EMCO LIMITED/EMCO LIMITED


o	Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer

The name of the subject company is Emco Limited (the “Company”), a company organized under the laws of Ontario, Canada, which has its principal executive offices at 620 Richmond Street, London, Ontario, Canada, N6A 5J9. The telephone number of the principal executive offices of the Company is (519) 645-3900. Capitalized terms used in this Schedule 14D-9 and not defined in this document shall have the meanings set forth in the Directors’ Circular dated February 28, 2003 (the “Directors’ Circular”) included as Exhibit (a)(1) to this Schedule 14D-9.

The title of the class of equity securities to which this statement relates is the common shares of the Company (the “Common Shares”). As of February 28, 2003, there were 15,907,419 Common Shares issued and outstanding.

This Schedule 14D-9 is being filed by the subject company, Emco Limited. The name, address and telephone number of the Company are set forth in Item 1 above.

This Schedule 14D-9 relates to the offer by 2022841 Ontario Inc. (the “Offeror”), an indirect wholly-owned subsidiary of Blackfriars Corp. (“Blackfriars”), disclosed in a Tender Offer Statement on Schedule TO filed by the Offeror and Blackfriars with the Securities and Exchange Commission (“SEC”), dated February 28, 2003 (as amended or supplemented from time to time) (the “Schedule TO”), to purchase all of the issued and outstanding Emco Shares, including all Emco Shares that may become outstanding pursuant to the Company’s Employee Stock Purchase Plan, on the exercise of Options, or on the conversion of Debentures, at a price of Cdn. $16.60 in cash for each Emco Share, subject to the terms and conditions set forth in the Offer to Purchase, dated February 28, 2003 (the “Offeror’s Circular”). Copies of the Offeror’s Circular and the related letters of transmittal are attached as exhibits to the Schedule TO and are being furnished to the Company’s shareholders concurrently with this Schedule 14D-9.

As set forth in the Schedule TO, the address of the principal executive offices of the Offeror is 199 Bay Street, Toronto, Ontario, Canada, M5L 1B9. As set forth in the Schedule TO, the address of the principal executive offices of Blackfriars is 555 Skokie Blvd., Suite 555, Northbrook, Illinois 60062. The telephone numbers of the Offeror and Blackfriars are (818) 597-3754 and (416) 814-7995, respectively.

All information concerning the Offeror, Blackfriars or their affiliates contained in this Schedule 14D-9 or incorporated by reference in this Schedule 14D-9 was obtained from reports or statements filed by the Offeror or Blackfriars with the SEC, including, without limitation, the Schedule TO, and the Company takes no responsibility for such information.

Except as set forth or incorporated by reference in this Item 3, there are no material agreements, arrangements or understandings and no actual or potential conflicts of interest between the Company or its affiliates and (a) the Company’s executive officers, directors or affiliates or (b) the Offeror or Blackfriars, or their respective executive officers, directors or affiliates. The information set forth in the Directors’ Circular under the captions “Background to the Offer”, “Arrangements, Agreements or Understandings”, “Principal Shareholders”, “Ownership of Securities of Emco by Directors and Senior Officers”, “Ownership of Securities of the Offeror or Blackfriars”, “Intention of Directors, Senior Officers and Certain Shareholders of Emco with respect to the Offer”, “Trading in Securities of Emco”, “Relationship between the Offeror and Directors, Senior Officers, Affiliates and Principal Shareholders of Emco”, and “Arrangements and Agreements Between Emco and its Directors, Senior Officers and Affiliates” is incorporated in this document by reference. Additionally, the section entitled “Executive Compensation” set forth in the Company’s Management Information Circular, dated March 4, 2002, as filed with the SEC as part of the Company’s Form 40-F, is incorporated in this document by reference and included as Exhibit (e)(10) to this Schedule 14D-9.

The information set forth under the caption “Recommendation of the Board of Directors” of the Directors’ Circular is incorporated in this document by reference.

The information set forth under the captions “Reasons for Recommendation” and “Engagement Agreement and Fairness Opinion” of the Directors’ Circular is incorporated in this document by reference.

The information set forth under the caption “Arrangements, Agreements or Understandings — Lock-Up Agreement” of the Directors’ Circular is incorporated in this document by reference.

The information set forth under the caption “Engagement Agreement and Fairness Opinion” of the Directors’ Circular is incorporated in this document by reference.

Except as set forth or incorporated by reference in this document, no transactions in Emco Shares have been effected during the past 60 days by the Company or any subsidiary of the Company or by any executive officer, director or affiliate of the Company. The information set forth under the captions “Trading in Securities of Emco” and “Issuances of Securities of Emco” of the Directors’ Circular is incorporated in this document by reference.

Except as indicated in Items 3 and 4 above, no negotiations are being undertaken or are underway by the Company in response to the Offer which relate to a tender offer or other acquisition of the Company’s securities by the Company, any subsidiary of the Company or any other person.

Except as indicated in Items 3 and 4 above, no negotiations are being undertaken or are underway by the Company in response to the Offer which relate to, or would result in, (i) an extraordinary transaction, such as a merger, reorganization or liquidation, involving the Company or any subsidiary of the Company, (ii) a purchase, sale or transfer of a material amount of assets of the Company or any subsidiary of the Company, or (iii) any change in the present dividend rate or policy, or indebtedness or capitalization of the Company.

Except as indicated in Items 3 and 4 above, there are no transactions, board resolutions, agreements in principle or signed contracts in response to the Offer that relate to or would result in one or more of the matters referred to in this Item 7.

The information set forth under the captions “Regulatory Matters”, and “Material Changes in the Affairs of Emco” of the Directors’ Circular is incorporated in this document by reference.

After due 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.


	February 28, 2003

	(Date)

	EMCO LIMITED

	/s/ MARK F. WHITLEY

	(Signature)
	Mark F. Whitley
	Vice President, General Counsel & Secretary

6 EX-99.A.1 3 t09060d9exv99waw1.htm DIRECTORS' CIRCULAR DATED FEBRUARY 28, 2003 DIRECTORS' CIRCULAR DATED FEBRUARY 28, 2003

This is an important document that requires your careful review and consideration. If you are in doubt as to how to respond to the Offer, you should consult with your investment dealer, stockbroker, bank manager, lawyer or other professional advisor. Inquiries concerning the information in this document should be directed to Mark F. Whitley, Vice President, General Counsel and Secretary of Emco Limited, at (519) 645-3900.

The enforcement by investors of civil liabilities under United States federal securities laws may be adversely affected by the fact that Emco Limited is governed by the laws of the Province of Ontario, Canada, that the majority of its officers and directors are residents of Canada, and that a substantial portion of the assets of Emco Limited and those persons may be located in Canada.

In this Directors’ Circular, unless the context otherwise requires, the following terms have the meanings set forth below:

“Company” and “Emco” mean Emco Limited, a corporation amalgamated under the OBCA.

“Confidentiality Agreement” means the confidentiality agreement dated as of September 25, 2002 between Emco and an affiliate of Blackfriars.

“Debentures” means the 6.5% convertible unsecured subordinated debentures of the Company issued pursuant to the Trust Indenture, of which an aggregate principal amount of $69.12 million is currently outstanding.

“Expiry Time” means 8:00 p.m. (EST) on April 7, 2003, unless the Offer has been extended, in which case it means the expiry time of the Offer as extended from time to time.

“Fairness Opinion” means the written fairness opinion dated February 19, 2003 from TD Securities relating to the Offer and addressed to the Independent Committee.

“fully-diluted basis” means, with respect to the number of outstanding Emco Shares at any time, the number of Emco Shares that would be outstanding assuming all Options and other rights (other than Emco Shares issuable on the conversion of the outstanding Debentures) to acquire Emco Shares outstanding at that time have been exercised.

“Independent Committee” means the Independent Committee of the Board of Directors consisting of three independent directors, Richard B. Grogan, D. Brian Harrison (Chair) and David L. Johnston, formed for the purpose of conducting a review of strategic alternatives in order to maximize shareholder value, which review included, among other things, considering the Offer and making recommendations to the Board of Directors in respect thereof.

“Lock-Up Agreement” means the agreement dated as of February 19, 2003 between the Offeror, Blackfriars and Masco pursuant to which Masco has agreed to deposit the Locked-Up Shares to the Offer and not withdraw them, except in limited circumstances, as described under “Lock-Up Agreement” below.

“Locked-Up Shares” means the 6,621,334 Emco Shares held by Masco that are subject to the Lock-Up Agreement.

“Minimum Condition” means that there shall have been validly deposited under the Offer and not withdrawn at the Expiry Time such number of Emco Shares which constitute at least 66 2/3% of the Emco Shares outstanding (on a fully-diluted basis) at the Expiry Time.

“Offer” means the Offeror’s offer to purchase all of the Emco Shares, the terms and conditions of which are set forth in the Offeror’s Circular.

“Offeror’s Circular” means the offer to purchase all of the Emco Shares and take-over bid circular of the Offeror dated February 28, 2003 setting forth the terms and conditions of the Offer.

“Offeror” means 2022841 Ontario Inc., a corporation incorporated under the OBCA and an indirect wholly-owned Subsidiary of Blackfriars.

“Option” means an option to purchase Emco Shares granted under the Stock Option Plan.

“Person” includes an individual, partnership, association, body corporate, unincorporated association, unincorporated syndicate, unincorporated organization, joint venture, business organization, trust, trustee, executor, administrator, legal representative, governmental entity or any other entity, whether or not having legal status.

“Stock Option Plan” means the stock option plan for key employees of the Company which forms part of Emco’s 1991 Long-Term Incentive Program.

“Subsidiary” means any corporation, partnership, limited liability company, joint venture or other legal entity of which the relevant Person (either alone or through or together with any other Subsidiary), owns, directly or indirectly, 50% or more of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation, partnership, limited liability company, joint venture or other legal entity.

“Superior Proposal” means a Take-over Proposal on terms which a majority of the members of the Board of Directors determines, at a duly constituted meeting of the Board of Directors or by unanimous written consent, in its reasonable good faith judgment to be more favourable to the Shareholders than the Offer (after consultation with the Company’s financial, legal and other advisors) and for which financing, to the extent required, is then committed or which, in the reasonable good faith judgment of a majority of such members, as expressed in a resolution adopted at a duly constituted meeting of such members (after consultation with the Company’s financial, legal and other advisors), is reasonably capable of being obtained by the Person making such Take-over Proposal.

“Support Agreement” means the support agreement dated as of February 19, 2003 between the Offeror, Blackfriars and Emco, as described under “Support Agreement” below.

“Support Agreement Effective Time” means the period from February 19, 2003 to the earlier of the appointment or election to the Board of Directors of persons designated by the Offeror who represent a majority of the directors of Emco and the termination of the Support Agreement in accordance with its terms.

“Take-over Proposal” means any proposal or offer from any Person whatsoever (including any of the Company’s officers or directors, but excluding the Offeror or Blackfriars) relating to any recapitalization, merger, amalgamation, acquisition, arrangement or other business combination involving the Company or any of its Subsidiaries or any proposal or offer from any such Person to acquire in any manner, directly or indirectly, an equity interest in, any voting securities of, or a substantial portion of the assets of the Company or any of its Subsidiaries, other than the Offer.

“TD Securities” means TD Securities Inc., the financial advisor to the Independent Committee.

“Trust Indenture” means the trust indenture dated as of July 4, 1997 made between Emco and Montreal Trust Company of Canada.

In this Directors’ Circular, words importing the singular number include the plural and vice versa and words importing any gender include all genders. The term “including” means “including, without limiting the generality of the foregoing” and the terms “include” and “includes” have corresponding meanings.

This Directors’ Circular is issued by the Board of Directors in connection with the Offer made by the Offeror to purchase all of the issued and outstanding Emco Shares, including all Emco Shares that may become outstanding on the exercise of Options, or on the conversion of Debentures, at a price of $16.60 in cash for each Emco Share, upon the terms and subject to the conditions set forth in the Offeror’s Circular. Reference is made to the Offeror’s Circular for details of the terms and conditions of the Offer.

The Expiry Time of the Offer is 8:00 p.m. (EST) on April 7, 2003, unless withdrawn, extended or varied.

All references in this Directors’ Circular to “dollars” and to “$” are to Canadian dollars, except where otherwise indicated.

After carefully considering the terms of the Offer, the recommendation of the Independent Committee relating to the Offer, the advice of its financial and legal advisors, the Fairness Opinion (a complete copy of which is attached as Schedule “A” to this Directors’ Circular), and various additional matters, the Board of Directors has unanimously determined that the Offer is in the best interests of the Shareholders and recommends that Shareholders accept the Offer and deposit their Emco Shares to the Offer. See “Reasons for Recommendation”.

Shareholders who are in doubt as to how to respond to the Offer should consult their own investment dealer, stockbroker, bank manager, lawyer or other professional advisors.

The Board of Directors has carefully considered the Offer and received the benefit of advice from the Independent Committee and its financial and legal advisors. In reaching its decision to approve the Support Agreement and to recommend acceptance of the Offer, the Independent Committee and the Board of Directors considered a number of factors, including the following:

The Offer price of $16.60 in cash for each Emco Share (approximately $290 million on a fully-diluted basis) represents a 12.5% premium over the closing price of the Emco Shares of $14.75 on the TSX on February 19, 2003 (the day prior to the announcement of the Offer by the Offeror and Emco) and a 58% premium over the closing price of the Emco Shares of $10.50 on the TSX on July 23, 2002 (the day prior to the announcement by the Board of Directors of its strategic alternatives review). The Emco Shares have not traded at the Offer price during the twelve month period preceding the Offer.

On July 23, 2002, the Board of Directors formed the Independent Committee, with a mandate to review and consider strategic alternatives to maximize shareholder value. The review of strategic alternatives by Emco was publicly announced on July 24, 2002. The Independent Committee retained TD Securities in August 2002 who, over the course of six months, contacted over 200 potentially interested parties. In excess of 60 parties signed confidentiality agreements and received non-public information regarding Emco. The Independent Committee and TD Securities identified and considered a number of strategic alternatives available to maximize shareholder value, including the sale of Emco, in whole or in parts, and conversion of all or parts of Emco’s business into an income trust. Several parties

submitted bids for all or parts of Emco, and the Independent Committee and the Board of Directors determined that the Offer of $16.60 per Emco Share was the most attractive proposal available to Shareholders.

TD Securities has delivered a written opinion to the Independent Committee concluding that the consideration under the Offer is fair, from a financial point of view, to the Shareholders. A copy of the Fairness Opinion is attached to this Directors’ Circular as Schedule “A”. See “Fairness Opinion” below.

The Offer represents an opportunity for Shareholders that, in the absence of the Offer might not otherwise be available, to dispose of all of their Emco Shares for cash consideration of $16.60 per share.

The terms of the Support Agreement permit the Board of Directors to respond, in accordance with its fiduciary duties, to unsolicited Superior Proposals made prior to the successful completion of the Offer. The ability of the Board of Directors to respond to any such Superior Proposal is subject to the conditions contained in the Support Agreement. In such circumstances, the Company would be required to pay a $6 million termination fee to Blackfriars, which represents approximately 2.1% of the aggregate consideration offered to the Shareholders under the Offer. The Board of Directors considers it unlikely that a Superior Proposal will emerge.

The Board of Directors also considered the recommendation of the Independent Committee relating to the Offer. The foregoing discussion of the factors considered by the Independent Committee and the Board of Directors is not intended to be exhaustive. In view of the wide variety of factors considered in connection with its evaluation of the Offer, the Board of Directors did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weight to specific factors in reaching its determination. In addition, individual members of the Board of Directors may have given different weight to different factors. The Board recognized that, while the consummation of the Offer gives the Shareholders the opportunity to realize a premium over the prices at which the Common Shares were traded prior to the public announcement of the Offer, consummation of the Offer will eliminate the Shareholders’ ability to participate in the future growth and possible profits of the Company.

On August 22, 2002, the Independent Committee engaged TD Securities pursuant to a letter of engagement (the “Engagement Agreement”) to act as exclusive financial advisor to the Independent Committee in connection with the identification, evaluation and implementation of strategic initiatives to maximize value for the Company’s Shareholders. On February 19, 2003, the Independent Committee received the oral opinion of TD Securities, which was subsequently confirmed in writing, that the consideration under the Offer is fair, from a financial point of view, to the Shareholders. The following is a summary of certain provisions in the Engagement Agreement and the Fairness Opinion.

In consideration for acting as financial advisor to the Independent Committee, the Company agreed to pay TD Securities cumulative work fees and a transaction fee, in accordance with the terms of the Engagement Agreement. TD Securities will receive cumulative work fees of $50,000 per month continuing throughout TD Securities’ term of engagement under the Engagement Agreement to a maximum of 4 months, which fees will be credited to any transaction fee payable upon the closing of the type of transaction contemplated by the Offer. Any such transaction fee payable to TD Securities by Emco will be based upon an amount equal to 0.60% of the consideration received by Emco or its Shareholders. TD Securities will also be reimbursed by the Company for all reasonable out-of-pocket expenses incurred by TD Securities in performing its role as financial advisor.

The Company has indemnified TD Securities, each of its affiliates and each of its directors, officers and employees from and against any losses which it or they might suffer as a result of TD Securities’ engagement as financial advisor to the Independent Committee.

Neither TD Securities nor any of its affiliates is an insider, associate or affiliate (as those terms are defined by applicable securities laws) of the Company, the Offeror or Blackfriars or any of their respective associates or affiliates. TD Securities has not been engaged to provide any financial advisory services or act as lead or co-lead underwriter of securities of the Company, the Offeror or Blackfriars or any of their respective associates or affiliates, within the past two years, other than the services provided under the Engagement Agreement. Other than the Engagement Agreement, there are no understandings, agreements or commitments between TD Securities and the Company, the Offeror or Blackfriars or any of their respective associates or affiliates with respect to any future business dealings.

TD Securities, acting as financial advisor to the Independent Committee, delivered the Fairness Opinion to the Independent Committee verbally on February 19, 2003 concluding that the consideration under the Offer is fair, from a financial point of view, to the Shareholders. The Fairness Opinion does not constitute a recommendation as to whether or not any Shareholder should deposit his or her Emco Shares to the Offer.

The full text of the written Fairness Opinion delivered by TD Securities, which sets forth assumptions made, matters considered and qualifications and limitations on the review undertaken in connection with the Fairness Opinion, is attached as Schedule “A”. Shareholders are urged to read the Fairness Opinion in its entirety.

On July 23, 2002, the Board of Directors, after considering the business and operations of Emco, on both a historical and prospective basis and the industry, economic and market conditions, including a perceived low market capitalization, established an Independent Committee of directors to review strategic alternatives available to Emco to maximize shareholder value.

The Independent Committee of directors, consisting of three independent directors, Richard B. Grogan, D. Brian Harrison (Chair) and David L. Johnston, was authorized, among other things, (i) to consider all available strategic alternatives, including a possible sale or restructuring of all or a portion of Emco, in the best interests of Emco and the Shareholders, (ii) to inquire into such matters as the Independent Committee considered appropriate in connection with the strategic alternatives, (iii) to take such actions as the Independent Committee considers necessary or advisable in connection with its mandate, and (iv) to report its conclusions and recommendations to the Board of Directors.

The commencement of the strategic alternatives review and the appointment of the Independent Committee was announced on July 24, 2002. After the completion of a selection process, the Independent Committee retained TD Securities to act as its financial advisor and McCarthy Tétrault LLP to act as its legal advisor.

The Independent Committee and TD Securities identified and considered a number of strategic alternatives available to maximize Shareholder value, including the sale of Emco, in whole or in parts, and conversion of all or parts of Emco’s business into an income trust.

In assessing the alternatives available to Emco, TD Securities presented the Independent Committee with a list of industry participants and other interested parties who were most likely to have the ability and interest to enter into one or more favourable transactions with Emco. The Independent Committee and TD Securities reviewed, discussed and agreed upon the list of likely industry participants and other interested parties.

TD Securities, working with Emco’s management, prepared a confidential information memorandum describing the business and prospects of Emco and its business units. TD Securities contacted potentially interested parties and circulated the confidential information memorandum to those parties who requested it, following the execution of a confidentiality agreement.

On the instructions of the Independent Committee, TD Securities invited the potential candidates, including an affiliate of Blackfriars, to submit non-binding proposals for a possible transaction no later than November 15, 2002. As a result of this process, written, non-binding proposals and verbal indications of interest were received. On November 19, 2002, the Independent Committee met with TD Securities and legal counsel and reviewed the proposals in detail.

The Independent Committee evaluated the proposals it received and determined to allow certain of the candidates access to more detailed due diligence materials, including materials provided in a data room containing confidential information relating to the business, operations and plans of Emco.

The interested parties were allowed access to Emco’s facilities and received presentations from Emco’s management. Presentations were made by management to 17 different parties, some of whom were interested in all of Emco and some of whom were interested only in one or more of Emco’s business units.

Interested parties were then asked to submit binding proposals which were received by TD Securities by February 7, 2003 and then reviewed with the Independent Committee in person on February 11, 2003 and by conference call on February 14, 2003.

The Independent Committee received advice from TD Securities on all bids including the proposal by Blackfriars and reviewed with it the structure and terms of the proposals. On February 14, 2003, the acquisition proposal from Blackfriars was identified by the Independent Committee as the most favourable to Shareholders based on price and other terms. Thereafter, further negotiations took place between Emco and Blackfriars with respect to the proposal submitted by Blackfriars, including settling the terms of the Support Agreement, the Offer price and the conditions and other terms of the Offer.

Throughout the process, the Independent Committee met on numerous occasions to receive updates from TD Securities and review the process. The full Board of Directors was updated periodically by the Independent Committee. On February 19, 2003, the Independent Committee and its financial and legal advisors updated the Board of Directors as to the status of negotiations. TD Securities provided the Board of Directors with financial advice regarding the proposed consideration under the Offer, including its view as to the fairness of the consideration, from a financial point of view, to the Shareholders. The Independent Committee’s legal advisors, McCarthy Tétrault LLP, provided advice on the structure of the transaction and the terms of the draft Support Agreement. The Board of Directors reviewed the terms of the draft Support Agreement, discussed with its counsel a number of issues arising in respect of the Support Agreement (including the draft Lock-Up Agreement) and fully considered its duties and responsibilities to Shareholders. After deliberations, and upon the recommendation of the Independent Committee, the Board of Directors unanimously approved the Support Agreement and unanimously determined that the Offer is in the best interests of the Shareholders. The Board of Directors unanimously approved the making of a recommendation that Shareholders accept the Offer.

The Support Agreement was executed on the morning of February 20, 2003, and the transaction was publicly announced, during a suspension of trading of the Emco Shares on the TSX and Nasdaq, that same morning.

Emco, the Offeror and Blackfriars have entered into the Support Agreement pursuant to which the Offeror has agreed to make the Offer, on and subject to the terms and conditions set out therein. Blackfriars has guaranteed the obligations of the Offeror under the Support Agreement. The following is a summary of certain provisions of the Support Agreement.

Pursuant to the Support Agreement, Emco has represented to the Offeror and Blackfriars that: (i) the Board of Directors, following consultation with its financial and legal advisors, has determined unanimously that the Offer is fair to the Shareholders and that it is in the best interests of Emco and the Shareholders for the Support Agreement to be entered into, for the Offer to be made, and for the Board of Directors to support the making of the Offer; and (ii) the Board of Directors has unanimously approved the entering into of the Support Agreement and the making of a recommendation to the Shareholders that they accept the Offer.


	(a)	until the earlier of the time of the appointment or election to the Board of Directors of individuals designated by the Offeror who represent a majority of the directors of Emco and the termination of the Support Agreement in accordance with its terms, Emco shall, and shall cause its Subsidiaries to, in all material respects conduct its and their businesses in the ordinary course of its and their businesses as currently conducted and, to the extent consistent therewith, use reasonable commercial efforts to preserve


		intact its and their current business organizations, keep available the services of its and their current officers and employees and preserve its and their relationships with customers, suppliers and others having business dealings with it and them to the end that its and their goodwill and ongoing businesses shall be unimpaired to such time;

	(b)	neither it nor any of its Subsidiaries nor any officer, director, employee, financial advisor, attorney, advisor, representative or agent of Emco or any of its Subsidiaries will (i) solicit, initiate or encourage inquiries or the submission of any Take-over Proposal, (ii) enter into any agreement with respect to or approve or recommend any Take-over Proposal, or (iii) participate in any negotiations regarding, or furnish to any Person any information with respect to the Company or any of its Subsidiaries in connection with the making of any proposal that constitutes, or may reasonably be expected to lead to, any Take-over Proposal, provided, however, that if the Board of Directors of the Company reasonably determines (after consultation with its financial advisors) that an unsolicited bona fide written Take-over Proposal constitutes a Superior Proposal, then, to the extent required by the fiduciary obligations of the Board of Directors of the Company, the Company may, in response to an unsolicited request therefor, (i) furnish information with respect to the Company and its Subsidiaries to any Person pursuant to a customary confidentiality agreement (as determined by the Company’s counsel), and (ii) negotiate with the third party and enter into an agreement with respect to a Superior Proposal;

	(c)	it shall immediately cease and cause to be terminated any existing discussions or negotiations with any parties (other than the Offeror and Blackfriars) with respect to any potential Take-over Proposal and immediately demand the return or destruction of all confidential information provided in connection therewith and use all reasonable efforts to ensure that such information is returned and it shall not terminate, amend, modify or waive any provision of any confidentiality or standstill agreement to which the Company or any of its Subsidiaries is a party (other than any involving the Offeror, Blackfriars or a Superior Proposal);

	(d)	it shall advise Blackfriars of (i) any Take-over Proposal or any inquiry with respect to or which could lead to any Take-over Proposal received by any officer, director, financial advisor, attorney, advisor, representative or agent of the Company on or after the date of the Support Agreement, (ii) the material terms of any such Take-over Proposal (including a copy of any written proposal), and (iii) the identity of the Person making any such Take-over Proposal or inquiry, no later than 24 hours following receipt of such Take-over Proposal or inquiry;

	(e)	it will not enter into any agreement (a “Proposed Agreement”), other than a confidentiality agreement contemplated by paragraph (b) above, with any third party providing for or to facilitate any Take-over Proposal that the Board of Directors reasonably determines constitutes a Superior Proposal unless the Company shall have provided the Offeror and Blackfriars with a copy of any Proposed Agreement not less than three business days prior to its proposed execution by the Company, together with a written notice from the Board of Directors regarding the value in financial terms that the Board of Directors has in consultation with its financial advisors determined should be ascribed to any non-cash consideration offered under the Proposed Agreement. During such three business day period, the Company agrees that the Offeror and Blackfriars shall have the opportunity but not the obligation, to offer to amend the terms of the Support Agreement in order to provide for financial terms at least equivalent to those in the Proposed Agreement. The Board of Directors of the Company shall review any offer by the Offeror and Blackfriars to amend the terms of the Support Agreement to determine, acting in good faith and in accordance with its fiduciary duties, whether the Offeror’s amended Offer would be at least as favourable to the Shareholders as the Take-over Proposal provided for in the Proposed Agreement. If the Board of Directors of the Company so determines, the Company will enter into an amended Support Agreement with the Offeror and Blackfriars reflecting the amended Offer. If the Board of Directors continues to believe, acting in good faith and in the proper discharge of its fiduciary duties and after consultation with its financial, legal and other advisors, that the Take-over Proposal provided for in the Proposed Agreement continues to be a Superior Proposal with respect to the amended Offer, and therefore rejects the amended Offer, the Company shall be entitled to enter into the Proposed Agreement following payment to Blackfriars of a termination fee of $6 million. Each successive modification of any Take-over Proposal shall constitute a new Take-over Proposal for the purpose of this right to match and will initiate an additional three business day notice period;


	(f)	Emco agreed (i) that the Board of Directors will pass a resolution accelerating the vesting of all Options, (ii) that the Company will promptly notify the holders of Options of such resolution, and (iii) that the Company will permit holders of Options to transfer the Options to the Company in exchange for a cash payment of the in-the-money value of the Option, conditional upon the Offeror taking up and paying for Emco Shares under the Offer;

	(g)	promptly upon the take-up and payment by the Offeror pursuant to the Offer of more than 66 2/3% of the Emco Shares (on a fully-diluted basis), Emco has agreed to use its reasonable best efforts to enable the Offeror to acquire the balance of the Emco Shares by way of compulsory acquisition, amalgamation, statutory arrangement, capital reorganization or other transaction carried out for a consideration per Emco Share of not less than $16.60; and

	(h)	the Company has agreed and represented that the Board of Directors has determined unanimously to use its and their respective reasonable efforts to enable the Offeror to elect or appoint all of the directors of Emco as soon as possible after the Offeror takes up and pays for in excess of 66 2/3% of the Emco Shares (on a fully-diluted basis) pursuant to the Offer. If the Offeror takes up and pays for more than 50% of the outstanding Emco Shares (on a fully-diluted basis), but less than 66 2/3% (on a fully-diluted basis), the Company has agreed that the Offeror shall be entitled to designate such number of members of the Board of Directors, and any committees thereof, as is proportionate to the percentage of the outstanding Emco Shares owned by the Offeror.

In the Support Agreement, Emco also made certain customary representations, warranties, covenants and agreements with respect to, among other things: conducting the business of Emco; refraining from corporate reorganizations; issuing securities except in certain circumstances and entering into certain agreements; the capitalization of Emco; borrowing money; granting security; corporate authority and execution; compliance with laws and licenses; regulatory filings; accuracy of financial statements of Emco; interest in properties; material agreements; employment matters; absence of certain changes in the conduct of Emco’s business; litigation; taxes; insurance; and pension and employment benefits.

The Offeror agreed that it will not amend the terms of the Offer other than to increase the consideration payable thereunder, to extend the expiry of the Offer or to waive any conditions of the Offer, except with the prior consent of Emco. If, within 120 days after the date of the Offer, the Offer has been accepted by holders of not less than 90% of the Emco Shares, the Offeror has agreed it will use its reasonable best efforts to acquire the remainder of the Emco Shares through a statutory right of acquisition under the OBCA.

Under the Support Agreement, the Offeror has agreed to cause Emco to maintain in effect current or substantially similar provisions regarding indemnification of officers and directors contained in the constating documents of Emco and its subsidiaries and any directors and officers indemnification agreements of Emco or its subsidiaries. Emco intends to purchase run-off insurance, for such term as may be considered reasonable by it (but which in any event will not exceed six years from the Support Agreement Effective Time, for its past and present directors and officers in respect of all matters relating to the period when they were directors and/or officers. In the absence of run-off insurance, Blackfriars will cause Emco or any successor to Emco to provide, for an aggregate period of not less than six years from the Support Agreement Effective Time, Emco’s current and former directors and officers an insurance and indemnification policy that provides coverage for events occurring prior to the Support Agreement Effective Time that is substantially similar to Emco’s existing policy if such a policy is available at a reasonable cost.

The Offeror also agreed to permit the Company to honour and comply with the terms of all existing employment and change of control contracts entered into by Emco or its subsidiaries and with the terms of all pension and benefit plans to which Emco or its subsidiaries is a party.

The Support Agreement may be terminated at any time by mutual written consent of Blackfriars and Emco.

The Support Agreement may be terminated by Emco: (i) if the Offeror has not become legally obligated to accept and take-up any Emco Shares pursuant to the Offer by May 15, 2003; (ii) if it proposes to enter into a merger, acquisition or other agreement to effect a Superior Proposal, but only if the Offeror and Blackfriars have not exercised their right to match the Superior Proposal as set out above; (iii) if there has been a breach by the Offeror or Blackfriars of any of their respective representations, warranties or covenants under the Support Agreement, which is not cured

The Support Agreement may be terminated by Blackfriars after commencement of the Offer: (i) if the Offeror has not become legally obligated to accept and take-up any Emco Shares pursuant to the Offer by May 15, 2003; (ii) if there has been a breach by Emco of any of its representations, warranties or covenants under the Support Agreement, which is not cured within five business days of notice of such breach, (iii) if any condition of the Offer has not been satisfied or waived on the expiry of the Offer, as the same may be extended from time to time by the Offeror pursuant to the Support Agreement, or (iv) if the Board of Directors qualifies, modifies or withdraws its recommendation in favour of the Offer or recommends to the Shareholders any Take-over Proposal other than the Offer.

