1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------------
CORE INDUSTRIES INC
(Name of Subject Company)
CORE INDUSTRIES INC
(Name of Person Filing Statement)
------------------------------
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
218675 10 6
(CUSIP Number of Class of Securities)
------------------------------
DAVID R. ZIMMER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CORE INDUSTRIES INC
500 NORTH WOODWARD AVENUE
BLOOMFIELD HILLS, MICHIGAN 48303
(248) 642-3400
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
------------------------------
Copy to:
DONALD J. KUNZ
HONIGMAN MILLER SCHWARTZ AND COHN
2290 FIRST NATIONAL BUILDING
DETROIT, MICHIGAN 48226
(313) 256-7704
================================================================================
2
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Core Industries Inc, a Nevada
corporation (the "Company"), and the address of the principal executive offices
of the Company is 500 North Woodward Avenue, Bloomfield Hills, Michigan 48304.
The title of the class of equity securities to which this statement relates is
Common Stock, par value $1.00 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the tender offer (the "Offer") disclosed in a
Tender Offer Statement on Schedule 14D-1/13D, dated July 2, 1997 (the "Schedule
14D-1") of UD Nevada Corp., a Nevada corporation ("Purchaser") and a wholly
owned subsidiary of United Dominion Industries Limited, a corporation organized
under the laws of Canada ("Parent"), to purchase all outstanding Shares at a
price of $25.00 per Share (such amount, or any greater amount paid pursuant to
the Offer, the "Per Share Amount"), 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 July 2, 1997 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer").
The Offer is being made pursuant to the Agreement and Plan of Merger among
Parent, Purchaser and the Company, dated as of June 25, 1997 (the "Merger
Agreement"). The Merger Agreement provides, among other things, that, upon the
terms and subject to the conditions contained therein, and in accordance with
the General Corporation Law of the State of Nevada ("Nevada law"), as promptly
as practicable after the satisfaction or waiver of the conditions contained
therein, and the purchase of Shares pursuant to the Offer, Purchaser will be
merged with and into the Company (the "Merger").
According to the Schedule 14D-1, the address of the principal executive
offices of Purchaser and of Parent is 2300 One First Union Center, 301 South
College Street, Charlotte, North Carolina 28202-6039.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding
between the Company or its affiliates and (i) its executive officers, directors
or affiliates and (ii) the Purchaser, Parent, its executive officers, directors
or affiliates is described in the attached Schedule I or set forth below.
The Merger Agreement. The following is a summary of the Merger Agreement,
a copy of which is filed as Exhibit 99.1. Such summary is qualified in its
entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days after the initial public announcement of the execution of the Merger
Agreement. The obligation of Purchaser to accept for payment Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Condition
and certain other conditions that are described in this Item 3. Purchaser and
Parent have agreed with the Company that no change in the Offer may be made that
decreases the price per Share payable in the Offer, that changes the form of
consideration payable in the Offer, that reduces the number of Shares to be
purchased in the Offer, that imposes conditions to the Offer in addition to
those set forth in this Item 3, or that changes the Minimum Condition.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Nevada Law, at the Effective
Time, Purchaser shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Purchaser will cease and the Company
will continue as the Surviving Corporation and as an indirect wholly owned
subsidiary of Parent. Notwithstanding the foregoing, Parent may elect at any
time prior to the fifth business day immediately preceding the date on which the
Proxy Statement (as hereinafter defined) is mailed initially to the Company's
stockholders, to merge the Company into Purchaser or another direct or indirect
wholly owned subsidiary of
3
Parent. In such event, the parties agreed to execute an appropriate amendment to
the Merger Agreement in order to reflect the foregoing and to provide, as the
case may be, that Purchaser or such other wholly owned subsidiary of Parent
shall be the Surviving Corporation.
Upon consummation of the Merger, each issued and then outstanding Share
(other than any Shares owned by Purchaser, Parent, the Company or any wholly
owned subsidiary of Parent or the Company and any Shares that are held by
stockholders who have properly exercised their rights of dissent with respect to
such Shares in accordance with Nevada Law) shall be cancelled and converted
automatically into the right to receive the Merger Consideration. Pursuant to
the Merger Agreement, each share of common stock, par value $.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one share of common stock, par value $.01
per share, of the Surviving Corporation.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement provides that, unless otherwise determined by Parent prior to
the Effective Time, and subject to the requirements described below with respect
to indemnification, at the Effective Time, the Articles of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation and shall be amended and
restated to conform to the Articles of Incorporation of Purchaser as in effect
immediately prior to the Effective Time; provided, however, that, at the
Effective Time, Article I of the Articles of Incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the corporation is
Core Industries Inc" and the Articles of Incorporation of the Surviving
Corporation shall be amended if required to comply with the requirements
described below with respect to indemnification. The Merger Agreement also
provides that the Bylaws of Purchaser, as in effect immediately prior to the
Effective Time, will be the Bylaws of the Surviving Corporation.
Company Stockholders' Meeting; Proxy Statement. Pursuant to the Merger
Agreement, unless not required under Nevada Law, the Company shall duly call,
give notice of, convene and hold a special meeting of its stockholders as soon
as practicable following consummation of the Offer for the purpose of
considering and taking action on the Merger Agreement and the transactions
contemplated thereby (the "Stockholders' Meeting"). The Merger Agreement
provides that, unless not required under Nevada law, the Company shall, as soon
as practicable following consummation of the Offer, file with the Commission
under the Exchange Act, and use its best reasonable efforts to have cleared by
the Commission, a proxy statement and related proxy materials (the "Proxy
Statement") with respect to the Stockholders' Meeting and shall cause the Proxy
Statement to be mailed to stockholders of the Company at the earliest
practicable time. The Company has also agreed, subject to the fiduciary duties
of the Board under applicable law as advised in writing by counsel, to include
in the Proxy Statement the unanimous recommendation of the Board that the
stockholders of the Company approve and adopt the Merger Agreement and the
transactions contemplated thereby and to use its best reasonable efforts to
obtain such approval and adoption. Parent and Purchaser have each agreed to vote
all Shares beneficially owned by them in favor of the Merger.
Conduct of Business. Pursuant to the Merger Agreement, the Company has
covenanted and agreed that, between the date of the Merger Agreement and the
election or appointment of Purchaser's designees to serve on the Company's Board
of Directors (the "Purchaser's Election Date"), unless Parent shall otherwise
agree in writing, each of the Company and its Subsidiaries (as defined in the
Merger Agreement) shall conduct its business only in, and the Company and the
Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and the Company shall
use its best efforts to preserve substantially intact the business organization
of the Company and the Subsidiaries, to keep available the services of the
current officers, employees and consultants of the Company and its Subsidiaries
and to preserve the current relationships of the Company and the Subsidiaries
with customers, suppliers and other persons with which the Company or any
Subsidiary has significant business relations. The Merger Agreement also
provides that, except with the prior written consent of Parent or as
contemplated by the Merger Agreement, neither the Company nor any Subsidiary
shall, between the date of the Merger Agreement and the Purchaser's Election
Date, directly or indirectly do, or propose to do, any of the following: (a)
amend or otherwise change its Articles of Incorporation or Bylaws or equivalent
organizational
2
4
documents; (b) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares
of capital stock of any class of the Company or any Subsidiary, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company or any Subsidiary
(except for the issuance of a maximum of 696,049 Shares issuable pursuant to
employee and director stock options outstanding on the date thereof) or (ii) any
assets of the Company or any Subsidiary, except for sales in the ordinary course
of business and in a manner consistent with past practice; (c) declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock, except for such
declarations, set asides, and payment of cash dividends declared at times and in
amounts consistent with the Company's current dividend policy ($.06 per Share
per quarter); (d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock; (e) (i)
acquire (including, without limitation, by merger, consolidation, or acquisition
of stock or assets or any other business combination) any corporation,
partnership, other business organization or any division thereof or any material
amount of assets other than in the ordinary course of business; (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, pledge in respect of or otherwise as an accommodation
become responsible for the obligations of any person, or make any loans or
advances, except in the ordinary course of business and consistent with past
practice; (iii) enter into any contract or agreement other than contracts or
agreements entered into in the ordinary course of business, consistent with past
practice and which require payments by the Company or its Subsidiaries in an
aggregate amount of less than U.S. $250,000; (iv) terminate, cancel or request
any material change in, or agree to any material change in, any of certain
specified material contracts and with respect to all other material contracts,
except in the ordinary course of business consistent with past practice; (v)
authorize any single capital expenditure (excluding software development
activity) which is in excess of U.S. $250,000 or capital expenditures which are,
in the aggregate, in excess of U.S. $1,000,000 for the Company and its
Subsidiaries taken as a whole; or (vi) enter into or amend any contract,
agreement, commitment or arrangement with respect to any matter described in
this clause (e); (f) increase the compensation payable or to become payable to
its officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company or any Subsidiary who
are not officers of the Company, or grant any severance or termination pay to,
or enter into any employment or severance agreement with, any director, officer
or other employee of the Company or any Subsidiary, or establish, adopt, enter
into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee or circulate to any employee any details of any proposal to adopt or
amend any such plan; (g) take any action, other than reasonable and usual
actions in the ordinary course of business and consistent with past practice,
with respect to accounting policies or procedures (including, without
limitation, procedures with respect to the payment of accounts payable and
collection of accounts receivable); (h) make any tax election or settle or
compromise any material federal, state, local or foreign income tax liability;
(i) pay, discharge or satisfy any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or reserved against on
the Company's consolidated balance sheet included in its Quarterly Report on
Form 10-Q for the period ended February 28, 1997 or subsequently incurred in the
ordinary course of business and consistent with past practice; or (j) settle or
comprise any pending or threatened suit, action or claim that is material or
which relates to any of the transactions contemplated by the Merger Agreement;
or (k) announce an intention, enter into any formal or informal agreement, or
otherwise make a commitment, to do any of the foregoing or any action that would
result in any of the conditions to the Offer not being satisfied (other than as
contemplated by the Merger Agreement).
