SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Bryan Steam Corporation
(Name of Subject Company)
Bryan Steam Corporation
(Name of Person(s) Filing Statement)
Common Stock, par value $10.00 per share
(Title of Class of Securities)
117547 109
(CUSIP Number of Class of Securities)
H. Jesse McVay
Bryan Steam Corporation
P.O. Box 27
Peru, Indiana 46970
(765) 473-6651
With copy to:
Eric R. Moy, Esquire
Barnes & Thornburg
11 South Meridian Street
Indianapolis, Indiana 46204
(317) 236-1313
(Name, address and telephone number of
person authorized to receive notice
and communications on behalf of the
person(s) filing statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Bryan Steam Corporation, a New
Mexico corporation ("Bryan" or the "Company"). The address of the principal
executive offices of the Company is State Road 19 North, P.O. Box 27, Peru,
Indiana 46970. The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9" or
the "Statement") relates is the Company's Common Stock, par value $10 per share
(the "Common Stock" or the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER
This Statement relates to the tender offer by Burnham Acquisition
Corporation, a New Mexico corporation ("Purchaser"), and a wholly owned
subsidiary of Burnham Corporation, a New York corporation ("Parent"), disclosed
in a Tender Offer Statement on Schedule 14D-1, dated September 29, 1998 (the
"Schedule 14D-1"), to purchase all outstanding Shares for a purchase price of
$152.00 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
September 29, 1998 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"), copies of which are filed herewith as
Exhibits A and B, respectively, and incorporated herein by reference.
The Offer is being made pursuant to the terms of an Agreement and Plan
of Merger, dated as of September 23, 1998 (the "Merger Agreement"), by and among
Parent, Purchaser and the Company, a copy of which is filed herewith as Exhibit
C and incorporated herein by reference. Pursuant to the Merger Agreement, after
completion of the purchase of Shares pursuant to the Offer and the satisfaction
of other provisions of the New Mexico Business Corporation Act (the "NMBCA"),
Purchaser will be merged with and into the Company (the "Merger"), with the
Company being the surviving corporation in the Merger and a wholly owned
subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), by virtue of the Merger and without any action on the part of the
Company, Parent or Purchaser, each Share then outstanding (other than Shares
owned by Parent, Purchaser or any subsidiary of Parent, Purchaser or the Company
or held in the treasury of the Company, all of which shall be canceled, and
Shares held by shareholders who perfect their appraisal rights under the NMBCA)
will be converted into and represent the right to receive $152.00 in cash per
Share, subject to applicable withholding or back-up withholding taxes, if any,
without interest thereon (the "Merger Consideration").
Based on information in the Offer to Purchase, the principal executive
offices of Purchaser and Parent are 1241 Harrisburg Pike, Lancaster,
Pennsylvania 17603. Copies of the press release issued by the Company and Parent
are filed herewith as Exhibit D, and incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND.
(a) Name and Address of The Company. The name and address of the
Company, which is the person filing this Statement, is set forth in Item 1
above.
(b) Material Contracts, etc. Except as set forth in this Item 3(b) or
incorporated herein by reference, to the knowledge of the Company, as of the
date hereof there exists no material contract, agreement, arrangement or
understanding and no actual or potential conflict of interest between the
Company or its affiliates and (1) the executive officers, directors or
affiliates of the Company or (2) Parent or Purchaser or their respective
executive officers, directors or affiliates.
(b)(1)
The Stockholders' Agreement.
General. In order to induce Parent to execute and deliver the Merger
Agreement, each of Robert Miller, Ina Mae Miller, Beverly Bryan, Georgeanna
Williams, as Trustee of the Georgeanna Williams Revocable Living Trust, Lisa
Lockhart, Charles Miller, Kenneth Starkey, Bryan Herd, Sharon Herd, Marilyn
Malott, Paul Malott, Victor Herd and Kristine Herd
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have entered into a Stockholders' Agreement, dated as of September 23, 1998,
with Parent. The stockholders who have signed the Stockholders' Agreement
together beneficially own 106,315 Shares, constituting approximately 55.6% of
the outstanding Shares.
The following is a summary of the material terms of the Stockholders'
Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is incorporated herein by reference and a copy of which has
been filed with the Securities and Exchange Commission (the "Commission") as
Exhibit E to the Schedule 14D-9.
Voting of Shares. The stockholders of the Company who signed the
Stockholders' Agreement have agreed as set forth below to tender their Shares
and have irrevocably appointed Parent as the exclusive attorney-in-fact and
proxy of such stockholder, with full power of substitution. Parent, as proxy of
such holder has been granted the power:
I. to attend any and every meeting (whether annual or special or
both) of the stockholders of the Company, including any
adjournment or postponement thereof, on behalf of such
stockholder, and at each such meeting, with respect to all
shares of common stock of the Company owned by such
stockholder on the date of execution and delivery of the
Stockholders' Agreement or acquired thereafter that are
entitled to vote at each such meeting or over which such
stockholder has voting power (and any and all other shares of
common or preferred stock of the Company or other securities
issued on or after such date in respect of any such shares),
including, without limitation, the shares indicated opposite
such stockholder's signature at the end of the Stockholders'
Agreement:
A. to vote in favor of the Merger (as such term is
defined in the Merger Agreement) and to vote in favor
of the adjournment of any meeting, which Parent
believes may facilitate the obtaining the approval of
the Merger; and otherwise to act with respect to such
shares as said attorney-in-fact and proxy (or his
substitute) shall deem necessary or appropriate to
cause the approval of the Merger by the necessary
majority required under applicable law;
B. to vote and otherwise act with respect to such shares
in such a manner as said attorney-in-fact and proxy
(or his substitute) shall deem proper, with respect
to (x) proposals or offers (other than the Merger)
relating to (1) any proposed sale, lease or other
disposition of all or a substantial amount of the
assets of the Company or any of its subsidiaries, (2)
any proposed merger, consolidation or other
combination of the Company or any of its subsidiaries
with any other entity, (3) any sale, issuance,
disposition or granting of rights in respect of the
shares of the Company or of any subsidiary of the
Company or (4) any other proposed action of the
Company or any of its subsidiaries requiring
stockholder approval that would conflict with or
violate the Company's representations, covenants or
obligations under the Merger Agreement, adversely
affect the Company's ability to consummate the Merger
or the other transactions contemplated by the Merger
Agreement or otherwise impede, interfere with or
discourage the Merger (each of the actions described
in (1) - (4) above, an "Acquisition Proposal"), and
(y) any procedural matters presented at any such
meeting at which any action is scheduled to be taken
with respect to the Merger or any Acquisition
Proposal;
II. if no meeting of stockholders is scheduled in accordance with
the Merger Agreement or if any such meeting is canceled,
postponed or adjourned other than with Parent's approval, to
call a special stockholders meeting of the Company for the
purpose of (i) approving the Merger or any action with respect
thereto, or (ii) taking action with respect to any Acquisition
Proposal; and
III. to waive, for the duration of this Stockholders' Agreement,
any and all rights such stockholder may have to exercise any
rights as dissenting shareholder under Sections 53-15-3 and
53-15-4 of the NMBCA, subject to the right to receive the
consideration as specifically provided in the Merger
Agreement.
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Restrictions on Transfer. Each of the stockholders who is a party to
the Stockholders' Agreement have agreed (a) not to deposit any of such
stockholder's shares of common stock of the Company into a voting trust or enter
into a voting agreement with respect to such shares; (b) not to sell, transfer
or otherwise dispose of or pledge or otherwise encumber, any shares of common
stock of the Company, or options or warrants to purchase such shares, unless the
purchaser or transferee of such shares or rights agrees in writing (a copy of
which shall be delivered by such stockholder to Parent and Purchaser) prior to
such sale, transfer or disposition to be bound by and subject to the provisions
contained in the Stockholders' Agreement; and (c) not, in his or her capacity as
stockholder, to solicit, initiate, encourage, endorse, support (including, by
providing information) or participate in any discussions regarding, any
Acquisition Proposal other than the Merger.
Irrevocable Proxy. Each of the stockholders who is a party to the
Stockholders' Agreement has affirmed that the proxy contained in the
Stockholders' Agreement is issued in connection with the Merger Agreement to
facilitate the transactions contemplated thereunder and in consideration of
Parent and Purchaser entering into the Merger Agreement and as such is coupled
with an interest and is irrevocable. The proxy contained in the Stockholders'
Agreement will terminate upon the earlier to occur of (a) the Effective Time as
defined in the Merger Agreement and (b) the termination of the Merger Agreement
in accordance with its terms. By execution and delivery of the Stockholders'
Agreement, each of the stockholders who are a party to the Stockholders'
Agreement has confirmed that such stockholder has received a copy of a
substantially final form of the Merger Agreement, and that all other information
deemed necessary by such stockholder concerning the Merger, the Merger Agreement
and the transactions contemplated thereunder or any other matters considered by
such stockholder to be relevant to the stockholder's decision to execute this
Agreement has been made available to such stockholder. All authority conferred
or agreed to be conferred in the Stockholders' Agreement survives the death,
insolvency, or incapacity of each the stockholders who is a party to the
Stockholders' Agreement and any obligation of any of such stockholder thereunder
is binding upon the heirs, personal representatives, successors and assigns of
such stockholder. The proxy contained in the Stockholders' Agreement revokes any
and all other proxies theretofore granted by each and every stockholder who is
party to the Stockholders' Agreement. Each stockholder who is a party to the
Stockholders' Agreement has agreed to not give any subsequent proxy or grant any
option with respect to such shares (and such proxy or option if given will be
deemed not to be effective) that purports to grant authority within the scope of
the authority conferred in the Stockholders' Agreement.
