that the stockholders of the
3
<PAGE> 10
Company accept the Offer, tender their Shares pursuant to the Offer and approve
and adopt this Agreement and the Transactions; and (iii) determined that this
Agreement and the Transactions are fair to, and in the best interests of, the
stockholders of the Company and (y) Wasserstein Perella & Co., Inc. has rendered
to the Board of Directors its opinion that the consideration to be received by
the Company's stockholders pursuant to the Offer and the Merger is fair to such
holders from a financial point of view.
(b) As soon as practicable on the date the Offer is commenced, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any and all amendments or supplements thereto and
including the exhibits thereto, the "Schedule 14D-9"). The Schedule 14D-9 will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, mailed or given to the Company's stockholders, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the Company with respect to information
furnished by Parent or Purchaser, in writing, expressly for inclusion in the
Schedule 14D-9. The Company further agrees to take all steps necessary to cause
the Schedule 14D-9 to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. The Company shall mail, or cause to be mailed, such Schedule
14D-9 to the stockholders of the Company at the same time the Offer Documents
are first mailed to the stockholders of the Company together with such Offer
Documents. The Schedule 14D-9 and the Offer Documents will contain the
recommendations of the Board of Directors described in Section 1.2(a), subject
to the terms of this Agreement. The Company will promptly correct the Schedule
14D-9 if and to the extent that it shall have become false or misleading in any
material respect (and each of Parent and Purchaser, with respect to written
information supplied by it specifically for use in the Schedule 14D-9, shall
promptly notify the Company of any required corrections of such information and
cooperate with the Company with respect to correcting such information) and to
supplement the information contained in the Schedule 14D-9 to include any
information that shall become necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. Purchaser and its counsel shall be given the opportunity to
review the Schedule 14D-9 before it is filed with the SEC. In addition, the
Company agrees to provide Purchaser and its counsel, in writing, with any
comments, whether written or oral, that the Company or its counsel may receive
from time to time from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments or other communications.
(c) In connection with the Offer, the Company will promptly
furnish or cause to be furnished or transmitted to Purchaser mailing labels and
any available listing or computer file, as Purchaser or its representative
requests, containing the names and addresses of
4
<PAGE> 11
all record holders of Shares and security position listings of Shares held in
stock depositories, each as of a recent date, and shall promptly furnish
Purchaser with such additional information (including updated lists of
stockholders (updated as frequently as possible) and their addresses, mailing
labels and security position listing, each in such electronic format as may be
reasonably requested by Purchaser or its representative) and such other
information and assistance as Purchaser or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of the Shares.
Section 1.3 Directors.
(a) Subject to compliance with applicable law, promptly upon
the purchase of any Shares by Purchaser pursuant to the Offer, and from time to
time thereafter as Shares are acquired by Purchaser, Parent shall be entitled to
designate such number of directors, rounded up to the next whole number, on the
Board of Directors as is equal to the product of the total number of directors
on the Board of Directors (giving effect to the directors designated by Parent
pursuant to this sentence) multiplied by the percentage that the number of
Shares beneficially owned by Purchaser or any affiliate of Purchaser bears to
the total number of Shares then outstanding. In furtherance thereof, the Board
of Directors has resolved as part of its approval of this Agreement to promptly
increase the size of the Board of Directors to a number not in excess of ten
upon the request of Parent or secure the resignations of such number of
directors as is necessary to enable Parent's designees to be elected to the
Board of Directors in accordance with the terms of this Section 1.3, and upon
the request of Parent, the Company shall promptly increase the size of the Board
of Directors, or secure the resignations of such number of directors, as is
necessary to enable Parent's designees to be elected to the Board of Directors
in accordance with the terms of this Section 1.3, and shall take all actions
available to the Company to cause Parent's designees to be so elected (the date
Parent's designees are elected to the Board of Directors being referred to as
the "Appointment Date"). At such time, the Company shall, if requested by
Parent, take all actions available to it to cause persons designated by Parent
to constitute at least the same percentage (rounded up to the next whole number)
as is on the Board of Directors of (i) each committee of the Board of Directors,
(ii) each board of directors (or similar body) of each Subsidiary of the Company
and (iii) each committee (or similar body) of each such board.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under Section 1.3(a), and shall
include in the Schedule 14D-9 mailed to stockholders with the Offer Documents
promptly after the commencement of the Offer (or an amendment thereof or an
information statement pursuant to Rule 14f-1 if Purchaser has not theretofore
designated directors) such information with respect to the Company and its
officers and directors as is required under Section 14(f) and Rule 14f-1 in
order to enable Parent's designees to be elected or appointed to the Board of
Directors immediately after the purchase of and payment for any Shares by
Purchaser. Parent or Purchaser shall supply the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and
5
<PAGE> 12
affiliates required by such Section 14(f) and Rule 14f-1. The provisions of this
Section 1.3(b) are in addition to and shall not limit any rights which
Purchaser, Parent or any of their respective affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election of
directors or otherwise.
(c) If Parent's designees are elected or appointed to the
Board of Directors, subject to the other terms of this Agreement until the
Effective Time, the Board of Directors shall have at least one director who is a
director on the date hereof and who is neither an officer of the Company nor a
designee, stockholder, affiliate or associate (within the meaning of the federal
securities laws) of Parent (one or more of such directors, the "Independent
Directors"), provided that, if no Independent Directors remain, the other
directors shall designate one person to fill one of the vacancies who shall not
be either an officer of the Company or a designee, shareholder, affiliate or
associate of Parent and such person will be deemed to be an Independent Director
for purposes of this Agreement. Notwithstanding anything in this Agreement to
the contrary, if Parent's designees are elected to the Company's Board of
Directors, after the acceptance for payment of Shares pursuant to the Offer and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required to (i) amend or terminate this Agreement
on behalf of the Company, (ii) exercise or waive any of the Company's rights,
benefits or remedies hereunder, if such exercise or waiver materially and
adversely affects holders of Shares other than Parent or Purchaser, (iii) extend
the time for performance of Purchaser's obligations hereunder or (iv) take any
other action by the Company under or in connection with this Agreement required
to be taken by the Board of Directors, if such action materially and adversely
affects holders of Shares other than Parent or Purchaser.
Section 1.4 The Merger. Upon the terms and subject to the conditions
of this Agreement and Delaware Law, at the Effective Time, Purchaser will be
merged with and into the Company (the "Merger"), the separate corporate
existence of Purchaser will cease, and the Company will continue as the
surviving corporation. The Company as the surviving corporation after the Merger
hereinafter sometimes is referred to as the "Surviving Corporation."
Section 1.5 Effective Time. The parties hereto shall cause a
Certificate of Merger to be executed and filed on the Closing Date (or on such
other date as Parent and the Company may agree) with the Secretary of State of
the State of Delaware (the "Secretary of State") in such form as required by,
and executed in accordance with, the relevant provisions of the Delaware Law.
The Merger will become effective on the date on which the Certificate of Merger
is duly filed with the Secretary of State or such time as is agreed upon by the
parties and specified in the Certificate of Merger, and such time is hereinafter
referred to as the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing") shall
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of all of
the conditions set forth in Article VII hereof (the "Closing Date"), at the
offices of Warner, Norcross & Judd LLP, 900 Old Kent Building, 111
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<PAGE> 13
Lyon Street, N.W., Grand Rapids, Michigan 49503, unless another date or place is
agreed to in writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving Corporation. The
directors of Purchaser immediately before the Effective Time will be the initial
directors of the Surviving Corporation, and the officers of the Company
immediately before the Effective Time will be the initial officers of the
Surviving Corporation, in each case until their successors are duty elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and the Bylaws of the Surviving
Corporation. If, at the Effective Time, a vacancy exists on the Board of
Directors or in any office of the Surviving Corporation, such vacancy may
thereafter be filled in the manner provided by law.
Section 1.8 Effect of the Merger. At the Effective Time, the effect of
the Merger will be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Purchaser will vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Purchaser will become the debts,
liabilities and duties of the Surviving Corporation.
Section 1.9 Subsequent Actions. If, at any time after the Effective
Time, the 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 to vest, perfect or confirm of record or otherwise in the
Surviving Corporation, its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Purchaser acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or Purchaser, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, 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 the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.10 Certificate of Incorporation; Bylaws.
(a) At the Effective Time the Certificate of Incorporation of
the Company, as in effect immediately before the Effective Time, will be the
Certificate of Incorporation of the Surviving Corporation and will be amended to
read in its entirety as set forth in Exhibit A hereto until thereafter amended
as provided by law and such Certificate of Incorporation.
(b) At the Effective Time the Bylaws of Purchaser, as in
effect immediately before the Effective Time, will be the Bylaws of the
Surviving Corporation until
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<PAGE> 14
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-Laws.
Section 1.11 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") as promptly as
practicable following the acceptance for payment and purchase of Shares by
Purchaser pursuant to the Offer for the purpose of considering and taking action
upon the approval of the Merger and the adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy
or information statement relating to the Merger and this Agreement and use its
reasonable best efforts, subject to the terms of this Agreement, (x) to obtain
and furnish the information required to be included by the SEC in the Proxy
Statement and, after consultation with Parent, to respond promptly to any
comments made by the SEC with respect to the preliminary proxy or information
statement and cause a definitive proxy or information statement, including any
amendment or supplement thereto (the "Proxy Statement") to be mailed to its
stockholders, provided that no amendment or supplement to the Proxy Statement
will be made by the Company without consultation with Parent and its counsel and
(y) to obtain the necessary approvals of the Merger and this Agreement by its
stockholders, and
(iii) subject to the terms of this Agreement, include in
the Proxy Statement the recommendation of the Board of Directors that
stockholders of the Company vote in favor of the approval of the Merger and the
adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all of the
Shares then owned by it, Purchaser or any of its other Subsidiaries and
affiliates in favor of the approval of the Merger and the approval and adoption
of this Agreement.
Section 1.12 Merger Without Meeting of Stockholders. Notwithstanding
Section 1.11 hereof, if Parent, Purchaser and any other Subsidiaries of Parent
shall acquire in the aggregate at least 90% of the outstanding Shares, pursuant
to the Offer or otherwise, the parties hereto shall, at the request of Parent
and subject to Article VII, take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after such acquisition,
without a meeting of stockholders of the Company, in accordance with Section 253
of Delaware Law.
8
<PAGE> 15
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Purchaser, the
Company or the holder of any of the following securities:
(a) Each Share issued and outstanding immediately before the
Effective Time (other than any Shares to be cancelled pursuant to Section 2.1(b)
and any Dissenting Shares) will be cancelled and extinguished and be converted
into the right to receive the Offer Price payable to the holder thereof, without
interest (the "Merger Consideration"), upon surrender of the certificate
formerly representing such Share in the manner provided in Section 2.3. All such
Shares, when so converted, will no longer be outstanding and will be canceled
automatically, retired and cease to exist. Each holder of a certificate
representing any such Shares will cease to have any rights with respect thereto,
except the right to receive the Merger Consideration therefor upon the surrender
of such certificate in accordance with Section 2.3, without interest.
(b) Each Share held in the treasury of the Company and each
Share owned by Parent or any direct or indirect wholly owned subsidiary of
Parent immediately before the Effective Time will be cancelled and extinguished,
and no payment or other consideration will be made with respect thereto.
(c) Each share of common stock, no par value, of Purchaser
issued and outstanding immediately before the Effective Time will thereafter
represent one validly issued, fully paid and nonassessable share of common
stock, no par value, of the Surviving Corporation.
Section 2.2 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any Shares held by a holder who has demanded and perfected his demand
for appraisal of his Shares in accordance with Delaware Law (including but not
limited to Section 262 thereof) and as of the Effective Time has neither
effectively withdrawn nor lost his right to such appraisal ("Dissenting
Shares"), will not be converted into or represent a right to receive cash
pursuant to Section 2.1, but the holder thereof will be entitled to only such
rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of Section 2.2(a), if any
holder of Shares who demands appraisal of his Shares under Delaware Law
effectively withdraws or loses (through failure to perfect or otherwise) his
right to appraisal, then as of the Effective Time or the occurrence of such
event, whichever later occurs, such holder's Shares will automatically be
converted into and represent only the right to receive the Merger Consideration
as provided in
9
<PAGE> 16
Section 2.1(a), without interest thereon, upon surrender of the certificate or
certificates representing such Shares pursuant to Section 2.3.
(c) The Company shall give Purchaser prompt notice of any
written demands for appraisal or payment of the fair value of any Shares,
withdrawals of such demands, and any other instruments served pursuant to
Delaware Law received by the Company. The Company shall not voluntarily make any
payment with respect to any demands for appraisal and shall not, except with the
prior written consent of Purchaser, settle or offer to settle any such demands.
Section 2.3 Surrender of Shares; Stock Transfer Books.
(a) Before the Effective Time, Purchaser shall designate the
Company's transfer agent or another bank or trust company reasonably acceptable
to the Company to act as agent for the holders of Shares in connection with the
Merger (the "Exchange Agent") to receive the funds necessary to make the
payments contemplated by Section 2.1(a). At the Effective Time, Purchaser shall
deposit, or cause to be deposited, in trust with the Exchange Agent for the
benefit of holders of Shares the aggregate consideration to which such holders
shall be entitled at the Effective Time pursuant to Section 2.1(a).
(b) Each holder of a certificate or certificates representing
any Shares cancelled upon the Merger, which immediately prior to the Effective
Time represented outstanding Shares (the "Certificates"), and whose Shares were
converted pursuant to Section 2.1(a), may thereafter surrender such Certificate
or Certificates to the Exchange Agent, as agent for such holder, to effect the
surrender of such Certificate at Certificates on such holder's behalf for a
period ending 180 days after the Effective Time. Purchaser agrees that promptly
after the Effective Time it will cause the distribution to holders of record of
Shares as of the Effective Time of appropriate materials to facilitate such
surrender, including (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 a form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon the surrender of Certificates,
together with a letter of transmittal duly executed and such other documents as
may be reasonably required by the Exchange Agent, Purchaser shall cause the
Exchange Agent to pay the holder of such certificates in exchange therefor cash
in an amount equal to the Merger Consideration multiplied by the number of
Shares represented by such Certificate. Until so surrendered, each Certificate
(other than Certificates representing Dissenting Shares and Certificates
representing Shares held by Purchaser or in the treasury of the Company) will
represent solely the right to receive the aggregate Merger Consideration
relating thereto.
(c) If payment of the Merger Consideration in respect of
cancelled Shares is to be made to a Person other than the Person in whose name a
surrendered Certificate or instrument is registered, it will be a condition to
such payment that the Certificate or instrument
10
<PAGE> 17
so surrendered will be properly endorsed with signatures guaranteed and
otherwise be in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the Certificate or
instrument surrendered or shall have established to the satisfaction of
Purchaser or the Exchange Agent that such tax either has been paid or is not
applicable.
(d) At the Effective Time, the stock transfer books of the Company
will be closed and there will not be any further registration of transfers of
shares of any shares of capital stock thereafter on the records of the Company.
From and after the Effective Time, the holders of certificates evidencing
ownership of the Shares outstanding immediately prior to the Effective Time will
cease to have any rights with respect to such Shares, except as otherwise
provided for herein or by applicable law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they will be cancelled
and exchanged for cash as provided in this Article II. No interest will accrue
or be paid on any cash payable upon the surrender of a Certificate or
Certificates which immediately before the Effective Time represented outstanding
Shares.
(e) Promptly following the date which is 180 days after the
Effective Time, the Surviving Corporation will be entitled to require the
Exchange Agent to deliver to it any cash (including any interest received with
respect thereto), Certificates and other documents in its possession relating to
the Transactions, which had been made available to the Exchange Agent and which
have not been disbursed to holders of Certificates, and thereafter such holders
will be entitled to look to the Surviving Corporation (subject to abandoned
property, escheat or similar laws) only as general creditors thereof with
respect to the Merger Consideration payable upon due surrender of their
Certificates, without any interest thereon. Notwithstanding the foregoing
neither the Surviving Corporation nor the Exchange Agent will be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) The Merger Consideration paid in the Merger will be net to the
holder of Shares in cash, subject to reduction only for any applicable federal,
state, local or foreign tax withholding or, as set forth in Section 2.3(c),
stock transfer taxes payable by such holder. To the extent that amounts are so
deducted and withheld by Parent or the Exchange Agent, (i) such amounts shall be
paid over to the applicable tax authority in a commercially reasonable manner
and time and (ii) such amounts shall be treated for purposes of this Agreement
as having been paid to the holder of the Shares in respect of which such
deduction and withholding was made.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit, reasonably satisfactory in form and
content to Parent, of that fact by the person claiming such Certificate to be
lost, stolen or destroyed and, if required by Parent, the posting by such person
of a bond in such reasonable amount as Parent may direct as indemnity against
any claim that may be made with respect to such Certificate, the Exchange
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Agent or the Surviving Corporation shall issue in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration to which such person is
entitled under this Article II.
Section 2.4 Stock Plans.
(a) As soon as practicable following the date of this
Agreement, the Board of Directors (or, if appropriate, any committee
administering the Easco, Inc. Stock Option Plan dated December 17, 1993, as
amended effective November 24, 1996, and any other stock-based incentive plan or
arrangement of the Company (collectively, the "Stock Plans")) shall adopt such
resolutions or take such other actions as are required to provide for the
cancellation of all outstanding options to purchase Shares issued under the
Stock Plans (the "Options") upon the Effective Time (including but not limited
to the approval of such cancellation in accordance with the terms and conditions
set forth in that certain No-Action Letter, dated January 12, 1999, issued by
the SEC to Skadden, Arps, Slate, Meagher & Flom LLP for the purpose of ensuring
that such cancellation shall be exempt under Rule 16b-3 promulgated under the
Exchange Act), in exchange for a cash payment of an amount equal the product of
(x) the excess, if any, of the Offer Price over the per share exercise price
thereof and (y) the number of Shares subject to such Options for which such
Option shall not theretofore have been exercised, whether or not then vested and
exercisable.
(b) Each outstanding unvested restricted Share issued pursuant
to a Stock Plan (each, a "Restricted Share") shall, immediately prior to the
Effective Time, be canceled and be converted into, and become the right to
receive, the Offer Price which shall be payable in accordance with Section 2.1.
(c) All amounts payable pursuant to this Section 2.4 shall be
subject to any required withholding of taxes and shall be paid without interest.
(d) The Board of Directors (or, if appropriate, any committee
administering the Stock Plans) shall adopt such resolutions or take such actions
as are required to terminate the Stock Plans as of the Effective Time, to delete
as of the Effective Time the provision in any other benefit plan of the Company
providing for the issuance, transfer or grant of capital stock of the Company or
any interest in respect of capital stock of the Company and to ensure that
following the Effective Time, no holder of Options or any participant in any
Stock Plan or other Company benefit plan shall have any right thereunder to
acquire capital stock of the Company or the Surviving Corporation.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed on the Company Disclosure Schedule (which shall
include a specific reference to the Section of this Agreement to which such
disclosure relates, with no disclosure to be deemed to apply to any other
Section of this Agreement to which it would not be readily apparent to a
reasonable person that such disclosure applies), the Company represents and
warrants to Parent and Purchaser as follows:
Section 3.1 Organization. (a) Each of the Company and its Subsidiaries
is a corporation, partnership or other entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority,
and governmental approvals would not, individually or in the aggregate, have a
Company Material Adverse Effect. As used in this Agreement, "Subsidiary" means,
with respect to any party, any foreign or domestic corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding such
partnerships where such party or any Subsidiary of such party do not have a
majority of the voting interest in such partnership) or (ii) at least a majority
of the securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries. As used in
this Agreement, "Company Material Adverse Effect" means any change in or effect
on the business of the Company or its Subsidiaries, taken as a whole, that could
reasonably be expected to be, individually or in the aggregate with any other
change or effect, materially adverse to (i) the business, operations, properties
(including intangible properties), condition (financial or otherwise), results
of operations, assets or liabilities of the Company or its subsidiaries, taken
as a whole, (other than any change or effect generally applicable to the
industry in which the Company and its Subsidiaries operate or changes in general
economic conditions) or (ii) the ability of the Company to consummate any of the
Transactions or to perform its obligations under this Agreement. The Disclosure
Schedule delivered to Parent prior to the execution of this Agreement (the
"Company Disclosure Schedule"), sets forth a complete list of the Company's
Subsidiaries.