If the Support Agreement is terminated in accordance with its terms, the Offeror may terminate or withdraw the Offer.

Emco has agreed to pay Blackfriars a termination fee of $6 million if the Support Agreement is terminated by the Company in order to effect a Superior Proposal or by Blackfriars as a result of the Board of Directors qualifying, modifying or withdrawing its recommendation in favour of the Offer or recommending to the Shareholders any Take-over Proposal other than the Offer.

Pursuant to the Lock-Up Agreement, and subject to the conditions therein, the Offeror has agreed to make the Offer. Blackfriars has guaranteed all obligations of the Offeror under the Lock-Up Agreement.

Masco, at the request of the Independent Committee, entered into the Lock-Up Agreement which requires Masco (i) to deposit all of the Locked-Up Shares under the Offer as soon as practicable after the mailing of the Offer but in any event within five business days of such mailing, and (ii) thereafter not to withdraw any of the Locked-Up Shares deposited under the Offer, unless the Lock-Up Agreement is terminated in accordance with its terms prior to the Offeror taking up and paying for the Locked-Up Shares.

The Lock-Up Agreement also requires Masco to cooperate with the Offeror in the following respects in order to assist the Offeror to successfully complete the acquisition of all of the outstanding Emco Shares by: (A) exercising the voting rights attached to its Emco Shares to oppose any proposed action (i) which might reasonably be regarded as being directed towards, or preventing or delaying the successful completion of the Offer, or (ii) which could materially change the business, assets, operations, capital, affairs, financial conditions, licences, permits, rights or privileges of Emco and its subsidiaries; and (B) not taking any action of any kind which may reduce the likelihood of success of or delay the completion of the Offer and, promptly upon request, assisting the Offeror by providing any information reasonably required for the Offeror to secure regulatory approvals in respect of the completion of the Offer.

The Lock-Up Agreement may be terminated at any time: (A) by the Offeror if (i) there is a material breach of the Lock-Up Agreement by Masco, or (ii) the Offeror is entitled to terminate the Support Agreement in accordance with its terms; or (B) by Masco if (i) the Offer is not mailed by March 14, 2003, or (ii) the Offeror has not taken up and paid for the Locked-Up Shares pursuant to the Offer by May 15, 2003.

Upon any termination of the Lock-Up Agreement in accordance with its terms, Masco shall be entitled to withdraw the Locked-Up Shares deposited pursuant to the Offer.

If a Superior Proposal is made, the Offeror and Blackfriars will either (i) waive any unsatisfied conditions relating to the Offer and irrevocably commit to purchase the Locked-Up Shares on the terms of the Offer, or (ii) release Masco from the Lock-Up Agreement and return the Locked-Up Shares to Masco so as to permit Masco to tender such shares into the Superior Proposal.

Pursuant to a confidentiality agreement, dated September 25, 2002, made between Emco and an affiliate of Blackfriars (the “Confidentiality Agreement”), the affiliate of Blackfriars agreed to keep all information, including any information belonging to, relating to or otherwise concerning Emco or its affiliates, confidential.

The affiliate of Blackfriars further agreed it or its affiliates would not during a period of one year from the date of the Confidentiality Agreement, without the prior written authorization of the Independent Committee, acquire or make any offer to acquire in any manner any securities of Emco or its affiliates. The affiliate of Blackfriars also agreed in the Confidentiality Agreement, for a period of two years, to not (i) directly or indirectly solicit for employment any person

employed at Emco, other than in publications of a general nature, or (ii) employ, hire or contract for the services of any person employed by Emco who was identified to the affiliate of Blackfriars as a result of this Offer.

Blackfriars delivered a letter, dated February 19, 2003, to the Board of Directors to assure the Board that Blackfriars intends to keep U.S. funds equivalent to a minimum of $300 million in its accounts with a third party bank until the earlier of the taking up and payment for Emco Shares or the termination of the Support Agreement. In addition, Blackfriars agreed to have its bank confirm to TD Securities that Blackfriars was financially capable of consummating the Offer.

Each of Emco’s senior or executive (collectively “senior”) officers noted on page 10 of the Directors’ Circular, other than Jaap Burck, has entered into letter agreements (the “Change of Control Agreement”) with Emco providing for the payment of severance payments and benefits in the event that a transaction such as the Offer, which changes the control of Emco, results in the termination of their employment with Emco within 18 months following the effective date of the Offer.

Upon termination of employment upon the change in control of Emco, Emco will provide each senior officer that is a party to a Change of Control Agreement the following for a period of 2 years following the date of such termination (except in the case of Douglas Speers, in which case such period shall be 3 years) unless otherwise noted herein: (i) a base salary, paid in the form of salary continuance, (ii) benefits on substantially the same terms and conditions as payable prior to a change in control, until the earlier of new employment is obtained or the applicable severance period ends, (iii) pension plan contributions and recognition of credited service for employment during the applicable severance period, (iv) vacation pay owing at the date of termination of employment, (v) car arrangements in effect prior to termination of employment until the earlier of the end of the applicable severance period and the date new employment is obtained, (vi) an annualized, prorated bonus for the calendar year in which employment is terminated, and an amount equal to the number of years and fractions thereof that constitute the applicable severance period multiplied by the average applicable bonuses for the two fiscal years immediately prior to termination, (vii) the vesting of stock options, payable under Emco’s 1991 Long-Term Incentive Program, on the effective date of termination of employment, (viii) re-employment consulting services, in an amount not to exceed $40,000 for a period of 12 months following termination and (ix) directors and officers liability insurance for a period of six years after termination.

In consideration for the foregoing severance payments and pension entitlements, each senior officer that is a party to a Change of Control Agreement agrees, for two years, not to obtain new employment with or invest in a competitor of Emco, solicit employees of Emco or solicit any customers of Emco. In addition, each senior officer that is a party to a Change of Control Agreement agrees to maintain any confidential information of Emco confidential.

Emco has also entered into a change of control agreement, substantially similar to the Change of Control Agreements described above, with Jaap Burck (the “Burck Change of Control Agreement”), except that the Burck Change of Control Agreement provides for the payment of the above-noted benefits if he is terminated within 12 months of a change of control, instead of 18 months.

Details of compensation paid to the President and Chief Executive Officer of Emco and the four other most highly compensated senior officers, in addition to stock options and stock appreciation rights for the fiscal year ended December 31, 2001 granted and exercised by those senior officers, as well as summaries of Emco’s 1991 Long-Term Incentive Program, Share Ownership Guidelines, and Company Pension Plan are set forth in Emco’s Management Information Circular, dated March 4, 2002, under the section heading “Executive Compensation”, which section is incorporated herein by reference.

Effective January 1, 2002, the annual fee payable to each director (other than Douglas Speers) was $20,000. The annual fee is payable as to $15,000 in cash and $5,000 in Emco common shares which are purchased on behalf of each director on the day of Emco’s Annual Meeting. The fee for each meeting of the Board of Directors or meeting of a committee of the Board of Directors attended is $1,400 with the exception of meetings held by telephone conference

call. If a meeting of the Board of Directors or any committee of the Board of Directors is held by telephone conference call, the fee payable for such meeting is $700.

Also, effective January 1, 2002, Emco agreed to pay an annual retainer to the Chairman of the Board in the amount of $50,000 (increased to $80,000 on January 1, 2003). The retainer is to be paid either in cash or in common shares of Emco which Emco is to purchase in the market on behalf of the Chairman or any combination of these two methods, at the discretion of the Chairman. Effective January 1, 2002, an annual retainer is to be paid to the Chairman of any committee of the Board of Directors of Emco in the amount of $3,000, which shall be paid in common shares of Emco which Emco will purchase on the day of the Emco’s Annual Meeting.

Emco has provided each of its senior officers and directors with indemnity agreements (the “Indemnity Agreements”). Under the Indemnity Agreements, Emco provides each senior officer and director of Emco with an indemnification in respect of any losses incurred by any senior officer or director by reason of being a senior officer or director of Emco. Each Indemnity Agreement further confirms that Emco has purchased directors and officers insurance in the amount of $15 million.

Emco purchases insurance for the benefit of the directors, officers and executives of the Company and its subsidiaries against liabilities incurred by them in such capacities. The policy covers claims made against the insureds during the policy period with a limit of liability of $20,000,000 during the policy year and a limit of $20,000,000 in respect of each claim. The premium payable for this coverage in 2002 was approximately $150,000, all of which was paid by the Company.

The authorized share capital of Emco consists of an unlimited number of Emco Shares and an unlimited number of preference shares. As at February 28, 2003, 15,907,419 Emco Shares and no preference shares were issued and outstanding.

In addition, as of February 28, 2003 Options to acquire up to a maximum of 1,589,680 Emco Shares are outstanding under the Stock Option Plan. Up to 3,499,747 Emco Shares as of February 28, 2003 may also be issued upon the conversion, at a conversion price of $19.75, of the outstanding $69.12 million principal amount of Debentures.

To the knowledge of the directors and senior officers of the Company, after reasonable inquiry, the only Persons holding more than 10% of any class of equity securities of Emco, and the number, designation and percentage of outstanding securities of Emco owned or over which control or direction is exercised by them, are as set forth below:

The following table discloses the names of all directors and senior officers of Emco, the positions held by them and, as at February 28, 2003, the number of securities of Emco owned or over which control or direction is exercised, by each such director and officer and, to the knowledge of such directors and officers, after reasonable inquiry, by their respective associates:


(1)	The information as to Emco Shares, Options and Debentures owned or over which control or direction is exercised by each director and senior officer of the Company and by their respective associates, not being within the knowledge of Emco, has been furnished by the respective directors and senior officers individually.

(2)	On an undiluted basis.

(3)	See “Stock Option Plan”.

(4)	Includes 100 Emco Shares held in the name of Kathy Speers.

(5)	Includes 1,500 Emco Shares held in the name of Tina Fantham.

(6)	Includes 5,230 Emco Shares held in the name of Lorna LeGrow. Also includes 156 Emco Shares held in trust for Samantha LeGrow and Sydney LeGrow.

There is no Person acting jointly or in concert with Emco in connection with the Offer.

The Company’s Stock Option Plan: (a) provides incentives to its key employees; (b) aligns the interests of such key employees with the Company to maximize shareholder value; (c) encourages such key employees to own securities of the Company; and (d) maintains a competitive compensation plan for such key employees.

The exercise price payable in respect of the Options granted pursuant to the Stock Option Plan is equal to the market price for Emco Shares on the trading day preceding the date of grant. As at February 28, 2003, Options to acquire up to a maximum of 1,589,680 Emco Shares were outstanding under the Stock Option Plan. The aggregate number of Emco Shares issuable in respect of Options held by any one Person may not exceed 5% of the total number of Emco Shares outstanding from time to time.

The Board of Directors has resolved and has authorized and directed the Company to (i) cause the vesting of Options under the Stock Option Plan to accelerate effective immediately prior to the expiry of the Offer, such that all outstanding Options become exercisable prior to and expire concurrently with the expiry of the Offer, and (ii) to allow all employees holding Options to exercise such Options in accordance with the Stock Option Plan for the purpose of tendering under the Offer all Emco Shares issued in connection with such exercise, in each case, conditional upon the Offeror taking up and paying for the Emco Shares. In lieu of exercising such Options in accordance with their terms, holders of Options shall be entitled to be paid any “in-the-money” value of their Options in cash, conditional upon the Offeror taking up and paying for the Emco Shares.

None of Emco, the directors and senior officers of Emco or, to the knowledge of the directors and senior officers of Emco, after reasonable inquiry, any of their respective associates or affiliates (as those terms are defined by applicable securities laws) or any Person holding more than 10% of the Emco Shares, owns or exercises control or direction over any securities of the Offeror or Blackfriars.

To the knowledge of Emco, as at February 28, 2003, the directors and senior officers of Emco, and their respective affiliates and associates (as those terms are defined by applicable securities laws), owned or exercised control or direction over an aggregate of 566,938 Emco Shares (excluding Emco Shares issuable upon the exercise of outstanding Options) and hold Options to acquire up to an additional 1,089,720 Emco Shares.

The Company has been informed that each of the directors and senior officers of Emco, and their respective affiliates and associates (as those terms are defined by applicable securities law) currently intends to deposit to the Offer all Emco Shares owned by him or her and to transfer to Emco all of their Options for a cash payment equal to the “in-the-money” amount of such Options.

Letko, Brosseau & Associes Inc. has advised the Board of Directors that it currently intends to accept the Offer in respect of all of its Emco Shares. The intentions of Masco to accept the Offer are described above under “Lock-Up Agreement”.

Except as disclosed in the following table and under “Issuances of Securities of Emco” below, none of Emco, any of its Subsidiaries, directors, senior officers or affiliates (as defined by applicable securities laws) of Emco or, to the knowledge of the directors or senior officers of Emco, after reasonable inquiry, any of their respective associates (as defined by applicable securities laws) or any Person holding more than 10% of the Emco Shares, has traded in any securities of Emco during the six month period preceding the date of this Directors’ Circular:


(1)	The trade was performed over the facilities of the TSX.

(2)	These shares were acquired pursuant to Emco’s Employee Stock Purchase Plan. Under this Plan, employees are permitted to acquire Emco Shares with funds deducted from their salary and matched by Emco up to a maximum of 2.5% of the employee’s salary. Employer contributions are used to purchase Emco Shares on the TSX at the then current price on behalf of the employee. Employee contributions are used to purchase Emco Shares from treasury. Shares are purchased and issued every 2 weeks coinciding with Emco’s payroll. The Emco Shares listed in this table are the aggregate number of Emco Shares purchased on the TSX by Emco on behalf of each listed individual over the 6 month period indicated. Emco Shares purchased from treasury are reflected in the table on the following page.

The Company has been informed that no director or senior officer of Emco, or any of their respective affiliates and associates (as those terms are defined by applicable securities laws), intends to purchase securities of Emco before the expiry of the Offer (other than pursuant to the exercise of Options or pursuant to the Company’s Employee Stock Purchase Plan) nor knows of the existence of such an intention on the part of any other Person.

Except as disclosed in the following table, no Emco Shares, Options, Debentures or other securities convertible into Emco Shares have been issued to any of the directors or senior officers of Emco, or any of their respective affiliates and associates (as those terms are defined by applicable securities laws), during the two year period preceding the date of this Directors’ Circular:


(1)	Represents the exercise price per Emco Share in the case of a grant or exercise of Options.

(2)	These shares were acquired pursuant to Emco’s Employee Stock Purchase Plan. Under this Plan, employees are permitted to acquire Emco Shares with funds deducted from their salary and matched by Emco up to a maximum of 2.5% of the employee’s salary. Employer contributions are used to purchase Emco Shares on the TSX at the then current price on behalf of the employee. Employee contributions are used to purchase Emco Shares from treasury. Shares are purchased and issued every 2 weeks coinciding with Emco’s payroll. The Emco Shares listed in this table are the aggregate number of Emco Shares issued from treasury to each listed individual over the 2 year period indicated. Emco Shares purchased on the TSX are reflected in the table on the preceding page.

(3)	These shares were issued upon the exercise of Options.

No arrangements or agreements (including any arrangements or agreements as to any payments or other benefits to be made or given by way of compensation for loss of office or as to the directors or senior officers of Emco remaining or retiring from office if the Offer is successful) have been made or are proposed to be made between Blackfriars or the Offeror and any of the directors or senior officers of Emco, or any of their respective affiliates and associates (as those terms are defined by applicable securities laws).

No director, senior officer or affiliate of Emco is also a director or officer of Blackfriars or the Offeror or any subsidiary of Blackfriars or the Offeror.

Emco’s largest shareholder, Masco, with approximately 42% of the Emco Shares, is a large U.S. based manufacturer and distributor of building products. Affiliates of Blackfriars are distributors of plumbing and related products in the U.S. and are arms-length customers of Masco with sales by Masco to such Blackfriars’ affiliates of, in aggregate, approximately $31 million (United States dollars) in each of 2002 and 2001.

Neither the directors or senior officers of Emco, nor any of their respective affiliates or associates (as those terms are defined by applicable securities laws) nor any Person holding more than 10% of the Emco Shares has any interest in any material contract to which Blackfriars or the Offeror is a party, other than as set out above under this heading and under “Lock-Up Agreement”.

Except as described below, there are no arrangements or agreements made or proposed to be made between Emco and any of its directors or senior officers, or any of their respective affiliates and associates (as those terms are defined by applicable securities laws), pursuant to which a payment or other benefit is to be made or given by way of compensation for loss of office or as to their remaining in or retiring from office if the Offer is successful.

The Company is party to the Change of Control Agreements with each of its senior officers as described in this Directors’ Circular under the heading “Arrangements, Agreements or Understandings — Change of Control Agreements”.

Under the Investment Canada Act, certain transactions involving the acquisition of control of a Canadian business by a non Canadian are subject to review and cannot be implemented unless the Minister responsible for the Investment Canada Act (the “Minister”) is satisfied that the transaction is likely to be of net benefit to Canada.

If a transaction is subject to the review requirement (a “Reviewable Transaction”), an application for review must be filed with the Investment Review Division of Industry Canada prior to the implementation of the Reviewable Transaction. The Minister is then required to determine whether the Reviewable Transaction is likely to be of net benefit to Canada taking into account, among other things, certain factors specified in the Investment Canada Act and any written undertakings that may have been given by the applicant. The Investment Canada Act contemplates an initial review period of 45 days after filing; however, if the Minister has not completed the review by that date, the Minister may unilaterally extend the review period by up to 30 days (or such longer period as may be agreed to by the applicant) to permit completion of the review. The prescribed factors of assessment to be considered by the Minister include, among other things, the effect of the investment on the level and nature of economic activity in Canada (including the effect on employment, resource processing, utilization of Canadian products and services and exports), the degree and significance of participation by Canadians in the acquired business, the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada, the effect of the investment on competition within any industry in Canada, the compatibility of the investment with national industrial, economic and cultural policies (taking into consideration corresponding provincial policies) and the contribution of the investment to Canada’s ability to compete in world markets. If the Minister determines that he is not satisfied that a Reviewable Transaction is likely to be of net benefit to Canada, the Reviewable Transaction may not be implemented.

As the acquisition of control of Emco contemplated by the Offer is a Reviewable Transaction, the Offeror will need to file an application for review under the Investment Canada Act.

The Competition Act requires a pre-merger notification to the Commissioner of Competition for transactions that exceed certain financial thresholds and, in the case of share acquisitions, that exceed an additional voting interest threshold. If a transaction is subject to pre-merger notification, a pre-merger filing must be submitted to the Commissioner and a waiting period must expire or be waived by the Commissioner before the proposed transaction may be completed. Either a short form (with a 14 day waiting period) or long form (with a 42 day waiting period) may be filed, but, if a short form is filed, the Commissioner may, within 14 days, require a long form, in which case the proposed transaction generally may not be completed until 42 days after a long form filing is made. The Commissioner’s review of a transaction subject to a pre-merger notification may take longer than the statutory waiting period, in which case the parties may be asked to delay completion of the transaction until the review is completed and the Commissioner has determined his position.

Whether or not a pre-merger filing is required, the Commissioner may apply to the Competition Tribunal, a specialized tribunal empowered to deal with certain matters under the Competition Act, with respect to a “merger” (as defined in the Competition Act) and, if the Competition Tribunal finds that the merger is likely to prevent or lessen competition substantially, it may order that the merger not proceed or, in the event that the merger has been completed, order its dissolution or the disposition of some of the assets or shares involved. The Competition Tribunal also may issue an interim order under the Competition Act prohibiting the completion of the merger for a period of up to 30 days where (a) the Commissioner has certified that an inquiry is being made under paragraph 10(1)(b) of the Competition Act in connection with the merger and that in his opinion more time is required to complete the inquiry, and (b) the Competition Tribunal finds that, in the absence of an interim order, a party to the merger or any other person is likely to take an action that would substantially impair the ability of the Competition Tribunal to remedy the effect of the merger on competition under section 92 of the Competition Act because that action would be difficult to reverse. The duration of such interim orders may be extended for an additional period of up to 30 days where the Competition Tribunal finds that the Commissioner is unable to complete his inquiry because of circumstances beyond his control. If the Commissioner challenges the merger under section 92 of the Competition Act, he may also apply to the Competition Tribunal for an injunctive order.

The Commissioner may upon request issue an advance ruling certificate (“ARC”), where he is satisfied that he would not have sufficient grounds on which to apply to the Competition Tribunal under the merger provisions of the Competition Act. If the Commissioner issues an ARC in respect of a proposed transaction, that transaction is exempt from the pre-merger notification provisions. Alternatively, the Commissioner may issue a “no action” letter following a notification or an application for an ARC, indicating that he is of the view that grounds do not then exist to initiate proceedings before the Competition Tribunal under the merger provisions of the Competition Act with respect to the proposed transaction, while preserving during the three years following completion of the proposed transaction his ability to so initiate proceedings should circumstances change.

The purchase of Emco Shares pursuant to the Offer requires pre-merger notification to the Commissioner and the Offeror’s acquisition of control of Emco would be a “merger” for the purposes of the merger provisions of the Competition Act. The Offeror will need to request an ARC, in respect of the Offer and the Offeror and Emco will need to make a short-form pre-merger notification filing in respect of the Offer.

Under the Hart-Scott-Rodino Act of the United States and the rules that have been promulgated thereunder by the Federal Trade Commission (the “FTC”), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the “Antitrust Division”) and the FTC and certain waiting period requirements have been satisfied. The purchase of Emco Shares pursuant to the Offer is subject to such requirements.

Pursuant to the requirements of the Hart-Scott-Rodino Act, the Offeror intends to file a Notification and Report Form with respect to the Offer with the Antitrust Division and the FTC as soon as practicable. The waiting period applicable to the purchase of Emco Shares pursuant to the Offer will expire at 11:59 p.m., Eastern time, on the fifteenth calendar day from the day after such filing is made by the Offeror. However, prior to such time, the Antitrust Division

or the FTC may extend the waiting period by requesting additional information or documentary material relevant to the Offer from the Offeror. If such a request is made, the waiting period will be extended until 11:59 p.m., Eastern time, on the tenth day after substantial compliance by the Offeror with such request. Thereafter, such waiting period can be extended only by court order.

The Antitrust Division and the FTC scrutinize the legality under the antitrust laws of transactions such as the acquisition of Emco Shares by the Offeror pursuant to the Offer. At any time before or after the consummation of any such transactions, the Antitrust Division or the FTC could take such action under the antitrust laws of the United States as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Emco Shares pursuant to the Offer or seeking divestiture of the Emco Shares so acquired or divestiture of substantial assets of Blackfriars or Emco. Private parties (including individual States) may also bring legal actions under the antitrust laws of the United States.

Except as otherwise described or referred to in this Directors’ Circular, no information is known to any of the directors or senior officers of Emco that indicates any material change in the affairs of Emco since December 31, 2002, the date of Emco’s most recently published financial statements.

No negotiations involving the Company are currently underway in response to the Offer which relate to or would result in: (a) an extraordinary transaction such as a merger, reorganization or liquidation involving the Company or any Subsidiary; (b) the purchase, sale or transfer of a material amount of assets of the Company or any Subsidiary; (c) an issuer bid for or other acquisition of securities by or of the Company; or (d) any dividend rate or policy, indebtedness or capitalization of the Company.

There is no other information that has not been disclosed in the foregoing but is known to the Board of Directors which would reasonably be expected to affect the decision of holders of Emco Shares to accept or reject the Offer.

Securities legislation in certain of the provinces and territories of Canada provides security holders of Emco with, in addition to any other rights they may have at law, rights of rescission or to damages, or both, if there is a misrepresentation in a circular or notice that is required to be delivered to such security holders. However, such rights must be exercised within prescribed time limits. Security holders of Emco should refer to the applicable provisions of the securities legislation of their province or territory for particulars of those rights or consult with a lawyer.

The contents of this Directors’ Circular have been approved, and the delivery of this Directors’ Circular has been authorized, by the Board of Directors.

We hereby consent to the inclusion of our written fairness opinion dated February 19, 2003 as Schedule “A” to the Directors’ Circular of the Board of Directors of Emco Limited dated February 28, 2003 and to the reference to our name and to our written fairness opinion under various headings of such Directors’ Circular.

The foregoing contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made. In addition, the foregoing does not contain any misrepresentation likely to affect the value or the market price of the securities subject to the Offer within the meaning of the Securities Act (Quebec).

TD Securities Inc. (“TD Securities”) understands that Emco Limited (“Emco”, or the “Company”) has entered into an agreement dated February 19, 2003, (the “Support Agreement”) with Blackfriars Corp. (“Blackfriars”) and 2022841 Ontario Inc. (the “Offeror”), an indirect wholly-owned subsidiary of Blackfriars, pursuant to which the Offeror has agreed to make an offer (the “Offer”) to purchase all of the issued and outstanding common shares (the “Emco Shares”) of Emco at a price of $16.60 per share in cash (the “Consideration”). The specific terms and conditions of the Offer will be more fully described in a take-over bid circular (the “Circular”), which will be mailed to holders of Emco Shares (the “Shareholders”) in connection with the Offer.

TD Securities further understands that Masco Corporation (“Masco”), the holder of approximately 42% of the Emco Shares, has entered into an agreement dated February 19, 2003, (the “Lock-Up Agreement”) with Blackfriars and the Offeror pursuant to which Masco has agreed to deposit the Emco Shares held by it to the Offer and not withdraw them, except in limited circumstances, as more fully described in the Circular.

TD Securities also understands that a committee (the “Independent Committee”) of the board of directors (the “Board of Directors”) of the Company has been constituted for the purpose of conducting a review of strategic alternatives (the “Strategic Alternatives Review”) in order to maximize Shareholder value, which included, among other things, considering the Offer and making recommendations thereon to the Board of Directors.

TD Securities was engaged by the Independent Committee pursuant to an engagement agreement (the “Engagement Agreement”) dated August 22, 2002, to provide advice and assistance to the Company and the Independent Committee in connection with the Strategic Alternatives Review (the “Engagement”), including the preparation and delivery to the Independent Committee of TD Securities’ opinion (the “Fairness Opinion”) as to the fairness of the Consideration under the Offer, from a financial point of view, to the Shareholders. TD Securities has not prepared a valuation of the Company or any of its securities or assets and the Fairness Opinion should not be construed as such.

The terms of the Engagement Agreement provide that TD Securities is to be paid fees for its services as financial advisor, including fees that are contingent on a change of control of the Company or certain other events. In addition, the Company has agreed to reimburse TD Securities for its reasonable out-of-pocket expenses and to indemnify TD Securities, in certain circumstances, against certain expenses, losses, claims, actions, damages and liabilities incurred in connection with the provision of its services.

The Fairness Opinion may not be published, reproduced, disseminated, quoted from or referred to without the express written consent of TD Securities, save as hereinafter provided. Subject to the terms of the Engagement Agreement, TD Securities consents to the inclusion of the Fairness Opinion in its entirety, with a summary thereof, in a form acceptable to TD Securities, in the directors’ circular (the “Directors’ Circular”) to be mailed to Shareholders in connection with the Offer and to the filing thereof, as necessary, by Emco with the securities commissions or similar regulatory authorities in Canada and the United States.

Neither TD Securities, nor any of its affiliates is an insider, associate or affiliate (as those terms are defined in the Securities Act (Ontario)) of the Company, Blackfriars, the Offeror, or any of their respective affiliates (collectively, the “Interested Parties”). Except as financial advisor to the Independent Committee, neither TD Securities nor any of its affiliates is an advisor to any of the Interested Parties with respect to the Strategic Alternatives Review or the Offer.

TD Securities and its affiliates have not been engaged to provide any financial advisory services or act as lead or co-lead underwriter of securities of the Company or any Interested Party during the 24 months preceding the date on which TD Securities was first contacted in respect of the Engagement.

Other than the Engagement Agreement, no understandings or agreements exist between TD Securities and the Company or any Interested Party with respect to future financial advisory or investment banking business. TD Securities may in the future, in the ordinary course of its business, perform financial advisory or investment banking services for the Company or any Interested Party, and The Toronto-Dominion Bank, the parent company of TD Securities, may provide banking services to the Company or any Interested Party.

TD Securities acts as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have and may in the future have positions in the securities of any Interested Party and, from time to time, may have executed or may execute transactions on behalf of such companies or other clients for which it may have received or may receive compensation. As an investment dealer, TD Securities conducts research on securities and may, in the ordinary course of its business, provide research reports and investment advice to its clients on investment matters, including matters with respect to the Offer, the Company, or other Interested Parties.

TD Securities is a Canadian investment banking firm with operations in a broad range of activities, including corporate and government finance, mergers and acquisitions, equity and fixed income sales and trading, investment management and investment research. TD Securities has participated in a significant number of transactions involving public and private companies and has extensive experience in preparing fairness opinions.

The Fairness Opinion is the opinion of TD Securities and its form and content have been approved by a committee of senior investment banking professionals of TD Securities, each of whom is experienced in merger, acquisition, divestiture, valuation and fairness opinion matters.

In connection with the Fairness Opinion, TD Securities reviewed and relied upon (without attempting to verify independently the completeness or accuracy of) or carried out, among other things, the following:


	1. the Support Agreement;

	2. the Lock-Up Agreement;

	3. audited financial statements of the Company for the three years ended December 31, 1999, 2000 and 2001, and draft audited financial statements of the Company for the year ended December 31, 2002;

	4. unaudited interim financial statements of the Company for the three month periods ended March 31, 2001, June 30, 2001, September 30, 2001, March 31, 2002, June 30, 2002, and September 30, 2002;

	5. annual reports of the Company for the three years ended December 31, 1999, 2000 and 2001;

	6. annual information forms of the Company for the three years ended December 31, 1999, 2000 and 2001;

	7. notices of annual meetings of shareholders and management information circulars of the Company for the three years ended December 31, 1999, 2000 and 2001;

	8. the prospectus of the Company dated June 25, 1997, regarding the Company’s 6.5% Convertible Unsecured Subordinated Debentures;

	9. the trust indenture dated July 4, 1997, regarding the Company’s 6.5% Convertible Unsecured Subordinated Debentures;


	10. the Company’s 2003 Profit Plan and 2003 — 2005 Strategic Plan, including unaudited projected operating and financial statements for the Company and its major operating divisions and subsidiaries prepared by management of the Company for the years ending December 31, 2003, through December 31, 2005;

	11. discussions with senior management of the Company and its major operating divisions and subsidiaries with respect to the information referred to above and other issues deemed relevant;

	12. discussions with members of the Independent Committee;

	13. discussions with McCarthy Tétrault LLP, legal advisor to the Independent Committee;

	14. discussions with KPMG LLP, auditor of the Company;

	15. discussions with certain parties, including parties that have received confidential information regarding the Company and have met with senior management of Emco concerning their potential interest in a transaction involving Emco, and a review of certain other potential transactions involving Emco;

	16. various research publications prepared by equity research analysts regarding the Company and other selected public companies considered relevant;

	17. public information relating to the business, operations, financial performance and stock trading history of the Company and other selected public companies considered relevant;

	18. public information with respect to certain other transactions of a comparable nature considered relevant;

	19. representations contained in a certificate dated as of the date hereof from senior officers of the Company; and

	20. such other corporate, industry, and financial market information, investigations and analyses as TD Securities considered necessary or appropriate in the circumstances.

