SCHEDULE 14A
SCHEDULE 14 INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Name of Registrant as Specified in Its Charter:
Paul Mueller Company
Name of Person(s) Filing Proxy Statement:
Sheet Metal Workers International Association
Payment of Filing Fee (check the appropriate box)
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
[Preliminary proxy statement]
[Note: Bracketed portions show sources for SEC Staff review and
will not appear in final version; exhibits are being supplied
Staff under separate cover]
For release to shareholders 9/20/99
Sheet Metal Workers International Association
1750 New York Avenue NW
Washington, D.C. 20078-2412
Tel. (800) 457-7694
Fax: (202) 662-0895
NOTICE OF INTENDED PROXY CONTEST
AT
PAUL MUELLER COMPANY
To Fellow Paul Mueller Company shareholders:
I. PLEASE SUPPORT OUR PROPOSAL TO REQUIRE ANY POISON PILL BE
APPROVED BY SHAREHOLDERS
Our local affiliate owns stock in the Company and also
represents about 380 Company employees. We intend to solicit
shareholder proxies for a proposal to amend the Company's
Articles to require the Board to first get shareholder approval
before it implements any poison pill.
Without shareholders' approval, in 1991 the Board of
Directors established a poison pill here. This pill provides that
if someone attempts to buy more than 20% of the stock without
approval from the Board, then every other shareholder gets the
right to buy an additional share at a designated price for each
share he already owns -- thus diluting the acquirer's stock.
The practical effect of this plan is to force someone
interested in buying stock in large quantities to get permission
from the Board.
We believe you should have the right to decide when and to
whom to sell your stock, without the Board's interference. We
believe restrictions on the marketability of stock are likely to
keep its value down in the marketplace.
Proposals like ours have been made at other companies by
leading institutional investors, such as the College Retirement
Equities Fund (part of the nation's largest pension fund, TIAA-
CREF) and several public employee retirement systems. The
Investor Responsibility Research Center reports that shareholder
proposals against poison pills were supported by shareholders at
over 50% of the companies facing such proposals in 1996, 1997 and
1998. Even some companies' boards are volunteering proposals like
ours, such as the recent bylaw amendment proposed by the board of
ICF Kaiser International.
A poison pill is labeled by management a "shareholder rights
agreement" -- but in reality it diminishes shareholders' rights
to sell stock to whomever they wish.
The poison pill at Paul Mueller is worse than many others
because it contains a "dead hand" provision -- the only directors
who can approve a merger without triggering the pill are members
of the Board "prior to the date of this Agreement" (1/29/91), or
subsequent directors approved by the prior directors.[Ex. A:
Shareholder Rights Agreement, sections 1(i)-(j) and 13(d).]<FN1>.
<FN1>: A copy of the Rights Agreement is available free of
charge from the Company, according to the Company's Form 8-A of
February 1991 filed with the SEC. The phone number of the
Company's headquarters is (417) 831-3000. A copy is also
available from us at no charge, or from SEC files at your own
expense.
As CREF said in support of its shareholder proposal at Mylan
Laboratories [Ex. B]:
[T]his type of poison pill, unlike most
poison pills, not only allows the current Board to thwart
acquisition offers which may be favored by a majority of
shareholders, but also denied shareholders the right to
replace this board with new directors empowered to redeem
the poison pill, permitting such offers to go forward; * * *
[A] "dead hand" poison pill has a coercive
effect on the shareholders' basic right to freely elect a new Board
and also takes away normal decision-making authority in this
important area from a newly elected Board; * * *
Traditional poison pills have been defended with
the argument that directors can generally be trusted to act
in the shareholders' interest, and if they do not, they can
be replaced by the shareholders with other directors.
Adoption of "dead hand" poison pills, however, is
different. The purpose is entrenchment, by coercing
shareholders into voting for incumbent directors to preserve
the possibility of redemption of the pill. Their intended
effect is to preclude proxy contests for corporate control,
which are appropriate means to challenge incumbent
management.