Designation of Directors. The Merger Agreement provides that, promptly
upon the purchase by Purchaser of Shares pursuant to the Offer, and from time to
time thereafter, Purchaser shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board as shall give
Purchaser representation on the Board equal to the product of the total number
of directors on the Board (giving effect to the directors elected pursuant to
the following sentence) multiplied by the percentage that the
3
5
aggregate number of Shares beneficially owned by Purchaser or any affiliate of
Purchaser at such time bears to the total number of Shares then outstanding.
Pursuant to the Merger Agreement, the Company agrees, at such time of purchase,
to promptly take all actions necessary to cause Purchaser's designees to be
elected as directors of the Company, including increasing the size of the Board
or securing the resignations of incumbent directors or both. The Merger
Agreement also provides that, at such times, the Company shall use its best
efforts to cause persons designated by Purchaser to constitute the same
percentage as persons designated by Purchaser shall constitute of the Board of
(a) each committee of the Board (some of whom may be required to be independent
as required by applicable law or requirements of the New York Stock Exchange),
(b) each board of directors of each Subsidiary and (c) each committee of each
such board, in each case only to the extent permitted by applicable law.
Notwithstanding the foregoing, the Merger Agreement provides that until the time
Purchaser acquires a majority of the then outstanding Shares on a fully diluted
basis, the Company shall use its best efforts to ensure that all the members of
the Board and each committee of the Board and such boards and committees of the
Subsidiaries as of the date thereof who are not employees of the Company shall
remain members of the Board and of such boards and committees.
Amendments. The Merger Agreement provides that following the election or
appointment of Parent's designees in accordance with the immediately preceding
paragraph and prior to the Effective Time, any amendment of the Merger Agreement
or the Articles of Incorporation or Bylaws of the Company, any termination of
the Merger Agreement by the Company, any extension by the Company of the time
for the performance of any of the obligations or other acts of Parent or
Purchaser or any waiver of any of the Company's rights thereunder will require
the concurrence of a majority of those directors of the Company then in office
other than directors designated by Purchaser or directors who are employees of
the Company or, if no such directors are then in office, no such amendment,
termination, extension or waiver shall be effected which is materially adverse
to the holders of Shares (other than Parent and its subsidiaries).
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
from the date of the Merger Agreement to the consummation of the Offer, the
Company agreed to, and to cause its Subsidiaries and the officers, directors,
employees, auditors and agents of the Company and its Subsidiaries to, afford
the officers, employees and agents of Parent and Purchaser complete access at
all reasonable times to the officers, employees, agents, properties, offices,
plants and other facilities, books and records of the Company and each
Subsidiary and to furnish Parent and Purchaser with all financial, operating and
other data and information as Parent or Purchaser, through its officers,
employees or agents, may reasonably request. Parent and Purchaser agreed in the
Merger Agreement to keep such information confidential in accordance with the
confidentiality agreement, dated October 2, 1996 (the "Confidentiality
Agreement"), between Parent and the Company. Pursuant to the Merger Agreement,
the Company, Parent and Purchaser agreed, from the date of the Merger Agreement
to the completion of the Offer, to the extent permitted by applicable law, to
cooperate reasonably with each other to effect an orderly transition including,
without limitation, with respect to communications with the Company's customers
and employees.
No Solicitation of Transactions. The Company has agreed that neither the
Company nor any Subsidiary shall, directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any person relating to any acquisition or purchase of
all or any material portion of the assets of, or any equity interest in, the
Company or any material Subsidiary or any business combination with the Company
or any material Subsidiary or participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek any of the foregoing.
Notwithstanding the foregoing, the Merger Agreement permits the Board to furnish
information to, or enter into discussions or negotiations with, any person in
connection with an unsolicited (from the date of the Merger Agreement) proposal
in writing by such person to acquire the Company pursuant to a merger,
consolidation, share exchange, business combination or other similar transaction
or to acquire all or substantially all of the assets of the Company or any of
its Subsidiaries, if, and only to the extent that, (a) the Board, after
consultation with independent legal counsel (which may include its regularly
engaged independent legal counsel), determines in good faith that such action is
required for the Board to comply with its fiduciary duties to stockholders
imposed by Nevada Law and (b) prior to furnishing such
4
6
information to, or entering into discussions or negotiations with, such person,
the Company uses its reasonable best efforts to obtain from such person an
executed confidentiality agreement on terms no less favorable to the Company
than those contained in the Confidentiality Agreement (or obtained a
confidentiality agreement prior to the date of the Merger Agreement). Pursuant
to the Merger Agreement, the Company agreed to immediately cease and cause to be
terminated all existing discussions or negotiations with any parties conducted
prior to the date of the Merger Agreement with respect to any of the foregoing.
Moreover, the Company agreed (x) to notify Parent promptly if any such proposal
or offer, or any inquiry or contact with any person with respect thereto, is
made and (y) not to release any third party from, or waive any provision of, any
confidentiality or, subject to the fiduciary duties of the Board, standstill
agreement to which the Company is or may become a party.
Treatment of Stock Options; Deferred Director Fees. The Merger Agreement
provides that each outstanding option to purchase Shares granted under the
Company's 1978 Stock Option Plan, 1988 Stock Option Plan, 1988 Director
Discounted Stock Option Plan, 1991 Director Discounted Stock Option Plan and
1993 Performance Incentive Plan (the "Stock Option Plans") shall, immediately
prior to the Effective Time, become exercisable regardless of the vesting
schedule contained in any stock option agreement or in any of the Stock Option
Plans and shall be canceled at the Effective Time. In the event that any
unexercised option is canceled by the Company, each holder of a canceled option
shall be entitled to receive, at the Effective Time or as soon as practicable
thereafter, from the Company, in consideration for the cancellation of such
option, an amount (subject to any applicable withholding tax) in cash equal to
the product of (a) the number of Shares previously subject to such option and
(b) the excess, if any, of the Merger Consideration over the exercise price per
Share previously subject to such option. The Merger Agreement also provides
that, at the Effective Time, the Company shall pay to each individual who served
as a director of the Company prior to the Effective Time any and all deferred
director fees owed to such individual.
Indemnification and Insurance. Pursuant to the Merger Agreement, the
Articles of Incorporation and Bylaws of the Surviving Corporation are required
to contain provisions no less favorable with respect to indemnification than are
set forth in Article VI of the Bylaws of the Company, which provisions shall not
be amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would affect adversely the rights thereunder
of individuals who at any time to and including the Effective Time were
directors, officers, employees, fiduciaries or agents (collectively
"Representatives") of the Company in respect of acts or omissions occurring at
or prior to the Effective Time (including, without limitation, the matters
contemplated by the Merger Agreement), unless such modification shall be
required by law. Moreover, from and after the Purchaser's Election Date, the
Merger Agreement prohibits the amendment, repeal or other modification of the
indemnification and advancement of expenses provisions of Article VI of the
Bylaws of the Company or the Articles of Incorporation or Bylaws of any of its
Subsidiaries in any manner that would adversely affect the rights thereunder of
Representatives of the Company or its Subsidiaries in respect of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the matters contemplated by the Merger Agreement), unless such
modification is required by law.
The Merger Agreement also provides that prior to the Effective Time, the
Company shall, and after the Effective Time, the Surviving Corporation shall, to
the fullest extent permitted under applicable law, indemnify and hold harmless,
each present and former Representative of the Company and each Subsidiary
(collectively, the "Indemnified Parties") against all costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), whether civil, criminal, administrative or investigative,
arising out of or pertaining to any action or omission in their capacity as a
Representative, whether occurring before or after the Effective Time, for a
period of six years after the date of the Merger Agreement (and shall pay any
expenses in advance of the final disposition of any such action or proceeding to
each Indemnified Party to the fullest extent permitted under Nevada Law, and,
with respect to Indemnified Parties who are or were directors or officers of the
Company, upon receipt from the Indemnified Party to whom expenses are advanced
of any undertaking to repay such advances required under Nevada Law).