Covenant to Tender Shares. In order further to induce Purchaser and
Parent to enter into the Merger Agreement, each stockholder who signed the
Stockholders' Agreement thereby further agreed validly to tender (or cause the
record owner of such shares validly to tender), and not to withdraw, pursuant to
and in accordance with the terms of the Offer, not later than the tenth business
day after commencement of the Offer pursuant to the Merger Agreement and Rule
14d-2 under the Exchange Act, the number of Shares set forth opposite such
stockholder's name on the signature pages to the Stockholders' Agreement (the
"Existing Securities" and, together with any Shares acquired by such stockholder
(whether beneficially or of record) after the date of the Stockholders'
Agreement and prior to the termination of the Stockholders' Agreement by means
of purchase, dividend, distribution, transfer, issuance, or exercise of options
or other rights to acquire the Shares (the "Securities")). If any stockholder
who signed the Stockholders' Agreement acquires Securities after the date of the
Stockholders' Agreement, such stockholder has agreed to tender (or cause the
record holder to tender) pursuant to the Offer such Securities on or before such
tenth business day or, if later, on or before the second business day after such
acquisition. Each stockholder who signed the Stockholders' Agreement
acknowledged and agreed that Purchaser's obligation to accept for payment,
purchase and pay for the Securities in the Offer, including the Securities
beneficially owned by such stockholder, is subject to the terms and conditions
of the Offer.
Specific Performance. Each stockholder who executed the Stockholders'
Agreement acknowledged that money damages would be both incalculable and an
insufficient remedy for any breach of the Stockholders' Agreement by it, and
that any such breach would cause Parent and Purchaser irreparable harm.
Accordingly, each such stockholder agreed that in the event of any breach or
threatened breach of this Agreement, Parent and Purchaser, in addition to any
other remedies at law or in equity they may have, is entitled, without the
requirement of posting a bond or other security, to equitable relief, including
injunctive relief and specific performance.
Representations. Each stockholder who executed the Stockholders'
Agreement represented and warranted that, as of the date of the Stockholders'
Agreement, such stockholder (a) owned personally and directly the number of
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shares of the Shares set forth in the signature page of the Stockholders'
Agreement, (b) owned such stock free and clear of all liens, security interests,
encumbrances, options and other adverse interests of every kind whatsoever, and
(c) had the power and right to execute and deliver the Stockholders' Agreement,
and perform such stockholder's obligations thereunder, without the consent or
agreement of any other person or entity.
Release of Claims. Each of the stockholders who executed the
Stockholders' Agreement irrevocably waived and released any and all claims such
stockholder may have as a holder of Shares against any employee, officer or
director of the Company or any of its subsidiaries in respect of the conduct of
such employee, officer or director in his or her capacity as such prior to
consummation of the Merger.
Governing Law. The Stockholders' Agreement is governed by the laws of
the State of Indiana except that the provisions hereof with respect to the
granting of proxies, the exercise of the rights granted in respect of such
proxies and the associated appointment of attorneys-in-fact is governed by the
laws of the jurisdiction of incorporation of the Company.
Employment Agreement with McVay.
The Company has an Employment Agreement, dated April 1, 1998, with H.
Jesse McVay. Such agreement provides for an initial term of three (3) years,
automatically extended for an additional year on each anniversary of the date of
such agreement unless either party gives written notice not to so extend within
ninety (90) days prior to an annual anniversary, in which case no further
extension shall occur and the term shall end two years subsequent to the annual
anniversary immediately following the anniversary prior to which the notice not
to extend for an additional year is given. Such agreement provides for an
initial annual salary of $77,200 which may be increased from time to time by the
Company. Pursuant to such agreement, if the Company terminates the employment of
Mr. McVay without cause, or if Mr. McVay terminates his employment by reason of
a material breach of any term, condition or covenant of the Company under the
Employment Agreement, the Company must pay to Mr. McVay a lump sum equal to one
hundred percent (100%) of his total salary and bonus (excluding the Transaction
Bonus described below) for the preceding calendar year, plus costs of engaging a
placement firm to find alternative employment, and the Company must maintain,
for a period of one year after the date of termination, each employee medical
and life benefit plan in which Mr. McVay was entitled to participate immediately
prior to the date of termination, unless an essentially equivalent benefit is
provided by another source. Such agreement also provides for the payment of a
transaction bonus (the "Transaction Bonus") in the amount of $30,000 in the
event of a change of control (as defined in the agreement), payable one half on
the date of the change of control and one half on the date six months after the
change in control. The Merger Agreement provides that such Transaction Bonus
will be triggered by the Offer.
The foregoing summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is incorporated by reference and a copy of which has been
filed with the Commission as Exhibit F to the Schedule 14D-9.
Employment Agreement with Bishop.
The Company has an Employment Agreement, dated April 1, 1998, with
Albert J. Bishop. Such agreement provides for an initial term of five years and
initial annual salary of $12,000 which may be increased from time to time by the
Company. Pursuant to such agreement, if the Company terminates the employment of
Mr. Bishop without cause, or if Mr. Bishop terminates his employment by reason
of a material breach of any term, condition or covenant of the Company under the
Employment Agreement, the Company must continue to pay to Mr. Bishop monthly
payments equal to his base compensation for the full remainder of the term of
the agreement, and the Company must maintain, for a period of one year after the
date of termination, each employee medical and life benefit plan in which Mr.
Bishop was entitled to participate prior to the date of termination, unless an
essentially equivalent benefit is provided by another source. Such agreement
also provides for the payment of a Transaction Bonus in the amount of $50,000 in
the event of a change of control (as defined in the agreement), payable one half
on the date of the change of control and one half on the date six months after
the change in control. The Merger Agreement provides that the Transaction Bonus
will be triggered by the Offer.
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The foregoing summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is incorporated by reference and a copy of which has been
filed with the Commission as Exhibit G to the Schedule 14D-9.
Other Employment Agreements.
The Company also has Employment Agreements, dated April 1, 1998, with
each of the following executive officers of the Company: Richard D. Holmquist,
Kurt J. Krauskopf, Terrence D. Kubly, P. Wayne McCune, Gregory A. Minard, Sandra
A. Mitting and Michael D. Sturch (each an "Employment Agreement" and,
collectively, the "Employment Agreements"). The Employment Agreements of Mr.
Holmquist, Mr. Krauskopf, Mr. Minard, Ms. Mitting and Mr. Sturch provide for an
initial term of two (2) years and the Employment Agreements of Mr. Kubly and Mr.
McCune provide for an initial term of three (3) years. Pursuant to the
Employment Agreements, if the Company terminates the employment of such
employees without cause, or if the respective employee terminates his or her
employment by reason of a material breach of any term, condition or covenant of
the Company under the applicable Employment Agreement, the Company must pay to
the respective employee a lump sum equal to fifty percent (50%) of his or her
total salary and bonus for the preceding calendar year (excluding any
Transaction Bonus), plus the costs of engaging a placement firm to find
alternative employment, and the Company must maintain, for a period of one year
after the date of termination, each employee medical and life benefit plan in
which the respective employee was entitled to participate immediately prior to
the date of termination, unless an essentially equivalent benefit is provided by
another source. Such agreement also provides for the payment of a Transaction
Bonus in the event of a change of control (as defined in the agreement), payable
one half on the date of the change of control and one half on the date six
months after the change in control. The Transaction Bonuses provided in the
Employment Agreements for Messrs. Holmquist, Krauskopf, Kubly, McCune, Minard,
Mitting and Sturch are $4,000, $8,000, $8,000, $8,000, $4,000, $2,000 and
$4,000, respectively. The Merger Agreement provides that the Transaction Bonuses
will be triggered by the Offer.
The foregoing summary is not a complete description of the terms and
conditions of the Employment Agreements and is qualified in its entirety by
reference to the full text of the Employment Agreements which are incorporated
by reference and copies of which has been filed with the Commission as Exhibits
H through N to the Schedule 14D-9.
Goelzer Agreement.
On March 18, 1998, the Company and a management group led by H. Jesse
McVay and consisting of several senior management employees of the Company
(excluding Albert J. Bishop) engaged Goelzer & Co., Inc. ("Goelzer & Co.") to
represent such management group (the "Management Group") in arranging a
management-supported offer for up to 100% of the common equity of the Company.
Pursuant to a Letter Agreement by and among the Company, Goelzer & Co. and the
Management Group, dated March 18, 1998 and amended August 26, 1998, the Company
has agreed to pay to Goelzer & Co. a fee of $200,000.
The foregoing summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is incorporated by reference and a copy of which has been
filed with the Commission as Exhibit O to the Schedule 14D-9.
(b)(2) In connection with the transactions contemplated by the Merger,
the following agreements were entered into: (i) the Merger Agreement and (ii) a
Confidentiality Agreement, dated as of June 18, 1998, by and between the Company
(acting through its agent, Goelzer) and Parent (the "Confidentiality
Agreement").
The Merger Agreement.
The following is a summary of the material terms of the Merger
Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof, which is incorporated herein by reference and a copy of which has
been filed with the Commission as Exhibit C to this Schedule 14D-9.
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The Offer. The Merger Agreement provides for the commencement of the
Offer, in connection with which Parent or Purchaser has expressly reserved the
right to waive conditions of the Offer, in whole or in part, at any time and
from time to time in their sole discretion. Purchaser has agreed, however, that
it will not, without the prior written consent of the Company, (i) decrease or
change the amount or form of consideration payable in the Offer, (ii) decrease
the number of Shares sought pursuant to the Offer, (iii) impose additional
conditions to the Offer, (iv) change the conditions of the Offer (provided that
Parent or Purchaser in their sole discretion may waive any of the conditions to
the Offer) or (v) make any change to any other provision of the Offer that is
materially adverse to the holders of the Shares. Purchaser is entitled to extend
the Offer in accordance with applicable law as follows: (i) if any of the
conditions to the Offer are not satisfied or waived by Purchaser as of any
scheduled expiration date, then Purchaser may extend the Offer from time to time
until the earlier of (a) the consummation of the Offer or (b) twenty business
days following the original expiration date of the Offer specified herein, and
(ii) if all conditions to the Offer are satisfied or waived as of any scheduled
expiration date, then Purchaser may extend the Offer from time to time by not
more than ten business days in the aggregate. The obligation of Purchaser to
consummate the Offer and to accept for payment and to pay for any Shares
tendered pursuant to the Offer will be subject only to the conditions set forth
in "--Conditions to the Offer."
Board Representation. Upon the purchase of Shares by Purchaser pursuant
to the Offer, it is not contemplated that any changes in the present Board of
Directors of the Company or Management of the Company will occur.