TD Securities has not, to the best of its knowledge, been denied access by the Company to any information requested by TD Securities.

With the Independent Committee’s acknowledgement and agreement as provided for in the Engagement Agreement, TD Securities has relied upon the accuracy, completeness and fair representation of all data and other information obtained by it from public sources or provided to it by the Company and its personnel, advisors, or otherwise, including the certificate identified below (collectively, the “Information”). The Fairness Opinion is conditional upon such accuracy, completeness and fair representation. Subject to the exercise of professional judgment, and except as expressly described herein, TD Securities has not attempted to verify independently the accuracy or completeness of any of the Information.

With respect to the budgets, forecasts, projections or estimates provided to TD Securities and used in its analyses, TD Securities notes that projecting future results is inherently subject to uncertainty. TD Securities has assumed, however, that such budgets, forecasts, projections and estimates were prepared using the assumptions identified therein which, in the opinion of the Company, are reasonable in the circumstances.

Senior officers of the Company have represented to TD Securities in a certificate dated February 19, 2003, among other things, that (i) the Company has no information or knowledge of any facts, public or otherwise, not specifically provided to TD Securities relating to the assets, liabilities, affairs, prospects or condition (financial or otherwise) of the Company and its divisions and subsidiaries which would reasonably be expected to affect materially the Fairness Opinion; (ii) with the exception of forecasts, projections or estimates referred to in subparagraph (iv) below, the information and data provided to TD Securities by or on behalf of the Company in respect of the Company or its divisions and subsidiaries or their respective assets, liabilities, affairs, prospects or condition (financial or otherwise) in connection with the Engagement is or, in the case of historical information and data, was, at the date as of which it was prepared, true, complete and accurate in all material respects and no additional material, data or information is required to make the information and data provided to TD Securities not misleading in light of the circumstances in which it was provided; (iii) to the extent that any of the information and data identified in subparagraph (ii) above is historical, there have been no changes in any material facts or new material facts since the respective dates thereof which have not been

disclosed to TD Securities; (iv) any portions of the information and data provided to TD Securities which constitute forecasts, projections or estimates were prepared using the assumptions identified therein, which, in the reasonable opinion of the Company, are reasonable in the circumstances; (v) there have been no prior valuations, as defined in Ontario Securities Commission Rule 61-501, of Emco, its securities or any material assets of Emco or any of its divisions or subsidiaries made in the preceding 24 months which have not been disclosed to TD Securities; and (vi) there have been no offers for or material transactions involving the securities of the Company, or any material assets of the Company or any of its divisions or subsidiaries during the preceding 24 months which have not been disclosed to TD Securities.

In preparing the Fairness Opinion, TD Securities has made several assumptions, including that all final versions of documents will conform in all material respects to the drafts provided to TD Securities, conditions precedent to the completion of certain steps in the Offer can be satisfied in due course, all consents, permissions, exemptions or orders of relevant regulatory authorities will be obtained, without adverse condition or qualification, the procedures being followed to implement the Offer are valid and effective, all required documents will be distributed to the Shareholders in accordance with the applicable laws, and the disclosure in such documents will be accurate in all material respects and will comply, in all material respects, with the requirements of all applicable laws. In its analysis in connection with the preparation of the Fairness Opinion, TD Securities made numerous assumptions with respect to industry performance, general business and economic conditions, and other matters, many of which are beyond the control of TD Securities, the Company, or any party involved in the Offer.

The Fairness Opinion is addressed to the Independent Committee and is not intended to be, and does not constitute, a recommendation that any Shareholder tender Emco Shares to the Offer. The Fairness Opinion is rendered as of February 19, 2003, on the basis of securities markets, economic and general business and financial conditions prevailing on that date and the condition and prospects, financial and otherwise, of the Company and its respective divisions, subsidiaries and affiliates as they were reflected in the Information provided to TD Securities. Any changes therein may affect the Fairness Opinion and, although TD Securities reserves the right to change or withdraw the Fairness Opinion in such event, it disclaims any undertaking or obligation to advise any person of any such change that may come to its attention, or update the Fairness Opinion after such date.

The preparation of the Fairness Opinion was a complex process and is not necessarily amenable to partial analysis or summary description. TD Securities believes that its analyses must be considered as a whole and that selecting portions of the analyses or the factors considered by it, without considering all factors and analyses together, could create an incomplete view of the process underlying the Fairness Opinion. Accordingly, this Fairness Opinion should be read in its entirety.

Based upon and subject to the foregoing, TD Securities is of the opinion that, as of February 19, 2003, the Consideration is fair, from a financial point of view, to the Shareholders.

A-4 EX-99.A.2 4 t09060d9exv99waw2.htm LETTER DATED FEBRUARY 28, 2003 LETTER DATED FEBRUARY 28, 2003

You have likely heard that 2022841 Ontario Inc., a subsidiary of Blackfriars Corp., is offering to purchase all of the outstanding common shares of Emco at a price of Cdn. $16.60 in cash per share.


	1. the Takeover Bid Circular from 2022841 Ontario Inc.;

	2. the Directors’ Circular from Emco’s Board of Directors;

	3. a Schedule 14D-9;

	4. a Letter of Transmittal;

	5. a Notice of Guaranteed Delivery;

	6. Guidelines for completing the United States tax withholding portion of the Letter of Transmittal; and

	7. a return envelope.

The Emco Board of Directors has unanimously determined that the offer is in the best interests of the shareholders of Emco and, for the reasons set out in the Directors’ Circular, recommends that you accept the offer and tender your shares. Masco Corporation, which owns approximately 42% of Emco’s shares, has agreed to tender into the offer. All of the directors and senior officers of Emco have confirmed their intention to accept the offer.

Emco has received an opinion from TD Securities Inc. that Cdn. $16.60 is fair to the Emco shareholders from a financial point of view.

The expiry date for the offer is April 7, 2003 unless extended by 2022841 Ontario Inc. If you intend to accept the offer, you must deposit your Emco shares in accordance with the instructions in the Takeover Bid Circular and the Letter of Transmittal (or the Notice of Guaranteed Delivery).

We urge you to read the enclosed material carefully. If you have questions about the offer or require any assistance with the materials, please contact either your professional advisor or the dealer managers for the offer identified on the last page of the Takeover Bid Circular.

For those of you holding Emco 6.5% debentures, Emco has been advised that 2022841 Ontario Inc. intends to give notice that Emco will redeem those debentures following the successful completion of the offer.


	Sincerely,

	/s/ Douglas E. Speers
	DOUGLAS E. SPEERS
	President and Chief Executive Officer

(EMCO ADDRESS FOOTER) EX-99.A.3 5 t09060d9exv99waw3.txt LETTER DATED FEBRUARY 28, 2003 EXHIBIT (a)(3) [LETTERHEAD OF EMCO LIMITED] February 28, 2003 TO: PARTICIPANTS IN THE EMCO EMPLOYEE STOCK PURCHASE PLAN Enclosed is the formal documentation of an offer by 2022841 Ontario Inc. to purchase all of the shares of Emco Limited. As you are an Emco shareholder through the Employee Stock Purchase Plan, this offer is important to you and you should review the enclosed materials. You must decide whether to accept the offer for your shares. The purpose of this letter is to provide you with a summary of certain highlights of the offer and to let you know what steps you must take if you wish to accept the offer. THE OFFER - The bidder (2022841 Ontario Inc.) is offering to pay $16.60 Canadian in cash for each share of Emco that you own, on the terms and conditions described in the enclosed documents. One of the more important conditions is that shareholders owning at least 2/3 of the outstanding shares accept the offer by its expiry date, which is anticipated to be Monday, April 7, 2003. - After considering a number of alternatives to increase shareholder value, the board of directors of Emco has recommended that shareholders accept this offer. - If the offer is successful, all of your shares in the Employee Stock Purchase Plan will vest and you will be able to tender all shares in your account to this offer. - You will shortly receive a statement showing the total number of shares you have in the Employee Stock Purchase Plan. - This letter contains only summary information about the offer. You are urged to read the accompanying circular of 2022841 Ontario Inc. with respect to the offer in detail before you decide whether or not to sell your shares. YOUR CHOICES - If you do not wish to accept the offer, do nothing. - If you wish to accept the offer for all of your shares, complete BLOCK A on page 3 of the attached Letter of Transmittal and Direction, complete BLOCK B on page 4 (if you are a U.S. employee), date and sign the letter on page 4, and send it by mail or courier in the enclosed addressed envelope to Clarica Trust Company at the address set out in the Letter of Transmittal and Direction. Clarica, as the registered holder of the Emco shares held in the Employee Stock Purchase Plan, will then tender your shares into the offer on your behalf. Note that your letter must be received by Clarica by the offer expiry date for your acceptance to be effective. -2- - If you wish to accept the offer for only some of your shares, write that number in the blank in Item 1 on page 1 of the attached Letter of Transmittal and Direction, complete BLOCK A on page 3, complete BLOCK B on page 4 (if you are a U.S. employee), date and sign the letter on page 4, and send it by mail or courier in the enclosed addressed envelope to Clarica Trust Company at the address set out in the Letter of Transmittal and Direction. Clarica, as the registered holder of the Emco shares held in the Employee Stock Purchase Plan, will then tender your shares into the offer on your behalf. Note that your letter must be received by Clarica by the offer expiry date for your acceptance to be effective. - Note that if you accept the offer and then change your mind, you may under certain circumstances have a right to withdraw your shares from the offer. In order to exercise any such right, you must provide written notice that you wish to withdraw to Clarica Trust Company at the address set out in the Letter of Transmittal and Direction, by personal delivery, courier or fax. Clarica, as the registered holder of the Emco shares held in the Employee Stock Purchase Plan, will then withdraw your shares from the offer on your behalf. We would emphasize that if you choose to accept the offer for some or all of your shares in the Employee Stock Purchase Plan, you must arrange for the delivery of your completed and signed Letter of Transmittal and Direction to Clarica by the offer expiry date in order to be effective. You may also have received another somewhat similar package of documents from Computershare Trust Company in respect of the offer. Please note that the Letter of Transmittal and Direction enclosed with this letter (and NOT the documents received from Computershare Trust Company) should be used by you for the shares held by you in the Emco Employee Stock Purchase Plan. (You should use the documents received from Computershare Trust Company for any other Emco shares owned by you.) Note also that the completed and signed Letter of Transmittal and Direction must be delivered to Clarica Trust Company at the address set out in the Letter of Transmittal and Direction (and NOT to Computershare Trust Company). If you need assistance in completing the enclosed Letter of Transmittal and Direction, please contact one of the persons listed at the end of that document. Yours truly, EMCO LIMITED By: /s/ Wayne Lawrence Wayne Lawrence Assistant Treasurer EX-99.A.4 6 t09060d9exv99waw4.txt LETTER OF TRANSMITTAL AND DIRECTION EXHIBIT (a)(4) LETTER OF TRANSMITTAL AND DIRECTION FOR USE BY PARTICIPANTS IN THE EMCO LIMITED EMPLOYEE STOCK PURCHASE PLAN This Letter of Transmittal and Direction (this "LETTER OF TRANSMITTAL") is for use by participants in the Employee Stock Purchase Plan (the "PLAN") of Emco Limited ("EMCO") in connection with the offer (the "OFFER") dated February 28, 2003 made by 2022841 Ontario Inc. (the "OFFEROR"), an indirect wholly-owned subsidiary of Blackfriars Corp., to purchase all of the outstanding Common Shares of Emco (the "EMCO SHARES"). In order to accept the Offer, participants in the Plan must properly complete and sign this Letter of Transmittal and deliver it to the sole trustee for the Plan, Clarica Trust Company (the "TRUSTEE") prior to 8:00 p.m. (EST) on the Expiry Date (as defined in the Offer) (currently Monday, April 7, 2003, but subject to extension at the discretion of the Offeror). See Instruction 1 below for delivery instructions. Participants in the Plan are referred to the offer to purchase and take-over bid circular of the Offeror dated February 28, 2003 (the "OFFEROR'S CIRCULAR") that accompanies this Letter of Transmittal. Capitalized terms used but not otherwise defined in this Letter of Transmittal have respective meanings set out in the Offeror's Circular. The terms and conditions of the Offer are incorporated by reference in this Letter of Transmittal. PLEASE CAREFULLY READ THE INSTRUCTIONS SET OUT BELOW BEFORE COMPLETING THIS LETTER OF TRANSMITTAL. ************************* TO: 2022841 ONTARIO INC. AND TO: COMPUTERSHARE TRUST COMPANY OF CANADA AND TO: CLARICA TRUST COMPANY The undersigned: 1. irrevocably authorizes and directs the Trustee to tender into the Offer ALL (unless a lesser number or percentage is specified hereafter: _____________, in which case such lesser number or percentage) of the Emco Shares held on behalf of the undersigned by the Trustee pursuant to the Plan, together with any and all dividends, stock dividends, securities, rights, warrants, payments, assets or other interests and distributions declared, paid, issued, distributed, made or transferred on or in respect of such Emco Shares on and after February 20, 2003 (the date of the announcement of the Offer) (collectively, the "PURCHASED SHARES"), and for doing so, this shall be the Trustee's good and sufficient authority; 2. subject only to the provisions of the Offer regarding withdrawal, irrevocably accepts the Offer for and in respect of the Purchased Shares and, on and subject to the terms and conditions of the Offer, sells, assigns and transfers to the Offeror all of the undersigned's -2- right, title and interest in and to the Purchased Shares, effective on and after the date on which the Offeror takes up and pays for the Purchased Shares (the "EFFECTIVE DATE"); 3. acknowledges that, in order for the undersigned to exercise any right of withdrawal the undersigned may have under the provisions of the Offer, the undersigned must provide written notice to such effect to the Trustee, Clarica Trust Company, at 227 King Street South, Waterloo, Ontario, N2J 4C5, Attention: Kim Dreher, by personal delivery, courier or fax (fax no. (519) 888-3143); 4. acknowledges receipt of the Offeror's Circular; 5. represents and warrants that: (a) the undersigned is a "Participant" in the Plan (as such term is defined therein); (b) the undersigned has full power and authority to instruct the Trustee to tender the Purchased Shares into the Offer and to sell, assign and transfer the Purchased Shares to the Offeror as contemplated herein; (c) the undersigned beneficially owns the Purchased Shares free and clear of all liens, restrictions, charges, encumbrances, claims and equities whatsoever; (d) the undersigned has not sold, assigned or transferred, or agreed to sell, assign or transfer, any of the Purchased Shares to any other person; and (e) when the Purchased Shares are taken up and paid for by the Offeror, the Offeror will acquire good title thereto free and clear of all liens, restrictions, charges, encumbrances, claims and equities whatsoever; 6. irrevocably constitutes and appoints any officer of the Offeror as the true and lawful agent, attorney and proxy of the undersigned with respect to the Purchased Shares, effective on and after the Effective Date, with full power of substitution, in the name and on behalf of the undersigned (such power of attorney being deemed to be an irrevocable power coupled with an interest): (a) to register, record, transfer and enter the transfer of Purchased Shares on the appropriate register of shareholders maintained by Emco; and (b) to exercise any and all of the rights of the holder of the Purchased Shares; 7. agrees, effective on and after the Effective Date, not to vote any of the Purchased Shares at any meeting of holders of Emco Shares or to exercise any other rights or privileges attached to the Purchased Shares; 8. covenants to execute, upon request, any additional documents, transfers or other assurances necessary or desirable to complete the sale, assignment and transfer of the Purchased Shares to the Offeror contemplated herein; -3- 9. acknowledges that all authority herein conferred by the undersigned shall survive the death, incapacity, bankruptcy or insolvency of the undersigned and that all obligations of the undersigned herein shall be binding upon the heirs, executors, personal representatives, successors and assigns of the undersigned; and 10. by virtue of the execution of this Letter of Transmittal, shall be deemed to have agreed that all questions as to validity, form, eligibility (including timely receipt) and acceptance of any Purchased Shares deposited pursuant to the Offer will be determined by the Offeror, in its reasonable discretion, and that such determination shall be final and binding and acknowledges that there shall be no duty or obligation on the Offeror, Computershare Trust Company of Canada (the "DEPOSITARY") or any other person to give notice of any defect or irregularity in any deposit and no liability shall be incurred by any of them for failure to give any such notice. The undersigned instructs the Trustee, the Offeror and the Depositary, upon the Offeror taking up and paying for the Purchased Shares, to mail the resulting cheque by first class mail, postage prepaid, in accordance with the instructions given below in Block A. Should the Purchased Shares not be purchased in accordance with the terms of the Offer, this Letter of Transmittal shall be returned to the undersigned in accordance with the instructions in the preceding sentence and the Purchased Shares shall be returned to the Trustee. FOR QUEBEC PLAN PARTICIPANTS ONLY: By reason of the use by the undersigned of an English language form of Letter of Transmittal, the undersigned shall be deemed to have required that any contract evidenced by the Offer, as accepted through this Letter of Transmittal, as well as all documents related thereto, be drawn exclusively in the English language. En raison de l'usage d'une lettre d'envoi en langue anglaise par le soussigne, le soussigne et les destinataires sont reputes avoir demande que tout contrat atteste par l'offre et son acceptation par cette lettre d'envoi, de meme que tous les documents qui s'y rapportent, soient rediges exclusivement en langue anglaise. BLOCK A - ------------------------------------------------------------------- ISSUE CHEQUE IN THE NAME OF AND SEND CHEQUE TO: (please print) - --------------------------------------------------- (Name) - --------------------------------------------------- (Street Address and Number) - --------------------------------------------------- (City and Province/State) - --------------------------------------------------- (Country and Postal Code/Zip Code) - --------------------------------------------------- (Telephone - Business Hours) - --------------------------------------------------- (Social Insurance or Tax Identification Number) -4- Dated: , 2003 -------------------------------------- - --------------------------------------------------- Signature of Plan Participant or Authorized Representative (see Instruction 3) - --------------------------------------------------- Name of Plan Participant (please print or type) - --------------------------------------------------- Name of Authorized Representative (please print or type) (if applicable) BLOCK B SUBSTITUTE FORM W-9 TO BE COMPLETED BY U.S. PLAN PARTICIPANTS ONLY (See Instruction 5) Under penalty of perjury, I certify that: 1. The social security or other taxpayer identification number stated above is my correct taxpayer identification number (or I am waiting for a number to be issued to me); 2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the United States Internal Revenue Service that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and 3. I am a U.S. person (including a U.S. resident alien). Certification Instructions: You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. - ----------------------------------- Tax Identification Number - ----------------------------------- ---------------------------- Signature of Plan Participant Date -i- INSTRUCTIONS 1. DELIVERY OF LETTER OF TRANSMITTAL (a) This Letter of Transmittal, properly completed and signed, must be received by the Trustee, Clarica Trust Company, at its office specified below at or prior to 8:00 p.m. (EST) on the Expiry Date (as defined in the Offer) (currently Monday, April 7, 2003, but subject to extension at the discretion of the Offeror). (b) The method used to deliver this Letter of Transmittal is at the option and risk of the Plan participant, and delivery will be deemed effective only when this Letter of Transmittal is actually received as indicated above. The Offeror recommends that this Letter of Transmittal be hand delivered or couriered to the Trustee, Clarica Trust Company, at its office specified below and that a receipt therefor be obtained; otherwise, the use of registered mail with return receipt requested, properly insured, is recommended. 2. SIGNATURES This Letter of Transmittal must be completed and signed by the Plan participant accepting the Offer or by such Plan participant's duly authorized representative (in accordance with Instruction 3 below). 3. FIDUCIARIES, REPRESENTATIVES AND AUTHORIZATIONS Where this Letter of Transmittal is executed by a person acting as an executor, administrator, trustee, guardian, attorney-in-fact, agent or any other representative or fiduciary capacity, this Letter of Transmittal must be accompanied by satisfactory evidence/proof of his or her appointment and authority to act. Any of the Offeror, the Trustee or the Depositary, at its sole discretion, may require additional evidence of appointment and authority to act. 4. PARTIAL TENDERS If less than all of the Emco Shares held by the Trustee on behalf of the Plan participant pursuant to the Plan are to be deposited into the Offer, fill in the number or percentage of Emco Shares to be deposited in the appropriate space in Section 1 of this Letter of Transmittal. In such case, the Emco Shares not deposited will continue to be held in the Plan. The total number of Emco Shares held by the Trustee on behalf of the Plan participant will be deemed to have been deposited unless otherwise indicated. 5. SUBSTITUTE FORM W-9 Each U.S. Plan participant is required to provide the Trustee and the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 which is provided in Block B, and to certify whether such Plan participant is subject to backup withholding of United States federal income tax. If a U.S. Plan participant has been notified by the Internal Revenue Service that such Plan participant is subject to backup withholding, such Plan participant must cross out item 2 of the Substitute Form W-9, unless such Plan participant has since been notified by the Internal Revenue Service that such Plan participant is no longer -ii- subject to backup withholding. Failure to provide the information in the Substitute Form W-9 may subject a U.S. Plan participant to 30% United States federal income tax withholding on the payment of the purchase price of all Emco Shares purchased from such Plan participant. If a U.S. Plan participant has not been issued a TIN and has applied for one or intends to apply for one in the near future, such Plan participant should write "Applied For" in the space provided for in the TIN in the Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For" is written in the Substitute Form W-9 and the Trustee and the Depositary are not provided with a TIN within 60 days, the Trustee and the Depositary will withhold 30% of all payments of the purchase price to such Plan participant until a TIN is provided to the Trustee and the Depositary. 6. MISCELLANEOUS (a) No alternative, conditional or contingent deposits of Emco Shares held pursuant to the Plan will be accepted. All depositing Plan participants by execution of this Letter of Transmittal waive any right to receive any notice of acceptance of the Purchased Shares for payment. (b) The Offer and any agreement resulting from the acceptance of the Offer will be construed in accordance with and governed by the laws of the Province of Ontario and the laws of Canada applicable therein. The Plan participant signing this Letter of Transmittal hereby unconditionally and irrevocably attorns to the jurisdiction of the courts of the Province of Ontario. ************************* CLARICA TRUST COMPANY 227 King Street South Waterloo, Ontario N2J 4C5 Attention: Kim Dreher email: kim.dreher@clarica.com telephone: 1-519-888-3900 ext. 5298 fax: 1-519-888-3143 ANY QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED BY PLAN PARTICIPANTS TO EMCO AT THE TELEPHONE NUMBER AND LOCATION SET OUT BELOW: Emco Limited 1108 Dundas Street East London, Ontario N5W 3A7 Attention: Martha Lawson or Frances Smeets email: mlawson@emcoltd.com or fsmeets@emcoltd.com telephone: 1-519-453-9600 fax: 1-519-453-4659 EX-99.A.5 7 t09060d9exv99waw5.txt LETTER DATED FEBRUARY 28, 2003 EXHIBIT (a)(5) [LETTERHEAD OF EMCO LIMITED] February 28, 2003 [NAME AND ADDRESS OF OPTION HOLDER] Dear -: RE: OFFER BY 2022841 ONTARIO INC., AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF BLACKFRIARS CORP., TO ACQUIRE ALL OUTSTANDING COMMON SHARES OF EMCO LIMITED ("EMCO") We are writing to you as a holder of options ("OPTIONS") under Emco's Stock Option Plan, being Part II of Emco's 1991 Long Term Incentive Program. As you know, 2022841 Ontario Inc. (the "OFFEROR"), an indirect wholly-owned subsidiary of Blackfriars Corp., has made an offer (the "OFFER") to acquire all of the outstanding Common Shares of Emco at a cash price of Cdn. $16.60 per share (the "OFFER PRICE"). The Offer is open for acceptance until 8:00 p.m. (EST) on the Expiry Date (as defined in the Offer) (currently Monday, April 7, 2003, but subject to extension at the discretion of the Offeror). The Offer extends to the Common Shares of Emco issuable upon the exercise of your Options (the "OPTIONED SHARES"). A copy of the Offer accompanies this letter. According to Emco's records, you hold Options to purchase the number of Optioned Shares specified in the attached Schedule "A". The Board of Directors of Emco has passed a resolution which (i) vests all outstanding Options immediately, and (ii) PROVIDES THAT ALL OPTIONS MUST BE EXERCISED ON OR BEFORE THE EXPIRY DATE, FAILING WHICH THEY WILL LAPSE AND BE CANCELLED, all conditional upon the Offeror taking up and paying for the Common Shares of Emco pursuant to the Offer. Emco has agreed to put into place certain arrangements which will facilitate your participation in the Offer in respect of any or all of your Optioned Shares, without any requirement for you to fund the option exercise price of your Options. If you wish to participate in these arrangements, you should complete and sign the Notice of Acceptance accompanying this letter and deliver it to Emco at 620 Richmond Street, London, Ontario, N6A 5J9, Fax No.: (519) 645-2870, Attention: Wayne Lawrence, by personal delivery, courier or fax, by no later than the Expiry Date. -2- By signing the Notice of Acceptance in respect of any or all of your Options, you elect, in lieu of exercising such Options in accordance with their terms, to transfer such Options to Emco in exchange for Emco paying you the "in-the-money" value of such Options in cash (net of any applicable withholding taxes), conditional upon the Offeror taking up and paying for the Common Shares of Emco pursuant to the Offer. In other words, you will receive payment of an amount equal to the difference between the Offer Price and the option exercise price of such Options (net of any applicable withholding taxes). If the Offeror does not acquire any Emco Common Shares under the Offer, the above election will have no effect and your Options will remain valid and outstanding, exercisable in accordance with their original terms. You may use the Notice of Acceptance to elect to participate in these arrangements in respect of all or any part of your Optioned Shares. You also have the choice of dealing with your Options in accordance with their terms. The Board of Directors of Emco recommends that you accept the Offer, both in respect of your "in-the-money" Optioned Shares and in respect of any other Common Shares of Emco you may own. However, the decision to accept the Offer is your own. If you do not wish to accept the Offer, do not complete the Notice of Acceptance accompanying this letter. As noted above, however, the Options will lapse and be cancelled if they have not been exercised on or before the Expiry Date, provided the Offeror takes up and pays for Emco Common Shares pursuant to the Offer. You may also have received another somewhat similar package of documents from Computershare Trust Company of Canada in respect of the Offer. Please note that the Notice of Acceptance enclosed with this letter (and NOT the documents received from Computershare Trust Company of Canada) should be used by you for your Optioned Shares if you wish to be paid their "in-the-money" value as described in this letter. TAX CONSEQUENCES CANADIAN FEDERAL INCOME TAX CONSEQUENCES Under the Income Tax Act (Canada) and the regulations thereto, upon the transfer of your Options to Emco and the payment by Emco to you of the "in-the-money" value of such Options as described in this letter, you will be deemed to receive a taxable benefit that will be included in your income from employment. This benefit will be equal to the difference between the Cdn. $16.60 Offer Price and the option exercise price of your Options. You will be allowed to deduct 50% of the benefit in computing your taxable income. Effectively, only 50% of the benefit will be taxed. Any payment made to you will be subject to any applicable withholding taxes required by law. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES If you are a citizen or a resident of the United States, under the Internal Revenue Code, upon the transfer of your Options to Emco and the payment by Emco to you of the "in-the-money" value of such Options as described in this letter, you will be treated as receiving income in connection with the performance of services equal to the excess of the Offer Price over the option exercise price of your Options. Such amount will be included in your gross -3- income as ordinary income for United States federal income tax purposes and also may be subject to state and local taxes. Any payment made to you may be subject to the withholding of federal, state and local income and employment taxes. SERVICES PERFORMED IN ANOTHER COUNTRY If you are a resident of Canada who has received Options in connection with the performance of services in the United States or a resident of the United States who has received Options in connection with the performance of services in Canada, you may be subject to taxation in both Canada and the United States. You should consult your tax adviser concerning such taxation and the possible application of foreign tax credits and benefits available under the United States - Canada Income Tax Treaty. These summaries are of a general nature only and are not intended to constitute, nor should they be construed to constitute, legal or tax advice to any particular holder of Options of the consequences of the Offer. If you have any questions, please contact the writer at (519) 645-3924. Yours truly, EMCO LIMITED By: /s/ Wayne Lawrence Wayne Lawrence Assistant Treasurer SCHEDULE "A" OPTIONS HELD NAME OF OPTION HOLDER: - NUMBER OF OPTIONED SHARES OPTION EXERCISE PRICE(s) - - EX-99.A.6 8 t09060d9exv99waw6.txt NOTICE OF ACCEPTANCE EXHIBIT (a)(6) NOTICE OF ACCEPTANCE IF YOU WISH TO PARTICIPATE IN THE OFFER (AS DEFINED BELOW) IN RESPECT OF ANY OR ALL OF YOUR OPTIONED SHARES (AS DEFINED BELOW), WITHOUT ANY REQUIREMENT FOR YOU TO FUND THE EXERCISE PRICE OF YOUR OPTIONS (AS DEFINED BELOW), AS DESCRIBED IN THE ACCOMPANYING LETTER, CAREFULLY COMPLETE PARAGRAPH 2 BELOW, SIGN THIS NOTICE OF ACCEPTANCE AND RETURN IT TO EMCO LIMITED AT 620 RICHMOND STREET, LONDON, ONTARIO, N6A 5J9, ATTENTION: WAYNE LAWRENCE, ON OR BEFORE THE EXPIRY DATE (AS DEFINED IN THE OFFER) (CURRENTLY MONDAY, APRIL 7, 2003, BUT SUBJECT TO EXTENSION AT THE DISCRETION OF THE OFFEROR (AS DEFINED BELOW)). THE ACCOMPANYING RETURN ENVELOPE MAY BE USED FOR THIS PURPOSE OR YOU MAY FAX THE COMPLETED NOTICE OF ACCEPTANCE TO (519) 645-2870. ALL OPTIONS MUST BE EXERCISED ON OR BEFORE THE EXPIRY DATE, FAILING WHICH THEY WILL LAPSE AND BE CANCELLED. TO: EMCO LIMITED ("EMCO") 1. I hold options (the "OPTIONS") to purchase Emco Common Shares (the "OPTIONED SHARES") under Emco's Stock Option Plan, being Part II of Emco's 1991 Long Term Incentive Program. I have received and have read (i) the Letter to Employee Stock Option Holders from Wayne Lawrence of Emco dated February 28, 2003, and (ii) the offer (the "OFFER") of 2022841 Ontario Inc. (the "OFFEROR") dated February 28, 2003 to purchase all outstanding Common Shares of Emco for Cdn. $16.60 per share (the "OFFER PRICE"). 2. The election specified in Paragraph 3 below will apply in respect of the following Options held by me (the "ELECTED OPTIONS"):