(b) The Company and each of its Subsidiaries is duly qualified
or licensed to do business and in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate have a Company Material Adverse Effect. The
Company does not own any equity interest in any corporation or other entity.
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(c) The Company has delivered to Parent complete and correct
copies of its Certificate of Incorporation and Bylaws and the Certificate of
Incorporation and Bylaws (or similar organizational documents) of each of its
Subsidiaries, in each case as amended to the date of this Agreement.
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 40,000,000 shares of Common Stock and 1,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock" ). As of the
close of business on July 27, 1999, (i) 9,673,224 Shares are issued and
outstanding, (ii) no shares of Preferred Stock are issued and outstanding, (iii)
1,027,798 Shares are issued and held in the treasury of the Company, and (iv) a
total of 836,475 Shares are issuable pursuant to outstanding Options. Section
3.2(a) of the Company Disclosure Schedule discloses (i) the number of shares
subject to each outstanding Option and the exercise price thereof and (ii) the
number of non-vested Restricted Shares. All the outstanding shares of the
Company's capital stock are, and all Shares which may be issued pursuant to the
exercise of outstanding Options will be, when issued in accordance with the
terms thereof, duly authorized, validly issued, fully paid and non-assessable
and free of preemptive rights with respect thereto. Except as set forth above,
there are no (i) shares of capital stock of the Company authorized, issued or
outstanding, (ii) existing options, warrants, calls, preemptive rights,
subscription or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company or
any of its Subsidiaries, obligating the Company or any of its Subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or other equity interest in the Company or any of its Subsidiaries
or securities convertible into or exchangeable for such share or equity
interests, or obligating the Company or any of its Subsidiaries to grant extend
or enter into any such option, warrant, call, subscription or other right,
agreement, arrangement or commitment and (iii) outstanding contractual
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire or dispose of any Shares, or the capital stock of the Company
or of any Subsidiary or affiliate of the Company or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity.
(b) All of the outstanding shares of capital stock of each of
the Subsidiaries are beneficially owned by the Company, directly or indirectly,
and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its Subsidiaries
free and clear of all liens, charges, security interests, options, claims,
mortgages, pledges, or other encumbrances and restrictions of any nature
whatsoever.
(c) There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of the capital stock of the Company or any of the
Subsidiaries.
(d) There is no outstanding Indebtedness of the Company or any
of its Subsidiaries. No Indebtedness of the Company or its Subsidiaries contains
any restriction upon (i) the prepayment of such Indebtedness, (ii) the
incurrence of Indebtedness by the Company or its
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<PAGE> 21
Subsidiaries, respectively, or (iii) the ability of the Company or its
Subsidiaries to grant any liens on its properties or assets. Section 3.2 of the
Company Disclosure Schedule sets forth the amount of principal and unpaid
interest outstanding as of June 30, 1999 under each instrument evidencing
indebtedness of the Company and its Subsidiaries which will accelerate or become
due or result in a right of redemption or repurchase on the part of the holder
of such indebtedness (with or without due notice or lapse of time) as a result
of this Agreement, the Merger or the other Transactions. For purposes of this
Agreement "Indebtedness" shall include (i) all indebtedness for borrowed money
or for the deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (ii) any other indebtedness which is
evidenced by a note, bond, debenture or similar instrument, (iii) all
obligations under financing leases, (iv) all obligations in respect of
acceptances issued or created, (v) all liabilities secured by any lien on any
property, and (vi) all guarantee obligations.
Section 3.3 Authorization; Validity of Agreement; Company Action. (a)
The Company has full corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions. The execution, delivery and
performance by the Company of this Agreement, and the consummation by it of the
Transactions, have been duly and validly authorized by the Board of Directors by
unanimous vote, and no other corporate action on the part of the Company is
necessary to authorize the execution and delivery by the Company of this
Agreement and the consummation by it of the Transactions, except that
consummation of the Merger may require approval of the Company's stockholders as
contemplated by Section 1.11. This Agreement has been duly executed and
delivered by the Company and, assuming due and valid authorization, execution
and delivery hereof by Parent and Purchaser, is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) Neither the provisions of Section 203 of Delaware Law nor,
to the knowledge of the Company, any other takeover laws of any state or
jurisdiction are applicable to this Agreement or the other Transactions,
including the Merger and the purchase of Shares in the Offer. The affirmative
vote of the holders of a majority of the outstanding shares of Common Stock is
the only vote of the holders of any class or series of the Company's capital
stock which may be necessary to approve this Agreement and the other
Transactions, including the Merger.
Section 3.4 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the filing
of the Certificate of Merger pursuant to Delaware Law, none of the execution,
delivery or performance of this Agreement by the Company, the consummation by
the Company of the Transactions or compliance by the Company with any of
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<PAGE> 22
the provisions hereof will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation, the Bylaws or similar
organizational documents of the Company or any of its Subsidiaries, (ii) require
any filing with, or permit, authorization, consent or approval of, any court,
arbitral tribunal, administrative agency or commission or other governmental or
other regulatory authority or agency (a "Governmental Entity"), (iii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound (the "Company Agreements") or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any of its
Subsidiaries or any of their properties or assets, except in the case of clauses
(ii), (iii) or (iv) where failure to obtain such permits, authorizations,
consents or approvals or to make such filings, or where such violations,
breaches or defaults would not, individually or in the aggregate, have a Company
Material Adverse Effect.
Section 3.5 SEC Reports and Financial Statements. The Company has
timely filed with the SEC, and has heretofore made available to Parent, and with
respect to filings not yet due, will timely file and promptly make available to
Parent, true and complete copies of all forms, reports, schedules, statements
and other documents required to be filed by it since January 1, 1996, under the
Exchange Act or the Securities Act of 1933, as amended (the "Securities Act")
(as such documents have been amended since the time of their filing,
collectively, the "Company SEC Documents"). As of their respective dates, or if
amended, as of the date of the last such amendment, the Company SEC Documents,
including any financial statements or schedules included therein (a) did not, or
will not, with respect to filings not yet due, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied, or will comply,
with respect to filings not yet due, in all material respects with the
applicable requirements of the Exchange Act or the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. None of
the Company's Subsidiaries is required to file any forms, reports or other
documents with the SEC. Each of the consolidated financial statements included
in the Company SEC Documents (the "Financial Statements") (i) has been prepared,
or will be prepared, with respect to filings not yet due, from, and is in
accordance with, the books and records of the Company and its consolidated
Subsidiaries, (ii) complies, or will comply, with respect to filings not yet
due, in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, (iii) has
been prepared, or will be prepared, with respect to filings not yet due, in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto and subject, in the case of unaudited
statements, to normal year-end audit adjustments) and (iv) fairly presents, or
will fairly present, with respect to filings not yet due, the consolidated
financial position and the consolidated results of operations and cash flows
(and
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changes in financial position, if any) of the Company and its consolidated
Subsidiaries as of the times and for the periods referred to therein.
Section 3.6 Absence of Certain Changes. From January 1, 1999 through
the date of this Agreement, (i) the Company and its Subsidiaries have conducted
their respective businesses only in the ordinary and usual course, (ii) there
has not occurred any event, change or effect (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having, individually or in the aggregate, a Company Material Adverse Effect, and
(iii) neither the Company nor any of its Subsidiaries has taken any of the
actions that if taken after the date of this Agreement would be prohibited by
Section 5.2 hereof.
Section 3.7 No Undisclosed Liabilities. Except (a) as disclosed in the
balance sheet contained in the most recent Financial Statements included in the
Company SEC Documents filed prior to the date of this Agreement (the "Recent
Balance Sheet") and (b) for liabilities and obligations (i) incurred in the
ordinary course of business and consistent with past practice since the date of
the Recent Balance Sheet, (ii) pursuant to the terms of this Agreement, or (iii)
as disclosed in Section 3.7 of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would,
individually or in the aggregate have a Company Material Adverse Effect or would
be required to be reflected or reserved against on a consolidated balance sheet
of the Company and its Subsidiaries (including the notes thereto) prepared in
accordance with GAAP as applied in preparing the Recent Balance Sheet.
Section 3.8 Information in Proxy Statement. The Proxy Statement, if any
(or any amendment thereof or supplement thereto), will, at the date it or any
amendment or supplement is filed with the SEC, mailed to Company stockholders
and at the time of the meeting of Company stockholders to be held in connection
with the Merger, not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation is made by the Company with
respect to statements made therein based on information supplied in writing by
Parent or Purchaser for inclusion in the Proxy Statement. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
Section 3.9 Opinion of Financial Advisor. The Board of Directors has
received the opinion of Wasserstein Perella & Co., Inc., dated July 27, 1999 to
the effect that, as of such date, the consideration to be received in the Offer
and the Merger by the Company's stockholders is fair from a financial point of
view, a copy of which opinion has been delivered to Parent and Purchaser.
Section 3.10 Brokers or Finders. The Company represents, as to itself
and its Subsidiaries and affiliates, that, except for Wasserstein Perella & Co.,
Inc., no agent, broker, investment banker, financial advisor or other firm or
person is or will be entitled to any brokers'
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or finder's fee or any other commission or similar fee from the Company or any
of its Subsidiaries in connection with any of the transactions contemplated by
this Agreement.
Section 3.11 Litigation. As of the date hereof, there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries or any of
their respective properties or assets before any Governmental Entity which,
individually or in the aggregate, would have a Company Material Adverse Effect,
nor, to the knowledge of the Company, are there any facts, circumstances or
developments that are reasonably likely to give rise to any such suit, claim,
action, proceeding or investigation. Neither the Company nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, has had, or in the future would
reasonably be expected to have, a Company Material Adverse Effect.
Section 3.12 Compliance with Applicable Law. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses, except such permits, licenses, variances, exceptions,
orders or approvals the failure of which to hold, individually or in the
aggregate, has not had, or would reasonably be expected not to have, a Company
Material Adverse Effect (the "Company Permits"). The Company and its
Subsidiaries are in compliance in all material respects with the terms of the
Company Permits. The businesses of the Company and its Subsidiaries have not
been and are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity except for violations or possible
violations which have not had, or would reasonably be expected not to have, a
Company Material Adverse Effect. As of the date hereof, no investigation or
review by any Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the knowledge of the Company, threatened nor, to
the knowledge of the Company, has any Governmental Entity indicated an intention
to conduct the same.
Section 3.13 Taxes. Each of the Company and its Subsidiaries has filed,
or caused to be filed, all material federal, state, local and foreign income and
other tax returns required to be filed by it, has paid or withheld, or caused to
be paid or withheld, all taxes of any nature whatsoever, with any related
penalties, interest and liabilities (any of the foregoing being referred to
herein as a "Tax"), that are shown on such tax returns as due and payable, or
otherwise required to be paid, other than such Taxes as are being contested in
good faith and for which adequate reserves have been established or such Taxes,
the failure of which to be paid or withheld would not have a Company Material
Adverse Effect. There are no claims or assessments pending against the Company
or its Subsidiaries for any alleged deficiency in any Tax, and the Company does
not know of any threatened Tax claims or assessments against the Company or any
of its Subsidiaries which if upheld could, individually or on the aggregate,
have a Company Material Adverse Effect. There is no material deferred
intercompany gain within the meaning of the Treasury regulations promulgated
under section 1502 of the Internal Revenue Code of 1986, as amended. There are
no waivers or extensions of any applicable statue of limitations to assess any
Taxes. All returns filed with respect to Taxes are true and correct in all
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material respects, except for such returns, the failure of which to be so true
and correct would not have a Company Material Adverse Effect. There are no
outstanding requests for any extension of time within which to file any return
or within which to pay any Taxes shown to be due on any return.
Section 3.14 ERISA. The Company has delivered to Parent a correct and
complete list and copy of each Company Plan and each Company Multiemployer Plan.
Each Company Plan complies in all material respects with the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code and all other applicable statutes and governmental rules and
regulations, and (i) no "reportable event" (within the meaning of Section 4043
of ERISA) has occurred with respect to any Company Plan, (ii) neither the
Company nor any of its ERISA Affiliates has withdrawn, completely or partially,
from any Company Multiemployer Plan or instituted, or is currently considering
taking, any action to do so, and (iii) no action has been taken, or is currently
being considered to terminate any Company Plan subject to Title IV of ERISA.
Except as provided in the Recent Balance Sheet, no Company Plan, or any trust
created thereunder, has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, which would,
individually or in the aggregate, have a Company Material Adverse Effect. There
are no actions, suits or claims pending or, to the knowledge of the company,
threatened (other than routine claims for benefits) with respect to any Company
Plan which would have a Company Material Adverse Effect. Neither the Company nor
any of its ERISA Affiliates has incurred or reasonably expects to incur any
liability under or pursuant to Title IV or ERISA which would, individually or in
the aggregate, have a Company Material Adverse Effect. No prohibited
transactions described in Section 406 of ERISA or Section 4975 of the Code have
occurred. All Company Plans that are intended to be qualified under Section
401(a) of the Code have been determined by the Internal Revenue Service to be so
qualified, and the Company is not aware of any reason why any such Company Plan
is not so qualified in operation. Neither the Company nor any of its ERISA
Affiliates has been notified by any Company Multiemployer Plan that such Company
Multiemployer Plan is currently in reorganization or insolvency under and within
the meaning of Section 4241 or 4245 of ERISA or that such Company Multiemployer
Plan intends to terminate or has been terminated under Section 4041A of ERISA.
As used herein, (i) "Company Plan" means a "pension plan" (as defined in Section
3(2) of ERISA (other than a Company Multiemployer Plan)) or a "welfare plan" (as
defined in Section 3(1) of ERISA) established or maintained by the Company or
any of its ERISA Affiliates or as to which the Company or any of its ERISA
Affiliates has contributed or otherwise may have any liability; (ii) "Company
Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which the Company or any of its ERISA Affiliates is or
has been obligated to contribute or otherwise may have any liability; and (iii)
"ERISA Affiliate" means (A) any corporation which at any time on or before the
Effective Time is or was a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as the Company, (B) any
partnership, trade or business (whether or not incorporated) which at any time
on or before the Effective Time is or was under common control (within meaning
of Section 414(c) of the Code) with the Company and (C) any entity which at any
time on or before the Effective Time is or was
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a member of the same affiliated service group (within the meaning of Section
414(m) of the Code) as either the Company, any corporation described in clause
(A) of this clause (iii) or any partnership, trade or business described in
clause (B) of this clause (iii). No Company Plan (i) provides health, life
insurance or other welfare benefits to former employees (or their dependents or
beneficiaries) after retirement or termination of employment except as required
by Section 601 et seq. of ERISA or any applicable state law, death benefits or
retirement benefits under any "pension plan" (as defined in section 3(2) of
ERISA), deferred compensation benefits accrued as liabilities on the books of
the Company, any of its Subsidiaries or any ERISA Affiliates or benefits, the
full direct cost of which is borne by the current or former employee (or
beneficiary thereof) and (ii) no Company Plan provides additional benefits or
contains other provisions that would become effective upon or as a result of the
consummation of any of the transactions contemplated herein.
Section 3.15 Environmental Matters. Except as would not reasonably be
expected to have a Company Material Adverse Effect:
(a) the Company and each of its Subsidiaries has obtained and is
in compliance with the terms and conditions of all permits, licenses and other
authorizations required under applicable federal, state and local laws and
regulations as currently in effect relating to pollution or the protection or
clean-up of the environment ("Environmental Laws");
(b) no asbestos requiring abatement, equipment containing
polychlorinated biphenyls above regulated levels or leaking underground or
aboveground storage tanks is contained in or located at, and no release of a
Hazardous Substance (as hereinafter defined) has occurred and remains
outstanding at, any facility that is or has been owned, leased or controlled by
the Company or any of its Subsidiaries;
(c) the Company and each of its Subsidiaries is in compliance with
all applicable Environmental laws; and
(d) neither the Company nor any of its Subsidiaries has received
written notice of any event, condition, circumstance, activity, practice,
incident, action or plan that has resulted in or reasonably threatens to result
in any legal liability to the Company or any of its Subsidiaries under, or
otherwise reasonably forms the basis of any claim, action, suit, proceeding,
hearing or investigation under, any applicable Environmental Laws in any such
case that remains outstanding.
For purposes of this Section 3.15, "Hazardous Substances" means any toxic or
other substance regulated under Environmental Laws, including (i) any "hazardous
substance" as defined in 42 U.S.C. ss. 9601, and (ii) petroleum products,
derivatives, byproducts and other hydrocarbons.
Section 3.16 Labor Matters. (i) Neither the Company nor any of its
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or
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understanding with a labor union or labor organization; (ii) neither the Company
nor any of its Subsidiaries is the subject of any proceeding asserting that it
has committed an unfair labor practice or seeking to compel it to bargain with
any labor union or organization as to wages or conditions of employment; (iii)
there is no strike, work stoppage or other labor dispute involving it or any of
its Subsidiaries pending or, to the Company's knowledge, threatened, except, in
the case of clauses (ii) and (iii), for matters that would not, individually or
in the aggregate, have a Company Material Adverse Effect.
Section 3.17 Intellectual Property. Except as would not reasonably be
expected to have a Company Material Adverse Effect, all patents, patent
applications, registered and unregistered copyrights, trade names, registered
and unregistered trademarks and trademark applications, trade secrets and other
proprietary information of the Company or any of its Subsidiaries (collectively,
"Company Intellectual Property") are owned by or licensed to the Company or any
of its Subsidiaries, free and clear of all liens, charges, security interests,
options, claims, mortgages, pledges or other encumbrances and restrictions of
any nature whatsoever. All Company Intellectual Property consisting of patents,
patent applications, trademarks and trademark applications are identified on
Schedule 3.17 of the Company Disclosure Schedule and, except as set forth
therein, have been duly registered and filed in and issued by the United States
Patent and Trademark Office or the corresponding offices of other countries, and
have been properly maintained and renewed in accordance with all applicable laws
and regulations in the United States and each such country. Use of Company
Intellectual Property by the Company and its Subsidiaries does not, and use by
Parent or its Subsidiaries at and following the Effective Time (subject to the
filing of renewal notices in the ordinary course following the Effective Time)
will not, require the consent of any other Person and the same are freely
transferable (except as otherwise provided by law). Except as would not
reasonably be expected to have a Company Material Adverse Effect and except as
set forth in Schedule 3.17 of the Company Disclosure Schedule, (i) no other
Person has an interest in or right or license to use, or the right to license
any other Person to use, any Company Intellectual Property, (ii) there are no
claims or demands of any other Person pertaining thereto and no proceeding has
been instituted, is pending or, to the knowledge of the company, threatened
which challenges the Company's or its Subsidiaries' rights in respect thereof
which, if resolved adversely to the Company, would materially impair the use or
value of such Company Intellectual Property before or after the Effective Time
or would, individually or in the aggregate, have a Company Material Adverse
Effect and (iii) to the Company's knowledge, no Company Intellectual Property is
being infringed by another Person or is subject to any outstanding order,
decree, ruling, charge, injunction, judgment or stipulation.
Section 3.18 Year 2000 Matters. All information systems, computer
systems and electronic systems of the Company and each of its Subsidiaries are
Millennium Compliant, except for failures to be Millennium Compliant as
individually or in the aggregate would not have a Company Material Adverse
Effect. "Millennium Compliant" means the quality of a system to provide all of
the following functions: (i) handle date information before, during and after
January 1, 2000, including accepting date input, providing date output, and
performing calculations on dates or portions of dates; (ii) function accurately
and without interruption before, during and
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after January 1, 2000, without any change in operations associated with the
advent of the new century; (iii) respond to two-digit year-date input in a way
that resolves the ambiguity as to century in a disclosed, defined, and
predetermined manner; and (iv) store and provide output of date information in
ways that are unambiguous as to century.
