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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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STANT CORPORATION
(Name of Subject Company)
STANT CORPORATION
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
854727-10-4
(CUSIP Number of Class of Securities)
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JOHN P. REILLY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
STANT CORPORATION
425 COMMERCE DRIVE
RICHMOND, IN 47374-2646
(317) 962-6655
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
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WITH COPIES TO:
RICHARD HALL
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NY 10019
(212) 474-1000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Stant Corporation, a Delaware
corporation (the "Company"), and the principal executive offices of the
Company are located at 425 Commerce Drive, Richmond, Indiana 47374-2646. The
title of the class of equity securities to which this Statement applies is
the Common Stock, par value $0.01 per share (the "Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to a tender offer by E&W Acquisition Corp., a
Delaware corporation ("Sub") and a wholly owned subsidiary of Tomkins
Corporation, a Delaware corporation ("Tomkins"), disclosed in a Tender Offer
Statement on Schedule 14D-1, dated April 11, 1997 (the "Schedule 14D-1"), to
purchase all outstanding Shares at a price of $21.50 per Share, net to
sellers in cash, without any interest upon the terms and subject to the
conditions set forth in Sub's Offer to Purchase, dated April 11, 1997 (the
"Offer to Purchase"), and the related Letter of Transmittal (which together
constitute the "Offer"). Tomkins is a wholly owned subsidiary of Tomkins PLC,
a corporation organized under the laws of England.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of April 9, 1997 (the "Merger Agreement"), among Sub, Tomkins and the
Company, a copy of which is filed as Exhibit 1 to this Statement and
incorporated herein by reference. Pursuant to the Merger Agreement, as soon
as practicable after consummation of the Offer and satisfaction of the other
conditions specified in the Merger Agreement, Sub will be merged with and
into the Company (the "Merger"), and the Company will continue as the
surviving corporation and become a wholly owned subsidiary of Tomkins (the
"Surviving Corporation").
All references in this Schedule 14D-9 to the Merger Agreement and to the
transactions contemplated thereby are to the Merger Agreement and to such
transactions as contemplated by the Merger Agreement.
All information contained in this Statement or incorporated herein by
reference concerning Sub, Tomkins or their affiliates, or actions or events
with respect to any of them, was provided by Sub or Tomkins, and the Company
takes no responsibility for the accuracy or completeness of such information
or for any failure by such entities to disclose events or circumstances that
may have occurred and may affect the significance, completeness or accuracy
of any such information.
Based on information in the Offer to Purchase, the principal executive
offices of Tomkins and Sub are located at 4801 Springfield Street, Dayton, OH
45431.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Except as described or referred to in the attached Annex A or set
forth below, there exists no material contract, agreement, arrangement or
understanding and no actual or potential conflict of interest between the
Company or any of its affiliates and (i) the Company's executive officers,
directors or affiliates or (ii) Sub, its executive officers, directors or
affiliates.
A number of grants of stock options of the Company made to employees of
the Company after October 30, 1996, were conditioned upon receiving
stockholder approval of the amendments adopted by the Company's Board of
Directors (the "Company Board") on October 30, 1996, to the 1993 Stock Option
Plan for Key Employees. The stockholders of the Company were to be requested
to approve such amendments at the Company's annual meeting of stockholers,
originally scheduled for April 30, 1997. As the Merger Agreement requires the
Company to postpone indefinitely such meeting and thus not to seek
stockholder approval of such amendments, such conditional options will be
null and void. The 1997 Special Compensation Incentive Plan for Key Employees
of Stant Corporation and Its Subsidiaries was adopted by the Company Board on
April 9, 1997, in order to provide affected executives with a cash payment,
in lieu of such options, as soon as practicable after the Merger equal to the
product of (a) the
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number of shares of Common Stock subject to each conditional option held by
the executive and (b) $21.50 less the option price applicable to such option.
In connection with the election of Mr. John P. "Jack" Reilly as the
Company's President and Chief Executive Officer, the Company and Mr. Reilly
entered into an Employment Agreement dated as of January 17, 1997, as amended
by a First Amendment dated as of April 9, 1997. For a summary of Mr. Reilly's
agreement and the employment agreements of the other executive officers, see
"Executive Compensation -Employment Agreements" in the Information Statement
pursuant to Section 14(f) of the Securities Exchange Act of 1934 (the
"Exchange Act") and Rule 14f-1 thereunder (the "Information Statement") which
is attached as Annex A to this Statement.
In connection with the Merger, certain amendments were made to the Stock
Option Plan for Directors (1993) and to the 1993 Stock Option Plan for Key
Employees. For a summary of these amendments, see "Information Concerning the
Board of Directors" and "Executive Compensation -Amendment to 1993 Option
Plan, respectively, in the Information Statement.
Effective March 12, 1997, the Company, Bessemer Partners & Co. ("Bessemer
Partners") and Tomkins entered into a confidentiality agreement which
provides for the confidential treatment by Tomkins and its affiliates of
certain oral and written information concerning the Company furnished to
Tomkins.
Tomkins PLC and the Company entered into an agreement dated April 2, 1997,
pursuant to which the Company agreed until April 30, 1997, not to solicit
other proposals or offers from any person other than Tomkins relating to any
merger or business combination involving the Company or the acquisition of a
material amount of the Company's stock or assets.
The following is a summary of certain provisions of the Merger Agreement
and a stockholder agreement dated as of April 9, 1997, among Tomkins, Sub and
Bessemer Capital Partners, L.P. ("BCP"), and a letter agreement dated as of
April 9, 1997, among Tomkins, Sub and W. Thomas Margetts (collectively, the
"Stockholder Agreement"). Such summary is qualified in its entirety by
reference to the full text of the Merger Agreement and the Stockholder
Agreement, copies of which are filed as Exhibits 1, 2 and 3 to this
Statement, respectively, and which are incorporated herein by reference.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Merger Agreement.
MERGER AGREEMENT
The Offer. The Merger Agreement provides that, subject to the provisions
of the Merger Agreement, as promptly as practicable but in no event later
than five business days after the announcement of the execution of the Merger
Agreement, Sub will commence the Offer and that, upon the terms and subject
to prior satisfaction or waiver of the conditions of the Offer, Sub will
purchase all Shares tendered pursuant to the Offer. The Merger Agreement
provides that, without the written consent of the Company, Sub will not
reduce the number of Shares sought in the Offer, reduce the Offer Price,
modify or add to the conditions of the Offer set forth in "-Conditions to the
Offer" below or otherwise amend the Offer in any manner materially adverse to
the Company's stockholders, except as provided in the next two sentences,
extend the Offer, change the form of consideration payable in the Offer, or
waive or modify the Minimum Tender Condition (as defined under "-Conditions
to the Offer" below). Notwithstanding the foregoing, Sub may, without the
consent of the Company, (i) extend the Offer for a period of not more than 10
business days beyond the initial expiration date of the Offer (which initial
expiration date shall be 20 business days following commencement of the
Offer), if on the date of such extension less than 90% of the outstanding
Shares have been validly tendered and not properly withdrawn pursuant to the
Offer, (ii) extend the Offer from time to time if at the initial expiration
date or any extension thereof the Minimum Tender Condition or any of the
other conditions to Sub's obligations to purchase Shares set forth in
paragraphs (a), (b) and (e) under "-Conditions to the Offer" below shall not
be satisfied or waived, until such time as such conditions are satisfied or
waived, (iii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") or the staff thereof applicable to the Offer and (iv)
extend the Offer for any
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reason for a period of not more than 10 business days beyond the latest
expiration date that would otherwise be permitted under clauses (i), (ii) or
(iii) of this sentence. In addition, Sub shall at the request of the Company
extend the Offer for five business days if at any scheduled expiration date
of the Offer any of the conditions to Sub's obligation to purchase Shares
shall not be satisfied; provided, however, that Sub shall not be required to
extend the Offer beyond December 31, 1997.
Conditions to the Offer. Notwithstanding any other terms of the Offer or
the Merger Agreement, Sub shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to Sub's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer), to
pay for any Shares tendered pursuant to the Offer, unless (i) there shall
have been validly tendered and not withdrawn prior to the expiration of the
Offer that number of Shares which would represent at least a majority of the
Fully Diluted Shares (the "Minimum Tender Condition") and (ii) any waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act") applicable to the purchase of Shares pursuant to the Offer shall
have expired or been terminated. The term "Fully Diluted Shares" means all
outstanding securities entitled generally to vote in the election of
directors of the Company on a fully diluted basis, after giving effect to the
exercise or conversion of all options, rights and securities exercisable or
convertible into such voting securities. Furthermore, notwithstanding any
other term of the Offer or the Merger Agreement, Sub shall not be required to
accept for payment or, subject as aforesaid, to pay for any Shares not
theretofore accepted for payment or paid for, and may terminate the Offer if,
at any time on or after the date of the Merger Agreement and before the
acceptance of such shares for payment or the payment therefor, any of the
following conditions exists:
(a) there shall be threatened or pending any suit, action or proceeding
by any Federal, state or local government or any court, administrative or
regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity") or any other person (in the
case of any suit, action or proceeding by a person other than a
Governmental Entity, such suit, action or proceeding having a reasonable
likelihood of success) (i) challenging the acquisition by Tomkins or Sub
of any Shares, seeking to restrain or prohibit the making or consummation
of the Offer or the Merger or the performance of any of the other
transactions contemplated by the Merger Agreement or the Stockholder
Agreement (collectively, the "Operative Agreements"), or seeking to obtain
from the Company, Tomkins or Sub any damages that are material in relation
to the Company and its subsidiaries taken as a whole, (ii) seeking to
prohibit or limit the ownership or operation by the Company, Tomkins or
any of their respective subsidiaries of any material portion of the
business or assets of the Company, Tomkins or any of their respective
subsidiaries, or to compel the Company, Tomkins or any of their respective
subsidiaries to dispose of or hold separate any material portion of the
business or assets of the Company, Tomkins or any of their respective
subsidiaries, as a result of the Offer or any of the other transactions
contemplated by the Operative Agreements (the "Transactions"), (iii)
seeking to impose limitations on the ability of Tomkins or Sub to acquire
or hold or exercise full rights of ownership of, any Shares, including the
right to vote the Shares purchased by it on all matters properly presented
to the stockholders of the Company, (iv) seeking to prohibit Tomkins or
any of its subsidiaries from effectively controlling in any material
respect the business or operations of the Company or its subsidiaries, or
(v) which otherwise is reasonably likely to have a material adverse effect
on the business, properties, assets, condition (financial or otherwise),
results of operations or prospects of the Company and its subsidiaries
taken as a whole;
(b) there shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction threatened, proposed,
sought, enacted, entered, enforced, promulgated, amended or issued with
respect to, or deemed applicable to, or any consent or approval withheld
with respect to, (i) Tomkins, the Company or any of their respective
subsidiaries or (ii) the Offer, the Merger or any of the other
Transactions by any Governmental Entity or before any court or
governmental authority, agency or tribunal, domestic or foreign, that has
a substantial likelihood of resulting, directly or indirectly, in any of
the consequences referred to in clauses (i) through (v) of paragraph (a)
above;
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(c) since the date of the Merger Agreement there shall have occurred any
material adverse change, or any development that, insofar as reasonably
can be foreseen, is reasonably likely to result in a material adverse
change, in the businesses, properties, assets, condition (financial or
otherwise), results of operations or prospects of the Company and its
subsidiaries taken as a whole, other than changes relating to the economy
in general or to the Company's industry in general and not specifically
relating to the Company or any of its subsidiaries;
(d) (i) the Company Board or any committee thereof shall have withdrawn
or modified in a manner adverse to Tomkins or Sub its approval or
recommendation of the Offer, the Merger or the Merger Agreement or
approved or recommended any takeover proposal or (ii) the Company Board or
any committee thereof shall have resolved to do any of the foregoing;
(e) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange or
on the London Stock Exchange for a period in excess of 24 hours (excluding
suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States or
involving the United Kingdom and, in the case of armed hostilities
involving the United Kingdom, having, or which could reasonably be
expected to have, a substantial continuing general effect on business and
financial conditions in the United Kingdom, (iv) any limitation (whether
or not mandatory) by any United States or the United Kingdom governmental
authority on the extension of credit generally by banks or other financial
institutions, or (v) in the case of any of the foregoing existing at the
time of the commencement of the Offer, a material acceleration or
worsening thereof;
(f) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be
true and correct and any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in
each case as if such representations and warranties were made as of such
time;
(g) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement; or
(h) the Merger Agreement shall have been terminated in accordance with
its terms,
which, in the reasonable judgment of Sub, in any such case, giving rise to
any such condition, makes it inadvisable to proceed with the Offer and/or
with such acceptance for payment of or payment for any of the Shares.
Subject to the provisions of the Merger Agreement set forth under "-The
Offer" above, the foregoing conditions (i) may be asserted by Tomkins and Sub
regardless of the circumstances giving rise to such condition and (ii) are
for the sole benefit of Tomkins and Sub and may be waived by Tomkins or Sub,
in whole or in part at any time and from time to time, in the sole discretion
of Tomkins or Sub. The failure by Tomkins or Sub at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right, and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
The Merger. The Merger Agreement provides that, subject to the conditions
set forth in the Merger Agreement and in accordance with Delaware General
Corporation Law, Sub will be merged with and into the Company, and each then
outstanding Share (other than Shares owned by the Company or by any
subsidiary of the Company and Shares owned by Tomkins, Sub or any other
subsidiary of Tomkins or held by stockholders, if any, who are entitled to
and who properly exercise appraisal rights under Delaware law) will be
converted into the right to receive an amount in cash equal to the price per
Share paid pursuant to the Offer, without interest.