I ACKNOWLEDGE THAT IF THIS PARAGRAPH 2 IS NOT COMPLETED BY ME, I WILL BE DEEMED TO HAVE SPECIFIED ALL "IN-THE-MONEY" OPTIONS HELD BY ME. 3. On and subject to the conditions set out in Paragraphs 4 and 5 below, in lieu of exercising the Elected Options in accordance with their terms, I irrevocably elect to transfer the Elected Options to Emco in exchange for Emco paying me the "in-the-money" value of the Elected Options in cash (net of any applicable withholding taxes), such value being determined based on the Offer Price. -2- 4. I retain the right to withdraw this Notice of Acceptance, at any time during which a holder of Common Shares of Emco has the right to withdraw such shares from the Offer under the rights of withdrawal set out in the Offer, by providing written notice to such effect to Emco at 620 Richmond Street, London, Ontario, N6A 5J9, Attention: Wayne Lawrence by personal delivery, courier or fax (fax no. (519) 645-2870). 5. I understand that, if the Offeror does not take up and pay for the Emco Common Shares deposited under the Offer, this Notice of Acceptance will cease to be of any force or effect and my Elected Options will remain valid and outstanding, exercisable in accordance with their original terms. DATED this ______ day of _________________, 2003. - ----------------------------- --------------------------------- WITNESS SIGNATURE OF OPTION HOLDER --------------------------------- NAME OF OPTION HOLDER - PLEASE PRINT EX-99.E.1 9 t09060d9exv99wew1.txt SUPPORT AGREEMENT DATED FEBRUARY 19, 2003 EXHIBIT (e)(1) SUPPORT AGREEMENT BETWEEN BLACKFRIARS CORP. AND 2022841 ONTARIO INC. AND EMCO LIMITED DATED AS OF FEBRUARY 19, 2003 TABLE OF CONTENTS TABLE OF CONTENTS ARTICLE 1 - THE OFFER.................................................... 1 1.1 Interpretation...................................................... 1 1.2 The Offer........................................................... 3 1.3 Mailing the Offer................................................... 3 1.4 SEC Filings......................................................... 3 1.5 Expiry of the Offer................................................. 4 1.6 Modification of the Offer........................................... 4 1.7 Approval of the Offer............................................... 4 1.8 Directors' Circular................................................. 4 1.9 Shareholder Lists................................................... 5 1.10 Directors........................................................... 5 1.11 Subsequent Acquisition Transaction.................................. 5 1.12 OSC Rule 61-501 Order............................................... 6 1.13 Guarantee........................................................... 6 ARTICLE 2 - Representations and warranties............................... 6 2.1 Representations and Warranties....................................... 6 ARTICLE 3 - COVENANTS RELATING TO CONDUCT OF BUSINESS ................... 6 3.1 Conduct of Business by the Company.................................. 6 3.2 No Solicitation..................................................... 9 3.3 Existing Take-over Proposals; Third Party Standstill Agreements ....11 ARTICLE 4 - ADDITIONAL AGREEMENTS........................................11 4.1 Access to Information...............................................11 4.2 Indemnification; Directors and Officers Insurance...................12 4.3 Notification of Certain Matters.....................................12 4.4 Fees................................................................13 4.5 Company Stock Options...............................................13 4.6 Reasonable Commercial Efforts.......................................13 4.7 Public Announcements................................................14 4.8 Take Up and Payment.................................................14 4.9 Employment Contracts and Benefit Plans..............................14 4.10 Transfer Agent......................................................14 ARTICLE 5 - CONDITIONS PRECEDENT TO THE OFFER ...........................15 5.1 Conditions to Bidco's Obligation to Make the Offer..................15 5.2 Conditions to Bidco's Obligation to Complete the Offer..............15 ARTICLE 6 - TERMINATION, AMENDMENT AND WAIVER............................18 6.1 Termination.........................................................18 6.2 Effect of Termination...............................................19 6.3 Amendment...........................................................19 6.4 Waiver..............................................................19 ARTICLE 7 - GENERAL PROVISIONS ..........................................19 7.1 Notices.............................................................20 7.2 Counterparts........................................................20 7.3 Currency............................................................21 7.4 Time of the Essence.................................................21 7.5 Entire Agreement; No Third-Party Beneficiaries......................21 7.6 Governing Law.......................................................21 7.7 Assignment..........................................................21 7.8 Severability........................................................21 7.9 Enforcement of this Agreement.......................................21 SCHEDULE "A"............................................................. 1 Part 1 - Representations and Warranties of Parent and Bidco ............. 1 1.1 Organization.................................................. 1 1.2 Authority..................................................... 1 1.3 No Violation.................................................. 1 1.4 Financing the Offer........................................... 2 1.5 Litigation, etc .............................................. 2 Part 2 - Representations and Warranties of the Company .................. 2 2.1 Organization.................................................. 2 2.2 Capitalization................................................ 2 2.3 Authority .................................................... 3 2.4 No Violation.................................................. 3 2.5 Absence of Changes............................................ 4 2.6 No Material Misrepresentation................................. 4 2.7 Financial Statements.......................................... 4 2.8 Litigation, etc............................................... 4 2.9 Tax Matters................................................... 5 2.10 Pension and Termination Benefits.............................. 6 2.11 Fairness Opinion.............................................. 6 2.12 Severance and Employment Agreements........................... 6 2.13 Compliance with Laws.......................................... 6 2.14 Insurance..................................................... 7 2.15 Directors and Officers Insurance.............................. 7 2.17 TD Fee........................................................ 7 2.18 Foreign Private Issuer........................................ 7 SUPPORT AGREEMENT ----------------- THIS AGREEMENT is made as of February 19, 2003 BETWEEN: BLACKFRIARS CORP., a corporation existing under the laws of Delaware ("PARENT"), -and- 2022841 ONTARIO INC., a corporation existing under the laws of Ontario, a wholly owned subsidiary of Parent ("BIDCO"), -and- EMCO LIMITED, a company existing under the laws of Ontario (the "Company"), WHEREAS Parent, through Bidco, proposes to make an offer (the "OFFER") to purchase all of the common shares of the Company (the "COMMON SHARES") at a price of $16.60 per Common Share in cash; AND WHEREAS the Offer is the result of a comprehensive process of reviewing strategic alternatives conducted by an independent committee of the Company's board of directors, with the assistance of professional financial and legal advisors; AND WHEREAS the Board of Directors of the Company has determined, after receiving legal, financial and other advice, that it would be in the best interests of the Company to support the Offer and to recommend acceptance of the Offer to the Shareholders; AND WHEREAS in order to induce Parent and Bidco to enter into this Agreement, concurrently herewith Masco Corporation has agreed to enter into a Lock-up Agreement dated as of the date hereof (the "LOCK-UP AGREEMENT") in the form of the attached Schedule "B" pursuant to which Masco Corporation has agreed, subject to the terms and conditions of such agreement, to deposit 6,621,334 Common Shares in acceptance of the Offer; NOW, THEREFORE, in consideration of the covenants, representations and warranties herein contained, the parties agree as follows: ARTICLE 1 - THE OFFER --------------------- 1.1 INTERPRETATION -------------- (1) When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "INCLUDE," "INCLUDES" or "INCLUDING" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." (2) "EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as amended. (3) "SUBSIDIARY" means any corporation, partnership, limited liability company, joint venture or other legal entity of which Parent or the Company, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, 50% or more of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation, partnership, limited liability company, joint venture or other legal entity. (4) "KNOWLEDGE OF THE COMPANY" means the actual knowledge of the directors and officers of the Company after having made reasonable enquiry. (5) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means, when used with respect to the Company, Parent or Bidco, as the case may be, any change or effect that is or could reasonably be expected to be materially adverse to the business, operations, assets, liabilities, employee relationships, customer or supplier relationships, earnings or results of operations, business conditions or prospects (financial or otherwise), of the Company and its Subsidiaries, or Parent and its Subsidiaries, taken as a whole, as the case may be. (6) "PERSON" means an individual, partnership, association, body corporate, unincorporated association, unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator, or other legal representative. (7) "OPTIONS" means all currently outstanding options to purchase Common Shares under the Company's 1991 Long-Term Incentive Plan, or other compensation arrangements. (8) "SEC" means the United States Securities and Exchange Commission. (9) "SHAREHOLDERS" means, collectively, all holders of Common Shares. (10) A calculation made on a "FULLY-DILUTED BASIS" means a calculation made on a fully-diluted basis after excluding therefrom all impact of converting the Company's 6-1/2% convertible unsecured subordinated debentures. (11) "CONFIDENTIALITY AGREEMENT" means the confidentiality agreement dated as of September 25, 2002 between an affiliate of Parent and the Company. (12) "DISCLOSURE LETTER" means the disclosure letter dated the date of this Agreement from the Company to Parent and Bidco. (13) "$" means the lawful currency of Canada. 1.2 THE OFFER --------- Subject to the terms and conditions set forth below, Parent shall cause Bidco to make the Offer to purchase all of the issued and outstanding Common Shares, including all Common Shares issued on the exercise of outstanding Options, at a price of $16.60 per Common Share in cash in accordance with all applicable securities legislation, including the Exchange Act. The term "OFFER" shall include any amendments to the Offer made in accordance with the terms of this Agreement, including removing or waiving any condition or extending the period during which Common Shares may be deposited. The Offer shall be subject to there being validly deposited under the Offer and not withdrawn at the expiry thereof such number of Common Shares which constitutes at least 66-2/3% of the Common Shares outstanding (on a Fully-Diluted Basis) (the "MINIMUM TENDER CONDITION") and shall be subject to the other conditions set forth in Article 5. If the Company has declared, set aside or paid any dividend on, or made any other actual, constructive or deemed distribution in respect of, any of its Common Shares, or otherwise made any payments to its shareholders in their capacity as such, Bidco may reduce the amount of the Offer price per Common Share by any amount they determine in their sole discretion, provided that such amount shall not exceed the amount of such dividend or distribution received per Common Share. 1.3 MAILING THE OFFER ----------------- Subject to Section 5.1, Bidco shall mail the Offer and accompanying take-over bid circular (collectively, the "TAKE-OVER BID CIRCULAR") in accordance with applicable law to all registered Shareholders as soon as reasonably practicable and, in any event, not later than 11:59 p.m. (Toronto time) on March 14, 2003 (such time on such date being referred to herein as the "LATEST MAILING TIME"); provided, however, that if the mailing of the Offer is delayed by reason of an injunction or order made by a court or regulatory authority of competent jurisdiction, then, provided that such injunction or order is being contested or appealed, then the Latest Mailing Time shall be extended to the earlier of 11:59 p.m. (Toronto time) on April 7, 2003 and 11:59 p.m. (Toronto time) on the fifth business day following the date on which such injunction or order ceases to be in effect. The Company and its counsel shall be given an opportunity to review and comment upon the Take-over Bid Circular prior to mailing, recognizing that whether or not such comments are appropriate will be determined by Bidco, acting reasonably. 1.4 SEC FILINGS ----------- As soon as practicable on the date of commencement of the Offer, Parent and Bidco shall file or cause to be filed with the SEC a Tender Offer Statement on Schedule TO (together with any supplements or amendments thereto, the "SCHEDULE TO") with respect to the Offer which shall contain (as an exhibit) or shall incorporate by reference the Take-over Bid Circular and related letter of transmittal, as well as other ancillary Offer documents and instruments. 1.5 EXPIRY OF THE OFFER ------------------- The Offer shall expire not earlier than 5:00 p.m. (Toronto time) on the 36th day after the date that the Offer is first commenced within the meaning of the Securities Act (Ontario), subject to the right of Bidco to extend the period during which Common Shares may be deposited under the Offer (the "EXPIRY TIME"). 1.6 MODIFICATION OF THE OFFER ------------------------- It is understood and agreed that Bidco shall not, without the prior consent of the Company, amend the terms of the Offer other than to increase the consideration per Common Share payable under the Offer, to extend the expiry of the Offer or to waive any conditions of the Offer. 1.7 APPROVAL OF THE OFFER --------------------- The Company represents and warrants to and in favour of Bidco and Parent and acknowledges that Bidco and Parent are relying upon such representations and warranties in entering into this Agreement, that, as of the date hereof, the Board of Directors of the Company, following consultation with its financial and legal advisors, has determined unanimously that the Offer is fair to the Shareholders and that it is in the best interests of the Company and the Shareholders for this Agreement to be entered into, the Offer to be made and the Board of Directors of the Company to support the making of the Offer and, accordingly, has approved the entering into of this Agreement and the making of a recommendation that Shareholders accept the Offer. After reasonable enquiry, the Board of Directors has been advised and believes that each of the directors of the Company intends to tender under the Offer all Common Shares of which he is the beneficial owner. 1.8 DIRECTORS' CIRCULAR ------------------- (1) The Company covenants to cooperate with Bidco and Parent and to take all reasonable action to support the Offer and to provide to Bidco and Parent on a confidential basis, a draft copy of any directors' circular (each, a "DIRECTORS' CIRCULAR") to be issued in respect of the Offer, prior to the mailing thereof, and to provide Bidco and Parent with a reasonable opportunity to review and provide comments thereon, recognizing that whether or not such comments are appropriate will be determined by the Company, acting reasonably. The Directors' Circular will reflect the determinations referred to in Section 1.7 and the Company will mail the Directors' Circular concurrently with the mailing by Bidco of the Take-over Bid Circular to the Shareholders. (2) The Company shall file with the SEC, contemporaneously with the filing by Parent and Bidco of the Schedule TO, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any supplements or amendments thereto, the "SCHEDULE 14D-9") containing the recommendation of the Board of Directors of the Company in favour of the Offer and the approval of this Agreement. 1.9 SHAREHOLDER LISTS ----------------- (1) The Company shall cause its transfer agent to provide Bidco, within three business days of the execution and delivery of this Agreement, with a list of the registered holders of Common Shares and a list of participants in book-based nominee registrants such as CDS & Co. and CEDE & Co. who hold Common Shares, together with their addresses and respective holdings of Common Shares. The Company shall concurrently provide Bidco with the names, addresses and holdings of all persons having rights to acquire Common Shares and the details of such rights. The Company shall from time to time furnish Bidco with such additional information, including updated or additional lists of Shareholders, mailing labels and lists of securities positions and other assistance as Bidco may reasonably request in order to be able to communicate the Offer to the Shareholders and to such other persons as are entitled to receive the Offer under applicable law. (2) The Company will make such enquiries as counsel shall advise are necessary to determine to the extent feasible the number of Shareholders in the United States in order to confirm the availability of exemptions for the Offer from U.S. laws respecting tender offers. 1.10 DIRECTORS --------- The Company agrees and represents that its Board of Directors has determined unanimously to use its and their respective reasonable efforts to enable Bidco to elect or appoint all of the directors of the Company as soon as possible after Bidco takes up and pays for in excess of 66-2/3% of the Common Shares (on a Fully-Diluted Basis) pursuant to the Offer. If Bidco takes up and pays for such number of Common Shares as represents at least a majority of the outstanding Common Shares (on a Fully-Diluted Basis) but less than 66-2/3% (on a Fully-Diluted Basis), the Company acknowledges that Bidco shall be entitled to designate such number of members of the Board of Directors, and any committees thereof, as is proportionate to the percentage of the outstanding Common Shares owned by Bidco and the Company shall cooperate with Bidco, subject to applicable law, to enable Bidco's designees to be elected or appointed to the Board of Directors and to constitute a majority of the Board of Directors, including at the request of Bidco, by its reasonable efforts to expand the Board of Directors and/or secure the resignations of such number of directors as is necessary to enable Bidco's designees to be elected or appointed to the Board of Directors. 1.11 SUBSEQUENT ACQUISITION TRANSACTION ---------------------------------- If, within 120 days after the date of the Offer, the Offer has been accepted by holders of not less than 90% of the outstanding Common Shares, Bidco shall use its reasonable best efforts, to the extent permitted by applicable law, to acquire the remainder of the Common Shares from those Shareholders who have not accepted the Offer pursuant to Section 188 of the Business Corporations Act (Ontario) (the "OBCA") at the same price as in the Offer. If that statutory right of acquisition is not available, Bidco may pursue other means of acquiring the remaining Common Shares not tendered to the Offer. In the event Bidco takes up and pays for Common Shares under the Offer representing at least 66-2/3% of the Common Shares (on a Fully-Diluted Basis), the Company agrees to cooperate with Bidco and to use its reasonable best efforts to enable Bidco to acquire the remaining Common Shares by way of amalgamation,statutory arrangement, capital reorganization or other transaction involving the Company and Bidco or an Affiliate (as defined in the Securities Act (Ontario)) of Bidco (a "Subsequent Acquisition Transaction"), provided that the consideration offered in connection with the Subsequent Acquisition Transaction is at least equivalent in value to the consideration offered under the Offer. 1.12 OSC RULE 61-501 ORDER --------------------- The Company acknowledges that Parent and/or its affiliates may, if determined necessary or desirable in their sole discretion, apply for an order under section 4.8(1)1 or section 9.1 of Rule 61-501 of the Ontario Securities Commission (and equivalent provisions in other jurisdictions) to confirm that, as contemplated in section 2.3(2) of Policy 61-501CP of the Ontario Securities Commission, Masco Corporation is not, by virtue of entering into the Lock-up Agreement, acting jointly or in concert with Parent or its affiliates and thus will be able to be counted as part of the minority for the purposes of any second step going private transaction, and for greater certainty, the Company will support such efforts in such application or before the Court and elsewhere in the event that it is challenged. 1.13 GUARANTEE --------- Parent hereby irrevocably and unconditionally guarantees the timely performance by Bidco of all its obligations under this Agreement, including the making of the Offer and the taking up and paying for of the Common Shares properly deposited thereunder, subject to the terms and conditions of this Agreement. ARTICLE 2 - REPRESENTATIONS AND WARRANTIES ------------------------------------------ 2.1 REPRESENTATIONS AND WARRANTIES ------------------------------ Certain representations and warranties from Parent and Bidco to the Company and from the Company to Parent and Bidco are set out in Schedule "A". The representations and warranties in this Agreement (including those set out in Schedule "A") shall terminate at the Effective Time. ARTICLE 3 - COVENANTS RELATING TO CONDUCT OF BUSINESS ----------------------------------------------------- 3.1 CONDUCT OF BUSINESS BY THE COMPANY ---------------------------------- Except as expressly permitted by clauses (a) through (s) of this Section 3.1, during the period from the date of this Agreement to the earlier of the time (the "EFFECTIVE TIME") of the appointment or election to the Board of Directors of the Company of persons designated by Bidco who represent a majority of the directors of the Company and the termination of this Agreement in accordance with its terms, the Company shall, and shall cause each of its Subsidiaries to, in all material respects carry on its and their businesses in the ordinary course of its and their businesses as currently conducted and, to the extent consistent therewith, use reasonable commercial efforts to preserve intact its and their current business organizations, keep available the services of its and their current officers and employees and preserve its and their relationships with customers, suppliers and others having business dealings with it and them to the end that its and their goodwill and ongoing businesses shall be unimpaired at the Effective Time. Without limiting the generality of the foregoing, and except as otherwise expressly contemplated by this Agreement or in the Disclosure Letter, the Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Parent: (a) (A) split, combine or reclassify any of its or their shares or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its or their shares or (B) purchase, redeem or otherwise acquire, or offer to purchase, redeem or otherwise acquire, any shares of the Company or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities, in each case, other than intercompany transactions involving the Company and its Subsidiaries and other than purchases of Common Shares pursuant to the Company's Employee Stock Purchase Plan; (b) issue, deliver, sell, pledge, dispose of, or otherwise encumber, any of its or their shares, any other voting securities or equity equivalent or any securities convertible into, or any rights, warrants or options to acquire any such shares, voting securities, equity equivalent or convertible securities, other than the issuance of Common Shares upon the exercise of Options outstanding on the date of this Agreement or upon the conversion of 6-1/2% convertible unsecured subordinated debentures; (c) amend its or their certificate of incorporation, articles, by-laws or other charter documents; (d) acquire or agree to acquire by merging, amalgamating or consolidating with, or by purchasing a substantial portion of the assets of or equity in, or by any other manner, any business or any person or other business organization or division thereof or otherwise acquire or agree to acquire any assets, other than acquisitions of inventory or fixed assets in the ordinary course of business consistent with past practice, including capital expenditures previously authorized in the Company's most recent budget as disclosed in the Company's data room; (e) pledge, encumber, sell, lease or otherwise dispose of, or agree to pledge, encumber, sell, lease or otherwise dispose of, any of its or their assets, other than in the ordinary course of business consistent with past practice; (f) incur any indebtedness for borrowed money, guarantee any such indebtedness or make any loans, advances or capital contributions to, or other investments in, any other person, other than indebtedness, guarantees, loans, advances, capital contributions and investments (i) between the Company and any of its wholly-owned Subsidiaries in the ordinary course of business consistent with past practice and (ii) other than borrowings under the Company's existing revolving credit facilities or master lease arrangements in the ordinary course of business consistent with past practice; (g) alter (through merger, liquidation, reorganization, restructuring or in any other fashion) the corporate structure or ownership of the Company or any of its Subsidiaries; (h) enter into or amend any material written employment, consulting or severance agreement with any management level employee or any consultant or the equivalent or any compensation agreement, benefit plan, retention plan, severance plan or bonus plan or grant any bonuses, salary increases, pension benefits, retirement allowances, retention, severance or termination pay to any management level employee or any consultant other than pursuant to and in accordance with written agreements in effect on the date hereof; (i) violate or fail to perform any material obligation or duty imposed upon it or any of its Subsidiaries by any applicable law; (j) make any change to accounting policies or procedures (other than changes required to be made by Canadian generally accepted accounting principles); (k) prepare or file any Returns inconsistent with past practice or, on any such Returns, take any position, make any election, or adopt any method that is inconsistent with positions taken, elections made or methods used in preparing or filing similar Returns in prior periods; (l) make or rescind any express or deemed Tax election related to Taxes or change any of its or their methods of reporting income or deductions for Tax purposes or make a request for a Tax ruling or enter into any agreement with any taxing authority; (m) commence any litigation or proceeding or settle or compromise any litigation except in the ordinary course of business consistent with past practice and except for any settlement or compromise having an aggregate cost to the Company of not more than $500,000; (n) enter into or amend any agreement or contract material to the Company and its Subsidiaries, taken as a whole, other than in the ordinary course of business consistent with past practice (and other than as contemplated by this Agreement) or purchase any real property; (o) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the December 31, 2002 audited financial statements (or the notes thereto) of the Company and its Subsidiaries or incurred in the ordinary course of business consistent with past practice or arising under applicable law; (p) directly or indirectly (i) reduce the stated capital of the Company or any of its Subsidiaries, or (ii) reorganize, merge, amalgamate or consolidate the Company or any of its Subsidiaries with any person; (q) allow its current insurance (or re-insurance) policies to be cancelled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such cancellation, termination or lapse, replacement policies underwritten by insurance and re-insurance companies of nationally recognized standing providing coverage equal to or greater than the coverage under the cancelled, terminated or lapsed policies for substantially similar premiums are in full force and effect; (r) in the case of employees who are not management level employees, take any action other than in the ordinary course of business consistent with past practice, with respect to entering into or amending any employment, severance, collective bargaining, benefit or similar agreements, policies or arrangements or with respect to the grant of any bonuses, salary increases, pension benefits, retirement allowances, deferred compensation, retention, severance or termination pay or any other form of compensation or profit sharing or with respect to any increase of benefits otherwise payable; or (s) authorize, recommend, propose or announce an intention to do any of the foregoing, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing. 3.2 NO SOLICITATION --------------- (1) Except with the prior written consent of Parent, the Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any officer, director or employee of or any financial advisor, attorney or other advisor or representative or agent of, the Company or any of its Subsidiaries to, (i) solicit, initiate or encourage inquiries or the submission of any Take-over Proposal (as hereafter defined), (ii) enter into any agreement with respect to or approve or recommend any Take-over Proposal or (iii) participate in any negotiations regarding, or furnish to any person any information with respect to the Company or any of its Subsidiaries in connection with the making of any proposal that constitutes, or may reasonably be expected to lead to, any Take-over Proposal; provided, however, that nothing contained in this Section 3.2 shall prohibit the Company, its directors or its professional advisors from referring a third party to this Section 3.2 or making a copy of this Section 3.2 available to any third party; and, provided, further, that if the Board of Directors of the Company reasonably determines (after consultation with its financial advisors) that an unsolicited bona fide written Take-over Proposal constitutes a Superior Proposal (as defined below), then, to the extent required by the fiduciary obligations of the Board of Directors of the Company, as determined in good faith by a majority thereof after receiving a written opinion of its outside counsel, or advice of its outside counsel that is reflected in the minutes of the meeting of the Board of Directors of the Company, to such effect, the Company may, in response to an unsolicited request therefor, (i) furnish information with respect to the Company and its Subsidiaries to any person pursuant to a customary confidentiality agreement (as determined by the Company's counsel) and, (ii) negotiate with the third party and enter into an agreement with respect to a Superior Proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any officer or director of the Company or any of its Subsidiaries or any financial advisor, attorney or other advisor or representative of the Company or any of its Subsidiaries, whether or not such person is purporting to act on behalf of the Company or any of its Subsidiaries or otherwise, shall be deemed to be a breach of this Section 3.2(1) by the Company. (2) For purposes of this Agreement, "TAKE-OVER PROPOSAL" means any proposal or offer from any other person, or other business organization whatsoever (including any of the Company's officers or directors) relating to any recapitalization, merger, amalgamation, acquisition, arrangement or other business combination involving the Company or any of its Subsidiaries or any proposal or offer from any such person to acquire in any manner, directly or indirectly, an equity interest in, any voting securities of, or a substantial portion of the assets of the Company or any of its Subsidiaries, other than the transactions contemplated by this Agreement, and "SUPERIOR PROPOSAL" means a Take-over Proposal on terms which a majority of the members of the Board of Directors of the Company determines, at a duly constituted meeting of the Board of Directors or by unanimous written consent, in its reasonable good faith judgment to be more favourable to the Shareholders than the Offer (after consultation with the Company's financial, legal and other advisors) and for which financing, to the extent required, is then committed or which, in the reasonable good faith judgment of a majority of such members, as expressed in a resolution adopted at a duly constituted meeting of such members (after consultation with the Company's financial, legal and other advisors), is reasonably capable of being obtained by such third party. (3) The Company shall advise Parent orally and in writing of (i) any Take-over Proposal or any inquiry with respect to or which could lead to any Take-over Proposal received by any officer or director of the Company or, to the Knowledge of the Company, any financial advisor, attorney or other advisor or representative or agent of the Company on or after the date hereof, (ii) the material terms of such Take-over Proposal (including a copy of any written proposal), and (iii) the identity of the person making any such Take-over Proposal or inquiry no later than 24 hours following receipt of such Take-over Proposal or inquiry. If the Company intends to furnish any person with any information with respect to any Take-over Proposal in accordance with Section 3.2(1), the Company shall advise Parent orally and in writing of such intention and shall provide the Parent with a copy of all such information not less than one business day in advance of providing any such information to such person. The Company will not, except in the usual and ordinary course of business and pursuant to Section 3.2(1) in the case of a Superior Proposal, provide any information about the Company or its Subsidiaries to any third party, including any party making a Take-over Proposal. The Company will keep Parent fully informed of the status and details of any such Take-over Proposal or inquiry. (4) The Company covenants and agrees that it will not enter into any agreement (a "PROPOSED AGREEMENT"), other than a confidentiality agreement as contemplated by Section 3.2(1), with any third party providing for or to facilitate any Take-over Proposal that, pursuant to Section 3.2(1), the Board of Directors reasonably determines constitutes a Superior Proposal unless the Company shall have provided Parent and Bidco with a copy of any Proposed Agreement not less than three business days prior to its proposed execution by the Company, together with a written notice from the Board of Directors of the Company regarding the value in financial terms that the Board has in consultation with its financial advisors determined should be ascribed to any non-cash consideration offered under the Proposed Agreement. During such three business day period, the Company acknowledges and agrees that the Parent and Bidco shall have the opportunity but not the obligation, to offer to amend the terms of this Agreement in order to provide for financial terms at least equivalent to those in the Proposed Agreement. The Board of Directors of the Company shall review any offer by Parent and Bidco to amend the terms of this Agreement to determine, acting in good faith and in accordance with its fiduciary duties, whether Bidco's amended Offer would be at least as favourable to the Shareholders as the Take-over Proposal provided for in the Proposed Agreement. If the Board of Directors of the Company so determines, the Company will enter into an amended agreement with Parent and Bidco reflecting the amended Offer. If the Board of Directors of the Company continues to believe, acting in good faith and in the proper discharge of its fiduciary duties and after consultation with its financial, legal and other advisors, that the Take-over Proposal provided for in the Proposed Agreement continues to be a Superior Proposal with respect to the amended Offer, and therefore rejects the amended Offer, the Company shall be entitled to enter into the Proposed Agreement following payment to the Parent of all amounts payable pursuant to Section 4.4. The Company acknowledges and agrees that each successive modification of any Take-over Proposal shall constitute a new Take-over Proposal for purposes of the requirement of this Section 3.2(4) and will initiate an additional three business day notice period. 3.3 EXISTING TAKE-OVER PROPOSALS; THIRD PARTY STANDSTILL AGREEMENTS --------------------------------------------------------------- (1) Except with the prior written consent of Parent, the Company shall immediately cease and cause to be terminated any existing discussions or negotiations with any parties (other than Parent and Bidco) with respect to any potential Take-over Proposal. The Company will immediately demand the return or destruction of all confidential information provided at the date hereof to any third parties in connection with any potential Take-over Proposal and will use all reasonable efforts to ensure that such information is returned. During the period from the date of this Agreement through the Effective Time, the Company shall not terminate, amend, modify or waive any provision of any confidentiality or standstill agreement to which the Company or any of its Subsidiaries is a party (other than any involving Parent or a Superior Proposal). During such period, the Company agrees to enforce, to the fullest extent permitted under applicable law, the provisions of any such agreements, including obtaining injunctions to prevent any breaches of such agreements and to enforce specifically the terms and provisions thereof. (2) The Company will ensure that the officers and directors of the Company and its Subsidiaries and any investment bankers or other advisors or representatives or agents retained by the Company are aware of the provisions of these Sections 3.1, 3.2 and 3.3, and the Company will be responsible for any breach of such sections by such bankers, advisors or representatives. ARTICLE 4 - ADDITIONAL AGREEMENTS --------------------------------- 4.1 ACCESS TO INFORMATION --------------------- Subject to currently existing contractual and legal restrictions applicable to the Company or any of its Subsidiaries, the Company shall, and shall cause each of its Subsidiaries to, afford to the accountants, counsel, financial advisors and other representatives of Parent reasonable access to, and permit them to make such inspections as they may reasonably require of, during the period from the date of this Agreement through the Effective Time, all of their respective properties, books, contracts, commitments and records (including tax returns and the work papers of independent accountants, if available and subject to the consent of such independent accountants, which the Company shall use reasonable commercial efforts to obtain) and, during such period, the Company shall, and shall cause each of its Subsidiaries to, (i) furnish promptly to Parent a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal, provincial or other securities laws, (ii) furnish promptly to Parent all other information concerning its business, properties and personnel as Parent may reasonably request and (iii) promptly make available to Parent all personnel of the Company and its Subsidiaries knowledgeable about matters relevant to such inspections. No investigation pursuant to this Section 4.1 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto. All information obtained by Parent or Bidco pursuant to this Section 4.1 shall be kept confidential in accordance with the Confidentiality Agreement as if Parent was a party thereto, and, for this purpose, Bidco shall be deemed to be bound by all obligations of Parent under such Confidentiality Agreement as if it was a party thereto in the place and in the stead of Parent. 4.2 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE ------------------------------------------------- (1) From and after the Effective Time, Parent shall cause the Company or any successor to the Company to indemnify and hold harmless all past and present officers and directors of the Company and of its Subsidiaries to the same extent and in the same manner such persons are indemnified as of the date of this Agreement by the Company and its Subsidiaries pursuant to their respective governing laws and the articles, by-laws or other constating documents of the Company and its Subsidiaries and existing indemnity agreements for acts or omissions occurring at or prior to the Effective Time. (2) Notwithstanding Section 3.1, the Company intends to purchase run-off insurance, for such term as may be considered reasonable by it (but which in any event shall not exceed six years from the Effective Time), for its past and present directors and officers in respect of all matters relating to the period when they were directors and/or officers. (3) In the absence of the run-off insurance described in Section 4.2(2), Parent shall cause the Company or any successor to the Company to provide, for an aggregate period of not less than six years from the Effective Time, the Company's current and former directors and officers an insurance and indemnification policy that provides coverage for events occurring prior to the Effective Time that is substantially similar to the Company's existing policy if such a policy is available at a reasonable cost. 4.3 NOTIFICATION OF CERTAIN MATTERS ------------------------------- Parent and Bidco shall use their reasonable best efforts to give prompt notice to the Company, and the Company shall use its reasonable best efforts to give prompt notice to Parent and Bidco, of: (i) the occurrence, or non-occurrence, of any event which would be reasonably likely to cause (x) any representation or warranty contained in this Agreement and made by it to be untrue or inaccurate or (y) any covenant, condition or agreement contained in this Agreement and made by it not to be complied with or satisfied, (ii) any failure of Parent, Bidco or the Company, as the case may be, to comply in a timely manner with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder or (iii) any change or event which would be reasonably likely to have a Material Adverse Effect on Parent, Bidco or the Company, as the case may be; provided, however, that the delivery of any notice pursuant to this Section 4.3 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. 4.4 FEES ---- Notwithstanding any provision in this Agreement to the contrary, if this Agreement is terminated by the Company pursuant to Section 6.1(i) or, by Parent pursuant to Section 6.1 (h) or (j), then the Company shall (without prejudice to any other rights of Parent against the Company) pay to Parent $6 million in cash (the "TERMINATION FEE"), such payment to be made by the Company concurrently with such termination if the termination is by the Company, or no later than the second business day following such termination if the termination is by Parent. 4.5 COMPANY STOCK OPTIONS --------------------- On the date of this Agreement, the Board of Directors of the Company shall pass a resolution accelerating the vesting of all Options. The Company shall promptly notify the holders of Options of such resolution and shall permit holders of Options to either (i) make a "cashless" exercise whereby they will receive shares of the Company with a value equal to any in-the-money amount, or (ii) be paid any in-the-money value of the Option in cash, in each case, conditional upon Bidco taking up and paying for Common Shares under the Offer. 4.6 REASONABLE COMMERCIAL EFFORTS ----------------------------- (1) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use its reasonable commercial efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to make, in the most expeditious manner practicable, the Offer and to consummate the other transactions contemplated by the Offer and this Agreement, including: (i) the obtaining of all necessary actions or non-actions, waivers, consents and approvals from any domestic (federal, state, provincial or territorial), foreign or supranational court, commission, governmental body, quasi-governmental entity, body or authority of any kind whatsoever, regulatory agency, authority, stock exchange or tribunal ("GOVERNMENTAL ENTITY") and the making of all necessary registrations and filings (including filings with Governmental Entities) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity (including those in connection with the Competition Act (Canada)), (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed, and (iv) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by this Agreement. No party to this Agreement shall consent to any voluntary delay of the making of the Offer or the taking up and paying for the Common Shares deposited under the Offer at the behest of any Governmental Entity without the consent of the other parties to this Agreement, which consent shall not be unreasonably withheld. (2) Each party shall use all reasonable commercial efforts not to take any action, or enter into any transaction, which would cause any of its representations or warranties contained in this Agreement to be untrue or result in a breach of any covenant made by it in this Agreement. 