<PAGE> 1
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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
EASCO, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NOT APPLICABLE)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
[EASCO, INC. LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Easco, Inc., a Delaware corporation
(the "Company"), will be held at the Holiday Inn, 7410 South Avenue, Boardman,
Ohio, on May 7, 1999, at 10:00 a.m., local time, for the following purposes:
1. To elect three directors to hold office for a term of three years;
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the Company for 1999; and
3. To transact such other business as may properly be presented at the
meeting.
A proxy statement with respect to the annual meeting accompanies and forms
a part of this Notice. A form of proxy and the annual report of the Company for
the fiscal year ended December 31, 1998 also accompany this Notice.
By order of the Board of Directors.
TERRY D. SMITH
Executive Vice President and
Chief Financial Officer,
Secretary and Treasurer
706 South State Street
Girard, Ohio 44420
March 31, 1999
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, AND DATE YOUR PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT
YOU INTEND TO ATTEND THE MEETING.
<PAGE> 3
[EASCO, INC. LOGO]
706 SOUTH STATE STREET
GIRARD, OHIO 44420
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company for use at the Annual Meeting of Stockholders of the Company to be held
on May 7, 1999, and any adjournments thereof. This proxy statement and
accompanying proxy are first being sent to stockholders on or about March 31,
1999.
Shares represented by an effective proxy given by a stockholder will be
voted as directed by the stockholder. If a properly signed proxy form is
returned to the Company and is not marked, it will be voted in accordance with
the recommendation of the Board of Directors on all proposals. A stockholder
giving a proxy may revoke it at any time prior to the voting of the proxy by
giving written notice of such revocation to the Secretary of the Company, or by
submitting a later dated proxy or by attending the meeting and voting in person.
The Company's common stock, $.01 par value per share (the "Common Stock"),
is its only issued and outstanding class of stock. Only stockholders of record
at the close of business on March 22, 1999 are entitled to notice of and vote at
the meeting. At the close of business on March 22, 1999, the Company had
9,452,541 shares of Common Stock outstanding and entitled to vote. Each share of
Common Stock of the Company is entitled to one vote. A list of stockholders of
record entitled to vote at the meeting will be kept at the Easco, Inc. corporate
headquarters for a period of 10 days prior to the meeting.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board of Directors of the Company presently is comprised of eight
Directors. The directors of the Company are divided into three classes; Classes
I and III each consist of three directors and Class II consists of two
directors. At the meeting, the three directors of Class I are to be elected to
serve for three-year terms expiring in 2002 and until their respective
successors are duly elected and qualified. Shares may not be voted for more than
three nominees.
The names of the nominees for election to the Board of Directors, and
certain information about them, are set forth below. The Company does not know
of any reason why any of these nominees may be unable to serve as a director. If
any nominee is unable to serve, the shares represented by the proxy will be
voted for the person designated by the Company's current Board of Directors to
replace that nominee. Under Delaware law and the Company's bylaws, directors are
elected by a plurality of the votes cast by holders of the shares of Common
Stock present in person or represented by proxy at the meeting and entitled to
vote for the election of directors. Shares represented at the meeting in person
or by proxy but withheld or otherwise not cast for the election of directors
will have no effect on the outcome of the election.
<PAGE> 4
NOMINEES TO SERVE UNTIL 2002 ANNUAL MEETING OF STOCKHOLDERS (CLASS I)
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE AND OTHER INFORMATION
---- --- -----------------------------------------
<S> <C> <C>
Theodore C. Rogers 64 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 AIP, L.P., the
general partner of American Industrial Partners Capital
Fund, L.P. ("AIP-CF"). From 1980 to 1987, he served as
Chairman, President and Chief Executive Officer of NL
Industries, Inc., a petroleum service and chemical company.
Mr. Rogers is a director of Sweetheart Holdings Inc.,
Bucyrus International, Inc., Stanadyne Automotive Corp., RBX
Corporation, Derby International, Great Lakes Carbon
Corporation and Steel Heddle Group, Inc. He has been a
director of the Company since 1992.
Robert J. Klein 34 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. He
has been a director of the Company since 1993.
Kenneth J. Diekroeger 36 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. and Stanadyne Automotive Corp.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE
FOR DIRECTOR NAMED ABOVE.