The Merger. The Merger Agreement provides that, upon the terms and
subject to the conditions of the Merger Agreement, and in accordance with the
relevant provisions of the NMBCA, Purchaser shall be merged with and into the
Company as soon as practicable following the satisfaction or waiver of the
conditions to the Merger. The Company shall be the Surviving Corporation and
shall continue its existence under the laws of New Mexico, and the Certificate
of Incorporation and the Bylaws of Purchaser as in effect immediately prior to
the Effective Time shall be the Certificate of Incorporation and Bylaws of the
Surviving Corporation (except the name of the Surviving Corporation shall be
Bryan Steam Corporation). H. Jesse McVay, Albert Morrison III and Ronald L.
Griffith will be the initial directors of the Surviving Corporation and H. Jesse
McVay (President), Ronald L. Griffith (Vice President), Kurt J. Krauskopf
(Treasurer, Comptroller and Secretary), Robert Berardi (Assistant Treasurer) and
Tammy McEwen (Assistant Secretary) will be the initial officers of the Surviving
Corporation. Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares owned by Parent, Purchaser or any subsidiary
of Parent, Purchaser or the Company or held in the treasury of the Company, all
of which shall be canceled, and other than Dissenting Shares, as defined herein)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive in cash the Merger Price, upon
the surrender of the certificate representing such Shares. The parties to the
Merger Agreement shall cause the Merger to be consummated by filing with the
Corporation Commission of the State of New Mexico or its successor duly prepared
and executed Articles of Merger, as required by the NMBCA. The Merger will
become effective upon such filing or at such time thereafter as is provided
under applicable law.
Stockholder Meeting; Recommendation to Stockholders. Unless the Merger
is consummated in accordance with the "short-form" merger provisions under the
NMBCA, and subject to applicable law, the Company shall, through its Board of
Directors, duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Shareholder Meeting") for the purpose of voting on the
adoption of the plan of merger set forth in the Merger Agreement as soon as
reasonably practicable following the consummation of the Offer but in any event
prior to the 90th day after the date of the Merger Agreement (subject to
unavoidable delays in receiving comments from the SEC Staff or in considering
and preparing responses to such comments). Except to the extent legally required
for the discharge of the Board of Directors' fiduciary duties as reflected in a
written opinion of independent legal counsel, Bryan shall, through its Board of
Directors, include in the Proxy Statement the recommendation of the Board of
Directors of Bryan that the shareholders of Bryan adopt the Merger Agreement and
approve the Merger, and the Company is required to use all reasonable efforts to
obtain the adoption and approval of its stockholders, and obtaining the opinion
of McDonald & Company Securities, Inc. ("McDonald & Co.") to the effect that the
Merger Price is fair to the Company's stockholders from a financial point of
view. Parent and Purchaser have agreed that, at the Shareholder Meeting, all of
the Shares acquired pursuant to the Offer or otherwise by Parent or Purchaser or
any of their affiliates will be voted in favor of the Merger.
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If Purchaser or any other direct or indirect subsidiary of Parent shall
acquire at least 90 percent of the outstanding Shares, each of Parent, Purchaser
and the Company may, if Purchaser so elects, take all necessary and appropriate
action to cause the Merger to become effective, as soon as practicable after the
consummation of the Offer, without a meeting of stockholders of the Company, in
accordance with Section 53-14-5 of the NMBCA.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to corporate
existence and good standing, capital structure, subsidiaries, corporate
authorization, absence of changes, Commission filings, consents and approvals,
no defaults under agreements, investment banking fees, employee benefits, labor
relations, litigation, taxes, compliance with applicable laws, environmental
matters, intellectual property, real property, insurance, material contracts,
and other matters.
Purchaser and Parent have also made certain representations and
warranties with respect to corporate existence and good standing, corporate
authorization, Commission filings, consents and approvals, no violations of
other agreements and other matters.
Conduct of Business and Other Covenants Pending the Merger. The Company
has agreed that, except as expressly contemplated or permitted by the Merger
Agreement (or to the extent that Parent may otherwise grant prior consent in
writing, which consent shall not be unreasonably withheld), during the period
from the date of the Merger Agreement to the Effective Date, the Company will
conduct its business only in, and the Company will cause each of its
subsidiaries not to take any action except in, the ordinary course consistent
with past practice (subject to the further limitations specified in the Merger
Agreement). In addition, the Company has agreed that it will, and it will cause
its subsidiaries to use, all commercially reasonable efforts to preserve intact
in all material respects its present business organization and reputation, to
keep available the services of its key officers and employees, to maintain its
assets and properties in good working order and condition (ordinary wear and
tear excepted), to preserve its relationships with customers and suppliers and
others having significant business dealings with them, to comply in all material
respects with all laws and orders of all governmental or regulatory authorities
applicable to them, and to maintain insurance (subject to consulting with Parent
prior to renewing any insurance policy), including, without limitation, product
liability insurance, in such amounts and against such risks and losses as was in
effect on June 30, 1998 (subject to the specific reinstatement of product
liability insurance for one of the Company's subsidiaries).
In addition, without limiting the generality of the foregoing and
except as expressly contemplated or permitted by the Merger Agreement, during
the period specified in the first sentence of the preceding paragraph, the
Company has agreed that, without the prior written consent of Parent, it will
not (and will cause its subsidiaries not to):
(i) amend or propose to amend its or their Articles of
Incorporation or By-laws;
(ii) (w) declare, set aside or pay any dividends on or
make other distributions in respect of any of its
capital stock other than the dividend of $2.00 per
share declared on the Shares on August 26, 1998 and
payable on September 15, 1998; (x) split, combine,
reclassify or take similar action with respect to any
of its capital stock or issue or authorize or propose
the issuance of any other securities or option in
respect of, in lieu of or in substitution for Shares,
(y) adopt a plan of complete or partial liquidation
or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or other
reorganization or (z) directly or indirectly redeem,
repurchase or otherwise acquire any Shares or any
option with respect thereto;
(iii) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any Shares or any
option with respect thereto, or modify or amend any
right of any holder of outstanding Shares or options
with respect thereto;
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(iv) acquire (by merging or consolidating with, or by
purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other
manner) any business or any corporation, partnership,
association or other business organization or
division thereof or otherwise acquire or agree to
acquire any assets other than raw materials and
supplies acquired in the ordinary course of its
business consistent with past practice in amounts in
any one instance (or group of related instances) not
in excess of $250,000 and in each case pursuant to an
order or agreement requiring delivery of such raw
materials and supplies within 120 days after the
creation of such order or agreement;
(v) sell, lease, grant any security interest in or
otherwise dispose of or encumber any of its assets or
properties other than finished goods in the ordinary
course of business consistent with past practice
pursuant to orders as to which (x) no one order (or
group of related orders) involves an aggregate
selling price in excess of $150,000, and (y) (i) each
order is to be fully performed within 150 days after
its creation or (ii) in the case of orders for which
there is no definite date by which the orders must be
fully performed, the aggregate selling price for all
such orders that are more than 150 days old shall not
exceed $500,000;
(vi) except to the extent required by applicable law or
generally accepted accounting principals, (x) permit
any material change in (A) any pricing, marketing,
purchasing, investment, accounting, financial
reporting, inventory, receivable, credit, allowance
or tax practice or policy or (B) any method of
calculating any bad debt, contingency or other
reserve for accounting, financial reporting or tax
purposes or (y) make any material tax election or
settle or compromise any material income tax
liability with any governmental or regulatory
authority;
(vii) (x) other than working capital borrowings of up to
$300,000 under the Company's existing bank line of
credit, incur any indebtedness for borrowed money
(which shall be deemed for this purpose to include
entering into credit agreements, lines of credit or
similar arrangements, whether or not amounts are
borrowed thereunder) or guarantee any such
indebtedness, or (y) voluntarily purchase, cancel,
prepay or otherwise provide for a complete or partial
discharge in advance of a scheduled repayment date
with respect to, or waive any right under, any
indebtedness for borrowed money;
(viii) (x) enter into, adopt, amend in any material respect
(except as may be required by applicable law) or
terminate any Company benefit plan or other agreement
between the Company (or any of its subsidiaries) and
one or more of its directors, officers or employees,
or (y) increase in any manner the compensation or
fringe benefits of any director, officer or employee
or pay any benefit not required by any plan or
arrangement in effect as of the date hereof (except
that the Company shall comply with the union contract
and except for normal increases approved by Parent);
(ix) enter into any new contract or amend, modify or
terminate any existing contract, or engage in any new
transaction (x) not in the ordinary course of
business consistent with past practice, (y) not on an
arm's length basis, or (z) with any shareholder or
affiliate of the Company;
(x) make any capital expenditure or any commitment to
make a capital expenditure or any commitment for
additions to plant, property or equipment
constituting capital assets;
(xi) make any change in lines of business or any material
changes in prices, marketing plans or procedures;
(xii) make any changes to current levels of inventory,
receivables or payables, except as may occur in the
ordinary course of business consistent with past
practice;
-9-
(xiii) grant any stock-related, performance or similar
awards or bonuses;
(xiv) forgive any loans to employees, officers or directors
or any of their respective affiliates or associates;
(xv) make any deposits or contributions of cash or other
property to, or take any other action to fund or in
any other way secure the payment of compensation or
benefits under, any Company benefit plan;
(xvi) enter into, amend, extend or waive any rights under
any collective bargaining or other labor agreement;
(xvii) commence, settle or agree to settle any litigation,
suit, action, claim, proceeding or investigation;
(xviii) pay, discharge or satisfy or agree to pay, discharge
or satisfy any claim, liability or obligation
(absolute accrued, asserted or unasserted, contingent
or otherwise) other than (A) the payment, discharge
or satisfaction of liabilities reflected or reserved
against in full in the financial statements as at
June 30, 1998 or incurred in the ordinary course of
business subsequent to June 30, 1998 or (B) the
Company's Transaction Costs, which for these purposes
shall mean all out- of-pocket costs reasonably
incurred by the Company or any of its subsidiaries on
or after July 1, 1998 in connection with the
potential and actual sale of the Company, including
without limitation (1) the fees and expenses of
McDonald & Co., (2) the fees and expenses of Goelzer
& Co., (3) legal fees and expenses, (4) expenses for
environmental reports, (5) expenses for title
reports, (6) expenses for proxy solicitation and fees
and expenses of the Exchange Agent, and (7) filing
fees in connection with compliance with securities
and antitrust laws; but the term Company's
Transaction Costs shall not include (I) any amounts
payable or paid to senior managers of the Company
under the Senior Management Agreements by virtue of
the consummation of the Merger (Parent having agreed
separately to cause the Company after the Effective
Time to pay such amounts in addition to all other
consideration for the Merger), or (II) any expenses
incurred by Parent or Purchaser with respect to the
Offer;
(xix) enter into, modify, amend or terminate any contract
material to the business of the Company or any of its
subsidiaries which it may enter, amend or terminate
without violating clause (ix) above, or waive any
rights under any such contract, unless in each
instance the Company first obtains the consent of
Parent, which consent shall not be unreasonably
withheld;
(xx) enter into or extend or renew any contract (including
without limitation any insurance policy), which
contract, extension or renewal has a term or is to be
performed over a period of more than 60 days (and
before renewing any insurance policy, the Company
shall reasonably consult with Parent); or
(xxi) enter into any contract, agreement, commitment or
arrangement to do or engage in any of the foregoing.