5
7
Pursuant to the Merger Agreement, the Company, from and after the date of
the Merger Agreement and to and including the Effective Time, and the Surviving
Corporation, from the Effective Time until six years thereafter, each agreed to
use its best efforts to maintain in effect, if available, the current directors'
and officers' liability insurance policies maintained by the Company (provided
that the Surviving Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring on or prior to the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to expend more than an amount per year equal to 250% of current annual premiums
paid by the Company for such insurance (which annual premiums the Company has
represented in the Merger Agreement to be approximately $110,000).
The Merger Agreement provides that in the event the Company or the
Surviving Corporation or any of their respective successors or assigns (a)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(b) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Company or the Surviving Corporation, as the case
may be, or at Parent's option, Parent, shall assume the obligations described
above. The Merger Agreement provides that the obligations described above shall
survive the Effective Time.
Employee Benefits. Pursuant to the Merger Agreement, for a period of one
year from the Effective Time, Parent has agreed to, or to cause the Company or
the Surviving Corporation to, maintain the employee benefit plans (other than
the Stock Option Plans) which the Company maintains for the benefit of, or which
are open to, a majority of the employees of the Company on the terms in effect
on the date of the Merger Agreement, or such other plans, arrangements or
programs as will provide employees with benefits that in the aggregate are
substantially equivalent to, and no less favorable than, those provided under
the employee benefit plans (other than the Stock Option Plans) as in effect on
the date of the Merger Agreement.
In addition, Parent shall, or shall cause the Surviving Corporation to,
assume and agree to perform certain specified agreements (the "Change of Control
Agreements") in the same manner and to the same extent that the Company is
required to perform such agreements. The Change of Control Agreements are
described in Schedule I hereto.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company as to the Company's filings with the Commission, consolidated
financial statements of the Company and its Subsidiaries, the absence of certain
changes or events concerning the Company's business, compliance with law and
certain contracts, litigation, insurance, licenses and permits, employee benefit
plans, labor matters, ownership of assets, trademarks, patents and copyrights,
environmental matters, brokers, taxes, absence of certain business practices and
letters of credit, surety bonds and guarantees.
The Company also represented in the Merger Agreement that (a) the Board has
unanimously (i) determined that the Merger Agreement and the transactions
contemplated thereby, including each of the Offer and the Merger, are fair to
and in the best interests of the stockholders of the Company, (ii) approved and
adopted the Merger Agreement and the transactions, including, without
limitation, the Offer, the purchase of Shares pursuant to the Offer and the
Merger, contemplated thereby, (iii) taken all action to redeem the rights issued
to stockholders pursuant to the Rights Agreement dated September 16, 1987
between the Company and Harris Trust and Savings Bank, (iv) amended the
Company's Bylaws to provide that the provisions of Sections 78.378 to 78.3793 of
the Nevada Law shall not apply to the Company, and (v) recommended that the
stockholders of the Company accept the Offer and approve and adopt the Merger
Agreement and the transactions, including, without limitation, the Merger,
contemplated thereby and (b) approval of the Merger Agreement by the Board
constitutes approval of a "memorandum of understanding" setting forth the
principal terms of a transaction governed by, and within the meaning of, Article
Eleventh of the Company's Articles of Incorporation. Approval by the Board of
such a "memorandum of understanding" renders inapplicable to the Merger certain
provisions in the Company's Articles of Incorporation that would otherwise
require the approval of the Merger by the holders of not less than four-fifths
of the outstanding Shares.
6
8
Parent represented and warranted to the Company in the Merger Agreement,
among other things, that Parent has, or has commitments to obtain, sufficient
funds to permit Purchaser to acquire all the outstanding Shares in the Offer and
the Merger, evidence of which has been provided to the Company.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions and only the
following conditions: (a) the Merger Agreement and the transactions contemplated
by the Merger Agreement shall have been approved and adopted by the affirmative
vote of the stockholders of the Company (unless the vote of the stockholders is
not required by Nevada Law); (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 foreign, United States or state governmental
authority or other agency or commission or foreign, United States or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of making the acquisition of Shares by Parent or Purchaser or any
affiliate of either of them or the consummation of the Merger illegal or
otherwise restricting, preventing or prohibiting the consummation of the
transactions contemplated by the Merger Agreement; and (d) Purchaser or its
permitted assignee shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; provided, however, that neither Parent nor
Purchaser shall be entitled to assert the failure of this condition if, in
breach of the Merger Agreement or the terms of the Offer, Purchaser fails to
purchase any Shares validly tendered and not withdrawn pursuant to the Offer.
Termination. The Merger Agreement may be terminated and the Merger and the
other transactions contemplated by the Merger Agreement may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the stockholders of the Company: (a) by mutual written consent duly authorized
by the Boards of Directors of Parent, Purchaser and the Company prior to
Purchaser's Election Date; (b) by Parent, Purchaser or the Company if (i) the
Effective Time shall not have occurred on or before December 31, 1997 (so long
as the party seeking such termination has not failed to fulfill any obligation
under the Merger Agreement, which failure has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date) or (ii) any
court of competent jurisdiction in the United States or other governmental
authority shall have issued an order, decree, ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; (c) by
Parent, upon approval of its Board of Directors, if (i) due to an occurrence or
circumstance that would result in a failure to satisfy any condition to the
Offer, Purchaser shall have (A) failed to commence the Offer within 30 days
following the date of the Merger Agreement, (B) terminated the Offer without
having accepted any Shares for payment thereunder or (C) failed to pay for
Shares pursuant to the Offer within 90 days following the commencement of the
Offer; unless such action or inaction under (A), (B) or (C) shall have been
caused by or resulted from the failure of Parent or Purchaser to perform in any
material respect any material covenant or agreement of either of them contained
in the Merger Agreement or the material breach by Parent or Purchaser of any
material representation or warranty of either of them contained in the Merger
Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the
Board or any committee thereof shall have withdrawn or modified in a manner
adverse to Purchaser or Parent its approval or recommendation of the Offer, the
Merger Agreement, the Merger or any other transaction contemplated by the Merger
Agreement or shall have recommended another merger, consolidation, business
combination with, or acquisition of, the Company or its assets or another tender
offer or exchange offer for Shares, or shall have resolved to do any of the
foregoing; or (d) by the Company, upon approval of the Board, if (i) due to an
occurrence or circumstance that would result in a failure to satisfy any
condition to the Offer, Purchaser shall have (A) failed to commence the Offer
within 30 days following the date of this Agreement, (B) terminated the Offer
without having accepted any Shares for payment thereunder or (C) failed to pay
for Shares pursuant to the Offer within 90 days following the commencement of
the Offer, unless such action or inaction under (A), (B), and (C) shall have
been caused by or resulted from the failure of the Company to perform in any
material respect any material covenant or agreement of it contained in the
Merger Agreement or the material breach by the Company of any material
representation or warranty of it
7
9
contained in the Merger Agreement or (ii) prior to the purchase of Shares
pursuant to the Offer, the Board shall have withdrawn or modified in a manner
adverse to Purchaser or Parent its approval or recommendation of the Offer, the
Merger Agreement, the Merger or any other transaction contemplated by the Merger
Agreement in order to approve the execution by the Company of a definitive
agreement providing for the acquisition of the Company or any of its assets by a
sale, merger or other business combination or in order to approve a tender offer
or exchange offer for Shares by a third party, in either case, as the Board
determines in good faith that such action is required for the Board to comply
with its fiduciary duties to stockholders, after consultation with its
independent legal counsel and financial advisers, and is on terms more favorable
to the Company's stockholders than the Offer and the Merger taken together;
provided, however, that such termination under clause (ii) above shall not be
effective until the Company has made payment to Parent of the Fee (as
hereinafter defined) required to be paid as described below and has deposited
with a mutually acceptable escrow agent U.S. $3.0 million for reimbursement to
Parent and Purchaser of Expenses (as hereinafter defined).
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it shall forthwith become void, and there shall be no
liability on the part of any party hereto, except under the provisions of the
Merger Agreement related to fees and expenses described below and
confidentiality and except for liability of any party for breach of the Merger
Agreement prior to its termination.
Fees and Expenses. The Merger Agreement provides that in the event that
(a) any person (including, without limitation, the Company or any affiliate
thereof), other than Parent or any affiliate of Parent, shall have become the
beneficial owner of more than 25% of the then outstanding Shares and the Merger
Agreement shall have been terminated and within 12 months of such termination a
Third Party Acquisition (as defined hereinafter) shall occur; or (b) any person
shall have commenced, publicly proposed or communicated to the Company a
proposal that is publicly disclosed for a tender or exchange offer for 25% or
more (or which, assuming the maximum amount of securities that could be
purchased, would result in any person beneficially owning 25% or more of the
then outstanding Shares) or otherwise for the direct or indirect acquisition of
the Company or all or substantially all of its assets for per Share
consideration having a value greater than the Per Share Amount and (i) the Offer
shall have remained open for at least 20 business days, (ii) the Minimum
Condition shall not have been satisfied and (iii) the Merger Agreement shall
have been terminated; or (c) the Merger Agreement is terminated pursuant to the
termination provisions described in clause (c)(ii) or (d)(ii) of the second
preceding paragraph, then, in any such event, the Company shall pay Parent
promptly (but in no event later than one business day after the first of such
events shall have occurred) a fee of U.S. $10.0 million (the "Fee"), which
amount shall be payable in immediately available funds, plus all Expenses (as
hereinafter defined).