Section 3.19 Customers and Suppliers. During the 18 months prior to the
date hereof, there has not been any material adverse change in the business
relationship (including notices of reductions in purchases from or sales to, the
Company), and there has been no material dispute or complaint, between the
Company or any Subsidiary (on the one part) and any Major Customer or Major
Supplier (on the other part), other than routine disputes or complaints handled
in the ordinary course of business. A "Major Customer" means one of the 20
largest customers of the Company and its Subsidiaries in terms of revenue earned
during each of the two most recently completed fiscal years and the portion of
the current fiscal year prior to the date of this Agreement and a "Major
Supplier" means one of the 20 largest suppliers of Company and its Subsidiaries
in terms of purchases during each of the two most recently completed fiscal
years and the portion of the current fiscal year prior to the date of this
Agreement.
Section 3.20 Title to and Condition of Assets. The Company and each of
its Subsidiaries have good, sufficient, and marketable title to all of their
properties and assets, whether real, personal, or a combination thereof, free
and clear of all liens, charges, security interests, options, claims, mortgages,
pledges or other encumbrances and restrictions of any nature whatsoever, except
for such imperfections of title, easements, restrictions, and encumbrances, if
any, as are not material in character, amount, or extent, and do not materially
detract from the value, or materially interfere with the present use, of the
properties subject thereto or affected thereby, except liens for real estate
taxes not yet due and payable. All of the personal property owned or used by the
Company is in good condition and repair (normal wear and tear excepted). With
respect to each parcel of real property owned, legally and beneficially, by the
Company or the Company's Subsidiaries ("Company Real Property"):
(a) No Encroachments. Except for those encroachments that have
been insured over by a policy of title insurance, no building or improvement to
the Company Real Property encroaches on any easement or property owned by
another Person. No building or property owned by another Person encroaches on
the Company Real Property or on any easement benefitting the Company Real
Property. No claim of encroachment has been asserted by any Person with respect
to any parcel of the Company Real Property.
(b) Zoning. Neither the Company, any of the Company's
subsidiaries, nor the Company Real Property is in material violation of any
zoning regulation, building restriction, restrictive covenant, ordinance, or
other law, order, regulation, or requirement relating to the Company Real
Property.
(c) Buildings. All buildings and improvements to the Company
Real Property are in good condition (normal wear and tear excepted), are
structurally sound and are not in need
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of material repairs, are fit for their intended purposes, and are adequately
serviced by all utilities necessary for the effective operation of business as
presently conducted at that location.
(d) No Condemnation. None of the Company Real Property is the
subject of any condemnation action. There is no proposal under active
consideration by any public or governmental authority or entity to acquire the
Company Real Property for any governmental purpose.
Section 3.21 Material Contracts. Schedule 3.21 of the Company
Disclosure Schedule sets forth all Company Agreements of the following types:
(a) any collective bargaining agreement;
(b) any Company Agreement with any employee, officer, or
director of the Company or any Subsidiary, or any of the respective affiliates
of such individuals not terminable by the Company or a Subsidiary without
liability on 90 or fewer days' notice;
(c) any Company Agreement with a sales representative,
manufacturer's representative, distributor, dealer, broker, sales agency,
advertising agency, or other Person engaged in sales, distributing or
promotional activities, or any Company Agreement to act as one of the foregoing
on behalf of any Person not terminable by the Company or a Subsidiary without
liability on 90 or fewer days' notice;
(d) any Company Agreement that either: (i) requires a payment of
cash or other property by any party in excess of, or a series of payments that
in the aggregate exceed, $250,000, or provides for the delivery of goods or
performance of services, or any combination thereof, having a value in excess of
$250,000; or (ii) has a term, or requires the performance of any obligations
over a period, in excess of one (1) year;
(e) any Company Agreement pursuant to which the Company or any
Subsidiary grants or is granted any license, rights of joint use, or other
rights to use any of the Company's or any Subsidiary's material assets;
(f) any Company Agreement pursuant to which the Company or any
Subsidiary has made or shall make loans or advances, or has or shall have
incurred debts or become a guarantor or surety, or has or shall have pledged its
credit on, or otherwise become responsible with respect to, any undertaking of
any third party (except for the negotiation or collection of negotiable
instruments in transactions in the ordinary course of business and loans or
advances to employees in the ordinary course of business);
(g) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement, lease of real property or personal property, loan
commitment, or other Company Agreement relating to the borrowing of funds,
extension of credit, or financing;
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(h) any Company Agreement, irrespective of whether fully
performed, relating to any acquisition or disposition of the Company, any
Subsidiary, or any predecessor in interest thereof, or any acquisition or
disposition of any division, line of business, or real property (whether by
stock or asset purchase, merger, consolidation, or otherwise) entered into since
July 1, 1994;
(i) any Company Agreement involving a partnership, joint
venture or other similar undertaking;
(j) any Company Agreement involving any restrictions with
respect to the geographical area of operations or scope or type of business of
the Company or any Subsidiary;
(k) any power of attorney or agency agreement or arrangement
with any Person pursuant to which such Person is granted the authority to act
for, or on behalf of, the Company or any Subsidiary, or the Company or any
Subsidiary is granted the authority to act for, or on behalf of, any Person; and
(l) any Company Agreement not made in the ordinary course of
business and consistent with past practice, or any Company Agreement not
specified above that is material to the Company or any Subsidiary.
The Company has delivered or made available to Parent a copy
of each written Company Agreement and a written description of each oral Company
Agreement specified above. Neither the Company nor any Subsidiary is in default
in any respect under any Company Agreement, and there has not occurred any event
which, with the lapse of time or the giving of notice or both, would constitute
such a default, except, in both cases, for such defaults as individually or in
the aggregate would not have a Company Material Adverse Effect.
Section 3.22 No Other Representations or Warranties. Except
for the representations and warranties contained in this Article III, the
Stockholders Agreements or the letter agreement dated of even date herewith
provided by Caradon plc to the Company, neither the Company nor any other Person
makes any other express or implied representation or warranty on behalf of the
Company or any of its affiliates, and for the avoidance of doubt, neither the
Company nor any of its affiliates makes any express or implied representation or
warranty with respect to information contained in the confidential memorandum
prepared by the Company in conjunction with Wasserstein Perella & Co. and
delivered to Parent or its representatives in May 1999, including any
projections set forth therein, or any projections otherwise provided to Parent
or the Purchaser.
Section 3.23 Full Disclosure. No representation or warranty of
the Company set forth in this Agreement and no statement contained in any
certificate or writing (including the Company Disclosure Schedule) delivered to
Parent or Purchaser as contemplated by this Agreement or in connection with the
Transactions, contains or will contain any untrue statement
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of material fact or omits or will omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and
warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization.
Section 4.2 Authorization; Validity of Agreement; Necessary
Action. Each of Parent and Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the Merger and the other
Transactions. The execution, delivery and performance by Parent and Purchaser of
this Agreement and the consummation by them of the Transactions have been duly
and validly authorized by the respective boards of directors of Parent and
Purchaser and by Parent as the sole stockholder of Purchaser, and no other
corporate action on the part of Parent or Purchaser is necessary to authorize
the execution and delivery by Parent and Purchaser of this Agreement and the
consummation by them of the Transactions. This Agreement has been duly executed
and delivered by Parent and Purchaser and, assuming due and valid authorization,
execution and delivery hereof by the Company, is a valid and binding obligation
of each of Parent and Purchaser enforceable against each of them in accordance
with its terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the HSR Act, and
the filing of the Certificate of Merger pursuant to Delaware Law, none of the
execution, delivery or performance of this Agreement by Parent or Purchaser, the
consummation by Parent or Purchaser of the Transactions or compliance by Parent
or Purchaser with any of the provisions hereof will (i) conflict with or result
in any breach of any provision of the respective Certificates of Incorporation
or Bylaws of Parent or Purchaser, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (iii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or
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any of its Subsidiaries or Purchaser is a party or by which any of them or any
of their respective properties or assets may be bound, or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Parent, any of their Subsidiaries or any of their properties or assets, except
in the case of clause (ii), (iii) or (iv) where failure to obtain such permits,
authorizations, consents or approvals or to make such filings, or where such
violations, breaches or defaults would not, individually or in the aggregate,
have a material adverse effect on the ability of Parent and Purchaser to
consummate the Transactions.
Section 4.4 Information in Proxy Statement. None of the
information supplied by Parent or Purchaser in writing specifically for
inclusion or incorporation by reference in the Proxy Statement (or any amendment
thereof or supplement thereto) will, at the date mailed to stockholders and at
the time of the meeting of stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
Section 4.5 Financing. Parent and Purchaser have, and at the
Closing will have, sufficient funds available to finance and consummate the
Transactions.
Section 4.6 Brokers or Finders. Each of Purchaser and Parent
represents, as to itself and its affiliates, that, except for KPMG Corporate
Finance, no agent, broker, investment banker, financial advisor or other firm or
person is or will be entitled to any brokers' or finder's fee or any other
commission or similar fee from either Purchaser or Parent in connection with any
of the transactions contemplated by this Agreement.
Section 4.7 No Other Representations and Warranties. Except
for the representations and warranties contained in this Article IV and the
letter agreement dated of even date herewith provided by Caradon plc to the
Company, neither Parent, Purchaser nor any other Person makes any other express
or implied representation or warranty on behalf of the Parent, Purchaser or any
of their affiliates.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Acquisition Proposals; No Solicitation.
(a) The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations, if
any, with any parties conducted heretofore with respect to any Takeover Proposal
(as defined below). In addition, the Company will not, will cause its officers
and directors not to, and will use its reasonable best efforts to ensure that
its employees (other than its officers or directors), investment bankers,
attorneys, accountants and other agents and representatives do not, directly or
indirectly: (i) initiate, solicit
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or encourage, or take any action to facilitate the making of, any offer or
proposal which constitutes or is reasonably likely to lead to any Takeover
Proposal, (ii) enter into any agreement with respect to any Takeover Proposal,
or (iii) engage in any negotiations or discussions with, or provide any
information or data to, any Person (other than Parent or any of its affiliates
or representatives) relating to any Takeover Proposal; provided that nothing
contained in this Section 5.1 or any other provision hereof shall prohibit the
Company or the Board of Directors from (1) taking and disclosing to the
Company's stockholders a position with respect to a tender or exchange offer by
a third party pursuant to Rules l4d-9 and 14e-2 promulgated under the Exchange
Act or (2) making such other disclosure to the Company's stockholders as the
Board of Directors determines in good faith after consulting with its counsel
and determining that the failure to make such disclosure would constitute a
breach of the Board of Directors' fiduciary duties under applicable law.
(b) Notwithstanding the foregoing, prior to the acceptance of
Shares pursuant to the Offer, the Company may, in response to an unsolicited
written proposal with respect to a Takeover Proposal from a financially capable
third party that contains no financing condition, furnish information to, and
negotiate, explore or otherwise engage in substantive discussions with, such
third party, in each case only if (i) the Board determines in good faith by a
majority vote, after consultation with its financial advisors and after receipt
of advice of the outside legal counsel of the Company, that failing to take such
action would constitute a breach of the fiduciary duties of the Board, and (ii)
the Company obtains a confidentiality and standstill agreement no less favorable
to the Company than the Confidentiality Agreement entered into with Parent. The
Company shall promptly advise Parent in writing of the receipt of any inquiries
or proposals relating to a Takeover Proposal, indicating the name of the Person
making such inquiry or proposal, the terms and conditions thereof and any
actions taken pursuant to this Section 5.1(b). A copy of any written inquiry or
proposal relating to a Takeover Proposal shall be promptly furnished to Parent.
(c) As used in this Agreement, "Takeover Proposal" shall mean
any tender or exchange offer involving the Company, any proposal for a merger,
consolidation or other business combination involving the Company, any proposal
or offer to acquire in any manner greater than a 20% equity interest in, or
greater than a 20% portion of the business or assets of, the Company, any
proposal or offer with respect to any recapitalization or restructuring with
respect to the Company or any proposal or offer with respect to any other
transaction similar to any of the foregoing with respect to the Company, other
than pursuant to the Transactions.
Section 5.2 Interim Operations of the Company. The Company
covenants and agrees that, except (i) as expressly contemplated by this
Agreement, in compliance with applicable laws, and (ii) as set forth in Section
5.2 of the Company Disclosure Schedule or (iii) as agreed in writing by Parent
after the date hereof, and prior to the Appointment Date:
(a) the business of the Company and its Subsidiaries
shall be conducted only in the ordinary and usual course consistent with past
practice and in compliance with
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applicable laws, and each of the Company and its Subsidiaries shall use its
reasonable best efforts to preserve and protect its business organization,
properties and assets intact and maintain its existing relations with customers,
suppliers, employees, creditors and business partners to the end that its
goodwill and business shall be unimpaired in any material respect as of the
Effective Time;
(b) the Company will not, directly or indirectly,
(i) except upon exercise of Options or other rights to purchase shares of Common
Stock pursuant to the Stock Plans outstanding on the date hereof, issue, sell,
transfer or pledge or agree to issue, sell, transfer or pledge any capital stock
of the Company or any capital stock of any of its Subsidiaries beneficially
owned by it, (ii) amend its Certificate of Incorporation or Bylaws or similar
organizational documents or the organizational document of any Subsidiary; or
(iii) split, combine, reclassify or otherwise amend or modify the terms or
rights of the outstanding Shares or any outstanding capital stock of any of the
Subsidiaries of the Company;
(c) neither the Company nor any of its
Subsidiaries shall: (i) declare, set aside, pay or make provision for any
dividend or other distribution payable in cash, stock or property with respect
to its capital stock, except for a cash dividend of $.01 per share payable on
September 30, 1999 to recordholders of Shares as of September 15, 1999; (ii)
issue, sell, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire (or stock appreciation rights with
respect to), any shares of capital stock of any class of the Company or its
Subsidiaries, other than Shares reserved for issuance on the date hereof
pursuant to the exercise of Options outstanding on the date hereof, (iii) enter
into any agreement or understanding with respect to the voting of any of its
capital stock or the capital stock of any Subsidiary; (iv) acquire, transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any assets,
other than the sale of inventory in the ordinary and usual course of business
and consistent with past practice, or incur or modify any indebtedness except
for additional borrowings under existing lines of credit in the ordinary course
of business and consistent with past practice and in an amount not to exceed
$100,000 or other liability, other than in the ordinary and usual course of
business and consistent with past practice; (v) redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock; or (vi) make or
authorize any capital expenditure in excess of $100,000 individually or $400,000
in the aggregate;
(d) neither the Company nor any of its
Subsidiaries shall (i) make any change in the compensation payable or to become
payable to any of its officers, directors, employees, agents or consultants
(other than general increases in wages to employees who are not officers or
directors or affiliates in the ordinary course consistent with past practice),
or to Persons providing management, consulting or similar services, (ii) enter
into or amend any employment, severance, consulting, termination or other
agreement or employee benefit Plan or other Plan or make any loans to any of its
officers, directors, employees, affiliates, agents or consultants or make any
change in its existing borrowing or lending arrangements for or on behalf of any
of such Persons pursuant to an employee benefit plan or otherwise;
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(e) neither the Company nor any of its
Subsidiaries shall (i) pay or make any accrual or arrangement for payment of any
pension, retirement allowance or other employee benefit pursuant to any existing
plan, agreement or arrangement to any officer, director, employee or affiliate
or pay or agree to pay or make any accrual or arrangement for payment to any
officers, directors, employees or affiliate of the Company of any amount
relating to unused vacation or sick days, except payments and accruals made in
the ordinary course consistent with past practice or as required under the terms
of any employment, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, stock appreciation right or other stock-based incentive,
severance, change-in-control, termination or similar pay, hospitalization or
other medical, disability, life or other insurance, supplemental unemployment
benefits, profitsharing, pension, or retirement plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by the Company or any of its Subsidiaries for the benefit of any
current or former employee or director of the Company or any of its Subsidiaries
(the "Plans"); (ii) adopt or pay, grant, issue, accelerate or accrue salary or
other payments or benefits pursuant to any pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, stock purchase, stock option,
stock appreciation right or other stock-based incentive, group insurance,
severance pay, retirement or other employee benefit plan, agreement or
arrangement, or any employment or consulting agreement with or for the benefit
of any director, officer, employee, agent or consultant whether past or present
except for payments and accruals made in the ordinary course of business and
consistent with past practice or as required under the terms of the Plans; or
(iii) amend in any material respect any such existing Plan, agreement or
arrangement in a manner inconsistent with the foregoing;
(f) neither the Company nor any Subsidiary shall
modify, amend or terminate any of the Company Agreements, enter into any Company
Agreement other than in the ordinary course of business and consistent with past
practice, extend the term or renew any Company Agreements, or waive, release or
assign any rights or claims, except for the waiver, release or assignment of
immaterial rights or claims in the ordinary course of business and consistent
with past practice, or waive or release any rights under any standstill,
confidentiality or similar agreements;
(g) neither the Company nor any of its
Subsidiaries will permit any insurance policy naming it as a beneficiary or a
loss payable payee to be cancelled or terminated or the coverages thereunder to
be reduced or deductibles increased;
(h) neither the Company nor any of its
Subsidiaries will (i) incur or assume any long-term debt, or except as provided
under subparagraph (c) above incur or assume any short-term indebtedness or
increase or modify the terms of any Indebtedness; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person; (iii) make
any loans, advances or capital contributions to, or investments in, any other
Person, except the extension of customary trade credit in the ordinary course of
business and consistent with past practice; (iv) enter into any
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material commitment or transaction (including, but not limited to, any
borrowing, capital expenditure or purchase, sale or lease of assets or real
estate) or (v) mortgage or pledge any of its assets of record or suffer to exist
any lien or encumbrance thereon;
(i) neither the Company nor any of its
Subsidiaries shall (i) change any of the accounting methods used by it unless
required by GAAP and after consultation with Parent; (ii) make any tax election
or change any tax election already made, adopt any tax accounting method, change
any tax accounting method unless required by applicable law, enter into any
closing agreement, settle any tax claim or assessment or consent to any tax
claim or assessment or any waiver of the statute of limitations for any such
claim or assessment or (iii) revalue any of its assets; and
(j) neither the Company nor any of its
Subsidiaries will (i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations, in the ordinary course of business and
consistent with past practice, or claims, liabilities or obligations reflected
or reserved against in, or contemplated by, the Recent Balance Sheet (or the
notes thereto) or (ii) settle or compromise any suit, action or claim relating
to the Transactions;
(k) neither the Company nor any of its
Subsidiaries will (i) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than the Merger)
or (ii) acquire (by merger or acquisition of stock or assets) any corporation,
partnership or other entity, or division thereof, or equity interest therein;
(l) neither the Company nor any of its
Subsidiaries will take, or agree to commit to take, any action that would or is
reasonably likely to result in any of the conditions to the Merger set forth in
Article VII or any of the conditions to the Offer set forth in Annex A not being
satisfied, or would make many representation or warranty of the Company
contained herein inaccurate in any respect at, or as of any time prior to, the
Effective Time, or that would materially impair the ability of the Company to
consummate the Merger in accordance with the terms hereof or materially delay
such consummation; and
(m) the Company will not enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or
authorize, recommend, propose or announce an intention to do any of the
foregoing.
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ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Proxy Statement. As promptly as practicable after
the consummation of the Offer and if required by the Exchange Act, the Company
shall prepare and file with the SEC, and shall use all reasonable efforts to
have cleared by the SEC, and promptly thereafter shall mail to Company's
stockholders, the Proxy Statement. Subject to this Agreement, the Proxy
Statement shall contain the recommendation of the Board of Directors to the
Stockholders to vote to approve the Merger and approve and adopt this Agreement.
