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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
(AMENDMENT NO. 1)
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TRIANGLE PACIFIC CORP.
(NAME OF SUBJECT COMPANY)
TRIANGLE PACIFIC CORP.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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89591210
(CUSIP NUMBER OF CLASS OF SECURITIES)
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E. DWAIN PLASTER
VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER
TRIANGLE PACIFIC CORP.
16803 DALLAS PARKWAY
DALLAS, TX 75248
(214) 887-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF
THE PERSON FILING STATEMENT)
WITH A COPY TO:
JEFFREY J. ROSEN, ESQ.
O'MELVENY & MYERS LLP
153 EAST 53RD STREET, 53RD FLOOR
NEW YORK, NY 10022
(212) 326-2000
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This Amendment No. 1 amends and supplements the information set forth in the
Solicitation/ Recommendation Statement Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934 on Schedule 14D-9 (the "Schedule 14D-9")
originally filed on June 19, 1998 by Triangle Pacific Corp., a Delaware
corporation (the "Company"). The Schedule 14D-9 relates to the tender offer by
Sapling Acquisition, Inc. ("Merger Sub" or "Purchaser"), a Delaware
corporation and a wholly owned subsidiary of Armstrong Worldwide Industries,
Inc., a Pennsylvania corporation ("Armstrong" or "Parent"), disclosed in the
Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated June 19,
1998, to purchase all of the outstanding shares of common stock, par value
$.01 per share (the "Shares"), of the Company at a price of $55.50 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated June 19, 1998 and the related Letter of
Transmittal. Unless otherwise indicated, the capitalized terms used herein
shall have the meanings specified in the Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
LITIGATION
On June 23, 1998 an amended purported class action complaint was filed in
the Court of Chancery of Delaware by Pinna Yosevitz in full substitution of
the purported class action complaint filed by Pinna Yosevitz on June 15, 1998.
The purported class action was brought individually and on behalf of other
stockholders of the Company similarly situated against the Company, its
directors and Parent. The lawsuit is styled Pinna Yosevitz v. Floyd F. Sherman
et. al. (C.A.No. 16447-NC) and seeks, among other things, a preliminary and
permanent injunction against the Offer and the Merger, rescission of the Offer
and the Merger if they are consummated, and compensatory damages. The
complaint asserts, among other things, that (i) the Company's stockholders
cannot determine, based on materials provided in the Offer, the intrinsic
value of their Shares and whether the acquisition by Parent is preferable over
other alternatives or is fair; (ii) the Company's stockholders are unable to
rely upon the integrity of the fairness opinion rendered by Salomon Smith
Barney ("Salomon"), the Company's financial advisor, in light of alleged
conflicts of interest; (iii) as a result of the receipt of consideration for
the cancellation of their outstanding options, certain of the individual
defendants have interests in the proposed transaction that conflict with those
of the public stockholders of the Company; (iv) the individual defendants have
not acted reasonably and in compliance with their fiduciary duties to the
Company's stockholders in a manner designed to obtain the highest possible
price for the Company's public stockholders; (v) the intrinsic value of the
Company is materially in excess of the Offer Price giving due consideration to
anticipated operating results, net asset value, cash flow and profitability of
the Company; (vi) the Offer Price is not the result of an appropriate
consideration of the value of the Company's business because the board of
directors of the Company approved the Merger without undertaking appropriate
steps to ascertain the Company's value; (vii) by entering into the agreement
with Parent, the individual defendants have allowed the price of the Company's
common stock to be capped, thereby depriving the stockholders of an
opportunity to realize any increase in the value of their Shares; and (viii)
the individual defendants did not appoint or retain any truly independent
person or entity to negotiate for or on behalf of the Company's public
stockholders to promote their best interests in the Merger. The complaint
alleges that the defendants' have participated in unfair dealing toward the
public stockholders and have engaged in and substantially aided and abetted
each other in breach of fiduciary duties owed by them to the stockholders. The
complaint further asserts that Parent has knowingly aided and abetted the
alleged breaches of fiduciary duty committed by the individual defendants.
In connection with the purported class action lawsuit, on June 19, 1998, the
plaintiff served defendants with a first request for production of documents.