The Merger Agreement also provides that so long as neither Parent nor
Purchaser is in material breach of its obligations under the Merger Agreement,
if (a) the Merger Agreement is terminated as described in clause (c) of the
third preceding paragraph due to the material breach of the Company's
obligations under the Merger Agreement or (b) the Merger Agreement is terminated
as described in clause (c) of the third preceding paragraph because of the
failure of representations and warranties of the Company to be true and correct,
which failures in the aggregate have or are reasonably likely to have any change
or effect that is or is reasonably likely to be materially adverse to the
business, operations, condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) of the Company and its
Subsidiaries taken as a whole (a "Material Adverse Effect"), then, in either
case (a) or (b), the Company shall promptly reimburse Parent and Purchaser for
all Expenses.
"Expenses" is defined in the Merger Agreement to mean all out-of-pocket
expenses and fees up to U.S. $3.0 million in the aggregate (including, without
limitation, fees and expenses payable to all banks, investment banking firms,
other financial institutions and other persons and their respective agents and
counsel for arranging, committing to provide or providing any financing for the
transactions contemplated by the Merger Agreement or structuring such
transactions and all fees of counsel, accountants, experts and consultants to
Parent and Purchaser, and all printing and advertising expenses) actually
incurred or accrued by either of them or on their behalf in connection with the
transactions contemplated by the Merger Agreement, including, without
limitation, the financing thereof, and actually incurred or accrued by banks,
investment
8
10
banking firms, other financial institutions and other persons and assumed by
Parent and Purchaser in connection with the negotiation, preparation, execution
and performance of the Merger Agreement, the structuring and financing of the
transactions contemplated by the Merger Agreement and any financing commitments
or agreements relating thereto. In the event that the Company shall fail to pay
the Fee or any Expenses when due, the term "Expenses" is deemed to include the
costs and expenses actually incurred or accrued by Parent and Purchaser
(including, without limitation, fees and expenses of counsel) in connection with
the collection under and enforcement of the fees and expenses provision of the
Merger Agreement, together with interest on such unpaid Fee and Expenses,
commencing on the date that the Fee or such Expenses became due, at a per annum
rate equal to the rate of interest publicly announced by Morgan Guaranty Trust
Company of New York, from time to time, in the City of New York, as such bank's
prime rate plus 1.00 percentage point.
"Third Party Acquisition" is defined in the Merger Agreement to mean the
occurrence of any of the following events: (i) the acquisition of the Company by
merger, consolidation or other business combination transaction by any person
other than Parent, Purchaser or any affiliate thereof (a "Third Party"); (ii)
the acquisition by any Third Party of all or substantially all of the assets of
the Company and its Subsidiaries, taken as a whole; (iii) the acquisition by a
Third Party of 50% or more of the outstanding Shares whether by tender offer,
exchange offer or otherwise; (iv) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend; or (v)
the repurchase by the Company or any of its Subsidiaries of 50% or more of the
outstanding Shares.
Except as set forth above, all costs and expenses incurred by Parent,
Purchaser and the Company in connection with the Merger Agreement and the
transactions contemplated by the Merger Agreement shall be paid by the party
incurring such expenses, whether or not any such transaction is consummated.
Confidentiality Agreement. The following is a summary of the
Confidentiality Agreement, a copy of which is filed as Exhibit 99.3. Such
summary is qualified in its entirety by reference to the Confidentiality
Agreement.
On October 2, 1996, Parent entered into the Confidentiality Agreement with
the Company. Under the Confidentiality Agreement, Parent agreed to use
information furnished by the Company or gathered by Parent by inspection of the
Company and its Subsidiaries that is not otherwise generally available to the
public (other than as a result of disclosure by Parent or its representatives)
(the "Evaluation Materials") exclusively for the purpose of evaluating an
acquisition transaction with the Company. In addition, Parent agreed not to
disclose any of the Evaluation Materials other than under certain circumstances.
Under the Confidentiality Agreement, Parent agreed that for a period of two
years from the date of the Confidentiality Agreement neither it nor any of its
affiliates would in any manner, directly or indirectly: (a) effect or seek,
offer or propose (whether publicly or otherwise) to effect, or cause or
participate in or in any way assist any other person to effect or seek, offer or
propose (whether publicly or otherwise) to effect or participate in, (i) any
acquisition of any securities (or beneficial ownership thereof) or assets of the
Company; (ii) any tender or exchange offer, merger or other business combination
involving the Company; (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company; or
(iv) any "solicitation" of "proxies" (as such terms are used in the proxy rules
of the Commission) or consents to vote any voting securities of the Company; (b)
form, join or in any way participate in a "group" (as defined under the Exchange
Act); (c) otherwise act, alone or in concert with others, to seek to control or
influence the management, Board of Directors or policies of the Company, (d)
take any action which might force the Company to make a public announcement
regarding any of the types of matters set forth in (a) above; or (e) enter into
any discussions or arrangements with any third party with respect to any of the
foregoing. Parent also agreed under the Confidentiality Agreement that for a
period of one year from the date of the Confidentiality Agreement none of its
employees who gain access to the Evaluation Material and no employee resident in
its Charlotte, North Carolina corporate office directly or indirectly would
solicit to employ any of the current officers or employees of the Company
without obtaining the prior written consent of the Company.
9
11
Fee Agreement. The following is a summary of the letter agreement dated
June 20, 1997, between Parent and the Company (the "Fee Agreement"), a copy of
which is filed as Exhibit 99.2. Such summary is qualified in its entirety by
reference to the Fee Agreement.
Parent and the Company entered into the Fee Agreement on June 20, 1997,
which attached as an exhibit a draft copy of the Merger Agreement. Pursuant to
the Fee Agreement, Parent represented that it had completed its due diligence
investigation with respect to the Company and its assets, properties, claims,
liabilities and business, that Parent was satisfied with the results of such
investigation, that Parent had scheduled a meeting of its Board of Directors for
Wednesday, June 25, 1997 to consider approval of the Merger Agreement, and that
management of Parent would recommend that its Board approve the Merger
Agreement. The Company represented that it had scheduled a meeting of the Board
for not later than Tuesday, June 24, 1997, to consider approval of the Merger
Agreement, and that management of the Company would recommend that the Board
approve the Merger Agreement.
Pursuant to the Fee Agreement, the Company agreed that, in the event (i)
the Board did not approve the Merger Agreement on or before June 25, 1997, (ii)
an authorized officer of the Company did not execute and deliver the Merger
Agreement on or before June 25, 1997, or (iii) management of the Company
rescinded its agreement to the Merger Agreement prior to Parent's execution
thereof, then the Company would pay promptly to Parent, as liquidated damages, a
fee of $10,000,000 (the "Fee") plus all Expenses (as defined in the Merger
Agreement) up to a maximum of $3,000,000. The Fee Agreement also provides that,
notwithstanding the foregoing, the Fee Agreement would terminate without
liability accruing to either party if (a) the Board of Directors of Parent shall
not have approved the Merger Agreement by 11:59 p.m., Eastern Daylight Savings
Time on June 25, 1997, or (ii) an authorized officer of Parent shall not have
executed and delivered the Merger Agreement by 11:59 p.m., Eastern Daylight
Savings Time on such date. In the event either of such conditions were not
satisfied, the Company would have no obligation to pay the Fee or Expenses.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendations of the Board of Directors.
The Board of Directors has unanimously approved the Merger Agreement and
the transactions contemplated thereby and determined that each of the Offer and
the Merger is fair to, and in the best interests of, the stockholders of the
Company. The Board of Directors unanimously recommends that all holders of
Shares accept the Offer and tender their Shares pursuant to the Offer.
(b) Background; Reasons for the Recommendation.
In the summer of 1996, three investment banking firms were interviewed by
representatives of the Company to seek assistance regarding long-term strategic
planning alternatives, including the possible sale of the Company. In August
1996, a financial advisor under general engagement by Parent contacted Harold M.
Marko, a director and Chairman Emeritus of the Company, to arrange a meeting
between Mr. Marko and Richard A. Bearse, a senior vice president of Parent. On
September 5, 1996, Mr. Bearse met with Mr. Marko and Alan E. Schwartz, a
director of the Company, to discuss Parent's business and desire to acquire
attractive companies with strong market positions in proprietary engineered
products. On October 2, 1996, Parent, through its wholly-owned subsidiary United
Dominion Industries, Inc., entered into a confidentiality agreement with the
Company agreeing to keep certain information confidential and not to take
certain action to obtain control of the Company. See "Confidentiality Agreement"
in Item 3. On October 9, 1996, members of the Company's senior management,
including David R. Zimmer, the Company's President and Chief Executive Officer,
Mr. Marko, Mr. Schwartz and Lawrence J. Murphy, the Company's Executive Vice
President, met with Mr. Bearse and William R. Holland, Parent's Chairman and
Chief Executive Officer, to discuss interest in a possible business combination.
