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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DRAVO CORPORATION
(Name of Subject Company)
DRAVO CORPORATION
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
261471 10 6
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(CUSIP Number of Class of Securities)
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EARL J. BELLISARIO
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
DRAVO CORPORATION
11 STANWIX STREET
PITTSBURGH, PA 15222
412-995-5500
(Name, Address and Telephone Number of Person Authorized to
Receive Notice and Communications on Behalf of the Person Filing the Statement)
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Copies to:
MICHAEL J. FLINN, ESQ.
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
ONE OXFORD CENTRE
301 GRANT STREET, 20TH FLOOR
PITTSBURGH, PA 15219-1410
412-562-1027
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Dravo Corporation, a Pennsylvania
corporation ("Dravo" or the "Company"). The principal executive offices of the
Company are located at 11 Stanwix Street, Pittsburgh, PA 15222. The title of the
class of equity securities to which this Solicitation/Recommendation Statement
on Schedule 14D-9 relates is the common stock, par value $1.00 per share, of the
Company ("Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer disclosed in the Tender Offer
Statement on Schedule 14D-1 dated September 21, 1998 (the "Schedule 14D-1")
filed by Carmeuse Lime, Inc., a Delaware corporation ("Carmeuse" or "Parent"),
and DLC Acquisition Corp., a Pennsylvania corporation and a wholly-owned
subsidiary of Parent ("Purchaser"), to purchase all of the outstanding shares of
Common Stock (the "Shares") at $13.00 per Share, net to the seller in cash,
without interest and less any required withholding taxes (the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated September 21, 1998 (the "Offer to Purchase") and the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
together constitute the "Offer"), copies of which are filed as Exhibits hereto.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 15, 1998, by and among Parent, Purchaser and the Company (the
"Merger Agreement"). The obligations of Parent and Purchaser under the Merger
Agreement are guaranteed by Carmeuse SA, which, as disclosed in the Schedule
14D-1, is a Belgian corporation and an affiliate of Parent and Purchaser.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Merger Agreement.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and Purchaser are located at 390 East Joe Orr Road, Chicago Heights,
Illinois 60411-0488.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) (1) The election and designation of directors to the Board of Directors
of the Company, as provided for in the Merger Agreement (a summary of which is
contained in this Schedule 14D-9), is subject to Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which requires the
Company to mail to its shareholders an Information Statement (the "Information
Statement") containing the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. The Information Statement is attached
as Schedule I hereto and is incorporated herein by reference. Certain contracts,
agreements, arrangements or understandings between the Company and certain of
its executive officers, directors or affiliates are described in Schedule I
hereto under the headings "Directors' Compensation," "Beneficial Security
Ownership of Directors and Executive Officers," "Executive Officers'
Compensation," "Severance Agreements" and "Executive Benefit Plan." Except as
set forth in this Item 3(b), to the knowledge of the Company, there are no
material contracts, agreements, arrangements or understanding and no actual or
potential conflicts of interest between (i) the Company or its affiliates and
the Company's executive officers, directors or affiliates; or (ii) Parent or
Purchaser and their respective executive officers, directors or affiliates.
(b) (2) THE MERGER AGREEMENT.
The Merger Agreement provides, among other things, for the making of the
Offer by Purchaser and further provides that, following consummation of the
Offer and subject to the satisfaction or waiver of certain conditions, Purchaser
will be merged with and into the Company (the "Merger") with the Company being
the surviving corporation in the Merger as a wholly owned subsidiary of the
Parent. As a result of the Merger, each outstanding Share (other than Shares
held by the Company in treasury, Shares held by the Purchaser or Parent and
Shares held by shareholders who have properly exercised their dissenters' rights
under Pennsylvania law) will be converted into the right to receive the Offer
Price at the date and time when properly executed Articles of Merger
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are duly filed with the Department of State of the Commonwealth of Pennsylvania
(or such later time as may be specified in the Articles of Merger) (the
"Effective Time").
The following is a summary of the material provisions of the Merger
Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text of the Merger Agreement which is incorporated herein by reference and a
copy of which has been filed with the Securities and Exchange Commission (the
"Commission") as an Exhibit to this Schedule 14D-9.
The Offer. The Merger Agreement provides that Purchaser will, and Parent
shall cause Purchaser to, commence the Offer as promptly as practical but in no
event later than five Business Days after the date of the publication of the
Offer. The Offer will be subject only to a number of shares of Common Stock
being validly tendered and not properly withdrawn prior to the expiration of the
Offer which would result in Purchaser's owning such number of shares of Common
Stock that represents at least a majority of (i) the actual outstanding shares
of Common Stock on a fully diluted basis including shares issuable upon exercise
of outstanding options (whether or not exercisable) and other securities
convertible into Common Stock and (ii) the voting power of the Company's
outstanding voting securities entitled to vote on the Merger (the "Minimum
Condition") and satisfaction or waiver of the further conditions set forth in
Annex I to the Merger Agreement, any of which conditions may be waived in the
sole discretion of Purchaser. Subject to the terms and conditions of the Offer,
Purchaser shall pay, as soon as reasonably practicable, for all Shares validly
tendered.
The Offer shall remain open (unless Purchaser elects to terminate the Offer
upon the occurrence of an Event (as defined in Annex I to the Merger Agreement))
for a period of twenty (20) Business Days from the commencement of the Offer
(the "Expiration Date"), unless Purchaser shall have extended the period of time
for which the Offer is open as may be permitted or required by the Merger
Agreement, or applicable law, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by Purchaser,
shall expire.
The Merger Agreement provides that Purchaser shall extend the Offer (i) for
ten Business Days beyond the initial Expiration Date if the Minimum Condition
has not been satisfied; and (ii) on one or more occasions, in each instance for
up to ten Business Days beyond the then scheduled Expiration Date, but not
beyond the Termination Date. If the Company, Parent or Purchaser receives a
request for additional information from a Governmental Agency with respect to
the Company's and Parent's filing under the HSR Act, the Offer shall be extended
until the waiting period under the HSR Act is terminated or until the Merger
Agreement is terminated in accordance with its terms.
Purchaser shall not, without the prior written consent of the Company, (i)
decrease or change the form of the Offer Price, (ii) reduce the number of shares
of Common Stock sought pursuant to the Offer, (iii) amend the conditions or
impose additional conditions to the Offer, (iv) amend any term of the Offer, (v)
amend the Minimum Condition, or (vi) amend any other term of the Offer in a
manner adverse to the holders of the Common Stock. Subject to the last sentence
of the preceding paragraph, Purchaser may at any time, in its sole discretion,
extend the Offer, provided, however, that Purchaser shall consummate the Offer
as promptly as possible after all conditions to the Offer have been satisfied or
waived.
Directors. The Merger Agreement provides that promptly upon the purchase
by Purchaser, pursuant to the Offer, of such number of Shares (rounded up to the
next whole number) as represents at least a majority of the outstanding shares
of Common Stock (on a fully diluted basis) and from time to time thereafter,
Purchaser shall be entitled to designate such number of directors as will give
Purchaser representation equal to the product of (a) the number of directors on
the Board of Directors of the Company (after giving effect to the appointment of
such directors) and (b) the percentage that such number of shares of Common
Stock so purchased bears to the number of shares of Common Stock outstanding;
provided, that in no event shall such number of directors be less than a
majority of the total number of directors of the Company. In connection with the
foregoing, the Company shall, upon written request by Purchaser, promptly (i)
increase the size of the Board of Directors of the Company to the extent
permitted by its Articles of Incorporation and By-Laws (as amended if
necessary); and/or (ii) take all steps necessary and appropriate to secure the
resignations of such number of directors as is necessary to enable Purchaser's
designees to be elected to the Board of Directors of the Company (and shall hold
a Board meeting for such purpose); and (iii) cause Purchaser's designees to be
so elected; provided, however, that, in the event that
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Parent's designees are appointed or elected to the Board of Directors, until the
Effective Time, the Board of Directors shall have at least two directors who are
directors on the date hereof and who are neither an officer of the Company or
its subsidiaries nor a designee, stockholder, affiliate or associate (within the
meaning of the federal securities laws) of Parent (the "Independent Directors");
provided further, that if the number of Independent Directors shall be reduced
below two for any reason, any remaining Independent Directors (or Independent
Director if there is only one) shall be entitled to fill such vacancy(ies) and
if no Independent Directors remain, the other directors shall designate one
person who shall not be either an officer of the Company or its subsidiaries or
a designee, shareholder, affiliate or associate of Parent to fill one of the
vacancies which person shall be deemed to be an Independent Director for
purposes of the Merger Agreement and who shall be entitled to fill any remaining
vacancy in the number of Independent Directors as provided in the Merger
Agreement. Pursuant to the Merger Agreement, and subject to applicable law, the
Company has agreed to take, at its expense, all action necessary to effect any
such election or appointment of Purchaser's designees, including mailing to all
holders of record of its outstanding securities the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
Purchaser and Parent are obligated to supply to the Company all information with
respect to themselves and their officers, directors and affiliates required by
such Section and Rule and will be solely responsible for any information
disseminated to shareholders with respect to either of them and their respective
nominees.
Upon consummation of the Offer and prior to the Effective Time, in addition
to any other approval of the directors required by applicable law or the
Articles of Incorporation or By-Laws of the Company, the Merger Agreement
provides that the affirmative vote of a majority of the Independent Directors
shall be required (i) to amend or terminate the Merger Agreement by the Company,
(ii) to waive any of the Company's rights or to exercise any of its remedies
under the Merger Agreement, (iii) to extend the time for performance of
Purchaser's obligations under the Merger Agreement or (iv) to take any other
action by the Company in connection with the Merger Agreement required to be
taken by the Board of Directors of the Company, whether or not such Independent
Directors constitute a quorum.
The Merger. Upon the terms and subject to the conditions of the Merger
Agreement, at the Effective Time, Purchaser shall be merged into the Company and
the separate existence of Purchaser shall thereupon cease, and the Company, as
the surviving corporation in the Merger, shall by virtue of the Merger continue
its corporate existence under the laws of the Commonwealth of Pennsylvania with
all of its rights, privileges, immunities, powers and franchises unaffected
thereby. The Merger shall become effective at the Effective Time when properly
executed Articles of Merger are duly filed with the Department of State of the
Commonwealth of Pennsylvania, which filing shall be made as soon as practicable
following fulfillment of the conditions set forth in the Merger Agreement, or at
such time thereafter as is provided in such Articles of Merger. The Articles of
Incorporation of the Company shall, after the Effective Time, be the Articles of
Incorporation of the Company and thereafter may be amended in accordance with
their terms and as provided by applicable law. The By-laws of Purchaser as in
effect at the Effective Time shall, after the Effective Time, be the By-laws of
the Company. The directors of Purchaser immediately prior to the Effective Time
shall, after the Effective Time, be the directors of the Company and the
officers of the Company immediately prior to the Effective Time shall, after the
Effective Time, be the officers of the Company, in each case until their
respective successors are duly elected and qualified.