Section 6.2 Meeting of Stockholders of the Company. At the
Special Meeting, if any, the Company will use its reasonable best efforts to
solicit from stockholders of the Company proxies in favor of the Merger and
subject to fiduciary requirements of applicable law, will take any other action
necessary or, in the reasonable opinion of Purchaser, advisable to secure any
vote or comment of stockholders required by Delaware Law to effect the Merger.
Purchaser agrees that it shall vote, or cause to be voted, in favor of the
Merger all Shares directly or indirectly beneficially owned by it.
Section 6.3 Additional Agreements. Subject to the terms and
conditions as herein provided, the Company, Parent and Purchaser will each
comply in all material respects with all applicable laws and with all applicable
rules and regulations of any governmental authority to achieve the satisfaction
of the Minimum Condition and all conditions set forth in Annex A, and to
consummate and make effective the Merger and the other transactions contemplated
hereby. Each of the parties hereto agrees to use all reasonable efforts to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and to use all reasonable
efforts to take, or cause to be taken, all other actions and to do, or cause to
be done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of the Company, Parent and Purchaser shall use all
reasonable efforts to take, or cause to be taken, all such necessary actions.
Section 6.4 Notification of Certain Matters. The Company shall
give prompt notice to Purchaser and Purchaser shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence of any event whose occurrence,
or non-occurrence would be likely to cause either (A) 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 (B) any
condition set forth in Annex A to be unsatisfied in any material respect at any
time from the date hereof to the date Purchaser purchases Shares pursuant to the
Offer and (ii) any material failure of the Company, Purchaser or Parent, as the
case may be, or any officer, director, employee or agent or representative
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided that the delivery of any
notice pursuant to this
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Section 6.4 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Section 6.5 Access; Confidentiality. From the date hereof to
the Effective Time upon reasonable notice, the Company shall (and shall cause
each of its Subsidiaries to) afford to the officers, accountants, counsel,
financing sources and other representatives of Parent, access, during normal
business hours, to all its properties, books, contracts, commitments and records
and, during such period, the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to Parent (i) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and (ii) all
other information concerning its business, properties and personnel as Parent
may reasonably request for the purpose of reviewing the Company's
representations and warranties set forth in Article III. Unless otherwise
required by law and until the Effective Time, Parent and Purchaser will hold any
such information which is non-public in confidence pursuant to the
Confidentiality Agreement, dated June 10, 1999 between the Company and Parent.
No investigation pursuant to this Section 6.5 shall affect any representation or
warranty made by the Company hereunder.
Section 6.6 Consents and Approvals.
(a) Each of the Company, Parent and Purchaser
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to this Agreement and the
Transactions (which actions shall include furnishing all information required
under the HSR Act and in connection with approvals of or filings with any other
Governmental Entity in accordance with applicable law) and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their Subsidiaries in connection
with this Agreement and the Transactions. Each of the Company, Parent and
Purchaser will, and will cause its Subsidiaries to, take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party required to be
obtained or made by Parent, Purchaser, the Company or any of their Subsidiaries
in connection with the Transactions or the taking of any action contemplated
thereby or by this Agreement.
(b) The Company and Parent shall take all
reasonable actions necessary to file as soon as practicable notifications under
the HSR Act and to respond as promptly as practicable to any inquiries received
from the Federal Trade Commission and the Antitrust Division of the Department
of Justice additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any state Attorney
General or other Governmental Entity in connection with antitrust matters.
Section 6.7 Publicity. The initial press release with
respect to the execution of this Agreement shall be a joint press release
acceptable to Parent and the Company. Thereafter,
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so long as this Agreement is in effect, neither the Company, Parent nor any of
their respective affiliates shall issue or cause the publication of any press
release or other announcement with respect to the Merger, this Agreement or the
other Transactions without the prior consultation of the other party, except as
such party believes, after receiving the advice of outside counsel and after
informing all other parties thereto, may be required by law or by any listing
agreement with a national securities exchange or trading market. Without
limiting the generality of the foregoing, the Company shall consult with Parent
concerning the timing and content of communications to the Company's or its
Subsidiaries' customers, suppliers, employees and other third parties having
material business dealings with the Company or its Subsidiaries.
Section 6.8 Directors' and Officers' Insurance and Indemnification.
(a) In the event of any threatened or actual claim, action, suit
proceeding or investigation, whether civil, criminal or administrative,
including any such claim, action, suit, proceeding or investigation by or in the
right of the Company or any of its Subsidiaries, in which any of the present
orformer officers or directors (the "Indemnified Parties") of the Company is, or
is threatened to be, made a party by reason of the fact that he or she is or
was, prior to the Effective Time, a director, officer, employee or agent of the
Company or any of its Subsidiaries or is or was, prior to the Effective Time,
serving as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise at the request of the
Company or any of its Subsidiaries, whether such claim arises before or after
the Effective Time, the Company shall indemnify and hold harmless, and after the
Effective Time the Surviving Corporation, jointly and severally, shall indemnify
and hold harmless, as and to the same extent and on the same terms and
conditions provided for in the Company's Certificate of Incorporation, Bylaws
and the agreements set forth in items 4 and 5 of Section 3.21(b) of the Company
Disclosure Schedule in effect on the date hereof (to the extent consistent with
applicable laws), each such Indemnified Party against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in connection with
any such claim, action, suit proceeding or investigation. In the event of any
such claim, action, suit proceeding or investigation (whether arising before or
after the Effective Time) with respect to which the Company or the Surviving
Corporation is required to provide indemnification hereunder, (i) the Company or
the Surviving Corporation may, at its election, assume the defense of such
matter; provided, that in the event that the Company or the Surviving
Corporation fails to assume such defense or, under applicable standards of
professional conduct, a conflict of interest on any significant issue exists
between the Company and the Surviving Corporation, on the one hand, and the
Indemnified Parties on the other hand, the Indemnified Parties may retain
counsel satisfactory to them (which counsel shall be reasonably satisfactory to
the Company or the Surviving Corporation), and the Company, or the Surviving
Corporation after the Effective Time, shall pay all reasonable fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor are
received and (ii) the Company or the Surviving Corporation, as the case may be,
will use its reasonable efforts to assist in the vigorous defense of any such
matter; provided, that neither the Company nor the Surviving Corporation, as the
case may be, shall be liable for any settlement effected without its prior
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written consent (which consent shall not be unreasonably withheld); and provided
further that neither the Company nor the Surviving Corporation, as the case may
be, shall have any obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that indemnification
of such Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. The Indemnified Parties as a group may retain only one law firm
to represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict of interest on any
significant issue between the positions of any two or more Indemnified Parties,
or any similar impediment to the joint representation of multiple Indemnified
Parties by a single law firm. After the Effective Time, Parent shall guarantee
the performance by the Surviving Corporation of its obligations under this
Section 6.8(a).
(b) Until the Effective Time, the Company shall
keep in effect Article VII of its Certificate of Incorporation, and thereafter
for a period of six years the Surviving Corporation shall keep in effect in its
Certificate of Incorporation or Bylaws a provision which provides for
indemnification of the Indemnified Parties to the extent required under Section
6.8(a).
(c) Parent or the Surviving Corporation shall
maintain the Company's existing officers' and directors' liability insurance
("D&O Insurance") for a period of not less than six years after the Effective
Time; provided that Parent may substitute therefor policies of substantially
equivalent coverage and amounts containing terms no less favorable to such
former directors or officers; provided, further if the existing D&O Insurance
expires, is terminated or cancelled during such period, Parent or the Surviving
Corporation will use all reasonable efforts to obtain substantially similar D&O
Insurance; provided, further, that in no event shall Parent be required to pay
aggregate premiums for insurance under this Section 6.8(c) in excess of 200% of
the average of the aggregate premiums paid by the Company in 1997, 1998 and 1999
(through the date hereof) on an annualized basis for such purpose (the "Average
Premium"), which true and correct amounts are set forth in Section 6.8(c) of the
Company Disclosure Schedule; and provided, further that if Parent or the
Surviving Corporation is unable to obtain the amount of insurance required by
this Section 6.8(c) for such aggregate premium, Parent or the Surviving
Corporation shall obtain as much insurance as can be obtained for an annual
premium not in excess of 200% of the Average Premium.
Section 6.9 Purchaser Compliance. Parent shall cause
Purchaser to comply with all of its obligations under or related to this
Agreement.
Section 6.10 Reasonable Best Efforts.
(a) Prior to the Closing, upon the terms and
subject to the conditions of this Agreement, Purchaser and the Company agree to
use their respective reasonable best 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 any applicable laws to consummate and make effective the
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transactions contemplated by this Agreement as promptly as practicable
including, but not limited to (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the transactions
contemplated by this Agreement and the taking of such actions as are necessary
to obtain any requisite approvals, consents, orders, exemptions or waivers by
any third party or Governmental Entity and (ii) the satisfaction of the other
parties' conditions to Closing. In addition, no party hereto shall take any
action after the date hereof that would reasonably be expected to materially
delay the obtaining of, or result in not obtaining, any permission, approval or
consent from any Governmental Entity necessary to be obtained prior to Closing.
Notwithstanding anything in this Agreement to the contrary, the Company shall
not, without Parent's prior written consent, commit to any divestiture
transaction and neither Parent nor any of its Subsidiaries (including Purchaser)
shall be required to divest or hold separate or otherwise commit to take any
action that limits its freedom of action with respect to, or its ability to
retain, the Company or any of its Subsidiaries, or any of the businesses,
product lines or assets of Parent or any of its Subsidiaries or that could,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on the Company or Parent. Nothing contained in this Agreement
shall require any party to cure any breach of this Agreement by any other party
or waive any condition to its Transactions.
(b) Prior to the Closing, each party shall promptly consult
with the other parties hereto with respect to, provide any necessary information
with respect to and provide the other (or its counsel) copies of, all filings
made by such party with any Governmental Entity or any other information
supplied by such party to a Governmental Entity in connection with this
Agreement and the transactions contemplated by this Agreement. Each party hereto
shall promptly inform the other of any communication from any Governmental
Entity regarding any of the transactions contemplated by this Agreement. If any
party hereto or affiliate thereof receives a request for additional information
or documentary material from any such Government Entity with respect to the
transactions contemplated by this Agreement, then such party will endeavor in
good faith to make, or cause to be made, as soon as reasonably practicable and
after consultation with the other party, an appropriate response in compliance
with such request. To the extent that transfers of any permits issued by any
Governmental Entity are required as a result of execution of this Agreement or
consummation of the transactions contemplated hereby, the Company shall use its
reasonable best efforts to effect such transfers.
Section 6.11 Employee Matters. (a) Parent and the Purchaser
hereby agree to honor, and agree to cause the Surviving Corporation to honor,
and to make required payments when due under all contracts and agreements of the
Company and its Subsidiaries in effect as of the date hereof with any employee,
officer, director or executive or former employee, officer, or executive of the
Company or any Subsidiary thereof, including any such compensation, employment
and employee or director agreements in existence as of the date hereof (or as
modified to the extent permitted by Section 5.2 or by agreement of the parties
thereto).
(b) In addition to the foregoing, except as otherwise provided
in this Agreement, Parent hereby agrees that for a period of one year
immediately following the Effective
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Time, it shall, or shall cause the Surviving Corporation to, maintain plans for
the benefit of the employees of the Company and its Subsidiaries which in the
aggregate provide benefits that are substantially comparable to those provided
to them under such Plans on the date hereof.
Section 6.12 Company Financial Statements and SEC Reports. As
soon as practicable, but in any event within 20 days after the end of each
fiscal month commencing with the execution of this Agreement, and continuing
through the Effective Time or termination of this Agreement, the Company shall
deliver to Parent unaudited balance sheets of the Company and its Subsidiaries
as at the end of such fiscal month and as at the end of the comparative fiscal
month of the preceding year, together with unaudited statements of income and
cash flows of the Company and its Subsidiaries for such fiscal month and for the
period from the beginning of the fiscal year to the end of such fiscal month and
the comparative fiscal month and period of the preceding year. Such balance
sheets and statements of income and cash flows shall be presented in
consolidated and consolidating form as of the end of each month which is also
the end of a fiscal quarter and shall be prepared in accordance with past
practice. The Company shall also promptly deliver to Parent a copy of each
Company SEC Document filed by the Company after the date of this Agreement
promptly following the filing of such SEC Document, provided, that the Company
shall not be required to deliver a copy of any Company SEC Document filed
through the SEC's EDGAR system if the Company provides Parent with prompt notice
of such filing.
ARTICLE VII
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
The respective obligation of each party to effect the Merger
shall be subject to the satisfaction on or prior to the Closing Date of each of
the following conditions, any and all of which may be waived in whole or in part
by the Company, Parent or Purchaser, as the case may be, to the extent permitted
by applicable law:
Section 7.1 Stockholder Approval. The Merger and this
Agreement shall have been approved and adopted by the requisite vote of the
holders of the Shares, if required by Delaware Law;
Section 7.2 Statutes; Court Orders. No statute, rule or
regulation shall have been enacted or promulgated, no final, nonappealable
judgment, writ, decree, order or injunction shall have been entered or enforced,
and no other legally binding, final and nonappealable action shall have been
taken by any domestic or foreign government, governmental, administrative or
regulatory authority or agency or by any court or tribunal of competent
jurisdiction, domestic or foreign, that in any of the foregoing cases has the
effect of making illegal, restraining, restricting or precluding consummation of
the Merger; and
Section 7.3 Purchase of Shares in Offer. Purchaser
shall have made, or caused to be made, the Offer and shall have purchased, or
caused to be purchased, the Shares pursuant to
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the Offer, provided that this condition shall be deemed to have been satisfied
with respect to the obligation of Parent and Purchaser to effect the Merger if
Purchaser fails to accept for payment or pay for Shares pursuant to the Offer in
violation of the terms of the Offer or of this Agreement.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement (other than this
Article VIII and Article IX) may be terminated and the transactions contemplated
herein may be abandoned at any time before the Effective Time, whether before or
after stockholder approval:
(a) By mutual written consent of Parent and the
Board of Directors; or
(b) By Parent if the Offer shall have expired or
been terminated without any Shares being purchased thereunder by Purchaser as a
result of the failure to meet the conditions set forth in Annex A; or
(c) By either Parent or the Company if any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling the parties hereto shall use their
reasonable best efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement; or
(d) By Parent if, without any material breach by
Parent or Purchaser of its obligations under this Agreement, the purchase of
Shares pursuant to the Offer shall not have occurred on or before October 31,
1999; or
(e) By the Company if, without any material breach
by the Company of its obligations under this Agreement, the purchase of Shares
pursuant to the Offer shall not have occurred on or before October 31, 1999; or
(f) By the Company (i) if, prior to the purchase
of Shares pursuant to the Offer, there shall be a material breach of any of
Parent or Purchaser's representations, warranties or covenants hereunder, which
breach cannot be or has not been cured within ten days of the receipt of written
notice thereof or (ii) to allow the Company to enter into a definitive agreement
to consummate a Superior Proposal (as defined below); provided, that it has
complied with all provisions thereof; and provided further, that it furnishes a
copy of the Superior Proposal, containing all of the terms and conditions
thereof, to Parent at least two calendar days prior to terminating this
Agreement pursuant to this Section 8.1(f); or
(g) By Parent if, prior to the purchase of Shares
pursuant to the Offer, the Company shall have breached in any material respect
(without reference to any materiality qualification contained therein) any
representation, warranty or covenant or other agreement
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contained in this Agreement, which breach (i) would give rise to the failure of
a condition set forth in paragraph (f) or (g) of Annex A and (ii) cannot be or
has not been cured within ten days of the receipt of written notice thereof; or
(h) By Parent if, (i) the Board of Directors shall
withdraw, modify, or change its recommendation or approval in respect of this
Agreement or the Offer in a manner adverse to Purchaser or (ii) the Board of
Directors shall have recommended any proposal other than by Parent or Purchaser
in respect of a Takeover Proposal; or
(i) By Parent if (A) the Company has exercised a
right regarding a Takeover Proposal pursuant to Section 5.1(b) and, directly or
indirectly (including through its representatives), shall continue discussions
or negotiations with a third party for more than 20 business days after the date
of receipt of such Takeover Proposal or (B) a Takeover Proposal shall have been
publicly disclosed, commenced, proposed or communicated to the Company other
than by Parent or Purchaser, and the Board of Directors shall have not
affirmatively rejected such Takeover Proposal within 20 business days after the
earlier of receipt or the public disclosure of such Takeover Proposal.
A "Superior Proposal" is a bona fide written Takeover Proposal submitted by any
Person other than Parent or Purchaser on an unsolicited basis that the Board of
Directors determines in good faith, based on the advice of its financial
advisor, represents a transaction that is more financially favorable to the
stockholders of the Company than the Offer and the Merger.
Section 8.2 Effect of Termination.
(a) In the event of termination of this
Agreement as provided in Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void, and there shall be no liability on the part of Parent, Purchaser or
the Company, except (i) as set forth in Sections 6.5, 8.2 and 9.3 and (ii)
nothing herein shall relieve any party from liability for any material breach of
this Agreement.
(b) If (i) the Company shall have terminated
this Agreement pursuant to Section 8.1(f)(ii), (ii) Parent shall have terminated
this Agreement pursuant to Section 8.1(h), or (iii) (A) Parent shall have
terminated this Agreement pursuant to Section 8.1(i), Section 8.1(g) (and the
breach giving rise to such right to terminate shall have been willful or in bad
faith) or Section 8.1(b) (because the Minimum Condition has not been satisfied)
and (B) in each case, the Company shall have consummated or entered into a
definitive agreement with respect to a Takeover Proposal within twelve months
following the date of such termination, then the Company shall pay to Parent,
(A) in the case of clause (i) or (ii) above, at the time of such termination,
and, in the case of clause (iii) above, upon the Company's consummation of or
entry into a definitive agreement regarding such Takeover Proposal, an amount
(the "Termination Fee") equal to $6,500,000 (which, in the case of a termination
pursuant to Section 8.1(g), shall
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constitute liquidated damages with respect to any breach giving rise to a right
to terminate hereunder) plus an amount (not to exceed $1,500,000) equal to
Parent's and Purchaser's actual out-of-pocket expenses attributable to the
Offer, the Merger, this Agreement and the consummation of the transactions
contemplated hereby. Any amount due under this Section 8.2(b) shall be payable
by wire transfer to such account as Parent may designate in writing to the
Company.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification; Waiver. Subject to
applicable law, this Agreement may be amended, modified and supplemented in any
and all respects, whether before or after any vote of the stockholders of the
Company contemplated hereby, by written agreement of the parties hereto, by
action taken by their respective Boards of Directors or equivalent governing
bodies, at any time prior to the Effective Time with respect to any of the terms
contained herein; provided, that after the approval of this Agreement by the
shareholders of the Company, no such amendment, modification or supplement shall
reduce the amount or change the form of the Merger Consideration. At any time
prior to the Effective Time, by action taken or authorized by the respective
Boards of Directors of Parent or the Company, as applicable, Parent or the
Company may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
Section 9.2 Non-survival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time.
Section 9.3 Expenses. Except as expressly set forth in Section
8.2, all fees, costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
fees, costs and expenses.
Section 9.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is electronically confirmed) or sent by a nationally
recognized overnight courier service, such as FedEx, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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(a) if to Parent or Purchaser, to:
Caradon Inc.
10931 Laureate Dr.
San Antonio, Texas 78249
Attention: Robert B. Leckie
Telephone: 210-694-1082
Facsimile: 210-641-0274
with a copy to:
Warner, Norcross & Judd LLP
900 Old Kent Building
111 Lyon Street, N.W.
Grand Rapids, Michigan 49503
Attention: Tracy T. Larsen
Telephone: 616-752-2152
Facsimile: 616-752-2501
and
(b) if to the Company, to:
Easco, Inc.