4.7 PUBLIC ANNOUNCEMENTS -------------------- None of the parties will issue any press release with respect to the transactions contemplated by this Agreement or otherwise issue any written public statements with respect to such transactions without prior consultation with the other parties, except as may be required by applicable law or by obligations pursuant to any listing agreement with the Toronto Stock Exchange or NASDAQ. Moreover, in any event, each party agrees to give prior notice to the others of any public announcement relating to the Offer or the Lock-up Agreement and agrees to consult with each other prior to issuing each such public announcement. The Company agrees that, promptly after the entering into of this Agreement, it shall issue a press release in the form attached as Schedule "B". Nothwithstanding the foregoing, the Company agrees not to issue any press release or other public disclosure with a description of Parent or Bidco without the consent of Parent. 4.8 TAKE UP AND PAYMENT ------------------- Subject to the terms and conditions hereof and of the Offer, Bidco agrees to take up the Common Shares deposited under the Offer and pay for such Common Shares in accordance with the Offer and applicable securities laws. Bidco covenants that, in the event Bidco increases the consideration per Common Share offered under the Offer, Bidco will pay such increased consideration to each Shareholder in respect of all Common Shares tendered, notwithstanding that such shares have previously been taken up and paid for by Bidco. 4.9 EMPLOYMENT CONTRACTS AND BENEFIT PLANS -------------------------------------- Bidco and Parent shall permit the Company to honour and comply with the terms of all existing employment and change of control contracts entered into by the Company or any of its Subsidiaries and with the terms of all pension and benefit plans to which the Company or any of its Subsidiaries is a party or by which it is bound (other than stock option or similar plans). 4.10 TRANSFER AGENT -------------- The Company consents to its transfer agent mailing the Take-over Bid Circular to the Shareholders and to acting as depositary under the Offer. ARTICLE 5 - CONDITIONS PRECEDENT TO THE OFFER --------------------------------------------- 5.1 CONDITIONS TO BIDCO'S OBLIGATION TO MAKE THE OFFER -------------------------------------------------- The obligation of Bidco to make the Offer and mail the Take-over Bid Circular is conditional upon the satisfaction of the following conditions at or prior to the Latest Mailing Time, all of which conditions are included for the sole benefit of Bidco and any or all of which may be waived by Bidco in whole or in part in its sole discretion without prejudice to any other rights it may have under this Agreement. (a) No Termination. The obligations of Bidco and Parent hereunder shall not have been terminated under Article 6. (b) No Impossibility. No circumstance shall exist that would render it unlikely, in the reasonable opinion of Bidco and Parent, for any one or more of the conditions set out in Section 5.2 to be satisfied. (c) Lock-up Agreement. Masco Corporation shall have entered into the Lock-up Agreement in a form satisfactory to Parent. (d) Board of Directors Recommendation. The Board of Directors of the Company shall have unanimously recommended that Shareholders accept the Offer and shall not have withdrawn such recommendation or changed such recommendation in a manner that has substantially the same effect as the withdrawal thereof. (e) No Prohibition. No cease trade order, injunction or other prohibition at law shall exist against Bidco making the Offer or taking up or paying for Common Shares deposited under the Offer. (f) Directors' Circular. The Board of Directors of the Company shall have prepared and approved in final form, for mailing by the Company on the date the Takeover Bid Circular is mailed, the Directors' Circular, which circular shall contain the recommendation that Shareholders accept the Offer and a copy of the opinion from the Company's financial advisor, TD Securities Inc., that, as of the date hereof, the Offer is fair, from a financial point of view, to Shareholders. 5.2 CONDITIONS TO BIDCO'S OBLIGATION TO COMPLETE THE OFFER ------------------------------------------------------ Notwithstanding any other provisions of the Agreement, Bidco shall have the right to withdraw or terminate the Offer and not take up and pay for any Common Shares deposited under the Offer, unless all of the following conditions are satisfied or waived by Bidco at or prior to the Expiry Time: (a) Minimum Tender Condition. The Minimum Tender Condition shall have been satisfied. (b) Competition Act. Bidco and the Company shall each have filed all notices and information required to be filed under Part IX of the Competition Act, except if such requirement shall have been waived pursuant to paragraph 113(c) of the Competition Act, and any information Bidco elects to file with the Competition Commissioner in its sole discretion under the Competition Act, including, without limiting the foregoing, a competitive impact statement and (i) Bidco shall have received an advance ruling certificate in accordance with section 102 of the Competition Act from the Competition Commissioner in connection with the transactions contemplated by this Agreement, or (ii) the Competition Commissioner shall have confirmed, in writing, that he has no intention to file an application under Part VIII of the Competition Act in connection with the transactions contemplated by this Agreement. (c) Investment Canada Act. Bidco shall have received evidence satisfactory to it that any requisite approvals to the completion of the transactions contemplated by this Agreement shall have been granted or deemed to have been granted under the Investment Canada Act on terms satisfactory to Bidco in its commercially reasonable discretion. (d) Approvals. All other authorizations, consents, orders, declarations or approvals of, or filings with, or terminations or expirations of waiting periods imposed by a Governmental Entity (including any stock exchange or other securities regulatory authority and including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976) that are necessary to make the Offer or to effect any of the transactions contemplated hereby shall have been obtained, shall have been made or shall have occurred, each on terms satisfactory to Bidco and Parent, acting reasonably. (e) No Order. No court or other Governmental Entity having jurisdiction over the Company or Parent, or any of their respective Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the Offer or any of the transactions contemplated hereby (including taking up and paying for any Common Shares deposited under the Offer and completing any compulsory acquisition or subsequent acquisition transaction) illegal. (f) Performance of Obligations, Representations and Warranties. The Company shall have performed each of its agreements contained in this Agreement required to be performed on or prior to the Expiry Time (including, for certainty, its obligations under Section 3.1) in all material respects, each of the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects on and as of the Expiry Time as if made on and as of such time (other than representations and warranties which address matters only as of a certain date which shall be true and correct as of such certain date) and Parent shall have received a certificate signed on behalf of the Company by its Chief Executive Officer and its Chief Financial Officer to such effect. (g) Performance of Obligations by Masco Corporation. Masco Corporation shall have performed each of its agreements contained in the Lock-up Agreement required to be performed on or prior to the Expiry Time. (h) Material Adverse Change. Since the date of this Agreement, there shall have been no Material Adverse Change with respect to the Company. (i) No Untrue Statement. Bidco shall not have become aware of any material misstatement, untrue statement of a material fact, or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made and at the date it was made (after giving effect to all subsequent filings in relation to all maters covered in earlier filings) in any document filed by or on behalf of the Company with any securities regulatory authority. (j) No Withdrawal of Recommendation. The Board of Directors of the Company shall not have withdrawn its recommendation that holders of Common Shares accept the Offer or changed such recommendation in a manner that has substantially the same effect. (k) No Action. (A) No act, action, suit or proceeding shall have been taken before or by any domestic or foreign court or other Governmental Entity or by any elected or appointed public official or private person (including, without limitation, any individual, corporation, firm, group or other entity) in Canada or elsewhere, whether or not having the force of law, and (B) no law, regulation or policy shall have been proposed, enacted, promulgated or applied, in either case: (i) to cease trade, enjoin, prohibit or impose material limitations or conditions on the purchase by or the sale to Bidco of the Common Shares or the right of Bidco to own or exercise full rights of ownership of the Common Shares; or (ii)which, if the Offer were consummated, could, in Bidco's judgment, acting reasonably, materially adversely affect Bidco's ability to effect a Subsequent Acquisition Transaction or have a Material Adverse Change with respect to the Company. The foregoing conditions are for the exclusive benefit of Bidco and Bidco may waive any of the foregoing conditions in whole or in part at any time and from time to time without prejudice to any other rights which Bidco may have. The failure by Bidco at any time to exercise any of the foregoing rights will not be deemed to be a waiver of any such right and each such right shall be deemed to be an ongoing right which may be asserted at any time and from time to time. ARTICLE 6 - TERMINATION, AMENDMENT AND WAIVER --------------------------------------------- 6.1 TERMINATION ----------- This Agreement may be terminated at any time prior to the Expiry Time: (a) by mutual written consent of Parent and the Company; (b) by either Parent or the Company if the other party (in the case of Parent, including Bidco) shall have failed to comply with any of its covenants or agreements contained in this Agreement required to be complied with prior to the date of such termination, which failure to comply has not been cured within five business days following receipt by such other party of written notice of such failure to comply; (c) by either Parent or the Company if there has been a breach by the other party (in the case of Parent, including any breach by Bidco) of any representation or warranty which has the effect of making such representation or warranty not true and correct in all material respects and which breach has not been cured within five business days following the breaching party becoming aware of such breach or the receipt by the breaching party of written notice of the breach from the other party; (d) by the Company if the Take-over Bid Circular has not been mailed by the Latest Mailing Time; provided, however, that the right to terminate this Agreement pursuant to this Section 6.1 (d) shall not be available if the Company has failed to fulfill any of its obligations contained in this Agreement, or has been a cause of the failure of the Take-over Bid Circular to have been mailed or the Offer to have been completed on or prior to the aforesaid time and date, respectively; (e) by either Company or the Parent if Bidco has not become legally obligated to accept and take-up any Common Shares pursuant to the Offer by May 15, 2003; (f) by either Parent or the Company if any court or other Governmental Entity having jurisdiction over a party hereto shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; (g) by Parent if any condition of making the Offer set out in Section 5.1 has not been satisfied or waived prior to the Latest Mailing Time or if any condition of the Offer set out in Section 5.2 has not been satisfied or waived prior to the Expiry Time; (h) by Parent if (i) the Board of Directors of the Company qualifies, modifies or withdraws its recommendation in favour of the Offer, (ii) the Board of Directors of the Company recommends to the Shareholders any Take-over Proposal other than the Offer or (iii) the Board of Directors of the Company resolves to do anything referred to in (i) or (ii) of this paragraph; (i) by the Company if it proposes to enter into a merger, acquisition or other agreement to effect a Superior Proposal; but only if Parent and Bidco have not exercised their right to match the Superior Proposal as set out in Section 3.2(4); or (j) by Parent if any person or group of persons acting jointly or in concert acquires 50% or more of the outstanding Common Shares. The right of any party hereto to terminate this Agreement pursuant to this Section 6.1 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party hereto, any person controlling any such party or any of their respective officers or directors, whether prior to or after the execution of this Agreement. 6.2 EFFECT OF TERMINATION --------------------- (1) In the event of any termination of this Agreement by either Parent or the Company in accordance with the provisions of Section 6.1, Bidco may terminate or withdraw the Offer without any liability or obligation on its or Parent's part under this Agreement; provided, however, that nothing contained in this Section 6.2 shall relieve any party hereto from any liability for any wilful breach of a representation or warranty contained in this Agreement or the breach of any covenant contained in this Agreement (2) Any termination of this Agreement pursuant to the sections referred to in Section 4.4 shall not affect the obligation of the Company, if any, to pay the Termination Fee set out in Section 4.4. 6.3 AMENDMENT --------- This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 6.4 WAIVER ------ At any time prior to the Expiry Time, the parties hereto may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein which may legally be waived. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE 7 - GENERAL PROVISIONS ------------------------------ 7.1 Notices ------- All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally, one day after being delivered to an overnight courier or when telecopied (with a confirmatory copy sent by overnight courier) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to Parent or Bidco, to: Blackfriars Corp. 555 Skokie Blvd., Suite 555 Northbrook, IL 60065 Attention: Tom Lullo, Treasurer and Assistant Secretary Facsimile No.: (818) 597-3176 and to: Stikeman Elliott LLP 5300 Commerce Court West 199 Bay Street Toronto, Ontario M5L 1B9 Attention: Marvin Yontef Facsimile No.: (416) 947-0866 If to the Company, to: Emco Limited 620 Richmond Street London, Ontario N6A 5J9 Attention: Mark Whitley Vice President, General Counsel and Secretary Facsimile: 519-645-2465 with a copy to: McCarthy Tetrault LLP Suite 4700, Toronto Dominion Bank Tower Toronto-Dominion Centre Toronto, Ontario M5K 1E6 Attention: Graham P.C. Gow Facsimile: 416-868-0673 7.2 COUNTERPARTS ------------ This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. 7.3 CURRENCY -------- All references to currency herein are to lawful money of Canada. 7.4 TIME OF THE ESSENCE ------------------- Time is of the essence in this Agreement. 7.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES ---------------------------------------------- This Agreement, together with the Confidentiality Agreement, 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. This Agreement, except for the provisions of Sections 4.2 and 4.9, is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 7.6 GOVERNING LAW ------------- This Agreement shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the laws of Canada applicable therein. 7.7 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. 7.8 SEVERABILITY ------------ If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other terms, conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement may be consummated as originally contemplated to the fullest extent possible. 7.9 ENFORCEMENT OF THIS AGREEMENT ----------------------------- The parties hereto 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 wording or were otherwise breached. It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof (but any such proceeding shall be brought exclusively in the Superior Court of Ontario), such remedy being in addition to any other remedy to which any party is entitled at law or in equity. Each party hereto waives any right to a trial by jury in connection with any such action, suit or proceeding and waives any objection based on forum non conveniens or any other objection to venue thereof. IN WITNESS WHEREOF, Parent, Bidco and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized all as of the date first written above. BLACKFRIARS CORP. By: /s/ Thomas A. Lullo -------------------------- Name: Thomas A. Lullo Title: Treasurer and Assistant Secretary 2022841 ONTARIO INC. By: /s/ Christopher Pappo -------------------------- Name: Christopher Pappo Title: Director EMCO LIMITED By: /s/ Frank M. Hennessey -------------------------- Name: Frank M. Hennessey Title: Chairman of the Board By: /s/ D. Brian Harrison -------------------------- Name: D. Brian Harrison Title: Chairman of the Independent Committee of the Board SCHEDULE "A" PART 1 - REPRESENTATIONS AND WARRANTIES OF PARENT AND BIDCO Parent and Bidco hereby jointly and severally represent and warrant to the Company as follows: 1.1 ORGANIZATION ------------ Each of Parent and Bidco has been duly incorporated or formed under applicable law, is validly existing and has full corporate or legal power and authority to own its properties and conduct its businesses as currently owned and conducted. 1.2 AUTHORITY --------- Parent and Bidco have the requisite corporate power and authority to enter into this Agreement and to perform their respective obligations hereunder. The execution and delivery of this Agreement by Parent and Bidco and the consummation by Parent and Bidco of the transactions contemplated by this Agreement have been duly authorized by the board of directors of Parent and Bidco and no other corporate proceedings on the part of Parent or Bidco are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by Parent and Bidco and constitutes a valid and binding obligation of Parent and Bidco, enforceable against Parent and Bidco in accordance with its terms subject to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other laws relating to or affecting creditors' rights generally and to general principles of equity. 1.3 NO VIOLATION ------------ Except as disclosed in writing to the Company prior to the date hereof, the execution and delivery by Parent and Bidco of this Agreement and performance by it of its obligations hereunder and (subject to satisfying the conditions to the completion of the Offer specified in Section 5.2(b) of this Agreement with respect to subparagraph (a)(ii) below) the completion of the Offer and the transactions contemplated thereby, will not: (a) result in a violation or breach of, require any consent to be obtained under or give rise to any termination rights under any provision of: (i) its certificate of incorporation, articles, by-laws or other charter documents; (ii) any law, regulation, order, judgment or decree; or (iii) any material contract, agreement, license, franchise or permit to which Parent or Bidco is bound or is subject or is the beneficiary; (b) give rise to any right of termination or acceleration of indebtedness, or cause any indebtedness to come due before its stated maturity or cause any available credit to cease to be available; or (c) result in the imposition of any encumbrance, charge or lien upon any of its material assets, or restrict, hinder, impair or limit the ability of Parent or Bidco to carry on the business of Parent or Bidco as and where it is now being carried on or as and where it may be carried on in the future. 1.4 FINANCING THE OFFER ------------------- As at the time the Offer is first commenced within the meaning of the Securities Act (Ontario), Bidco shall have made all necessary arrangements to ensure that the required funds are available to effect payments in full for all of the Common Shares that Bidco shall have offered to acquire under the Offer. 1.5 LITIGATION, ETC. ---------------- Except as disclosed in writing to the Company prior to the date hereof, there is no claim, action, proceeding or investigation pending or, to the knowledge of Parent or Bidco, threatened against or relating to Parent or Bidco that, if adversely determined, is likely to prevent or materially delay consummation of the transactions contemplated by this Agreement or the Offer, and Parent and Bidco are not aware of any basis for any such claim, action, proceeding or investigation. Neither Parent or Bidco is subject to any outstanding order, writ, injunction or decree that is likely to prevent or materially delay consummation of the transactions contemplated by this Agreement or the Offer. PART 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and Bidco as follows: 2.1 ORGANIZATION ------------ Each of the Company and each of its Subsidiaries has been duly incorporated or formed under applicable law, is validly existing and has full corporate or legal power and authority to own its properties and conduct its businesses as currently owned and conducted. All of the outstanding shares and other ownership interests of the Subsidiaries are validly issued, fully paid and non-assessable and, except as disclosed in the Disclosure Letter, all such shares and other ownership interests are owned directly or indirectly by the Company free and clear of all liens, claims or encumbrances, other than for a security interest in favour of the Company's lenders. Except as disclosed in the Disclosure Letter, there are no outstanding options, rights, entitlements, understandings or commitments (contingent or otherwise) regarding the right to acquire any shares or other ownership interests in any of the Subsidiaries from the Company or any of its Subsidiaries. The Disclosure Letter contains a list of all subsidiaries of the Company and their respective jurisdictions of incorporation. 2.2 CAPITALIZATION -------------- The authorized capital of the Company consists of an unlimited number of Common Shares and an unlimited number of preference shares, and 15,874,822 Common Shares and no preference shares have been validly issued and are outstanding as fully paid and nonassessable. There is no contract, option or any other right of another binding upon or which at any time in the future may become binding upon the Company or any Subsidiary to allot or issue any of its unissued shares or to create any additional class of shares, other than 1,613,660 Common Shares issuable upon exercise of the Options, Common Shares issuable pursuant to the Company's Employee Share Purchase Plan and 3,498,734 Common Shares issuable upon the conversion, at a conversion price of $19.75, of the Company's outstanding $69.1 million principal amount of 6 1/2% convertible unsecured subordinated debentures. 2.3 AUTHORITY --------- The Company has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement have been duly authorized by the Board of Directors of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms subject to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other laws relating to or affecting creditors' rights generally and to general principles of equity. 2.4 NO VIOLATION ------------ Except as disclosed in the Disclosure Letter, the execution and delivery by the Company of this Agreement and performance by it of its obligations hereunder and (subject to satisfying the conditions to the completion of the Offer specified in Section 5.2(b) of this Agreement with respect to subparagraph (a)(ii) below) the completion of the Offer and the transactions contemplated thereby, will not: (a) result in a violation or breach of, require any consent to be obtained under or give rise to any termination rights, rights of first refusal or rights of first offer under any provision of: (i) its or any Subsidiary's certificate of incorporation, articles, by-laws or other charter documents, including any unanimous shareholder agreement or any other agreement or understanding with any party holding an ownership interest in any Subsidiary; (ii) any law, regulation, order, judgment or decree; or (iii) any material contract, agreement, license, franchise or permit to which the Company or any Subsidiary is bound or is subject or is the beneficiary; (b) give rise to any right of termination or acceleration of indebtedness, or cause any indebtedness to come due before its stated maturity or cause any available credit to cease to be available, other than the outstanding 6.5% redeemable convertible debentures which may go into default if the Company Shares cease to be listed on an exchange; or (c) result in the imposition of any encumbrance, charge or lien upon any of its material assets or the material assets of any Subsidiary, or restrict, hinder, impair or limit the ability of the Company or any Subsidiary to carry on the business of the Company or any Subsidiary as and where it is now being carried on or as and where it may be carried on in the future. 2.5 ABSENCE OF CHANGES. ------------------ Since December 31, 2002, and except as has been publicly disclosed (i) the Company and the Subsidiaries have conducted their respective businesses only in the ordinary course, (ii) no material liability or obligation of any nature (whether absolute, accrued, contingent or otherwise) material to the Company or any Subsidiary has been incurred, other than in the ordinary course of business, and (iii) there has not been any Material Adverse Change in the Company. 2.6 NO MATERIAL MISREPRESENTATION. ------------------------------ The Company has filed all documents required to be filed by it under the Securities Act (Ontario) or other applicable securities laws, including the Exchange Act, and no such filings have been made on a confidential basis. As at their respective dates, all documents filed by the Company under the Securities Act (Ontario) or other applicable securities laws were in compliance in all material respects with such applicable securities laws and did not contain any material misstatement or 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 made therein, in light of the circumstances under which they were made, not misleading. 2.7 FINANCIAL STATEMENTS. --------------------- The audited consolidated financial statements for the Company as at and for each of the fiscal years ended on December 31, 2002, December 31, 2001 and December 31, 2000, including the notes thereto and the report by the Company's auditors thereon, have been, and all financial statements of the Company which are publicly disseminated by the Company in respect of any subsequent periods will be, prepared in accordance with Canadian generally accepted accounting principles applied on a basis consistent with prior periods (other than to the extent the result of changes in such generally accepted accounting principles disclosed in such financial statements) and present fairly (or will present fairly), in all material respects, the consolidated financial position and results of operations of the Company and its Subsidiaries, taken as a whole, as of the respective dates thereof and for the respective periods covered thereby. 2.8 LITIGATION, ETC. ---------------- Except as disclosed in the Disclosure Letter, there is no claim, action, proceeding or investigation pending or, to the Knowledge of the Company, threatened against or relating to the Company or any Subsidiary or affecting any of their properties or assets before any court or governmental or regulatory authority or body that, if adversely determined, is likely to have a Material Adverse Change with respect to the Company, or prevent or materially delay consummation of the transactions contemplated by this Agreement or the Offer, and the Company is not aware of any basis for any such claim, action, proceeding or investigation. Neither the Company nor any Subsidiary is subject to any outstanding order, writ, injunction or decree that has had or may have a Material Adverse Change with respect to the Company or prevent or materially delay consummation of the transactions contemplated by this Agreement or the Offer. 2.9 TAX MATTERS. ------------ (a) DEFINITIONS. For purposes of this Agreement, the following definitions shall apply: (i) The term "TAXES" shall mean all taxes, however denominated, including any interest, penalties or other additions that may become payable in respect thereof, imposed by any federal, territorial, state, local or foreign government or any agency or political subdivision of any such government, which taxes shall include all income or profits taxes (including federal income taxes and provincial income taxes), payroll and employee withholding taxes, unemployment insurance, social insurance taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, workers' compensation and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing, which the Company or any of its Subsidiaries is required to pay, withhold or collect. (ii) The term "RETURNS" shall mean all reports, estimates, declarations of estimated tax, information statements and returns relating to, or required to be filed in connection with, any Taxes. (b) RETURNS FILED AND TAXES PAID. All Returns required to be filed by or on behalf of the Company or any Subsidiaries have been duly filed on a timely basis and such Returns are true, complete and correct in all material respects. All Taxes shown to be payable on the Returns or on subsequent assessments with respect thereto have been paid in full on a timely basis, and no other Taxes are payable by the Company or any material Subsidiaries with respect to items or periods covered by such Returns. (c) TAX RESERVES. The Company has paid or provided adequate accruals in its financial statements for the year ended dated December 31, 2002 for Taxes, including income taxes and related deferred taxes, owing in respect of the period ending on such date, in conformity with generally accepted accounting principles applicable in Canada. (d) TAX DEFICIENCIES; AUDITS; STATUTES OF LIMITATIONS. Except as disclosed in the Disclosure Letter, no deficiencies exist, or have been asserted and remain outstanding, with respect to Taxes of the Company or any Subsidiary. Neither the Company nor any Subsidiary is a party to any action or proceeding for assessment or collection of Taxes, nor has any such action or proceeding been asserted or, to the Knowledge of the Company, threatened against the Company or any Subsidiary or any of their respective assets which remains outstanding. No waiver or extension of any statute of limitations is in effect with respect to Taxes or Returns of the Company or any Subsidiary. Except as has been disclosed in the Disclosure Letter, no audit of the Returns of the Company or any Subsidiary by a government or taxing authority is in process, pending or, to the Knowledge of the Company, threatened. 2.10 PENSION AND TERMINATION BENEFITS. --------------------------------- Other than as disclosed in the Disclosure Letter, the Company has provided accruals adequate under Canadian generally accepted accounting principles in its financial statements for the year ended December 31, 2002 (or such amounts are fully funded) for all pension or other employee benefit obligations of the Company to such date arising under or relating to each of the pension or retirement income plans or other employee benefit plans or agreements or policies maintained by or binding on the Company or any of its Subsidiaries as well as for any other payment required to be made by the Company to such date in connection with the termination of employment or retirement of any employee of the Company or any Subsidiary. Except as set out in the Disclosure Letter, all contributions or premiums required to be made by the Company under the terms of the pension or retirement income plans or other employee benefit plans or by applicable law have been made and the Company does not have any contribution, premium, reimbursement or funding liabilities in respect of such plans. 2.11 FAIRNESS OPINION. ----------------- The Company has received an opinion from its financial advisors, TD Securities Inc., that, as of the date hereof, the consideration received pursuant to the Offer is fair, from a financial point of view, to Shareholders. 2.12 SEVERANCE AND EMPLOYMENT AGREEMENTS. ------------------------------------ Except as disclosed in the Disclosure Letter, neither the Company nor any of its Subsidiaries has entered into any written agreement relating to employment, compensation, severance, retention, change of control, termination or the provision of other benefits, with any directors or senior management. 2.13 COMPLIANCE WITH LAWS. --------------------- The Company and each of its Subsidiaries have conducted their respective businesses in compliance, in all material respects, with all applicable laws and regulations and the terms and conditions of all of their respective licenses and the Company and each of its Subsidiaries is currently in compliance, in all material respects, with all such laws, regulations and licenses. 2.14 INSURANCE. ---------- Policies of insurance in force as of the date hereof naming the Company or any of its Subsidiaries as an insured adequately cover all risks reasonably and prudently foreseeable in the operation of the businesses of the Company and its Subsidiaries. 2.15 DIRECTORS AND OFFICERS INSURANCE. --------------------------------- There have been no claims within the past two years made by the Company or any of its Subsidiaries or any of their respective officers or directors under any directors or officers insurance policies obtained by the Company or any of its Subsidiaries and the Company is not aware of any basis for any such claims. 2.16 TD FEE. ------- The fees and disbursements owing to TD Securities in connection with its engagement to review strategic alternatives relating to Emco shall not exceed $2 million. 2.17 FOREIGN PRIVATE ISSUER. ------------------------ The Company is a "foreign private issuer" within the meaning of Rule 3b-4(c) under the Exchange Act. EX-99.E.2 10 t09060d9exv99wew2.txt LOCK-UP AGREEMENT DATED FEBRUARY 19, 2003 EXHIBIT (e)(2) BLACKFRIARS CORP. 555 Skokie Blvd, Suite 555 Northbrook, Illinois 60062 (818) 991-9000 February 19,2003 CONFIDENTIAL Masco Corporation 21001 Van Born Road Taylor, Michigan USA 48180 Attention: Mr. John Leekley Dear Sirs: This Agreement sets out the terms and conditions of the agreement by Masco Corporation (the "SELLER") to deposit 6,621,334 common shares (the "COMMON SHARES") of Emco Limited (the "COMPANY") under the offer (the "OFFER") to be made by a wholly-owned subsidiary (the "OFFEROR") of Blackfriars Corp. ("PARENT") pursuant to a support agreement (the "SUPPORT AGREEMENT") of even date herewith between Parent, the Offeror and the Company. ARTICLE 1 - THE OFFER AND ACCEPTANCE 1.1 Price and Terms. The Offeror agrees to make the Offer on the terms and conditions provided in the Support Agreement. 1.2 Deposit of Common Shares. Subject to the terms and conditions hereof, Seller agrees to deposit its Common Shares, together with a completed and executed letter of transmittal, under the Offer as soon as practicable after the mailing thereof and, in any event, within five business days of such mailing. 1.3 Non-Withdrawal. Seller irrevocably agrees not to withdraw or take any action to withdraw any of its Common Shares deposited under the Offer, notwithstanding any withdrawal rights it may have under the terms of the Offer or otherwise, unless this Agreement is terminated in accordance with its terms prior to the Offeror taking up and paying for Seller's Common Shares under the Offer. 1.4 Parent Guarantee. Parent guarantees that the Offeror will fulfill all of its obligations under this Agreement in a timely manner. 1.5 Minority Approval Counting. Seller hereby confirms that it is not acting jointly or in concert with Parent and its affiliates in respect of the Offer, and that the entry into this Agreement was a condition imposed by Parent to proceeding with the Offer. Seller consents to being treated, and confirms that it will support its treatment, as part of the minority for the purposes of the minority approval requirement under Rule 61-501 of the Ontario Securities Commission (or equivalent provisions in other jurisdictions) in any regulatory or court proceedings. ARTICLE 2 - REPRESENTATIONS AND WARRANTIES 2.1 Representation and Warranties of Seller. Seller hereby represents and warrants that: (a) it is a corporation duly incorporated and validly existing under the laws of Delaware and has the requisite corporate power to enter into this Agreement and to sell its Common Shares to the Offeror pursuant to the Offer; (b) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by Seller; (c) Seller has duly executed and delivered this Agreement and it constitutes a valid and binding obligation of Seller enforceable against Seller in accordance with its terms, subject to bankruptcy, insolvency, reorganization and other laws of general application limiting the enforcement of creditors' rights generally and to general principles of equity; (d) it is, and upon the deposit of its 6,621,334 Common Shares under the Offer will be, the sole legal and beneficial owner of such Common Shares free and clear of all mortgages, liens, pledges, security interests, charges, encumbrances and any other rights of others, and it has and will have the exclusive right to dispose of its Common Shares as provided in this Agreement; and (e) the 6,621,334 Common Shares to be acquired by the Offeror from Seller pursuant to the Offer will be acquired with good and marketable title, free and clear of all mortgages, liens, pledges, security interests, charges, encumbrances and adverse claims and are all of the Common Shares owned by the Seller. 2.2 Representations and Warranties of the Parent and Offeror. The Parent and Offeror hereby represent and warrant, jointly and severally, that: (a) the Offeror is a corporation duly incorporated and validly existing under the laws of Ontario and has the requisite corporate power to enter into this Agreement and to carry out its obligations hereunder; (b) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by both Parent and the Offeror; (c) Parent and the Offeror have duly executed and delivered this Agreement and it constitutes a valid and binding obligation of both of them enforceable against them in accordance with its terms, subject to bankruptcy, insolvency, reorganization and other laws of general application limiting the enforcement of creditors' rights generally and to general principles of equity; and (d) the Offeror has sufficient funds, or has made adequate and binding arrangements to ensure that such funds are available, to make payment in full for all Common Shares offered to be acquired pursuant to the Offer. 2.3 Survival of Representations and Warranties. The representations and warranties made by Seller and the Offeror herein shall survive for a period of two years fiom the date hereof except the representations and warranties made by the Seller in Sections 2.l(d) and (e) which shall survive indefinitely. ARTICLE 3 - TERMINATION 3.1 Termination by Seller. Seller may, without prejudice to any other rights, terminate its obligations under this Agreement by notice to the Offeror if the Offer is not mailed by March 14, 2003 or the Offeror has not taken up and paid for the Seller's Common Shares pursuant to the Offer by May 15, 2003. 3.2 Termination by the Offeror. The Offeror may, without prejudice to any other rights, terminate its obligations under this Agreement by notice to Seller if there is a material breach of this Agreement by Seller or if the Offeror is entitled to terminate the Support Agreement in accordance with its terms. 3.3 Superior Proposal. If, during the term of this Agreement, a Superior Proposal (as defined in the Support Agreement) is made, Parent and Offeror will (i) notify Seller in writing prior to the expiry of the Superior Proposal that it will waive any unsatisfied conditions in its transaction and irrevocably commit to purchase Seller's Common Shares on the terms of the Offer or (ii) will release Seller from this Agreement and return Seller's Common Shares to Seller so as to permit Seller to tender those Common Shares into the Superior Proposal 48 hours prior to its expiry. ARTICLE 4 - GENERAL 4.1 Disclosure. Unless required by applicable laws, rules or regulations (including stock exchange rules and regulations), neither party shall make any public announcement or statement with respect to this Agreement without prior consultation with the other. Seller shall not issue any press release or other public disclosure that describes Parent or Offeror without the consent of Parent. 4.2 Expenses. Each of the Offeror and Seller will pay its own legal, financial advisor and other costs and expenses incurred in connection with this Agreement and the Offer. 4.3 Assignment. This Agreement shall not be assignable by either party without the prior written consent of the other party, which consent will be within its sole discretion. 4.4 Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior agreements, arrangements and understandings with respect thereto. 4.5 Time. Time shall be of the essence of ths Agreement. 4.6 Notices. All notices or other communications which are required or permitted hereunder shall be communicated confidentially and in writing to the addresses set out below or if sent by confidential facsimile to: Blackfriars Corp., Attn: Tom Lullo at (818) 597-3176, and to Stikeman Elliott LLP, Attn: Marvin Yontef at (416) 947-0866, in respect of the Offeror; and to (313) 792-4451, Attn: Mr. John Leekley, in respect of the Seller. 4.7 Counterparts. This Agreement may be executed in one or more counterparts which together shall be deemed to constitute one valid and binding agreement. 4.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 4.9 Cooperation. Seller agrees to cooperate with the Offeror in the following respects in order to assist the Offeror to successfully complete the acquisition of all of the outstanding Common Shares: (a) to consent to the disclosure of the substance of this Agreement in the Take-over Bid Circular (as defined in the Support Agreement) and the filing of this Agreement as may be required pursuant to applicable securities laws; (b) to exercise its voting rights attached to its Common Shares to oppose any proposed action (i) which might reasonably be regarded as being directed towards reducing the likelihood of, or preventing or delaying the successful completion of the Offer, or (ii) which could materially change the business, assets, operations, capital, affairs, financial conditions, licences, permits, rights or privileges of the Company and its subsidiaries; (c) not to take any action of any kind which may reduce the likelihood of success of or delay the completion of the Offer and, promptly upon request, to assist the Offeror by providing any information reasonably required for the Offeror to secure regulatory approvals in respect of the completion of the Offer; and (d) to ensure that its representations and warranties in section 2.1 are true and correct at all times during the period from the date of this Agreement until the earlier of (i) the date the Offeror acquires the Seller's Common Shares and (ii) the date this Agreement is terminated in accordance with its terms. Please confirm that the foregoing accurately reflects the agreement between Seller and the Offeror by signing and returning the enclosed copy of this letter to the undersigned. 