Consideration to be Paid in the Merger. In the Merger, each share of
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares of Common Stock held by Purchaser, Parent or in the treasury
of the Company, all of which shall be canceled, and other than shares of Common
Stock held by shareholders exercising their dissenters' rights) shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into the right to receive $13.00 per Share, in cash, without interest
(subject to any applicable withholding tax).
Preference Stock Unaffected
As of the Effective Time, each issued and outstanding share of the
Company's Cumulative Convertible Series B Preference Stock and Series D
Cumulative Convertible Changeable Preference Stock (together, the "Preference
Stock") shall remain outstanding and unaffected by the Merger unless redeemed or
converted
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pursuant to the terms and conditions of the Company's Articles of Incorporation
and the applicable statement of designation of preferences and rights for such
Preference Stock.
Company Stock Options. At the Effective Time, each option (an "Option") to
purchase Common Stock issued by the Company which is outstanding shall be
canceled by virtue of the Merger and shall cease to exist. Each holder of an
Option, whether or not such Option is immediately exercisable, shall be entitled
to receive at the Effective Time, for each share of Common Stock issuable upon
exercise of such Option, an amount (subject to any applicable withholding tax)
in cash equal to the excess of (x) the Offer Price over (y) the per share
exercise price of the Option as in effect immediately prior to the Effective
Time. No consideration shall be payable with respect to any Option if the
exercise price of such Option exceeds the Offer Price.
Approval Required. The Merger Agreement provides that if required by
applicable law to approve the Merger, the Company will, promptly following
consummation of the Offer, take all action necessary in accordance with the PBCL
and its Articles of Incorporation and By-Laws to convene a meeting of its
shareholders to consider and vote upon the Plan of Merger contained in the
Merger Agreement and the transactions contemplated thereby. If a meeting of the
Company's shareholders is to be called, the Company shall, if and to the extent
requested by Purchaser but subject to the fiduciary duties of the Independent
Directors, use all reasonable efforts to solicit from such shareholders proxies
in favor of the adoption of the Plan of Merger and shall take all other action
reasonably necessary, or which otherwise may be reasonably requested by
Purchaser, to secure a vote of such shareholders in favor of adoption of the
Merger Agreement. The Company's Board of Directors has agreed to include in its
Proxy or Information Statement relating to that meeting the recommendation of
its Board of Directors that the shareholders of the Company vote in favor of the
adoption of the Merger Agreement.
Purchaser and Parent have each agreed to vote or cause to be voted all of
the Common Stock then owned by it in favor of the Merger and the Company has
agreed to vote or cause to be voted all securities entitled to vote at such
meeting with respect to which proxies in the form distributed by the Company
have been given, and not voted against the adoption of the Merger Agreement, in
favor of adoption of the Merger Agreement.
In the event that Purchaser or Parent shall acquire at least 80% or more of
the outstanding shares of each class of the Company's capital stock, the parties
have agreed to take all necessary and appropriate action, to cause the Merger to
become effective as soon as practicable after the expiration of the Offer
without a meeting of shareholders of the Company in accordance with Section
1924(b)(ii) of the PBCL.
Dissenting Shareholders--Common Stock. Notwithstanding anything in the
Merger Agreement to the contrary, shares of Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by
shareholders who (i) have not voted such shares in favor of the Merger and (ii)
have delivered timely a written demand for appraisal of such shares in the
manner provided in Subchapter D of Chapter 15 of the PBCL ("Subchapter D") shall
not be canceled and converted into the right to receive the Offer Price, unless
and until such shareholder shall have failed to perfect, or effectively shall
have withdrawn or lost, such shareholder's right to appraisal and payment under
the PBCL, but rather, such shareholders shall be entitled to payment of the fair
value of their shares determined and payable in accordance with the provisions
of Subchapter D. If such shareholder shall have so failed to perfect, or
effectively shall have withdrawn or lost such right, the Common Stock owned by
such shareholder shall thereupon be deemed to have been canceled and converted
at the Effective Time, into the right to receive the Offer Price. From and after
the Effective Time, no shareholder who has demanded appraisal rights as provided
in Subchapter D shall be entitled to vote his or her shares of Common Stock for
any purpose or to receive payment of dividends or other distributions with
respect to such shares (except dividends and other distributions payable to
shareholders of record at a date which is prior to the Effective Time). The
Company shall give Purchaser prompt notice of all written demands received by it
for appraisal of Common Stock and shall not settle or compromise any such demand
without the prior written consent of Purchaser.
Dissenting Shareholders--Preference Stock. Notwithstanding anything in the
Merger Agreement to the contrary, shares of Preference Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by holders
of shares of Preference Stock who (i) have not voted such shares in favor of the
Merger and (ii) have delivered timely a written demand for appraisal of such
shares in the manner provided in
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Subchapter D, unless and until such shareholder shall have failed to perfect, or
effectively shall have withdrawn or lost, such shareholder's right to appraisal
and payment under the PBCL, shall be entitled to payment of the fair value of
their shares determined and payable in accordance with the provisions of
Subchapter D. If such shareholder shall have so failed to perfect, or
effectively shall have withdrawn or lost such right, the Preference Stock owned
by such shareholder shall remain outstanding and unaffected by the Merger. From
and after the Effective Time, no shareholder who has demanded appraisal rights
as provided in Subchapter D shall be entitled to vote his or her shares of
Preference Stock for any purpose or to receive payment of dividends or other
distributions with respect to such shares (except dividends and other
distributions payable to shareholders of record at a date which is prior to the
Effective Time). The Company shall give Purchaser prompt notice of all written
demands received by it for appraisal of Preference Stock and shall not settle or
compromise any such demand without the prior written consent of Purchaser.
Interim Operations. The Company has agreed that, except as expressly
contemplated by the Merger Agreement, during the period from the date of the
Merger Agreement to the Effective Time, the Company will conduct and will cause
each of its subsidiaries to conduct its operations according to its ordinary and
usual course of business and consistent with past practice and the Company will
use and cause each of its subsidiaries to use its best efforts to preserve
intact its business organization and to maintain its existing relationships with
customers, suppliers, employees, creditors and business partners.
In addition, without limiting the generality of the foregoing and except as
otherwise expressly provided in the Merger Agreement, the Company has agreed
that, without the prior written consent of Parent:
1. the Company shall not, directly or indirectly, amend its or any of
its subsidiaries' Articles or Certificate of Incorporation or By-laws or
similar organizational documents;
2. the Company shall not, and it shall not permit any of its
subsidiaries to: (i) (A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the
Company's capital stock or that of any of its subsidiaries (other than
regularly scheduled dividends on the Preference Stock in accordance with
the terms of the Preference Stock) or (B) redeem, purchase or otherwise
acquire directly or indirectly any of the Company's capital stock (or
options, warrants, calls, commitments or rights of any kind to acquire any
shares of capital stock) or that of any of its subsidiaries, other than
redemptions of Preference Stock required by the Company's Articles of
Incorporation; (ii) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of capital stock of any class of the Company or any of its
subsidiaries, other than Common Stock issuable upon the exercise of the
Options, or upon the conversion of the Series B Preferred or Series D
Preferred outstanding on the date hereof or (iii) split, combine or
reclassify the outstanding capital stock of the Company or of any of its
subsidiaries;
3. the Company shall not, and it shall not permit any of its
subsidiaries to, acquire or agree to acquire, or dispose of or agree to
dispose of, any material assets other than in the ordinary course of
business, either by purchase, merger, consolidation, sale of shares in any
of its subsidiaries or otherwise;
4. the Company shall not, and it shall not permit any of its
subsidiaries to, transfer, lease, license, sell, mortgage, pledge, dispose
of, or encumber any of the Owned Real Property or Leased Property (except
for mortgages on such real property existing on the date hereof) or, other
than in the ordinary course of business, intellectual properties;
5. neither the Company nor any of its subsidiaries shall: (i) grant
any increase in the compensation payable or to become payable by the
Company or any of its subsidiaries to any of its officers, directors or key
employees, except for (A) increases in the ordinary course of business
consistent with past practices or to the extent required by any contract,
and (B) payment immediately prior to consummation of the Offer, of a pro
rata portion of the 1998 target award under the Company's Annual Incentive
Plan for which amounts have been accrued on the Company's financial
statements, or (ii) (A) adopt any new, (B) grant any award under any, or
(C) amend or otherwise increase, or accelerate the payment or vesting of
the amounts payable or to become payable under, any existing employee
benefit or compensation plan other than as contemplated by the Merger
Agreement or in accordance with the provisions of such benefit plan; or
(iii) increase the
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number of directors of the Company, enter into or modify or amend any
existing employment or severance agreement with or, grant any severance or
termination rights to any officer, director or employee of the Company or
any of its subsidiaries or terminate any of the employees of the Company
other than in the ordinary course of business; or (iv) enter into or modify
in any material respect any collective bargaining agreement;
6. neither the Company nor any of its subsidiaries shall modify, amend
or terminate in any material respect any of its Material Contracts or
waive, release or assign any material rights or claims;
7. neither the Company nor any of its subsidiaries shall: (i) incur or
assume any indebtedness other than indebtedness with respect to working
capital in amounts consistent with past practice; (ii) materially modify
any existing indebtedness or obligation; (iii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person (other than a
subsidiary), other than immaterial amounts in the ordinary course of
business consistent with past practice; (iv) make any loans, advances or
capital contributions to, or investments in, any other person (other than
to wholly owned subsidiaries of the Company or customary advances to
employees in accordance with past practice); or (v) enter into any material
commitment or transaction other than in the ordinary course of business;
8. neither the Company nor any of its subsidiaries shall change any of
the accounting methods, practices or policies used by it, unless required
by generally accepted accounting principles or SEC rules and regulations;
9. the Company shall not, and it shall not permit any of its
subsidiaries to, make or agree to make any capital expenditures, except for
capital expenditures that are not materially inconsistent with the 1998
Plan;
10. the Company shall not, and it shall not permit any of its
subsidiaries to, make any material tax election (unless required by law) or
settle or compromise any material income tax liability;
11. the Company shall not, and it shall not permit any of its
subsidiaries to, (i) waive the benefits of, or agree to modify in any
material manner, any confidentiality, standstill or similar agreement to
which the Company or any of its subsidiaries is a party, or (ii) pay,
discharge or satisfy any legal proceeding, other than a payment, discharge
or satisfaction, (A) involving payments by the Company or its subsidiaries
of less than $100,000, or (B) for which liabilities are fully reflected on
or are fully reserved against in the Company's most recent consolidated
financial statements (or the notes thereto) included in the Company SEC
Reports, in each case in complete satisfaction, and with a complete
release, of such matter with respect to all parties to such matter;
12. the Company shall not, and it shall not permit any of its
subsidiaries to, make any payment or incur any liability or obligation for
the purpose of obtaining any consent from any third party to the
transactions contemplated under the Merger Agreement; and
13. neither the Company nor any of its subsidiaries shall enter into
an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to
do any of the foregoing.