The Company has agreed that it will confer on a regular and frequent
basis with Parent with respect to the Company's businesses and operations and
other matters relevant to the Merger, and shall promptly advise Parent, in
writing, of any change or event, including, without limitation, any complaint,
investigation or hearing by any governmental or regulatory authority (or
communication indicating the same may be contemplated) or the institution or
threat of litigation, having, or which, insofar as can be reasonably foreseen,
could have, a material adverse effect on the Company or on the ability of the
Company to consummate the transactions contemplated by the Offer and the Merger
Agreement.
-10-
No Solicitation. The Company has agreed that it will not, and it will
not authorize or permit its subsidiaries or any of its or their officers,
directors, employees, investment bankers, financial advisors, attorneys,
accountants or other agents or representatives (each, a "Representative") to
directly or indirectly, solicit, initiate or participate in any negotiations
regarding, furnish any confidential information in connection with, endorse or
otherwise cooperate with, or assist, participate in or facilitate (collectively,
"Solicitation Activities") the making of any proposal or offer for, or which may
reasonably be expected to lead to, a Potential Transaction (as defined below),
by any person, corporation, partnership or other entity or group, including a
current holder of the Shares or a person acting on behalf of or who has been in
contact with such a holder (a "Potential Acquiror"); provided, however, that to
the extent the Board of Directors of the Company believes, on the basis of a
written opinion furnished by independent legal counsel, that the failure to take
any such actions would constitute a breach of applicable fiduciary duties of
such Board of Directors, then the Company and its Representatives may
participate in Solicitation Activities but only to the extent necessary to
comply with such duties; provided further, however, that the Company will
promptly inform Parent, in writing, of the material terms and conditions of any
proposal or offer for, or which may reasonably be expected to lead to, a
Potential Transaction that it receives and the identity of the Potential
Acquiror and the Company shall keep Parent fully apprised of all developments
regarding such Potential Transaction. Such full apprising of all developments
shall include providing Parent with copies of all correspondence from or to the
Company and the Potential Acquirer, including all attachments and enclosures.
(As used in the Merger Agreement, "Potential Transaction" means any potential
merger, consolidation or other business combination involving the Company, or
any acquisition in any manner of all or a substantial portion of the equity of,
or all or a substantial portion of the assets of the Company whether for cash,
securities or any other consideration or combination thereof other than pursuant
to the transactions contemplated by the Merger Agreement.)
The Company has also agreed, as of the date and time of the Merger
Agreement that the Company and its Representatives will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties other than Parent and Purchaser conducted theretofore with respect
to any Potential Transaction.
Filing of the Proxy Statement. The Company has agreed that it will
prepare and file with the SEC the Proxy Statement at the earliest practicable
date after the Offer has expired or terminated (unless 90% or more of Shares are
acquired by Purchaser pursuant to the Offer or the Shares cease to be registered
under the Exchange Act in accordance with applicable law); and shall use all
reasonable efforts to have the Proxy Statement cleared by the SEC. Parent,
Purchaser and the Company have agreed to cooperate with each other in the
preparation of the Proxy Statement, and the Company has agreed to promptly
notify Parent of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information, and to promptly provide to Parent copies
of all correspondence between the Company or any representative of the Company
and the SEC with respect to the Proxy Statement. The Company has agreed to give
Parent and its counsel the opportunity to review the Proxy Statement and all
responses to requests for additional information by and replies to comments of
the SEC before their being filed with, or sent to, the SEC. If the Proxy
Statement is required to be filed with the SEC, each of the Company, Parent and
Purchaser has agreed to use all reasonable efforts, after consultation with the
other parties thereto, to respond promptly to all such comments of and requests
by the SEC and to cause the Proxy Statement to be mailed to the holders of
Shares entitled to vote at the Shareholder Meeting at the earliest practicable
time.
Shareholder Approval of the Merger. To the extent required by
applicable law, the Company has agreed to, through its Board of Directors, duly
call, give notice of, convene and hold the Shareholder Meeting for the purpose
of voting on the adoption of the Merger Agreement (the "Shareholders' Approval")
as soon as reasonably practicable after consummation of the Offer but in any
event prior to the 90th day after the date of the Merger Agreement (subject to
unavoidable delays in receiving comments from the SEC staff or in considering
and preparing responses to such comments).
Except to the extent legally required for the discharge of its fiduciary duties
as reflected in a written opinion of independent legal counsel, the Company has
agreed to include in the Proxy Statement the recommendation of the Board of
Directors of the Company that the shareholders of the Company adopt the Merger
Agreement and approve the Merger, and the Company has agreed to use all
reasonable efforts to obtain such adoption and approval, including utilizing a
proxy solicitation firm that is reasonably acceptable to Parent and obtaining
the opinion of McDonald & Co. to the effect that the Merger Price is fair to the
holders of the Shares from a financial point of view. At such meeting, Parent
shall, and has agreed to and has
-11-
agreed to cause its Subsidiaries to, vote all shares of the Shares, if any, then
owned by Parent or any such Subsidiary in favor of the adoption of the Merger
Agreement.
In the event that the approval and adoption of the Merger Agreement and
the Merger at the Shareholder Meeting or any adjournment thereof receives the
affirmative vote of less than 66-2/3% of all shares entitled to vote for such
approval, then Parent may in its sole discretion require the Company to, and the
Company has agreed to be obligated to, through its Board of Directors, duly
call, give notice of, convene and hold a second Shareholder Meeting for the
purpose of voting on the adoption of the Merger Agreement. Such second
Shareholder Meeting shall be held as soon as reasonably practicable after the
date of the notice from Parent to the Company in which Parent notifies the
Company that Parent desires the Company to call a second Shareholder Meeting.
If Parent directly or indirectly acquires at least 90 percent of the
outstanding Shares, each of Parent, Purchaser and the Company have agreed to
take all necessary and appropriate action as Parent may reasonably request to
cause the Merger to become effective as promptly as practicable after the
consummation of the Offer without a meeting of holders of the Shares in
accordance with the applicable provisions of the New Mexico Business Corporation
Act.
Consents and Approvals. Subject to certain conditions, each of the
Company and Parent have agreed to proceed diligently and in good faith and will
use all commercially reasonable efforts to do, or cause to be done, all things
necessary, proper or advisable to, as promptly as practicable, obtain all
consents, approvals or actions of, make all filings with and give all notices to
governmental or regulatory authorities or any other public or private third
parties that may be required of Parent, the Company or any of their subsidiaries
in order to consummate the Offer and the Merger. In addition to and not in
limitation of the foregoing, (i) each of the parties have agreed to (x) take
promptly all actions necessary to make the filings required of Parent and the
Company or their affiliates under the Hart Scott Rodino Antitrust Improvements
Act of 1974 (the "HSR Act"), (y) comply at the earliest practicable date with
any request for additional information received by such party or its affiliates
from the Federal Trade Commission (the "FTC") or the Antitrust Division of the
Department of Justice (the "Antitrust Division") pursuant to the HSR Act, and
(z) cooperate with the other party in connection with such party's filings under
the HSR Act and in connection with resolving any investigation or other inquiry
concerning the Merger or the other matters contemplated by the Merger Agreement
commenced by either the FTC or the Antitrust Division or state attorneys
general.
Company Employees. Parent has agreed the after the Effective Time the
Company will honor in accordance with their respective provisions the existing
agreements between the Company and each of Messrs. Bishop, McVay, Holmquist,
Krauskopf, Kubly, Minard, Mitting, McCune and Sturch (collectively, "Senior
Management Agreements"). Further, Parent has agreed to cause after the Effective
Time the Company to pay to each of such persons the transaction bonus
contemplated in each persons applicable Senior Management Agreement, in the
installments and at the times specified therein, irrespective of whether the
Merger is deemed to have been supported or sponsored by management or any
management group. In addition, Parent has agreed that it will cause the Company
after the Effective Time to honor all existing union contracts and all other
existing agreements between the Company and its employees that have been
disclosed by the Company to Parent prior to the date of the Merger Agreement.
Expenses. Subject to the applicability of the Termination Fee and
remedies in respect of a breach of the Merger Agreement, if the Merger is not
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated by the Merger Agreement will be paid
by the party incurring such cost or expense. However, if the Merger is
consummated, the Company's Transaction Costs (as defined below) will be paid by
the Company either before or after the Effective Time, or by Parent, without
reduction of the Offer Price or Merger Price payable to holders of Shares
pursuant to the terms of the Offer and the Merger Agreement. As used herein, the
"Company's Transaction Costs" means all out-of-pocket costs reasonably incurred
by the Company or any of its subsidiaries on or after July 1, 1998 in connection
with the potential and actual sale of the Company, including without limitation
(i) the fees and expenses of McDonald & Co., (ii) the fees and expenses of
Goelzer & Co., (iii) legal fees and expenses, (iv) expenses for environmental
reports, (v) expenses for title reports, (vi) expenses for proxy solicitation
and fees and expenses of the Exchange Agent, and (viii) filing fees in
connection with compliance with securities and antitrust laws. However, the
Company's Transaction Expenses do not include (a) any amounts payable or paid to
senior managers of the Company under the Senior Management
-12-
Agreements by virtue of the consummation of the Merger (Parent having agreed, as
described above, to cause the Company after the Effective Time to pay such
amounts in addition to all other consideration for the Merger), or (b) any
expenses incurred by Parent or Purchaser with respect to the Offer.