Conditions to the Merger. The Merger Agreement provides that the Merger is
subject to the satisfaction or waiver of the following conditions: (1) if
required by applicable law, the Merger Agreement
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shall have been adopted by the affirmative vote or consent of the holders of
a majority of the outstanding Shares in accordance with applicable law and
the Company's Restated Certificate of Incorporation, (2) the waiting period
(and any extension thereof) applicable to the Merger under the HSR Act shall
have been terminated or shall have expired and (3) no temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
each of the Company, Sub and Tomkins has used its best efforts to prevent the
entry of any such injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered.
Termination of the Merger Agreement. The Merger Agreement may be
terminated at any time prior to the time the Merger becomes effective (the
"Effective Time"), whether before or after approval of matters presented in
connection with the Merger by the stockholders of the Company, (1) by mutual
written consent of the Company and Tomkins, (2) by either the Company or
Tomkins if (a) Sub shall not have purchased any Shares pursuant to the Offer
prior to December 31, 1997, provided, however, that the passage of such
period shall be tolled for any part thereof during which any party shall be
subject to a nonfinal order, decree, ruling or action restraining, enjoining
or otherwise prohibiting the purchase of Shares pursuant to the Offer or the
consummation of the Merger; and provided further that the right to terminate
the Merger Agreement as decribed in clause 2(a) shall not be available to any
party whose failure to fulfill any of its obligations under any Operative
Agreement results in the failure of any such condition or (b) any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
purchase of Shares pursuant to the Offer or the Merger and such order, decree
or ruling or other action shall have become final and nonappealable, (3) by
the Company if (a) the Board of Directors of the Company approves or
recommends a superior proposal under circumstances described below in the
second paragraph under "-Takeover Proposals" and (b) the Company has paid to
Tomkins an amount in cash equal to the Termination Fee (as defined below) or
(4) by Tomkins or Sub if Sub terminates the Offer as a result of the
occurrence of any event set forth in paragraph (d) of "-Conditions to the
Offer" above.
Takeover Proposals. The Merger Agreement provides that the Company shall
not, nor shall it permit any of its subsidiaries to, nor shall it authorize
or permit any director, officer or employee of, or any investment banker,
attorney or other advisor or representative of, the Company or any of its
subsidiaries to: (1) solicit, initiate or encourage the submission of any
takeover proposal (as defined below); (2) except as provided in the next
paragraph, enter into any agreement with respect to any takeover proposal or
(3) participate in any discussions or negotiations regarding, or furnish to
any person any non-public information with respect to the Company, or take
any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any takeover
proposal; provided, however, that prior to the acceptance for payment of
Shares pursuant to the Offer, to the extent required by the fiduciary
obligations of the Company Board, as determined in good faith by a majority
of the members thereof based on the advice of outside counsel, the Company
may, in response to an unsolicited bona fide takeover proposal from a person
that the Company Board reasonably believes has the financial ability to make
a superior proposal (as defined below), subject to compliance with the second
following paragraph, furnish non-public information with respect to the
Company to such person pursuant to a customary confidentiality agreement and
participate in discussions or negotiations (including the solicitation of
revised takeover proposals) with such person. The Merger Agreement defines
"takeover proposal" as any proposal for a merger or other business
combination involving the Company or any of its subsidiaries or any proposal
or offer to acquire in any manner, directly or indirectly, more than 30% of
the equity securities of the Company or more than 30% of the Company's
consolidated total assets, other than the Transactions.
The Merger Agreement provides further that neither the Company Board nor
any committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Tomkins or Sub, the approval or recommendation
by the Company Board or any such committee of the Offer, the Merger Agreement
or the Merger or (ii) approve or recommend, or propose to approve or
recommend, any takeover proposal. Notwithstanding the foregoing, the Company
Board, to the extent required by the fiduciary obligations thereof, as
determined in good faith by a majority of the members thereof based on
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the advice of outside counsel, may approve or recommend (and, in connection
therewith, withdraw or modify its approval or recommendation of the Offer,
the Merger Agreement or the Merger) a superior proposal. For purposes of the
Merger Agreement, a "superior proposal" means a bona fide takeover proposal
made by a third party on terms which the Company Board determines in its good
faith judgment to be more favorable to the Company's stockholders than the
Offer and the Merger.
The Merger Agreement also provides that the Company shall advise Tomkins
orally and in writing of any takeover proposal or any inquiry with respect to
or which could lead to any takeover proposal and the identity of the person
making any such takeover proposal or inquiry. The Company is further required
to keep Tomkins fully informed of the status and details of any such takeover
proposal or inquiry; provided, however, that neither the Company nor the
Company Board is required to take any action that the Company Board
determines in good faith, based on the advice of outside counsel, would be
inconsistent with its fiduciary duties.
The Merger Agreement provides that nothing contained therein shall
prohibit the Company and the Company Board from complying with Rule 14e-2
under the Exchange Act, or issuing a communication meeting the requirements
of Rule 14d-9(e) under the Exchange Act, with respect to any tender offer;
provided, however, that the Company may not, except as permitted by the
second preceding paragraph, withdraw or modify its position with respect to
the Offer or the Merger or approve or recommend, or propose to approve or
recommend, a takeover proposal.
Fees and Expenses. The Merger Agreement provides that the Company shall
pay to Tomkins PLC, the sole stockholder of Tomkins, upon demand a fee of
$15,000,000 (the "Termination Fee") if (i) Tomkins or the Company terminates
the Merger Agreement under the circumstances described in clause 2(a) under
"-Termination of the Merger Agreement" above as a result of the failure of
any condition set forth in paragraph (d) under "-Conditions to the Offer"
above, (ii) (a) after the date of the Merger Agreement, any person or "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) shall have
publicly made a takeover proposal, (b) the Offer shall have remained open
until at least the scheduled expiration date immediately following the date
such takeover proposal is made (and in any event for at least ten business
days following the date such takeover proposal is made), (c) the Minimum
Tender Condition shall not have been satisfied at the expiration of the Offer
and (d) the Merger Agreement shall thereafter be terminated by either Tomkins
or the Company under the circumstances described in clause 2(a) under
"-Termination of the Merger Agreement" above or (iii) the Merger Agreement is
terminated under the circumstances described in clause (3) or (4) under
"-Termination of the Merger Agreement" above.
Conduct of Business by the Company. The Merger Agreement provides that
during the period from the date of the Merger Agreement to the earlier of the
Effective Time and the appointment or election of Sub's designees to the
Company Board pursuant to the terms of the Merger Agreement (such earlier
time, the "Control Time"), the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular
and ordinary course in substantially the same manner as conducted prior to
the date of the Merger Agreement and, to the extent consistent therewith, use
all reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with
them to the end that their goodwill and ongoing businesses shall be
unimpaired at the Effective Time. The Merger Agreement further provides that,
except as contemplated by the Merger Agreement or otherwise approved in
writing by Tomkins, during the period from the date of the Merger Agreement
to the Control Time, the Company shall not, and shall not permit any of its
subsidiaries to: (1) (a) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned subsidiary
of the Company to its parent, (b) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(c) purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(2) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible
into, or any rights,
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warrants or options to acquire, any such shares, voting securities or
convertible securities other than the issuance of Shares upon the exercise of
employee stock options and other options (the "Stock Options") outstanding on
the date of the Merger Agreement in accordance with their present terms; (3)
amend its certificate of incorporation, by-laws or other comparable charter
or organizational documents; (4) acquire or agree to acquire (a) by merging
or consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or division thereof
or (b) any assets that are material, individually or in the aggregate, to the
Company and its subsidiaries taken as a whole, except purchases of inventory
in the ordinary course of business consistent with past practice; (5) sell,
lease, license, mortgage or otherwise encumber or subject to any pledge,
claim, lien, charge, encumbrance or security interest of any kind or nature
or otherwise dispose of any of its properties or assets, except sales of
inventory in the ordinary course of business consistent with past practice;
(6) (a) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants
or other rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing, except for short term borrowings incurred in the
ordinary course of business consistent with past practice and pursuant to
existing agreements, or (b) make any loans, advances or capital contributions
to, or investments in, any other person, other than to the Company or any
direct or indirect wholly owned subsidiary of the Company; (7) make or agree
to make any new capital expenditure or expenditures which, individually, is
in excess of $30,000 or, in the aggregate, are in excess of $250,000; (8) (a)
grant to any officer of the Company or any of its subsidiaries any increase
in compensation, except as was required under employment agreements in effect
as of December 31, 1996, (b) grant to any officer of the Company or any of
its subsidiaries any increase in severance or termination pay, except as was
required under employment, severance or termination agreements in effect as
of December 31, 1996, (c) enter into any employment, severance or termination
agreement with any officer of the Company or any of its subsidiaries or (d)
amend any collective bargaining agreement or any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan,
arrangement or understanding (whether or not legally binding) providing
benefits to any current or former employee, officer or director of the
Company or any of its subsidiaries (collectively, "Benefit Plans") in any
respect; (9) make any change in accounting methods, principles or practices
materially affecting the Company's assets, liabilities or business, except
insofar as may have been required by a change in generally accepted
accounting principles; (10) pay, discharge, settle or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent
with past practice or in accordance with their terms; (11) except in the
ordinary course of business, modify, amend or terminate any material note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be
bound, or waive or release or assign any material rights or claims; (12) make
any material tax election or settle or compromise any material income tax
liability; or (13) authorize any of, or commit or agree to take any of, the
foregoing actions.
Pursuant to the Merger Agreement, the Company shall not, and shall not
permit any of its subsidiaries to, take any action that would or that could
reasonably be expected to result in (1) any of its representations and
warranties set forth in the Merger Agreement that are qualified as to
materiality becoming untrue, (2) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (3)
except as otherwise permitted by the provisions of the Merger Agreement
described above under "-Takeover Proposals", any of the conditions to the
Offer or to the Merger as described above under "-Conditions to the Offer"
and "-Conditions to the Merger", respectively, not being satisfied. In
addition, the Merger Agreement provides that the Company shall take
appropriate action to postpone the annual meeting of stockholders of the
Company originally scheduled to be held on April 30, 1997 until termination
of the Merger Agreement.
7
In addition, the Merger Agreement provides that the Company shall promptly
advise Tomkins orally and in writing of any change or event having, or which,
insofar as can reasonably be foreseen, would have, a material adverse effect
on the Company and its subsidiaries taken as a whole.
Board of Directors. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment by Sub for, any Shares pursuant to the
Offer, Sub shall be entitled to designate such number of directors on the
Company Board as shall give Sub, subject to compliance with Section 14(f) of
the Exchange Act, representation on the Company Board equal to at least that
number of directors, rounded up to the next whole number, which is the
product of (a) the total number of directors on the Company Board (giving
effect to the directors elected pursuant to this sentence) multiplied by (b)
the percentage that (i) such number of Shares so accepted for payment and
paid for by Sub plus the number of Shares otherwise owned by Sub or any other
subsidiary of Tomkins bears to (ii) the number of such Shares outstanding,
and the Company shall, at such time, cause Sub's designees to be so elected;
provided, however, that in the event that Sub's designees are appointed or
elected to the Company Board, until the Effective Time such Board of
Directors shall have at least two directors who are directors on the date of
the Merger Agreement and who are not officers of the Company (the
"Independent Directors") or shall have at least three Independent Directors
in the event the total number of directors on the Board of Directors of the
Company is greater than six; and provided further that, in such event, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, any remaining Independent Directors shall be entitled to
designate persons to fill such vacancies who shall be deemed to be
Independent Directors for purposes of the Merger Agreement or, if no
Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers, stockholders or
affiliates of the Company, Tomkins or Sub, and such persons shall be deemed
to be Independent Directors for purposes of the Merger Agreement. Subject to
applicable law, the Company has agreed to take all action requested by
Tomkins necessary to effect any such election, including mailing to its
stockholders the Information Statement attached as Annex A hereto. In
connection with the foregoing, the Company shall promptly, at the option of
Sub, either increase the size of the Company Board or obtain the resignation
of such number of its current directors as is necessary to enable Sub's
designees to be elected or appointed to the Company Board as provided above.
The Merger Agreement also provides that the provisions of this paragraph are
in addition to and shall not limit any rights which Sub, Tomkins or any of
their affiliates may have as a holder or beneficial owner of Shares as a
matter of law with respect to the election of directors or otherwise.
Stock Options. The Merger Agreement provides that either prior to or as
soon as practicable following the consummation of the Offer, the Company
Board (or, if appropriate, any committee administering any stock option
program or arrangement of the Company (collectively, the "Stock Plans"))
shall adopt such resolutions or take such other actions as are required to
adjust the terms of all outstanding Stock Options granted as of the date of
the Merger Agreement under any Stock Plan to provide that, at the Effective
Time, each Stock Option outstanding immediately prior to the acceptance for
payment of Shares pursuant to the Offer shall be canceled in exchange for a
cash payment by the Company of, or can only be exercised for net cash equal
to, an amount equal to (i) the excess, if any, of (A) the price per Share to
be paid pursuant to the Offer over (B) the exercise price per Share subject
to such Stock Option, multiplied by (ii) the number of Shares for which such
Stock Option shall not theretofore have been exercised. The related
amendments to the Stock Plans are described above and in the Information
Statement.
The Merger Agreement provides further that all Stock Plans shall terminate
as of the Effective Time and the provisions in any other Benefit Plan
providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company shall
be deleted as of the Effective Time, and the Company shall ensure that
following the Effective Time no holder of a Stock Option or any participant
in any Stock Plan or any other Benefit Plan of the Company shall have any
right thereunder to acquire any capital stock of the Company or the Surviving
Corporation.