Employee Benefits. Until at least December 31, 1999, Parent will cause the
Company to maintain, at its option, either (i) the employee benefit plans of the
Company and its subsidiaries in effect on the date of the Merger Agreement or
(ii) other benefits to employees of the Company and its subsidiaries that are
not materially less favorable in the aggregate to such employees than those in
effect on September 15, 1998; provided, however, that the Company will not
maintain any plan or arrangement that provides for the issuance of securities of
the Company.
Notwithstanding anything in the Merger Agreement to the contrary, prior to
consummation of the Merger, Purchaser and Parent have agreed that the Company
may pay eligible participants a pro rata portion (from January 1, 1998 through
the Effective Time) of the 1998 target award under the Company's Annual
Incentive Plan, for which amounts have been accrued on the Company's financial
statements through such date.
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Parent has acknowledged the existence of those certain agreements between
the Company and various employees and former employees of the Company which
provide for the payment of severance benefits in certain circumstances, and
Parent has agreed that after the Effective Time such agreements shall continue
to be an obligation of the Company and shall remain in full force and effect.
Parent and Purchaser have agreed that until at least March 31, 2000, Parent
or its affiliates shall maintain the Company's Pittsburgh, Pennsylvania office.
No Solicitation. The Company has agreed that it will not and will not
permit any of its subsidiaries or its Company Representatives to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any Takeover Proposal; (ii) participate in any discussions or negotiations
regarding any Takeover Proposal; or (iii) enter into any agreement with respect
to any Takeover Proposal; provided, however, that, if at any time prior to the
Effective Time, the Board of Directors of the Company determines in good faith,
in consultation with its legal counsel, that it is necessary to do so in order
to comply with its fiduciary duties, the Company may, in response to an
unsolicited Takeover Proposal, (x) furnish information with respect to the
Company to any person pursuant to a confidentiality agreement and (y)
participate in negotiations regarding such Takeover Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set forth
in the preceding sentence by any Company Representative shall be deemed to be a
breach by the Company.
The Company has agreed that neither the Board of Directors of the Company
nor any committee thereof shall: (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Parent, the approval or recommendation by such
Board of Directors or such committee of the Merger Agreement or the Offer or the
Merger; (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal; or (iii) cause the Company to enter into any agreement with
respect to any Takeover Proposal. Notwithstanding the foregoing, in the event
that prior to the Effective Time the Board of Directors of the Company
determines in good faith, in consultation with its legal counsel as to legal
matters, that it is necessary to do so in order to comply with its fiduciary
duties, the Board of Directors of the Company may withdraw or modify its
approval or recommendation of the Merger Agreement, the Offer and the Merger,
approve or recommend a Superior Proposal or cause the Company to enter into an
agreement with respect to a Superior Proposal, but in each case only at a time
that is after the fifth Business Day following Parent's receipt of written
notice advising Parent that the Board of Directors of the Company has received a
Superior Proposal.
In addition, the Company shall promptly advise Parent orally of any request
for information or of any Takeover Proposal, including the terms of such
Takeover Proposal.
For the purposes of the preceding paragraphs in this section (The Merger
Agreement -- No Solicitation) "Takeover Proposal" means any inquiry, proposal or
offer from any person relating to any: (A) merger, consolidation or similar
transaction involving the Company, (B) sale, lease or other disposition directly
or indirectly by merger, consolidation, share exchange or otherwise of assets of
the Company or its subsidiaries outside the ordinary course of business
representing 10% or more of the consolidated assets of the Company and its
subsidiaries, (C) issue, sale, or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 20% or more of the voting power of the Company or (D)
transaction in which any person shall acquire beneficial ownership (as such term
is defined in Rule 13d-3 under the Exchange Act), or the right to acquire
beneficial ownership or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of more than 20% of the outstanding Common Stock, in each
case, other than the transactions with Parent contemplated by the Merger
Agreement.
Indemnification. Purchaser and Parent have agreed that until and after the
Effective Time, Purchaser's By-laws shall contain indemnification and limitation
of liability provisions which are substantially identical to the indemnification
and limitation of liability provisions of Article XVII of the By-laws of the
Company, and such provisions shall not be amended, repealed or otherwise
modified in any manner that would make any of such provisions less favorable to
the directors, officers and employees of the Company than pertain to such
persons on
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the date thereof. Without limiting the foregoing, from the Effective Time and
for a period of six years after the Effective Time, Parent shall, (i) indemnify,
defend and hold harmless the present and former officers, directors, employees
and agents of the Company and its subsidiaries and of Purchaser (collectively,
the "Indemnified Parties"), from and against, and pay or reimburse the
Indemnified Parties for, all losses, obligations, expenses, claims, damages or
liabilities resulting from third-party claims (and involving claims by or in the
right of the Company) and including interest, penalties, out-of-pocket expenses
and attorneys' fees incurred in the investigation or defense of any of the same
or in asserting any of their rights hereunder resulting from or arising out of
actions or omissions of such Indemnified Parties occurring on or prior to the
Effective Time (including, without limitation, the transactions contemplated by
the Merger Agreement) to the fullest extent permitted or required under (A)
applicable law, (B) the Articles of Incorporation or By-laws of the Company or
Purchaser in effect on the date of the Merger Agreement, including, without
limitation, provisions relating to advances of expenses incurred in the defense
of any action or suit, or (C) any indemnification agreement between the
Indemnified Party and the Company; and (ii) advance to any Indemnified Parties
expenses incurred in defending any action or suit with respect to such matters,
in each case to the extent such Indemnified Parties are entitled to
indemnification or advancement of expenses under the Company's or Purchaser's
Articles of Incorporation and By-laws in effect on the date thereof and subject
to the terms of such Articles of Incorporation and By-laws; provided, however,
that in the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of each such claim shall
continue until final disposition of such claim.
If Parent or the Company, as the case may be, or any of their respective
successors or assigns (i) reorganizes or consolidates with or merges into any
other person and is not the resulting, continuing or surviving corporation or
entity of such reorganization, consolidation or merger, or (ii) liquidates,
dissolves or transfers all or substantially all of its properties and assets to
any person or persons, then, and in such case, proper provision will be made so
that the successors and assigns of Parent or the Company assume all of the
indemnification obligations of Parent or the Company, as the case may be.
Parent shall use commercially reasonable efforts for a period of six years
after the Effective Time to provide officers' and directors' liability insurance
coverage for acts or omissions occurring prior to the Effective Time, including
but not limited to the transactions contemplated by the Merger Agreement,
covering each person currently covered by the Company's existing officers' and
directors' liability insurance policy, or who becomes covered by such policy
prior to the Effective Time, on terms with respect to coverage and amount no
less favorable than those of such policy in effect on September 15, 1998,
provided that in satisfying such obligation, Parent shall not be obligated to
pay premiums in excess of 150% of the amount per annum the Company paid in 1997,
and provided further that Parent shall nevertheless be obligated to provide such
coverage as may be obtained for such amount.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the fulfillment at
or prior to the Effective Time of the following conditions: (i) the Offer shall
have been consummated in accordance with its terms; (ii) the waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated; (iii) the Merger Agreement shall have been adopted
by the requisite vote of the Company's shareholders or, if permitted by Section
1924(b)(1)(ii) of the PBCL, by the Board of Directors of the Company; and (iv)
no preliminary or permanent injunction or other order by any federal or state
court in the United States which prevents the consummation of the Merger shall
have been issued and remain in effect (each party agreeing to use its best
efforts to have any such injunction lifted).
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company and its subsidiaries with respect to (i) corporate organization,
good standing and corporate power, (ii) capitalization, (iii) corporate
authority to enter into the Merger Agreement (iv) consents and approvals, (v)
accuracy of Commission reports and financial statements, (vi) absence of certain
changes or events, (vii) litigation and liabilities, (viii) accuracy of
information supplied by the Company for the Offer Documents, Schedule 14D-9, the
Rule 14f-1 Information Statement, the Proxy Statement (if required), and other
documents and any amendments or supplements thereto, (ix) ERISA matters, (x)
brokers' and finders' fees and expenses, (xi) obtaining the opinions of
financial advisors as to the fairness of the Offer Price to be received by the
shareholders pursuant to the Offer from a financial point of view,
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(xii) compliance with laws and permits, (xiii) environmental matters, (xiv) tax
matters, (xv) contracts, (xvi) changes in equity and (xvii) real property.
Parent and Purchaser have also made certain representations and warranties
with respect to (i) corporate organization, good standing and corporate power,
(ii) corporate authority to enter into the Merger Agreement, (iii) consents and
approvals, (iv) brokers' and finders' fees and expenses and (v) financing.
All representations and warranties set forth in the Merger Agreement shall
terminate at the Effective Time. All covenants and agreements set forth in the
Merger Agreement shall survive in accordance with their terms.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the Company's
shareholders: (i) by mutual consent of the Board of Directors of Parent and the
Board of Directors of the Company; (ii) by either Parent or the Company if the
Offer shall not have been consummated on or before December 14, 1998 (the
"Termination Date") (provided the terminating party is not otherwise in material
breach of its representations, warranties or obligations under the Merger
Agreement); (iii) by the Company if any of the conditions specified in the
Merger Agreement have not been satisfied or waived by the Company at such time
as such condition is no longer capable of satisfaction; (iv) by Parent if any of
the conditions specified in the Merger Agreement have not been satisfied or
waived by Parent at such time as such condition is no longer capable of
satisfaction; (v) by the Company, if Parent or Purchaser shall have breached or
failed to perform in any material respect any of its representations, warranties
or covenants contained in the Merger Agreement, which breach or failure to
perform (A) would give rise to a failure of condition, and (B) cannot be or has
not been cured within thirty (30) days after the giving of notice to Parent of
such breach; and (vi) by the Company, in connection with entering into an
agreement for a Superior Proposal, provided the Company has complied with all
provisions thereof, including the notice provisions therein.
In the event of termination of the Merger Agreement by either Parent or the
Company, the Merger Agreement shall forthwith become void and of no further
force and effect; provided, however, that each of the parties shall be entitled
to pursue, exercise and enforce any and all remedies, rights, powers and
privileges available to it at law or in equity for any breach of the Merger
Agreement which occurred prior to such termination unless Parent is entitled to
payment of a $9,500,000 topping fee (the "Topping Fee"), in which case the
Merger Agreement shall be of no further force or effect, the Company shall have
no other or further obligation to Parent or Purchaser (except payment of such
fee) and neither Purchaser nor Parent shall have any Remedies against Company or
any subsidiary under the Merger Agreement.
Fees and Expenses. Except as provided in the following paragraph, whether
or not the Merger is consummated, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated by the Merger
Agreement shall be paid by the party incurring such expenses.