706 South State Street
Girard, OH 44420
Attention: Theodore C. Rogers
Telephone No.: (330) 545-4311
Telecopy No.: (330) 545-2027
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with a copy to:
Roetzel & Andress
1375 E. Ninth Street
One Cleveland Center, 10th Floor
Cleveland, Ohio 44114
Attention: Howard Groedel
Telephone: 216-623-0150
Facsimile: 216-623-0134
and
Skadden, Arps, Slate, Meagher & Flom LLP
Four Embarcadero Center, Suite 3800
San Francisco, California 94111
Attention: Kenton J. King
Telephone: 415-984-6400
Facsimile: 415-984-2698
Section 9.5 Interpretation. When a reference is made in this
Agreement to an Article, Section or Annex, such reference shall be to an
Article, Section or Annex of this Agreement unless otherwise indicated. Whenever
the words "include" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." As used in this
Agreement, the term "affiliates" shall have the meaning set forth in Rule 12b-2
of the Exchange Act. As used in this Agreement, the term "Person" shall mean a
natural person, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Entity or other entity or organization.
Section 9.6 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 9.7 Entire Agreement; No Third Party Beneficiaries.
This Agreement (including the documents and the instruments referred to herein
and therein): (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) other than Sections 6.8 and 6.11
hereof, is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
Section 9.8 Severability. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms
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and provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction or other authority declares that
any term or provision hereof is invalid, void or unenforceable, the parties
agree that the court asking such determination shall have the power to reduce
the scope, duration, area or applicability of the term or provision, to delete
specific words or phrases, or to replace any invalid, void or unenforceable term
or provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision.
Section 9.9 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
Section 9.10 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Purchaser may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to Parent or to any direct or indirect wholly owned Subsidiary of Parent.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 9.11 Enforcement of this Agreement. 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 the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, such remedy being in addition to
any other remedy to which any party is entitled at law or in equity.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
CARADON INC.
By: /s/Robert B. Leckie
-------------------------------------------------
Name: Robert B. Leckie
Title: Vice President
E ACQCO INC.
By: /s/Robert B. Leckie
--------------------------------------------------
Name: Robert B. Leckie
Title: President
EASCO, INC.
By: /s/Norman E. Wells, Jr.
--------------------------------------------------
Name: Norman E. Wells, Jr.
Title: President and Chief Executive Officer
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ANNEX A
Certain Conditions of the Offer. Notwithstanding any other
provisions of the Offer, and in addition to (and not in limitation of)
Purchaser's rights to extend and amend the Offer at any time in its sole
discretion (subject to the provisions of this Agreement), Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate or amend the Offer as to any Shares
not then paid for, if (i) any applicable waiting period under the HSR Act has
not expired or been terminated, (ii) the Minimum Condition has not been
satisfied, or (iii) at any time on or after the date of this Agreement and
before the time of acceptance for payment for any such Shares, any of the
following events shall have occurred and be continuing:
(a) there shall be threatened (in writing) or pending any
suit, action or Proceeding by any Governmental Entity against Purchaser, Parent,
the Company or any Subsidiary of the Company (i) challenging the acquisition by
Parent or Purchaser of any Shares under the Offer, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by the Agreement or
the Stockholder Agreements, (ii) seeking to impose material limitations on the
ability of Purchaser, or render Purchaser unable, to accept for payment, pay for
or purchase some or all of the Shares pursuant to the Offer and the Merger,
(iii) seeking to impose material limitations on the ability of Purchaser or
Parent effectively to acquire, hold or exercise full rights of ownership of the
Shares, including, without limitation, the right to vote the Shares purchased by
it on all matters properly presented to the Company's shareholders, (iv) seeking
to prohibit or restrict the ownership or operation by Parent or the Purchaser
(or any of their respective affiliates or subsidiaries) of any portion of its or
the Company's business or assets which is material to the business of the
Company and its Subsidiaries or of the Parent and its Subsidiaries or compel
Parent or Purchaser (or any of their respective affiliates or subsidiaries) to
dispose of or hold separate any portion of its or the Company's business or
assets which is material to the business of the Company and its Subsidiaries or
of Parent and its Subsidiaries; (v) seeking to impose any material limitations
on the ability of Parent or Purchaser or any of their respective affiliates or
subsidiaries effectively to control in any material respect the business and
operations of the Company and its subsidiaries, or (vi) which otherwise is
reasonably likely to have a Company Material Adverse Effect;
(b) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated, or deemed
applicable, pursuant to an authoritative interpretation by or on behalf of a
Governmental Entity, to the Offer or the Merger, or any other action shall be
taken by any Governmental Entity, other than the application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (vi) of paragraph (a) above;
A-1
<PAGE> 51
(c) there shall have occurred (i) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (ii) any limitation (whether or not
mandatory) by any United States governmental authority on the extension of
credit generally by banks or other financial institutions, (iii) a change in
general financial, bank or capital market conditions which materially and
adversely affects the ability of financial institutions in the United States to
extend credit or syndicate loans, (iv) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange,
over-the-counter market or The Nasdaq Stock Market for a period in excess of 24
hours (excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges not related to market conditions), or
(v) in the case of any of the foregoing existing at the time of the commencement
of the Offer, a material acceleration or worsening thereof;
(d) since March 31, 1999, there shall have occurred any change
that constitutes a Company Material Adverse Effect (or there shall have been any
development that is reasonably likely to result in a Company Material Adverse
Effect);
(e) (i) the Board of Directors or any committee thereof shall
have withdrawn or modified in a manner adverse to Parent or Purchaser its
approval or recommendation of the Offer, the Merger or this Agreement, or
approved or recommended any Takeover Proposal or (ii) the Company shall have
entered into any agreement in principle or definitive agreement with respect to
any Takeover Proposal or shall have exercised its rights in accordance with
Section 5.1(b) with respect to a Takeover Proposal;
(f) any of the representations and warranties of the Company
set forth in this Agreement shall not be true and correct (without reference to
any materiality qualification contained therein) in each case (i) as of the date
referred to in any representation or warranty which addresses matters as of a
particular date, or (ii) as to all other representations and warranties, as of
the date of this Agreement and as of the scheduled expiration of the Offer
except for any breach that individually or in the aggregate, together with all
other breaches, could not reasonably be expected to have a Company Material
Adverse Effect;
(g) the Company shall have failed to perform in any material
respect any obligation, or to comply with any agreement or covenant to be
performed or complied with by it, under this Agreement; or
(h) this Agreement shall have been terminated in accordance
with its terms.
The foregoing conditions are for the sole benefit of Parent
and Purchaser, may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to such condition (including any action or inaction by
Parent or Purchaser) and may be waived by Parent or Purchaser in whole or in
part at any time and from time to time in the sole discretion of Parent or
Purchaser, subject in each case to the terms of this Agreement. The failure by
Parent or
A-2
<PAGE> 52
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
A-3
<PAGE> 1
EXHIBIT 2
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT (the "Agreement") is entered into
as of July 28, 1999 by and between Caradon Inc., a Delaware corporation
("Parent"), E Acqco Inc., a Delaware corporation and an indirect wholly owned
subsidiary of Parent ("Purchaser"), and American Industrial Partners Capital
Fund, L.P., a stockholder (the "Stockholder") of Easco, Inc., a Delaware
corporation (the "Company").
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of July 28, 1999 (the "Merger Agreement"), by and among Parent, Purchaser and
Company, it is proposed that Purchaser will make a tender offer (the "Offer") to
acquire any and all shares of the issued and outstanding common stock, $.01 par
value (the "Common Stock"), of the Company and that, following the Offer,
Purchaser will be merged with and into the Company (the "Merger") and, as a
result of the Merger, the separate corporate existence of Purchaser shall cease
and the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"); and
WHEREAS, the Company, as the Surviving Corporation of the
Merger, will become an indirect wholly owned subsidiary of Parent; and
WHEREAS, in order to induce Parent and Purchaser to enter into
the Merger Agreement, which they otherwise would not do, Stockholder has agreed
to execute and deliver to Parent this Agreement; and
WHEREAS, prior to the date hereof, Parent and Stockholder had
no agreement, arrangement or understanding (as defined in Section 203 of the
Delaware General Corporation Law (the "DGCL")) for the purpose of acquiring,
holding, voting or disposing of shares of Common Stock; and
WHEREAS, in consideration for the agreements contained herein,
prior to the date hereof, and prior to the time at and date on which Parent
became or may become an "interested stockholder" for purposes of Section 203 of
the DGCL, the board of directors of the Company has approved the agreement of
Stockholder to vote as provided in Section 2 of this Agreement and not to
transfer shares of Common Stock as provided in Section 4 of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used and not defined herein
shall have the meanings in the Merger Agreement.
2. TENDER AND VOTING; FURTHER ASSURANCES. Stockholder hereby
1
<PAGE> 2
irrevocably agrees, for the period from the date hereof through the Effective
Time or the date on which the Merger Agreement is terminated in accordance with
its terms, whichever is earlier (such period being hereinafter referred to as
the "Term"), (a) to tender all of the Subject Securities (as defined below) into
the Offer and (b) to vote all of the Subject Securities owned by it (i) in favor
of the approval and adoption of the Merger Agreement and the transactions
contemplated thereby and (ii) against (A) any Takeover Proposal by any third
party and (B) the following actions (other than the Merger and the transactions
contemplated by the Merger Agreement): (1) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company or its subsidiaries; (2) a sale, lease or transfer of a
material amount of assets of the Company or its subsidiaries or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its Subsidiaries; (3)(w) any change in the majority of the board of directors of
the Company; (x) any change in the present capitalization of the Company or any
amendment of the Company's Certificate of Incorporation; (y) any other change in
the Company's corporate structure or business; or (z) any other action; which,
in the case of the matters referred to in clauses (w), (x), (y) or (z) above, is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, discourage or materially adversely affect the contemplated economic
benefits to Parent of the Merger or the transactions contemplated by the Merger
Agreement or this Agreement.
3. IRREVOCABLE PROXY. STOCKHOLDER HEREBY GRANTS TO, AND
APPOINTS PURCHASER AND THE PRESIDENT OF PURCHASER AND THE TREASURER OF
PURCHASER, IN THEIR RESPECTIVE CAPACITIES AS OFFICERS OF PURCHASER, AND ANY
INDIVIDUAL WHO SHALL HEREAFTER SUCCEED TO ANY SUCH OFFICE OF PURCHASER AND ANY
OTHER DESIGNEE OF PURCHASER, EACH OF THEM INDIVIDUALLY, STOCKHOLDER'S PROXY AND
ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE OR ACT BY WRITTEN
CONSENT WITH RESPECT TO STOCKHOLDER'S SUBJECT SECURITIES IN ACCORDANCE WITH
SECTION 2 HEREOF. THIS PROXY IS COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE, AND STOCKHOLDER WILL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER
INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND
HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY IT WITH RESPECT TO THE SUBJECT
SECURITIES.
4. COVENANTS OF STOCKHOLDER. During the Term, and except as
specifically contemplated hereby, Stockholder shall not (i) directly or
indirectly sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any of the Subject Securities, unless the transferee of the
Subject Securities, prior to and as a condition to any transfer of the Subject
Securities, executes and delivers an agreement in substantially the form hereof
or such transfer is otherwise approved in advance in writing by Parent and
Purchaser, (ii) grant any proxies, deposit any Subject Securities into a voting
trust or enter into an agreement with respect to any Subject Securities, (iii)
voluntarily take any action which would have the effect of preventing or
2
<PAGE> 3
inhibiting Stockholder from performing its obligations under this Agreement or
(iv) indirectly, solicit (including by way of furnishing information) or respond
to any inquiries or the making of any proposal by any person or entity (other
than Parent or any affiliate of Parent) with respect to the Company that
constitutes or could reasonably be expected to lead to a Takeover Proposal. If
Stockholder receives any such inquiry or proposal, then it shall promptly inform
Parent of the terms and conditions, if any, of such inquiry or proposal and the
identity of the person making it. Stockholder will immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
5. STOCKHOLDER'S REPRESENTATIONS. Stockholder is the record
and beneficial owner of the number of shares of Common Stock (the "Existing
Securities" and together with any shares of Common Stock or other securities
hereafter acquired by Stockholder, the "Subject Securities") set forth on the
signature page to this Agreement. Stockholder does not own any securities of the
Company on the date hereof other than the Existing Securities. Stockholder has
sole voting power and sole power to issue instructions with respect to the
voting of the Existing Securities, sole power of disposition, sole power of
exercise or conversion and the sole power to demand appraisal rights, in each
case with respect to all of the Existing Securities and, on the date of the
Special Meeting (as defined in the Merger Agreement), will have sole voting
power and sole power to issue instructions with respect to the voting of all of
Stockholder's Subject Securities, sole power of disposition, sole power of
exercise or conversion and the sole power to demand appraisal rights, in each
case with respect to all of Stockholder's Subject Securities.
Stockholder has full power and authority to enter into and
perform all its obligations under this Agreement. This Agreement has been duly
and validly executed and delivered by Stockholder and constitutes a valid and
binding agreement of Stockholder, enforceable against Stockholder in accordance
with its terms. Stockholder hereby represents and warrants to Parent and
Purchaser that the execution and delivery of this Agreement by Stockholder does
not, and the performance of Stockholder's obligations under this Agreement will
not, (i) conflict with or violate any law, statute, ordinance, rule, regulation,
order, judgment or decree applicable to Stockholder or by which it or any of its
properties is bound or affected, or (ii) result in any breach of or constitute a
default (or an event which with or without notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an encumbrance on
any of the Subject Securities, pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Stockholder is a party or by which Stockholder or any of its
Subject Securities are bound or affected, except for any such conflicts,
violations, breaches, defaults or other alterations or occurrences that would
not prevent the performance by such Stockholder of its obligations under
this Agreement.
6. UNDERSTANDING OF THIS AGREEMENT. Stockholder has carefully
read this Agreement and has discussed its requirements, to the extent such
Stockholder believes necessary, with its counsel (which may be counsel to the
Company). Stockholder understands that the parties to the Merger Agreement will
be proceeding in reliance upon this Agreement.
3
<PAGE> 4
7. HEADINGS. The headings of the sections of this Agreement
are inserted for convenience of reference only and do not form a part or affect
the meaning hereof.
8. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which when so executed and delivered shall be an original,
but all of such counterparts shall together constitute one and the same
instrument.
9. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties hereto with respect to
the subject matter hereof and (ii) shall not be assigned by operation of law or
otherwise.
10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under applicable principles of conflicts of
law.
11. SPECIFIC PERFORMANCE. The parties hereto agree that if any
of the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
12. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person or persons any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
13. AMENDMENT; WAIVERS. This Agreement shall not be amended,
altered or modified except by an instrument in writing duly executed by each of
the parties hereto. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement shall impair any
such right, power or privilege or be construed as a waiver of any default or
any acquiescence thereto. No single or partial exercise of any such right, power
or privilege shall preclude the further exercise of such right, power or
privilege, or the exercise of any other right, power or privilege. No waiver
shall be valid against any party hereto, unless made in writing and signed by
the party against whom enforcement of such waiver is sought, and then only to
the extent expressly specified therein.
14. ADDITIONAL ACTIONS AND DOCUMENTS. Each of the parties
hereto hereby agrees to take or cause to be taken such further actions, to
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments, and to obtain such consents as may be
necessary or as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Agreement.
4
<PAGE> 5
15. TERMINATION. This Agreement, and all rights and
obligations hereunder, shall terminate at the end of the Term.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, or have caused this Agreement to be duly executed and
delivered in their names and on their behalf, as of the date first written
above.
CARADON INC.
By: /s/Robert B. Leckie
--------------------
Name: Robert B. Leckie
Title: Vice President
E ACQCO INC.
By: /s/Robert B. Leckie
--------------------
Name: Robert B. Leckie
Title: President
AMERICAN INDUSTRIAL PARTNERS
CAPITAL FUND, L.P.
By: American Industrial Partners, L.P.,
its general partner
By: American Industrial Partners
Management Company, Inc.,
its general partner
By: /s/Theodore C. Rogers
---------------------
Name: Theodore C. Rogers
Title: Chairman
Number of shares owned
beneficially and of record
by Stockholder:
4,239,470
--------------------
5
<PAGE> 1
EXHIBIT 3
Caradon Inc. and E Acqco Inc. entered into the following Stockholder
Agreement with the following directors and executive officers of Easco, Inc. on
July 28, 1998:
Name Number of Shares
---- ----------------
Robert J. Klein 2,300
Lawrence J. Sax 12,500
Joseph M. Byers 12,500
Terry D. Smith 12,500
Norman E. Wells, Jr. 170,000
Gene Little 3,500
Samuel N. Smith, Jr. 1,000
James R. McKeithan 12,500
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT (the "Agreement") is entered into
as of July 28, 1999 by and between Caradon Inc., a Delaware corporation
("Parent"), E Acqco Inc., a Delaware corporation and an indirect wholly owned
subsidiary of Parent ("Purchaser"), and , a
stockholder (the "Stockholder") of Easco, Inc., a Delaware corporation (the
"Company").
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of July 28, 1999 (the "Merger Agreement"), by and among Parent, Purchaser and
Company, it is proposed that Purchaser will make a tender offer (the "Offer") to
acquire any and all shares of the issued and outstanding common stock, $.01 par
value (the "Common Stock"), of the Company and that, following the Offer,
Purchaser will be merged with and into the Company (the "Merger") and, as a
result of the Merger, the separate corporate existence of Purchaser shall cease
and the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"); and
WHEREAS, the Company, as the Surviving Corporation of the
Merger, will become an indirect wholly owned subsidiary of Parent; and
WHEREAS, in order to induce Parent and Purchaser to enter into
the Merger Agreement, which they otherwise would not do, Stockholder has agreed
to execute and deliver to Parent this Agreement; and
WHEREAS, prior to the date hereof, Parent and Stockholder had
no agreement, arrangement or understanding (as defined in Section 203 of the
Delaware General Corporation Law (the "DGCL")) for the purpose of acquiring,
holding, voting or disposing of shares of Common Stock; and
WHEREAS, in consideration for the agreements contained herein,
prior to the date hereof, and prior to the time at and date on which Parent
1
<PAGE> 2
became or may become an "interested stockholder" for purposes of Section 203 of
the DGCL, the board of directors of the Company has approved the agreement of
Stockholder to vote as provided in Section 2 of this Agreement and not to
transfer shares of Common Stock as provided in Section 4 of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used and not defined herein
shall have the meanings in the Merger Agreement.
2. TENDER. Stockholder hereby irrevocably agrees, for the
period from the date hereof through the Effective Time or the date on which the
Merger Agreement is terminated in accordance with its terms, whichever is
earlier (such period being hereinafter referred to as the "Term"), to tender all
of the Subject Securities (as defined below) into the Offer.
3. COVENANTS OF STOCKHOLDER. During the Term, and except as
specifically contemplated hereby, Stockholder shall not (i) directly or
indirectly sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any of the Subject Securities, unless the transferee of the
Subject Securities, prior to and as a condition to any transfer of the Subject
Securities, executes and delivers an agreement in substantially the form hereof
or such transfer is otherwise approved in advance in writing by Parent and
Purchaser, (ii) grant any proxies, deposit any Subject Securities into a voting
trust or enter into an agreement with respect to any Subject Securities, (iii)
voluntarily take any action which would have the effect of preventing or
inhibiting Stockholder from performing his obligations under this Agreement or
(iv) indirectly, solicit (including by way of furnishing information) or respond
to any inquiries or the making of any proposal by any person or entity (other
than Parent or any affiliate of Parent) with respect to the Company that
constitutes or could reasonably be expected to lead to a Takeover Proposal. If
Stockholder receives any such inquiry or proposal, then he shall promptly inform
Parent of the terms and conditions, if any, of such inquiry or proposal and the
identity of the person making it. Stockholder will immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
4. STOCKHOLDER'S REPRESENTATIONS. Stockholder is the record
and beneficial owner of the number of shares of Common Stock (the "Existing
Securities" and together with any shares of Common Stock or other securities
hereafter acquired by Stockholder, the "Subject Securities") set forth on the
signature page to this Agreement. Stockholder does not own any securities of the
Company on the date hereof other than the Existing Securities.