2022841 ONTARIO INC. By: /s/ Christopher Pappo ---------------------- Name: Christopher Pappo ---------------------- Title: Director ---------------------- Yours truly, BLACKFRIARS CORP. By: /s/ Thomas A. Lullo ----------------------------------- Name: Thomas A. Lullo --------------------------------- Title: Treasurer & Assistant Secretary --------------------------------- Agreed and confirmed this 19th day of February, 2003. MASCO CORPORATION By: /s/ John R. Leekley ----------------------------------------------- Name: John R. Leekley ---------------------------------------------- Title: Senior Vice President and General Counsel ---------------------------------------------- EX-99.E.3 11 t09060d9exv99wew3.txt CONFIDENTIALITY AGREEMENT DATED SEPTEMBER 25, 2003 EXHIBIT (e)(3) September 25, 2002 PRIVATE AND CONFIDENTIAL - ------------------------ Hajoca Corporation 127 Coulter Avenue Ardmore, PA 19003 Attention: Mr. Richard Klau President Dear Mr. Klau: Re: Confidential Information - --------------------------------- You have requested that Emco Limited ("Emco" or the "Company") provide you with financial, operating and other information concerning the Company, which may include proprietary information and/or confidential information which has not been generally disclosed to the public, for use in connection with a possible acquisition of the Company or one or more of the Company's business units or any other possible transaction between you and the company and/or its shareholders (collectively a "Transaction"). It is acknowledged that it would be in the best interests of the Company that, if a Transaction is to proceed, Information (as defined below) be made available to you for purposes of evaluating and/or implementing a Transaction (the "Permitted Purpose"). Therefore, subject to the terms and conditions hereof, and to the extent which the Company in its sole discretion considers advisable in the circumstances, the Company agrees to provide certain Information to you solely for the Permitted Purpose. As a condition to furnishing the Information, and the agreement and consent of the Company herein contained, you covenant and agree with the Company as follows: 1. "Information" means collectively all information, whether orally, in writing and/or in electronic form, belonging to, relating to or otherwise concerning the Company and/or its affiliates now, before or hereinafter furnished to you by the Company, its affiliates or their respective representatives, and all analyses, compilations, data, structures or other documents prepared by the Company or its affiliates, by you or by their or your respective representatives, containing or based upon, in whole or in part, any such information or reflecting reviews of the Company or its affiliates, regardless of whether specifically identified as "confidential". 2. For the purposes of this Agreement, the term representatives shall include, without limitation, all directors, officers, employees, agents, lawyers, accountants, consultants, financial advisors or other representatives. 3. The term "person" as used in this Agreement shall be broadly interpreted to include, without limitation, any individual, corporation, company, group, partnership or other entity. 4. Except with the prior written authorization of the Company or as may be permitted pursuant to Sections 5, 6 or 12 of this Agreement, you will not, and will direct your representatives not to, disclose to any other person the fact that the Information has been made available to you, that discussions or negotiations are taking place concerning a Transaction or any of the terms, conditions or other facts with respect to any such Transaction, including the status of this Agreement. 5. You will keep the Information strictly confidential and treat the Information as proprietary to Emco and will not, without the prior written consent of the Company, disclose or allow access to, the Information in any manner whatsoever, in whole or in part. In addition, you will not use, directly or indirectly, the Information for any purpose other than the Permitted Purpose or in any way which is or may be detrimental to Emco or in any manner which is in competition with any of Emco's businesses. You agree to transmit the Information only to those of your employees ("Employees") and lawyers and accountants ("Advisors"), but excluding your financial advisors except as set out in section 6 below, in all cases who need to know the Information for the Permitted Purpose, who shall be informed by you of the confidential nature of the Information and who agree to be bound by the terms of this Agreement. On request, you shall notify the Company of the identity of each Advisor to whom any Information has been delivered or disclosed. You shall be responsible for any breach of this Agreement by any of your Employees and Advisors. You shall make all reasonable, necessary or appropriate efforts to safeguard the Information from disclosure to anyone other than as permitted hereby. You agree to comply with all applicable laws in respect of the Information. 6. Notwithstanding any other provision of this Agreement you may, with the prior written consent of the Company, discuss a Transaction with, and disclose Information to, specified persons acceptable to the Company who have signed an agreement with the Company in substantially the form of this Agreement (as to which you may rely upon a written acknowledgement from an officer of the Company referred to in section 8 below). For greater certainty, you may not discuss any Transaction with, or disclose Information to, any financial advisor unless that financial advisor is acceptable to the Company and has signed a confidentiality agreement with the Company substantially in the form of this Agreement. If at any time you consider that a Transaction would require the involvement or participation directly or indirectly of a third party, you agree that such third party will not be contacted without the prior written consent of Emco, and that such third party shall sign a confidentiality agreement with the Company substantially in the form of this Agreement prior to disclosure to such party of any Information. 7. All requests for Information made by you shall be to David Duncan and/or such other persons at TD Securities Inc. whose names are set out in the Company's September 2002 Confidential Information Memorandum, TD Tower, 66 Wellington Street West, 8th Floor, Toronto, Ontario M5K 1A2, telephone (416) 307-8992, fax (416) 308-0182 who, subject to this Agreement, will arrange for the provision of such Information. 8. You will not, and will direct your representatives not to, contact any representative of the Company or its affiliates other than Brian Harrison, Chairman, Independent Committee of the Board of Directors, Douglas Speers, President and Chief Executive Officer, Gordon Currie, Executive Vice President and Chief Financial Officer, or Mark Whitley, General Counsel and Secretary, with respect to any Transaction, Information or any other matter contemplated in this Agreement. 9. If you determine that you do not wish to be involved in a Transaction, you will promptly advise the Company of that fact. If the Company requests for any reason whatsoever, you will promptly re-deliver to the Company all Information without retaining copies thereof and shall destroy all analyses, compilations, forecasts, studies or other documents prepared by you or your representatives. In such event, you shall forthwith confirm such re-delivery and destruction to the Company by delivering to the Company a certificate in writing signed by two senior officers of your organization certifying such re-delivery and destruction. Any oral Information will continue to be subject to the terms of this Agreement. 10. The obligations imposed on you hereunder shall not apply to any Information (i) which is or becomes generally available to the public other than as a result of a disclosure by you or your representatives; (ii) which becomes available to you on a non-confidential basis from a source other than the Company or its affiliates or their respective representatives, provided that you do not believe, after a good faith enquiry, that such source is bound by a confidentiality agreement with the Company or its affiliates or their respective representatives or is otherwise prohibited from transmitting the Information to you by a contractual, legal or fiduciary obligation; or (iii) which was known to you on a non-confidential basis prior to disclosure to you by the Company or its affiliates or by their respective representatives, provided that such information is not known by you to be subject to another confidentially agreement with or other obligation of secrecy of the Company or another party. 11. Although you understand that the Company will endeavour to include in the Information those materials which are believed to be reliable and relevant for the Permitted Purpose, you acknowledge that neither the Company (including its affiliates) nor any of its representatives makes any representation or warranty as to the accuracy or completeness of the Information except as otherwise may be provided in a definitive agreement with the Company (other than this Agreement) entered into in connection with a Transaction which provides specific representations or warranties and only to the extent of such specific representations or warranties. You agree that neither the Company (including its affiliates) nor any of its representatives shall have any liability to you or to any of your representatives as a result of the use of the information by you or your representatives except as otherwise may be provided in a definitive agreement with the Company (other than this Agreement) entered into in connection with a Transaction which provides specific representations or warranties and only to the extent of such specific representations or warranties. 12. In the event that you or any of your representatives becomes legally compelled (by oral questions, interrogations, requests for information or documents, subpoena, civil investigative demand, or similar process) to disclose any of the Information, you will provide the Company with prompt notice so that the Company may seek a protective order or other appropriate remedy or waive compliance with the provisions of this Agreement and you shall not oppose any action by Emco to seek such a protective order or other remedy. You will cooperate with the Company on a reasonable basis in its efforts to obtain a protective order or other remedy. In the event that such protective order or other remedy is not obtained, or the Company waives compliance with the provisions of this Agreement, you or your representatives will furnish only that portion of the Information which is legally required and each such party shall exercise reasonable commercial efforts to obtain reliable assurances that confidential treatment will be accorded the Information. 13. You acknowledge and agree that the Information shall at all times remain the property of the Company and, without limiting the generality of the foregoing, the Company shall not be restricted in any manner whatsoever by this Agreement from disclosing the Information to other third parties. In particular, you acknowledge that the Company may, from time to time, disclose the Information to other third parties in connection with other possible transactions involving the Company. 14. You acknowledge that you are aware, and you will advise your representatives, that securities laws prohibit any person who has received from an issuer material non-public information concerning matters such as those which are the subject of this Agreement from purchasing or selling securities of such issuer or from communicating such information to any other person. 15. During the period of one year from the date hereof, you and your affiliates (including any person or entity, directly or indirectly, through one or more intermediaries, controlled by or under common control with you) shall not, without the prior written authorization of the Independent Committee of the Board of Directors of the Company: (i) acquire or agree to acquire or make any offer or proposal to acquire, in any manner, any securities or property of the Company or its affiliates, except that, subject to Section 14 of this Agreement, shares may be purchased not to exceed 5% of the total number of shares then outstanding; (ii) assist, advise, encourage, agree with, discuss or negotiate with any other persons to acquire or agree to acquire, in any manner, any securities or property of the Company or its affiliates; (iii) solicit, or in any way participate in any solicitation of, proxies of the Company's shareholders or form, join or in any way participate in a proxy group; (iv) make any proposal for or offer of an extraordinary transaction involving Emco or its shares or assets (including, without limitation, an amalgamation, merger or other business combination); (v) seek any modification to or waiver of your agreements and obligations under this Agreement; or (vi) make any public announcement with respect to the foregoing, except as may be required by applicable law or regulatory authorities. 16. Without the prior written consent of the Company, you agree that you shall not, for a period of two years from the date hereof, (i) directly or indirectly solicit for employment or solicit for hire or contract for the services of, any person employed by the Company, other than in publications of a general nature and not specifically directed at the employees of the Company, or (ii) employ, hire or contract for the services of any person employed by the Company who is identified by you, made known to you or introduced to you as a result of your consideration of a Transaction. 17. You acknowledge and agree that the Company would not have an adequate remedy at law and would suffer losses which could not be adequately compensated for by damages in the event that any of the provisions of this Agreement are not performed by you in accordance with their specific terms or are otherwise breached by you. Accordingly, you agree that the Company shall be entitled to injunctive relief or specific performance to prevent breaches of this Agreement and to specifically enforce the terms and provisions hereof in addition to any other remedy to which the Company may be entitled at law or in equity, without proof of actual damages to Emco and/or its affiliates and notwithstanding that damages may be readily quantifiable and you agree not to plead sufficiency of damages as a defense in the proceeding for such injunctive relief or specific performance brought by Emco and/or its affiliates. The prevailing party in any such litigation will be entitled to payment of its legal fees and disbursements, court costs and other expenses of enforcing, defending or otherwise protecting its interest hereunder. You further agree to indemnify and save harmless the Company and its representatives from any losses, costs, damages or expenses arising out of a breach by you of any of the terms and conditions of this Agreement. 18. It is further understood and agreed that no failure or delay by the Company in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or future exercise of any right, power or privilege hereunder. 19. Except as specifically set forth in this Agreement, neither you nor the Company will be under any legal obligation with respect to any Transaction unless and until a definitive agreement between us is executed and delivered. You further acknowledge and agree that the Company reserves the right, in its sole discretion, to reject any and all proposals made by you or on your behalf with regard to a Transaction, and to terminate discussions and negotiations with you at any time. 20. This Agreement shall terminate five (5) years from the date hereof. 21. Any demand, notice or other communication authorized or required to be given by or in connection with this Agreement shall be given in writing and shall be given by personal delivery, courier or by facsimile addressed to the recipient as follows: To the Company: Emco Limited 620 Richmond Street London, Ontario N6A 5J9 Attention: Mark F. Whitley, General Counsel and Secretary Fax: 519-645-2465 To you: Hajoca Corporation 127 Coulter Avenue Ardmore, PA 19003 Attention: Richard Klau President Fax: 610-896-7538 or to such other address, facsimile number or individual as may be designated by notice given by either party to the other. Any communication given by personal or courier delivery shall be conclusively deemed to have been given on the day of actual delivery thereof, and if given by facsimile, on the day of transmittal thereof if given during the normal business hours of the recipient, and on the day during which such normal business hours next occur if not given during such hours on a business day of the recipient. 22. This Agreement shall be governed and construed in accordance with the laws of the Province of Ontario and of Canada applicable therein and both parties hereby irrevocably attorn to the exclusive jurisdiction of the courts of the Province of Ontario. 23. This Agreement is not intended to create, and shall not be construed as creating, a joint venture, partnership or other form of business association between the parties, nor as establishing a license or grant of any kind from one party to another. No right or license whatsoever, either expressed or implied, is granted to you, your affiliates or your representatives pursuant to this Agreement under any patent, patent application, trademark, or other proprietary right, now or hereafter owned or controlled by the Company or its affiliates. 24. If any provision or any part of this Agreement is or is held to be unenforceable, invalid or illegal, then it shall be severable and deemed to be deleted, and the remaining provisions of this Agreement shall remain valid and binding to the full extent permitted by law. 25. Facsimiles of this executed document will be treated as original documents and are valid and binding on the parties. 26. The obligations of confidentiality and other agreements contained in this Agreement are in addition to, and not in limitation of, any other applicable legal restrictions upon the use and disclosure of the Information. 27. This Agreement is being written on behalf of Emco by its agent TD Securities Inc. and your obligations hereunder will be directly to Emco. If you are in agreement with the foregoing, please so indicate by signing and returning one copy of this letter whereupon this letter will constitute our agreement with respect to the subject matter hereof. Yours truly, /s/ D. Duncan EMCO LIMITED By TD Securities Inc., As Agent ACCEPTED AND AGREED TO AS OF THE DATE SET FORTH ABOVE HAJOCA CORPORATION By: /s/ Christopher Pappo ------------------------------------------ Name Christopher Pappo ------------------------------------------ Title: Vice President Finance and Administration ------------------------------------------ EX-99.E.4 12 t09060d9exv99wew4.txt WRITTEN ASSURANCE DATE FEBRUARY 19, 2003 EXHIBIT (e)(4) BLACKFRIARS CORP. 555 Skokie Blvd, Suite 555 Northbrook, Illinois 60062 (818) 991-9000 February 19, 2003 Board of Directors Emco Limited 620 Richmond Street London, Ontario N6A 5J9 Canada Dear Sirs: This letter is provided to the Board of Directors (the "Board") of Emco Limited ("Emco"), in conjunction with the proposed transaction reflected in the Support Agreement currently being negotiated between Blackfriars Corp. ("Blackfriars") and 2022841 Ontario Inc. and Emco ("Agreement"). To encourage the Board to approve the Agreement, and in response to concerns raised by the Board, Blackfriars agrees to keep a balance of U.S. funds equivalent to a minimum of $300 million (Canadian Dollars) in our accounts with Bank of America until the earlier of the taking up and payment for Emco stock as contemplated by the Agreement or any termination of the Agreement in accordance with its terms. IT is understood and agreed that such funds may be used to take up and pay for such Emco stock. In addition, Blackfriars will endeavor to have the Bank of America confirm in writing to the Board's financial advisor, TD Securities, the oral advice that it gave earlier today in respect to the financial capabilities of Blackfriars. Sincerely, /s/ Thomas A. Lullo Thomas A. Lullo Treasurer and Assistant Secretary EX-99.E.5 13 t09060d9exv99wew5.txt FORM OF CHANGE OF CONTROL AGREEMENT EXHIBIT (e)(5) PRIVATE AND CONFIDENTIAL October __, 2002 [Name] [Address] [City, Province] [Postal Code] Dear [Name]: For the purpose of providing you, in your capacity as [Title] of Emco Limited ("Emco" or the "Company"), with an incentive to improve the profitability of Emco and to encourage you to continue to contribute in a substantial manner to the success of Emco's business activities, the Board of Directors of Emco has approved the terms of this letter. In the event of a Transaction and your employment is terminated by Emco, or a successor to some or all of its business, as the case may be, within eighteen months following the effective date of such a Transaction, Emco will provide you with the severance payments and benefits set out below (the "severance payments"), which are inclusive of all amounts and benefits (other than vested pension and other vested retirement benefits and vested stock options at the date of such termination) to which you would otherwise be entitled under Emco's usual policies, applicable statues and regulations, or at law. For the purposes of this Agreement, the following terms shall have the following meanings: 1) "Transaction" means: a) the sale of all or substantially all of the assets of Emco; b) the acquisition by any entity or related entities, other than Masco Corporation ("Masco") and its subsidiaries and affiliates, of beneficial ownership of securities of Emco which, directly or following conversion or exercise thereof, would entitle the holder thereof to cast more than 50% of the votes attaching to all securities of Emco which may be cast to elect directors of Emco; or c) a reorganization, merger, amalgamation or other transaction whereafter (i) the common shares of Emco are no longer publicly traded on a recognized stock exchange, or (ii) at least one-half of the members of Board of Directors of Emco on the day immediately prior to such reorganization, merger, amalgamation or other transaction cease to be members of the Board within eighteen months following such reorganization, merger, amalgamation or other transaction. 2) "termination of your employment" and other similar expressions mean termination of your employment with Emco for any reason (including, without limitation, constructive dismissal), other than (i) voluntary resignation (other than in connection with constructive dismissal), (ii) termination for just cause, (iii) normal retirement or voluntary early retirement, (iv) death, (v) permanent mental or physical disability; or (vi) termination which arises solely as a result of a sale by Emco of all or substantially all of its assets provided employment is offered to you by a successor purchaser on substantially the same terms and conditions of employment which existed prior to such sale provided no constructive dismissal results therefrom. 3) "constructive dismissal" means any fundamental adverse change in the status, scope or authority of your functions and responsibilities or in salary, benefits, pension contribution or benefit, bonus, long term incentive compensation or other elements of your usual compensation, or any other matter which may constitute constructive dismissal at law, which have not been accepted by you in writing and following which you voluntarily terminate your employment within one month of any such change. 4) "just cause" means wilful or gross misconduct or disobedience, wilful or gross neglect of duty, the commission of a criminal offence against Emco or any of its subsidiaries (including, without limitation, theft, embezzlement or misappropriation of funds or other property of Emco or any of its subsidiaries), or any act which constitutes a material breach of your obligations to Emco, but shall not include personality conflict. 5) "severance period" means the earlier of (i) o months following the effective date of the termination of your employment or (ii) the period of time remaining to your 65th birthday. 6) "entity" means any business, person, partnership, firm, corporation or other entity. 7) "new employment" means your employment by any entity, the offering of your services as an independent contractor or consultant, or you otherwise becoming independently employed and your annual earnings or income from such activities are equal to at least two-thirds of your annual base salary in effect at the time of termination of your employment. In the event your employment is terminated within eighteen months following the effective date of a Transaction, Emco, or its successor, will provide to you the following severance payments: 1) BASE SALARY: You will receive, for the severance period, the greater of (i) your base salary in effect at the time of termination of your employment and (ii) your base salary in effect on the day immediately prior to the effective date of the Transaction, less all deductions required by law. This amount will be paid to you in the form of salary continuance; 2) BENEFITS: You will continue to receive, until the earlier of the end of the severance period and the date you obtain new employment, benefits coverage, at a minimum, on substantially the same terms and conditions in effect immediately prior to the effective time of the Transaction, including, without limitation health, medical, dental, and long-term disability insurance, and health spending account, provided that you continue to pay on account of benefits any amount that you were required to pay on account of benefits prior to termination of your employment. To the extent that some or all of the foregoing benefits coverage cannot be continued following the date of the termination of your employment for some or all of the severance period with same or similar carriers at the same or similar rates and in respect of critical illness, accident, travel and life insurance, you will receive a lump sum payment equal to Emco's cost of providing such coverage, based on coverage costs in effect prior to the termination of your employment, for the period during the severance period for which such benefits coverage cannot be continued; 3) PENSION PLAN: a) You will be credited with pensionable service for the period included in the severance period under your pension plan (to the extent permitted by applicable pension and income tax laws) and under the supplemental retirement plan portion of your pension plan ("SRPA"); b) Your highest average earnings for this purpose shall be calculated at the end of the severance period, including the base salary and bonuses paid during the severance period and otherwise as provided for in your pension plan; c) Your age, for the purpose of calculating any early retirement reduction factor under your pension plan (to the extent permitted by applicable income tax laws) and under the SRPA, shall be deemed to be equal to the age you have attained at the end of the severance period; and d) The date of payment and form of benefit to which you are entitled under your pension plan and under the SRPA, as modified by this Agreement, shall be determined in accordance with the terms of such plan or arrangement in effect at the applicable time; 4) VACATION PAY: You will be paid vacation pay owing to you as of the effective date of termination of your employment, but no vacation pay shall accrue for the severance period; 5) COMPANY CAR: Emco, or its successor, will continue to pay your car arrangements in effect immediately prior to the time of termination of your employment, including insurance and reasonable operating expenses (excluding a cell phone), until the earlier of the end of the severance period and the date you obtain new employment. In the event that the lease, if any, for such car expires during the severance period, such lease will be extended or otherwise renegotiated for the period for which your car arrangements are to be continued hereunder. At the end of the severance period, you have the option of returning the car to Emco or buying out the lease at the cost provided for therein; 6) MANAGEMENT INCENTIVE PLAN: a) You will receive your annualized bonus for the calendar year in which your employment is terminated, prorated from January 1 of such year to the date of the termination of your employment; b) In addition to the amount set out in section 6(a): (i) In the event that your employment is terminated in the 2002 calendar year, you will receive an amount equal to the number of years and fractions thereof that constitute the severance period multiplied by the average of your annualized bonus for the 2002 fiscal year and your bonus for the 2001 fiscal year. This amount will be paid to you in the same manner as your base salary. In such event, your annualized bonus for the 2002 fiscal year will be calculated for the full year based on the 2002 year-to-date results versus the 2002 year-to-date bonus objectives, as at the effective time of the termination of your employment; and (ii) In the event that your employment is terminated subsequent to the 2002 calendar year, you will receive an amount equal to the number of years and fractions thereof that constitute the severance period multiplied by the average of your bonuses for the two fiscal years prior to the termination of your employment. This amount will be paid to you in the same manner as your base salary; 7) STOCK OPTIONS: Subject to the earlier vesting of your stock options pursuant to, and the Reorganization provisions of, the 1991 Long Term Incentive Program: a) Stock options which would normally vest after the termination of your employment will vest on the effective date of the termination of your employment, and shall thereafter expire on the expiry dates established at the time of the award of the stock options, and b) Regardless of whether there is a termination of your employment, to the extent you are not otherwise compensated by way of substitute stock options or other forms of compensation of at least a value equivalent to the value of your vested and unvested stock options, in the event of a Transaction such that the common shares of Emco are no longer publicly traded on a recognized stock exchange, your options shall vest and you will receive promptly thereafter for the cancellation of such options payment of an amount equal to the difference, if any, between (i) the compensation paid per share for the common shares of Emco on such a Transaction and (ii) the price per share at which your stock options are exercisable; 8) OUTPLACEMENT: Emco, or its successor, will pay for reasonable re-employment consulting services, in an amount not to exceed $40,000 for a period of 12 months following termination of your employment; and 9) INSURANCE - Emco, or its successor, as the case may be, will maintain on your behalf, for a period of at least six years from the date of the termination of your employment, liability insurance in respect of any liabilities incurred by you in your capacity as an officer and/or executive of Emco, in an amount and coverage at least equal to that which was in effect on the day immediately prior to the Transaction or if the cost thereof would exceed 125% of the cost paid for such insurance in the year immediately prior to the Transaction, then for the amount and coverage which 125% of such amount previously paid would purchase. In the event of the first to occur of (A) a Transaction where Masco owns 30% or more of the Company's outstanding common stock immediately prior to such Transaction and which is not unanimously approved by the Board of Directors of Emco, or (B) any Transaction where Masco owns less than 30% of the Company's outstanding common stock immediately prior to such Transaction or (C) any second Transaction after the date hereof, all of which are regardless of whether your employment is terminated thereafter, or (D) on the termination of your employment within eighteen months following the effective date of a Transaction, Emco or its successor, as the case may be, will cause your entitlement under the SRPA to be secured by way of a letter of credit issued to and held in trust for your benefit in an amount equal to the value of such entitlement as modified by this Agreement, as determined by actuarial valuation (the "pension entitlement"), and Emco (or its successor) will be responsible for establishing such trust, any tax, legal, administrative or other costs associated with such trust, the cost of the actuarial valuation, and any costs associated with the letter of credit. Such irrevocable letter of credit shall be renewed annually to reflect the then current value of the pension entitlement as determined by an actuarial valuation at the cost of Emco (or its successor). Such irrevocable letter of credit shall be drawn down by the trustee in certain circumstances to be stipulated in the terms of the trust, including, without limitation, a default in payment of the pension entitlement, or any portion thereof, failure of the letter of credit to be renewed as required herein, failure by Emco (or its successor) to pay the trustee's annual fees and other administrative costs of the trust, failure to obtain the initial actuarial valuation or a new actuarial valuation relating to the replacement letter of credit, or on a subsequent Transaction. If a letter of credit is not issued and held in trust as required herein, then Emco or its successor, as the case may be, will be required to deposit in trust an amount of money equal to the amount determined by actuarial valuation. Emco (or its successor) will be responsible for establishing such trust, the cost of the actuarial valuation, and any administrative or other costs associated with such trust. For greater certainty, the amount deposited to such trust will, to the extent necessary, be grossed up for income taxes, so that any amounts received by you, or which you are entitled to receive, from the trust will be equal, on an after-tax basis, to those amounts that you would otherwise have received or have been entitled to receive. For the purposes of this paragraph, "actuarial valuation" shall mean the amount required to fully fund the pension entitlement under the SRPA determined on a wind-up basis as at the date of the Transaction according to actuarial assumptions and methodologies recommended for this purpose by an actuary who shall be retained by Emco (or its successor) and who shall be a Fellow of the Canadian Institute of Actuaries. In consideration of the severance payments and the pension entitlement, you agree, for a period of two years from the effective date of termination of your employment, not to directly or indirectly: 1) in Canada, obtain new employment with, be a creditor of, be an investor in (other than being an investor in less than 1% of the outstanding shares of a publicly traded company), or in any way be connected with any competitor of Emco or any entity that is in the same business as Emco on the date of termination of your employment or at any time within the twelve months prior to the date of termination of your employment; 2) employ, attempt to employ or assist any entity to employ any employee of Emco, except where such an employee seeks employment in response to a general advertisement for employment; and 3) solicit, attempt to solicit, or interfere with the relationship of Emco, in respect of products sold by Emco, with any entity that is a customer of Emco on the date of termination of your employment, was a customer of Emco at any time within twelve months prior to the date of termination of your employment, or was being pursued as a prospective customer by Emco on the date of termination of your employment. For purposes of the foregoing paragraph, the term "Emco" shall mean Emco Limited and its subsidiaries. You are in a fiduciary relationship with Emco and hold secret, proprietary and/or confidential information, knowledge and data relating to Emco, its subsidiaries and their respective businesses (collectively the "confidential information"). As a result of your fiduciary relationship and in consideration of the severance payments and the pension entitlement, after termination of your employment with Emco, you shall not, without the prior written consent of Emco, communicate or divulge any confidential information for your own benefit or the benefit of anyone other than Emco and its subsidiaries. In the event that (i) you or Emco institute any action or proceeding in a court, arbitration or otherwise to enforce or interpret any provision of this Agreement, or for damages by reason of an alleged breach of any provision of this Agreement, and (ii) you are the prevailing party in such action or proceeding, Emco or its successor, as the case may be, shall pay all of your reasonable legal fees and expenses related to the action or proceeding. This Agreement may not be amended or modified otherwise than by written agreement executed by you and Emco. Other than as acknowledged in writing, there shall not be any waiver of any right, privilege or dissent of any party hereto, and it is expressly agreed that no statement, acquiescence or silence by a party hereto shall be deemed to constitute a waiver. This Agreement cancels and supersedes the letters dated February 1, 1999 and October 31, 2000. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to be effective on the date of personal delivery, the date of delivery by courier service, the date of transmission if sent by facsimile or on the fifth day after mailing is sent by registered or certified mail. The rights and obligations of Emco under this Agreement shall enure to the benefit of and be binding upon the successors and assigns of Emco, including, without limitation, any successors in the event of a Transaction. In no event may Emco assign or transfer this Agreement, by contract, agreement, operation of law or otherwise, to an entity which is not solvent at the time of a Transaction or termination of your employment. This Agreement is personal to you and may not be assigned by you. This Agreement shall commence as of the date of acceptance by you. Would you please acknowledge your agreement to the foregoing by dating, signing and returning the enclosed copy of this letter. Yours truly, Frank M. Hennessey Chairman of the Board The terms and conditions contained in this letter are acknowledged and agreed to this ____ day of October, 2002. Witness: - ------------------------ ------------------------------ Name: [Name] Address: EX-99.E.6 14 t09060d9exv99wew6.txt FORM OF CHANGE OF CONTROL AGREEMENT EXHIBIT (e)(6) PRIVATE AND CONFIDENTIAL November __, 2002 [Name] [Address] [City, Province] [Postal Code] Dear [Name]: Provided that you cooperate with and assist the Company in implementing a Transaction as expeditiously and successfully as possible, in the event that (i) a Transaction is completed on or before December 31, 2003 and (ii) your employment is terminated within twelve months following the effective date of a Transaction, Emco Limited ("Emco"), or its successor, will provide to you the following severance payments and benefits (the "severance payments"), which are inclusive of all amounts and benefits (other than vested pension and other vested retirement benefits and vested stock options/SARS at the date of such termination) to which you would otherwise be entitled under Emco's usual policies, applicable statues and regulations, or at law: 1) BASE SALARY: You will receive, for the severance period, your base salary in effect at the time of termination of your employment, less all deductions required by law. This amount will be paid to you in the form of salary continuance; 2) BENEFITS: You will continue to receive, until the earlier of the end of the severance period and the date you obtain new employment, benefits coverage, at a minimum, on substantially the same terms and conditions in effect immediately prior to the effective time of the Transaction, provided that you continue to pay on account of benefits any amount that you were required to pay on account of benefits prior to termination of your employment. To the extent that some or all of the foregoing benefits coverage cannot be continued following the date of the termination of your employment for some or all of the severance period with same or similar carriers at the same or similar rates and in respect of critical illness, accident, travel and life insurance, you will receive a lump sum payment equal to Emco's cost of providing such coverage, based on coverage costs in effect prior to the termination of your employment, for the period during the severance period for which such benefits coverage cannot be continued; 3) RETIREMENT PLAN: Emco will continue its contributions to the defined contribution component of your pension plan during the severance period. Your contributions during the severance period will be deducted from your salary continuance payments; 4) VACATION PAY: You will be paid vacation pay owing to you as of the effective date of termination of your employment, but no vacation pay shall accrue for the severance period; 5) COMPANY CAR: Emco, or its successor, will continue to pay your car arrangements in effect immediately prior to the time of termination of your employment, including insurance and reasonable operating expenses (excluding a cell phone), until the earlier of the end of the severance period and the date you obtain new employment. In the event that the lease, if any, for such car expires during the severance period, such lease will be extended or otherwise renegotiated for the period for which your car arrangements are to be continued hereunder. At the end of the severance period, you have the option of returning the car to Emco or buying out the lease at the cost provided for therein; 6) BONUS: You will receive: a) Your annualized bonus for the calendar year in which your employment is terminated, prorated from January 1 of such year to the date of the termination of your employment; and b) An amount equal to the number of years and fractions thereof that constitute the severance period multiplied by the average of your bonuses for the two fiscal years prior to the termination of your employment. This amount will be paid to you in the same manner as your base salary; 7) STOCK OPTIONS/SARS: Subject to the earlier vesting of your stock options and/or SARs (collectively "LTI Units") pursuant to the Reorganization provisions of the 1991 Long Term Incentive Program: a) LTI Units which would normally vest after the termination of your employment will vest on the effective date of the termination of your employment, and shall thereafter expire on the expiry dates established at the time of the award of the LTI Units, and b) Regardless of whether there is a termination of your employment, to the extent you are not otherwise compensated by way of substitute LTI Units or other forms of compensation of at least a value equivalent to the value of your vested and unvested LTI Units, in the event of a Transaction such that the common shares of Emco are no longer publicly traded on a recognized stock exchange, your LTI Units shall vest and you will receive promptly thereafter for the cancellation of such LTI Units payment of an amount equal to the difference, if any, between (i) the compensation paid per share for the common shares of Emco on such a Transaction and (ii) the price per share at which your LTI Units are exercisable. 8) OUTPLACEMENT: Emco, or its successor, will pay for reasonable re-employment consulting services, in an amount not to exceed $20,000 for a period of six (6) months following termination of your employment. For the purposes of this Agreement, the following terms shall have the following meanings: 1) "Transaction" means: a) the sale of all or substantially all of the assets of Emco; b) the acquisition by any entity or related entities, other than Masco Corporation ("Masco") and its subsidiaries and affiliates, of beneficial ownership of securities of Emco which, directly or following conversion or exercise thereof, would entitle the holder thereof to cast more than 50% of the votes attaching to all securities of Emco which may be cast to elect directors of Emco; or c) a reorganization, merger, amalgamation or other transaction whereafter (i) the common shares of Emco are no longer publicly traded on a recognized stock exchange, or (ii) at least one-half of the members of Board of Directors of Emco on the day immediately prior to such reorganization, merger, amalgamation or other transaction cease to be members of the Board within twelve months following such reorganization, merger, amalgamation or other transaction. 2) "termination of your employment" and other similar expressions mean termination of your employment with Emco for any reason (including, without limitation, constructive dismissal) other than (i) voluntary resignation (other than in connection with constructive dismissal), (ii) termination for just cause, (iii) normal retirement or voluntary early retirement, (iv) death, (v) permanent mental or physical disability; or (vi) termination which arises solely as a result of a sale by Emco of all or substantially all of its assets provided employment is offered to you by a successor purchaser on substantially the same terms and conditions of employment which existed prior to such sale provided no constructive dismissal results therefrom. 3) "constructive dismissal" means any fundamental adverse change in the status, scope or authority of your functions and responsibilities or in salary, benefits, pension contribution or benefit, bonus, long term incentive compensation or other elements of your usual compensation, or any other matter which may constitute constructive dismissal at law, which have not been accepted by you in writing and following which you voluntarily terminate your employment within one month of any such change. 4) "just cause" means wilful or gross misconduct, disobedience or negligence, wilful or gross neglect of duty, the commission of a criminal offence against Emco or any of its subsidiaries (including, without limitation, theft, embezzlement or misappropriation of funds or other property of Emco or any of its subsidiaries), or any act which constitutes a material breach of your obligations to Emco, but shall not include personality conflict. 5) "severance period" means the earlier of (i) o months following the effective date of the termination of your employment or (ii) the period of time remaining to your 65th birthday. 6) "entity" means any business, person, partnership, firm, corporation or other entity. 