If either (A)(i) the Company receives a bona fide Takeover Proposal at any
time after the date of the Merger Agreement and prior to the termination of the
Merger Agreement, (ii) the Merger Agreement terminates prior to the consummation
of the Offer for any reason (other than a breach of the Merger Agreement by
Parent or Purchaser), and (iii) the Company enters into a definitive agreement
for a Takeover Proposal (as defined below) with a third party within six (6)
months after the termination of this Agreement which is thereafter consummated,
or (B) the Company terminates the Merger Agreement in connection with a Superior
Proposal, then, in either event, the Company shall pay to Parent, by wire
transfer of immediately available funds, within two days after the consummation
of the Takeover Proposal or Superior Proposal, as the case may be, the Topping
Fee.
For the purposes of determining whether or not the Topping Fee is payable
only, the term "Takeover Proposal" shall mean any proposal or offer from any
person relating to any: (A) merger, consolidation or similar transaction
involving the Company, (B) sale, lease or other disposition directly or
indirectly by merger, consolidation, share exchange or otherwise of assets of
the Company or its subsidiaries outside the ordinary course of business
representing 10% or more of the consolidated assets of the Company and its
subsidiaries, (C) issue, sale, or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 20% or more of the voting power of the Company or (D)
transaction in which any person shall acquire beneficial ownership (as such term
is defined in Rule 13d-3 under the Exchange Act), or the right to
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acquire beneficial ownership or any "group" (as such term is defined under the
Exchange Act) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of more than 50% of the outstanding Common Stock,
in each case, other than the transactions with Parent contemplated by the Merger
Agreement.
Amendment. Subject to applicable law, the Merger Agreement may be amended
by the parties, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after approval thereof by the shareholders of
the Company, but, after such approval, no amendment shall be made which changes
the Offer Price or which in any way materially adversely affects the rights of
such shareholders, without the further approval of such shareholders. The Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties thereto.
(b)(3) ARRANGEMENTS WITH DIRECTORS, OFFICERS AND EMPLOYEES.
Certain directors, officers and employees of the Company may be deemed to
have interests in the transactions contemplated by the Merger Agreement that are
in addition to their interests as shareholders of the Company generally. The
Company's Board of Directors was aware of these interests when it considered and
approved the Merger Agreement and the transactions contemplated thereby. In
considering the recommendation of the Board in respect of the Offer, the
shareholders of the Company should be aware of these interests.
The Company has granted options to purchase shares of Common Stock to
non-employee directors, executive officers and certain other key employees of
the Company and its subsidiaries pursuant to the terms of the Company's Long
Term Incentive Award Plan of 1983, the Employee Stock Option Plan of 1988 and/or
the Stock Option Plan of 1994. Such stock options were intended to provide a
long-range incentive and a shareholder's perspective to those persons
principally responsible for the continued growth and financial success of the
Company. Pursuant to the Merger Agreement, each option to purchase Common Stock
issued by the Company which is outstanding at the Effective Time shall be
canceled by virtue of the Merger and shall cease to exist and each holder of an
Option, whether or not such Option is immediately exercisable, shall be entitled
to receive at the Effective Time, for each share of Common Stock issuable on
exercise of such Option, an amount in cash equal to the excess of (x) the Offer
Price over (y) the per share exercise price of the Option as in effect
immediately prior to the Effective Time. No consideration shall be payable with
respect to any Option if the exercise price of such Option exceeds the Offer
Price. The consideration due shall be payable without interest after (x)
verification by the Paying Agent of the ownership and terms of the particular
Option by reference to the Company's records and (y) delivery of a written
instrument duly executed by the owner of the Option, in a form to be provided by
the Paying Agent promptly after the Effective Time, setting forth (i) the
aggregate number of shares of Common Stock acquirable by such Option holder upon
exercise of all Options held by such holder, whether or not such Options are
immediately exercisable, the respective issue dates of each Option and the
exercise price of each Option; (ii) a representation by the person that he or
she is the owner of all Options described pursuant to clause (i), and that none
of those Options has expired or ceased to be exercisable; and (iii) a consent to
the treatment of such Options pursuant to the Merger Agreement in full
satisfaction of all rights relating to such Options.
The Company has entered into agreements with the executive officers of the
Company, as well as certain other officers and employees of the Company, that
provide for the payment of severance benefits to such officers and employees in
certain circumstances. Specifically, under those agreements, such officers and
employees are entitled to receive continued compensation and benefits, including
eligibility, coverage, vesting and benefit provisions under the Company's
benefit plans as if they were still an employee of the Company, for a period of
two years following the date of their termination in the event that their
employment is terminated by the Company other than "for cause" (as defined in
those agreements). In the Merger Agreement, Parent has acknowledged the
existence of these agreements and has agreed that after the Effective Time, such
agreements shall continue to be an obligation of the Company and shall remain in
full force and effect.
Under the Merger Agreement, Parent has agreed (i) to maintain in
Purchaser's By-laws after the Effective Time indemnification provisions which
are substantially similar to the indemnification provisions in the
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Company's By-laws immediately prior to the Effective Time; (ii) to indemnify,
defend and hold harmless for six years after the Effective Time the Company's
present and former directors, officers, employees and agents against any
liability or expenses they may incur resulting from or arising out of any
actions or omissions prior to the Effective Time to the fullest extent permitted
by law, the Company's or Purchaser's Articles of Incorporation or By-laws, or by
any agreement; and (iii) to use commercially reasonable efforts for a period of
six years after the Effective Time to provide officers' and directors' liability
insurance coverage for acts or omissions prior to the Effective Time covering
each person currently covered by the Company's existing officers' and directors'
liability insurance policy, or who becomes covered by such policy prior to the
Effective Time, on terms and in amounts no less favorable than the Company's
policy in effect on September 15, 1998, subject to certain limitations. See Item
3(b)(2), "The Merger Agreement -- Indemnification," above.
(b)(4) CONFIDENTIALITY AGREEMENT.
The following is a summary of certain provisions of the Confidentiality
Agreement, dated April 29, 1998 (the "Confidentiality Agreement"), between the
Company and Parent. This summary is qualified in its entirety by reference to
the Confidentiality Agreement, which is filed as an Exhibit hereto and
incorporated herein by reference.
In reliance on the Confidentiality Agreement, the Company supplied Parent
and its directors, officers, employees, agents or advisors (collectively,
"Representatives") with certain non-public, confidential and proprietary
information about the Company ("Evaluation Material"). Parent and its
Representatives have agreed in the Confidentiality Agreement not to use any such
Evaluation Material (whether prepared by the Company, its advisors or otherwise
and irrespective of the form of communication) which has been furnished to
Parent or to its Representatives in any manner that is detrimental to the
Company. Parent has also agreed that, without the prior written consent of the
Company, neither it nor its Representatives would disclose to any other person
the fact that the Evaluation Material has been made available, that discussions
or negotiations were taking place concerning a possible transaction involving
the companies or any of the terms, conditions or other facts with respect
thereto, unless in the written opinion of counsel to a party that such
disclosure is required by law and then only with as much prior written notice to
the Company as is practical under the circumstances. Parent also agreed that it
would not, without the prior written consent of the Company, directly or
indirectly, enter into any agreement, arrangement or understanding, with any
other person regarding a possible transaction involving the Company. In
addition, Parent agreed (with certain exceptions) that it would not, without the
prior written consent of the Board of Directors of the Company, for a period of
eighteen months from the date of the Confidentiality Agreement, acquire or offer
or agree to acquire, directly or indirectly, by purchase or otherwise, any
voting securities of the Company, or otherwise seek to influence or control, in
any manner whatsoever, the management or policies of the Company.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
At a meeting held on September 14, 1998, at which all the directors were
present, the Board of Directors of the Company unanimously approved and adopted
the Merger Agreement, including the Offer, the Merger and the other transactions
contemplated thereby. The Board of Directors has determined that the Merger
Agreement is fair to and in the best interests of the Company and its
shareholders. The Board recommends that shareholders accept the Offer and tender
their shares of Common Stock pursuant to the Offer and if a meeting of the
Company's shareholders is required to be called and held in accordance with
applicable law, recommends that shareholders approve the Merger Agreement and
the transactions contemplated thereby, including the Merger. For a discussion of
the Board's reasons for its recommendation, see "Reasons for Recommendation,"
below.
A joint press release announcing the Merger Agreement and related
transactions and a letter to the shareholders of the Company communicating the
Board's recommendation are filed as Exhibits to this Schedule 14D-9 and are
incorporated herein by reference.
(b) BACKGROUND TO THE OFFER; REASONS FOR THE RECOMMENDATION OF THE COMPANY'S
BOARD OF DIRECTORS
Background of the Offer
In October 1996, Dravo announced that, with the assistance of its financial
advisor, Lehman Brothers Inc., it intended to investigate its strategic
alternatives. Dravo desired to expand the scope of its business and thereby
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lessen the sensitivity of Dravo's financial results to its customers'
utilization of lime. This process, which included exploring business
combinations with several potential buyers, ultimately did not result in a shift
from Dravo's fundamental strategy. Instead, in July 1997, Dravo announced that
it would pursue internal growth through implementation of its strategic plan.
In December 1997, Dravo retained Salomon Smith Barney Inc. ("Salomon Smith
Barney") as its financial advisor for the purpose of providing Dravo with
general financial advice as well as further assisting Dravo in its evaluation of
strategic alternatives.
In early March 1998, it became generally known in the industry that Global
Stone Corporation, a major Canadian lime and aggregates producer, was for sale
and was actively seeking a buyer. On April 15, 1998, it was announced that
Oglebay Norton Corporation, a Cleveland-based company engaged in marine
transportation and materials handling, had entered into an agreement for the
acquisition of Global Stone Corporation. This transaction confirmed that the
consolidation trend in the North American lime industry would likely continue
and it became apparent that critical mass would be important to future success
in the industry.
In early April 1998, a company with interests in the lime industry
("Company A") approached Dravo regarding a possible business combination. Prior
to this time, several companies, including Company A, had informally indicated
an interest in acquiring Dravo but none of those contacts moved beyond the very
preliminary stages. In response to Company A's approach, Dravo asked Company A
to execute a confidentiality agreement and invited Company A to conduct a due
diligence investigation of Dravo. Dravo made available to Company A certain
nonpublic information regarding Dravo, and Dravo's management made presentations
to Company A and its representatives regarding Dravo's business and prospects.
In late April 1998, while Dravo continued its discussions with Company A,
Carmeuse approached Dravo to determine whether Dravo would be interested in
discussing a business combination. Dravo indicated that it would be interested
in discussing such a transaction and, after having Carmeuse execute the
Confidentiality Agreement, Dravo made available to Carmeuse the same information
that it had made available to Company A. On May 14 and 15, 1998, members of
Dravo's management made a presentation to members of Carmeuse's management
regarding the business and prospects of Dravo. Dravo indicated to Carmeuse that
time was of the essence because of Dravo's ongoing discussions with Company A.