Indemnification. Sub and Tomkins have agreed in the Merger Agreement that
all rights to indemnification for acts or omissions occurring prior to the
Effective Time existing on the date of the
8
Merger Agreement in favor of the current or former directors or officers of
the Company and its subsidiaries as provided in their respective certificates
of incorporation or by-laws shall survive the Merger and shall continue in
full force and effect in accordance with their terms for a period of not less
than six years from the Effective Time, and Tomkins shall ensure that all
such rights to indemnification are honored on a timely basis. The Merger
Agreement provides further that Tomkins shall cause to be maintained for a
period of not less than three years from the Effective Time the Company's
current directors' and officers' insurance and indemnification policy to the
extent that it provides coverage for events occurring prior to the Effective
Time (the "D&O Insurance") for all persons who are directors and officers of
the Company on the date of the Merger Agreement, so long as the annual
premium therefor would not be in excess of 150% of the last annual premium
paid prior to the date of the Merger Agreement (such 150% amount, the
"Maximum Premium"); provided, however, that Tomkins may substitute therefor
policies of substantially equivalent coverage and amounts containing terms no
less favorable to such directors or officers. If the existing D&O Insurance
expires, is terminated or canceled during such three-year period, the Merger
Agreement provides that Tomkins shall use its best efforts to cause to be
obtained as much D&O Insurance as can be obtained for the remainder of such
period for an annualized premium not in excess of the Maximum Premium, on
terms and conditions no less advantageous than the existing D&O Insurance.
The Company has represented to Tomkins in the Merger Agreement that the
Maximum Premium is $462,000. Following the date of the Merger Agreement, the
Company will not amend or modify the D&O Insurance.
Benefit Plans. Tomkins has agreed in the Merger Agreement to cause the
Surviving Corporation for a period of six months after the Effective Time to
provide benefits to employees of the Company and its subsidiaries that are no
less favorable in the aggregate to such employees than those in effect on the
date of the Merger Agreement except for the treatment of Stock Options as
described under "-Stock Options" above.
Best Efforts; Notification. The Merger Agreement provides that, on the
terms and subject to the conditions of the Merger Agreement, each of the
parties shall use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable,
the Offer, the Merger and the other Transactions.
Procedure for Termination, Amendment, Extension or Waiver. The Merger
Agreement provides that in the event Sub's designees are appointed or elected
to the Board of Directors of the Company as described above under "-Board of
Directors", after the acceptance for payment of Shares pursuant to the Offer
and prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required for the Company to amend or terminate
the Merger Agreement, exercise or waive any of its rights or remedies under
the Merger Agreement or extend the time for performance of Sub's and Tomkins'
respective obligations under the Merger Agreement.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Tomkins and Sub with respect
to, among other things, its organization, capitalization, financial
statements, public filings, conduct of business, employee benefit plans,
labor relations and employment matters, compliance with laws, subsidiaries,
tax matters, litigation, vote required to approve the Merger Agreement,
undisclosed liabilities, information supplied, the absence of any material
adverse changes in the Company since December 31, 1996, absence of excess
parachute payments, inapplicability of state takeover statutes, the opinion
of the Company's financial advisor, brokers, fees and expenses, intellectual
property, environmental protection, transactions with affiliates, contracts,
customers and product liability.
STOCKHOLDER AGREEMENT WITH BCP
Simultaneously with entering into the Merger Agreement, BCP, Tomkins and
Sub entered into a stockholder agreement. The following summary of this
stockholder agreement is qualified in its entirety by reference to this
stockholder agreement, a copy of which is attached hereto as Exhibit 2 and
incorporated by reference. Such agreement should be read in its entirety for
a more complete understanding of its terms and provisions.
9
Tender of Shares. Upon the terms and subject to the conditions of the BCP
stockholder agreement, BCP has agreed to validly tender (and not withdraw)
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer, the number of Shares
owned beneficially by BCP.
Stock Option. In order to induce Tomkins and Sub to enter into the Merger
Agreement, BCP has granted to Sub an irrevocable option (a "Stock Option") to
purchase its Shares (the "Option Shares") at an amount (the "Purchase Price")
equal to $21.50 per share. Pursuant to the BCP stockholder agreement, if (i)
the Merger Agreement is terminated in accordance with (3) or (4) under
"-Termination of the Merger Agreement" above or (ii) the Merger Agreement is
terminated in accordance with (2)(a) under "-Termination of the Merger
Agreement" above and (x) BCP shall have breached its agreement to tender its
Shares pursuant to the Offer or (y) at the time of such termination, the
Minimum Tender Condition shall not have been satisfied, the Stock Option
shall, in any such case, become exercisable, in whole or in part, upon the
first to occur of any such event and remain exercisable in whole or in part
until the date which is 120 days after the date of the occurrence of such
event (the "120 Day Period"), so long as (i) all waiting periods under the
HSR Act required for the purchase of the Option Shares upon such exercise
shall have expired or been waived and (ii) there shall not be in effect any
preliminary injunction or other order issued by any Governmental Entity
prohibiting the exercise of the Stock Option pursuant to this stockholder
agreement. This stockholder agreement provides that if (i) all HSR Act
waiting periods have not expired or been waived or (ii) there shall be in
effect any such injunction or order, in each case on the expiration of the
120 Day Period, the 120 Day Period shall be extended until 5 business days
after the later of (x) the date of expiration or waiver of all HSR Act
waiting periods and (y) the date of removal or lifting of such injunction or
order.
Provisions Concerning the Shares. BCP has agreed that during the period
commencing on the date of the BCP stockholder agreement and continuing with
the first to occur of the Effective Time or the termination of the Merger
Agreement in accordance with its terms, at any meeting of the holders of
Shares or in connection with any written consent of the holders of Shares,
BCP will vote (or cause to be voted) the Shares held of record or of which
BCP has "beneficial ownership" (as determined pursuant to Rule 13d-3 under
the Exchange Act, including pursuant to any agreement, arrangement or
understanding, whether or not in writing), (i) in favor of the Merger, the
execution and delivery by the Company of the Merger Agreement and the
approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this stockholder agreement and any actions required
in furtherance thereof and (ii) against any takeover proposal and against any
action or agreement that would impede, frustrate, prevent or nullify this
stockholder agreement or result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or which would result in any of the
conditions set forth under "-Conditions to the Offer" or "-Conditions to the
Merger" above not being fulfilled. In addition, BCP has appointed
representatives of Tomkins as proxies to vote its Shares or grant a consent
or approval in respect of such Shares in favor of the various transactions
contemplated by the Merger Agreement and against any takeover proposal. BCP
has also agreed not to transfer its Shares and has agreed that neither it nor
any of its subsidiaries or affiliates shall, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations
with, or provide any information to, any corporation, partnership, person or
other entity or group (other than Tomkins, any of its affiliates or
representatives) concerning any takeover proposal.
Other Covenants, Representations, Warranties. In connection with the BCP
stockholder agreement, BCP made certain customary representations and
warranties, including with respect to (i) ownership of the Shares, (ii) BCP's
authority to enter into and perform its obligations under this stockholder
agreement, (iii) the absence of certain conflicts, (iv) applicable
governmental consents and approvals and (v) the absence of encumbrances on
and in respect of BCP's Shares. Tomkins and Sub have made certain
representations and warranties with respect to Tomkins and Sub's authority to
enter into this stockholder agreement and the absence of certain conflicts
and applicable governmental consents and approvals.
STOCKHOLDER AGREEMENT WITH MR. MARGETTS
In connection with the execution of the Merger Agreement, W. Thomas
Margetts, the Senior Vice President -Corporate Development of the Company,
entered into a letter agreement dated April 9, 1997.
10
The following summary of the letter agreement is qualified in its entirety by
reference to the letter agreement, a copy of which is attached hereto as
Exhibit 3 and incorporated by reference. Such agreement should be read in its
entirety for a more complete understanding of its terms and provisions. Mr.
Margetts, the beneficial owner of 204,099 Shares (or approximately 1% of the
outstanding Shares on a fully diluted basis), of which 202,299 are Shares
issuable upon exercise of Stock Options, agreed that if he were to exercise
any of his Stock Options during the pendency of the Offer, he would validly
tender (or cause the record owner of such shares to validly tender) and not
withdraw, pursuant to and in accordance with the terms of the Offer, all of
the Shares issued upon such exercise. In addition, Mr. Margetts also agreed
not to exercise his Stock Options following consummation of the Offer.
CONFIDENTIALITY AGREEMENT
Pursuant to the Confidentiality Agreement entered into as of March 12,
1997 among Tomkins, the Company and Bessemer Partners (the "Confidentiality
Agreement") the parties agreed to provide, among other things, for the
confidential treatment of their discussions regarding the Offer and the
Merger and the exchange of certain confidential information concerning the
Company. The Confidentiality Agreement has been filed as Exhibit 12 to this
Statement and is incorporated herein by reference.
ITEM 4. THE SOLICITATION AND RECOMMENDATION.
BACKGROUND
The Company went public in July 1993 at a price of $16 per Share. By late
1995 and early 1996, however, the Company's stock price had fallen to
approximately $10 per Share and was performing significantly worse than that
of comparable companies. Although the Company's financial performance had
started to improve in late 1995 and through 1996, this was not reflected in
the market price of the Shares. Over the course of late 1995 and 1996, the
Company Board became concerned that the stock market was not properly
reflecting the value of the Company. In addition, the Company Board observed
that a number of the Company's major competitors in the automotive original
equipment and afterparts industries were growing rapidly (through both
internal growth and acquisitions) and were taking advantage of substantial
economies of scale, particularly in sales, marketing and inventory
management, that were not available to the Company.
Accordingly, over the course of 1996, discussions were held with several
potential acquirors of the Company. None of these preliminary discussions led
to proposals to acquire the Company, although several potential acquirors
gave preliminary indications of interest in acquiring the Company.
By late 1996, the Company Board had concluded that the Company needed to
pursue aggressively a program of manufacturing cost savings, expansion of its
sales force and streamlining of management. Mr. Reilly was appointed
President and Chief Executive Officer in January 1997, and the Company Board
instructed Mr. Reilly to develop and implement such a program.
On March 10, 1997, a representative of Tomkins PLC met with a
representative of the Company in New York City to discuss Tomkins PLC's
possible interest in acquiring the Company. At such meeting, the parties
agreed to provide to Tomkins PLC certain information regarding the Company.
On March 12, 1997, Tomkins, the Company and Bessemer Partners entered into
a confidentiality agreement preceding Tomkins PLC's review of certain
information concerning the Company.
On March 14, 1997, representatives of Tomkins PLC met with representatives
of the Company in New York City to discuss Tomkins PLC's review of
information concerning the Company which could lead to an offer to acquire
the Company.
Between March 17 and March 24, 1997, representatives of Tomkins PLC met
with representatives of the Company to discuss the Company's business,
valuation parameters of the Company and to discuss generally the terms and
conditions of a possible transaction, including Tomkins PLC's requirement
that BCP sign a stockholder agreement providing for the sale of the Shares
owned by it to Tomkins PLC through a tender of such Shares in the Offer or
otherwise.
11
The Company Board held an informational meeting on April 1, 1997, at which
Mr. Reilly, Ward W. Woods (the Chairman of the Company) and Robert D. Lindsay
(a director of the Company) described to the other members of the Company
Board the status of discussions with Tomkins PLC, and the Company Board
discussed generally the appropriateness of selling the Company at this time.
The Company Board authorized management to continue discussions with Tomkins
PLC which it noted possessed a substantial cash position and ability to act
expeditiously.
On April 1, 1997, the Company engaged Morgan Stanley & Co. Incorporated
("Morgan Stanley") to assist the Company in its evaluation of any offer which
might be made by Tomkins PLC.
On April 2, 1997, the Company agreed to negotiate exclusively with Tomkins
PLC regarding Tomkins PLC's proposed acquisition of the Company until April
30, 1997.
On April 2, 1997, the Company furnished Tomkins PLC with a form of Merger
Agreement. On April 4, 1997, representatives of Tomkins PLC and
representatives of the Company began negotiating the terms of the definitive
merger agreement and a definitive stockholder agreement.
The Company Board met on the evening of April 8, 1997, in New York. At
that meeting, the Company Board heard presentations from management, Morgan
Stanley and the Company's legal counsel concerning the Company, its financial
condition, results of operations, business and prospects and the terms of the
Merger Agreement, the Stockholder Agreement and the transactions contemplated
thereby. The Company Board discussed the terms of the Merger Agreement and
the Stockholder Agreement, particularly those provisions relating to the
ability of the Company Board to pursue alternative proposals and the
circumstances under which the option granted to Sub under the Stockholder
Agreement would be exercisable. The Company Board also discussed the terms of
the proposed amendment to Mr. Reilly's employment agreement.
The Company Board met again on the morning of April 9, 1997. The Company
Board heard a further presentation from Morgan Stanley concerning the
Company, its historical stock price performance and its financial condition,
results of operations, business and prospects. The Company Board discussed
with Morgan Stanley and management of the Company various matters raised in
Morgan Stanley's presentation, including the costs and risks associated with
the implementation of the Company's current strategic plan, the likely timing
of realization of benefits from such implementation, the competitive
environment in which the Company operates and the likelihood of Tomkins PLC
or a third party being willing to pay more than $21.50 per share for the
Company. Morgan Stanley rendered its oral opinion, subsequently confirmed in
writing (the "Morgan Stanley Opinion"), that, based upon and subject to
certain considerations and assumptions, the consideration to be received by
the holders of Common Stock pursuant to the Offer and the Merger is fair from
a financial point of view to such holders. Copies of the Morgan Stanley
Opinion containing the assumptions made, procedures followed, matters
considered and limits of its review is attached hereto as Annex B and is
incorporated herein by reference. THE FULL TEXT OF SUCH OPINION SHOULD BE
READ IN CONJUNCTION WITH THIS STATEMENT.