Brokers or Finders. Each of Parent and the Company has represented to
the other, as to itself and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by the Offer or the Merger Agreement,
except, in the case of the Company, for McDonald & Co. and Goelzer & Co.
Directors' and Officers' Indemnification.
(a) Until the fourth anniversary of the Effective Time (and until
resolution of any claims asserted prior to such fourth
anniversary), Parent has agreed to cause the Company after the
Effective Time to indemnify, defend and hold harmless, to the
extent allowed by law and to the extent currently provided in
the By-laws and Articles of Incorporation of the Company, each
person who is as of the date hereof, or has been at any time
prior to the date hereof, a director or officer of the Company
or any of its subsidiaries (the "Indemnified Parties") against
(i) (subject to certain restrictions specified in the Merger
Agreement) all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in
settlement of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person
is or was a director or officer of the Company or any
subsidiary of the Company, whether pertaining to any matter
existing or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities") and (ii) all
Indemnified Liabilities based in whole or in part on, or
arising in whole or in part out of, or pertaining to the
Merger Agreement or the transactions contemplated thereby, in
each case to the full extent the Company would have been
permitted under New Mexico law to indemnify such person (and
subject to the foregoing, the Company after the Effective Time
will, in the event the Company determines in its reasonable
discretion that such person would be entitled to
indemnification hereunder, pay expenses in advance of the
final disposition of any such action or proceeding to each
Indemnified Party; provided, however, that the person to whom
the expenses are advanced must provide an undertaking (without
delivering a bond or other security) to repay such advance if
it is ultimately determined that such person is not entitled
to indemnification as provided in Section 53-11-4.1 of the
NMBCA). Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought
against any Indemnified Parties (whether arising before or
after the Effective Time), (i) any counsel retained by the
Indemnified Parties for any period after the Effective Time
shall be reasonably satisfactory to the Company; (ii) after
the Effective Time, the Company will pay all reasonable fees
and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received as theretofore
provided; and (iii) after the Effective Time, the Company will
use all reasonable efforts to assist in the vigorous defense
of such matter, provided that the Company will not be liable
for any settlement of any claim effected without its written
consent, which consent, however, shall not be unreasonably
withheld. Any Indemnified Party wishing to claim
indemnification under the terms of the Merger Agreement, upon
learning of any such claim, action, suit, proceeding or
investigation, shall notify the Company (but the failure so to
notify the Company will not relieve the Company from its
obligation to indemnify such person except to the extent such
failure to notify prejudices the Company), and shall deliver
to the Company the undertaking, if any, required by the NMBCA
or the Merger Agreement. Notwithstanding anything to the
contrary contained in the Merger Agreement, after the
Effective Time the Company's obligation to indemnify the
officers and directors prior to the Effective time of the
Company as set forth above shall be limited to cover claims
only to the extent that those claims are not covered under the
Company's directors' and officers' insurance policies in
effect as of the date of the Merger Agreement and the
continuation, maintenance or substitution thereof as required
by the Merger Agreement.
-13-
Directors' and Officers' Insurance. For a period of four years after
the Effective Time, Parent has agreed to cause the Company after the Effective
Time to maintain in effect the policies of directors' and officers' liability
insurance that were maintained by the Company prior to the execution of the
Merger Agreement (provided that the Company may substitute therefor other
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
facts or events which occurred before or at the Effective Time; provided,
however, that the Company is not obligated to make annual premium payments for
such insurance to the extent such premiums exceed 125% of the premiums paid as
of the date of the Merger Agreement by the Company for such insurance (the
"Company's Current Premium"), and if such premiums for such insurance would at
any time exceed 125% of the Company's Current Premium, then the Company shall
cause to be maintained policies of insurance which, in the Company's good faith
determination, provided the maximum coverage available at an annual premium
equal to 125% of the Company's Current Premium.
Retention of the Company Name. Parent has agreed that until the 10th
anniversary of the Effective Time of the Merger, Parent will cause the name of
the Company to continue to be "Bryan Steam Corporation", unless, due to a change
in circumstances after the Effective Time, such continuation will be, in the
opinion of the Board of Directors of the Company at that time, materially
adverse to Parent or the Company.
Takeover Laws. The Company has agreed to, upon the request of Parent,
take all reasonable steps to exclude the applicability of, or to assist in any
challenge by Parent or the Purchaser of the validity or applicability to the
Merger of, any Takeover Laws. As used herein, "Takeover Laws" means any
"moratorium", "control share acquisition", "business combination", "fair price"
or other form of antitakeover laws and regulations of any jurisdiction that may
purport to be applicable to the Merger Agreement or the Merger.
Termination Fee; Expenses.
(a) The Company has agreed that in the event that the Merger
Agreement is terminated as a result of the occurrence of any
Trigger Event (as defined below), then the Company will pay to
Parent a fee equal to 1.5% of the Purchase Price plus all
Reimbursable Expenses (as defined below); provided, however,
that if such termination is solely attributable to events
described in clause (iii) or (iv) of the definition of Trigger
Event, then the Company will pay to Parent all Reimbursable
Expenses (but not the 1.5% fee). Amounts due hereunder shall
be payable in immediately available funds at the time of such
termination.
(b) As used herein, "Trigger Event" means the occurrence of any of
the following:
(i) the Board of Directors of the Company (or any
committee thereof) shall approve, recommend,
authorize, propose or facilitate any potential
Acquisition Transaction (as defined below) other than
the Offer and the Merger pursuant to the Merger
Agreement, or such Board (or any such committee)
shall engage in discussions or negotiations with a
potential counterparty concerning any such potential
Acquisition Transaction, or such Board (or any such
committee) shall publicly announce its intention to
do any of the foregoing;
(ii) the Board of Directors of the Company (or any
committee thereof) shall fail to recommend the Offer
and the Merger to stockholders of the Company in the
Schedule 14D-9 or proxy statement required by the
Merger Agreement or within two business days
following Parent's request from time to time that the
Company so confirm its recommendation of the Offer
and the Merger, or such Board (or any such committee)
shall withdraw, modify or amend in any manner adverse
to Parent the authorization, approval or
recommendation given by such Board (or such
committee) to the Offer and the Merger, or shall
publicly announce that it does not favor the Offer or
the Merger;
(iii) the shareholders of the Company holding at least
66-2/3% of the outstanding shares of the Shares shall
fail to approve the Merger in accordance with
-14-
applicable law at the Shareholder Meeting, or if the
Shareholder Meeting shall not be held on or prior to
December 31, 1998; or
(iv) any person, entity or "group" (as that term is used
in Section 13(d)(e) of the Exchange Act), other than
those shareholders who have executed and delivered
Stockholder Agreements as described in the recitals
to the Merger Agreement, becomes the beneficial owner
(as defined in Rule 13d-3 promulgated under the
Exchange Act) of 15% or more of outstanding the
Shares.
(c) As used herein, "Acquisition Transaction" means any tender
offer or exchange offer, any merger, consolidation,
liquidation, dissolution, recapitalization, reorganization or
other business combination, any acquisition, sale or other
disposition of a material amount of assets or securities or
any other similar transaction involving the Company, its
securities or any of its subsidiaries or divisions.
(d) As used herein, "Parent Reimbursable Expenses" means all
out-of-pocket costs (including without limitation reasonable
legal and accounting costs) theretofore and hereafter incurred
by Parent in connection with the transactions contemplated by
the Merger Agreement including, without limitation, costs and
expenses incurred in connection with (i) Parent's due
diligence investigations concerning the Company and its
subsidiaries, (ii) Parent's preparation of preliminary and
final proposals relating to the acquisition of the Company,
(iii) Parent's negotiation of the Merger Agreement, (iv)
Parent's assistance in the preparation of the proxy statement
relating to the Merger, (v) fees and expenses of the Exchange
Agent, and (vi) fees and expenses reasonably incurred so as to
facilitate and promote consummation of the Merger.
Conditions to the Merger. Pursuant to the Merger Agreement, the
respective obligations of each party to effect the Merger are subject to the
fulfillment, or waiver where permissible, at or prior to the proposed Effective
Time, of each of the following conditions: (a) the Merger Agreement and the
transactions contemplated thereby shall have been approved by the Company's
shareholders in the manner and to the extent required by applicable law and the
Articles of Incorporation and By-laws of the Company; (b) any waiting period
(and any extension thereof) applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated; (c) no action or proceeding
before a court of competent jurisdiction or other competent governmental body by
any governmental or regulatory authority shall have been instituted or
threatened to make illegal or otherwise restrain or prohibit (whether
temporarily, preliminary or permanently) the Merger or the other transactions
contemplated by the Merger Agreement or to obtain an amount of damages or other
material relief in connection with the execution of the Merger Agreement or the
consummation of the Merger or other transactions contemplated by the Merger
Agreement; and no governmental agency shall have given notice to any party
thereto to the effect that consummation of the Merger or the other transactions
contemplated by the Merger Agreement would constitute a violation of any law or
that it intends to commence proceedings to restrain consummation of the Merger
(each party thereto, however, has agreed to use reasonable efforts promptly to
have such prohibition or notice lifted); and (d) each of Purchaser and the
Company shall have received from the other appropriately certified copies of all
resolutions adopted by their respective Boards of Directors and shareholders in
connection with the Merger Agreement and the transactions contemplated thereby.
Conditions to Obligation of Parent and Purchaser to Effect the Merger.