Ultimately, Company A informed Dravo that it was not comfortable with several
due diligence issues and it withdrew from the process in May 1998. At the same
time, Carmeuse indicated that it was still interested in a transaction, but for
internal reasons Carmeuse ceased actively pursuing such a transaction.
In early May 1998, another company with interests in the lime industry
("Company B") indicated that it would be interested in exploring a business
combination with Dravo. Dravo indicated it would be interested in discussing
such a transaction and, after having Company B execute a confidentiality
agreement, Dravo made available to Company B the same information that it had
previously made available to Company A and to Carmeuse. In late July 1998,
Company B concluded its due diligence on Dravo and in early August 1998, Dravo
commenced discussions with Company B regarding a stock-for-stock merger with
Company B. Negotiations with Company B terminated in August 1998 after Dravo's
Board determined, among other things, that the exchange ratio in Company B's
proposed stock-for-stock merger was not in the best interests of Dravo or its
shareholders.
At that time, Carmeuse, together with its announced North American joint
venture partner, Lafarge Aluminates, Lime & Admixtures ("Lafarge") (together,
Carmeuse and Lafarge are referred to herein as "Carmeuse/Lafarge"), expressed in
writing a renewed interest in acquiring all of Dravo's outstanding Common Stock
for $13.00 per Share, in cash, subject to a number of conditions, including
further due diligence, board approvals and the negotiation of a definitive
merger agreement. Also, during August 1998, Company A contacted Dravo to
indicate its willingness to reopen discussions regarding a possible business
combination. Dravo's Board directed Dravo's management and Salomon Smith Barney
to contact Carmeuse/Lafarge to pursue their indication of interest and to
contact Company A to discuss their renewed interest in exploring a business
combination.
Given Lafarge's proposed involvement with Carmeuse, Dravo asked Lafarge to
agree to be bound by Carmeuse's Confidentiality Agreement with Dravo and then
invited Carmeuse/Lafarge to conduct due diligence on Dravo. On August 11, Dravo
sent to Carmeuse/Lafarge a draft of a merger agreement and related disclosure
schedules. In the ensuing weeks, Carmeuse/Lafarge conducted due diligence on
Dravo. From August 27 through September 1, 1998, members of Dravo's management
made a presentation to members of Carmeuse's
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management and Lafarge's management regarding the business and prospects of
Dravo. During this period, Dravo also had several meetings with representatives
of Company A to discuss various forms that a possible transaction might take.
On September 2, 1998, as Carmeuse/Lafarge was completing its due diligence
investigation of Dravo, Carmeuse/Lafarge and its advisors and Dravo and its
advisors commenced negotiation of a definitive merger agreement. After the
parties had reached a tentative agreement on most of the terms of the
transaction, other than price, Dravo scheduled a special meeting of its Board of
Directors for September 14, 1998, which was also the earliest day that Lafarge
could schedule a meeting of its Board to consider the transaction. Immediately
preceding the start of Dravo's September 14, 1998 Board meeting, Carmeuse
confirmed in writing its offer to acquire all of the outstanding Common Stock of
Dravo for $13.00 per Share, in cash, on the terms set forth in the Merger
Agreement. At the Dravo Board meeting, Dravo's senior management, together with
Salomon Smith Barney and Buchanan Ingersoll Professional Corporation, counsel to
Dravo, reviewed the proposed transaction with the Board of Directors. The Board
then unanimously approved the Merger Agreement. The Merger Agreement was
executed as of September 15, 1998 by representatives of Dravo and Carmeuse and
publicly announced on September 15, 1998.
Reasons for Recommendation
The Company's Board of Directors determined that the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, taken
together, are fair to, and in the best interests of, the Company and its
shareholders. In arriving at its decision regarding its recommendation set forth
above, the Board of Directors considered, among other things, the following:
(1) the terms and conditions of the Merger Agreement, the Offer and
the Merger, including the amount and form of the consideration being
offered, the parties' representations, warranties and covenants and the
conditions to their respective obligations;
(2) the financial condition, results of operations, cash flows and
prospects of the Company, as well as the Board of Directors' knowledge of
the business, operations, assets and properties of the Company on both a
historical and prospective basis;
(3) the recent and historical market prices and trading volume of the
Company Common Stock and the premium to such market prices represented by
the Offer Price;
(4) the current status of the industry in which the Company competes
and the Company's position in that industry;
(5) the financial condition and business reputation of Parent (and
Lafarge), and the ability of Parent and Purchaser, together with Lafarge,
to complete the Offer and the Merger in a timely manner;
(6) the extensive arms-length negotiations between the Company and the
Parent that resulted in the Merger Agreement and the Offer Price;
(7) the process that resulted in the Merger Agreement, including
possible alternative transactions to the Offer and the Merger (including
the status of discussions with Company A) and the number of other parties
contacted;
(8) the fact that the Merger Agreement permits the Company's Board of
Directors, in the exercise of its fiduciary duties, to terminate the Merger
Agreement in favor of a Superior Proposal (Upon the consummation of a
transaction resulting from a Superior Proposal, the Company must pay Parent
a topping fee of $9,500,000.); and
(9) the oral opinion of Salomon Smith Barney (which opinion was
confirmed by delivery of a written opinion dated September 15, 1998, the
date of the Merger Agreement) to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
Offer Price to be received in the Offer and the Merger by holders of
Company Common Stock (other than Parent and its affiliates) was fair, from
a financial point of view, to such holders. The full text of Salomon Smith
Barney's written opinion dated September 15, 1998, which sets forth the
assumptions made, matters considered and limitations on the review
undertaken by Salomon Smith Barney, is attached hereto as an Exhibit and is
incorporated herein by reference. Salomon Smith Barney's opinion is
directed only to the fairness, from a financial point of view, of
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the Offer Price to be received in the Offer and the Merger by holders of
Company Common Stock (other than Parent and its affiliates) and is not
intended to constitute, and does not constitute, a recommendation as to
whether any shareholder should tender shares of Company Common Stock
pursuant to the Offer. HOLDERS OF COMPANY COMMON STOCK ARE URGED TO
CAREFULLY READ SUCH OPINION IN ITS ENTIRETY.
The foregoing discussion of factors considered by the Board of Directors is
not intended to be exhaustive. The Company's Board of Directors did not assign
relative weights to the above factors or determine that any factor was of
particular importance. Rather, the Board viewed its position and recommendations
as being based on the totality of the information presented and considered by
it. In addition, it is possible that different members of the Board assigned
different weights to the factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained Salomon Smith Barney as its financial advisor in
connection with the Offer and the Merger. Pursuant to the terms of Salomon Smith
Barney's engagement, the Company has agreed to pay Salomon Smith Barney for its
services an aggregate financial advisory fee based on a percentage of the total
consideration (including liabilities assumed) payable in connection with the
Offer and the Merger. The fee payable to Salomon Smith Barney is currently
estimated to be approximately $2,700,000. The Company also has agreed to
reimburse Salomon Smith Barney for reasonable travel and other out-of-pocket
expenses, including the reasonable fees and disbursements of its legal counsel,
and to indemnify Salomon Smith Barney and certain related parties against
certain liabilities, including liabilities under the federal securities laws,
arising out of Salomon Smith Barney's engagement. In the ordinary course of
business, Salomon Smith Barney and its affiliates (including Travelers Group
Inc. and its affiliates) may actively trade or hold the securities of the
Company for their own account or for the account of customers and, accordingly,
may at any time hold a long or short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to the shareholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in Shares have been effected
by the Company or, to the best of the Company's knowledge, by any of its
executive officers, directors, affiliates or subsidiaries, except that executive
officers of the Company may have acquired beneficial ownership of Shares under
the Company's 401(k) Savings Plan, which acquisitions are not material.
(b) To the best of the Company's knowledge, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by such persons (other
than shares issuable upon the exercise of stock options and Shares, if any,
which if tendered could cause such persons to incur liability under the
provisions of Section 16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Statement, the Company is not engaged in
any negotiation in response to the Offer that 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) Except as described in Items 3(b) or 4, there are no transactions,
Board of Director 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
(A) SUBCHAPTER 25E RIGHTS
Holders of Common Stock have certain rights ("Subchapter 25E Rights") under
Subchapter 25E of the Pennsylvania Law ("Subchapter 25E") which will become
applicable prior to the Effective Time in the event that
15
16
Purchaser (or a group of related persons, or any other person or group of
related persons) were to acquire Shares representing at least 20% of the voting
power of the Company, in connection with the Offer or otherwise (a "Control
Transaction"). In such event, shareholders of the Company would have the right
to demand "fair value" of such shareholders' Shares and to be paid such fair
value upon compliance with the requirements of Subchapter 25E. Under Subchapter
25E, "fair value" may not be less than the highest price per Share paid by the
controlling person or group at any time during the 90-day period ending on and
including the date of the Control Transaction, plus an increment, if any,
representing any value, including, without limitation, any proportion of value
payable for acquisition of control of the Company, that may not be reflected in
such price. Purchaser states in its Schedule 14D-1 that it believes that the
Offer Price represents fair value of the Shares within the meaning of Subchapter
25E. Subchapter 25E Rights would attach immediately upon consummation of a
Control Transaction and require that any shareholder seeking such appraisal must
make a demand for fair value within a reasonable time after the notice to
shareholders that a Control Transaction has occurred is given by the controlling
person or group in accordance with Subchapter 25E, which time period may be
specified in such notice, as well as comply with the other procedures of
Subchapter 25E. Subchapter 25E Rights are available only with respect to shares
of a registered corporation held by a shareholder after the occurrence of a
Control Transaction; accordingly, Subchapter 25E Rights would not be available
with respect to any Shares tendered in the Offer and accepted for payment.
Although under the terms of the Merger Agreement, Parent and Purchaser may waive
the Minimum Condition, they have stated in their Schedule 14D-1 that they do not
currently intend to do so; and Parent and Purchaser may terminate the Merger
Agreement and the transactions contemplated thereby (including, without
limitation, the Offer) if the Minimum Condition is not satisfied. The foregoing
summary of rights under Subchapter 25E is qualified in its entirety by reference
to the full text of Subchapter 25E.
(B) ANTITRUST
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules that have been promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
and the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by the Purchaser pursuant to the Offer is subject to such
requirements. Pursuant to the requirements of the HSR Act, Parent and the
Company filed their respective required Notification and Report Forms (the
"Forms") with the Antitrust Division and the FTC on September 17, 1998 and
September 21, 1998, respectively. The statutory waiting period applicable to the
purchase of Shares pursuant to the Offer is scheduled to expire at 11:59 P.M.,
New York City time, on the fifteenth day after Parent filed its Form, unless
early termination of the waiting period is granted or Parent and the Company
receive a request for additional information or documentary material prior
thereto. Pursuant to the HSR Act, Parent has requested early termination of the
applicable waiting period. However, prior to such date, the Antitrust Division
or the FTC may extend the waiting period by requesting additional information or
documentary material relevant to the acquisition. If such a request is made, the
waiting period will be extended until 11:59 P.M., New York City time, on the
tenth day after substantial compliance by Parent with such request. Thereafter,
such waiting periods can be extended only by court order. There can be no
assurance that the waiting period will be terminated early. The Antitrust
Division and the FTC frequently scrutinize the legality under the antitrust laws
of transactions. At any time before or after the consummation of any such
transaction, the Antitrust Division or the FTC could, notwithstanding
termination of the waiting period, take such action under the antitrust laws as
either deems necessary or desirable in the public interest, including seeking to
enjoin the purchase of Shares pursuant to the Offer or seeking divestiture of
the Shares so acquired or divestiture of substantial assets of Parent or the
Company. Private parties may also bring legal actions under the antitrust laws.