The Company believes that the lawsuit is without merit. A copy of the
complaint is filed herewith as Exhibit O and is incorporated herein by
reference.
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ITEM 9. MATERIALS TO BE FILED AS EXHIBITS
<TABLE>
<C> <S>
Exhibit O Amended Class Action Complaint filed in the Court of Chancery of the
State of Delaware in and for New Castle County in an action titled
Pinna Yosevitz on behalf of herself and all others similarly
situated v. Floyd F. Sherman et al. (C.A. No. 16447-NC)
</TABLE>
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Triangle Pacific Corp.
By: /s/ E. Dwain Plaster
-----------------------------------
Name: E. Dwain Plaster
Title: Vice President, Treasurer and
Chief Financial Officer
Dated: June 29, 1998
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EXHIBIT INDEX
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<C> <S>
Exhibit O Amended Class Action Complaint filed in the Court of Chancery of the
State of Delaware in and for New Castle County in an action titled
Pinna Yosevitz on behalf of herself and all others similarly
situated v. Floyd F. Sherman et al. (C.A. No. 16447-NC)
</TABLE>
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IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
______________________________________________________x
:
PINNA YOSEVITZ, :
:
Plaintiff, :
:
v. :
:
FLOYD F. SHERMAN, M. JOSEPH McHUGH, : C.A. No.16447-NC
BRUCE A. KARSH, DAVID R. HENKEL, KAREN :
GORDON MILLS, CARSON S. McKISSICK, :
B. WILLIAM BONNIVIER, CHARLES M. HANSEN :
JR., JACK L. McDONALD, TRIANGLE :
PACIFIC CORP., and ARMSTRONG WORLD :
INDUSTRIES, INC., :
:
Defendants. :
:
______________________________________________________x
AMENDED CLASS ACTION COMPLAINT
------------------------------
Plaintiff alleges upon information and belief, except for paragraph 1
hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of the common stock of Triangle
Pacific Corp. ("Triangle" or the "Company") since prior to the transaction
herein complained of and continuously to date.
2. Triangle is a corporation duly organized and existing under the
laws of the State of Delaware. The Company makes hardwood flooring products and
kitchen and bathroom cabinets at 15 plants, primarily in the United States. The
Company maintains its headquarters at 16803 Dallas Parkway, Dallas, Texas.
3. Armstrong World Industries, Inc. ("Armstrong") is a Pennsylvania
corporation based in Lancaster, Pennsylvania and is North America's largest
maker of floor coverings. It manufactures vinyl flooring, ceramic title and
other building products.
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4. Defendant Floyd F. Sherman is Chairman of the Board, Chief
Executive Officer and a Director of Triangle.
5. Defendant M. Joseph McHugh is President, Chief Operating Officer
and a Director of Triangle.
6. Defendants Bruce A. Karsh, David R. Henkel, Karen Gordon Mills,
Carson R. McKissick, B. William Bonnivier, Charles M. Hansen, and Jack L.
McDonald are Directors of Triangle.
7. The Individual Defendants are in a fiduciary relationship with
Plaintiff and the other public stockholders of Triangle and owe them the highest
obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
------------------------
8. Plaintiff brings this action on her own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court Chancery, on behalf of all
common stockholders of the Company (except the defendants herein and any person,
firm, trust, corporation, or other entity related to or affiliated with any of
the defendants) and their successors in interest, who are or will be threatened
with injury arising from defendants' actions as more fully described herein.
9. This action is properly maintainable as a class action because:
(a) The class is so numerous that joinder of all members is
impracticable. As of March 23, 1998, there were approximately 14,749,845 shares
of Triangle common stock outstanding owned by hundreds, if not thousands, of
record and beneficial, holders;
(b) There are questions of law and fact which are common to the
class including, inter alia, the following: (i) whether defendants have breached
----- ----
their fiduciary and other common law duties owed by them to plaintiff and the
members of the class; and (ii) whether the class is entitled to injunctive
relief or damages as a result of the wrongful conduct committed by defendants.