On November 7, 1996, Parent delivered a draft letter of intent outlining a
proposal for Parent to acquire the Company. On November 20, 1996, the Company's
Board of Directors met to consider Parent's proposal; at that meeting, the
Company's Board of Directors also met with representatives of Goldman, Sachs &
Co. ("Goldman Sachs"), and the Board of Directors determined, based on the
results of the earlier interviews
10
12
described above, to engage Goldman Sachs as the Company's financial advisor.
Over the next several months, representatives of Goldman Sachs contacted, and in
some cases met with, those companies, including Parent, which senior management
of the Company and Goldman Sachs had determined to be the most likely potential
purchasers of the Company. During that period, the Company's Board of Directors
and Executive Committee received ongoing updates of such process. On March 26,
1997, upon the recommendation of the Compensation Committee of the Company's
Board of Directors, the Board of Directors approved the execution of the Change
of Control Agreements with the Company's executives described in Schedule I
hereto (except that Mr. MacGuidwin's Change of Control Agreement was approved on
May 27, 1997).
On May 12, 1997, Mr. Zimmer, Mr. Murphy and Mark J. MacGuidwin, the
Company's Vice President-Finance and Chief Financial Officer, along with
representatives of Goldman Sachs, met with representatives of Parent's senior
management, including Mr. Holland and Mr. Bearse, to update Parent on the
Company's recent operations and activities. Following the meeting, on May 14,
1997, Parent delivered to Goldman Sachs Parent's expression of interest and a
draft letter of intent outlining the material terms of a proposed acquisition of
the Company. Shortly thereafter, the Company, through Goldman Sachs, advised
Parent that although the Company did not wish to enter into a letter of intent
it encouraged Parent to proceed with developing a formal proposal. Beginning May
22, 1997, representatives of Parent met with members of the Company's senior
management and visited various Company locations to conduct on-site review of
the Company's businesses and to conduct due diligence examinations. In addition,
representatives of the Company and Parent, their financial advisors and legal
counsel commenced negotiation of the definitive terms of the Merger Agreement.
During the business day of June 16, 1997, as a result of increases in the
market price of the Shares, the Company publicly announced that it was engaged
in discussions with a third party relating to a possible sale of the Company. On
the morning of June 17, 1997, Mr. Holland notified Mr. Zimmer that Parent would
not proceed with consideration of the transaction unless it received assurances
that if a third party acquired the Company, the Company would compensate Parent.
On June 20, 1997, representatives of Parent and the Company completed
substantive negotiations on the Merger Agreement, and the Company's Board of
Directors met, along with representatives of Goldman Sachs, to review the Merger
Agreement, issues related to the Merger Agreement and Parent's request for an
interim compensation arrangement. At the June 20, 1997 meeting, the Company's
Board of Directors, among other things, redeemed the Company's preferred share
purchase rights and approved the execution by the Company and Parent of a letter
agreement providing that if the Company's Board of Directors did not approve the
Merger Agreement on or before June 25, 1997, an authorized officer of the
Company did not execute and deliver the Merger Agreement to Parent on or before
June 25, 1997 or the Company approved and executed the Merger Agreement but
rescinded its agreement to the Merger Agreement prior to the execution thereof
by Parent, then the Company would pay to Parent, as liquidated damages, a fee of
$10,000,000 plus out-of-pocket expenses of up to $3,000,000, unless parent's
Board of Directors had not approved the Merger Agreement, and an authorized
officer of Parent had not executed and delivered the Merger Agreement, by 11:59
p.m. on June 25, 1997. See "Fee Agreement" in Item 3.
On June 24, 1997, the Company's Board of Directors met. At that meeting,
representatives of Goldman Sachs were present. After a presentation with respect
to the Merger Agreement, including Goldman Sachs' oral opinion described below,
the Company's Board of Directors unanimously approved the Merger Agreement and
the Offer and the Merger contemplated by it. On June 25, 1997, upon being
advised that the Company's Board of Directors had approved the Merger, the Offer
and the other transactions contemplated by the Merger Agreement, Parent's Board
of Directors approved the Merger Agreement. The Merger Agreement was executed by
the Company, Parent and Purchaser on the evening of June 25, 1997, and a press
release announcing the execution of the Merger Agreement was issued on the
morning of June 26, 1997.
In making the determinations and recommendations set forth in Item 4(a)
above, the Board considered a number of factors, including, without limitation,
the following:
(i) The terms and conditions of the Offer and the Merger Agreement;
11
13
(ii) Various presentations by management at Board of Director meetings
held on and before June 24, 1997 regarding the financial condition, results
of operations, business and prospects of the Company, including the
prospects of the Company if it were to remain independent;
(iii) The results of contacts by Goldman Sachs on behalf of the
Company with certain potential strategic acquirors;
(iv) The trading price of the Shares and that the $25.00 per Share
Offer price represents a premium of approximately 27% over the closing
sales price for the Shares on the New York Stock Exchange on June 13, 1997,
the last trading day prior to the public announcement of the Company's
ongoing discussions with a third party;
(v) The presentation of Goldman Sachs at the June 24, 1997 Board of
Directors' meeting and its oral opinion (which was subsequently confirmed
in writing) to the effect that, as of the date of such opinion, the $25.00
in cash to be received by holders of the Shares in the Offer and the Merger
was fair to the Company's stockholders. A copy of the opinion of Goldman
Sachs, which sets forth the assumptions made, matters considered and
limitations on the review undertaken by Goldman Sachs, is attached hereto
and filed as Exhibit 99.6, and incorporated herein by reference.
STOCKHOLDERS ARE URGED TO READ THE OPINION OF GOLDMAN SACHS CAREFULLY IN
ITS ENTIRETY;
(vi) That the Merger Agreement permits the Company if, and only to the
extent that, the Board of Directors of the Company after consulting with
Goldman Sachs and independent counsel and taking into consideration the
advice of Goldman Sachs and upon the advice of such counsel, determines in
good faith that such action is required by the Board of Directors to comply
with its fiduciary duty to stockholders imposed by Nevada law to furnish
information in response to requests which were not solicited by the Company
after date of the Merger Agreement to third parties pursuant to
confidentiality agreements, and to participate in discussions and
negotiations with any third party that has submitted an unsolicited
proposal in writing to the Company to acquire the Company;
(vii) The termination provisions of the Merger Agreement, which were a
condition to Parent's proposal, providing that Parent would be entitled to
a fee of $10 million and reimbursement of expenses of up to $3 million upon
the termination of the Merger Agreement under certain circumstances; and
(viii) The representation of Parent and the Purchaser that Parent has,
or has commitments to obtain, sufficient funds to permit Purchaser to
consummate the Offer and the Merger.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Goldman Sachs as its financial advisor in connection
with the possible sale or merger of the Company. The Company has agreed to pay
Goldman Sachs for its services an aggregate financial advisory fee equal to 1%
of the total consideration paid by a purchaser in any such transaction. The
Company also has agreed to reimburse Goldman Sachs for its out-of-pocket
expenses, including the reasonable fees and expenses of its counsel, and to
indemnify Goldman Sachs against certain liabilities, including liabilities under
the federal securities laws, arising in connection with its engagement.
In the ordinary course of its business, Goldman Sachs may from time to time
effect transactions and hold positions in securities of the Company and Parent.
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.
12
14
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, except for (i) Shares the sale
of which may result in liability for the holder(s) under Section 16(b) of the
Exchange Act, (ii) Shares which are subject to restrictions on transfer and (ii)
gifts of Shares to family members or charitable organizations, each executive
officer, director and affiliate of the Company currently intends to tender all
Shares over which he or she has sole dispositive power to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) The Company is not engaged in any negotiation in response to the Offer
which relates to or would result in (i) an extraordinary transaction, such as a
merger or reorganization, involving the company or any subsidiary of the
Company; (ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the company; (iii) a tender offer for or other
acquisition of securities by or of the Company; or (iv) any material change in
the present capitalization or dividend policy of the Company.
(b) There are no transactions, Board of Directors' resolutions, agreements
in principle or signed contracts in response to the Offer that relate to or
would result in one or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 99.1 Agreement and Plan of Merger, dated as of June 25, 1997,
among the Company, Parent and Purchaser
Exhibit 99.2 Letter Agreement, dated as of June 20, 1997, between the
Company and Parent
Exhibit 99.3 Confidentiality Agreement dated October 2, 1996 between the
Company and Parent
Exhibit 99.4 Form of Letter addressed to stockholders of the Company,
dated July 2, 1997
Exhibit 99.5 Press Release issued by the Company on June 26, 1997
Exhibit 99.6 Opinion of Goldman, Sachs & Company dated June 25, 1997
Exhibit 99.7 Change of Control Agreement between the Company and Mark J.
MacGuidwin dated May 27, 1997
Exhibit 99.8 Change of Control Agreement between the Company and David R.
Zimmer dated March 26, 1997.*
Exhibit 99.9 Change of Control Agreement between the Company and Lawrence
J. Murphy dated March 26, 1997.*
Exhibit 99.10 Change of Control Agreement between the Company and Thomas
G. Hooper dated March 26, 1997.*
Exhibit 99.11 Change of Control Agreement between the Company and James P.