There can be no assurance that a challenge to the Offer on antitrust grounds
will not be made, or if such a challenge is made, what the results will be.
(C) PURCHASER'S DESIGNATION OF PERSONS TO BE ELECTED TO THE COMPANY'S BOARD
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of Directors of the
Company other than at a meeting of the Company's shareholders.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
99.1 Agreement and Plan of Merger dated as of September 15, 1998 by and
among Parent, Purchaser and the Company.
99.2 Offer to Purchase dated September 21, 1998.
99.3 Confidentiality Agreement dated April 29, 1998 by and between Parent
and the Company.
99.4 Joint Press Release issued by Parent and the Company on September 15,
1998.
99.5 Opinion of Salomon Smith Barney Inc. dated September 15, 1998*.
99.6 Letter to the Shareholders dated September 21, 1998.*
99.7 Reference is made to the information under the captions "Directors'
Compensation," "Beneficial Security Ownership of Directors and Executive
Officers," "Executive Officers' Compensation," "Executive Benefit Plan," and
"Severance Agreements" which are included in Schedule I hereto.
- ---------------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
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SIGNATURES
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.
DATE: September 21, 1998 DRAVO CORPORATION
/s/ CARL A. GILBERT
--------------------------------------
Name: Carl A. Gilbert
Title: President and Chief Executive
Officer
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19
SCHEDULE I
DRAVO CORPORATION
11 STANWIX STREET
PITTSBURGH, PA 15222
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 September 21, 1998
as part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9"). You are receiving this Information Statement in
connection with the possible election of persons designated by Purchaser to a
majority of seats on the Board of Directors of the Company (the "Board"). The
Merger Agreement requires the Company, upon the purchase by the Purchaser of a
majority of the outstanding shares of common stock, par value $1.00 per share of
the Company (the "Shares"), pursuant to the Offer, promptly to cause the
Purchaser's designees to be elected to the Board under the circumstances
described therein. See "Rights to Designate Directors; Purchaser's Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used 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 Monday,
September 21, 1998. The Offer is scheduled to expire at 12:00 midnight on
Monday, October 19, 1998, New York City time, unless the Offer is extended. The
consummation of the Offer and the Merger pursuant to the terms of the Merger
Agreement would result in a change in control of the Company.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent and Purchaser, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
BOARD OF DIRECTORS
GENERAL
The Company had outstanding on September 15, 1998, 14,718,694 shares of
common stock, par value $1.00 per share (the "Common Stock"), 16,000 shares of
$2.475 Cumulative Convertible Series B Preference Stock, par value $1.00 per
share (the "Series B Preference Stock"), and 200,000 shares of Series D
Cumulative Convertible Exchangeable Preference Stock, par value $1.00 per share
(the "Series D Preference Stock").
Holders of Common Stock, Series B Preference Stock and Series D Preference
Stock are entitled to one vote for each share of any class held and to
cumulative voting rights in the election of directors. Under cumulative voting,
each shareholder, or the shareholder's proxy, is entitled, in the election of
directors, to that number of votes as determined by multiplying the number of
directors to be elected by the number of shares held by the shareholder. The
shareholder may then accumulate such votes and give to one or distribute to
either nominee as many votes as shall equal the total number of votes to which
the shareholder is entitled. The nominees receiving the greatest number of votes
are elected directors.
The shareholders of each class of the Company's outstanding capital stock
vote together as a single class on those matters brought to the shareholders of
the Company for their vote or approval, including the elections of directors.
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The Company has a classified Board of Directors, meaning that the Directors
of the Company are divided into three classes with the terms of one class
expiring each year. The term of each class of directors is three years.
RIGHTS TO DESIGNATE DIRECTORS; PURCHASER'S DESIGNEES
The Merger Agreement provides that promptly upon the purchase by Purchaser,
pursuant to the Offer, of such number of Shares (rounded up to the next whole
number) as represents at least a majority of the outstanding shares of Common
Stock (on a fully diluted basis) and from time to time thereafter, Purchaser
shall be entitled to designate such number of directors as will give Purchaser
representation equal to the product of (a) the number of directors on the Board
of Directors of the Company (after giving effect to the appointment of such
directors) and (b) the percentage that such number of shares of Common Stock so
purchased bears to the number of shares of Common Stock outstanding; provided,
that in no event shall such number of directors be less than a majority of the
total number of directors of the Company. In connection with the foregoing, the
Company shall, upon written request by Purchaser, promptly (i) increase the size
of the Board of Directors of the Company to the extent permitted by its Articles
of Incorporation and By-Laws (as amended if necessary); and/or (ii) take all
steps necessary and appropriate to secure the resignations of such number of
directors as is necessary to enable Purchaser's designees to be elected to the
Board of Directors of the Company (and shall hold a Board meeting for such
purpose); and (iii) cause Purchaser's designees to be so elected; provided,
however, that, in the event that Parent's designees are appointed or elected to
the Board of Directors, until the Effective Time the Board of Directors shall
have at least two directors who are directors on the date hereof and who are
neither an officer of the Company or its subsidiaries nor a designee,
shareholder, affiliate or associate (within the meaning of the federal
securities laws) of Parent (the "Independent Directors"); provided further, that
if the number of Independent Directors shall be reduced below two for any
reason, any remaining Independent Directors (or Independent Director if there is
only one) shall be entitled to fill such vacancy(ies) and if no Independent
Directors remain, the other directors shall designate one person who shall not
be either an officer of the Company or its subsidiaries or a designee,
shareholder, affiliate or associate of Parent to fill one of the vacancies which
person shall be deemed to be an Independent Director for purposes of the Merger
Agreement and who shall be entitled to fill any remaining vacancy in the number
of Independent Directors as provided in the Merger Agreement. Pursuant to the
Merger Agreement, and subject to applicable law, the Company has agreed to take,
at its expense, all action necessary to effect any such election or appointment
of Purchaser's designees, including mailing to all holders of record of its
outstanding securities the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. Purchaser and Parent are obligated to
supply to the Company all information with respect to themselves and their
officers, directors and affiliates required by such Section and Rule and are
solely responsible for any information disseminated to shareholders with respect
to either of them and their respective nominees.
Upon consummation of the Offer and prior to the Effective Time, in addition
to any other approval of the directors required by applicable law or the
Articles of Incorporation or By-Laws of the Company, the Merger Agreement
provides that the affirmative vote of a majority of the Independent Directors
shall be required (i) to amend or terminate the Merger Agreement by the Company,
(ii) to waive any of the Company's rights or to exercise any of its remedies
under the Merger Agreement, (iii) to extend the time for performance of
Purchaser's obligations under the Merger Agreement or (iv) to take any other
action by the Company in connection with the Merger Agreement required to be
taken by the Board of Directors of the Company, whether or not such Independent
Directors constitute a quorum.
PURCHASER'S DESIGNEES
Pursuant to the terms of the Merger Agreement, it is expected that
Purchaser's designees will take office as directors of the Company upon
Purchaser's payment for such number of Shares as represents at least a majority
of the outstanding Shares (on a fully diluted basis) in the Offer.
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Purchaser has advised the Company that its designees will be the persons
named in the following table and has provided the information below regarding
such individuals.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AGE MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --- --------------------------------------------------
Jacques A. Germay............................ 55 Chairman of Parent and Purchaser; Chief Executive
47 Rue de L'Abbaye Officer of Alpha, S.A.
4432 Alleur, Belgium
(citizen of Belgium)
Yves Willems................................. 39 Vice President of Parent and Purchaser; Managing
Parc Scientifique Athena Director of Carmeuse Coordination Center, S.A.;
Boulevard de Lauzelle 65 Chief Financial Officer of The Carmeuse Group;
1348 Louvain-la-Neuve Nord Director of Coil, S.A.
Belgium
(citizen of Belgium)
Richard C. Kraus............................. 52 President and Chief Executive Officer of Parent
and Purchaser; President and Chief Executive
Officer of Echo Bay Mines from 1981 to April,
1997; Director of St. Mary Land and Exploration
Company
William S. Brown III......................... 62 Director of Strategic Development of Parent; Vice
President of Carmeuse North America Group and
Chairman of Marblehead Lime Company since July,
1998; President and Chief Executive Officer of
Carmeuse North American Group from November, 1994
to July, 1998; President and Chief Executive
Officer of Brown Group from July, 1991 to
November, 1994
The business address of each of Purchaser's designees is c/o Parent, 390
East Joe Orr Road, Chicago Heights, Illinois 60411-0488. Purchaser has advised
the Company that each of the persons listed in the table above has consented to
act as a director, and that none of such persons has during the last five years
been convicted in a criminal proceeding or was party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was, or is, subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violation of such laws. Parent and
Purchaser have also advised the Company that none of the persons listed in the
table above is a director of, or holds any position with, the Company, and that
none of such persons beneficially owns any equity securities, or rights to
acquire any equity securities, of the Company or 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 Securities and Exchange Commission (the "SEC"). The election
of Purchaser's designees will be accomplished at a meeting or by written consent
of the Board.
BOARD OF DIRECTORS OF THE COMPANY
DIRECTORS WHOSE TERMS EXPIRE IN 2001
CARL A. GILBERT
President and Chief Executive Officer of the Company
Director since 1994 Age: 56
Mr. Gilbert has served as President and Chief Executive Officer of the
Company since January 1, 1995. Prior to such date, Mr. Gilbert served as
President and Chief Operating Officer of the Company from March 31, 1994 to
December 31, 1994. Mr. Gilbert has served as President of Dravo Lime Company
since February 1983. Mr. Gilbert also served as a Senior Vice President of the
Company from October 1988 to December 1994.
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WILLIAM G. ROTH
Former Chairman of the Board of Directors
and Chief Executive Officer of the Company
Director since 1987 Age: 59
Member -- Audit Committee, Compensation Committee, Finance Committee and
Nominating Committee
Mr. Roth served as Chairman of the Board of Directors of the Company from
June 1987 until his retirement in May 1994. Mr. Roth also served as Chief
Executive Officer of the Company from June 1987 until December 1989 and as
President from June 1987 to June 1988. In addition to his position on the Board
of Directors of the Company, Mr. Roth also serves on the boards of directors of
Amcast Industrial Corporation, Teknowledge Corporation and Service Experts Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
ARTHUR E. BYRNES
Chairman of the Board of Directors of the Company
Director since 1993 Age: 53
Member -- Audit Committee, Compensation Committee, Finance Committee and
Nominating Committee
Mr. Byrnes has served as a director of the Company since December 9, 1993
and Chairman since January 23, 1997. In addition to his position as Chairman of
the Board of Directors of the Company, Mr. Byrnes is Chairman of Deltec Asset
Management Corp. (independent investment counselors) and is a member of the
boards of directors of Deltec International S.A. and Argo Bancorp, Inc.