7) "new employment" means your employment by any entity, the offering of your services as an independent contractor or consultant, or you otherwise becoming independently employed and your annual earnings or income from such activities are equal to at least two-thirds of your annual base salary in effect at the time of termination of your employment. In consideration of the severance payments and the pension entitlement, you agree, for a period equal to the severance period from the effective date of termination of your employment, not to directly or indirectly: 1) in [TERRITORY], obtain new employment with, be a creditor of, be an owner of, be an investor in (other than being an investor in less than 1% of the outstanding shares of a publicly traded company), or in any way be connected with any competitor of Emco or any entity that is in the same business as Emco (being the business of Emco as of the date of termination of your employment or at any time within the twelve months prior to the date of termination of your employment); 2) employ, attempt to employ or assist any entity to employ any employee of Emco, except where such an employee seeks employment in response to a general advertisement for employment; and 3) solicit, attempt to solicit, or interfere with the relationship of Emco, in respect of products sold by Emco, with any entity that is a customer of Emco on the date of termination of your employment, was a customer of Emco at any time within twelve months prior to the date of termination of your employment, or was being pursued as a prospective customer by Emco on the date of termination of your employment. For purposes of the foregoing paragraph, the term "Emco" shall mean Emco Limited and its subsidiaries. You are in a fiduciary relationship with Emco and hold secret, proprietary and/or confidential information, knowledge and data relating to Emco, its subsidiaries and their respective businesses (collectively the "confidential information"). As a result of your fiduciary relationship and in consideration of the severance payments and the pension entitlement, after termination of your employment with Emco, you shall not, without the prior written consent of the Chief Executive Officer, Chief Financial Officer or General Counsel of Emco, communicate or divulge any confidential information for your own benefit or the benefit of anyone other than Emco and its subsidiaries. In addition, you shall not, without the prior written consent of the Chief Executive Officer, Chief Financial Officer or General Counsel of Emco, disclose to any person (including but not limited to, any other employee, officer or director of the Company or any potential strategic partner or bidder) the fact that any discussions or negotiations are or may be taking place or have taken place concerning a Transaction or any of the proposals, terms, conditions or other facts with respect to any Transaction, including the status of any Transaction (except as otherwise publicly disclosed) or the existence of this letter. If for any reason a Transaction has not occurred on or before December 31, 2003, this letter (other than the above paragraph in respect of confidential information) will have no further force or effect. This Agreement may not be amended or modified otherwise than by written agreement executed by you and Emco. Other than as acknowledged in writing, there shall not be any waiver of any right, privilege or dissent of any party hereto, and it is expressly agreed that no statement, acquiescence or silence by a party hereto shall be deemed to constitute a waiver. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to be effective on the date of personal delivery, the date of delivery by courier service, the date of transmission if sent by facsimile or on the fifth day after mailing is sent by registered or certified mail. The rights and obligations of Emco under this Agreement shall enure to the benefit of and be binding upon the successors and assigns of Emco, including, without limitation, any successors in the event of a Transaction. In no event may Emco assign or transfer this Agreement, by contract, agreement, operation of law or otherwise, to an entity which is not solvent at the time of a Transaction or termination of your employment. This Agreement is personal to you and may not be assigned by you. This Agreement shall commence as of the date of acceptance by you. Would you please acknowledge your agreement to the foregoing by dating, signing and returning the enclosed copy of this letter. Yours truly, Douglas E. Speers President and Chief Executive Officer The terms and conditions contained in this letter are acknowledged and agreed to this _________________ day of 2002. Witness: - --------------------------- -------------------------- Name: [Name] Address: EX-99.E.7 15 t09060d9exv99wew7.txt FORM OF IDEMNITY AGREEMENT EXHIBIT (e)(7) INDEMNITY AGREEMENT TO: [NAME] IN CONSIDERATION of your agreeing to act as a director of Emco Limited (the "Corporation") and for other good and valuable consideration, the Corporation hereby agrees as follows: 1. In this Agreement, "Indemnified Proceeding" means any civil, criminal or administrative action or proceeding to which you are made a party by reason of your being or having been a director of the Corporation or by reason of your being or having been, at the Corporation's request, a director or officer of any other body corporate of which the Corporation is or was a shareholder or creditor. 2. The Corporation shall indemnify you and save you harmless to the full extent permitted by law against all costs, charges and expenses (which includes amounts imposed by income tax authorities for expenses which are taxable benefits to you), and including any amount paid to settle an action or satisfy a judgment, reasonably incurred by you in respect of any Indemnified Proceeding provided: (a) you acted honestly and in good faith with a view to the best interest of the Corporation; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, you had reasonable grounds for believing that your conduct was lawful. 3. In respect of an Indemnified Proceeding by or on behalf of the Corporation or other body corporate of which the Corporation is or was a shareholder or creditor to procure judgment in its favour, the Corporation shall apply to the Ontario Court (General Division), or such other court as may have jurisdiction, for approval to indemnify you and save you harmless against all costs, charges and expenses (which includes amounts imposed by income tax authorities for expenses which are taxable benefits to you) reasonably incurred by you in connection with such Indemnified Proceeding provided: (a) you acted honestly and in good faith with a view to the best interest of the Corporation; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, you had reasonable grounds for believing that your conduct was lawful. 4. Notwithstanding anything in this Agreement, the Corporation shall indemnify you and save you harmless against all costs, charges and expenses (which includes amounts imposed by income tax authorities for expenses which are taxable benefits to you) reasonably incurred by you in connection with the defence of any Indemnified Proceeding provided: (a) you are substantially successful on the merits in your defence of the action or proceeding; (b) you acted honestly and in good faith with a view to the best interest of the Corporation; and (c) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, you had reasonable grounds for believing that your conduct was lawful. 5. This Agreement shall not operate to abridge or exclude any other rights, in law or in equity, to which you may be entitled by operation of law or under any statute, by-law of the Corporation, agreement, vote of shareholders of the Corporation, vote of disinterested directors of the Corporation or otherwise. 6. This Agreement shall enure to the benefit of and be binding upon the heirs, executors, administrators, legal personal representatives and successors and assigns of each of the parties hereto. 7. The Corporation confirms that it has purchased insurance in the amount of $15 Million (Cdn.) for your benefit against any liability incurred by you in your capacity as a director of the Corporation or as a director or officer of another body corporate where you act or acted in that capacity at the Corporation's request, subject to the restrictions set out in the Ontario Business Corporations Act. The Corporation will maintain such insurance for your benefit in at least such amount, provided that such insurance is, in the opinion of the Board of Directors of the Corporation, readily obtainable at a reasonable premium. The Corporation will give you prior notice of the Corporation's intention to cancel such insurance for whatever reason. 8. You confirm that you have been advised, and have been provided with an opportunity, to seek independent legal advice with respect to this Agreement. DATED as of the day of , 199 . EMCO LIMITED Per: ---------------------------- Douglas E. Speers President and Chief Executive Officer Per: ---------------------------- Richard B. Grogan Vice President, Finance and Chief Financial Officer AGREED AND ACCEPTED -------------------------- [NAME] I have obtained or freely and voluntarily waive my rights to consult with legal counsel of my choice with respect to this Agreement. --------------------------- [NAME] EX-99.E.8 16 t09060d9exv99wew8.txt FORM OF INDEMNITY AGREEMENT EXHIBIT (e)(8) INDEMNITY AGREEMENT TO: [NAME] IN CONSIDERATION of your agreeing to act as an officer of Emco Limited (the "Corporation") and for other good and valuable consideration, the Corporation hereby agrees as follows: 1. In this Agreement, "Indemnified Proceeding" means any civil, criminal or administrative action or proceeding to which you are made a party by reason of your being or having been an officer of the Corporation or by reason of your being or having been, at the Corporation's request, an officer or director of any other body corporate of which the Corporation is or was a shareholder or creditor. 2. The Corporation shall indemnify you and save you harmless to the full extent permitted by law against all costs, charges and expenses (which includes amounts imposed by income tax authorities for expenses which are taxable benefits to you), and including any amount paid to settle an action or satisfy a judgment, reasonably incurred by you in respect of any Indemnified Proceeding provided: (a) you acted honestly and in good faith with a view to the best interest of the Corporation; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, you had reasonable grounds for believing that your conduct was lawful. 3. In respect of an Indemnified Proceeding by or on behalf of the Corporation or other body corporate of which the Corporation is or was a shareholder or creditor to procure judgment in its favour, the Corporation shall apply to the Ontario Court (General Division), or such other court as may have jurisdiction, for approval to indemnify you and save you harmless against all costs, charges and expenses (which includes amounts imposed by income tax authorities for expenses which are taxable benefits to you) reasonably incurred by you in connection with such Indemnified Proceeding provided: (a) you acted honestly and in good faith with a view to the best interest of the Corporation; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, you had reasonable grounds for believing that your conduct was lawful. 4. Notwithstanding anything in this Agreement, the Corporation shall indemnify you and save you harmless against all costs, charges and expenses (which includes amounts imposed by income tax authorities for expenses which are taxable benefits to you) reasonably incurred by you in connection with the defense of any Indemnified Proceeding provided: (a) you are substantially successful on the merits in your defense of the action or proceeding; (b) you acted honestly and in good faith with a view to the best interest of the Corporation; and (c) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, you had reasonable grounds for believing that your conduct was lawful. 5. This Agreement shall not operate to abridge or exclude any other rights, in law or in equity, to which you may be entitled by operation of law or under any statute, by-law of the Corporation, agreement, vote of shareholders of the Corporation, vote of disinterested directors of the Corporation or otherwise. 6. This Agreement shall enure to the benefit of and be binding upon the heirs, executors, administrators, legal personal representatives and successors and assigns of each of the parties hereto. 7. The Corporation confirms that it has purchased insurance in the amount of $15 Million (Cdn.) for your benefit against any liability incurred by you in your capacity as an officer of the Corporation or as an officer or director of another body corporate where you act or acted in that capacity at the Corporation's request, subject to the restrictions set out in the Ontario Business Corporations Act. The Corporation will maintain such insurance for your benefit in at least such amount, provided that such insurance is, in the opinion of the Board of Directors of the Corporation, readily obtainable at a reasonable premium. The Corporation will give you prior notice of the Corporation's intention to cancel such insurance for whatever reason. 8. You confirm that you have been advised, and have been provided with an opportunity, to seek independent legal advice with respect to this Agreement. DATED as of the day of , 199 . EMCO LIMITED Per: ---------------------------- Douglas E. Speers President and Chief Executive Officer Per: ---------------------------- Richard B. Grogan Executive Vice President and Chief Financial Officer AGREED AND ACCEPTED -------------------------- [NAME] I have obtained or freely and voluntarily waive my rights to consult with legal counsel of my choice with respect to this Agreement. --------------------------- [NAME] EX-99.E.9 17 t09060d9exv99wew9.txt EMCO LIMITED STOCK OPTION PLAN Exhibit (e)(9) EMCO LIMITED LONG TERM INCENTIVE PROGRAM PART I 1. PURPOSE 1.1 This Long Term Incentive Program has been established by the Company to provide incentives to certain of its key employees, and to encourage managers to adopt a responsible balance between long term and current year results, and to build and maintain a strong spirit of high-performance and entrepreneurial autonomy. 2. DEFINITIONS AND INTERPRETATIONS 2.1 In this Long Term Incentive Program, the following terms have the following meanings: (a) "Beneficiary" means any person designated by the Participant by written instrument filed with the Company to receive any amount payable under the Program in the event of a Participant's death or, failing any such effective designation, the Participant's estate; (b) "Board" means the Board of Directors of the Company; (c) "Board Lot" means the number of shares constituting a board lot under the General By-Law of The Toronto Stock Exchange; (d) "Change in Control" means the occurrence of any of the following: i) unless previously approved by the Board, the acquisition by any person of beneficial ownership of securities of the Company which, directly or following conversion or exercise thereof, would entitle the holder thereof to cast more than 50% of the votes attaching to all securities of the Company which may be cast to elect directors of the Company; or ii) Incumbent Directors ceasing to constitute a majority of the Board as a consequence of the solicitation of proxies through a proxy circular by persons other than management; (e) "Committee" means the committee of the Board, as constituted from time to time, which may be appointed by the Board to, inter alia, interpret, administer and implement the Program, and includes any successor committee appointed by the Board for such purposes; (f) "Company" includes EMCO LIMITED, its participating affiliates and their respective successors and assigns, and any reference in the Program to action by the Company means action by or under the authority of the Board or any person or committee that has been designated for the purpose by the Company including, without limitation, the Committee; (g) "Date of Grant" of an Option or a Right, as the case may be, means the date the Option or Right is granted to a Participant under the Program; (h) "Designated Option Amount" of a Participant's Option means the maximum number of Shares which the Participant may purchase under the Option, as designated by the Company at the time the Option is granted; (i) "Designated Option Percentage" means the percentage of the Designated Option Amount representing the maximum number of Shares which a Participant may purchase under the Option during each Year, as designated by the Company from time to time, generally for the purposes of the Option Plan or at the time the Option is granted; (j) "Designated Rights Amount" of a Participant's Rights means the maximum number of Rights which the Participant may exercise, as designated by the Company at the time the Rights are granted; (k) "Designated Rights Percentage" means the percentage of the Designated Rights Amount representing the maximum number of Rights which a Participant may exercise each Year, as designated by the Company from time to time, generally for the purposes of the Rights Plan or at the time the Rights are granted; (l) "Earliest Exercise Date" in respect of an Option or Right, as the case may be, means the earliest date on which the Option or Right may be exercised, as designated by the Company at the time the Option or Right is granted; (m) "In the Money" means the excess, if any, of the Right Exercise Price of a Share at any time over the Strike Price; (n) "Incumbent Director" means any member of the Board who was a member of the Board immediately prior to the occurrence of a transaction, transactions or elections giving rise to a Change in Control (other than a transaction approved by the Board) and any successor to an Incumbent Director who is recommended or elected or appointed to succeed an Incumbent Director by the affirmative vote of a majority of the Incumbent Directors then on the Board; (o) "Insider" has the meaning ascribed to this term in the TSE Rules; 2 (p) "Latest Exercise Date" means the latest date on which an Option, or Right, as the case may be, may be exercised, as designated by the Company at the time the Option or Right is granted; (q) "Option" means a right granted under the Program to a Participant to purchase Shares in accordance with the Program; (r) "Option Notice" means a form of notice, approved by the Company, from the Participant to the Company specifying and subscribing for the number of Shares in respect of which an Option is being exercised at that time; (s) "Option Plan" means the Executive Stock Option Plan, consisting of Part II of the Program, as amended and restated from time to time; (t) "Option Price" in respect of a Participant's Option means the price designated by the Company determined in accordance with Section 4.2 at which the Participant may purchase Shares under the Option; (u) "Outstanding Shares" has the meaning ascribed to this term in the TSE Rules; (v) "Participant" means a bona-fide full-time employee of the Company designated by the Company for participation in the Program who has agreed to participate in the Program or parts thereof on such terms as the Company may specify; (w) "Program" means this Long Term Incentive Program, consisting of the Option Plan and the Rights Plan, as amended and restated from time to time; (x) "Reorganization" means any (i) capital reorganization, (ii) merger, (iii) amalgamation, (iv) offer for shares of the Company which if successful would entitle the offeror to acquire all of the shares of the Company or all of one or more particular class(es) of shares of the Company to which the offer relates, or (v) arrangement or other scheme of reorganization; (y) "Retirement" means retirement of a Participant in accordance with the Company's normal retirement policy; (z) "Right Exercise Price" shall mean the average closing market price for Board Lots of a Share (or the mean of the closing bid and ask prices, if not traded) on the TSE in the period of five trading days preceding the date the Right is exercised; (aa) "Right" means a stock appreciation right granted under the Program to a Participant in accordance with the Program; (bb) "Rights Letter" means a letter approved by the Company whereby a Participant may exercise his Rights; 3 (cc) "Rights Plan" means the Stock Appreciation Rights Plan, consisting of Part III of the Program, as amended and restated from time to time; (dd) "Shares" means the common shares in the capital of the Company, and includes any shares of the Company into which such shares may be converted, reclassified, redesignated, subdivided, consolidated, exchanged or otherwise changed, pursuant to a Reorganization; (ee) "Strike Price" shall mean the closing price of a Share sold as a part of a Board Lot of Shares on the TSE on the trading day immediately preceding the Date of Grant, or, if at least one Board Lot of Shares was not traded on that date, on the next preceding day on which a Board Lot was traded; (ff) "TSE" means the Toronto Stock Exchange; (gg) "TSE Rules" means the Policies relating to Employee Stock Option and Stock Purchase Plans, Options for Services and Related Matters; and (hh) "Year" in respect of an Option or Right, as the case may be, means a calendar year commencing on the Earliest Exercise Date of the Option or Right, as the case may be, or on any anniversary of such date, and ending prior to or on the Latest Exercise Date. 2.2 In this Program, unless the context requires otherwise, references to the male gender include the female gender, words importing the singular number may be construed to extend to and include the plural number, and words importing the plural number may be construed to extend to and include the singular number. 2.3 This Program is established under the laws of the Province of Ontario and the rights of all parties and the construction of each and every provision of the Program and any Options or Rights granted hereunder shall be construed according to the laws of the Province of Ontario. 2.4 This Program consists of three parts, the first part ("Part I") commencing with Section 1, consisting of general provisions applicable to the Program as a whole; the second part ("Part II") commencing with Section 4, consisting of the Option Plan; and the third part ("Part III") commencing with Section 10, consisting of the Rights Plan. 3. GENERAL 3.1 The Program shall be administered by the Company in accordance with its provisions. All costs and expenses of administering the Program will be paid by the Company. The Company, may from time to time, establish administrative rules and regulations relating to the operation of the Program as it may deem necessary to further the purpose of the Program and amend or repeal such rules and regulations. The Company, in its discretion, may appoint a Committee for the purpose of interpreting, administering and implementing the Program. In 4 administering the Program, the Company or the Committee may seek recommendations from the chief executive officer of the Company. The Company may also delegate to any director, officer or employee of the Company such administrative duties and powers as it may see fit. 3.2 From time to time the Company may, in addition to its powers under sections 7, 9, and 14, add to or amend any of the provisions of the Program or terminate the Program or either of the Option Plan or Rights Plan; provided however that (i) any approvals required under any applicable law or under the applicable rules of any stock exchange in Canada upon which shares of the Company are listed are obtained, and (ii) no such amendment or termination shall be made at any time which has the effect of adversely affecting the existing rights of a Participant under the Program without his consent in writing unless the Company, at its option, acquires such existing rights at an amount equal to the fair market value of such rights at such time as verified by an independent valuator. Neither designation of an employee as a Participant nor the grant of any Options or Rights to any Participant entitles any Participant to the grant, or any additional grant, as the case may be, of any Options or Rights under the Plan. 3.3 The determination by the Company of any question which may arise as to the interpretation or implementation of the Program or any of the Options or Rights granted hereunder shall be final and binding on all Participants and other persons claiming or deriving rights through any of them. 3.4 The Company shall keep or cause to be kept such records and accounts as may be necessary or appropriate in connection with the administration of the Program and the discharge of its duties. At such times as the Company shall determine, the Company shall furnish the Participant with a statement setting forth the details of his Options and Rights, including Date of Grant, Designated Option Amount and the Option Price of each Option, the number of Shares in respect of which the Option has been exercised, the maximum number of Shares which the Participant may still purchase under the Option Plan and the Designated Rights Amount held by each Participant. Such statement shall be deemed to have been accepted by the Participant as correct unless written notice to the contrary is given to the Company within 30 days after such statement is given to the Participant. 3.5 The Program shall enure to the benefit of and be binding upon the Company, its successors and assigns. The interest of any Participant under the Program or in any Option or Right shall not be transferable or alienable by him either by pledge, assignment or in any other manner whatsoever and, during his lifetime, shall be vested only in him, but shall thereafter enure to the benefit of and be binding upon the Participant's Beneficiary. 3.6 The Company's obligation to issue Shares in accordance with the terms of the Option Plan and any Options granted hereunder is subject to compliance with the laws, rules and regulations of all public agencies and authorities applicable to the issuance and distribution of such Shares and to the listing of such Shares on any stock exchange on which any of the Shares of the Company may be listed. As a condition of participating in the Program, each Participant agrees to comply with all such laws, rules and regulations and agrees to furnish to the Company all information and undertakings as may be required to permit compliance with such laws, rules and regulations. 5 3.7 A Participant shall not have any rights as a shareholder in respect of (i) Shares subject to an Option until such Shares have been paid for in full and issued or (ii) any Rights. 3.8 No member of the Board or the Committee shall be liable for any action or determination made in good faith in connection with the Program and members of the Board and the Committee shall be entitled to indemnification and reimbursement from the Company in respect of any claim relating thereto. 3.9 Participation in the Program shall be entirely voluntary and any decision not to participate shall not affect any employee's employment with the Company. Participation in this Program shall not affect the right of the Company to discharge a Participant. 3.10 Any payment, notice, statement, certificate or other instrument required or permitted to be given to a Participant or any person claiming or deriving any rights through him shall be given by: i) delivering it personally to the Participant or to the person claiming or deriving rights through him, as the case may be, or ii) mailing it postage paid (provided that the postal service is then in operation) or delivering it to the address which is maintained for the Participant in the Company's personnel records. (b) Any payment, notice, statement, certificate or other instrument required or permitted to be given to the Company shall be given by mailing it postage paid (provided that the postal service is then in operation), delivering it to the Company at its principal address, or (other than in the case of a payment) sending it by means of facsimile or similar means of electronic transmission, to the attention of the Company Secretary. (c) Any payment, notice, statement, certificate or other instrument referred to in Section 3.10(a) or 3.10(b), if delivered, shall be deemed to have been given or delivered on the date on which it was delivered, if mailed (provided that the postal service is then in operation), shall be deemed to have been given or delivered on the second business day following the date on which it was mailed and if by facsimile or similar means of electronic transmission, on the next business day following transmission. 3.11 If any provision of this Program is determined to be invalid or unenforceable in whole or in part, such invalidity or unenforceability shall attach only to such provision or part thereof and the remaining part, if any, of such provision and all other provisions hereof shall continue in full force and effect. 3.12 This Program is hereby instituted this 19th day of June, 1991. 6 3.13 This Program supersedes and replaces the 1986 Long-Term Incentive Program and such 1986 Long-Term Incentive Program is terminated, as to the Stock Bonus Plan and Share Purchase Plan of the 1986 Long-Term Incentive Program, effective June 19, 1991, in respect of the fiscal year ending December 31, 1990 and as to the Cash Performance Award Program of the 1986 Long-Term Incentive Program, March 1, 1993, in respect of the fiscal year ending December 31, 1992, but the institution of this Program and the replacement and termination of the 1986 Long-Term Incentive Program does not terminate or affect (i) amounts owing to any employees under the Cash Performance Award Program; (ii) indebtedness of any employees to the Company in respect of the Share Purchase Plan, or the terms thereof; and (iii) any Shares held in an employee's account under the Stock Bonus Plan which have not vested, which Shares shall vest subject to and in accordance with the terms of the Stock Bonus Plan. 7 PART II EXECUTIVE STOCK OPTION PLAN 4. GRANTING OF OPTIONS AND DETERMINATION OF THE OPTION PRICE 4.1 From time to time the Company may grant an Option to a Participant to acquire Shares in accordance with the Program. In granting such Option, the Company shall designate: (a) the Designated Option Amount; (b) the Earliest Exercise Date, which may be the Date of Grant; (c) the Latest Exercise Date, which shall be no earlier than two years after the Date of Grant and no later than ten years after the Date of Grant; (d) the Designated Option Percentage; and (e) the Option Price, which price shall be determined by the Company in accordance with Section 4.2. 4.2 The Option Price per Share in respect of an Option shall be equal to the closing price of a Share sold as part of a Board Lot of such Shares on the TSE on the trading day immediately preceding the Date of Grant of the Option or, if at least one Board Lot of Shares shall not have traded on that date, on the next preceding day on which a Board Lot was traded. 4.3 The majority of the Shares allocated under the Plan shall not be issuable to Insiders. The number of Shares reserved for issuance pursuant to Options granted pursuant to the Plan shall not exceed ten per cent of the Outstanding Shares. 5. EXERCISE OF PARTICIPANT'S OPTIONS 5.1 Subject to the provisions of the Program, an Option may be exercised by the Participant only on or after the Earliest Exercise Date and thereafter from time to time at his discretion to purchase in the aggregate a number of Shares equal to the aggregate of the previously unexercised portion of the Designated Option Amount provided that, unless the Company otherwise agrees in writing, (a) subject to clause (b) of this section 5.1, the maximum number of Shares which the Participant may purchase under the Option during each of the Years commencing on the Earliest Exercise Date of the Option shall be equal to the number of shares represented by the Designated Option Percentage of the Designated Option Amount of the Option, and (b) if the number of Shares purchased under the Option during any of the Years is less than the maximum number which could have been purchased under the Option during that Year, the difference shall be carried forward and added to the maximum number of Shares which may be purchased under the Option in the immediately following Year, and so on from time to time. 5.2 Notwithstanding Section 5.1, Options may be exercised at any time following a Change in Control. 5.3 Unless the Company otherwise agrees in writing, a Participant's Option shall terminate and may not be exercised after the earliest of: (a) in the case of the termination of employment with the Company for cause, immediately as of the time of such termination; (b) 30 days after the date of the Participant's termination of employment with the Company, unless such termination occurs by reason of termination of the Participant's employment for cause or the Participant's death, disability or Retirement as contemplated in subsections (a), (c) or (d) of this section, in which case the provisions of the applicable subsection shall govern; (c) 90 days after the Participant's Retirement provided that the Participant has not died prior to the expiry of such 90 day period; (d) one year after the Participant's death or the termination of employment with the Company by reason of his disability (as determined by the Company in its sole discretion); and (e) the Latest Exercise Date of the Participant's Option. 5.4 The exercise of an Option under the Plan shall be made by Option Notice and accompanied by a certified cheque or bank draft payable to the Company in the amount of the aggregate Option Price for such number of Shares. As of the day the Company receives the Option Notice and such payment, the Participant (or the person claiming through him, as the case may be) shall be entitled to be entered on the share register of the Company as the holder of the number of Shares in respect of which the Option was exercised and as promptly as possible thereafter shall be delivered a certificate representing the said number of Shares. 6. MAXIMUM NUMBER OF SHARES TO BE ISSUED UNDER THE PLAN 6.1 The number of Shares which may be issued under options issued and outstanding pursuant to this Program to all Participants shall not exceed in the aggregate 2,200,000 and the number of Shares which may be issued under Options issued and outstanding pursuant to this Program together with Shares which may be issued under options issued and outstanding under any other employee-related plan of the Company or options for services granted by the Company, to any one person shall not exceed 5% of the issued and outstanding Shares. 2 6.2 If any Option has terminated or expired without being fully exercised, any unissued Shares which have been reserved to be issued upon the exercise of the Option shall become available to be issued upon the exercise of Options subsequently granted under the Program. 6.3 Subject to any applicable regulatory requirement, the Company may, but is not obligated, to acquire issued and outstanding Shares in the market for the purposes of providing Shares to Participants upon the exercise of Options under the Program. The Shares acquired for this purpose shall not be included for the purposes of the determining the maximum number of Shares to be issued under the Plan in accordance with section 6.1. 7. ANTI-DILUTION PROVISIONS 7.1 If the number of outstanding Shares of the Company shall be increased or decreased as a result of a stock split, consolidation or recapitalization and not as a result of the issuance of Shares for additional consideration or by way of stock dividend, the Company may make appropriate adjustments to the Designated Option Amount of any Option which has previously been granted under the Program, the maximum number of Shares which the Participant may thereafter purchase under such Option, the Option Price in respect of such Option and the maximum number of Shares which may be issued under the Program in accordance with Section 6.1. Any determinations by the Company as to the required adjustments shall be made in its sole discretion and all such adjustments shall be conclusive and binding for all purposes under the Program. 7.2 No fractional shares shall be issued upon the exercise of an Option nor shall any scrip certificates in lieu therefor be issuable at any time. Accordingly, if as a result of any adjustment under Section 7.1 a Participant would otherwise have become entitled to a fractional share upon the exercise of an Option, he shall have the right to purchase only the next lower whole number of Shares and no payment or other adjustment will be made with respect to the fractional interests so disregarded. 8. LOANS TO EMPLOYEES 8.1 Subject to applicable law, the Company may in its sole discretion arrange for the Company or any subsidiary to make loans or provide guarantees for loans by financial institutions to assist Participants to purchase Shares upon the exercise of the Options so granted and to assist the Participants to pay any income tax exigible upon exercise of the Options. Such loans may be secured or unsecured, and at such rates of interest, if any, and on such other terms as may be determined by the Company, provided that in no event shall any loan be outstanding for more than 10 years from the Date of Grant of the Option. 9. REORGANIZATION 9.1 In the event of a Reorganization or proposed Reorganization, the Company, at its option, may do either of the following: 3 (a) the Company may irrevocably commute any Option that is still capable of being exercised, upon giving to the Participant to whom such Option has been granted at least 30 days written notice of its intention to commute the Option, and during such period of notice, the Option, to the extent that it has not been exercised, may be exercised by the Participant up to the Designated Option Amount of Shares which may be purchased under the Option, without regard to the limitations contained in subsection 5.1(a), and on the expiry of such period of notice, the unexercised portion of the Option shall lapse and be cancelled, or (b) the Company or any corporation which is or would be the successor to the Company or which may issue securities in exchange for Shares upon the Reorganization becoming effective may offer any Participant the opportunity to obtain a new or replacement option over any securities into which the Shares are changed or are convertible or exchangeable, on a basis proportionate to the number of Shares under option; in such event, the Participant shall, if he accepts such offer, be deemed to have released his Option over Shares and such Option shall be deemed to have lapsed. 9.2 Subsections (a) and (b) of Section 9.1 are intended to be permissive and may be utilized independently or successively or in combination or otherwise, and nothing therein contained shall be construed as limiting or affecting the ability of the Company to deal with Options in any other manner. 4 PART III STOCK APPRECIATION RIGHTS 10. GRANTING OF RIGHTS 10.1 From time to time, the Company may grant Rights to a Participant in accordance with the Rights Plan. In granting any such Rights, the Company shall designate: (a) the Designated Rights Amount; (b) the Earliest Exercise Date; (c) the Latest Exercise Date which shall be no earlier than two years after the Date of Grant and no later than ten years after the Date of Grant; (d) the Designated Rights Percentage; and (e) the Strike Price of the Shares on the Date of Grant. 11. EXERCISE OF PARTICIPANT'S RIGHTS 11.1 Subject to the provisions of the Program, a Right may be exercised by, the Participant only on or after the Earliest Exercise Date and thereafter from time to time at his discretion, provided that, unless the Company otherwise agrees in writing, (a) subject to clause (b) of this section 11.1, the maximum number of Rights which the Participant may exercise during each of the Years commencing on the Earliest Exercise Date of the Right shall be equal to the number of Rights represented by the Designated Rights Percentage of the Designated Rights Amount, and (b) if the number of Rights exercised during any of the Years is less than the maximum number which could have been exercised during that Year, the difference shall be carried forward and added to the maximum number of Rights which may be exercised immediately following the Year, and so on from time to time. 11.2 Notwithstanding section 11.1, Rights may be exercised at any time following a Change in Control. 11.3 Upon exercising a Right, the Participant will be paid the amount by which such Right is In The Money, subject to any applicable withholding of taxes. 11.4 Unless the Company otherwise agrees in writing, a Participant's Right shall terminate and may not be exercised after the earliest of: (a) in the case of termination of employment with the Company for cause, immediately as of the time of such termination; (b) 30 days after the date of the Participant's termination of employment with the Company, unless such termination occurs by reason of termination of the Participant's employment for cause or the Participant's death, disability or Retirement as contemplated in subsections (a), (c) or (d) of this section, in which case the provisions of the applicable subsection shall govern; (c) 90 days after the Participant's Retirement provided that the Participant has not died prior to the expiry of such 90 day period; (d) one year after the Participant's death or the termination of employment with the Company by reason of his disability (as determined by the Company in its sole discretion); and (e) the Latest Exercise Date of the Participant's Right. 11.5 In order to exercise his Rights, the Participant must forward a completed Rights Letter by personal delivery, or registered mail or facsimile to the Company in the manner provided for in section 3.10. 12. EXERCISE OF RIGHTS 12.1 Unless otherwise agreed by the Company, if the Participant is a person who has knowledge of a 'material fact' or 'material change' (each as defined under the Securities Act (Ontario)) in respect of the Company that has not been generally disclosed in accordance with applicable securities legislation and adequately disseminated to the public, he shall not be entitled to exercise the Right. 13. ANTI-DILUTION PROVISIONS 13.1 If the number of outstanding Shares of the Company shall be increased or decreased as a result of a stock split, consolidation or recapitalization and not as a result of the issuance of Shares for additional consideration or by way of stock dividend, the Company may make appropriate adjustments to the Designated Rights Amount and/or the Strike Price. Any determinations by the Company as to the required adjustments shall be made in its sole discretion and all such adjustments shall be conclusive and binding for all purposes under the Program. 14. REORGANIZATION 14.1 In the event of a Reorganization or proposed Reorganization, the Company, at its option, may do either of the following: (a) the Company may irrevocably commute any Right that is still capable of being exercised, upon giving to the Participant to whom such Right has been granted at least 30 days written notice of its intention to commute the Right, and during such period of notice, the Right, to the extent that it has not been exercised, may be exercised by the Participant up to the Designated Rights Amount without regard 2 to the limitations contained in subsection 11.1(a), and on the expiry of such period of notice, the unexercised portion of the Rights shall lapse or be cancelled; or (b) the Company or any corporation which is or would be the successor to the Company or which may issue securities in exchange for Shares upon the Reorganization becoming effective may offer any Participant the opportunity to obtain a new or replacement stock appreciation right in respect of any securities into which the Shares are changed or are convertible or exchangeable, on a basis proportionate to the number of Rights held by the Participant; in such event, the Participant shall, if he accepts such offer, be deemed to have released his Rights and such Rights shall be deemed to have lapsed. 14.2 Subsections (a) and (b) of Section 14.1 are intended to be permissive and may be utilized independently or successively or in combination or otherwise, and nothing therein contained shall be construed as limiting or affecting the ability of the Company to deal with Rights in any other manner. 15. RIGHT OF DEDUCTION 15.1 The Company shall have the right to deduct from all cash payments made to the Participant any federal or provincial taxes required by law to be withheld with respect to such payments. 16. RIGHT TO FUNDS 16.1 Neither the establishment of the Rights Plan, the awarding of Rights or the setting aside of any funds by the Company (if, in its sole discretion, it chooses to do so) shall be deemed to create a trust. Legal and equitable title to any funds set aside for the purposes of the Plan shall remain in the Company and no Participant shall have any security or other interest in such funds. Any funds so set aside shall remain subject to the claims of creditors of the Company present or future. Amounts payable to any Participant under the Rights Plan shall be a general, unsecured obligation of the Company. The right of the Participant or Beneficiary to receive payment pursuant to the Rights Plan shall be no greater than the right of other unsecured creditors of the Company. 3 EX-99.E.10 18 t09060d9exv99wew10.txt SECTION ENTITLED "EXECUTIVE COMPENSATION" EXHIBIT (e)(10) EXECUTIVE COMPENSATION The following table sets out details of compensation paid, during the three years ended December 31, 2001, to the President and Chief Executive Officer of the Corporation and the four other most highly compensated executive officers (the "named executive officers"). SUMMARY COMPENSATION TABLE