Dixon dated March 26, 1997.*
- ---------------
* Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the period ending February 28, 1997.
13
15
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
CORE INDUSTRIES INC
By: /s/ DAVID R. ZIMMER
----------------------------------
David R. Zimmer
President and Chief Executive
Officer
14
16
SCHEDULE I
CORE INDUSTRIES INC
500 NORTH WOODWARD AVENUE
BLOOMFIELD HILLS, MICHIGAN 48303
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
---------------
This Information Statement is being mailed on or about July 2, 1997, to the
holders of record of the Shares at the close of business on or about June 27,
1997, as a part of the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer by UD Nevada Corp. (the "Schedule
14D-9"). You are receiving this Information Statement in connection with the
possible election of persons designated by the Purchaser to a majority of the
seats on the Board of Directors of the Company. The Merger Agreement requires
the Company to use all reasonable efforts to cause the Purchaser Designees (as
defined below) to be elected to the Board of Directors under the circumstances
described therein. This Information Statement is required by Section 14(f) of
the Exchange Act and Rule 14f-1 thereunder. See "Board of Directors and
Executive Officers-Right to Designate Directors; The Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on July 2,
1997. The Offer is scheduled to expire at 12:00 midnight, Eastern Daylight
Savings Time, on Wednesday, July 30, 1997, unless the Offer is extended.
The terms of the Merger Agreement, a summary of the events leading up to
the Offer and the execution of the Merger Agreement and other information
concerning the Offer and the Merger are contained in the Offer to Purchase, the
related Letter of Transmittal and the Schedule 14D-9, copies of which are being
delivered to the Company's shareholders contemporaneously herewith.
The information contained in this Information Statement concerning
Purchaser and the Purchaser Designees has been furnished to the Company by
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of June 27, 1997, there were 10,752,608
Shares outstanding. The Board of Directors currently consists of seven members,
each of whom is elected to a three year term. Each director holds office until
such director's successor is elected and qualified or until such director's
earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the purchase by Purchaser
of Shares pursuant to the Offer, and from time to time thereafter, Purchaser
shall be entitled to designate up to such number of directors (the "Purchaser
Designees"), rounded up to the next whole number, on the Company's Board of
Directors as shall give Purchaser representation on the Board of Directors equal
to the product of the total number of directors on the Board of Directors
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares beneficially owned by
Purchaser or any affiliate of Purchaser at such time bears to the total number
of Shares then outstanding, and the Company shall, at such
15
17
time, promptly take all actions necessary to cause the Purchaser Designees to be
elected as directors of the Company, including increasing the size of the Board
of Directors or securing the resignations of incumbent directors or both. At
such times, the Company shall use its best efforts to cause persons designated
by Purchaser to constitute the same percentage as persons designated by
Purchaser shall constitute of the Board of Directors of (i) each committee of
the Board of Directors, (ii) each board of directors of each subsidiary of the
Company and (iii) each committee of each such board, in each case only to the
extent permitted by applicable law. Notwithstanding the foregoing, until the
time Purchaser acquires a majority of the then outstanding Shares on a fully
diluted basis, the Company shall use its best efforts to ensure that all the
members of the Board of Directors and each committee of the Board of Directors
and such boards and committees of such subsidiaries as of the date of the Merger
Agreement who are not employees of the Company shall remain members of the Board
of Directors and of such boards and committees.
Purchaser has informed the Company that each of the Purchaser Designees
listed below has consented to act as a director.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by Purchaser of a majority of the Shares pursuant to the
Offer, which purchase cannot be earlier than July 30, 1997, and that, upon
assuming office, the Purchaser Designees will thereafter constitute at least a
majority of the Board of Directors.
Biographical information concerning each of the Purchaser Designees is
presented on the following page.
16
18
PURCHASER DESIGNEES
The following table sets forth the name, age present principal occupation
or employment, and material occupations, positions, offices or employments and
business addresses thereof for the past five years of each Purchaser Designee.
Each such person is a citizen of the United States, and his business address is
2300 One First Union Center, 301 South College Street, Charlotte, North Carolina
28202-6039.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD
NAME AND AGE DURING THE PAST FIVE YEARS AND BUSINESS ADDRESSES THEREOF
------------ -------------------------------------------------------------------
William R. Holland, 58....................... Chairman of Parent since 1987, and Chief Executive Officer of
Parent since 1986.
Robert E. Drury, 52.......................... Executive Vice President and Chief Administrative Officer of Parent
since 1995. Chief Financial Officer of Parent, 1992-1995, and
Senior Vice President of Parent, 1993-1995. Vice President of
Parent, 1987-1993.
Richard A. Bearse, 58........................ Senior Vice President, Planning and Development of Parent since
1996. President of Building Products segment of Parent, 1995-1996.
President and Chief Executive Officer of Flair Corporation, a
manufacturer of air and filtration systems (and a subsidiary of
Parent), 4647 Southwest 40th Avenue, Ocala, Florida 34474-5799,
1991-1995.
Jan K. Ver Hagen, 59......................... President and Chief Operating Officer of Parent since 1994. Vice
Chairman, Emerson Electric Co., a manufacturer of a broad range of
electrical and electronic products, 8000 W. Florissant Ave., St.
Louis, Missouri 63136, 1988-1994.
Glenn A. Eisenberg, 36....................... Senior Vice President and Chief Financial Officer of Parent since
1995. Vice President of Planning and Development of Parent,
1992-1995. Director of Corporate Finance and Investor Relations of
Parent, 1991-1992.
J. Milton Childress, II, 39.................. Vice President of Parent since 1996. Director of Corporate
Development of Parent, 1992-1996.
Richard L. Magee, 39......................... Vice President of Parent since 1996. Associate General Counsel of
Parent since 1993. Assistant General Counsel of Parent, 1989-1993.
None of the Purchaser Designees (i) is currently a director of, or holds
any position with, the Company, (ii) has a familial relationship with any of the
directors or executive officers of the Company or (iii) to the best knowledge of
the Company, beneficially owns any securities (or rights to acquire any
securities) of the Company. The Company has been advised by Purchaser that, to
the best of Purchaser's knowledge, none of the Purchaser Designees has been
involved in any transactions with the Company or any of its directors, executive
officers or affiliates which are required to be disclosed pursuant to the rules
and regulations of the Commission, except as may be disclosed herein or in the
Schedule 14D-9.
17
19
DIRECTORS
Information with respect to the directors of the Company is as follows:
NAME AND YEAR POSITION AND OFFICES WITH THE COMPANY TERM
FIRST BECAME A DIRECTOR AGE AND OTHER PRINCIPAL OCCUPATION* EXPIRES
----------------------- --- ------------------------------------- -------
Harold M. Marko (1955).......................... 71 Chairman Emeritus of the Company...... 1998
Alan E. Schwartz (1960)......................... 71 Partner, Honigman Miller Schwartz and
Cohn, Detroit, Michigan, attorneys.... 1998
Richard P. Kughn (1988)......................... 67 Chairman and Chief Executive Officer,
Kughn Enterprises, a sole
proprietorship engaged in the
management of various business
interests............................. 1999
David R. Zimmer (1992).......................... 50 President and Chief Executive Officer
of the Company........................ 1999
Lawrence J. Murphy (1992)....................... 55 Executive Vice President and Secretary
of the Company........................ 2000
Lloyd E. Reuss (1997)........................... 60 Former President, General Motors
Corporation........................... 2000
Robert G. Stone, Jr. (1976)..................... 74 Chairman Emeritus, Kirby Corporation,
Houston, Texas, inland and off-shore
marine transportation and diesel
repair................................ 2000
Mr. Murphy is a director of Jabil Circuit, Inc.
Mr. Reuss is a director of the following corporations: Detroit Mortgage &
Realty; Handleman Company; International Speedway Corporation; and U.S. Sugar
Corporation.
Mr. Stone is a director of the following corporations: Novacare; Russell
Reynolds Associates, Inc.; Tandem Computers, Inc.; Tejas Gas Corporation; and
several funds managed by Scudder, Stevens & Clark. He is Director Emeritus of
The Chubb Corporation, Corning, Inc., The Japan Fund, and The Pittston Company.
Mr. Stone is also a Fellow of Harvard College.
Mr. Schwartz is a director of the following corporations: The Detroit
Edison Company; DTE Energy Company; Handleman Company; Howell Industries, Inc.;
Pulte Corporation; and Unisys Corporation.
Mr. Kughn is a director of AAA Michigan and Chairman Emeritus of Lionel
L.L.C.
Mr. Zimmer is a director of Twin Disc, Incorporated.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended August 31, 1996, the Board of Directors held
eight meetings. All of the directors attended at least 75 percent of their
respective board and committee meetings.
The Company has a standing Audit Committee. The members of the Audit
Committee are Harold M. Marko, Lloyd E. Reuss, and Alan E. Schwartz. During
fiscal 1996, the Audit Committee held two meetings. The duties of the Audit
Committee include recommending to the Board of Directors annually the
- ---------------
* The indicated occupations have been held by each director for the past five
years, except that: Mr. Stone served as Chairman of the Board of Kirby
Corporation until April, 1995; Mr. Kughn served as Chairman and Chief
Executive Officer of Lionel Trains, Inc. until September, 1995; Mr.