(c) Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of the plaintiff are typical of the claims of other members of the class and
plaintiff has the
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same interests as the other members of the class. Plaintiff will fairly and
adequately represent the class.
(d) Defendants have acted in a manner which affects plaintiff and all
members of the class alike, thereby making appropriate injunctive relief and/or
corresponding declaratory relief with respect to the class as a whole.
(e) The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of the Class, which would establish incompatible standards
of conduct for defendants, or adjudications with respect to individual members
of the Class which would, as a practical matter, be dispositive of the interests
of other members or substantially impair or impede their ability to protect
their interests.
SUBSTANTIVE ALLEGATIONS
-----------------------
ARMSTRONG ACTS TO ACQUIRE TRIANGLE
----------------------------------
10. On June 15, 1998, Triangle and Armstrong announced that they had
entered into a definitive merger agreement (the "Merger Agreement") whereby
Armstrong will acquire Triangle in a transaction valued at approximately $1.15
billion. Under the terms of the transaction as presently proposed, Armstrong
will commence a cash tender offer for all of Triangle's outstanding common
shares at a price of $55.50 per share (the "Merger"). Armstrong will also
assume $260 million of Triangle debt.
11. On or about June 19, 1998, Defendants other than Armstrong filed
with the United States Securities and Exchange Commission a
Solicitation/Recommendation Statement on 14D-9 (the "14D-9") purportedly
describing, inter alia, the merger transaction, the history of the negotiations
----- ----
between the companies, the opinion of Triangle's financial advisor and certain
other purportedly relevant information. The 14D-9 was apparently mailed to
Triangle shareholders shortly thereafter.
THE 14D-9 FAILS TO DISCLOSE THE
PROJECTIONS PROVIDED TO ARMSTRONG
---------------------------------
12. The 14D-9 fails to disclose material information necessary for
shareholders to make an informed decision. The 14D-9 states that "the Company
provided Parent [Armstrong] with certain additional estimates of the Company's
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projected revenues and net income through the Company's fiscal year 2001."
However, the Offer to Purchase does not provide these projections to the
Company's shareholders even though they are clearly material and were provided
to Armstrong. This omission is not cured by Armstrong's 14D-1 which likewise
fails to provide this information to Triangle shareholders. Triangle
shareholders are being asked to make an irrevocable decision regarding their
investment in Triangle on the basis of incomplete information.
THE INCOMPLETE DESCRIPTION OF THE BANKER'S
FINANCIAL ANALYSES AND CONFLICTS
--------------------------------
13. The fairness opinion recites a litany of various documents relied
on by Triangle's financial advisor, Salomon Smith Barney ("SSB"), in rendering
the fairness opinion, including "certain internal information of the Company,
primarily financial in nature, including projections, concerning the business
and operations of the Company." Yet none of this information is provided to
shareholders or accounted for in the fairness opinion.
14. Additionally, the 14D-9, in the section titled "Reasons for the
Recommendation of the Company's Board of Directors" lists certain of the factors
considered by the Board in recommending and approving the transaction including
the financial presentation of Salomon Smith Barney and the opinion of
Solomon Smith Barney delivered to the Board to the effect that, as of the
date of such opinion and based upon and subject to certain matters stated
in such opinion, the cash consideration of $55.50 per Share to be received
by holders of Shares in the Offer and the Merger was fair, from a financial
point of view, to such holders.
15. Neither the 14D-9 nor the fairness opinion contains a discussion
of the various financial analysis presumably performed by SSB. The 14D-9 and
the fairness opinion are silent with respect to what valuation methodologies
were employed by SSB in rendering its fairness opinion so that shareholders
cannot determine whether there was any deviation from standardized investment
banking practices. Accordingly, Triangle shareholders cannot determine from
these materials what the intrinsic value of the shares is and why the proposed
acquisition by Armstrong is preferable to other alternatives or is fair.