The Company Board then heard a further presentation from the Company's
legal counsel concerning the terms and conditions of the Merger Agreement,
the Stockholder Agreement, the terms of the prosposed amendment to Mr.
Reilly's employment agreement, the terms of the proposed agreement with
Thomas K. Erwin, the Company's Chief Financial Officer, the principal terms
of the proposed 1997 Special Compensation Incentive Plan and the other
instruments under consideration. The Company Board discussed the likely
timing of the transaction and the conditions to consummation of the Offer,
the right of the Company Board to terminate the Merger Agreement to accept a
superior proposal after paying a termination fee of $15,000,000 and the other
principal terms of the Merger Agreement and the Stockholder Agreement.
Thereafter, the Company Board unanimously approved and adopted the Merger
Agreement, approved the Offer, the Merger, the Stockholder Agreement and the
transactions contemplated by the Merger Agreement and the Stockholder
Agreement and determined that the terms of the Offer and the Merger were fair
and in the best interests of the stockholders of the Company and recommended
that the stockholders of the Company accept the Offer and tender their Shares
to Sub pursuant to the Offer.
12
RECOMMENDATION OF BOARD
At its meeting held on April 9, 1997, as discussed above, the Company
Board unanimously approved and adopted the Merger Agreement, approved the
Offer, the Merger, the Stockholder Agreement and the transactions
contemplated by the Merger Agreement and determined that the terms of the
Offer and the Merger were fair to and in the best interest of the
stockholders of the Company and recommended that the stockholders of the
Company accept the Offer and tender their Shares to Sub pursuant to the
Offer. In making its recommendations to the stockholders of the Company with
respect to the Offer and the Merger, the Company Board considered a number of
factors, including the following:
Financial Condition, Results of Operations, Business and Prospects of the
Company. The Company Board considered the financial condition, results of
operations, business and prospects of the Company, including its prospects if
it were to remain independent. The Company Board discussed the Company's
current strategic plan for aggressive expansion, including the costs of such
plan and the risks for the Company involved in its implementation. The
Company Board also discussed the competitive environment in which the Company
operates, including the rate of consolidation and the prospects for
substantial economies of scale that were becoming available to the Company's
competitors but not to the Company.
Other Potential Transactions. The Company Board also considered the
information provided by Morgan Stanley and Bessemer Partners concerning the
preliminary discussions that had been held over the course of 1996 with other
potential acquirors of the Company. The Company Board noted that none of
those discussions had resulted in proposals to acquire the Company, although
several potential acquirors gave preliminary indications of interest in
acquiring the Company. The Company Board noted that Tomkins PLC, by virtue of
its ownership of The Gates Rubber Company, could realize very substantial
operating synergies from an acquisition of the Company which would enable it
to pay more than other companies to acquire the Company. Moreover, the
Company Board noted that Tomkins PLC would benefit from a different
accounting treatment for goodwill than similar U.S. companies. The Company
Board also noted that the Merger Agreement would permit the Company to
terminate the Merger to accept a superior proposal from a third party
(subject to payment of the $15,000,000 Termination Fee), although the terms
of the Stockholder Agreement would make it significantly less likely that any
third party would make a proposal to acquire the Company.
Historical Stock Price Performance. The Company Board reviewed the
historical stock price performance of the Company and noted that the
consideration to be received by the Company's stockholders pursuant to the
Offer and the Merger would represent a premium of approximately 29% over the
closing price of the Shares on the NASDAQ Stock Market on April 7, 1997, and
a substantial premium over the average closing price of the Shares for the
previous year. The Company Board also noted that the historical stock
performance of the Company had been inferior to that of comparable automotive
parts companies, primarily because of the controlling position of BCP and the
low liquidity.
Morgan Stanley Presentations. The Company Board took into account the
presentations and advice of Morgan Stanley with respect to the financial and
other terms of the Offer and the Merger and the Morgan Stanley Opinion that
the consideration to be received by the holders of Shares pursuant to the
Offer and the Merger is fair from a financial point of view to such holders.
A copy of the Morgan Stanley Opinion is filed as Exhibit 5 to this Statement
and is incorporated herein by reference. Holders of Shares should read the
Morgan Stanley opinion in its entirety for a description of procedures
followed, assumptions and qualifications made, matters considered and
limitations on the review undertaken by Morgan Stanley.
Terms and Conditions of the Offer and the Merger. The Company Board also
considered the terms and conditions of the Offer and the Merger as well as
the terms of the Stockholder Agreement. The Company Board noted that the
transaction was being structured as a cash tender offer for all Shares, and
it would permit all holders of Shares to participate on the same basis. The
Company Board considered that BCP, as principal stockholder, was committing
to the transaction but was not being afforded any preferential treatment in
connection with the Offer and the Merger. The Company Board also considered
the implications of the Stockholder Agreement for the minority stockholders
of the Company. The Company Board noted the limited conditions to Tomkins
obligations to consummate the Offer.
13
The foregoing discussion of the information and factors considered and
given weight by the Company Board is not intended to be exhaustive. In view
of the variety of factors considered in connection with its evaluation of the
Offer and the Merger, the Company Board did not find it practicable to, and
did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. In addition, individual
members of the Company Board may have given different weights to different
factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Morgan Stanley has been retained by the Company to act as financial
advisor to the Company with respect to the Offer, the Merger and matters
arising in connection therewith. Pursuant to a letter agreement dated April
4, 1997, between the Company and Morgan Stanley, the Company has agreed to
pay Morgan Stanley a fee of $2,000,000. In addition, the Company has agreed
to reimburse Morgan Stanley for certain out-of-pocket expenses, if any,
whether or not any transaction is consummated, and to indemnify Morgan
Stanley and certain related persons against certain liabilities in connection
with their engagement.
Morgan Stanley has provided certain investment banking services to the
Company from time to time for which it has received customary compensation.
In the ordinary course of its business, Morgan Stanley may trade the equity
securities of the Company for its own account and for the accounts of
customers and may, therefore, at any time hold a long or short position in
such securities.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to the stockholders of the Company on its behalf concerning
the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past 60 days, no transaction in Shares have been effected
by the Company or, to the Company's knowledge, by any executive officer,
director or affiliate of the Company, except for (i) grants of stock options
described in Annex A, (ii) the purchase through the facilities of the NASDAQ
Stock Market by Mr. Reilly and his wife of 1000 Shares on February 20, 1997,
500 Shares on February 21, 1997 and 500 Shares on February 28, 1997 and (iii)
the purchase through the facilities of the NASDAQ Stock Market by Mr. Erwin
of 1100 Shares on February 28, 1997.
(b) To the Company's knowledge, to the extent permitted by applicable
securities laws, rules or regulations, except for any gifts of Shares to
family members or charitable organizations, each of the Company's executive
offers and directors currently intends to tender all Shares over which he has
sole dispositive power pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) As described under Item 4 above, the Company has agreed in the Merger
Agreement not to engage in certain activities in connection with any proposal
to engage in a business combination with, or acquire an interest in or assets
of, the Company.
Except in accordance with the terms of the Merger Agreement, in connection
with the exercise of fiduciary duties as advised by counsel as described
under Item 4 hereof and except as described in this Statement, the Company
does not presently intend to undertake any negotiations in response to the
Offer which relate to or would result in (i) an extraordinary transaction,
such as a merger or reorganization, involving the Company or any of its
subsidiaries, (ii) a purchase, sale or transfer of a material amount of
assets by the Company or any of its subsidiaries, (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 herein, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the events referred
to in Item 7(a) above.
14
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
See the Information Statement pursuant to Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder, a copy of which is attached as Annex A to this
Statement.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
Exhibit 1: Agreement and Plan of Merger dated as of April 9, 1997, among
Stant Corporation, E&W Acquisition Corp. and Tomkins
Corporation (incorporated by reference to Exhibit 2.1 of the
Form 8-K Current Report of Stant Corporation filed with the
Securities and Exchange Commission on April 11, 1997).
Exhibit 2: Stockholder Agreement, dated as of April 9, 1997, among
Tomkins Corporation, E&W Acquisition Corp. and Bessemer
Capital Partners, L.P. (incorporated by reference to Exhibit
(c)(2) of the Schedule 14D-1 of E&W Acquisition Corp. and
Tomkins PLC filed with the Securities and Exchange Commission
on April 11, 1997 (the "Schedule 14D-1")).
Exhibit 3: Letter Agreement dated as of April 9, 1997, among W. Thomas
Margetts, E&W Acquisition Corp. and Tomkins Corporation
(incorporated by reference to Exhibit (c)(3) of the Schedule
14D-1).
Exhibit 4: Form of letter dated April 11, 1997, to be sent to the
stockholders of Stant Corporation.*
Exhibit 5: Opinion dated April 9, 1997 of Morgan Stanley and Co.
Incorporated*
Exhibit 6: First Amendment dated as of April 9, 1997, to the Employment
Agreement dated as of January 17, 1997, between Stant
Corporation and John P. Reilly.
Exhibit 7: Agreement dated as of April 9, 1997, between Stant
Corporation and Thomas K. Erwin.
Exhibit 8: Employment Agreement dated as of April 1, 1997, between Stant
Corporation and William S. Wade, Jr.
Exhibit 9: Amendment to the Stant Corporation Stock Option Plan for
Directors (1993).
Exhibit 10: Amendment to the 1993 Stock Option Plan for Key Employees of
Stant Corporation and its Subsidiaries.
Exhibit 11: 1997 Special Compensation Incentive Plan for Key Employees of
Stant Corporation and its Subsidiaries.
Exhibit 12: Confidentiality Agreement dated as of March 12, 1997, among
Tomkins Corporation, Stant Corporation and Bessemer Partners
& Co. (incorporated by reference to Exhibit (c)(4) of the
Schedule 14D-1).
Exhibit 13: Letter Agreement dated April 2, 1997, between Tomkins PLC and
Stant Corporation (incorporated by reference to Exhibit
(c)(5) of the Schedule 14D-1).
Exhibit 14: Offer to Purchase dated April 11, 1997 (incorporated by
reference to Exhibit (a)(1) of the Schedule 14D-1).**
Exhibit 15: Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) of the Schedule 14D-1).**
- ------------
* Copy sent to stockholders of the Company.
** Included in the Offer to Purchase Materials being mailed to Company
stockholders
15
SIGNATURE
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this Statement is
true, complete and correct.
STANT CORPORATION,
by /s/ John P. Reilly
--------------------------------
Name: John P. Reilly
Title: President and Chief
Executive Officer
Dated: April 11, 1997
16
ANNEX A
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This information is being furnished in connection with the designation by
E&W Acquisition Corp. ("Sub"), pursuant to the Agreement and Plan of Merger
(the "Merger Agreement"), dated April 9, 1997, among Stant Corporation (the
"Company"), Tomkins Corporation ("Tomkins") and Sub, of persons to be elected
to the Board of Directors of the Company (the "Company Board") other than at
a meeting of the stockholders of the Company. The Merger Agreement is more
fully described under Item 4 of the Company's Schedule 14D-9 ("Schedule
14D-9"), of which this Annex A is a part. Capitalized terms used and not
defined in this Annex A have the meanings assigned to them in Schedule 14D-9.
RIGHT TO DESIGNATE DIRECTORS; SUB DESIGNEES
Pursuant to the Merger Agreement promptly upon the acceptance for payment
of, and payment by Sub for, any shares of Common Stock pursuant to the Offer,
Sub shall be entitled to designate such number of directors on the Company
Board as shall give Sub, subject to compliance with Section 14(f) of the
Securities Exchange Act of 1934 (the "Exchange Act"), representation on the
Company Board equal to at least that number of directors, rounded up to the
next whole number, which is the product of (a) the total number of directors
on the Company Board (giving effect to the directors elected pursuant to this
sentence) multiplied by (b) the percentage that (i) such number of shares of
Common Stock so accepted for payment and paid for by Sub plus the number of
shares of Common Stock otherwise owned by Sub or any other subsidiary of
Tomkins bears to (ii) the number of such shares outstanding, and the Company
shall, at such time, cause Sub's designees to be so elected; provided,
however, that in the event that Sub's designees are appointed or elected to
the Company Board, until the Effective Time such Board of Directors shall
have at least two directors who are Directors on the date of the Merger
Agreement and who are not officers of the Company (the "Independent
Directors") or shall have at least three Independent Directors in the event
the total number of directors on the Company Board is greater than six; and
provided further that, in such event, if the number of Independent Directors
shall be reduced below two for any reason whatsoever, any remaining
Independent Directors (or Independent Director, if there shall be only one
remaining) shall be entitled to designate persons to fill such vacancies who
shall be deemed to be Independent Directors for purposes of the Merger
Agreement or, if no Independent Directors then remain, the other directors
shall designate two persons to fill such vacancies who shall not be officers,
stockholders or affiliates of the Company, Tomkins or Sub, and such persons
shall be deemed to be Independent Directors for purposes of the Merger
Agreement. Subject to applicable law, the Company shall take all action
requested by Tomkins necessary to effect any such election, including mailing
to its stockholders this Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and the Company shall make such mailing with the mailing of the
Schedule 14D-9 (provided that Sub shall have provided to the Company on a
timely basis all information required to be included in this Information
Statement with respect to Sub's designees). In connection with the foregoing,
the Company shall promptly, at the option of Sub, either increase the size of
the Company Board or obtain the resignation of such number of its current
directors as is necessary to enable Sub's designees to be elected or
appointed to the Company Board as provided above.