We believe the right of shareholder freely to
elect a board of directors with full power to represent the
shareholders' interests is the foundation-stone of good
corporate governance. Yet this Board has unilaterally
deprived shareholders of their only real protection against
a board that acts against their interests -- the ability to
freely elect a board of their choosing with full powers to
represent them in all respects.
The current pill at Paul Mueller Company is scheduled to expire
January 29, 2001. We hope you join us in pressing for the pill to
not be renewed without shareholder approval.
II. COMPANY PERFORMANCE
When asked to vote on the poison pill issue, many
shareholders look only at whether such plan represents sound
corporate governance. However, some also consider how the Company
has been performing:
A. STOCK PRICES
GRAPH: Company vs. S & P 500 [Ex. C]
B. LATEST FINANCIALS
For 6 months ending 6/30/99:
Earnings per share: $0.54, down from $2.04 in same period of 1998
Net income: $633,000, down from $2.4 million in same period of
1998
[Source: Company 10-Q, 8/11/99]
C. RECENT EVENTS:
In 1999, the Company paid its customer Alcon Labs $1,875,000
resulting from Alcon's lawsuit for breach of warranty and breach
of contract over the rusting of tanks supplied by the Company.
The jury verdict resulted in a judgment of approximately $1.7
million, but then liability increased due to the Company's appeal
(adding interest and attorneys fees). The Texas Court of Appeals
rejected the Company's appeal, noting "the evidence at trial
showed that the rust and corrosion problems were caused by
Mueller's use of defective stainless steel, and Mueller does not
challenge that evidence on appeal." Paul Mueller Company v. Alcon
Laboratories, 993 S.W.2d 851, 857 (Tex. App. May 1999)[Ex. D and
Company 10-Q of 8/11/99].
D. BOARD COMPOSITION
As of the Company's 1999 proxy statement, the Board had 7
members, including Chairman Mueller, his grandson, and the
Company's top two executives.
III. IS ANOTHER ANTI-TAKEOVER DEVICE NEEDED AT THIS COMPANY?
If you think a takeover may not be in your best interests,
consider whether a poison pill is necessary to prevent one here:
The Company's Articles contain a provision banning business
combinations with any acquirer of more than 20% of the stock
without first obtaining a supermajority of shareholder support
(80% of the outstanding stock, not counting the acquirer's
stock), unless the transaction is approved by 2/3 of the
Continuing Directors (i.e., board members prior to the 20%
acquisition, or later board members whom they approved).
The Articles provide for a classified board of directors,
also known as staggered board elections (less than half the board
is up for election any year). The Articles also prohibit
shareholders from calling a special meeting. None of the above
provisions of the Articles can be amended without a supermajority
vote (again, 80% of the outstanding).* [Ex. E: Articles 6, 14,
15].
The Company's long-term incentive plan contains provisions
accelerating benefits in the event of a change in control. [1999
proxy statement] Missouri law also imposes many restrictions on
potential mergers and acquisitions. See e.g., Missouri Revised
Statutes sections 351.347, 351.407, 351.,459 [Ex. F].*
*The Company has the legal duty to supply shareholders with
copies of its Articles and other documents. However, copies of
all documented cited here are available from us at no charge.
Also, these documents were filed with the SEC and are available
from it (and from the other agencies involved) at your own
expense.
IV. IF YOU SUPPORT OUR PROPOSAL, DO NOT SEND BACK A PROXY CARD
UNLESS IT INCLUDES OUR PROPOSAL
We intend to solicit votes for the proposal in a few months
using our own proxy card and a revised proxy statement. Due to
SEC staff review, we probably cannot get these to you until after
you receive a proxy statement from the Company. The proxy card
you receive may not include our proposal. Passage of the proposal
will require a favorable vote by a majority of outstanding stock
- --thus it is important that everyone vote. We intend to solicit
at least a majority of the voting power of the outstanding stock.
The Company's annual shareholders meeting occurs the first Monday
of May, generally at the Company's headquarters, 1600 West Phelps
Street, Springfield MO 65802. The enclosed survey form is not a
proxy voting card, but only a voluntary survey.