JAMES C. HUNTINGTON, JR.
Director
Director since 1988 Age: 70
Member -- Audit Committee, Compensation Committee, Finance Committee and
Nominating Committee
Mr. Huntington has served as a director of the Company since January 28,
1988. Since his retirement as a Senior Vice President with American Standard,
Incorporated (manufacturers of air conditioning, building products and
transportation equipment) where he served from January 1977 until August 1988,
Mr. Huntington has pursued a career as an independent businessman and also
serves as a member of the boards of directors of Alumax Inc. and Westinghouse
Air Brake Company.
PETER T. KROSS
Director
Director since 1997 Age 56
Member -- Audit Committee, Compensation Committee, Finance Committee and
Nominating Committee
Mr. Kross has served as a director of the Company since April 24, 1997. Mr.
Kross has served as Senior Vice President, Investments, Everen Securities, Inc.
(independent investment counselors) since 1987.
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DIRECTOR WHOSE TERM EXPIRES IN 1999
WILLIAM E. KASSLING
Chairman, Chief Executive Officer
and President, Westinghouse Air Brake Company
Director since 1993 Age: 54
Member -- Audit Committee (Chairman), Compensation Committee, Finance Committee
(Chairman) and Nominating Committee
Mr. Kassling has served as Chairman, Chief Executive Officer and President
of Westinghouse Air Brake Company (supplier of air brake systems and related
products) since March 9, 1990. Prior to assuming his duties with Westinghouse
Air Brake, Mr. Kassling served as Vice President/Group Executive of the Railway
Products Group of American Standard, Incorporated. Mr. Kassling also serves as a
member of the boards of directors of Scientific Atlantic, Inc. and Commercial
Intertech.
Mr. Konrad M. Weis notified the Company prior to the 1998 Annual Meeting of
Shareholders of his intent to resign from the Board effective with the date of
the 1998 Annual Meeting of Shareholders, at which time the size of the board was
reduced from seven to six.
The Board held 7 meetings during 1997. Each incumbent director attended at
least 75% of the aggregate of the total number of meetings of the Board and
meetings (13 in total during 1997) of the standing Audit, Compensation, Finance
and Nominating Committees on which each such director served.
DIRECTORS' COMPENSATION
The Chairman of the Board, who is not an officer or employee of the
Company, receives cash compensation of $50,000 per year. Under the Non-Employee
Retainer Fee Plan approved by the shareholders at the 1996 Annual Meeting of
Shareholders, each director of the Company who is not an officer or employee
receives as compensation for his services to the Company, in lieu of an annual
retainer, 1,000 shares of the Company's Common Stock. In addition, directors
receive as compensation $1,000 for every meeting of the Board and meetings of
committees of the Board at which they are in attendance. The chairmen of the
standing committees of the Board are compensated an additional $1,000 per year
for serving as chairmen. Directors who are also officers or employees of the
Company do not receive any additional remuneration for so serving. Under the
Stock Option Plan of 1994, directors who are not officers or employees of the
Company are granted on an annual basis, an option to purchase up to 1,500 shares
of Common Stock, priced as of the day following each annual meeting of the
shareholders of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The By-laws of the Company provide that there shall be, as standing
committees of the Board, an Audit Committee, a Compensation Committee, a Finance
Committee and a Nominating Committee, each comprised exclusively of directors
who are not current officers or employees of the Company. The committees receive
their authority and assignments from the Board and report to the Board.
Audit Committee -- The Committee is comprised of Messrs. Kross (Chairman),
Kassling, Byrnes, Huntington, and Roth. The Committee held 2 meetings in 1997.
The Committee's duties include recommending, for nomination by the Board and
election at the annual shareholders' meeting, the firm of independent auditors
to audit the Company's financial records and review the overall approach
followed by the independent auditors and the Company's internal auditors to
insure the integrity of the Company's published financial statements. In
discharging these duties the Committee reviews the audit plans for the fiscal
year and reviews reports from the independent auditors to determine, among other
things, whether there have been any material changes in accounting principles
and, if so, the effect of such changes on the valuation of the Company's assets
or the determination of its earnings. After the end of each fiscal year, the
Committee meets separately with the
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independent auditors and with the Chief Financial Officer of the Company to
review the audit report prepared by the independent auditors and their comments
with respect thereto.
Compensation Committee -- The Committee is comprised of Messrs. Kassling
(Chairman), Byrnes, Huntington, Kross and Roth. The Committee held 3 meetings in
1997. The Committee is empowered to fix the compensation of the executives of
the Company. The Committee also selects the participants in the Company's
Executive Benefit Plan, performs the functions of the committee under the
Company's Incentive Compensation Plan and the Stock Incentive Plan encompassed
therein, and performs the functions of the committee which determines awards
under the Company's Employee Stock Option Plan of 1988 (the "1988 Plan") and
Stock Option Plan of 1994 (the "1994 Plan").
Finance Committee -- The Committee is comprised of Messrs. Kross
(Chairman), Byrnes, Huntington, and Roth. The Committee did not meet in 1997.
The Committee assists and counsels the Chief Executive Officer and Chief
Financial Officer of the Company in the formulation and development of financial
policies and plans.
Nominating Committee -- The Committee is comprised of Messrs. Kassling
(Chairman), Byrnes, Huntington, Kross and Roth. The Committee held 1 meeting in
1997. The Committee recommends, for nomination by the Board and election by the
shareholders, individuals to serve as members of the Board. The Committee
considers shareholder recommendations for positions on the Board. Any
shareholder wishing to recommend a nominee for consideration by the Committee
may do so by letter addressed to the Secretary of the Company, 11 Stanwix
Street, Pittsburgh, Pennsylvania 15222.
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BENEFICIAL SECURITY OWNERSHIP OF
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
beneficial ownership, direct or indirect, of shares of the Company's outstanding
securities, including shares of Common Stock as to which a right to acquire
beneficial ownership exists (for example, through the exercise of stock options,
conversions of securities or various trust arrangements) within the meaning of
Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), by (i) each director, (ii) each of the five most highly
compensated executive officers of the Company during the last completed fiscal
year named in the Summary Compensation Table (hereinafter, the "Named Executive
Officers") and (iii) all directors and executive officers as a group, as of
September 15, 1998. No shares of Series B Preference Stock or Series D
Preference Stock are beneficially owned by any director or Named Executive
Officer of the Company.
NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED BY DIRECTORS, NOMINEES AND
NAMED EXECUTIVE OFFICERS ON SEPTEMBER 15, 1998
----------------------------------------------------------
NO. OF PERCENT OF
NO. OF SHARES SUBJECT OUTSTANDING
SHARES TO STOCK COMMON
BENEFICIALLY OPTIONS AND AGGREGATE STOCK
NAME OF BENEFICIAL OWNER OWNED (#)(1) SARS (#)(2) TOTAL (#) OWNED (%)
------------------------ ------------ -------------- --------- -----------
Earl J. Bellisario........................ 3,000 0 3,000 *
Senior Vice President, Chief Financial
Officer and Secretary
Arthur E. Byrnes.......................... 15,000 6,000 21,000 *
Chairman of the Board and Director
Carl A. Gilbert........................... 10,033 230,000 240,033 1.6%
Director, President and Chief Executive
Officer
James C. Huntington, Jr. ................. 21,000 6,000 27,000 *
Director
William E. Kassling....................... 7,000 6,000 13,000 *
Director
Peter T. Kross............................ 536,700(3) 1,500 538,200 3.7%
Director
John R. Major............................. 4,571 71,000 75,571 *
Senior Vice President, Chief Operating
Officer
James J. Puhala........................... 4,934(4) 71,000 75,934 *
Former Vice President, General Counsel &
Secretary
William G. Roth........................... 72,000 124,500 196,500 1.3%
Director
Donald H. Stowe, Jr....................... 1,235(5) 59,000 60,235 *
Former Vice President, Sales and
Technology
Marshall S. Johnson,...................... 1,733 61,500 63,233 *
Vice President, Operations & Engineering
All directors and executive officers as a
group (13 persons)...................... 678,875 723,300 1,402,175 9.1%
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the beneficial owner has sole voting and
investment power over such securities. Amounts shown do not include shares
acquired by certain officers since December 31, 1997 under the Company's
401(K) Savings Plan, the number of which shares is not material.
(2) Includes stock options granted to each of the persons and the group
identified above which are currently exercisable as well as those options
which will become exercisable within 60 days after September 15, 1998. No
separately granted SARs are presently outstanding.
(3) Includes 7,200 shares owned by his wife, and 29,000 and 20,500 shares held
by his daughter and son respectively.
(4) Includes 800 shares owned jointly with his wife.
(5) Includes 27 shares owned jointly with his wife.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Roth, a former executive officer of the Company, serves on the
Compensation Committee.
EXECUTIVE OFFICERS' COMPENSATION
The following table shows the compensation received by the Chief Executive
Officer and the Named Executive Officers for services to the Company and its
subsidiaries during the last three fiscal years:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
SALARY BONUS COMPENSATION STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) AWARD(S) SARS(1) PAYOUTS COMPENSATION
--------------------------- ---- ------- ------- ------------ ---------- ---------- ------- ------------
Carl A. Gilbert................. 1997 290,000 0 0 0 40,000 0 0
President & Chief 1996 290,000 93,850 0 0 0 0 0
Executive Officer 1995 225,000 111,900 0 0 140,000 0 0
Donald H. Stowe, Jr.(2)......... 1997 120,840 0 0 0 7,000 0 $24,260(3)
Former Vice President, 1996 145,000 22,920 0 0 0 0 0
Sales & Technology 1995 140,000 27,300 0 0 35,000 0 0
John R. Major(4)................ 1997 145,000 0 0 0 10,000 0 0
Senior Vice President, 1996 145,000 22,920 0 0 0 0 0
Chief Operating Officer 1995 140,000 27,300 0 0 35,000 0 0
James J. Puhala(5).............. 1997 140,000 0 0 0 10,000 0 0
Former Vice President, 1996 140,000 22,920 0 0 0 0 0
General Counsel & Secretary 1995 135,000 27,300 0 0 35,000 0 0
Marshall S. Johnson............. 1997 140,000 0 0 0 10,000 0 0
Vice President, 1996 140,000 22,920 0 0 0 0 0
Operations & Engineering 1995 135,000 27,300 0 0 35,000 0 0
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(1) In 1995, stock options awarded to Named Executive Officers were intended to
represent two years' worth of awards. There were no additional stock option
awards made to any Named Executive Officers during 1996.