Zimmer served as President and Chief Executive Officer of New Venture Gear,
Inc. from January, 1990 until March, 1992 (when he became President of Core
Industries Inc); and Mr. Reuss served as President of General Motors
Corporation from August, 1990 until April, 1992 and as Executive Vice
President of New Vehicles and Systems of General Motors Corporation from
April, 1992 until January, 1993.
18
20
appointment of the independent auditors; reviewing with the independent auditors
the scope and results of the audit; reviewing the independent auditors' fees,
including fees for professional services unrelated to the audit; and reviewing
with the independent auditors and management the adequacy of the Company's
accounting and financial controls.
The Company has a standing Compensation Committee. The members of the
Compensation Committee are Richard P. Kughn and Robert G. Stone, Jr. During
fiscal 1996, the members of the Compensation Committee held two meetings as well
as informal discussions in lieu of formal committee meetings. The duties of the
Compensation Committee are: recommending to the Board of Directors the
compensation arrangements for senior management and directors; and recommending
to the Board compensation plans in which officers or directors are eligible to
participate.
The Company has a standing Executive Committee. The members of the
Executive Committee are Harold M. Marko, Alan E. Schwartz and David R. Zimmer.
During fiscal 1996, the Executive Committee held twelve meetings. The Executive
Committee has and may exercise the authority of the Board of Directors in the
management of the business of the Company between the meetings of the Board of
Directors.
The Company has a standing Nominating Committee. All of the non-employee
members of the Board of Directors serve as the Nominating Committee. The
Nominating Committee considers the performance of incumbent directors and
recommends to the stockholders nominees for election as directors. During fiscal
1996, the members of the Nominating Committee held informal discussions in lieu
of formal committee meetings.
EXECUTIVE OFFICERS
The following sets forth certain information with respect to these persons
who constitute the Company's executive officers as of June 27, 1997. These
officers have been appointed to terms which continue until the next annual
meeting of shareholders.
FIRST SERVED
NAME AND POSITION AGE AS OFFICER IN
----------------- --- -------------
David R. Zimmer........................................... 50 March 1992
President and Chief Executive Officer
Lawrence J. Murphy........................................ 55 October 1990
Executive Vice President
Mark J. MacGuidwin........................................ 45 October 1996
Vice President -- Finance and Chief Financial Officer
Thomas G. Hooper.......................................... 53 October 1990
Treasurer and Controller
James P. Dixon............................................ 53 January 1994
Vice President -- Technology
Certain biographical information with respect to Messrs. Zimmer and Murphy
is contained above under the caption "Directors."
Mr. MacGuidwin has been employed by the Company as its Vice
President-Finance and Chief Financial Officer since October 1996. He previously
served as the Vice President -- Controller of Varity Corporation (from April,
1995) and as Vice President -- Finance of Libbey-Owens-Ford Co. (from October,
1990).
Mr. Hooper has served as the Treasurer and Controller of the Company since
October 1990.
Mr. Dixon has served as the Vice President-Technology of the Company since
January 1997, and previously served as the Vice President -- Planning of the
Company from January 1994 and as the Vice President-Marketing of the Company
from October 1990.
19
21
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the shares of the Company's Common Stock
beneficially owned as of March 31, 1997 by the Company's directors, executive
officers identified in the "Summary Compensation Table," and all directors and
officers as a group. To the knowledge of the Company, no other persons were the
beneficial owners of more than 5% of the Company's Common Stock on such date.
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OWNED SHARES(1)
---- ------------ -----------
Harold M. Marko............................................. 427,236(2) 3.9%
Alan E. Schwartz............................................ 190,300(3) 1.7
Richard P. Kughn............................................ 68,109(4) (5)
David R. Zimmer............................................. 173,075(6) 1.6
Lawrence J. Murphy.......................................... 51,879(7) (5)
Lloyd Reuss................................................. 1,000 (5)
Robert G. Stone, Jr......................................... 3,375 (5)
Mark J. MacGuidwin.......................................... 0 (5)
Thomas G. Hooper............................................ 16,667(8) (5)
James P. Dixon.............................................. 16,935(9) (5)
All directors and executive officers as a group (10 persons
including those listed above)............................. 948,576(10) 8.6
- ---------------
(1) Includes shares which such persons have the right to purchase within 60
days after March 31, 1997 upon the exercise of certain stock options.
(2) In addition, 73,700 shares are owned by Mr. Marko's wife, as to which
shares Mr. Marko disclaims any beneficial interest. Includes 35,736 shares
subject to stock options exercisable within 60 days following March 31,
1997.
(3) In addition, 15,471 shares are owned by Mr. Schwartz's wife, as to which
shares Mr. Schwartz disclaims any beneficial interest. Includes 45,027
shares subject to stock options exercisable within 60 days following March
31, 1997.
(4) Includes 68,109 shares subject to stock options exercisable within the 60
days following March 31, 1997.
(5) Shares beneficially owned do not exceed one percent of the Company's Common
Stock.
(6) Includes 155,335 shares subject to stock options exercisable within the 60
days following March 31, 1997.
(7) Includes 38,166 shares subject to stock options exercisable within the 60
days following March 31, 1997.
(8) Includes 11,500 shares subject to stock options exercisable within the 60
days following March 31, 1997.
(9) Includes 11,333 shares subject to stock options exercisable within the 60
days following March 31, 1997.
(10) Includes 365,206 shares subject to stock options exercisable within 60 days
following March 31, 1997.
20
22
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this Schedule
14D-9 and/or Information Statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The following Stock Price Performance Graph compares the cumulative
stockholder return for the Company's common stock with the cumulative total
return of the Standard & Poor's 500 Composite Index and the Standard & Poor's
Diversified Manufacturers Index for the past five years.
Measurement Period (Fiscal Core S & P Diversified
Year Covered Industries Inc S & P 500 Mfr
1991 100 100 100
1992 120 108 98
1993 221 124 124
1994 170 131 138
1995 191 159 181
1996 205 189 224
Compound Return 15.4% 13.6% 17.5%
21
23
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION(1)
--------------------------------
NAME AND FISCAL
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) OPTIONS(#) OTHER
------------------ ------ --------- ----------- ---------- -----
David R. Zimmer 1996 $313,333 $211,239 83,000 --
President and Chief 1995 300,000 200,803 -- --
Executive Officer 1994 291,667 152,015 83,000 --
Lawrence J. Murphy 1996 201,667 118,925 46,000 --
Executive Vice President 1995 195,000 108,400 -- --
and Secretary 1994 190,000 84,311 46,000 --
Raymond H. Steben, Jr. 1996 123,283 53,961 30,000 --
Vice President -- Finance 1995 151,667 73,855 -- --
and Chief Financial Officer(3) 1994 145,000 43,514 30,000 --
James P. Dixon 1996 150,000 94,407 14,000 --
Vice President -- Technology 1995 145,667 82,463 -- --
1994 137,000 34,936 14,000 $62,888(4)
Thomas G. Hooper 1996 115,333 46,060 12,000 --
Treasurer and Controller 1995 110,000 44,926 -- --
1994 108,333 21,452 12,000 --
- ---------------
(1) Other annual compensation, which was less than the lesser of $50,000 or 10%
of the individual's bonus and salary, is not shown.
(2) Inclusive of $112,068, $56,162, $26,792, $49,998 and $23,746 in 1996;
$112,303, $60,625, $41,305, $46,119 and $25,126 in 1995; and $81,215,
$36,536, $23,290, $18,854 and $15,136 in 1994 awarded to the five named
individuals, respectively, in unrestricted common stock of the Company as
part of the earned annual bonus.
(3) Mr. Steben was employed by the Company as Vice President -- Finance and
Chief Financial Officer until June 17, 1996.
(4) Mr. Dixon relocated his household during the 1994 fiscal year. Of the amount
shown, $58,382 was part of a relocation reimbursement agreed to in fiscal
year 1990.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
NUMBER OF % OF OPTIONS STOCK PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE OR FOR OPTION TERM(2)
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------------
NAME OPTIONS FISCAL YEAR ($/SHARE)(1) DATE 0%($) 5%($) 10%($)
---- ---------- ------------ ------------ ---------- ----- ----- ------
David R. Zimmer.............. 83,000 37.3% $13.75 11/29/05 0 $ 717,726 $ 1,818,859
Lawrence J. Murphy........... 46,000 20.7 13.75 11/29/05 0 397,726 1,008,042
Raymond H. Steben, Jr. ...... 30,000 13.5 13.75 11/29/05 0 259,419 657,419
James P. Dixon............... 14,000 6.3 13.75 11/29/05 0 121,062 306,795
Thomas G. Hooper............. 12,000 5.4 13.75 11/29/05 0 103,768 262,968
Total Stockholders(3)........ 0 92,724,413 234,981,868
- ---------------
(1) Vesting of the options, i.e. the right to exercise, initially depends upon
accelerated growth in the market value of the Company's stock. One-third of
the granted options will vest if the Company's stock averages greater than
$15.81 for 30 calendar days before November 30, 1998, another one-third will
vest if the Company's stock price averages greater than $18.18 for 30
calendar days before such date and the final
22
24
one-third will vest if the Company's stock price averages $20.91 for 30
calendar days before such date. Any options that fail to become exercisable
under these provisions will vest 9 1/2 years from the grant date.