V. PROXY SOLICITATION
This solicitation is conducted by Sheet Metal Workers
International Association (SMWIA). Its Local affiliate (Local
208) owns 90 shares of Paul Mueller Company stock and represents
approximately 380 Mueller employees for collective bargaining
purposes. We do not seek your support in labor matters.
Regardless of the outcome of labor matters, SMWIA will vote each
proxy card it receives in accordance with the shareholder's
instructions. SMWIA will not seek any discretionary voting
authority for the shareholders meeting: rather, it will vote your
stock solely as you direct. SMWIA will bear all solicitation
costs (anticipated at $5000) and will not seek reimbursement from
the Company.
If you consider labor matters relevant to your vote on this
proposal, consider the following: Administrative Law Judges of
the National Labor Relations Board (NLRB) have issued three
decisions finding management violated federal labor laws.*
Management has appealed the first two of these decisions to the
full Board in Washington D.C., where they are still pending.
These decisions came after trial on complaints issued against the
Company by the NLRB's General Counsel. The first ALJ found the
1995 strike by SMWIA Local 208 at the Company was caused by
management's unfair labor practices: that is, its violations of
the law by taking unilateral actions regarding the workforce "as
though the Union did not exist" (including transferring work from
its unionized plant to its non-union one, offering new hires a
wage higher than long-term employees and higher than offered in
negotiations); and making threats and discriminating against
union supporters. [Ex. G: Paul Mueller Co., 1997 NLRB LEXIS 401,
esp'ly pp. *1, 25-26, 75].
At SMWIA's urging, most strikers made an unconditional offer
to return to work in May 1996, but management refused to
reinstate most of them at that time. It is established labor law
that an employer must reinstate unfair labor practice strikers
who make an unconditional offer to return to work. The ALJ thus
held the Company liable for back pay and benefits to 89 strikers.
The ALJ ordered the Company to make employees whole for
unilateral changes in medical care, pensions and wages. SMWIA
estimates the liability on this decision currently at over
$1,000,000, with interest still accruing at the short-term
federal rate plus 3%. [Ex. H: New Horizons for the Retarded, 282
NLRB No. 181 (1987), following interest rate for tax
underpayments].
While not essential to the decision, ALJ Ladwig discredited
the testimony of Personnel Director Young's testimony on at least
two issues, even finding his testimony on one issue "a
fabrication". [Ex. G at pp.*13, 20, 24]. The ALJ also analyzed
the testimony of Operations Manager Shaw in support of
management's claim to have shifted production because of unused
capacity. The ALJ found such testimony and a supporting graph
were "designed to deceive", and found the defense "a
falsification." [Ex. G at p* 33,35].
After the first ALJ decision, management committed
additional violations of federal labor laws, according to the
decisions of a different ALJ. [Ex. I: 1998 NLRB LEXIS 49, 1999
NLRB LEXIS 125]. The second ALJ found management failed to give
the union any opportunity to bargain over changing work
schedules, failed to respond to any grievances filed by the union
and discriminatorily disciplined a union supporter. Management
has not appealed the discriminatory discipline finding. There is
no collective bargaining agreement between Local 208 and the
Company; the Company implemented portions of its final offer in
1995; there are still about 20 employees who have not sought to
return to work. The Union has not engaged in any boycott
activities for at least 2 years.
The NLRB General Counsel has issued two complaints against
the Company which await hearing before an ALJ, one over the cut
in a union leader's pay, and another over subcontracting
employees' work without prior negotiation.
In SMWIA's experience, even managers who are anti-union
generally avoid the conduct engaged in here -- if for no other
reason that such conduct is likely to have significant financial
consequences and tie everyone up in litigation (management and
employees alike). We therefore do not believe management has
acted in shareholders' best interests in this area, but we do not
ask for your support in this regard.