(2) Mr. Stowe's employment as an executive officer terminated on October 31,
1997.
(3) Includes payments made under Mr. Stowe's Severance Agreement.
(4) Mr. Major was elected to his present position on October 21, 1997. Prior
thereto, he was Vice President, Administration.
(5) Mr. Puhala's employment as an executive officer terminated on December 31,
1997.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding the grant of stock
options during 1997 under the 1988 Plan and the 1994 Plan to each of the Named
Executive Officers:
PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE PRESENT
NAME GRANTED(#)(1) FISCAL YEAR(%) PRICE ($/SHARE) EXPIRATION DATE VALUE($)(2)
---- ------------- ---------------- ---------------- --------------- -------------
Carl A. Gilbert.............. 40,000 20.8 10.1875 7/25/07 165,694
Donald H. Stowe, Jr.......... 7,000 3.6 10.1875 7/25/07 28,980
John R. Major................ 10,000 5.2 10.1875 7/25/07 41,400
James J. Puhala.............. 10,000 5.2 10.1875 7/25/07 41,400
Marshall S. Johnson.......... 10,000 5.2 10.1875 7/25/07 41,400
- ---------------
(1) All options are to purchase shares of Dravo Common Stock and vest and become
exercisable one year after the grant date.
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(2) In accordance with Securities and Exchange Commission rules, the estimated
grant date present values were determined using the Black-Scholes model. The
material assumptions and adjustments incorporated in the model include: an
option term of six years, volatility of 29.89%, a risk free rate of return
of 6.11% and a reduction of 3% to reflect the probability that the above
options will be forfeited prior to the vesting date. The ultimate value of
the options will depend on the future market price of the Company's Common
Stock which cannot be forecast with reasonable accuracy.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information regarding the exercise of stock
options during 1997 and the unexercised options held as of the end of 1997 by
each of the Named Executive Officers:
SECURITIES UNDERLYING VALUE OF UNEXERCISED,
UNEXERCISED IN-THE-MONEY
VALUE REALIZED OPTIONS/SARS OPTIONS/SARS
SHARES (MARKET PRICE AT AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON EXERCISE LESS ------------------------- -------------------------
NAME EXERCISE(#) EXERCISE PRICE)($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ------------------ ------------------------- -------------------------
Carl A. Gilbert............ 0 0 200,000/40,000 114,531/32,500
John R. Major.............. 0 0 67,000/10,000 32,313/8,125
James J. Puhala............ 0 0 67,000/10,000 32,313/8,125
Donald H. Stowe, Jr........ 0 0 52,000/7,000 6,874/5,688
Marshall S. Johnson........ 0 0 51,500/10,000 20,688/8,125
SEVERANCE AGREEMENTS
The Company has entered into severance agreements with Messrs. Gilbert,
Major, Puhala, Stowe, Johnson and three other executive officers. An executive
receives benefits under these agreements only in the event of the termination of
such executive's employment by the Company other than for cause (as defined in
the agreements). In such event, the executive is entitled to receive continued
compensation and benefits, including eligibility, coverage, vesting and benefit
provisions under the Company's benefit plans, as if he were still an employee of
the Company, for a period of two years following the date of the executive's
termination.
EXECUTIVE BENEFIT PLAN
The Company's Executive Death and Disability Income Plan, as adopted in
October 1980, was amended and restated by the Board effective July 1, 1984, and
redesignated the Executive Benefit Plan (the "Plan"). The Plan was further
amended in 1994 to reflect changes in IRS limitations.
Participation in the Plan is limited to high-ranking officers of the
Company and its subsidiaries as selected by the Compensation Committee. The
Plan, which is noncontributory, affords retirement, pre-retirement death, and
disability benefits. The benefits under the Plan supplement, and are offset by,
benefits payable from the Company's broad-based benefit programs.
Retirement benefits are calculated pursuant to a final average earnings
formula reduced by benefits payable under the Company's pension plan at normal
retirement (age 65). The Compensation Committee has approved early retirement
benefits for current participants in the plan after age 55. The following chart
shows the estimated straight-life annual benefits payable at normal retirement
age to eligible participants in specified earnings and years of service
classifications. These estimates are before reduction for benefits payable under
the Company's pension plan and are not subject to any deduction for Social
Security benefits or other offset amounts. Messrs. Gilbert, Major, Puhala, Stowe
and Johnson are participants in the Plan, having 24, 12, 23, 24 and 17 years of
credited service, respectively. One other executive is a participant in the
Plan.
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ANNUAL RETIREMENT BENEFIT BASED ON SERVICE
AVERAGE FINAL COMPENSATION
(OVER 5 YEARS PRECEDING RETIREMENT)*
YEARS OF ---------------------------------------------------------------
SERVICE $100,000 $200,000 $300,000 $400,000 $500,000 $600,000
-------- -------- -------- -------- -------- -------- --------
5 $15,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000
10 30,000 60,000 90,000 120,000 150,000 180,000
15 45,000 90,000 135,000 180,000 225,000 270,000
20 47,500 95,000 142,500 190,000 237,500 285,000
25 50,000 100,000 150,000 200,000 250,000 300,000
30 52,500 105,000 157,500 210,000 262,500 315,000
35 55,000 110,000 165,000 220,000 275,000 330,000
40 57,500 115,000 172,500 230,000 287,500 345,000
- ---------------
* Earnings for this purpose are amounts reported as Annual Compensation in the
Summary Compensation Table, averaged over the five years preceding retirement.
In the event of the participant's death, the Plan provides a surviving
spouse an annual benefit equal to 45% of the participant's compensation (basic
annual salary at death plus any incentive compensation paid in the 12-month
period preceding death), reduced by the periodic surviving spouse benefit
payable under the Company's pension plan, if applicable.
The disability benefit provided under the Plan is an annual amount equal to
60% of the participant's compensation (basic annual salary at the onset of
disability plus any incentive compensation paid in the 12-month period preceding
the onset of disability), reduced by benefits payable under, and by amounts used
as an offset in, the Company's long-term disability plan.
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29
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth each person or entity who may be deemed to
have beneficial ownership of more than 5% of the Company's outstanding Common
Stock, Series B Preference Stock and Series D Preference Stock as of September
15, 1998 based upon information furnished to the Company:
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP(1)
-------------------------------
NAME AND ADDRESS AGGREGATE PERCENT
CLASS OF BENEFICIAL OWNER SHARES HELD OF CLASS(2)
----- ------------------- ----------- ------------
Common Stock Cowen & Company 1,654,424(3) 11.2%
Financial Square
New York, NY 10005-3597
Common Stock The Prudential Insurance 1,621,676(4) 11.0%
Company of America, Inc.
751 Broad Street
Newark, NJ 07102-3777
Common Stock Norwest Corporation 1,061,909 7.2%
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-1026
Common Stock Mellon Bank Corporation 818,469(6) 5.6%
One Mellon Bank Center
Pittsburgh, PA 15258
Series B Preference Stock Floyd A. Mechling 16,000 100%
5 North Calibogue Cay
Hilton Head Island, SC 29928-2913
Series D Preference Stock The Prudential Insurance 200,000(4) 100%
Company of America, Inc.
Prudential Plaza
Newark, NJ 07102-3777
- ---------------
(1) For purposes of the foregoing table, a "beneficial owner" includes any
person who directly or indirectly has or shares the power to vote or to
direct the voting of shares of the Company's stock or who directly or
indirectly has or shares the power to dispose of or to direct the
disposition of such shares.
(2) As of September 15, 1998 there were 14,718,693 shares of Common Stock,
16,000 shares of Series B Preference Stock and 200,000 shares of Series D
Preference Stock of the Company issued and outstanding.
(3) Cowen & Company, Cowen Incorporated, the parent holding company of Cowen &
Company, and Joseph M. Cohen, an individual who may be deemed to control
Cowen Incorporated, jointly filed with the Securities and Exchange
Commission under the Exchange Act Amendment No. 3 to Schedule 13G which
disclosed that as of December 31, 1997 Cowen & Company had sole voting and
investment power with respect to 157,400 shares, shared voting power with
respect to 1,069,500 shares, and shared investment power with respect to
1,497,024 shares of Common Stock of the Company. Cowen & Company is a
registered broker-dealer and investment advisor that holds a portion of the
shares of Common Stock covered by the Schedule 13G on behalf of its clients.
(4) The Prudential Insurance Company of America has filed with the Securities
and Exchange Commission under the Exchange Act Amendment No. 11 to Schedule
13G which disclosed that the 200,000 shares of Series D Preference Stock
owned by it are presently convertible into a total of 1,600,000 shares of
Common Stock of the Company. Said Amendment No. 11 also disclosed that as of
December 31, 1997, The Prudential Insurance Company of America had sole
investment and voting power with respect to 6,900 additional shares and
shared investment power with respect to 14,776 additional shares of Common
Stock. The total of the foregoing, 1,621,676 shares, would represent 11.0%
of the Company's Common Stock.
(5) Norwest Corporation and its subsidiary, Norwest Bank Colorado, N.A. ("NBC"),
have jointly filed with the Securities and Exchange Commission under the
Exchange Act Amendment No. 14 to Schedule 13G. NBC's principal place of
business is, 1740 Broadway, Denver, Colorado 80274-8677. In its filing, NBC
disclosed that as of December 31, 1997, it was the beneficial owner of
1,048,500 shares of the Company's Common
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Stock, including 830,000 shares held for the ATTIMCO Long-Term Investment
Trust with respect to a portion of whose assets NBC acts as an investment
advisor, such amount representing 7.1% of the Company's outstanding Common
Stock. Norwest Corporation, as the parent holding company of NBC and other
various subsidiaries, may be deemed to own the shares of the Company's
Common Stock beneficially owned by such subsidiaries.
(6) Mellon Bank Corporation, a holding company for various direct or indirect
subsidiaries identified on a Schedule 13G filed by it with the Securities
and Exchange Commission under the Exchange Act, disclosed that it, as the
parent holding company of such subsidiaries, none of which individually hold
in excess of 5% of the Company's outstanding Common Stock, may be deemed to
be the beneficial owner of in excess of 5% of the Company's outstanding
Common Stock as a result of the aggregation of the holdings of its
subsidiaries. In its Schedule 13G, Mellon Bank Corporation disclosed that it
may be deemed to have sole voting power with respect to 673,369 shares, sole
dispositive power with respect to 718,569 shares and shared dispositive
power with respect to 99,600 shares of the Company's Common Stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of Shares and other equity
securities of the Company. Executive officers, directors and greater than ten
percent shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms which they file.
To the Company's knowledge, based solely on review of information furnished
to the Company, reports filed through the Company and representations that no
other reports were required, all Section 16(a) filing requirements applicable to
its executive officers, directors and greater than ten percent beneficial owners
were complied with during the year ended December 31, 1997.
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