- ------------------ (1) None of the Named Executive Officers received perquisites and benefits greater than the lesser of $50,000 and 10% of salary and bonus. (2) Susan M. Rabkin resigned from the Corporation effective February 10, 2002. OPTIONS AND SARs OPTION/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR

AGGREGATED OPTION/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR AND FINANCIAL YEAR-END OPTION/SAR VALUES

1991 LONG-TERM INCENTIVE PROGRAM The Corporations's 1991 Long-Term Incentive Program (the "1991 LTI") is comprised of a stock option plan and a stock appreciation rights plan and is designed to provide incentives to key employees of the Corporation and its affiliates. The 1991 LTI provides that options may be granted to employees designated by the Corporation to purchase common shares of the Corporation at a price per share equal to the market price of the shares of the Corporation on the trading day preceding the date of grant. The number of shares issuable pursuant to the exercise of options under the 1991 LTI is limited to 2.2 million in the aggregate. The number of shares which may be reserved for issuance to any one person under the 1991 LTI, and all other option plans combined, is limited to 5% of the issued and outstanding shares of the Corporation. The 1991 LTI also provides that stock appreciation rights may be granted to designated employees whereby such employees will be entitled to a cash payment based on the number of rights allocated to them and the increase, if any, in the market price of the common shares of the Corporation from the date of allocation to the date of exercise. The expiry date of options and rights granted pursuant to the 1991 LTI is set at the time of the grant and may be any date between the second and tenth anniversaries of the grant. Subject to earlier expiration as a result of termination of employment, early retirement or death, the options issued to date expire on the tenth anniversary of the date of the grant. The percentage of each option or the number of rights exercisable in any one year is also determined by the Corporation at the time of the grant. In the event that such options or rights are not exercised in any one year, they are exercisable cumulatively throughout the period. Rights and options are non-transferable by participants. SHARE OWNERSHIP GUIDELINES The board of directors has established share ownership guidelines for the Chief Executive Officer and certain senior management employees to enhance alignment of executive and shareholder interests, to provide an incentive to achieve corporate financial targets and to communicate management commitment and confidence to the external financial community. These guidelines provide for shareholdings which are a multiple of the employee's salary. PENSION PLANS The standard retirement plan for executives is a defined benefit program (the "Plan"), which provides an annual pension, payable from age 65, equal to 2% of final average earnings for each year of executive service and is funded under a registered pension plan up to the maximum permitted by the Income Tax Act. Final average earnings are based on the 36 consecutive months of highest earnings in the 120 months prior to retirement. Earnings for this purpose include salary and bonus. The normal form of pensions is a 60% Joint and Survivor benefit. Amounts payable under the Plan are not subject to any offsets. The Corporation pays the full cost of the Plan. Named executive officers are eligible to participate under the Plan, other than Mr. Speers, who participates in the plan described below. The following table represents the estimated annual pension payable to a member with a spouse, following retirement at age 65. A discount is applicable on retirement prior to age 62.

As at December 31, 2001, Mr. Fantham's credited services was 2.3 years, Mr. Currie's credited service was 2.3 years, Mr. LeGrow's credited service was 13.2 years and Ms. Rabkin's credited services was 4.7 years. D.E. SPEERS As part of the purchase of the Building Products business from Imperial Oil Limited ("IOL"), the Corporation agreed to maintain a pension plan equivalent to the IOL pension plan for the employees who had been covered by that plan. The only named executive officer in the plan is Douglas E. Speers. The annual pension, before offsets, is 1.6% of the best 36 months credited earnings times credited service and is funded under a registered pension plan up to the maximum permitted by the Income Tax Act. The pension is offset, from age 65, by Canada/Quebec Pension Plan benefits in proportion to service and, from retirement, by any pension payable under the IOL pension plan. As at December 31, 2001, the estimated IOL offset pension for Mr. Speers is $45,000. The following table represents the estimated annual pension payable to a member, following retirement at age 60, before any reduction due to offsets. An adjustment of less than the full actuarial value is applied in the case of retirement between ages 55 and 60, unless the employee has 30 years or more of credited service. These pension values are based on the 50% surviving spouse benefit contained in the plan.

Mr. Speers' credited service as of December 31, 2001 was 30.7 years. AGREEMENTS WITH CERTAIN NAMED EXECUTIVE OFFICERS The Corporation is party to agreements with certain of the named executive officers, pursuant to which certain named executive officers are entitled to compensation for the termination of his/her employment with the Corporation for any reason (including a fundamental adverse change in the terms of the executive's employment), other than voluntary resignation, cause, retirement, death or disability, at any time within eighteen months following a change in control of the Corporation. The principal component of the compensation payable is an amount equal to three years' total compensation for Mr. Spears and two years' total compensation for the other certain named executive officers. REPORT ON EXECUTIVE COMPENSATION The Human Resources Committee, which is responsible for the design and administration of the executive compensation program, annually reviews compensation levels for the Corporation's executive officers and submits recommendations to the board for approval. One of the Corporation's primary business objectives is to maximize long-term shareholder returns. In order to do this, it is necessary to attract, retain and motivate employees at all levels who are of the highest quality. Accordingly, the Corporation's executive compensation program has been designed to: 1. Attract and retain high quality employees by offering competitive compensation. 2. Motivate and reward performance by tying incentive compensation to the achievement of corporate goals. 3. Link executive and shareholder interests and retain top performing executives through the use of equity based compensation. In arriving at its recommendations, the Committee uses third party competitive data to help determine the appropriate level of compensation. The Committee also considers the performance of the Corporation compared with the performance of other firms and the extent to which internal business objectives and strategies are being achieved. Performance measures considered include stock price, earnings per share, operating profit, cash flow and other criteria. In addition, the Committee considers economic conditions, executive retention and other related factors. Base salary is normally reviewed annually and adjustments, if any, are made effective in April to reflect the competitive environment. The annual bonus is tied to operating results and other key goals. The Corporation allows employees to defer their annual bonuses to the extent permitted for income tax purposes. Stock options are awarded to focus the recipient on enhancing long-term shareholder value and to help retain key performers. Stock options are normally granted annually at the discretion of the board. Share ownership guidelines have been established to, in part, align executive and shareholder interests and to provide an incentive to achieve corporate financial targets. Report Presented By: David L. Johnston, Chairman, Human Resources Committee Wayne B. Lyon Frank M. Hennessey -----END PRIVACY-ENHANCED MESSAGE-----


(a)(1)		The Directors’ Circular, dated February 28, 2003, including the Fairness Opinion, dated February 19, 2003, from TD Securities Inc. to Emco Limited*
(a)(2)		Letter, dated February 28, 2003, from Emco to the Emco Shareholders and Debentureholders*
(a)(3)		Letter, dated February 28, 2003, from Emco to participants in the Emco Share Purchase Plan*
(a)(4)		Letter of Transmittal and Direction, dated February 28, 2003, for use by participants in the Emco Share Purchase Plan*
(a)(5)		Letter, dated February 28, 2003, to participants in the Emco Stock Option Plan*
(a)(6)		Notice of Acceptance for use by participants in the Emco Stock Option Plan*
(e)(1)		Support Agreement, dated as of February 19, 2003, between 2022841 Ontario Inc., Blackfriars Corp. and Emco Limited
(e)(2)		Lock-up Agreement, dated as of February 19, 2003, between 2022841 Ontario Inc., Blackfriars Corp. and Masco Corporation
(e)(3)		Confidentiality Agreement, dated September 25, 2002, made between Emco Limited and an affiliate of Blackfriars Corp.
(e)(4)		Written Assurance, dated February 19, 2003, provided by Blackfriars Corp.
(e)(5)		Form of Change of Control Agreement made between Emco Limited and each of Douglas E. Speers, Gordon E. Currie, Richard J. Fantham, Roger K. Hollyman, Bradford W. Latner, Walter D. LeGrow and Mark F. Whitley
(e)(6)		Form of Change of Control Agreement made between Emco Limited and Jaap Burck
(e)(7)		Indemnity Agreement provided by Emco Limited for each of Frank M. Hennessey, Douglas E. Speers, Richard B. Grogan, D. Brian Harrison, David L. Johnston, and Wayne B. Lyon
(e)(8)		Indemnity Agreement provided by Emco Limited for each of Frank M. Hennessey, Douglas E. Speers, Gordon E. Currie, Richard J. Fantham, Roger K. Hollyman, Bradford W. Latner, Walter D. LeGrow and Mark F. Whitley
(e)(9)		Emco Limited’s Stock Option Plan, which forms part of Emco Limited’s 1991 Long-Term Incentive Plan
(e)(10)		Section entitled “Executive Compensation” from Emco Limited’s 2002 Management Information Circular


Exhibit No.		Description

(a)(1)		The Directors’ Circular, dated February 28, 2003, including the Fairness Opinion, dated February 19, 2003, from TD Securities Inc. to Emco Limited
(a)(2)		Letter, dated February 28, 2003, from Emco to Emco Shareholders and Debentureholders
(a)(3)		Letter, dated February 28, 2003, from Emco to participants in the Emco Share Purchase Plan
(a)(4)		Letter of Transmittal and Direction, dated February 28, 2003, for use by participants in the Emco Share Purchase Plan
(a)(5)		Letter, dated February 28, 2003, to participants in the Emco Stock Option Plan
(a)(6)		Notice of Acceptance for use by participants in the Emco Stock Option Plan
(e)(1)		Support Agreement, dated as of February 19, 2003, between 2022841 Ontario Inc., Blackfriars Corp. and Emco Limited
(e)(2)		Lock-up Agreement, dated as of February 19, 2003, between 2022841 Ontario Inc., Blackfriars Corp. and Masco Corporation
(e)(3)		Confidentiality Agreement, dated September 25, 2002, made between Emco Limited and an affiliate of Blackfriars Corp.
(e)(4)		Written Assurance, dated February 19, 2003, provided by Blackfriars Corp.
(e)(5)		Form of Change of Control Agreement made between Emco Limited and each of Douglas E. Speers, Gordon E. Currie, Richard J. Fantham, Roger K. Hollyman, Bradford W. Latner, Walter D. LeGrow and Mark F. Whitley
(e)(6)		Form of Change of Control Agreement made between Emco Limited and Jaap Burck
(e)(7)		Form of Indemnity Agreement provided by Emco Limited for each of Frank M. Hennessey, Douglas E. Speers, Richard B. Grogan, D. Brian Harrison, David L. Johnston, and Wayne B. Lyon
(e)(8)		Form of Indemnity Agreement provided by Emco Limited for each of Frank M. Hennessey, Douglas E. Speers, Gordon E. Currie, Richard J. Fantham, Roger K. Hollyman, Bradford W. Latner, Walter D. LeGrow and Mark F. Whitley
(e)(9)		Emco Limited’s Stock Option Plan which forms part of Emco Limited’s 1991 Long-Term Incentive Plan
(e)(10)		Section entitled “Executive Compensation” from Emco Limited’s 2001 Management Information Circular


DEFINITIONS
DIRECTORS’ CIRCULAR
RECOMMENDATION OF THE BOARD OF DIRECTORS
REASONS FOR RECOMMENDATION
ENGAGEMENT AGREEMENT AND FAIRNESS OPINION
BACKGROUND TO THE OFFER
ARRANGEMENTS, AGREEMENTS OR UNDERSTANDINGS
Support Agreement
SHARE CAPITAL OF EMCO
PRINCIPAL SHAREHOLDERS
OWNERSHIP OF SECURITIES OF EMCO BY DIRECTORS AND SENIOR OFFICERS
STOCK OPTION PLAN
OWNERSHIP OF SECURITIES OF THE OFFEROR OR BLACKFRIARS
INTENTION OF DIRECTORS, SENIOR OFFICERS, AND CERTAIN SHAREHOLDERS OF EMCO WITH RESPECT TO THE OFFER
TRADING IN SECURITIES OF EMCO
ISSUANCES OF SECURITIES OF EMCO
RELATIONSHIP BETWEEN THE OFFEROR AND DIRECTORS, SENIOR OFFICERS, AFFILIATES AND PRINCIPAL SHAREHOLDERS OF EMCO
ARRANGEMENTS AND AGREEMENTS BETWEEN EMCO AND ITS DIRECTORS, SENIOR OFFICERS AND AFFILIATES
REGULATORY MATTERS
MATERIAL CHANGES IN THE AFFAIRS OF EMCO
OTHER TRANSACTIONS
OTHER INFORMATION
STATUTORY RIGHTS
APPROVAL OF THE DIRECTORS’ CIRCULAR
CONSENT OF TD SECURITIES INC.
CERTIFICATE
DIRECTORS' CIRCULAR DATED FEBRUARY 28, 2003
LETTER DATED FEBRUARY 28, 2003
LETTER DATED FEBRUARY 28, 2003
LETTER OF TRANSMITTAL AND DIRECTION
LETTER DATED FEBRUARY 28, 2003
NOTICE OF ACCEPTANCE
SUPPORT AGREEMENT DATED FEBRUARY 19, 2003
LOCK-UP AGREEMENT DATED FEBRUARY 19, 2003
CONFIDENTIALITY AGREEMENT DATED SEPTEMBER 25, 2003
WRITTEN ASSURANCE DATE FEBRUARY 19, 2003
FORM OF CHANGE OF CONTROL AGREEMENT
FORM OF CHANGE OF CONTROL AGREEMENT
FORM OF IDEMNITY AGREEMENT
FORM OF INDEMNITY AGREEMENT
EMCO LIMITED STOCK OPTION PLAN
SECTION ENTITLED "EXECUTIVE COMPENSATION"


	Page

DEFINITIONS		ii
DIRECTORS’ CIRCULAR		1
RECOMMENDATION OF THE BOARD OF DIRECTORS		1
REASONS FOR RECOMMENDATION		1
ENGAGEMENT AGREEMENT AND FAIRNESS OPINION		2
BACKGROUND TO THE OFFER		3
ARRANGEMENTS, AGREEMENTS OR UNDERSTANDINGS		4
SHARE CAPITAL OF EMCO		9
PRINCIPAL SHAREHOLDERS		9
OWNERSHIP OF SECURITIES OF EMCO BY DIRECTORS AND SENIOR OFFICERS		10
STOCK OPTION PLAN		11
OWNERSHIP OF SECURITIES OF THE OFFEROR OR BLACKFRIARS		11
INTENTION OF DIRECTORS, SENIOR OFFICERS, AND CERTAIN SHAREHOLDERS OF EMCO WITH RESPECT TO THE OFFER		11
TRADING IN SECURITIES OF EMCO		12
ISSUANCES OF SECURITIES OF EMCO		13
RELATIONSHIP BETWEEN THE OFFEROR AND DIRECTORS, SENIOR OFFICERS, AFFILIATES AND PRINCIPAL SHAREHOLDERS OF EMCO		14
ARRANGEMENTS AND AGREEMENTS BETWEEN EMCO AND ITS DIRECTORS, SENIOR OFFICERS AND AFFILIATES		14
REGULATORY MATTERS		14
MATERIAL CHANGES IN THE AFFAIRS OF EMCO		16
OTHER TRANSACTIONS		16
OTHER INFORMATION		16
STATUTORY RIGHTS		16
APPROVAL OF THE DIRECTORS’ CIRCULAR		16
CONSENT OF TD SECURITIES INC.		17
CERTIFICATE		18
SCHEDULE “A” — FAIRNESS OPINION		A-1


	Number of		Percentage of
Name and Address	Emco Shares		Emco Shares (1)

MASCO CORPORATION Taylor, Michigan		6,621,334		41.7%
LETKO, BROSSEAU & ASSOCIÉS INC. Montreal, Quebec		1,893,215		11.9%

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Graham P.C. Gow, Esq. McCarthy Tétrault LLP Suite 4700 Toronto Dominion Bank Tower Toronto, Ontario M5K 1E6 (416) 601-7677		Kenneth R. Blackman, Esq. Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, NY 10004 (212) 859-8000


	Date of		Nature of		Number of		Price Per
Name	Trade		Trade		Emco Shares		Emco Share (1)

Letko, Brosseau & Associés Inc.		27-Feb-03		Sale (1)		600	$	16.48
		10-Sep-02		Purchase (1)		3,000	$	10.80
		6-Nov-02		Sale (1)		4,200	$	10.86
		15-Nov-02		Purchase (1)		4,500	$	11.34
		20-Nov-02		Sale (1)		300	$	11.00
		20-Nov-02		Purchase (1)		300	$	11.00
		18-Dec-02		Purchase (1)		500	$	11.00
Walter D. LeGrow		—		Purchase (2)		132		—
Douglas E. Speers		—		Purchase (2)		831		—
Gordon E. Currie		—		Purchase (2)		347		—
Mark F. Whitley		—		Purchase (2)		199		—
Roger K. Hollyman		—		Purchase (2)		284		—
Bradford W. Latner		—		Purchase (2)		210		—
Jaap Burck		—		Purchase (2)		216		—
Richard J. Fantham		—		Purchase (2)		360		—


	Date of		Securities					Price per
Name	Issuance		Issued		Number			Emco Share (1)

Douglas E. Speers		—		Emco Shares		4,313	(2)		—
		21-Feb-02		Options		40,000		$	7.75
		04-Sep-02		Emco Shares		14,000	(3)	$	7.00
Jaap Burck		—		Emco Shares		1,048	(2)		—
		21-Feb-02		Options		7,000		$	7.75
Gordon E. Currie		—		Emco Shares		1,469	(2)		—
		21-Feb-02		Options		17,000		$	7.75
Richard J. Fantham		—		Emco Shares		1,518	(2)		—
		21-Feb-02		Options		20,000		$	7.75
Roger K. Hollyman		—		Emco Shares		1,235	(2)		—
		21-Feb-02		Options		12,000		$	7.75
		04-Sep-02		Emco Shares		1,000	(3)	$	7.00
Bradford W. Latner		—		Emco Shares		1,755	(2)		—
		21-Feb-02		Options		6,000		$	7.75
Walter D. LeGrow		—		Emco Shares		527	(2)		—
		21-Feb-02		Options		17,000		$	7.75
		04-Sep-02		Emco Shares		9,000	(3)	$	7.00
Mark F. Whitley		—		Emco Shares		875	(2)		—
		21-Feb-02		Options		6,000		$	7.75
Richard B. Grogan		04-Sep-02		Emco Shares		12,000	(3)	$	7.00


(signed) FRANK M. HENNESSEY Chairman of the Board of Directors		(signed) D. BRIAN HARRISON Director



		(TD Securities)
		TD Securities Inc. TD Tower 66 Wellington Street West, 8^thFloor Toronto, Ontario M5K 1A2