VI. FURTHER INFORMATION ABOUT THE COMPANY'S CURRENT POISON PILL
In January 1991, the Board adopted the poison pill by
declaring a dividend of one common stock purchase right for each
outstanding share of common stock. Each Right entitles the
registered holder to purchase from the Company one share of
Common stock (or in some circumstances, other securities, cash or
other assets), at a price of $125 per common share, subject to
adjustment. The Rights are not exercisable until the Distribution
Date, defined as 10 days following an announcement that a person
or group of affiliated or associated persons has acquired 20% or
more of the Company's stock, or that they intend to make a tender
offer or exchange offer for 20% or more of the stock.
The Board in its discretion may redeem the Rights prior to
any acquisition of 20% or more at a price of one (1) cent per
Right. The Rights may also be redeemed in the following
exceptional situation: if a bidder is interested in acquiring all
the shares of the company for cash only, and such bidder does not
own more than 1% of the Company's stock (and has not owned more
than 1% in the prior year and never disclosed any intent to
influence or acquire the Company), and has written financing
commitments and an investment banker's opinion that the price he
offers is fair, then the Board must put the bidder's proposal up
for a shareholder vote in 60-90 days. If a majority of
outstanding stock votes in favor of the proposal, then the Rights
will be redeemed if the bidder pays in full within 60 days. We
incorporate by reference the Company's Summary of Rights to
Purchase Common Shares (provided all shareholders of record and
filed with the SEC on Form 8-A on 2/1/91).[Ex. J]*
VII. YOUR RIGHT TO MAKE SHAREHOLDER PROPOSALS
If a shareholder has owned more than $2000 worth of stock
for more than a year and meets the other criteria of SEC Rule
14a-8, then he or she has the legal right to have a proposal
appear in management's upcoming proxy statement and proxy card.
The deadline for shareholders to submit proposals for inclusion
in management's proxy materials in year 2000 is November 29,
1999.
VIII. TEXT OF OUR PROPOSAL:
RESOLVED, the shareholders of Paul Mueller Company hereby
amend its Bylaws and Articles to add the following
additional section to each:
Poison Pills (Shareholder Rights Plans)
A. The Corporation shall not adopt or maintain a
shareholder rights plan, rights agreement or any other
form of "poison pill" which is designed to or has the
effect of making acquisition of large holdings of the
Corporation's shares of stock more difficult or
expensive (such as the 1991 "Rights Agreement"), unless
such plan is first approved by a majority shareholder
vote.
B. The affirmative vote of a majority of shares voted
shall suffice to approve such a plan.
C. The Corporation shall redeem any such rights now in
effect.
D. Notwithstanding any other bylaw provision, the Board
may not amend any of the above provisions without
shareholder ratification.
IT IS FURTHER RESOLVED, that the above provisions are
intended to be severable: if any application or provision is
beyond the legal power of shareholders, then it shall be
severed from the rest. If shareholders have no authority
under Missouri law to impose such restriction in either
bylaws or articles, then this resolution shall be deemed as
a recommendation that the Board not adopt a poison pill
without prior shareholder approval.
PLEASE RETURN THE ENCLOSED SURVEY TODAY.
For more information, contact SMWIA Education Director Anthony
Picarazzi, (800) 457-7694.
SURVEY OF SHAREHOLDERS OF PAUL MUELLER COMPANY
This is a voluntary survey, not a proxy card, and cannot be
used to vote on the shareholder proposal. Your identity will be
kept confidential unless you specifically authorize to the
contrary. The information from your response will be used solely
for communicating about matters for future shareholder vote.
YOUR VIEW OF THE SHAREHOLDER PROPOSAL AGAINST THE POISON PILL:
[ ] Strongly support
[ ] Likely to support
[ ] Likely to oppose because _____________________
[ ] Undecided
[ ] Please send me more information about the issues on which
shareholders will be voting:
Mailing address: _______________________________________
_______________________________________
E-mail address:
Telephone: Fax:
__________________________ _______________
PRINT SHAREHOLDER NAME # SHARES (optional)
Please return by November 10, 1999 in the enclosed envelope, or
fax to (202) 662-0895.