It is expected that on the date that Sub accepts for payment and purchases
Shares under the Offer, the Company will promptly take such other action as
necessary to enable the Sub Designees to be elected to the Company Board.
A-1
Set forth in the table below are the name, age, present principal
occupation or employment and business address, and material occupations,
positions, offices or employments for the past five years for each of the
persons who may be designated by Sub as the Sub Designees. Each such person
is a citizen of the United Kingdom, unless otherwise indicated. The business
address of Messrs. Hutchings, Duncan and Webber is c/o Tomkins PLC, East
Putney House, 84 Upper Richmond Road, London SW15 2ST, England and of Messrs.
Eaton and Disser is c/o Tomkins Corporation, 4801 Springfield Street, Dayton,
Ohio 45431.
NAME AND AGE PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ----------------------------- ----------------------------------------------------------------------------
Gregory F. Hutchings (50) Director of Tomkins PLC since 1983, Chief Executive Officer of Tomkins PLC
since 1984 and Executive Chairman of Tomkins PLC since January 1995.
Ian A. Duncan (50) Finance Director of Tomkins PLC since 1984, Managing Director-Finance of
Tomkins PLC since 1992 and Deputy Chairman of Tomkins PLC since January 1995.
Geoffrey D. Eaton (38) President and Chief Executive Officer of Sub. Executive Vice
President of The Gates Rubber Company ("Gates") since 1986. Director
-Corporate Development (North America) of Tomkins PLC from 1995 to 1996. From
1992 to 1995 he was Executive Director of RHM.
Simon M. Webber (34) Senior Vice President and Corporate Secretary of Sub. Executive
Officer in Tomkins PLC's Corporate Development Unit since
1989 and Tomkins PLC Legal Counsel since 1993.
Dan Disser (40) Vice President of Finance of Sub. Chief Financial Officer of
Tomkins Corporation since March 1995. Comptroller of Tomkins Corporation and
Vice President -Finance of Redwing Co. Inc. ("Redwing") from December 1993 to
March 1995. Vice President and Comptroller of Redwing from August
1991 to December 1993. Citizen of the United States.
INFORMATION REGARDING THE COMPANY
As of April 9, 1997, there were 16,226,815 Shares outstanding and
2,676,583 Shares reserved for issuance upon the exercise of stock options
then outstanding. Each Share that is outstanding as of the close of business
on any applicable record date for any matter to be acted upon by shareholders
is entitled to one vote on such matter. The Company Board consists of six
members and is divided into three classes. Each director serves for a term of
three years and until his successor is duly elected and qualified or until
his earlier death, resignation or removal.
A-2
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The names of current directors, their ages as of April 9, 1997, and
certain other information about them (based upon information provided by such
persons) are set forth below. As indicated above, some (or all) of the
current directors may resign effective immediately following the purchase of
Shares by Sub pursuant to the Offer.
CLASS III--present term expires in 1997
Ogden M. Phipps A Director of the Company since 1987. Until
December 1994, Mr. Phipps was Chairman of the Board of
Bessemer Securities Corporation ("BSC") and of The
Bessemer Group, Incorporated ("BGI"), positions he had
held for more than ten years. He continues to serve as
a director of those corporations and of Kelley Oil &
Gas Corporation, and several private corporations, and
as an officer and director of several non-profit
organizations. Mr. Phipps is 56.
J.P. "Jack" Reilly A Director and President and Chief Executive
Officer of the Company since January 1997. Mr. Reilly
was Chief Executive Officer of Figgie International
Inc. ("Figgie") from January 1995 until he joined the
Company. He also served Figgie as its President from
February 1, 1995 and as its Chairman of the Board from
May 16, 1995. Figgie is a manufacturer of guidance and
navigation systems for defense and commercial
applications, life support and air purifying products
for the aviation and fire protection industries, and
self-propelled aerial work platforms for construction
and maintenance applications. Prior thereto Mr. Reilly
was President and Chief Operating Officer of Brunswick
Corporation ("Brunswick"), a world leader in marine
power, pleasure boating and recreation equipment, from
1993 to 1994, and President and Chief Executive
Officer of Tenneco Automotive, a worldwide producer of
automotive components and a division of Tenneco Inc.,
from 1987 to 1993. Mr. Reilly continues to serve as
the non-executive Chairman of the Board of Directors
of Figgie and is a director of TRINOVA Corporation and
a director emeritus of Barat College. Mr. Reilly is
53.
CLASS I--present term expires in 1998
Robert D. Lindsay A Director of the Company since 1991. Mr.
Lindsay was also a Vice President of the Company from
1991 to June 1993. He is currently the sole
shareholder and president of a corporation which is a
general partner of a limited partnership which is the
general partner of Bessemer Capital Partners, L.P.
("BCP"). In addition, Mr. Lindsay is currently the
sole shareholder and the president of a corporation
which is a general partner of Bessemer Partners & Co.
("BP&Co.") Mr. Lindsay was a Managing Director of BSC
from January 1991 until July 1, 1993. From January
1990 to January 1991, Mr. Lindsay was a Managing
Director in the Merchant Banking Division of Morgan
Stanley & Co. Incorporated and prior to that time was
a Principal at that firm. Mr. Lindsay is Chairman of
Metropolitan International, Inc. and a director of
BCP/Essex Holdings Inc. and several private companies.
Mr. Lindsay is 42.
A-3
William Reynolds A Director of the Company since August 1995.
Mr. Reynolds is Chief Executive of the Old Mill Group,
a private investment company. He was formerly Chairman
and Chief Executive Officer of GenCorp, a
technology-based company with positions in aerospace,
automotive and polymer products. Mr. Reynolds served
as Chief Executive Officer of GenCorp from August 1985
until July 1994, and as Chairman of that company until
March 1995. Mr. Reynolds is presently a director of
Boise Cascade Corporation, Boise Cascade Office
Products and Eaton Corporation. He also served as a
Director and Deputy Chairman of the Cleveland Federal
Reserve Bank from January 1991 to December 1992. On
January 1, 1993, he was appointed Chairman and served
in that capacity until December 31, 1996, when his
term of service was completed. Mr. Reynolds is 63.
CLASS II--present term expires in 1999
Edward O. Gaylord A Director of the Company since 1993. Mr.
Gaylord has served as Chairman of EOTT Energy Corp.,
an oil trading and transportation firm, since January
1993 and also operates Gaylord & Company, a private
venture capital firm based in Houston, Texas. He
served as Chairman and Chief Executive Officer of
Presto Industries, Inc., a plastics manufacturer, from
1985 to 1988, and prior thereto served as President
and Chief Executive Officer of Distribution Systems
Inc., a petroleum and chemical trucking and storage
terminal firm in Houston. Mr. Gaylord is a director of
the Houston Branch of the Federal Reserve Bank of
Dallas, Imperial Holly Corporation, Kinder Morgan
Energy Partners, L.P. and Seneca Foods Corporation,
and a trustee of MD Anderson Hospital and Baylor
College of Medicine. Mr. Gaylord is 65.
Ward W. Woods Chairman of the Board of Directors since
1989. Mr. Woods has been President and Chief Executive
Officer of BSC since 1989 and is the sole shareholder
and president of a corporation which is the managing
general partner of a limited partnership which is the
general partner of BCP. In addition, Mr. Woods is the
sole shareholder and president of a corporation which
is the managing general partner of BP&Co. Prior to
February 1989, Mr. Woods was a Senior Partner of
Lazard Freres & Co., an investment banking firm. He is
also Chairman of the Board of BCP/Essex Holdings Inc.
and a director of Freeport-McMoRan Copper & Gold Inc.,
Kelley Oil & Gas Corporation, Graphic Controls
Corporation, Boise Cascade Corporation and several
private companies.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1996 the Board of directors met seven times. All directors attended
at least 75% of the meetings of the Board of Directors and of the committees
of the Board of Directors of which they were members.
The Audit Committee of the Board of Directors (the "Audit Committee") is
composed of Messrs. Gaylord, Phipps and Reynolds. Mr. Gaylord serves as
Chairman. The principal functions of the Audit Committee are to recommend to
the Board of Directors the appointment of external auditors, review annually
the internal and external audit programs with both the internal and external
auditors, review the annual and other financial statements of the Company,
evaluate the quality and adequacy of the accounting, financial and internal
audit policies, procedures, controls and staffing of the Financial Department
of the Company and monitor by the Company with environmental, conflict of
interest and other corporate policies. The Audit Committee met two times in
1996.
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is composed of Messrs. Lindsay, Reynolds and Woods. Mr. Woods
serves as Chairman. The purpose of the
A-4
Compensation Committee is to oversee the compensation and benefit programs
provided to senior officers of the Company. The Compensation Committee met
three times in 1996.
The Committee of Independent Directors (the "Independent Committee") is
composed of Messrs. Reynolds and Gaylord. Mr. Reynolds serves as Chairman.
The purpose of the Independent Committee is to administer the 1993 Stock
Option Plan for Key Employees. The Independent Committee met once in 1996.
The Company does not have an Executive Committee or a Nominating Committee
or any committee performing similar functions.
Directors who are not employees of the Company are entitled to receive an
annual retainer of $16,000, plus $1,000 for each Board of Directors meeting
attended. In addition, nonemployee directors are entitled to receive $900 for
each committee meeting attended. Directors are reimbursed for travel and
other expenses related to attendance at the meetings. A Director who is an
employee of the Company is not compensated for his service on the Board or
its committees.
A nonemployee Director may elect to have any or all of his retainer and
meeting fees paid in the form of stock options, rather than in cash of
equivalent value, under the terms of the Stock Option Plan for Directors
(1993) (the "Directors Option Plan") which was approved at the Company's 1994
Annual Meeting of Stockholders. If a director makes such an election, the
number of shares subject to each stock option grant is determined by dividing
(a) the amount of compensation which the director directed to be paid in
options by (b) the fair market value of the Common Stock minus $2.50. The
$2.50 represents the amount to be paid on exercise of the option. Fair market
value is defined as the average of the market price (the mean between the
high and low sales price) of a share of the Common Stock at the middle of
each quarter during the year of participation.
Since the adoption of the Directors Option Plan, each nonemployee director
has elected to have all of his retainer and Board and Committee meeting fees
paid in the form of stock options. In connection with the execution of the
Merger Agreement, the Directors Option Plan was amended to provide that in
the event of consummation of the Merger, (i) the property issuable upon
exercise of any theretofore unexercised option shall be cash equal to the
product of (a) $21.50 less the exercise price of such option and (b) the
number of Shares subject to such option, (ii) each option exercised pursuant
to clause (i) shall be immediately canceled as of the date of the Merger and
of no force or effect and (iii) the Company shall pay an amount in cash to
the optionee within 30 days of the date of the Merger equal to the amount set
forth in clause (i). Pursuant to the Directors Option Plan, any pro rata
amounts of the annual retainer and meeting fees which a Director has
irrevocably elected to have paid in the form of options granted under the
Directors Option Plan earned since January 1, 1997 which would otherwise have
been paid in the form of options shall be paid to each Director in cash.
EXECUTIVE OFFICERS OF THE COMPANY
NAME AGED POSITION
- ----------------------- ------ -------------------------------------------------
John P. "Jack" Reilly 53 Director, President and Chief Executive Officer
Thomas K. Erwin 47 Senior Vice President and Chief Financial Officer
W. Thomas Margetts 60 Senior Vice President -Corporate Development
Thomas F. Plocinik 55 President of Trico
Robert W. Priebe 63 Senior Vice President -International
William S. Wade, Jr. 49 Senior Vice President -Sales & Marketing
A-5
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
John P. "Jack" Reilly has been a Director and President and Chief
Executive Officer of Stant since January 1997. From January 1995 until
January 1997, he served as Chief Executive Officer of Figgie and also served
as its President from February 1995 until he joined the Company. Figgie is a
manufacturer of guidance and navigation systems, life support and air
purifying products and self-propelled aerial work platforms. From 1993 to
1994, Mr. Reilly was President and Chief Operating Officer of Brunswick, a
world leader in marine power, pleasure boating and recreation equipment; and
from 1987 to 1993 he was President and Chief Executive Officer of Tenneco
Automotive, a producer of automotive components.
Thomas K. Erwin has been Senior Vice President and Chief Financial Officer
of Stant since February 10, 1997. Prior thereto he was associated with
Brunswick in various executive capacities for 18 years, including serving as
Corporate Controller of Brunswick from 1988 until 1996.
W. Thomas Margetts has been Senior Vice President-Corporate Development of
Stant since October 1994. He served Stant as Senior Vice President-Human
Resources and Legal from 1991 until October 1994. Mr. Margetts also served
Stant as Secretary from July 1993 until October 1994.
Thomas F. Plocinik, a certified public accountant, has been President of
Trico since April 1995. From 1991 until August 1995, he served as Senior Vice
President-Finance and Chief Financial Officer of Stant and from 1989 to 1991,
he held executive positions at Standard-Thomson Corporation.
Robert W. Priebe has been Senior Vice President-International of Stant
since July 1994. He served Stant as Senior Vice President -Original Equipment
Sales and International from 1991 until July 1994.
William S. Wade, Jr. joined the Company as Senior Vice President-Sales &
Marketing on April 1, 1997. From May 1995 until March 1997, Mr. Wade was
President and Chief Executive Officer of FAG Bearings Corp., the third
largest bearing company in the world and a subsidiary of FAG Kugelfisdner
(Germany). Prior thereto, Mr. Wade served for more than eight years as
President of CR Services, a manufacturer and distributor of seals, bearings
and heavy truck accessories.