(2) "Potential realizable value" is disclosed in response to SEC rules which
require such disclosure for illustration only. The values disclosed are not
intended to be, and should not be interpreted by stockholders as,
representations or projections of future value of the Company's stock.
(3) To lend perspective to the illustrative "potential realizable value," if the
Company's stock price increased five percent or 10 percent per year from the
date of the grant of the options for 10 years (disregarding dividends and
assuming for purpose of the calculation a constant number of shares
outstanding), the total increase in the value of all shares presently
outstanding is shown above as "potential realizable value" for all of the
Company's stockholders ("Total Stockholders").
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY OPTIONS AT
SHARES OPTIONS AT FY END(#) FISCAL YEAR END($)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
David R. Zimmer........... 0 0 107,667 158,333 $475,000 $118,750
Lawrence J. Murphy........ 0 0 22,833 76,667 8,906 --
Raymond H. Steben, Jr. ... 0 0 18,000 50,000 23,000 --
James P. Dixon............ 0 0 6,667 23,333 13,750 --
Thomas G. Hooper.......... 0 0 7,500 20,000 4,156 --
CHANGE OF CONTROL AGREEMENTS
Messrs. Zimmer, Murphy, MacGuidwin, Hooper and Dixon, along with certain
other key employees of the Company ("covered employees"), are parties to Change
of Control Agreements with the Company entered into between March and May, 1997.
Under the Change of Control Agreements, each of the covered employees is
entitled to receive certain benefits from the Company if a "Change in Control"
(defined to include the acquisition by any third party of 40% or more of the
combined voting power of the Company's then outstanding securities) occurs and
if the covered employee's employment is, within two years following the Change
in Control, either terminated by the Company without cause or the covered
employee resigns from the employ of the Company for "Good Reason" (defined to
include the assignment to the covered employee of any duties inconsistent in any
respect with the covered employee's position, other actions that result in a
diminution in the covered employee's position, authority, duties or
responsibilities, a reduction by the Company in the covered employee's base
salary, a failure by the Company to maintain plans providing benefits at least
as beneficial as those provided by any benefit or compensation plan, the
Company's requiring the covered employee to be based at any office or location
in excess of 50 miles from his office location immediately before the Change in
Control, and in the case of Mr. Zimmer and Mr. Murphy (but not in the case of
the other individuals listed above) the voluntary termination of employment by
the covered employee during the period beginning with the first day of the 13th
full calendar month following any Change in Control and ending on the later to
occur of (a) the last day of the 13th full calendar month following such Change
in Control or (b) the date 90 days after the Company gives the covered employee
written notice that such Change in Control has occurred.
The benefits to which covered employees are entitled in the foregoing
circumstances include the payment to the covered employee in a lump sum in cash
within 30 days after the date of termination a severance payment in an amount
equal to 100% of the covered employee's annual compensation, certain
outplacement services and the continuation of certain employee benefits for a
period following termination.
In addition, in the foregoing circumstances each covered employee (with the
exception of Mr. MacGuidwin) will, for a period of two years, be obligated to
consult with the Company and not to
23
25
compete with the Company, in connection with which the Company must pay the
covered employee 100% (200% in the case of Mr. Zimmer or Mr. Murphy) of the
covered employee's annual compensation.
PENSION PLANS
The Company has a tax-qualified Defined Benefit Pension Plan and a
nonqualified Benefit Equalization Plan, both of which cover salaried employees
of corporate headquarters and of certain divisions. The Defined Benefit Pension
Plan provides pension and disability benefits for covered employees. Employees
with five or more years of service are entitled to annual pension benefits
beginning at normal retirement age (65). The annual retirement benefit is equal
to 1.25% of the employee's final average compensation (substantially the same as
Annual Compensation as reported in the above Summary Compensation Table) plus
.65% of the employee's final average compensation in excess of the Social
Security taxable wage base multiplied by the employee's years of service. In no
event may the retirement benefit exceed 65% of the final average compensation.
The unfunded Benefit Equalization Plan provides for the payment of additional
amounts to covered employees so that the total amount paid will equal the
pension benefit which would have been calculated under the Defined Benefit
Pension Plan formula without regard to the limitations added to the Defined
Benefit Pension Plan to conform to Section 415 and 401(a)(17) of the Internal
Revenue Code of 1986. The following table shows estimated annual retirement
benefits payable under both plans to an employee at normal retirement age of 65
on a single life annuity basis assuming a Social Security taxable wage base of
an employee currently age 60:
YEARS OF SERVICE
FINAL AVERAGE --------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
------------- -- -- -- -- --
$125,000...................... $ 32,876 $ 43,834 $ 54,793 $ 65,751 $ 76,710
150,000...................... 40,001 53,334 66,668 80,001 93,335
175,000...................... 47,126 62,834 78,543 94,251 109,960
200,000...................... 54,251 72,334 90,418 108,501 126,585*
225,000...................... 61,376 81,834 102,293 122,751* 143,210*
250,000...................... 68,501 91,334 114,168 137,001* 159,835*
300,000...................... 82,751 110,334 137,918* 165,501* 193,085*
350,000...................... 97,001 129,334* 161,668* 194,001* 226,335*
400,000...................... 111,251 148,334* 185,418* 222,501* 259,585*
450,000...................... 125,501* 167,334* 209,168* 251,001* 292,500*
500,000...................... 139,751* 186,334* 232,918* 279,501* 325,000*
- ---------------
* Section 415 of the Internal Revenue Code limits the benefits which can be paid
from any funded pension plan that qualifies for federal tax exemption. The
amount for calendar year 1996 is $120,000. In addition, Section 401(a)(17) of
the Internal Revenue Code limits the amount of compensation that may be used
in the calculation of the benefit to $150,000 for 1996.
The credited years of service under the Company's pension plans to each of
the persons named above are: David R. Zimmer -- 4 years; Lawrence J. Murphy --
15 years; Raymond H. Steben, Jr. -- 3 years; James P. Dixon -- 6 years; and
Thomas G. Hooper -- 15 years.
COMPENSATION OF DIRECTORS
The current standard arrangement for compensation of directors is as
follows: officers of the Company who are directors do not receive any additional
compensation for services as a director. Each director who is not an officer of
the Company receives a director fee in the annual amount of $11,000 plus $1,750
for each board meeting attended up to a maximum of $15,750 in meeting fees.
There are six regularly scheduled board meetings per year. An additional sum of
$1,000 per meeting is paid for attendance at a committee meeting if such meeting
falls on a day on which a meeting of the entire Board of Directors is not held.
Non-employee directors may elect to defer compensation for services as a
director until the person ceases to be a director. All deferred amounts are held
in the general funds of the Company and bear interest at the prime rate from the
24
26
date such fees would otherwise be paid. Two directors have elected to defer
their compensation pursuant to this plan.
The non-employee directors of the Company are eligible to participate in
the Company's 1991 Director Discounted Stock Option Plan. Under that Plan,
directors may elect to receive stock options exercisable at either 50% or 75% of
market value on each January 1 in lieu of director fees payable in cash. The
number of options granted annually is that number of options which provides
aggregate discount from market value equal to the cash fees forfeited. Under the
Plan, 200,000 shares were reserved for issuance. Two of the Company's directors
elected to participate in the 1991 Director Discounted Stock Option Plan in
fiscal 1996, and stock options for a total of 12,941 shares (exercisable at
$9.56 per share) were granted to them in fiscal 1996. All such options have a
term of 10 years, and none had been exercised as of August 31, 1996.
25
27
EXHIBIT INDEX
EXHIBIT
NO. PAGE IN SEQUENTIAL NUMBERING SYSTEM
- ------- -----------------------------------
99.1 Agreement and Plan of Merger, dated as of June 25, 1997,
among the Company, Parent and Purchaser.
99.2 Letter Agreement, dated as of June 20, 1997, between the
Company and Parent.
99.3 Confidentiality Agreement dated October 2, 1996 between the
Company and Parent.
99.4 Form of Letter addressed to stockholders of the Company,
dated July 2, 1997.*
99.5 Press Release issued by the Company on June 26, 1997.
99.6 Opinion of Goldman, Sachs & Company dated June 25, 1997.*
99.7 Change of Control Agreement between the Company and Mark J.
MacGuidwin dated May 27, 1997.
99.8 Change of Control Agreement between the Company and David R.
Zimmer dated March 26, 1997.**
99.9 Change of Control Agreement between the Company and Lawrence
J. Murphy dated March 26, 1997.**
99.10 Change of Control Agreement between the Company and Thomas
G. Hooper dated March 26, 1997.**
99.11 Change of Control Agreement between the Company and James P.
Dixon dated March 26, 1997.**
- ---------------
* Included in copies mailed to stockholders.
** Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the period ending February 28, 1997.
26