CONTINUING DIRECTORS SERVING UNTIL THE
2001 ANNUAL MEETING OF STOCKHOLDERS (CLASS III)
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE AND OTHER INFORMATION
---- --- -----------------------------------------
<S> <C> <C>
Samuel H. Smith, Jr. 68 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. He has been a
director of the Company since 1993.
Kim A. Marvin 37 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 Steel Heddle Group,
Inc.
Gene E. Little 56 Mr. Little was named Senior Vice President-Finance of The
Timken Company ("Timken"), a manufacturer of highly
engineered bearings and alloy steel, in 1998. He was Vice
President -- Finance of Timken from 1992 to 1997 and he has
been Treasurer of Timken since 1990. Mr. Little is a trustee
of Aultman Hospital and the Northeastern Ohio Universities
College of Medicine Education Foundation. He has been a
director of the Company since 1995.
</TABLE>
2
<PAGE> 5
CONTINUING DIRECTORS SERVING UNTIL THE
2000 ANNUAL MEETING OF STOCKHOLDERS (CLASS II)
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE AND OTHER INFORMATION
---- --- -----------------------------------------
<S> <C> <C>
Norman E. Wells, Jr. 50 Mr. Wells joined the Company in November 1996 as President
and Chief Executive Officer of Easco, Inc. and Easco
Corporation ("Easco"), a subsidiary of the Company. Before
joining the Company, Mr. Wells served as President and Chief
Executive Officer of CasTech Aluminum Group Inc.
("CasTech"), a producer of continuous cast aluminum sheet
metal, from March 1993 to November 1996. Prior thereto, Mr.
Wells held other executive positions at CasTech, and he has
held a variety of positions in the aluminum industry since
1975. He has been a director of the Company since February
1997.
Raymond E. Ross 61 Mr. Ross was President and Chief Operating Officer and a
member of the Board of Directors of Cincinnati Milacron,
Inc. ("CMI") from 1980 until his retirement in December
1997. Prior thereto, Mr. Ross held various executive and
managerial positions with CMI. Mr. Ross is a director of
Hydac U.S.A. and serves on the Board of Advisors,
Engineering College, University of Cincinnati, and the Board
of Trustees, Greater Cincinnati United Way/Community Chest.
He has been a director of the Company since January 1998.
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
There were eight meetings of the Company's 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 "Executive
Compensation--Compensation Committee Interlocks and Insider Participation."
Messrs. Smith, Little and Ross each receive an annual directors' fee of $18,000
plus a $500 fee for each meeting attended. Mr. Little receives a $1,000 annual
fee for serving as Chairman of the Audit Committee. Directors are reimbursed for
expenses incurred attending board and committee meetings.
3
<PAGE> 6
EXECUTIVE COMPENSATION
SUMMARY
The following table provides certain summary information concerning
compensation paid or accrued by Easco to or on behalf of Easco's Chief Executive
Officer and each of Easco's four other most highly compensated executive
officers (collectively, the "Named Officers") for the years ended December 31,
1998, 1997 and 1996.
Beginning in November 1996, the Company realigned its executive management
group when Mr. Wells joined the Company as its President and Chief Executive
Officer. Mr. Wells was joined by Terry D. Smith, the Company's Executive Vice
President, Chief Financial Officer, Secretary and Treasurer; Joseph M. Byers,
Vice President of Sales and Marketing; James R. McKeithan, Vice President of
Operations; and Lawrence J. Sax, Vice President of Raw Materials.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------- ------------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL COMPENSATION STOCK UNDERLYING COMPENSATION
POSITION YEAR SALARY($) 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> 7
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> 8
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> 9
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> 10
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> 11
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> 12
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> 13
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> 14
COMPARISON OF CUMULATIVE TOTAL RETURN
The following chart compares the Company's cumulative total stockholder
return on its Common Stock from April 13, 1995, to December 31, 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-97 201.86 198.60 95.73
Dec-98 259.55 161.70 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.
PROPOSAL 2 -- APPOINTMENT OF INDEPENDENT AUDITORS
Subject to stockholder ratification, the Board of Directors has selected
Deloitte & Touche LLP to audit the accounts of the Company for the year 1999.
Deloitte & Touche LLP were the independent auditors of the Company for the year
ended December 31, 1998. Representatives of Deloitte & Touche LLP will be
present at the annual meeting and will be given the opportunity to make a
statement if they desire to do so. They will also be available to respond to
appropriate questions.