EXECUTIVE COMPENSATION
The following table summarizes annual and long-term compensation with
respect to the three years ended December 31, 1996, for services rendered in
all capacities to the Company which was paid to the person who served as the
Company's Chief Executive Officer during 1996 and the four executive officers
who, at December 31, 1996, were the four most highly compensated executive
officers other than the Chief Executive Officer (the "Named Executive
Officers").
LONG-TERM
ANNUAL COMPENSATION OTHER COMPENSATION
------------------------------ ANNUAL -----------
NAME AND PRINCIPAL SALARY BONUS COMP.(1) OPTIONS(2)
POSITION YEAR $ $ $ (#)
------------------ ----- ------ ------- -------- -----------
David R. Paridy(3) .......... 1996 450,000 225,000 77,346 40,000
President and Chief 1995 450,000 90,000 79,448 35,000
Executive Officer 1994 325,000 325,000 72,218 --
W. Thomas Margetts .......... 1996 160,600 82,000 24,034 10,000
Sr. Vice President- 1995 153,600 30,000 21,078 --
Corporate Development 1994 134,600 65,500 20,337 --
Gary G. Moose(4) ............ 1996 198,700 45,000 6,588 12,500
Sr. Vice President-Marketing 1995 208,800 -- 3,532 5,000
1994 (4) 78,373 -- 2,700 --
Thomas F. Plocinik .......... 1996 248,900 183,300 27,500 15,000
President of Trico Products 1995 232,397 105,750 29,335 10,000
Corporation, a wholly 1994 158,000 150,000 27,283 --
owned subsidiary
Thomas E. Schmitt(5) ........ 1996 166,400 83,200 9,443 15,000
Sr. Vice President-Finance 1995 128,398 32,000 9,419 --
and Chief Financial Officer 1994 92,500 33,500 8,543 --
- ------------
(1) In connection with management's participation in the purchase of Stant
Manufacturing Inc. from Emery Air Freight
A-6
Corporation in 1987 and its work in subsequent transactions, including
the acquisitions of Standard-Thomson Corporation and Epicor Industries,
Inc., stock options were granted to Messrs. Paridy, Margetts and
Plocinik. Payouts equivalent to dividends were made to these
individuals in 1994, 1995 and 1996. These amounts are included in the
figures set forth above in the Other Annual Compensation column as
follows: Paridy, $49,109 each year; Margetts, $13,944 each year; and
Plocinik, $16,942 each year. The balance of the amounts in this column
represent (i) employer 401(k) contributions to the Named Executive
Officers in 1994, 1995 and 1996, as follows: Paridy, $4,043, $4,043 and
$4,156; Margetts, $2,757, $2,985 and $3,006; Moose, $0, $33 and $3,167;
Plocinik, $2,761, $3,080 and $3,167; and Schmitt, $2,399, $3,330 and
$3,051; and (ii) the value of certain insurance and other benefits
provided to the named executive officers.
(2) Includes options granted in 1996 subject to stockholder approval of
proposed amendments to the 1993 Option Plan. See Item 3 of the Schedule
14D-9 for a discussion of the effect of the Offer and the Merger
Agreement on the conditional grants under the 1993 Option Plan and of
the 1997 Incentive Plan.
(3) Mr. Paridy gave notice of retirement on January 23, 1997, after serving
as the Company's President and Chief Executive Officer since July 21,
1993, the date of the Company's initial public offering of Common Stock
(the "IPO"), and having been employed by the Company and its
predecessors for 34 years. Mr. Paridy was succeeded as President and
Chief Executive Officer by John P. "Jack" Reilly. Additional
information with respect to the compensation which will be paid in the
future to Mr. Paridy and with respect to Mr. Reilly's employment
arrangements are set forth below under the caption "Employment
Agreements".
(4) Mr. Moose joined the Company in September 1994 in connection with the
acquisition by the Company of FEDCO Automotive Components Company, Inc.
Notice of Mr. Moose's resignation as an executive officer of the
Company was given on April 1, 1997.
(5) Notice of Mr. Schmitt's resignation as an executive officer of the
Company was given on March 15, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information concerning grants of stock
options to purchase shares of Common Stock made during the fiscal year ended
December 31, 1996, to the Named Executive Officers.
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL OPTIONS ANNUAL RATES OF STOCK
GRANTED TO PRICE APPRECIATION FOR
EMPLOYEES IN OPTION TERM(1)
OPTIONS CALENDAR EXERCISE PRICE ----------------------
EXECUTIVE OFFICER GRANTED(#) YEAR(%) ($/SHARE) EXPIRATION DATE 5% 10%
----------------- ---------- ------------- -------------- --------------- -------- ---------
David R. Paridy
Definitive Grants .. 20,000 $10.25 3/13/06 $128,923 $326,717
Provisional
Grants(2) ....... 20,000 $12.44 11/1/06 156,469 396,523
----------
Total ............ 40,000 17.1%
==========
W. Thomas Margetts
Definitive Grants .. 4,000 $10.25 3/13/06 $ 25,785 $ 65,343
Provisional Grants
(2) ................. 6,000 $12.44 11/1/06 46,941 118,957
----------
Total ............ 10,000 4.3%
==========
Gary G. Moose
Definitive Grants .. 0 -- -- -- --
Provisional
Grants(2) .......... 12,500 $12.44 11/1/06 $ 97,793 $247,827
----------
Total ............ 12,500 5.4%
==========
Thomas F. Plocinik
Definitive Grants .. 8,000 $10.25 3/13/06 $ 51,569 $130,687
Provisional Grants
(2) ................. 7,000 $12.44 11/1/06 54,764 138,783
----------
Total ............ 15,000 6.4%
==========
Thomas E. Schmitt
Definitive Grants .. 8,000 $10.25 3/13/06 $ 51,569 $130,687
Provisional
Grants(2) .......... 7,000 $12.44 11/1/06 54,764 138,783
----------
Total ............. 15,000 6.4%
==========
- ------------
(1) We recommend caution in interpreting the financial significance of
these figures. They are calculated by multiplying the number of options
granted by the difference between a future hypothetical stock price and
the option exercise price and are shown pursuant to rules of the SEC.
They assume the value of Company stock appreciates 5% or 10% each year,
compounded annually, for ten years (the life of each option). They do
not reflect the value of the options in light of the $21.50 price
payable in the Offer and the Merger.
A-7
(2) See Item 3 of the Schedule 14D-9 for a discussion of the effect of the
Offer and the Merger Agreement on the provisional grants under the 1993
Option Plan and of the 1997 Incentive Plan. In addition, the
Provisional Grants of Messrs. Paridy, Moose and Schmitt of 20,000,
12,500 and 7,000, respectively, lapse three months after the
termination of their employment. Mr. Paridy gave notice of retirement
on January 23, 1997, and notice of Messrs. Moose's and Schmitt's
resignations as executive officers of the Company was given on April 1,
1997 and March 15, 1997, respectively. Termination of employment is
effective 60 days after notice.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table shows information regarding the exercise of stock
options during 1996 by the Named Executive Officers and the number and value
of any unexercised, in-the-money stock options as of December 31, 1996.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE OPTIONS AT YEAR END YEAR END
EXECUTIVE OFFICER ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(1)(2)
- ------------------- --------------- ---------- ----------------------------- -------------------------------
David R. Paridy ... -- -- 750,858/20,000(3) $4,741,022/66,250
W. Thomas Margetts.. -- -- 202,299/6,000 $1,396,097/19,875
Gary G. Moose ...... -- -- 5,000/12,500(3) $ 1,875/41,406
Thomas F. Plocinik . -- -- 280,781/7,000 $1,733,295/23,188
Thomas E. Schmitt . -- -- 20,500/7,000(3) $ 45,875/23,188
- ------------
(1) Includes Provisional Grants.
(2) December 31, 1996, the closing price of the Common Stock was $15.75.
(3) Options are not exercisable until the later of six months after the
date of their grant or six months after the date of stockholder
approval. The Provisional Grants of Messrs. Paridy, Moose & Schmitt of
20,000, 12,500 and 7,000, respectively, were granted on November 1,
1996 and lapse three months after the termination of their employment.
Mr. Paridy gave notice of retirement on January 23, 1997, and notice of
Messrs. Moose's and Schmitt's resignations as executive officers of the
Company was given on April 1, 1997 and March 15, 1997, respectively.
Termination of employment is effective 60 days after notice.
RETIREMENT PLANS
The Company maintains the Stant Retirement Plan for Salaried Employees
(the "Retirement Plan"), an IRS qualified plan, for its salaried employees,
including its executive officers. The Retirement Plan is a defined benefit
plan which is designed to provide noncontributory benefits based upon both
years of service and the employee's highest five-year average annual
compensation ("Final Average Earnings"), up to a maximum of $150,000 per
annum, as adjusted. The benefit under the Retirement Plan is calculated at 1%
of Final Average Earnings up to covered compensation (which is set by the
Social Security Administration) times the employee's years of service, plus
1-1/2% of Final Average Earnings in excess of covered compensation times the
employee's years of service.
Under the Retirement Plan, benefits usually begin at the normal retirement
age of 65. The Retirement Plan also provides benefits for employees electing
early retirement from ages 55 through 64. If such an election is made, the
benefits will be reduced to reflect the longer interval over which the
benefits will be paid. Executive officers participate in the Retirement Plan
on the same basis as the employees of the Company. Contributions to and
benefits payable under the Retirement Plan must be in compliance with the
applicable guidelines or maximums established by the Internal Revenue Code of
1986, as amended (the "Code").
The Company has adopted the Pension Restoration Plan (the "Restoration
Plan"), an unfunded plan pursuant to which the Company undertakes to pay
those benefits which would otherwise be payable under the Retirement Plan,
but which, due to various Code limitations, are not permitted to be funded or
paid through the Retirement Plan. The Restoration Plan provides that any
benefits under such plan will be paid in the same form as benefits are paid
under the Retirement Plan. Plans such as the Restoration Plan are permitted
under applicable law and have been adopted by many corporations. Based upon
their
A-8
current compensation levels, Messrs. Paridy, Margetts, Moose, Plocinik and
Schmitt would each be entitled to receive retirement benefits from the
Company pursuant to the Restoration Plan if any of them retired.
AMENDMENT TO 1993 OPTION PLAN
In connection with the execution of the Merger Agreement, the 1993 Stock
Option Plan for Key Employees was amended to provide that in the event of
consummation of the Merger (i) the property issuable upon exercise of any
theretofore unexercised option shall be cash equal to the product of (A)
$21.50 less the exercise price of such option and (B) the number of Shares
subject to such option, (ii) each option exercised pursuant to clause (i)
shall be immediately canceled as of the date of the Merger and of no force or
effect and (iii) the Company shall pay an amount in cash to the optionee
within 30 days of the date of the Merger equal to the amount set forth in
clause (i).
1997 INCENTIVE PLAN
A number of grants made after October 30, 1996, were conditioned upon
receiving stockholder approval of the amendments adopted by the Company Board
on October 30, 1996, to the 1993 Stock Option Plan for Key Employees. As it
has been decided not to seek shareholder approval of such amendments, such
provisional options will be null and void. The 1997 Special Compensation
Incentive Plan for Key Employees was adopted by the Company Board on April 9,
1997, in order to provide affected executives with a cash payment as soon as
practicable after the merger of the Company with Sub equal to the product of
(a) the number of shares of Common Stock subject to each forfeited option
held by the executive and (b) $21.50 less the option price applicable to such
option.
EMPLOYMENT AGREEMENTS
Mr. Reilly. In connection with the election of Mr. Reilly as the Company's
President and Chief Executive Officer, the Company and Mr. Reilly entered
into an Employment Agreement dated as of January 17, 1997, which provides for
his employment as the Company's President and Chief Executive Officer until
January 31, 2000 at a minimum annual salary of $500,000 and the ability to
earn up to one hundred percent of his base salary annually under the
Company's incentive compensation plan provided that the Company achieves
specified objectives. In connection with his employment, Mr. Reilly will also
receive a $1,200,000 signing bonus which, to permit full tax deductibility to
the Company, will be paid over time with amounts deferred accruing interest
at 8% per annum. The Company will also credit $250,000 to an account
established in Mr. Reilly's name which will be hypothetically invested in an
investment fund, to be designated by Mr. Reilly, until the termination of his
employment with the Company and paid to him thereafter. Neither amounts
credited to this account nor Mr. Reilly's signing bonus will be tax
deductible to the Company until actually paid to Mr. Reilly.
Mr. Reilly was also granted an option to purchase 300,000 shares of Common
Stock at $15.375 per share, the mean between the high and low sales price of
a share of Common Stock on the NASDAQ Stock Market on January 21, 1997. This
option, which is scheduled to vest in equal installments on the first, second
and third anniversaries of the date of grant, is exercisable for ten years
and is subject to stockholder approval (but see "-1997 Incentive Plan"
above). Mr. Reilly's employment may be terminated by the Company at any time
"for cause".
Mr. Reilly's employment agreement was amended by a First Amendment dated
as of April 9, 1997 (the "Amendment"), the material provisions of which will
become effective upon the first acceptance of shares by Sub pursuant to the
Offer. The Amendment states, among other things, that (i) the term of Mr.