The obligation of Parent and Purchaser to effect the Merger is further subject
to the fulfillment at or prior to the proposed Effective Time, of each of the
following additional conditions (all or any of which may be waived in whole or
in part by Parent and Purchaser in their sole discretion): (a) the Company shall
have performed and complied with, in all material respects, each agreement,
covenant and obligation required by the Merger Agreement to be so performed or
complied with by the Company at or prior to the Closing, and the Company shall
have delivered to Parent a certificate, dated the Closing Date and executed on
behalf of the Company by its President, to such effect; (b) all proceedings to
be taken on the part of the Company in connection with the transactions
contemplated by the Merger Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to Parent, and Parent shall have
received copies of all such documents and other evidences as Parent may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith, and such documents
shall include, but shall not be limited to (i) certain certificates as required
by certain provisions of the Merger Agreement, (ii) a certificate of existence
or good standing regarding each of the Company
-15-
and its subsidiaries, certified in the case of the Company by the New Mexico
Corporation Commission and certified in the case of the Company's Subsidiaries
by the appropriate office of the jurisdiction of its respective incorporation,
each dated within ten (10) business days of the proposed Effective Time, (iii)
an incumbency certificate certifying the identity of the officers of the
Company, and (iv) the resignations, effective the Closing Date, of such
directors and officers of the Company and its subsidiaries as Parent shall
specify consistent with the Merger Agreement; (c) Parent shall have received a
complete list of the signatories of each account or safe deposit box of the
Company and its subsidiaries; (d) the Company shall not have received written
objections to the Merger from holders who in the aggregate hold more than 10% of
the outstanding shares of the Shares, and the Company shall not have knowledge
that holders of 10% or more of the outstanding shares of the Shares intend to
file with the Company written objections to the Merger; (e) the Company shall
have delivered to Parent a final accounting of the Company's Transaction
Expenses, in form reasonably satisfactory to Parent, including copies of
applicable final invoices; (f) other than specific filings provided for by the
Merger Agreement, all consents, approvals and actions of filings with and
notices to any governmental or regulatory authority or any other public or
private third party required of the Company or any of its subsidiaries to
consummate the Merger and the other transactions contemplated by the Merger
Agreement, the failure of which to be obtained or taken could, individually or
in the aggregate, be reasonably expected to have a material adverse effect on
the Company and its subsidiaries or on the ability of the Company to consummate
the transactions contemplated by the Merger Agreement shall have been obtained,
all in form and substance reasonably satisfactory to Parent and no such consent,
approval or action shall contain any term or condition which could be reasonably
expected to result in a material diminution of the benefits of the Merger to
Parent.
Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger is further subject to the
fulfillment, at or prior to the proposed Effective Time, of each of the
following additional conditions (all or any of which may be waived in whole or
in part by the Company in its sole discretion): (a) each of the representations
and warranties made by Parent and Purchaser in the Merger Agreement shall be
true and correct in all material respects as of the proposed Effective Time as
though made on and as of such time or, in the case of representations and
warranties made as of a specified date earlier than such time, on and as of such
earlier date, and Parent and Purchaser shall each have delivered to the Company
a certificate, dated the proposed Effective Time and executed on behalf of
Parent by its President and on behalf of Purchaser by its President, to such
effect; (b) Parent and Purchaser shall have performed and complied with, in all
material respects, each agreement, covenant and obligation required by the
Merger Agreement to be so performed or complied with by Parent or Purchaser at
or prior to the Closing, and Parent and Purchaser shall each have delivered to
the Company a certificate, dated the Closing Date and executed on behalf of
Parent by its President and on behalf of Purchaser by its President, to such
effect; (c) the Company shall have received a written opinion, dated as of the
Closing Date, from Krieg, Devault, Alexander & Capehart, Indiana counsel to
Parent and Purchaser, from Cleary, Gottlieb, Steen & Hamilton and/or from
Parent's New Mexico counsel, as appropriate, in form and substance reasonably
satisfactory to the Company, as to certain appropriate matters agreed upon by
legal counsel of Parent and Purchaser and of the Company; (d) all proceedings to
be taken on the part of Parent and Purchaser in connection with the transactions
contemplated by the Merger Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company, and the Company
shall have received copies of all such documents and other evidences as the
Company may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith, and such
documents shall include, but shall not be limited to: (i) certain certificates
as required by certain provisions of the Merger Agreement, (ii) certificates of
existence or good standing regarding each of Parent and Purchaser, certified by
the New York Secretary of State and the New Mexico State Corporation Commission,
respectively, dated within ten (10) business days of the Closing Date, and (iii)
incumbency certificates certifying the identity of the officers of Parent and
Purchaser, respectively; and (e) the Exchange Fund shall have been funded with
the full amount of the Merger Price for all outstanding shares of the Shares.
Conditions to the Offer. Notwithstanding any other provision of the
Offer, the obligation of Purchaser to accept for payment, purchase or pay for
any Shares tendered prior to the scheduled expiration date of the Offer or any
extension thereof (the "Offer Date") is subject to the fulfillment, at or prior
to the Offer Date, of the following conditions (and upon the failure of any such
condition to be fulfilled, unless waived by Purchaser, Purchaser may terminate
the Offer as to any Shares not then accepted for payment, and Purchaser shall
not be required to accept for payment, purchase or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange
Act, pay for any Shares):
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(a) The number of Shares validly tendered and not withdrawn
shall constitute at least a two-thirds majority plus one of the
outstanding Shares on a fully diluted basis.
(b) Any waiting period (and any extension thereof) applicable
to the consummation of the Offer under the HSR Act shall have expired
or been terminated.
(c) No action or proceeding before a court of competent
jurisdiction or other competent governmental body by any governmental
or regulatory authority shall have been instituted or threatened to
make illegal or otherwise restrain or prohibit (whether temporarily,
preliminary or permanently) the Offer or the Merger or the other
transactions contemplated by the Merger Agreement or to obtain an
amount of damages or other material relief in connection with the
execution of the Merger Agreement or the consummation of the Offer or
other transactions contemplated by the Merger Agreement; and no
governmental agency shall have given notice to any party hereto to the
effect that consummation of the Offer or the Merger or the other
transactions contemplated by the Merger Agreement would constitute a
violation of any law or that it intends to commence proceedings to
restrain consummation of the Offer or the Merger.
(d) Purchaser shall have received from the Company
appropriately certified copies of all resolutions adopted by the
Company's Board of Directors in connection with the Offer, the Merger,
the Merger Agreement and the transactions contemplated thereby.
(e) Each of the representations and warranties made by the
Company in the Merger Agreement shall be true and correct in all
respects (subject to limitations as to materiality as may be contained
therein) as though made on and as of the Offer Date or, in the case of
representations and warranties made as of a specified date earlier than
the Offer Date, on and as of such earlier date, and the Company shall
have delivered to Parent a certificate, dated the Offer Date and
executed on behalf of the Company by its President to such effect.
(f) The Company shall have performed and complied with, in all
material respects, each agreement, covenant and obligation required by
the Merger Agreement to be so performed or complied with by the Company
at or prior to the Offer Date, and the Company shall have delivered to
Parent a certificate, dated the Offer Date and executed on behalf of
the Company by its President, to such effect.
(g) Parent and Purchaser shall have received a written
opinion, dated as of the Offer Date, from Barnes & Thornburg, counsel
to the Company, in form and substance reasonably satisfactory to Parent
and Purchaser, as to certain appropriate matters agreed upon by legal
counsel of Parent and Purchaser and of the Company.
(h) All proceedings to be taken on the part of the Company on
or before the consummation of the Offer in connection with the
transactions contemplated by the Merger Agreement and all documents
incident thereto shall be reasonably satisfactory in form and substance
to Parent, and Parent shall have received copies of all such documents
and other evidences as Parent may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith. Such documents shall include, but
shall not be limited to: (i) the certificates required by clauses (e)
and (f) of this Section 14; (ii) a certificate of existence or good
standing regarding each of the Company and its Subsidiaries, certified
in the case of the Company by the New Mexico Corporation Commission and
certified in the case of the Company's subsidiaries by the appropriate
office of the jurisdiction of its respective incorporation, each dated
within ten (10) business days of the Offer Date; and (iii) an
incumbency certificate certifying the identity of the officers of the
Company.
(i) The Company and each of its Subsidiaries shall have good,
marketable and insurable title to their respective real properties,
subject only to those encumbrances identified in a schedule to the
Merger Agreement, and the Company shall have obtained and delivered to
Parent reasonable assurances from the relevant municipalities to the
effect that such real properties and their current operations are in
compliance with local zoning ordinances without constituting
non-conforming uses.
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(j) The Company shall have delivered to Parent a current
survey of the real property and facilities of the Company located in
Peru, Indiana, which survey (i) shall have been prepared by a licensed
Indiana land surveyor, (ii) shall fulfill the Minimum Detail
Requirements for ALTA/ACSM Land Title Surveys (1992) for an Urban
Survey and Table A thereof, and (iii) shall have been certified to the
Surviving Corporation, Parent and Parent's title insurance company in a
manner reasonably satisfactory to Parent; and such survey shall not
show encroachments or other matters which, individually or in the
aggregate, materially adversely affect the value or use of such real
property and facilities.
(k) There shall not have occurred (A) any general suspension
of, or limitation on prices for, trading in the securities of a general
nature on any national securities exchange that lasts more than 24
hours, (B) the declaration of any banking moratorium or any suspension
of payments in respect of banks or any limitation (whether or not
mandatory) on the extension of credit by lending institutions in the
United States, (C) the commencement of a war, armed hostilities or any
other international or national calamity involving the United States or
a substantial terrorist attack or the threat thereof on a target in
United States that leads to the declaration of a national emergency,
(D) a material adverse change in the United States currency exchange
rates or a suspension of, or limitation on, the markets therefor, or
(E) the Dow Jones Index shall fall below 6448 (which was the value of
such Index on December 31, 1996).
(l) A Trigger Event shall not have occurred.
(m) Other than the filings required in connection with the
Merger, all consents, approvals and actions of, filings with and
notices to any governmental or regulatory authority or any other public
or private third party required of the Company or any of its
subsidiaries to consummate the Offer, the failure of which to be
obtained or taken could, individually or in the aggregate, be
reasonably expected to have a material adverse effect on the Company
and its subsidiaries or on the ability of Parent to consummate the
purchase of Shares pursuant to the Offer, shall have been obtained, all
in form and substance reasonably satisfactory to Parent and no such
consent, approval or action shall contain any term or condition which
could be reasonably expected to result in a material diminution of the
benefits of the Offer to Parent.