Stockholder has full power and authority to enter into and
2
<PAGE> 3
perform all his obligations under this Agreement. This Agreement has been duly
and validly executed and delivered by Stockholder and constitutes a valid and
binding agreement of Stockholder, enforceable against Stockholder in accordance
with its terms. Stockholder hereby represents and warrants to Parent and
Purchaser that the execution and delivery of this Agreement by Stockholder does
not, and the performance of Stockholder's obligations under this Agreement will
not, (i) conflict with or violate any law, statute, ordinance, rule, regulation,
order, judgment or decree applicable to Stockholder or by which he or any of his
properties is bound or affected, or (ii) result in any breach of or constitute a
default (or an event which with or without notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an encumbrance on
any of the Subject Securities, pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Stockholder is a party or by which Stockholder or any of his
Subject Securities are bound or affected, except for any such conflicts,
violations, breaches, defaults or other alterations or occurrences that would
not prevent the performance by such Stockholder of his obligations under this
Agreement.
5. UNDERSTANDING OF THIS AGREEMENT. Stockholder has carefully
read this Agreement and has discussed its requirements, to the extent such
Stockholder believes necessary, with his counsel (which may be counsel to the
Company). Stockholder understands that the parties to the Merger Agreement will
be proceeding in reliance upon this Agreement.
6. HEADINGS. The headings of the sections of this Agreement
are inserted for convenience of reference only and do not form a part or affect
the meaning hereof.
7. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which when so executed and delivered shall be an original,
but all of such counterparts shall together constitute one and the same
instrument.
8. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties hereto with respect to
the subject matter hereof and (ii) shall not be assigned by operation of law or
otherwise.
9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under applicable principles of conflicts of
law.
10. SPECIFIC PERFORMANCE. The parties hereto agree that if any
of the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
3
<PAGE> 4
11. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person or persons any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
12. AMENDMENT; WAIVERS. This Agreement shall not be amended,
altered or modified except by an instrument in writing duly executed by each of
the parties hereto. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement shall impair any
such right, power or privilege or be construed as a waiver of any default or
any acquiescence thereto. No single or partial exercise of any such right, power
or privilege shall preclude the further exercise of such right, power or
privilege, or the exercise of any other right, power or privilege. No waiver
shall be valid against any party hereto, unless made in writing and signed by
the party against whom enforcement of such waiver is sought, and then only to
the extent expressly specified therein.
13. ADDITIONAL ACTIONS AND DOCUMENTS. Each of the parties
hereto hereby agrees to take or cause to be taken such further actions, to
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments, and to obtain such consents as may be
necessary or as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Agreement.
14. TERMINATION. This Agreement, and all rights and
obligations hereunder, shall terminate at the end of the Term.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, or have caused this Agreement to be duly executed and
delivered in their names and on their behalf, as of the date first written
above.
CARADON INC.
By: /s/Robert B. Leckie
-------------------
Name: Robert B. Leckie
Title: Vice President
E ACQCO INC.
By: /s/Robert B. Leckie
-------------------
Name: Robert B. Leckie
Title: President
STOCKHOLDER
---------------------------------
Name:
Address:
Number of shares owned
beneficially and of record
by Stockholder:
--------------------------
5
<PAGE> 1
EXHIBIT 4
[CARADON PLC LETTERHEAD]
28 July 1999
Easco, Inc.
706 South State Street
Girard, Ohio 44420
Gentlemen:
In reference to the Agreement and Plan of Merger between Caradon Inc., E Acqco
Inc., and Easco, Inc. dated as of this same date (the "Merger Agreement"),
Caradon plc hereby assures Easco, Inc. that, from the date hereof until the
Effective Time of Merger, at which time this Letter Agreement will terminate,
Caradon plc will cause Caradon Inc. to fulfill its obligations under the Merger
Agreement, including by providing sufficient capital to Caradon Inc. to allow
for the timely consummation of the Offer and the Merger. Capitalized terms used
herein and not otherwise defined are defined in the Merger Agreement.
Yours sincerely,
Caradon plc
/s/Martin Clark
Martin Clark
Group Finance Director
<PAGE> 1
EXHIBIT 5
CONFIDENTIALITY AGREEMENT
THIS CONFIDENTIALITY AGREEMENT, dated as of June 10, 1999
(this "Agreement"), is made by and between Easco, Inc., a Delaware corporation
("Easco," which term shall, for purposes of this Agreement, include its
subsidiaries) and Caradon Inc. ("Buyer," which term shall, for purposes of this
Agreement, include Caradon plc and all of its subsidiaries).
WHEREAS, Easco is prepared to furnish Buyer with certain
information that is confidential, proprietary or otherwise not publicly
available to assist in an evaluation (the "Evaluation") in connection with a
possible business combination transaction involving Easco and Buyer (a
"Transaction").
NOW, THEREFORE, as a condition to, and in consideration of,
Easco furnishing to Buyer Information (as defined herein), Easco and Buyer agree
as follows:
1. Nondisclosure of Information. Subject to Section 2, Buyer
agrees that, in connection with information it receives from Easco, Buyer will
(a) keep the Information confidential, (b) not use the Information in any manner
detrimental to Easco and (c) not use the Information other than in connection
with the Evaluation. Notwithstanding the preceding sentence, Buyer may disclose
Information to those of its Representatives (as defined herein) as are assisting
Buyer with the Evaluation; provided, however, that Buyer will first (i) inform
each of its Representatives receiving Information of the confidential nature of
the Information and of the obligations imposed by this Agreement and (ii) direct
its Representatives to treat the Information confidentially and in accordance
with the obligations imposed by this Agreement and not to use the Information
other than in connection with the Evaluation. Buyer will be responsible for (A)
any failure by Buyer or any of its Representatives (including, without
limitation, Representatives who, subsequent to the first date of disclosure of
Information hereunder, cease to be its Representatives) to treat the Information
confidentially and in accordance with the obligations imposed by this Agreement
or (B) the use by Buyer or by any of its Representatives or former
Representatives of the Information other than in connection with the Evaluation.
Subject to Section 2, without the prior written consent of Easco, neither Buyer
nor its Representatives will disclose to any person (1) that Information has
been made available to Buyer or its Representatives, (2) that discussions
relating to a Transaction are taking place or have terminated, or (3) any of the
terms, conditions or other facts with respect to such discussions, the
Evaluation or any Transaction.
2. Notice Preceding Compelled Disclosure. If Buyer or any of
its Representatives is legally compelled, pursuant to a subpoena, civil
investigative demand, regulatory demand or similar process, to disclose any
Information provided by or on behalf of Easco or which relates to Easco, Buyer
will promptly notify Easco to permit Easco to seek a protective order or take
other appropriate action. Buyer will also cooperate in all reasonable efforts by
Easco to obtain a protective order or other reasonable assurance that
confidential treatment will be accorded the Information. If, in the absence of a
<PAGE> 2
protective order, Buyer or any of its Representatives is compelled to disclose
Information as a matter of law (including as a matter of federal or state
securities law) or pursuant to the rules and policies of any securities
exchange, Buyer may disclose only that part of the Information as is required by
law to be disclosed (in which case, prior to such disclosure, Buyer will advise
and consult with Easco and its counsel as to such disclosure and the nature and
wording of such disclosure), and, if Easco seeks a protective order or takes
other action to obtain confidential treatment for any Information so disclosed,
Buyer or its Representatives will not oppose such efforts of Easco.
3. Treatment of Information. As soon as possible upon the
written request of Easco or upon the termination by either Easco or Buyer of the
Evaluation or the discussions relating to a Transaction, Buyer and its
Representatives will destroy (or, at their option, return to Easco) all
Information which has been provided in tangible form by or on behalf of Easco,
together with all copies thereof, as well as all Information that incorporates
information provided by or on behalf of Easco. Such destruction (or return) will
be confirmed in writing to Easco. Any Information not so destroyed (or returned)
will remain subject to this Agreement. Buyer acknowledges that it is aware and
that its Representatives have been or will be advised by it that the United
States securities laws prohibit any person who has material, non-public
information from purchasing or selling securities based on such information or
from communicating such information to any other person.
4. Public Information. This Agreement will not apply to such
portions of the Information that (a) are or become generally available to the
public through no action by Buyer or by Buyer's Representatives or (b) are or
become available to Buyer or Buyer's Representatives from a source, other than
Easco or its Representatives, which source Buyer believes, based upon reasonable
inquiry, is not prohibited from disclosing such portions by a contractual, legal
or fiduciary obligation or (c) Buyer or its Representatives can prove was
obtained as a result of work which is independent of and not based on any of the
Information.
5. No Warranty of Accuracy. Buyer understands that Easco will
endeavor to include in the Information materials it believes to be relevant for
the Evaluation, but Buyer acknowledges that neither Easco nor any of its
Representatives makes any representation or warranty as to the accuracy or
completeness of any Information. Neither Easco nor any of its Representatives
will have any liability to Buyer or its Representatives resulting from the use
of the Information, except for use of the Information in breach of this
Agreement.
6. Certain Actions. (a) During the course of the Evaluation,
neither Buyer nor its Representatives will initiate contact with any director,
officer, employee or person known to hold securities of Easco (other than
persons specifically authorized by Easco) regarding any matter relating to a
Transaction. If the Evaluation or the discussions relating to a Transaction are
terminated for any reason, Buyer and its Representatives will cease, during the
Restricted Period (as defined below), all such contacts, whether or not
previously authorized.
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(b) As of the date hereof, except as previously disclosed in
writing to Easco, Buyer is not the beneficial owner of any securities of Easco
entitled to be voted generally in the election of directors or any direct or
indirect options or other rights to acquire any such securities ("Voting
Securities"). During the period beginning on the date of this Agreement and
ending two years after the effectiveness of any Termination Notice (the
"Restricted Period"), except as specifically requested in writing by Easco,
neither Buyer nor any of its Representatives as a principal will propose,
induce, or enter into or agree to enter into, singly or with any other person or
directly or indirectly, (i) any form of business combination, acquisition or
other similar transaction relating to Easco, (ii) any form of restructuring,
recapitalization or similar transaction with respect to Easco, or (iii) any
demand, request or proposal, or any request for consent, to amend, waive or
terminate any provision of this Section 6. Furthermore, during the Restricted
Period, except as specifically requested in writing by Easco and except, as to a
Representative, as contemplated by the last sentence of this Section 6(b),
neither Buyer nor any of its Representatives as a principal will, singly or with
any other person or directly or indirectly, (1) acquire, or offer, propose or
agree to acquire, by tender offer, purchase or otherwise, any Voting Securities,
(2) make, or in any way participate in, any solicitation of proxies with respect
to any Voting Securities (including by the execution of action by written
consent), (3) become a participant in any election contest with respect to
Easco, (4) seek to influence any person with respect to the voting or
disposition of any Voting Securities, (5) demand a copy of Easco's list of
stockholders or its other books and records, (6) participate in or encourage the
formation of any partnership, syndicate or other group that owns or seeks or
offers to acquire beneficial ownership of any Voting Securities or that seeks to
affect control of Easco or for the purpose of circumventing any provision of
this Agreement, or (7) otherwise act (including by providing financing for
another person) to seek or to offer to control or influence, in any manner, the
management, Board of Directors or policies of Easco. The provisions of clause
(1) of the immediately preceding sentence are subject, as to a Representative of
Buyer that is a financial advisor engaged by Buyer and is also a securities
firm, to the fact that such financial advisor may from time to time acquire
Voting Securities, for its own account or the account of customers, and,
accordingly, may hold positions in Voting Securities.
(c) During the Restricted Period, neither Buyer nor its
Representatives will directly or indirectly solicit (other than by means of
general advertisement or solicitation) for employment any of the current
directors, officers or managers of Easco with whom initial contact was made, or
who were specifically identified by Easco, during the course of the Evaluation
(other than, in the case of a Representative, employment of any such person in
the regular course of the Representative's hiring practices and not arising by
reason of the Evaluation, and in the case of Buyer, employment of any such
person in the regular course of Buyer's hiring practices done by employees of
Buyer not aware of this Agreement).
(d) The provisions of this Section 6 will survive for two
years after the effectiveness of any Termination Notice notwithstanding that
some or all of the Information has become publicly disclosed or that any portion
of this Agreement has become inoperative as to any portion of the Information.
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<PAGE> 4
7. Certain Obligations Only on Definitive Agreement. Easco and
Buyer agree that unless and until a Definitive Agreement regarding a Transaction
has been executed and delivered by each of Easco and Buyer and each other party
thereto, neither Easco nor Buyer will be under any legal obligation of any kind
with respect to any Transaction by virtue of this Agreement or any other written
or oral expression with respect to any Transaction. Except as provided in
Section 6 of this Agreement, Easco and its Representatives will be free to
conduct the process for pursuing any possible business combination transaction
as they determine in their discretion (including, without limitation, changing
any procedures relating to a Transaction, or negotiating with and entering into
a Definitive Agreement with any other person, without in any such case prior
notice to Buyer). Either Easco or Buyer may terminate the Evaluation and any
discussions relating to a Transaction only upon furnishing notice to the other
(a "Termination Notice"), which Termination Notice shall become effective
immediately upon the date that it is actually received. Notwithstanding any
other provision of this Agreement, neither Easco nor Buyer will terminate the
Evaluation or any discussions relating to a Transaction except by delivering a
Termination Notice as provided in the immediately preceding sentence, and no
such Termination Notice will alter any provision of this Agreement (unless the
other party expressly agrees in writing). Except as provided in Section 6 of
this Agreement, neither Easco nor Buyer will have any claim against the other or
any of its Representatives arising out of or relating to any Transaction other
than those claims, if any, as parties to a Definitive Agreement and then only in
accordance with the terms of such Definitive Agreement.
8. General Provisions. This Agreement will be deemed to be
effective as of the earlier to occur of (a) the date Information was first
disclosed by or on behalf of Easco in connection with the Evaluation or (b) the
date first written above. No failure or delay in exercising any right hereunder
will operate as a waiver thereof, nor will any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right. This Agreement, any amendment to this Agreement, or any waiver of
rights or any notice or consent hereunder will be operative for purposes of this
Agreement only if it is in writing and is signed by a Chairman, President or
duly authorized Vice President or Director of the party in whose name it is
signed. This Agreement may be executed in multiple counterparts, each of which
will be deemed an original for all purposes and all of which will constitute a
single instrument. This Agreement will be binding upon and inure to the benefit
of the parties hereto and their respective affiliates, successors and assigns.
Buyer acknowledges that Easco may be irreparably injured by any violation of the
terms of this Agreement; accordingly, Easco will be entitled to seek specific
performance and injunctive relief as remedies for any violation, in addition to
all other remedies available at law or equity. Buyer consents to personal
jurisdiction in any action brought in any federal or state court within the
State of Delaware having subject matter jurisdiction in the matter for purposes
of any action arising out of this Agreement.
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This Agreement will be governed by and construed in accordance with the laws of
the State of Delaware, without giving effect to the principles of conflict of
laws thereof.
9. Certain Definitions. As used in this Agreement, (a) the
terms "affiliate," "beneficial owner," "election contest," "group,"
"participant," "person," "proxy," "security," and "solicitation" (and the
plurals thereof) will be ascribed a meaning no less broad than the broadest
definition or meaning of such terms under the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, (b) all
information furnished to Buyer as contemplated by this Agreement, whether in
oral, written or electronic form and whether furnished by Easco or Easco's
Representatives, together with all written or electronic documentation prepared
by Easco or its Representatives based upon, reflecting or incorporating, in
whole or in part, such information or the Evaluation, as well as the fact that
Easco and Buyer are considering a Transaction and performing the Evaluation, is
herein referred to as the "Information," (c) any director, officer, employee,
agent, lender, partner or representative, including, without limitation, any
accountant, consultant, attorney or financial advisor engaged by either Easco or
Buyer, is herein referred to as a "Representative," and (d) a written agreement
providing for a Transaction that is executed by or on behalf of Easco and Buyer
and that states it is intended to be, and is specifically identified as, a
Definitive Agreement for purposes of this Agreement is herein referred to as a
"Definitive Agreement."
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<PAGE> 6
IN WITNESS WHEREOF, each of Easco and Buyer has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
EASCO, INC.
By: /s/ TERRY D. SMITH
Name: Terry D. Smith
Title: Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
CARADON INC.
By: /s/ ROBERT B. LECKIE
Name: Robert B. Leckie
Title: Vice President and General
Counsel Caradon, Inc.
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<PAGE> 1
EXHIBIT 6
AMENDED AND RESTATED SERVICES AGREEMENT
THIS AMENDMENT AND RESTATED SERVICES AGREEMENT (the "Agreement") dated as
of April 12, 1995, by and among Easco Corporation a Maryland corporation (the
"Company") and American Industrial Partners Management Company, Inc., a Delaware
corporation ("AIPM").
Background
Subject to the terms and conditions of this Agreement, the Company desires
to continue to retain AIPM to provide certain management services to the
Company. Except as provided in Sections 2(a) and 2(c) hereof, the amendments
contemplated by this Agreement shall take effect upon, and only upon,
consummation of the initial public offering of Common Stock of Easco, Inc. (the
"Offering") pursuant to a Registration Statement on Form S-1 filed with the
Securities and Exchange Commission. If the Offering is not consummated for any
reason, the Agreement as heretofore in effect shall be reinstated, nunc pro
tunc, except as provided in Sections 2(a) and 2(c).
Terms and Conditions
In consideration of the mutual covenants contained herein and intending to
be legally bound hereby, the parties agree as follows:
1. Management Services. AIPM shall provide general management,
financial and other corporate advisory services to the Company. These
management services shall be performed by the officers, employees or agents of
AIPM as it may determine in its discretion from time to time.
2. Fees.
(a) The Company shall pay to AIPM management fees (the "Management
Fees") equal in the aggregate to $900,000 each fiscal year of the Company
during the term of this Agreement. The Management Fee shall be payable at
such times and in such amounts (in no event to exceed $900,000 in the
aggregate during any fiscal year) as the Company shall determine from time
to time. The Management Fee shall be as specified in this Section 2(a)
whether or not the Offering is completed.
(b) Notwithstanding the foregoing, on the third or fourth
anniversary of this Agreement, the Company may reduce the Management Fees
by 50% if American Industrial Partners Capital Fund, L.P. ("AIP") then owns
less than 10% but greater than or equal to 5% of the Company's outstanding
Common Stock. The reduction in fees contemplated by the foregoing sentence
is not cumulative, so that if a reduction is made effective on
<PAGE> 2
the third or fourth anniversary of this Agreement, no further reduction
shall be made under this paragraph thereafter.
(c) Notwithstanding anything to the contrary contained herein, the
Company shall not be required to pay any amounts owed in connection with
the Management Fees if: (i) any such payment would violate, breach or
otherwise constitute a default (or any event which might with the lapse
of time or the giving of notice of both, constitute a default)under any of
the Company's financing agreements; or (ii) AIPM instructs the Company not
to pay all or any portion of the Management Fees during any fiscal year.
Management Fees hereunder are expressly subordinated in right of payment to
all obligations of the Company under its Credit Agreement with Bank of
America, as agent, or any replacement credit agreement, and under the
Company's 10% Senior Notes due 2001. This Section 2(c) shall be as
specified above, whether or not the Offering is completed.
(d) For purposes of this agreement, "fiscal year" of the Company
shall mean (i) the period beginning on the date hereof and ending on
December 31, 1995, and (ii) any subsequent period beginning on January 1
and ending on the earlier of (x) December 31 of the same calendar year and
(y) the Termination Date (as defined below.)
(e) In addition to the Management Fees payable pursuant to this
Section 2, the Company agrees to promptly reimburse AIPM for all
out-of-pocket expenses incurred by AIPM in providing the services
contemplated by this Agreement, including fees and expenses paid to
consultants, subcontractors and other third parties in connection with such
services.