Reilly's employment is amended to December 10, 1997 (or such later date as
the parties may agree if the integration of Tomkins and the Company has not
yet been completed) and (ii) if his employment is terminated without cause,
if there is a constructive termination of his employment or if his term of
employment expires pursuant to clause (i) above, he will be entitled to
receive $1,000,000. In addition, if his term of employment is terminated by
Mr. Reilly for convenience or by the Company for good cause or if his term of
employment expires pursuant to clause (i) above, Mr. Reilly agrees that, for
a period of
A-9
six months after the termination date, he will not (i) directly or indirectly
engage in any business substantially similar to the business conducted by the
Stant Group or Gates in any geographical area in (ii) participate in the sale
to any customer of the Stant Group or Gates of products which are
substantially similar to those sold to such customer by the Stant Group or
Gates, (iii) have any significant interest, directly or indirectly, in any
such business; provided, however, that nothing in the Amendment will prevent
him from owning in the aggregate not more than 5% of the outstanding stock of
any class of a corporation that is publicly traded, so long as he has no
participation in the management of such corporation or (iv) directly or
indirectly solicit or induce any employee of the Stant Group or Gates to
terminate his or her employment with the Stant Group or Gates or otherwise
interfere with such employee's employment relationship with the Stant Group
or Gates.
If Mr. Reilly's term of employment is terminated by the Company for its
convenience or by Mr. Reilly for good reason or if the term of employment
expires, then on December 10, 1997 (or such later date as the parties may
agree if the integration of Tomkins and the Company has not yet been
completed), the Company shall pay Mr. Reilly $1,000,000 in consideration for
which Mr. Reilly agrees that until the second anniversary of the termination
date he will not accept employment with, or act as a director or officer of
or advisor or consultant to, or have any significant ownership interest in,
Cooper Industries, Inc., ITT Industries, Inc., Bosch (Robert) Gmbh, Valeo
S.A., The Goodyear Tire & Rubber Company, Mark IV Industries, Inc. or any
other business that manufactures, sells or purchases automotive windscreen
wipers for use in the United States. The Amendment does not prevent Mr.
Reilly from continuing to serve as a director of TRINOVA Corporation.
Mr. Erwin. In connection with the election of Mr. Erwin as Senior Vice
President and Chief Financial Officer, the Company and Mr. Erwin entered into
an Employment Agreement dated as of February 10, 1997, which provides for his
employment as the Company's Senior Vice President and Chief Financial Officer
until the age of 65 at a minimum annual salary of $250,000 and the ability to
earn up to 50% of his base salary annually under the Company's incentive
compensation plan provided that the Company achieves specified objectives.
Mr. Erwin was also granted an option to purchase 30,000 shares of Common
Stock at $14.125 per share, the average market price of the Common Stock on
the NASDAQ Stock Market on February 10, 1997. This option, which is scheduled
to vest on the first anniversary of the date of grant or sooner if a Change
in Control occurs, is exercisable for 10 years and is subject to stockholder
approval (but see "-1997 Incentive Plan" above). Mr. Erwin's employment may
be terminated by the Company at any time "for cause".
Mr. Erwin entered into an Agreement dated as of April 9, 1997 with the
Company pursuant to which Mr. Erwin agrees that if his employment is
terminated (i) by the Company for its convenience or (ii) by Mr. Erwin as a
result of an Event of Termination (as defined in Section 3(e) of his
Employment Agreement dated as of February 10, 1997, with the Company) then
until the second anniversary after the termination date, Mr. Erwin will not
accept employment with, or act as a director or officer of or advisor or
consultant to, or have any significant ownership interest in, Cooper
Industries, Inc., ITT Industries, Inc., Bosch (Robert) Gmbh, Valeo S.A. or
any other business that manufactures, sells or purchases automotive
windscreen wipers for use in the United States, and the Company will pay Mr.
Erwin $100,000.
Mr. Wade. In connection with the election of Mr. Wade as Senior Vice
President -Sales & Marketing, the Company and Mr. Wade entered an Employment
Agreement dated as of April 1, 1997, which provides for his employment as the
Company's Senior Vice President -Sales & Marketing until the age of 65 at a
minimum annual salary of $250,000 and the ability to earn up to 50% of his
base salary annually under the Company's incentive compensation plan provided
that the Company achieves specified objectives. Mr. Wade was also granted an
option to purchase 30,000 shares of Common Stock at $14.50 per share, the
average market price of the Common Stock on the NASDAQ Stock Market on April
1, 1997. This option, which is scheduled to vest on the first anniversary of
the date of grant or sooner if a Change of Control occurs, is exercisable for
10 years and is subject to stockholder approval. Mr. Wade's employment may be
terminated by the Company at any time "for cause".
Mr. Plocinik. Mr. Plocinik entered into an Employment Agreement dated as
of October 31, 1996, which provides for his employment as the President of
Trico Products Corporation ("Trico"), until the age
A-10
of 65 at a minimum annual salary of $244,400 and the ability to earn up to
50% of his base salary annually under the Company's incentive compensation
plan provided that the Company and/or Trico achieve specified objectives. Mr.
Plocinik's employment may be terminated by the Company at any time "for
cause".
Mr. Margetts. Mr. Margetts entered into an Employment Agreement dated as
of October 31, 1996, which provides for his employment as the Company's
Senior Vice President -Corporate Development until the age of 65 at a minimum
annual salary of $156,000 and the ability to earn up to 50% of his base
salary annually under the Company's incentive compensation plan provided that
the Company achieves specified objectives. Mr. Margetts' employment may be
terminated by the Company at any time "for cause".
The employment of any of the executive officers referred to in the
preceding paragraphs may be terminated by the Company at any time "for
cause", as defined in their respective agreements. Generally, if the
employment of any such executive is terminated without cause or if there is a
constructive termination of his employment (which includes an ordered
relocation of the executive's place of employment which results in his
commutation increasing by more than 50 miles round trip), he will be entitled
to receive payment of his then-current base salary for one year following the
date of the termination of his employment together with any earned but unpaid
compensation under the incentive compensation plan remaining unpaid under the
plan for the year in which such termination occurs. Generally, if the
employment of any such executive is terminated without cause or if there is a
constructive termination of his employment after a Change of Control (as
defined below), he will be entitled to (i) receive, in one lump sum, cash in
an amount equal to two times his then current base salary and maximum
incentive award and (ii) continue to participate for up to two years
following the termination of his employment in all pension, retirement and
welfare plans of the Company in which he participated at the time his
employment was terminated.
The term "Change of Control" generally means (i) the acquisition by any
person (as such term is defined in Section 13(d) of the Securities Exchange
Act of 1934, as amended) of 20% of more or the combined voting power of the
Company's outstanding securities entitled to vote generally in the election
of Directors (the "Voting Securities") or (ii) a majority of the Directors of
the Company are individuals who were not nominated by the Board of Directors;
provided, however, that (y) the acquisition or disposition of any portion of
the combined voting power of the Voting Securities by BCP and/or by any
person affiliated with BCP (BCP and all such persons being, collectively, the
"Bessemer Group") shall in no event constitute a Change of Control and (z)
the acquisition by any person who is not a member of the Bessemer Group of
20% or more of the combined voting power of the Voting Securities shall not
constitute a Change of Control so long as during the entire time such person
possesses 20% or more of such voting power the Bessemer Group has the power
to vote 50% or more of such voting power. In any dispute or controversy
arising under the employment agreement following a Change of Control, the
Company agrees to pay the reasonable fees and expenses of one legal counsel
for executive officer; provided, however, that executive officer acts in good
faith and in the reasonable belief of the merit of executive officer's
position.
Mr. Paridy. In accordance with an Employment Agreement dated October 31,
1996, between Mr. Paridy and the Company, until March 31, 1999, Mr. Paridy
will continue to receive payments at the annual rate of $450,000, the base
salary he was being paid at the time of his retirement, and will continue to
participate in all pension, retirement and welfare plans of the Company in
which he was participating at the time he ceased to be a full time employee
of the Company.
A-11
PERFORMANCE GRAPH
The following information compares the cumulative total return on the
Common Stock for the period commencing July 21, 1993 (the date of the IPO)
and ending December 31, 1996 with the cumulative total return on the S&P 500
Index and the S&P Auto Parts-Aftermarket Index over the same period, assuming
an initial investment of $100 on July 21, 1993 with all dividends reinvested.
TOTAL SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
[GRAPHIC OMITTED-TABLE BELOW REPRESENTS PERFORMANCE GRAPH]
7/21/93 DEC. 93 DEC. 94 DEC. 95 DEC. 96
--------- --------- --------- --------- ---------
Stant Corporation 100.00 126.83 92.84 61.83 100.53
Auto Parts & Equipment 500 100.00 105.68 92.16 113.94 127.84
S&P 500 Index 100.00 105.74 107.14 147.40 181.24
* The IPO price used to calculate the Total Return to Stockholders as of
July 21, 1993 was $16.00. The S&P 500 and the S&P Auto
Parts-Aftermarket were both calculated using the closing price on July
21, 1993.
A-12
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock, as of the date of this Statement,
by (a) each person who is known by the Company to own beneficially more than
5% of the outstanding shares of Common Stock, (b) each of the Company's
Directors and Named Executive Officers and (c) all Directors and executive
officers as a group:
NUMBER OF
SHARES PERCENT (11)
-------------- ------------
Bessemer Capital Partners, L.P. ........................ 9,237,843(1) 56.93%
630 Fifth Avenue
New York, NY 10111
Tomkins PLC@ .......................................... 9,229,595 50.10%
East Putney House
84 Upper Richmond Road
London SW15 2ST, England
Dimensional Fund Advisors, Inc. ........................ 1,131,600(2) 6.97%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
David R. Paridy# ....................................... 966,858(3) 5.44%
3088 Lantern Trail
Richmond, IN 47374
The Prudential Insurance Company of America ........... 944,700(4) 5.82%
751 Broad Street
Newark, NJ 07102-3777
Edward O. Gaylord* ..................................... 19,337(5) x
Robert D. Lindsay* ..................................... 4,083(1)(6) x
W. Thomas Margetts+ .................................... 203,399(7) 1.16%
Gary G. Moose+ ......................................... 5,000(8) x
Thomas F. Plocinik+ .................................... 280,981(9) 1.58%
Ogden M. Phipps* ....................................... 9,073(1)(6) x
J.P. Reilly* ........................................... 500 x
A. William Reynolds* ................................... 11,143(6) x
Thomas E. Schmitt# ..................................... 20,500(10) x
Ward W. Woods* ......................................... 4,083(1)(6) x
All Directors and Executive Officers as a group (twelve) 1,803,463 10.15%
- ------------
* Indicates a Director
@ Pursuant to the Stockholder Agreement
+ Indicates a Named Executive Officer
x Owns less than 1%
# Indicates a former Executive Officer
A-13
(1) The number of shares held by BCP also includes 8,248 shares owned by
certain employees or former employees of BSC. BCP owns 9,229,595 shares
of the Common Stock. The sole general partner of BCP is Kylix Partners,
L.P., a Delaware limited partnership ("Kylix"), which has its principal
office at 630 Fifth Avenue, New York, New York 10111. Kylix's only
activity is acting as the general partner of BCP. The general partners
of Kylix are Quentin Corporation, a Delaware corporation ("Quentin")
(Quentin is the managing general partner of Kylix), Belisarius
Corporation, a Delaware corporation ("Belisarius"), and East Harbor
Corporation, a Delaware corporation ("East Harbor"), each of which has
its principal office at 630 Fifth Avenue, New York, New York 10111.
Quentin, Belisarius and East Harbor are wholly owned by, respectively,
Mr. Woods, Mr. Lindsay and Mr. Michael B. Rothfeld. The principal
limited partner of BCP is BSC, a Delaware corporation, which has its
principal office at 630 Fifth Avenue, New York, New York 10111, and
whose principal activity is making investments. Approximately 93% of
the common stock of BSC is owned by trusts for the benefit of the heirs
of the late Henry Phipps, including Ogden M. Phipps, a director of the
Company.
(2) All information is based solely upon a statement on Schedule 13-G,
dated February 5, 1997, filed with the SEC. Dimensional Fund Advisors,
Inc. ("Dimensional Fund") is an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940 (the "Investment
Act"). All Shares of Common Stock reported as beneficially owned by
Dimensional Fund are owned by the advisory clients of Dimensional Fund,
no one of which, to the knowledge of Dimensional Fund, owns more than
5% of the outstanding shares of Common Stock. Dimensional Fund has sole
dispositive power over all 1,131,600 shares reported as beneficially
owned by it, sole voting power over 785,600 of such shares and shared
voting power over the remaining 346,000 such shares. Persons who are
officers of Dimensional Fund also serve as officers of DFA Investment
Dimensions Group, Inc. (the "Fund") and The DFA Investment Trust
Company (the "Trust"), each an open-end management investment company
registered under the Investment Act. In their capacities as officers of
the Fund and the Trust, these persons vote 140,500 shares which are
owned by the Fund and 205,500 shares which are owned by the Trust.
(3) Includes 1,000 shares held by his son, which are deemed beneficially
owned by Mr. Paridy. Also includes 770,858 shares under certain option
grants which are, or will in the next 60 days become, exercisable. Mr.
Paridy resigned as a Director, and retired as President and Chief
Executive Officer, of the Company on January 23, 1997.
(4) All information is based solely upon a statement on Schedule 13-G,
dated February 3, 1997, filed with the SEC. Prudential Insurance
Company of America ("Prudential") is an insurance company as defined in
Section 3(a)(19) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and an investment advisor registered under
Section 203 of the Investment Act. The 944,700 shares of the Common
Stock reported as beneficially owned by Prudential are held for the
benefit of Prudential's clients by its separate accounts, externally
managed accounts, registered investment companies, subsidiaries and/or
other affiliates, all of which holdings Prudential reports on a
combined basis for the purpose of administrative convenience.
Prudential has sole voting power and sole dispositive power over
616,800 shares of Common Stock and shared voting power and shared
dispositive power over 327,900 shares of Common Stock.