If stockholders do not ratify the appointment of Deloitte & Touche LLP, the
Board of Directors will reconsider its selection.
12
<PAGE> 15
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE COMPANY FOR 1999.
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 Securities and
Exchange Commission ("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.
PROXY SOLICITATION EXPENSE
The expense of the proxy solicitation will be paid by the Company. In
addition to the solicitation of proxies by use of the mails, solicitation may
also be made by telephone, telegram or personal interview by directors, officers
and regular employees of the Company, none of whom will receive additional
compensation for any such solicitation. The Company will, upon request,
reimburse brokers, banks and similar organizations for out-of-pocket and
reasonable clerical expenses incurred in forwarding proxy material to their
principals. The estimated cost of these expenses is $10,000.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders must be received in writing by the Secretary of
the Company prior to November 26, 1999 in order to be considered for inclusion
in the Company's proxy statement and form of proxy relating to the Annual
Meeting of Stockholders to be held in 2000.
Proposals of stockholders not intended for inclusion in the Company's 1999
Proxy Statement must be received in writing by the Secretary of the Company
prior to March 8, 2000 in order to preclude the Company's use of its
discretionary voting authority when the proposal is raised at the 2000 Annual
Meeting of Stockholders.
OTHER MATTERS
The Board of Directors knows of no matters to be presented at the annual
meeting other than those set forth in the Notice of Annual Meeting of
Stockholders. However, if any other matters do come before the meeting, it is
intended that the holders of the proxies will vote thereon in their discretion.
By order of the Board of Directors.
TERRY D. SMITH
Executive Vice President, Chief
Financial Officer, Secretary and
Treasurer
706 South State Street
Girard, Ohio 44420
Each stockholder, whether or not he or she expects to be present in person at
the annual meeting, is requested to SIGN, DATE AND RETURN THE ENCLOSED PROXY in
the accompanying envelope as promptly as possible. A stockholder may revoke his
or her proxy at any time prior to voting.
13
<PAGE> 16
<TABLE>
<S> <C>
P EASCO, INC. EASCO, INC.
R PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF 706 SOUTH STATE STREET
O EASCO, INC. FOR THE ANNUAL MEETING GIRARD, OHIO 44420
X OF STOCKHOLDERS ON MAY 7, 1999 (330) 545-4311
Y
</TABLE>
The undersigned hereby appoints Theodore C. Rogers, Norman E. Wells, Jr.
and Gene E. Little and each of them, proxies, with the powers the undersigned
would possess if personally present, and with full power of substitution, to
vote all shares of common stock of Easco, Inc. that the undersigned is entitled
to vote at the Annual Meeting of Stockholders to be held at the Holiday Inn,
7410 South Avenue, Boardman, Ohio at 10:00 am, local time, on May 7, 1999, and
at any adjournment thereof, upon all subjects that may properly come before the
meeting, including the matters described in the proxy statement furnished
herewith, subject to any direction indicated on the other side of this card.
Dated:_____________________, 1999
Signed:__________________________
_________________________________
PLEASE SIGN EXACTLY AS NAME
APPEARS HEREON. JOINT OWNERS
SHOULD EACH SIGN. WHEN SIGNING
AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES. SEE REVERSE SIDE. YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXYHOLDERS
NAMED ABOVE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND MAIL IT IN THE ENVELOPE
PROVIDED.
(Over)
- --------------------------------------------------------------------------------
DETACH CARD
<PAGE> 17
[X] Please mark
each vote
like this
THIS PROXY WHEN PROPERLY SIGNED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS
AND "FOR" PROPOSAL 2.
<TABLE>
<CAPTION>
FOR WITHHELD
ALL FOR ALL FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS: THEODORE C. ROGERS [ ] [ ] 2. Ratification of [ ] [ ] [ ]
ROBERT J. KLEIN independent
KENNETH J. DIEKROEGER auditors.
</TABLE>
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE:
- -----------------------------------------------------------
COMMENTS/ADDRESS CHANGE
Please mark this box if you have [ ]
written comments/address change
on the reverse side.
Signature(s)__________________________________________________ Date ____________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. The signer hereby revokes all proxies heretofore given
by the signer to vote at said meeting or any adjournment thereof.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
DETACH CARD