3. Indemnification. The Company will indemnify and hold harmless AIPM
and its partners, employees, agents, representatives and affiliates (each being
an "Indemnified Party") from and against any and all losses, claims, damages
and liabilities, joint or several, to which such Indemnified Party may become
subject under any applicable federal or state law, any claim made by any third
party or otherwise, relating to or arising out of the engagement of AIPM
pursuant to, and the performance by AIPM of the services contemplated by, this
Agreement, and the Company will reimburse any Indemnified Party for all costs
and expenses (including attorneys' fees and expenses) as they are incurred in
connection with the investigation of, preparation for or defense of any pending
or threatening claim, or any action or proceeding arising therefrom, whether or
not such Indemnified Party is a party hereto. The Company will not be liable
under the foregoing indemnification
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<PAGE> 3
provision, and an Indemnified Party shall reimburse the Company for any related
payments made hereunder, to the extent that any loss, claim, damage, liability,
cost or expense is determined by a court, in a final judgment from which no
further appeal may be taken, to have resulted primarily from the gross
negligence or willful misconduct of AIPM. No Indemnified Party shall be liable
to the Company for honest mistakes of judgment, or for action or inaction,
taken in good faith in the performance of services under this Agreement to the
extent such action would satisfy the standards for indemnification set forth in
this Section 3. This Section 3 shall survive the expiration or termination of
this Agreement with respect to all periods prior to such expiration or
termination.
4. Binding Effect; Assignability. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their successors and
permitted assigns. This Agreement may not be transferred or assigned by any
party without the written consent of the other party.
5. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement and understanding between the parties with respect to the subject
matter hereof. This Agreement may be amended or modified, or any provision
hereof may be waived, provided that such amendment or waiver is set forth in a
writing executed by the parties hereto. No course of dealing between or among
any persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any person under or by reason of this Agreement.
6. Term. This Agreement shall become effective on the date that the
Company receives the net cash proceeds of the Offering and shall, subject to
the provisions of Section 7 hereof, continue through the fifth anniversary of
the date hereof, unless sooner terminated pursuant to this Section 6, at which
time this Agreement shall terminate, shall have no further force or effect,
and shall not be binding on any party hereto, except to the extent of
obligations for any period prior to termination. Notwithstanding the
foregoing, the Company, by written notice to AIPM, may terminate this Agreement
on and as of the third or fourth anniversary of the date hereof, or on any
subsequent anniversary date of the date hereof during any renewal term, if AIP
shall on such date owns less than 5% of the Company's outstanding Common Stock.
7. Renewal. Upon the scheduled expiration of the originally scheduled
five (5) year term of this Agreement pursuant to Section 6 hereof and upon the
scheduled expiration of any renewal term pursuant to this Section 7, this
Agreement shall be automatically renewed for an additional one-year period,
unless either party hereto has delivered to the other party hereto within the
90 day period prior to such scheduled expiration written notice of termination
indicating that such
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<PAGE> 4
party wishes to terminate this Agreement at the then-scheduled expiration
date. If such notice of termination is given (and not withdrawn), then this
Agreement shall terminate on the then-scheduled expiration date.
8. Governing Law. The validity, performance, construction and effect of
this Agreement shall be governed by and construed in accordance with the
internal laws of the State of California.
IN WITNESS WHEREOF, each of the parties hereto has caused this writing
to be executed as of the day and year first above written.
EASCO CORPORATION
By: /s/
-------------------------------
Its:
------------------------------
AMERICAN INDUSTRIAL PARTNERS
MANAGEMENT COMPANY, INC.
By: /s/
-------------------------------
Its:
------------------------------
4
<PAGE> 1
EXHIBIT 7
Easco, Inc. entered into the following Indemnification Agreement with each
of Raymond E. Ross and Gene E. Little, each a director of Easco, Inc.
INDEMNIFICATION AGREEMENT
THIS AGREEMENT, effective as of May 7, 1999, is made by and between Easco,
Inc., a Delaware corporation (the "Company"), and ________________ (the
"Indemnitee").
WHEREAS, the Indemnitee is a director of the Company; and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service to
the Company in an effective manner and Indemnitee's reliance on the provisions
of the Company's Amended and Restated Certificate of Incorporation ("Charter
Document") requiring indemnification of the Indemnitee to the fullest extent
permitted by law, and in part to provide Indemnitee with specific contractual
assurance that the protection promised by such Charter Document will be
available to Indemnitee (regardless of, among other things, any amendment to or
revocation of such Charter Document or any change in the composition of the
Company's Board of Directors or acquisition transaction relating to the
Company), the Company wishes to provide in this Agreement for the
indemnification of and the advancing of expenses to Indemnitee to the full
extent (whether partial or complete) permitted by law and as set forth in this
Agreement, and, to the extent insurance is maintained, for the continued
coverage of Indemnitee under the Company's directors' and officers' liability
policies.
NOW THEREFORE, in consideration of the premises and of Indemnitee agreeing
to serve or continuing to serve the Company directly or, at its request, with
another enterprise, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. BASIC INDEMNIFICATION ARRANGEMENT. (a) In the event Indemnitee was, is
or becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, a Claim by reason of (or
arising in part out of) an Indemnifiable Event, the Company shall indemnify
Indemnitee to the fullest extent permitted by the laws of the State of Delaware
in effect on the date hereof or as such laws may from time to time hereafter be
amended to increase the scope of such permitted indemnification as soon as
practicable but in any event no later than 30 days after written demand is
presented to the Company, against any and all Expenses, judgments, fines,
penalties and amounts paid in settlement (including all interest, assessments
and other charges paid or payable in connection therewith) of such Claim and any
federal, state, local or foreign taxes imposed on Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement. If requested by
Indemnitee in writing, the Company shall advance (within ten business days of
such written request) any and all Expenses to Indemnitee (an "Expense Advance").
(b) Notwithstanding the foregoing, (i) the obligations of the Company
under Section 1(a) shall be subject to the condition that the Reviewing Party
shall not have determined (in a written opinion, in any case in which the
special independent counsel referred to in Section 2 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law, and
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<PAGE> 2
(ii) the obligation of the Company to make an Expense Advance pursuant to
Section 1(a) shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to
be so indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Company for any Expense
Advance until a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for Expense Advances shall be
unsecured and no interest shall be charged thereon. If there has not been a
Change in Control, the Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control, the Reviewing Party
shall be the special independent counsel referred in Section 2 hereof. If there
has been no determination by the Reviewing Party or if the Reviewing Party
determines that Indemnitee substantively would not be permitted to be
indemnified in whole or in part under applicable law, Indemnitee shall have the
right to commence litigation in any court in the states of Ohio or Delaware
having subject matter jurisdiction thereof and in which venue is proper seeking
an initial determination by the court or challenging any such determination by
the Reviewing Party or any aspect thereof and the Company hereby consents to
service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company
and Indemnitee.
2. CHANGE IN CONTROL. The Company agrees that if there is a Change in
Control of the Company (other than a Change in Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and Expense Advances under this Agreement or any other agreement, the Company's
Amended and Restated Bylaws (the "Bylaws") or Charter Document now or hereafter
in effect relating to Claims for Indemnifiable Events, the Company shall seek
legal advice only from special independent counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld),
and who has not otherwise performed services for the Company within the last
two years (other than in connection with such matters) or for Indemnitee.
Notwithstanding the foregoing, the special independent counsel may not include
any firm or person who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing either the
Company or Indemnitee in an action to determine Indemnitee's rights to
indemnification under this Agreement. In the event that Indemnitee and the
Company are unable to agree on the selection of the special independent
counsel, such special independent counsel shall be selected by lot from among
at least three law firms each in New York City, New York, the State of Delaware
and Cleveland, Ohio, having more that fifty attorneys and having a rating of
"av" or better in the then current Martindale-Hubbell Law Directory. Such
selection shall be made in the presence of Indemnitee (and his legal counsel or
either of them, as Indemnitee may elect). Such counsel, among other things,
shall, within 90 days of its retention, render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
permitted to be Indemnified under applicable law. The Company agrees to pay the
reasonable fees of the special independent counsel referred to above and to
fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating
to this Agreement or its engagement pursuant hereto.
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<PAGE> 3
3. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) and, if
requested by Indemnitee in writing, shall (within ten business days of such
written request) advance such expenses to Indemnitee, which are incurred by
Indemnitee in connection with any claim asserted against or action brought by
Indemnitee for (i) indemnification or advance payment of Expenses by the
Company under this Agreement or any other agreement, Bylaws or Charter
Document now or hereafter in effect relating to Claims for Indemnifiable Events
and (ii) recovery under any directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee ultimately
is determined to be entitled to such indemnification, advance expense payment
or insurance recovery, as the case may be.
4. PARTIAL INDEMNITY. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company of some or a portion of the
Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim
but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled. Moreover, notwithstanding any other provision of this Agreement,
to the extent that Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith. In connection with any determination by the Reviewing
Party or otherwise as to whether Indemnitee is entitled to be indemnified
hereunder the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
5. NO PRESUMPTION. For purposes of this Agreement, the termination of
any action, suit or proceeding by judgment, order, settlement (whether with
or without court approval) or conviction, or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that Indemnitee did not meet
any particular standard of conduct or have any particular belief or that a
court has determined that indemnification is not permitted by applicable law.
6. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by Indemnitee
of notice of the commencement of a Claim which may involve an Indemnifiable
Event, Indemnitee will, if a claim in respect thereof is to be made against the
Company under this Agreement, notify the Company of the commencement thereof;
provided, however, that the omission so to notify the Company will not relieve
it from any liability which it may have to Indemnitee otherwise than under this
Agreement. With respect to any such Claim as to which Indemnitee notifies the
Company of the commencement thereof:
(a) the Company will be entitled to participate therein at its own
expense; and
(b) except as otherwise provided below, to the extent that it may
wish, the Company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
satisfactory to Indemnitee. After notice from the Company to Indemnitee of
its election to assume the defense thereof, the Company will not be liable
to Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by Indemnitee in connection with the defense thereof
other than reasonable costs of investigation or as otherwise provided
below. Indemnitee shall have the right to employ its counsel in such
action, suit or proceeding, but the fees and expenses of such counsel
incurred after notice from the Company of its assumption of the defense
thereof shall be at
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<PAGE> 4
the expense of Indemnitee unless (i) the employment of counsel by Indemnitee
has been authorized by the Company, (ii) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
the Indemnitee in the conduct of the defense of such action or (iii) the
Company shall not in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and expenses of counsel shall
be at the expense of the Company. The Company shall not be entitled to
assume the defense of any claim brought by or on behalf of the Company or as
to which the Indemnitee shall have made the conclusion provided for in (ii)
above; and
(c) the Company shall not be liable to indemnify the Indemnitee under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any
action or claim in any manner which would impose any penalty or limitation
on the Indemnitee without the Indemnitee's written consent. Neither the
Company nor the Indemnitee will unreasonably withhold their consent to any
proposed settlement.
7. NONEXCLUSIVITY. The rights of the Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Charter Document or
the Delaware General Corporation Law or otherwise. To the extent that a change
in the Delaware General Corporation Law (whether by statute or judicial
decision) or in the Charter Document permits greater indemnification by
agreement than would be afforded currently under the Charter Document and this
Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by
this Agreement the greater benefits so afforded by such change.
8. LIABILITY INSURANCE. To the extent the Company maintains an insurance
policy or policies providing directors' and officers' liability insurance,
Indemnitee shall be covered by such policy or policies, in accordance with its
or their terms, to the maximum extent of the coverage available for any Company
director.
9. CERTAIN DEFINITIONS.
(a) CHANGE IN CONTROL: shall be deemed to have occurred if, after the
date hereof, (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended), other than a
trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company becomes the "beneficial owner" (as defined
in Rule 13d-3 under said Act), directly or indirectly, of securities of the
Company representing 25% or more of the total voting power represented by
the Company's then outstanding Voting Securities, or (ii) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new director whose
election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority
thereof, or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to
-4-
<PAGE> 5
represent (either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets.
(b) CLAIM: any threatened, pending or completed action, suit,
proceeding or alternative dispute resolution mechanism, or any inquiry,
hearing or investigation whether conducted by the Company or any other
party, whether civil, criminal, administrative, investigative or other.
(c) EXPENSES: include attorneys' fees and all other costs, fees,
expenses and obligations of any nature whatsoever paid or incurred in
connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to defend, be a
witness in or participate in any Claim relating to any Indemnifiable Event.
(d) INDEMNIFIABLE EVENT: any event or occurrence (whether before or
after the date hereof) related to the fact that Indemnitee is or was a
director, officer, employee, agent or fiduciary for the Company, or is or
was serving at the request of the Company as a director, officer, employee,
trustee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise, or by reason of
anything done or not done by Indemnitee in any such capacity.
(e) REVIEWING PARTY: (i) the Company's Board of Directors (if a
majority of directors are not parties to the particular claim for which the
Indemnitee is seeking indemnification), or (ii) any other person or body
appointed by the Company's Board of Directors, who is not a party to the
particular Claim for which Indemnitee is seeking indemnification, or (iii)
if there has been a Change in Control, the special independent counsel
referred to in Section 2 hereof.
(f) VOTING SECURITIES: any securities of the Company which vote
generally in the election of directors.
10. AMENDMENTS, TERMINATION AND WAIVER. No supplement, modification,
amendment or termination of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
11. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit
to enforce such rights.
12. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any claim made against
Indemnitee to the extent
-5-
<PAGE> 6
Indemnitee has otherwise actually received payment (under insurance policy,
Charter Document or otherwise) of the amounts otherwise indemnifiable hereunder.
13. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors, assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
or assets of the Company, spouses, heirs, and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as a director (or in one of the capacities
enumerated in Section 9(d) hereof) of the Company or of any other enterprise at
the Company's request.
14. SEVERABILITY The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
15. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws.
EASCO, INC.
By
--------------------------------
Name:
Title:
By
--------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 8
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,
1998, 1997 and 1996.
Beginning in November 1996, the Company realigned its executive management
group when Mr. Wells joined the Company as its President and Chief Executive
Officer. Mr. Wells was joined by Terry D. Smith, the Company's 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.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------- ------------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL COMPENSATION STOCK UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS($)(1) ($)(2) AWARDS($)(3) OPTIONS/SARS(#) ($)(#)(4)
------------------ ---- --------- ----------- ------------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Norman E. Wells, Jr., 1998 306,731 500,000 -- -- -- 16,818
President and Chief 1997 290,000 61,625 -- -- -- 9,839
Executive Officer of 1996 28,628 597,500 574,000 420,000 300,000 322
Easco, Inc. and Easco (5)
Terry D. Smith, 1998 166,153 50,000 -- -- -- 7,807
Executive Vice President, 1997 160,000 84,000 -- -- -- 4,735
Chief Financial Officer, 1996 15,795 100,000 71,750 -- 87,500 100
Secretary and Treasurer of
Easco, Inc. and Easco (5)
Lawrence J. Sax, 1998 160,635 50,000 -- -- -- 20,757
Vice President of Raw 1997 158,000 83,575 -- -- -- 7,866
Materials of Easco (6) 1996 -- 100,000 90,500 -- 87,500 --
James R. McKeithan, 1998 144,375 70,000 -- -- -- 10,873
Vice President of 1997 137,500 99,219 -- -- -- 4,343
Operations of Easco (5) 1996 -- 100,000 71,750 -- 87,500 --
Joseph M. Byers 1998 144,994 50,000 -- -- -- 11,699
Vice President of Sales 1997 138,900 79,516 -- -- -- 5,487
and Marketing of Easco (5) 1996 13,712 100,000 71,750 -- 87,500 243
</TABLE>
- ---------------
(1) Represents (i) for Mr. Wells, a cash retention payment in 1998 (see section
entitled "Employment Agreements"), performance bonus in 1997 and a cash
signing bonus in 1996 and (ii) for Messrs. Smith, Sax, McKeithan and Byers,
performance bonuses of $34,000, $33,575, $29,219 and $29,516, respectively,
in 1997, and the vesting and payment of a cash signing bonus installment of
$50,000 for Messrs. Smith, Sax and Byers in 1998 and 1997, and $70,000 and
$75,000 for Mr. McKeithan in 1998 and 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.
(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
4
<PAGE> 2
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 a portion of his cash signing bonus in 1996 and which had a value
of $542,500 as of December 31, 1998. Mr. Wells is entitled to receive
dividends paid on these shares.
(4) Includes (i) contributions of $3,200 per executive in 1998, and $3,346,
$1,846, $1,603, $1,337 and $1,375 in 1997 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 $13,618, $6,493 and $322 for Mr. Wells for 1998, 1997
and 1996, respectively, premiums of $4,607, $2,889 and $100 for Mr. Smith
for 1998, 1997 and 1996, respectively, premiums of $8,499, $3,884 and $243
for Mr. Byers for 1998, 1997 and 1996, respectively, premiums of $7,673 and
$2,968 for Mr. McKeithan for 1998 and 1997, respectively, and premiums of
$17,557 and $6,529 for Mr. Sax for 1998 and 1997, respectively, for
Company-provided life insurance benefits.
(5) The Named Officer has been employed by the Company and/or Easco in the
indicated office since November 1996.
(6) Mr. Sax has served as Vice President of Raw Materials of Easco since
December 1996.
OPTION/SAR GRANTS IN 1998
No stock options or stock appreciation rights were granted to the Named
Officers during 1998.
FISCAL YEAR-END OPTION/SAR VALUES
During 1998, none of the Named Officers exercised any stock options or
SARs. The table below sets forth certain information for the fiscal year ended
December 31, 1998 concerning unexercised options and SARs held by each of the
Named Officers as of December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END(#)(2) AT FY-END($)(3)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Norman E. Wells, Jr.......................... 200,000 100,000 650,000 325,000
Terry D. Smith (4)........................... 41,667 45,833 114,583 107,292
Joseph M. Byers (4).......................... 41,667 45,833 114,583 107,292
Lawrence J. Sax (4).......................... 41,667 45,833 89,583 57,292
James R. McKeithan (4)....................... 41,667 45,833 114,583 107,292
</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) below, 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) $7.75, the closing price of the Common
Stock on The Nasdaq Stock Market on December 31, 1998, as reported by IDD
Information Services TradeLine and (ii) the applicable option exercise
prices.
(4) Includes 50,000 options exercisable on November 26, 2003, subject to
continued employment, the vesting of which may be accelerated in equal
one-third increments on January 1 of 1998, 1999 and 2000, provided that the
Company achieves certain specified earnings targets. The performance
criteria for 1998 was not achieved
5
<PAGE> 3
and no vesting was accelerated on January 1, 1999. The Company achieved the
performance criteria for 1997 resulting in the accelerated vesting of
options covering 16,667 shares on January 1, 1998.
SALARIED EMPLOYEE PENSION PLAN
The Pension Plan table set forth below shows total estimated annual
benefits payable upon retirement 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 Plan") following various years of service upon normal retirement
at age 65.
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 33,275 44,367 55,458 66,550 66,550
$200,000 45,170 60,227 75,283 90,340 90,340
$250,000 57,065 76,087 95,108 114,130 114,130
$300,000 68,960 91,947 114,933 137,920 137,920
$350,000 80,855 107,807 134,758 161,710 161,710
$400,000 92,750 123,667 154,583 185,500 185,500
$450,000 104,645 139,527 174,408 209,290 209,290
$500,000 116,540 155,387 194,233 233,080 233,080
$600,000 140,330 187,107 233,883 280,660 280,660
$700,000 164,120 218,827 273,533 328,240 328,240
</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 ten 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 his or her 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
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 two credited
years of service at March 22, 1999.
EMPLOYMENT AGREEMENTS
Messrs. Wells, Smith, Sax, McKeithan and Byers serve in their respective
capacities pursuant to employment agreements. Each agreement has an indefinite
term, and upon 30 days written notice, may be terminated by either Easco or the
executive. Each agreement provides for an annual base salary, an annual
performance bonus, 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
first anniversary of termination without cause or until the executive commences
other employment, whichever occurs first. The
6
<PAGE> 4
agreements also provided 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 is required to return such signing bonus
previously received (or installment received thereof in the case of Messrs.