(5) Includes 5,000 shares held by Mr. Gaylord in an individual money
purchase pension plan and 4,337 shares under certain option grants
pursuant to the Directors Option Plan which are, or will in the next 60
days become, exercisable.
(6) With respect to Messrs. Lindsay, Phipps, Reynolds and Woods, 4,083,
4,073, 1,143 and 4,083 of these shares, respectively, represent option
grants pursuant to the Directors Option Plan which are, or will in the
next 60 days become, exercisable.
(7) Includes 1,100 shares owned by two foundations of which Mr. Margetts is
the principal manager. Mr. Margetts disclaims beneficial ownership of
such shares. Also includes 202,299 shares under certain option grants
which are, or will in the next 60 days become, exercisable.
(8) Includes 5,000 shares under certain option grants which are, or will in
the next 60 days become, exercisable. Mr. Moose resigned as an
executive officer of the Company on April 1, 1997.
(9) Includes 200 shares owned by his adult children. Mr. Plocinik disclaims
beneficial ownership of such shares. Also includes 280,781 shares under
certain option grants which are, or will in the next 60 days become,
exercisable.
(10) Includes 20,500 shares under an option grant which is, or will in the
next 60 days become, exercisable. Mr. Schmitt resigned as a executive
officer of the Company on March 15, 1997.
(11) Each beneficial owner's percentage ownership is determined by including
shares subject to options held by such person (but not including shares
subject to options held by any other person) which are exercisable
within 60 days.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of three nonemployee Directors:
Robert D. Lindsay, A. William Reynolds and Ward W. Woods. Mr. Woods serves as
Chairman of the Committee. Messrs. Woods and Lindsay are sole shareholders of
corporations which are general partners of (i) a limited partnership which is
the sole general partner of BCP, the owner of 56.88% of the outstanding
shares of Common Stock and (ii) BP&Co., the general partnership to which the
Company pays and has paid the fees described below.
BP&Co. provides the Company on a continuing basis with Management Services
Agreement. For such services the Company pays BP&Co. an annual fee in equal
quarterly installments and reimburses BP&Co. for out-of-pocket expenses.
Since January 1, 1995 the annual fee has been $850,000.
A-14
Bessemer Trust Company N.A. ("BTC") serves as trustee, administrator and
investment manager for certain of the Company's defined benefit retirement
plans, including the Retirement Plan. Fees paid to BTC for investment
management, trustee, administrative and other services rendered on behalf of
such plans in 1996 amounted to $525,000. Messrs. Phipps and Woods are
directors of BGI and BTC.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee oversees the compensation and benefit programs
provided to executive officers of the Company. In developing appropriate
policies for these programs, the Compensation Committee has in past years
used the services of nationally-known independent employee compensation and
benefit firms.
COMPENSATION POLICIES
The Company's executive compensation policies are based on the principle
that compensation paid by the Company should be competitive with the market
place and should be structured to recognize and encourage exceptional
performance. In determining the appropriateness of compensation, the
Compensation Committee has in past years retained an independent firm to
provide data for the Committee's consideration as to the compensation
practices of manufacturing companies similar in size, capitalization and
profitability to the Company (the "Comparison Group"). (Most of the
Comparison Group companies are not in the S&P Auto Parts-Aftermarket Index,
referred to on pages 9 and 10, which includes the companies with greater
revenue bases.)
With respect to the executive officers of the Company, the Compensation
Committee endeavors to provide these officers with a competitive salary with
above average reward opportunities tied into the Company's success in
creating value for its stockholders. Accordingly, the Compensation Committee
periodically reviews salaries of executive officers and makes adjustments if
warranted by corporate and individual performance. The Committee considers
salary data of the companies in the Comparison Group to confirm that salary
rates of executive officers generally do not exceed the 60th percentile of
base pay for similar positions in the Comparison Group. The Committee does
want to provide executive officers with the opportunity to earn significant
additional compensation through the Company's short-term and long-term
incentive compensation programs Under these programs, if corporate and
individual goals are substantially met or exceeded, the executive officers
can earn an amount in the high end of the range for companies in the
Comparison Group.
ANNUAL COMPENSATION
The principal components of an executive officer's cash compensation,
which in the case of the Named Executive Officers are provided for pursuant
to an employment agreement (the material terms of which are disclosed on
pages 8 and 9), are base salary and incentive pay. Base salaries paid to the
executive officers are reviewed periodically (usually once a year) and
increases may be approved by the Compensation Committee depending on an
executive officer's current pay, individual performance, relationship to
others in the organization, inflation information and compensation data for
similar positions in the Comparison Group as provided by an independent firm.
In determining whether to approve a salary adjustment, the individual's
performance in discharging his assigned duties and responsibilities is the
most important factor, although no factor is assigned any particular weight
and no one factor is controlling. With one exception, in 1996 the
Compensation Committee limited salary increases for the executive officers to
cost of living adjustments. The one exception was a 10% merit increase to an
executive officer (who is not a Named Executive Officer) in connection with
an expansion of his duties and responsibilities.
Under their employment agreements with the Company, executive officers may
also be paid annual incentive awards. Such payments are made pursuant to an
incentive plan adopted at the beginning of each plan year, designating the
participants in the plan, which include executive officers, staff officers
and the general managers of the Company's operating units, and setting the
bonus rate for each participant. In addition under the plan, financial
targets for the Company and its operating units are set and each
A-15
participant is assigned specific individual objectives. For executive
officers, the financial targets are the Company's budget for "income from
operations" for the year, which is usually set at a 10% or better improvement
over comparable prior year results, and for "operating cash flow". The
individual objectives relate to the participant's particular job function. A
participant may earn a full incentive award (50% of base salary in the case
of an executive officer) if the Company achieves its financial targets (and
the unit achieves its financial targets where a unit's general manager is a
participant) and the individual performance objectives are attained. An
additional payment (according to formula) may be earned if financial targets
are exceeded. A partial incentive award will be paid if the Company achieves
85% or more of the financial targets. Notwithstanding the plan formulas used
to determine the amount of a bonus, the Committee retains the right to
increase or reduce the amount of the payment to any participant for any
reason which it, in its sole discretion, determines. For instance, even if
the financial targets are achieved, an executive officer will not be paid a
bonus if not warranted by the individual's performance as determined by the
Committee in the case of the President and by the Committee and President in
the case of the other executive officers.
If financial objectives are not met, the Committee will consider, on an
individual basis, authorizing an incentive payment on a discretionary basis
to a participant. Factors considered by the Compensation Committee in making
its determination with respect to authorizing a discretionary incentive
payment to an executive officer include the following: (i) extent of
improvement in financial results (principally income from operations) by the
Company over prior year financial results, (ii) actual financial results
compared against budget, (iii) extent of accomplishment of preassigned
individual objectives and (iv) outstanding Company performance, such as the
development of new product lines and individual performance during the course
of the year. The Committee's determination is subjective as no one factor is
assigned any particular weight and no one factor is controlling.
With respect to performance in 1996, the executive officers were granted
awards under the bonus plan based upon achievement of individual objectives
and the Company achieving 100% of both of the financial targets. The bonus
awards recognized, among other things, that in 1996 consolidated revenue, net
income and earnings per share increased 7%, 46% and 46%, respectively, over
1995.
LONG-TERM COMPENSATION
During 1996, stock option grants covering a total of 233,500 shares of
Common Stock were made to key executives of the Company, of which grants
92,500 were made to the Named Executive Officers. The size of those grants
were based, in part, upon recommendations made by an independent firm which
obtains and analyzes information on the stock option practices of the
companies in the Comparison Group. In the opinion of the Compensation
Committee, stock options align the interests of employees with stockholder
interests, provide incentive for the creation of stockholder value over the
long term and significantly aid in recruiting and retaining key personnel.
BENEFITS
The Company provides certain supplemental benefits to executive officers
to ensure that it can compete effectively for executive talent. These
benefits include additional Company-paid group life insurance and the
Restoration Plan as described in the section on "Retirement Plans" on page
A-8.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee meets annually without the Chief Executive
Officer present to evaluate his performance and to determine his
compensation.
With respect to compensation paid for 1996 to David R. Paridy, the former
President and Chief Executive Officer of the Company, the Committee based its
determinations on the same criteria used for its compensation decisions
regarding base salaries and annual incentives for the other executive
officers. In 1995 Mr. Paridy's base salary was established by the Committee
after reviewing salary data for companies in the comparison group. Mr.
Paridy's base salary was not changed for 1996. With respect to 1996 annual
incentive compensation, as with the other executive officers, the Committee
decided to award
A-16
a bonus based upon achievement of both individual objectives and the Company
achieving 100% of both of the financial targets. In evaluating Mr. Paridy's
performance for purposes of the annual incentive award, the Committee
considered, among other factors, the fact that in 1996 consolidated revenues,
net income and earnings per share increased 7%, 46% and 46%, respectively.
Mr. Paridy retired in January 1997 and was succeeded by Mr. Reilly. With
respect to compensation that will be paid to Mr. Reilly pursuant to the
Employment Agreement which he entered into with the Company, see "Employment
Agreements" above.
COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS
Ward W. Woods, Chairman
Robert D. Lindsay
A. William Reynolds
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As a public company, the Company's directors, executive officers and more
than 10% beneficial owners are subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since 1994, BP&Co, a partnership which has as its general partners
corporations owned by Messrs. Woods, Lindsay and Rothfeld, provided the
Company with management, financial, strategic planning and advisory services
pursuant to a Management Advisory Services Agreement (the "Management
Services Agreement"). During 1996, pursuant to the Management Services
Agreement, the Company paid BP&Co. $850,000 in fees and reimbursed BP&Co. for
expenses. Pursuant to the Stockholder Agreement dated as of April 9, 1997,
among Tomkins, Sub and BCP, BCP has agreed to terminate the Management
Services Agreement effective as of the date Sub first accepts for payment
Shares pursuant to the Offer. The Management Services Agreement is also
summarized in the section "Compensation Committee Interlocks and Insider
Participation" on page A-14.
BTC serves as trustee, administrator and investment manager for certain of
the Company's defined benefit retirement plans, including the Company's
Retirement Plan for Salaried Employees. (BTC is a wholly owned subsidiary of
BGI, which the heirs of the late Henry Phipps own directly or through trusts
for their benefit.) Fees paid to BTC for investment management, trustee,
administrative and other services rendered on behalf of such plans in 1996
amounted to $525,000. Messrs. Phipps and Woods are directors of BGI and BTC.
A-17
ANNEX B
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
ONE FINANCIAL PLACE
440 SOUTH LA SALLE STREET
CHICAGO, IL 60605
(312) 706-4000
April 9, 1997
Board of Directors
Stant Corporation
425 Commerce Drive
Richmond, IN 47374
Members of the Board:
We understand that Stant Corporation ("Target" or the "Company"), Tomkins
Corporation ("Buyer") and E&W Acquisition Corp., a wholly owned subsidiary
of Buyer ("Acquisition Sub"), have entered into an Agreement and Plan of
Merger, dated as of April 9, 1997, (the "Merger Agreement"), which provides,
among other things, for (i) the commencement by Acquisition Sub of a tender
offer (the "Tender Offer") for all outstanding shares of common stock, par
value $.01 per share (the "Common Stock"), of Target for $21.50 per share net
to the seller in cash, and (ii) the subsequent merger (the "Merger") of
Acquisition Sub with and into Target. Pursuant to the Merger, Target will
become a wholly owned subsidiary of Buyer and each outstanding share of Common
Stock other than shares held in treasury or held by Buyer or any affiliate of
Buyer or as to which dissenters' rights have been perfected, will be converted
into the right to receive $21.50 per share in cash. The terms and conditions
of the Tender Offer and the Merger are more fully set forth in the Merger
Agreement.
We further understand that approximately 57% of the outstanding shares of
Common Stock are owned by Bessemer Capital Partners, L.P ("BCP") and that
concurrently with the execution and delivery of the Merger Agreement, Buyer,
Acquisition Sub and BCP have entered into a Stockholder Agreement dated as of
April 9, 1997 (the "Stockholder Agreement") pursuant to which BCP agrees to
take certain actions to support the transactions contemplated by the Merger
Agreement.
You have asked for our opinion as to whether the consideration to be received
by the holders of shares of Common Stock pursuant to the Merger Agreement is
fair from a financial point of view to such holders.
B-1
MORGAN STANLEY
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements
and other information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company
prepared by the management of the Company;
(iii) reviewed certain financial projections prepared by the
management of the Company;
(iv) discussed the past and current operations and financial
condition and the prospects of the Company with senior
executives of the Company;
(v) reviewed the reported prices and trading activity for the
Common Stock;
(vi) compared the financial performance of the Company and the
prices and trading activity of the Common Stock with that
of certain other comparable publicly-traded companies and
their securities;
(vii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
(viii) reviewed the Merger Agreement, dated April 9, 1997, the
Stockholder Agreement, dated April 9, 1997 and certain
related documents; and
(ix) performed such other analyses as we have deemed appropriate
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. We
have not made any independent valuation or appraisal of the assets or
liabilities of the Company, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of,
the date hereof.
We have been engaged to provide this opinion to the Board of Directors of the
Company in connection with this transaction and will receive a fee for our
services. In the past, Morgan Stanley & Co. Incorporated and its affiliates
have provided financial advisory and financing services for the Company and
BCP and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its
entirety in any filing by the Company with the Securities and Exchange
Commission in connection with the Tender Offer and Merger. In addition, Morgan
Stanley expresses no opinion or recommendation as to whether holders of Common
Stock should accept the Tender Offer.
B-2
MORGAN STANLEY
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair from a financial point of view to such
holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ T. Sands Thompson
-------------------------------------
T. Sands Thompson
Vice President
B-3