(n) The Merger Agreement shall not have been terminated
pursuant to its terms and shall not have been amended pursuant to its
terms to provide for its termination.
Termination. The Merger Agreement may be terminated, and the
transactions contemplated thereby may be abandoned, at any time prior to the
Effective Time, whether prior to or after Shareholders' Approval: (a) by mutual
written agreement of the parties thereto duly authorized by action taken by or
on behalf of their respective Boards of Directors; (b) by either the Company or
Parent upon notification to the non-terminating party by the terminating party:
(1) at any time after January 31, 1999 if the Merger shall not have been
consummated on or prior to such date and such failure to consummate the Merger
is not caused by a breach of the Merger Agreement by the terminating party;
provided, however, the date may be extended indefinitely by the mutual written
agreement of the parties, (2) if Shareholders' Approval shall not be obtained by
January 31, 1999, (3) if any governmental or regulatory authority, the taking of
action by which is a condition to the obligations of either the Company or
Parent to consummate the transactions contemplated thereby, shall have
determined not to take such action and all appeals of such determination shall
have been taken and have been unsuccessful, or (4) if any court of competent
jurisdiction or other competent governmental or regulatory authority shall have
issued an order making illegal or otherwise restricting, preventing or
prohibiting the Merger and such order shall have become final and nonappealable;
(c) by the Company, if (1) Purchaser fails to commence the Offer as provided in
the Merger Agreement or fails to purchase validly tendered Shares in violation
of the terms of the Offer or the Merger Agreement; (2) there has been a breach
by Parent or Purchaser of any representation or warranty contained in the Merger
Agreement, or (3) there has been a material breach of any of the covenants or
agreements set forth in the Merger Agreement on the part of Parent or Purchaser,
which breach is not curable or, if curable, is not cured within ten (10) days
after written notice of such breach is given by the Company to Parent or
Purchaser.; (d) by Parent, if (1) the Offer is terminated or withdrawn on
account of the failure to be fulfilled of a condition specified in Annex A to
the Merger Agreement (as specified in "--Conditions to the Offer"), (2) there
has been a breach by the Company of any representation or warranty contained in
the Merger Agreement or
-18-
(3) there has been a material breach of any of the covenants or agreements set
forth in the Merger Agreement on the part of the Company, which breach is not
curable or, if curable, is not cured within ten (10) days after written notice
of such breach is given by Parent to the Company; or (e) by Parent if a Trigger
Event occurs.
Amendment. The Merger Agreement may be amended, supplemented or
modified by the parties thereto at any time prior to the Effective Time, whether
prior to or after adoption of the Merger Agreement at the Shareholder Meeting,
but after such adoption only to the extent permitted by applicable law. No such
amendment, supplement or modification shall be effective unless set forth in a
written instrument duly executed by or on behalf of each party thereto.
Governing Law. The Merger Agreement is governed by and construed in
accordance with the laws of the State of Indiana applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof, except to the extent that the NMBCA, the Securities Act
and the Exchange Act shall apply to the transactions contemplated therein.
Enforcement of Agreement; Injunctive Relief. Parent, Purchaser and the
Company have irrevocably and unconditionally submitted to the exclusive
jurisdiction and venue of the United States District Court for the Southern
District of Indiana, Indianapolis Division for federal jurisdiction (unless such
court has no jurisdiction, in which case Parent, Purchaser and the Company
submitted to the exclusive jurisdiction of the courts of the State of Indiana
located in Marion County) for any actions, suits or proceedings arising out of
or relating to the Merger Agreement and the transactions contemplated thereby.
Parent, Purchaser and the Company have also waived, to the fullest extent
permitted by law, any rights they may have to a jury trial on any matter related
in any way to the Merger Agreement or the transactions contemplated thereby. In
addition, each of the Company on the one hand and Parent and Purchaser on the
other hand have recognized and acknowledged that a breach by it of any covenants
or agreements contained in the Merger Agreement will cause the other party to
sustain damages for which it would not have an adequate remedy at law for money
damages, and therefore each of the parties thereto has agreed that in the event
of any such breach, if the aggrieved party so desires, the aggrieved party shall
be entitled to the remedy of specific performance, injunctive and other
equitable relief (without the requirement or need for the posting of any bond)
in addition to any other remedy to which the aggrieved party may be entitled, at
law or in equity.
Joint and Several Obligations. The obligations of Parent and Purchaser
under the Merger Agreement are joint and several.
Timing. The exact timing and details of the Merger will depend upon
legal requirements and a variety of other factors, including the number of
Shares acquired by Purchaser pursuant to the Offer. Although Parent has agreed
to cause the Merger to be consummated on the terms and subject to the conditions
set forth above, there can be no assurance as to the timing of the Merger.
Confidentiality Agreement.
Pursuant to an agreement dated as of June 18, 1998 (the
"Confidentiality Agreement") between the Company (acting through its agent,
Goelzer & Co.) and Parent, the Company has supplied Parent with certain
non-public, confidential and proprietary information about the Company. Parent
has agreed in the Confidentiality Agreement among other provisions that it,
together with its, among others, representatives, employees, agents, advisors,
lenders or affiliates will treat confidentially all such information supplied by
the Company and that it will, until June 18, 2003, use the confidential
information solely for the purpose of evaluating a possible transaction with the
Company, and will keep the confidential information confidential, except for
disclosure as may be required by law.
The foregoing summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is incorporated by reference and a copy of which has been
filed with the Commission as Exhibit P to the Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
-19-
(a) Recommendation of the Board. At a meeting of the Company's Board of
Directors held on September 21, 1998, the board by unanimous vote (i) determined
that the Offer and the Merger were fair to, and in the best interests of, the
Company, its shareholders and its other constituencies, (ii) approved the Merger
Agreement, the Offer and the Merger and (iii) recommended that the shareholders
accept the Offer and approve the Merger Agreement. A letter to the Company's
shareholders from the Company's Chairman of the Board, dated September 29, 1998,
which includes the Board's recommendation to the shareholders, is attached
hereto as Exhibit Q and incorporated herein by reference.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS TENDER THEIR SHARES PURSUANT TO THE TERMS OF THE OFFER.
(b) Background; Reasons for Board's Recommendation.
Background of the Offer. On June 10, 1998, senior management of Parent
and the Company had initial discussions regarding the possible acquisition of
the Company by Parent. Parent was informed that the Company would be sold
through an "auction" which was to be conducted by McDonald & Co., the Company's
financial advisor. Parent executed a confidentiality agreement and thereafter
received certain financial, corporate and other information concerning the
Company from McDonald & Co. and from Goelzer & Co., a consultant specifically
engaged by the Company to arrange an offer for the Company supported by the
Company's management.
Senior management of Parent and the Company met on July 7, 1998
together with representatives of Goelzer & Co. further to explore Parent's
preliminary plans for the acquisition and to discuss the views of the Company's
management. Representatives of Parent and Goelzer & Co. had further
conversations concerning Parent's plans during the period July 8, 1998 through
July 20, 1998.
On July 21, 1998, based on the information received, Parent submitted
to McDonald & Co. a preliminary, non-binding proposal for the acquisition of the
Company at a cash price in the range of $135.00 to $148.00 per share. This
preliminary proposal was endorsed by Goelzer & Co., which indicated that the
proposal had the support of the Company's management.
The Company thereafter invited Parent and its representatives to
conduct a further business review of the Company, which the Company undertook
between July 23, 1998 and September 4, 1998.
On September 8, 1998, on the basis of its review and in accordance with
the auction procedures established by McDonald & Co., Purchaser submitted to
McDonald & Co. a final purchase proposal for the Company. Under this final
proposal, which was ultimately accepted in substantial part by the Company,
Purchaser offered to pay $152.00 per share net to holders of common stock of the
Company in the Merger. In addition, Purchaser agreed to pay the transaction
expenses incurred by the Company, and the amounts to which senior managers of
the Company would be entitled upon certain changes in control of the Company.
Purchaser's proposal was subject to the condition (among other conditions) that
ten shareholders of the Company holding in the aggregate in excess of 50% of the
outstanding common shares of the Company execute and deliver to Purchaser an
option entitling Purchaser to acquire their shares at $152.00 per share (as well
as a proxy to vote their shares in favor of the Merger).
On September 10, 1998, a meeting of the Board of the Company was held
at which the Company's outside legal counsel advised the Board regarding its
fiduciary duties under applicable law, and representatives of McDonald & Co.
made a presentation to the Board with respect to the financial terms of the
proposed Merger Agreement, as well as the terms and status of other proposals
which had been received from other entities during the auction process.
Representatives of McDonald & Co. also delivered its oral opinion to the Board
that the merger was fair to such holders from a financial point of view. After
discussion, the Board determined that further negotiations should take place
with Purchaser to finalize the Merger Agreement on a mutually acceptable basis.
Based on discussions with the Company, Purchaser understood that its proposal
was financially superior to all other proposals.
-20-
In subsequent negotiations on September 10 and 11, 1998 between
Purchaser and the Company, in order to expedite the acquisition, Purchaser
requested that the transaction be restructured from a single-step merger to a
"two-step" transaction consisting of a tender offer followed by a merger.
Purchaser also requested that ten shareholders holding in excess of 50% of the
Company's common stock irrevocably agree to tender their shares in such tender
offer, and grant Purchaser a proxy to vote their shares in favor of the Merger,
pursuant to a Stockholders' Agreement.
From September 10, 1998 through September 21, 1998, Parent and the
Company engaged in continued negotiations and document preparation through their
representatives.
On September 21, 1998, the Board of the Company met again to discuss
the transaction, including the restructuring to a "two-step" transaction. At
this meeting, the Company's outside legal counsel again advised the Board
regarding its fiduciary duties under applicable law, and representatives of
McDonald & Co. made a presentation to the Board with respect to the financial
terms of the proposed Offer and Merger. Representatives of McDonald & Co. also
delivered its written opinion to the Board that the consideration to be received
by the stockholders of the Company in connection with the Offer and the Merger
was fair to such holders from a financial point of view. Based upon such advice,
such presentation and such opinion, the Board unanimously approved the Merger
Agreement, the Merger and the Offer.