Smith, Sax, McKeithan and Byers) upon termination of his employment (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.
In December 1998, the Compensation Committee, with approval of the Board of
Directors, amended these agreements to provide for supplemental retention
payments to further assure the continuity of the Company's management team. The
amended agreements provide for a retention payment of $500,000 to Mr. Wells in
December 1998 and $300,000 to each of Messrs. Smith, Sax, McKeithan and Byers in
January 1999. These retention payments must be repaid to the Company, in whole
or in part, if the executive's employment terminates (other than termination
without cause, death or disability or resignation with "good reason") according
to the following formula: Each executive must return 100% of the retention
payment if termination occurs prior to January 1, 2000 and 66 2/3% if
termination occurs between January 1, 2000 and December 31, 2001. No amounts are
subject to repayment if termination occurs on or after January 1, 2002.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of two non-employee directors,
Robert J. Klein and Kenneth J. Diekroeger. Messrs. Klein and Diekroeger are
employees of AIP. Pursuant to a services agreement (the "Services Agreement"),
American Industrial Partners Management Company, Inc. and its affiliates
("AIPM") provides certain financial and other advisory services to Easco. Under
the Services Agreement, Easco reimburses AIPM for its out-of-pocket expenses and
pays AIPM an advisory fee, which for 1998 was $900,000. The Services Agreement
expires on April 12, 2000 with automatic one-year renewals thereafter unless
terminated by either party upon 90 days prior written notice. Pursuant to the
Services Agreement, on April 12, 1999, the Company may (i) reduce AIPM's
advisory fee by 50% in the event that AIP owns less than 10% but greater than 5%
of the Company's outstanding Common Stock as of such date; and (ii) terminate
the Services Agreement as of such date if AIP then owns less than 5% of the
Company's outstanding Common Stock.
In addition, Easco paid AIPM an advisory fee of $250,000 in connection with
services rendered by AIPM regarding the sale of Easco's vinyl extrusion
operations in January 1998.
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
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 to
achieve the Company's business and financial objectives. The Committee is
comprised of non-employee directors who, although affiliated with AIP, have no
"interlocking" relationships with other companies as defined by 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 also 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. As such, the Company believes that its
compensation policies should emphasize annual and long-term performance
incentives. 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.
7
<PAGE> 5
Base Salary
The initial base salaries for the Company's executive officers were
established in their respective employment agreements. These salaries were
established by considering the qualifications of each executive and the base
salaries of similar positions in comparable companies. These salaries are
reviewed periodically by the Committee, considering the responsibilities of the
individual's position, the individual's overall job performance and market
conditions. 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 established, and the Board
approved, EBITDA targets for 1997 through 2000. The Committee believed that
these multi-year targets provided a better incentive for managers to focus on
steady, long-term growth. Annual performance bonuses 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) is used for EBITDA results falling between the
EBITDA targets. The Committee or the Board may make equitable adjustments to the
EBITDA targets to reflect future acquisitions or divestitures or non-recurring
or extraordinary items.
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 extrusion business. The Company's performance in 1998 was
below the Minimum EBITDA target and no payments were made under the plan,
however, retention payments were made as described in the section entitled
"Employment Agreements." These payments are subject to repayment obligations
should the executive leave the Company. The Committee believes that these
retention payments are in the best interests of the Company and its shareholders
and are intended to assure the continuity of management in the face of a very
competitive market for executive talent.
For 1999, the Committee and the Board of Directors have revised downward
the EBITDA levels which will determine the 1999 performance bonus payments
pursuant to the employment agreements.
Stock Options
The Committee believes that stock options provide additional incentive to
officers to work towards maximizing shareholder value. The Committee views stock
options as one of the more important components of the Company's long-term
performance-based compensation philosophy. The Company's grant of stock options
is designed to motivate the Company's executives to implement strategies and
initiatives that will contribute to an increase in the Company's stock price
over time. These options are provided through initial grants at or near the date
of hire and through subsequent periodic grants. Options granted by the Company
to its executives and employees have exercise prices equal to the fair market
value at the time of grant.
Under the Stock Option Plan, the Committee is authorized to select from
among the eligible employees those to whom options are to be granted, the number
of options to be granted 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 current management
team. These options are exercisable over three years.
All options under the Stock Option Plan vest over three years except for
200,000 options granted to the Named Executives (other than Mr. Wells) in 1996.
These options vest 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. The
Committee believes that such modified vesting motivates the Company's executives
to increase shareholder value in a shorter time frame while still
8
<PAGE> 6
maintaining a focus on sustainable, long-term performance. 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
extrusion business. Based on the Company's EBITDA, accelerated vesting was
achieved in 1997, but was not achieved in 1998. The acceleration of vesting for
these options can be reinstated if specified EBITDA levels are attained in the
subsequent year.
Chief Executive Officer Compensation
During 1998, Mr. Wells' annual base salary was $290,000 as set by his
employment agreement. Effective June 1, 1998, the Compensation Committee
increased his annual base salary to $320,000 in recognition of the leadership
provided by Mr. Wells in improving the Company's financial and operational
performance since his employment in December 1996 and as a reflection of general
increases in competitive salary levels among peer executive positions in
comparable companies and industries. In December 1998, Mr. Wells received a cash
retention payment of $500,000 to help ensure his continued leadership of the
Company. No performance bonus was paid to Mr. Wells for 1998 pursuant to his
employment agreement since the Company's 1998 EBITDA did not meet the required
threshold. A portion of the retention payment must be repaid to the Company, as
more fully described under the section entitled "Employment Agreements", should
Mr. Wells terminate his employment prior to January 1, 2002. The Committee
believes that Mr. Wells, through his managerial efforts, has made a substantial
contribution to the improved performance of the Company in 1998 and to the
long-term enhancement of the Company's shareholder value.
Executive Compensation Deduction Limitations
Section 162(m) of the 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 1998 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).
COMPENSATION COMMITTEE
Robert J. Klein, Chairman
Kenneth J. Diekroeger
9
<PAGE> 7
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) the current directors and
nominees for director of the Company, the Named Officers, and all directors and
executive officers of the Company as a group, as of March 15, 1999 and (ii) each
stockholder known by the Company to be a beneficial owner of more than 5% of the
Company's Common Stock, as of December 31, 1998. The Company believes that,
except as otherwise noted, 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 44.9%
One Maritime Plaza
Suite 2525
San Francisco, CA 94111
W. Richard Bingham (5)...................................... 4,239,470 44.9%
Mellon Bank, N.A., Trustee for First Plaza
Group Trust (3)........................................... 978,674 10.4%
One Mellon Bank Center
Pittsburgh, PA 15258
Wellington Management Company (2)........................... 723,600 7.7%
75 State Street
Boston, MA 02109
Dimensional Fund Advisors Inc. (4).......................... 666,500 7.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Joseph M. Byers (6)......................................... 54,167 *
Robert J. Klein............................................. 2,300 *
Gene E. Little.............................................. 2,500 *
James R. McKeithan (6)...................................... 54,167 *
Theodore C. Rogers (5)...................................... 4,239,470 44.9%
Lawrence J. Sax (6)......................................... 54,167 *
Samuel H. Smith, Jr......................................... 1,000 *
Terry D. Smith (6).......................................... 54,167 *
Norman E. Wells, Jr. (6).................................... 374,000 4.0%
Directors and executive officers as a group (12 persons)
(6)....................................................... 4,835,938 51.2%
</TABLE>
- ---------------
* Less than one percent
(1) Easco Corporation, a wholly-owned subsidiary of the Company, owns 3,028,020
shares of the Common Stock, which shares are accounted for as treasury
stock.
(2) Based solely on the report of Wellington Management Company ("Wellington")
on Schedule 13-G, dated February 8, 1999 received by the Company. According
to this Schedule 13-G, these shares include (i) 162,600 shares as to which
Wellington has shared voting power and (ii) 723,600 shares as to which
Wellington has shared investment power.
(3) 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
10
<PAGE> 8
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 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.
(4) Based solely on the report of Dimensional Fund Advisors Inc. ("Dimensional")
on Schedule 13-G, dated February 12, 1999 received by the Company.
Dimensional, a registered investment advisor, is deemed to have beneficial
ownership of all of these shares which 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, for all of which Dimensional serves as
investment manager. Based on information provided the Company in the
Schedule 13-G, Dimensional disclaims beneficial ownership of all such
shares.
(5) 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. 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.
(6) Includes options which are presently exercisable or will become exercisable
within 60 days of the record date. See fiscal year-end option values table
above.
11
<PAGE> 1
EXHIBIT 9
FOR IMMEDIATE RELEASE
Contacts -- Caradon Inc.: Scott Langdon, Corporate Communications
(416-234-5808)
Easco, Inc.: Terry D. Smith, Executive Vice President and Chief
Financial Officer
(330-545-4311)
CARADON INC. AGREES TO ACQUIRE
EASCO, INC. FOR $15.20 CASH PER SHARE
WEYBRIDGE, ENGLAND and GIRARD, OHIO, July 28, 1999 -- Caradon Inc., a US
wholly owned subsidiary of Caradon plc, and Easco, Inc. (NASDAQ: ESCO) today
jointly announced that Caradon and Easco have signed a definitive agreement
pursuant to which Caradon will acquire all of the outstanding common stock of
Easco for a cash price of $15.20 per share, or approximately $155 million in the
aggregate. The agreement was unanimously approved by the boards of directors of
both companies.
Under the terms of the agreement, a Caradon subsidiary will make a cash
tender offer for all Easco shares at a price of $15.20 per share, and upon
successful completion of the tender offer the Easco stock not tendered will be
cashed out at $15.20 per share in a statutory merger. In connection with the
transaction, Easco has changed the record date for its previously declared
regular quarterly cash dividend of $0.01 per share. The new record date for the
dividend is September 15, 1999, payable on September 30, 1999. Easco's largest
stockholder, American Industrial Partners, and each of Easco's stock-owning
directors and executive officers, collectively owning approximately 46% of
Easco's outstanding shares, have entered into separate agreements with Caradon
supporting the transaction.
The acquisition of Easco is subject to a majority of Easco's fully diluted
shares being tendered in the tender offer and not withdrawn, expiration of the
Hart-Scott-Rodino review period and other customary conditions.
Jurgen Hintz, Group Chief Executive of Caradon plc, said, "The acquisition
of Easco is a significant step in Caradon's continuing commitment to expand our
highly successful and growing North American aluminum extrusion business. The
combined businesses will constitute one of the largest aluminum extrusion
operations in North America."
Norman E. Wells, Jr., President and Chief Executive Officer of Easco,
stated, "This merger combines the capabilities of two excellent companies in the
aluminum extrusion industry. We are pleased that the merger also provides our
stockholders with an exceptional value-maximizing opportunity."
Caradon Inc. is a wholly-owned subsidiary of Caradon plc, of Weybridge,
England. Caradon plc is a major international group of companies operating
across Europe and North America. Caradon plc is committed to growing each of its
four product sectors -- plumbing, electrical, extrusions and security printing.
Easco, Inc. is the largest independent extruder of soft alloy aluminum
products in the United States and is a leading producer of painted extrusions.
The company operates 21 aluminum extrusion presses and three casting facilities.
Its products include standard and custom profiles, conduit and drawn tubing.
Easco's largest shareholder is American Industrial Partners, a private equity
firm with offices in New York and San Francisco.
Wasserstein Perella & Co, Inc. advised Easco in the transaction and KPMG
Corporate Finance advised Caradon.
<PAGE> 1
EXHIBIT 10
CARADON PLC
ACQUISITION OF US EXTRUSION BUSINESS FOR $155M ((POUND)97m)
Caradon today announced that it has signed a definitive agreement pursuant to
which Caradon will acquire all of the outstanding shares of common stock of
Easco, Inc. ("Easco"), a US publicly traded company, at a cash price of $15.20
per share, valuing the net equity at approximately $155m ((pound)97m).
Caradon has received irrevocable undertakings from Easco's largest stockholder,
American Industrial Partners, and each of Easco's directors and executive
officers, collectively owning approximately 46% of Easco's outstanding shares.
Easco is the largest independent aluminium extrusion company of soft alloy
products in North America, serving transportation, building, electronics,
consumer durables and distribution markets. It employs 2000 people and has
eleven manufacturing sites in the United States.
The turnover in the year to December 1998 was $314m ((pound)197m) with EBITDA of
$32m ((pound)20m) and profit before tax of $13.3m ((pound)8.4m). Net operating
assets at the end of December 1998 was $89.5m ((pound)56.3m) and net debt of
$77m ((pound)48m).
Caradon has substantial aluminium extrusion operations in North America which
support market leadership in Canada and strong regional positions in the US.
In the half year to June 1999 the Caradon Extrusion sector reported operating
profits up 30% to (pound)10.8m on a sales increase of 15% at (pound)112m. In the
full year to December 1998 operating profits were (pound)18.3m (up16% on
previous year) on sales of (pound)196.1m.
Commenting on the proposed acquisition, Jurgen Hintz, Group Chief Executive,
said:
"This acquisition provides Caradon the opportunity to more than double our
buoyant and profitable Aluminium Extrusion business. The combination with
Easco creates one of the largest competitors in the growing $4 billion North
American Extrusion market. It promises substantial synergies, bigger and
better manufacturing capacity, improved mix of customer segments, and access
to important low cost remelt capacity.
This business combination offers significant opportunities to create
shareholder value.
The management and employees of Easco provide a further advance in our
ability to serve customers. We welcome Norman Wells and his team to the
Caradon Group."
Wasserstein Perella & Co., Inc. advised Easco in the transaction and KPMG
Corporate Finance advised Caradon.
<PAGE> 1
[EASCO, INC. LOGO] EXHIBIT 11
August 3, 1999
Dear Stockholder:
We are pleased to inform you that on July 28, 1999, Easco, Inc. ("Easco")
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
Caradon Inc. and E Acqco Inc. (the "Purchaser"). Pursuant to the Merger
Agreement, the Purchaser today commenced a tender offer to purchase all
outstanding shares of Easco's common stock (the "Shares") for $15.20 per Share,
net to the seller in cash, without interest. Under the Merger Agreement, the
tender offer will be followed by a merger in which any remaining Shares (other
than Shares held by dissenting Stockholders, if applicable) will be converted
into the same consideration as is paid in the tender offer.
Your Board of Directors has unanimously approved the Merger Agreement, the
tender offer and the merger and has determined that the tender offer and merger
are fair to, and in the best interests of, Easco and its stockholders.
Accordingly, the Board of Directors recommends that stockholders accept the
offer and tender their shares.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including, among other things, the opinion of Wasserstein
Perella & Co., Inc., Easco's financial advisor, that the cash consideration of
$15.20 per Share to be received by the stockholders pursuant to the offer and
the merger is fair to such stockholders from a financial point of view. The
opinion, dated July 27, 1999, is attached as Schedule I to the Schedule 14D-9
enclosed herein. We encourage you to read the opinion in its entirety.
Additional information with respect to the transaction is contained in the
enclosed Schedule 14D-9, and we urge you to consider this information carefully.
Sincerely,
/s/ Norman E. Wells, Jr.
NORMAN E. WELLS, JR.
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 12
July 27, 1999
Board of Directors
Easco, Inc.
706 South State Street
Girard, Ohio 44420
Members of the Board of Directors:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, par value $.01 per
share (the "Shares"), of Easco, Inc., a Delaware corporation (the "Company"),
(other than any Shares held by Parent (as defined below) or Sub (as defined
below) and their respective subsidiaries and affiliates) of the $15.20 per Share
cash consideration to be received by such holders pursuant to the terms of a
draft Agreement and Plan of Merger (the "Merger Agreement") among the Company,
Caradon Inc., a Delaware corporation ("Parent") and a wholly-owned subsidiary of
Caradon plc ("UK Parent"), and E Acqco Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Sub"). The Merger Agreement provides for,
among other things, (1) a tender offer by Sub (the "Tender Offer") to acquire
all of the outstanding Shares at a price of $15.20 per Share in cash (the "Offer
Price"), and (2) for a subsequent merger of Sub with and into the Company (the
"Merger" and, together with the Tender Offer, the "Transaction") pursuant to
which each remaining outstanding Share not purchased in the Tender Offer (other
than any Shares held in the treasury of the Company or owned by UK Parent,
Parent, Sub or their respective subsidiaries) will be converted into the right
to receive the Offer Price, without interest. The terms and conditions of the
Transaction will be set forth in more detail in the Merger Agreement.
In connection with rendering our opinion, we have reviewed a draft of the
Merger Agreement, dated July 26, 1999, and for purposes hereof we have assumed
that the final form of this document will not differ in any material respect
from the draft provided to us. We have also reviewed and analyzed certain
publicly available business and financial information relating to the Company
for recent years and interim periods to date, as well as certain internal
financial and operating information, including financial forecasts, analyses and
projections prepared by or on behalf of the Company and provided to us for
purposes of our analysis, and we have met with management of the Company to
review and discuss such information and, among other matters, the Company's
business, operations, assets, financial condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the aluminum products industry specifically, and in other
industries generally, that we believe to be reasonably comparable to the
Transaction or otherwise relevant to our inquiry. We have also performed such
other financial studies, analyses, and investigations and reviewed such other
information as we considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also assumed and relied upon the reasonableness and
accuracy of the financial projections, forecasts and analyses provided to us,
and we have assumed that such projections, forecasts and analyses were
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the Company's management. We express no
opinion with respect to such projections, forecasts and analyses or the
assumptions upon which they are based. In addition, we have not reviewed any of
the books and records of the Company, or assumed any responsibility for
conducting a physical inspection of the properties or facilities of the Company,
or for making or obtaining an independent valuation or appraisal of the assets
or
<PAGE> 2
Board of Directors
Easco, Inc.
July 27, 1999
Page 2
liabilities of the Company, and no such independent valuation or appraisal was
provided to us. We also have assumed that the transactions described in the
Merger Agreement will be consummated without waiver or modification of any of
the material terms or conditions contained therein by any party thereto. Our
opinion is necessarily based on economic and market conditions and other
circumstances as they exist and can be evaluated by us as of the date hereof.
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company and UK Parent 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.
We are acting as financial advisor to the Board of Directors of the Company
in connection with the proposed Transaction and will receive a fee for our
services, which is contingent upon the consummation of the Transaction. We
previously acted as financial advisor to the Special Committee of the Board of
Directors of the Company (the "Special Committee") with respect to, among other
things, its evaluation of an acquisition proposal dated April 30, 1999 by
American Industrial Partners Capital Fund, L.P. (together with its affiliates,
"AIP") to acquire the Company. We understand that AIP beneficially owns
approximately 45% of the Shares presently outstanding. We also understand that
AIP's proposal has expired, and the Special Committee has been disbanded.
Our opinion addresses only the fairness from a financial point of view to
the stockholders of the Company of the Offer Price, and we do not express any
views on any other terms of the Transaction. Specifically, our opinion does not
address the Company's underlying business decision to effect the transactions
contemplated by the Merger Agreement.
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in its consideration of the Transaction and, except
for inclusion in its entirety in any proxy statement required to be circulated
to stockholders of the Company relating to the Merger or tender offer
recommendation statement on Schedule 14D-9 from the Company to holders of Shares
relating to the Transaction, may not be quoted, referred to or reproduced at any
time or in any manner without our prior written consent. This opinion does not
constitute a recommendation to any stockholder with respect to whether such
holder should tender Shares pursuant to the Tender Offer or as to how such
holder should vote with respect to the Merger, and should not be relied upon by
any stockholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that, as of the date hereof,
the $15.20 per Share cash consideration to be received by the stockholders of
the Company pursuant to the Transaction is fair to such stockholders (other than
any Shares held by Parent or Sub and their respective subsidiaries and
affiliates) from a financial point of view.
Very truly yours,
/s/ WASSERSTEIN PERELLA & CO., INC.