Also on September 21, 1998, certain major stockholders of the Company
met with the Company's Chairman, its outside legal counsel and representatives
of McDonald & Co. to discuss the background of the proposed transaction and the
Stockholders' Agreement. Between September 21, 1998 and September 23, 1998, ten
stockholders holding in the aggregate approximately 55.6% of the outstanding
common stock of the Company executed the Stockholders' Agreement.
On September 23, 1998, Parent, Purchaser, and the Company executed and
delivered the Merger Agreement, and Parent, Purchaser executed and delivered the
Stockholders' Agreement. The transaction was publicly announced on September 23,
1998, and, on September 30, 1998, Purchaser commenced the Offer.
Reasons for the Board's Recommendation. In approving the Merger
Agreement and the transactions contemplated thereby, and recommending that all
shareholders tender their Shares pursuant to the Offer, the Company's Board of
Directors considered a number of factors, including:
(i) the financial and other terms of the Offer, the
Merger and the Merger Agreement;
(ii) the desire, as expressed to the Board of Directors,
of the Company's principal shareholders for an
opportunity to liquidate their Shares for fair value;
(iii) the presentations by McDonald & Co. at the September
10 and September 21, 1998 Board meetings and the
opinion of McDonald & Co. to the effect that, as of
the date of such opinion and based upon certain
matters considered relevant by McDonald & Co., the
consideration to be received by the shareholders of
the Company in the Offer and the Merger was fair from
a financial point of view (the full text of such
opinion, dated September 21, 1998, which sets forth
the procedures followed, assumptions and
qualifications made, matters considered and the
limitations thereof, is included as Exhibit R to the
Schedule 14D-9 filed with the Commission, and
shareholders are urged to read it in its entirety);
(iv) that the $152.00 per Share tender offer price
represents (A) a premium of 126% over the last
reported sales price of the Shares in the
over-the-counter market on June 23, 1998, the last
trading session before the Company announced its
intention to explore the strategic alternatives that
may be available to it with the objective of
maximizing shareholder value; and (B) a 90% premium
over the last reported sales price of the Shares on
September 22, 1998, the last trading day before the
announcement of the Merger Agreement;
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(v) the fact that the Company conducted an auction
process and no other bidder submitted a proposal
having terms more favorable than those ultimately
proposed by Parent and Purchaser;
(vi) advice to the Company's Board of Directors from
McDonald & Co. regarding any likelihood of a superior
offer arising;
(vii) the commitment by Parent in the Merger Agreement to
continue to manufacture the Company's products under
the Company name and to honor all commitments to the
Company employees, and Parent's stated intention, for
the foreseeable future, to continue the manufacture
of the Company's boiler products at the Company's
Peru, Indiana, facility;
(viii) Parent's stated intention for the Company to continue
to do business through its existing sales
representative network;
(ix) the familiarity of the Company's Board of Directors
with the business, results of operation, properties
and financial condition of the Company and the nature
of the industry in which it operates and the
familiarity of Parent with the business and industry
in which the Company operates;
(x) the fact that the obligations of Parent and Purchaser
under the Merger Agreement were not subject to any
financing conditions;
(xi) the financial resources of Parent and Purchaser and
their ability to meet their respective obligations
under the Merger Agreement; and
(xii) the limited number of conditions to Purchaser's
requirement to consummate the Offer and the Merger.
The foregoing discussion of the information and factors considered and
given weight by the Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Merger
Agreement and the Offer, the Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specified factors
considered in reaching its determination.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Merger Agreement provides that unless 90% or more of the Shares are
acquired by Purchaser pursuant to the Offer, to the extent required by
applicable law, the Company shall use all reasonable efforts to obtain the
adoption and approval of the Merger Agreement by the shareholders, including
utilizing a proxy solicitation firm reasonably acceptable to Parent. No such
proxy solicitation firm has been engaged at the time of filing this Statement.
Except as disclosed herein, neither the Company nor any person acting
on its behalf currently intends to employ, retain or compensate any other person
to make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Share Transactions in Last 60 Days. No transactions in Shares have
been effected by the Company or, to the Company's knowledge, by any of its
executive officers, directors, affiliates or subsidiaries during the past 60
days, except that Harold Koch, a director of the Company, transferred 30 Shares
to a church as a bona fide gift on September 21, 1998.
-22-
(b) Intent to Tender. To the Company's knowledge, (i) all of the
Company's executive officers and directors presently intend to tender in the
Offer all Shares that they now own and (ii) none of such persons presently
intends to otherwise sell any Shares which are owned beneficially or held of
record by such persons prior to the consummation of the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Certain Negotiations. Except as described in this Schedule 14D-9,
including as set forth in the Offer to Purchase, to the knowledge of the
Company, no negotiation is being undertaken or is under way by the Company in
response to the Offer which relates to or would result in (i) any extraordinary
transaction, such as a merger or reorganization, involving the Company or any
affiliate or subsidiary of the Company, (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company, (iii)
a tender offer for or other acquisition of securities by or of the Company or
(vi) any material change in present capitalization or dividend policy of the
Company. Pursuant to the Merger Agreement, however, and as described under
"Merger Agreement" in Item 3(b)(2) above, the Company may, subject to certain
limitations, take certain actions in respect of proposed transactions necessary
for the directors of the Company to discharge their fiduciary duties to
shareholders under applicable law.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT DESCRIPTION
Exhibit A Offer to Purchase*
Exhibit B Letter of Transmittal*
Exhibit C Agreement and Plan of Merger by and among
Parent, Purchaser and the Company, dated as of
September 23, 1998
Exhibit D Press release issued on September 23, 1998
Exhibit E Stockholders' Agreement, dated as of September
23, 1998, by and among Robert Miller, Ina Mae
Miller, Georgeanna Williams, as Trustee of
the Georgeanna Williams Revocable Living Trust,
Lisa Lockhart, Charles Miller, Kenneth Starkey,
Bryan Herd, Sharon Herd, Marilyn Malott, Paul
Malott, Victor Herd and Kristine Herd, Parent and
Purchaser
Exhibit F Employment Agreement, dated as of April 1, 1998,
by and between the Company and H. Jesse McVay
Exhibit G Employment Agreement, dated as of April 1, 1998,
by and between the Company and Albert J. Bishop
Exhibit H Employment Agreement, dated as of April 1, 1998,
by and between the Company and Richard D.
Holmquist
Exhibit I Employment Agreement, dated as of April 1, 1998,
by and between the Company and Kurt J. Krauskopf
Exhibit J Employment Agreement, dated as of April 1, 1998,
by and between the Company and Terrence D.
Kubly
Exhibit K Employment Agreement, dated as of April 1, 1998,
by and between Wendland Manufacturing Company
and P. Wayne McCune
Exhibit L Employment Agreement, dated as of April 1, 1998,
by and between the Company and Gregory A.
Minard
Exhibit M Employment Agreement, dated as of April 1, 1998,
by and between the Company and Sandra A. Mitting
-24-
Exhibit N Employment Agreement, dated as of April 1, 1998,
by and between the Company and Michael D. Sturch
Exhibit O Letter Agreement, dated as of March 18, 1998, by
and among Goelzer & Co., the Company and the
Management Group, and amendment thereto, dated
as of August 26, 1998
Exhibit P Confidentiality Agreement, dated as of
June 18, 1998, by and between Parent and the
Company (through its agent, Goelzer & Co.)
Exhibit Q Letter to the Company's shareholders from Albert J.
Bishop, Chairman of the Board of the Company *
Exhibit R Fairness Opinion, dated as of September 21, 1998,
from McDonald & Co.
* Included in the materials sent to stockholders of the Company.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Schedule 14D-9 is true, complete
and correct.
Dated: September 29, 1998 BRYAN STEAM CORPORATION
By: /s/ H. Jesse McVay
----------------------------
H. Jesse McVay, President
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
Exhibit 99(A) Offer to Purchase*
Exhibit 99(B) Letter of Transmittal*
Exhibit 99(C) Agreement and Plan of Merger by and among
Parent, Purchaser and the Company, dated as of
September 23, 1998
Exhibit 99(D) Press release issued on September 23, 1998
Exhibit 99(E) Stockholders' Agreement, dated as of September
23, 1998, by and among Robert Miller, Ina Mae
Miller, Georgeanna Williams, as Trustee of
the Georgeanna Williams Revocable Living Trust,
Lisa Lockhart, Charles Miller, Kenneth Starkey,
Bryan Herd, Sharon Herd, Marilyn Malott, Paul
Malott, Victor Herd and Kristine Herd, Parent and
Purchaser
Exhibit 99(F) Employment Agreement, dated as of April 1, 1998,
by and between the Company and H. Jesse McVay
Exhibit 99(G) Employment Agreement, dated as of April 1, 1998,
by and between the Company and Albert J. Bishop
Exhibit 99(H) Employment Agreement, dated as of April 1, 1998,
by and between the Company and Richard D. Holmquist
Exhibit 99(I) Employment Agreement, dated as of April 1, 1998,
by and between the Company and Kurt J. Krauskopf
Exhibit 99(J) Employment Agreement, dated as of April 1, 1998,
by and between the Company and Terrence D.
Kubly
Exhibit 99(K) Employment Agreement, dated as of April 1, 1998,
by and between Wendland Manufacturing Company
and P. Wayne McCune
Exhibit 99(L) Employment Agreement, dated as of April 1, 1998,
by and between the Company and Gregory A.
Minard
Exhibit 99(M) Employment Agreement, dated as of April 1, 1998,
by and between the Company and Sandra A. Mitting
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Exhibit 99(N) Employment Agreement, dated as of April 1, 1998,
by and between the Company and Michael D. Sturch
Exhibit 99(O) Letter Agreement, dated as of March 18, 1998, by
and among Goelzer & Co., the Company and the
Management Group, and amendment thereto, dated
as of August 26, 1998
Exhibit 99(P) Confidentiality Agreement, dated as of
June 18, 1998, by and between Parent and the
Company (through its agent, Goelzer & Co.)
Exhibit 99(Q) Letter to the Company's shareholders from Albert J.
Bishop, Chairman of the Board of the Company *
Exhibit 99(R) Fairness Opinion, dated as of September 21, 1998,
from McDonald & Co.
* Included in the materials sent to stockholders of the Company.
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