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16. Moreover, buried within the fairness opinion is a statement that
"Salomon Smith Barney or its affiliates have previously rendered certain
investment banking and financial advisory services to the Company and Acquiror,
for which we received customary compensation . . . Salomon Smith Barney and its
affiliates (including Travelers Group Inc.) may have other business
relationships with the Company and Acquiror." The existence of this
relationship between Armstrong and SSB receives only passing reference in the
14D-9 itself. Defendants fail to disclose any information regarding the nature
of SSB or its affiliates' relationships with Armstrong, the type of services
that may have been rendered, the extent of the current relationship with those
companies, and the fees received from Armstrong or its affiliates for these
services. Additionally, defendants fail to disclose whether SSB or its
affiliates anticipate whether they will provide investment banking services to
Armstrong in the future. Absent this information, Triangle shareholders are
unable to rely upon the integrity of the fairness opinion in light of SSB's
apparent conflicts of interest.
THE INDIVIDUAL DEFENDANTS HAVE
SUBSTANTIAL CONFLICTS WITH THE CLASS
------------------------------------
17. The merger agreement creates disabling conflicts of interest by
conferring extraordinary benefits on the individual defendants and certain
members of the Company's senior management. The merger agreement provides that
all options, whether presently exercisable or not, will be canceled in exchange
for a lump sum cash payment. Accordingly, based on the value of the options
held as of January 2, 1998, as set forth in the Company's 1998 Proxy Statement,
defendant Sherman will receive a lump sum cash payment of $7.79 million and
defendant McHugh will receive in excess of $5 million.
DEFENDANTS HAVE FAILED TO ACT IN THE
BEST INTERESTS OF TRIANGLE SHAREHOLDERS
---------------------------------------
18. The Individual Defendants, in violation of their fiduciary
obligations to protect and enhance the interests of Triangle's stockholders,
have not acted reasonably and in compliance with their fiduciary duties to
Triangle's shareholders, in a manner designed to obtain the highest possible
price for Triangle's public stockholders.
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19. The consideration to be paid to class members in the proposed
merger is unfair and inadequate because, among other things:
(a) The intrinsic value of Triangle's common stock is materially in
excess of the amount offered for those securities in the merger giving due
consideration to the anticipated operating results, net asset value, cash flow,
and profitability of the Company;
(b) The merger price is not the result of an appropriate consideration
of the value of Triangle because the Triangle Board approved the proposed merger
without undertaking the appropriate steps to accurately ascertain Triangle's
value; and
(c) By entering into the agreement with Armstrong, the Individual
Defendants have allowed the price of Triangle stock to be capped, thereby
depriving plaintiff and the Class of the opportunity to realize any increase in
the value of Triangle stock.
20. The Individual Defendants did not appoint or retain any truly
independent person or entity to negotiate for or on behalf of Triangle's public
shareholders to promote their best interests in the Merger.
21. By reason of all of the foregoing, defendants herein have
participated in unfair dealing toward plaintiff and the other members of the
Class and have engaged in and substantially assisted and aided and abetted each
other in breach of the fiduciary duties owed by them to the Class. As a result,
plaintiff and the Class will not receive the fair value of Triangle's assets and
businesses and will be unable to make an informed decision on whether to vote in
favor of the Merger.
22. Absent injunctive relief in this action, plaintiff and the other
members of the Class will suffer irreparable injury as a result of the improper
transactions complained of herein.
ARMSTRONG IS AN AIDER AND ABETTOR
---------------------------------
23. Armstrong has knowingly aided and abetted the breaches of
fiduciary duty committed by the Individual Defendants. Armstrong has agreed to
the favorable treatment of options held by Triangle's directors and senior
management to
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assure their agreement and cooperation in and to a transaction which will not
maximize value for Triangle shareholders. Armstrong has so agreed to enable it
to acquire Triangle at the lowest possible price although the favorable
treatment of employee and directorial options and restricted stock has
necessarily injected personal motives into the negotiations and compromised the
undivided loyalty which the Individual Defendants owe to Triangle's public
shareholders.
24. Plaintiff and other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiff and members of the Class demand judgment against
defendants as follows:
a. Declaring that this action is properly maintainable as a
class action and certifying plaintiff as the representative
of the Class;
b. Preliminarily and permanently enjoining defendants and their
counsel, agents, employees and all persons acting under, in
concert with, or for them, from proceeding with,
consummating, or closing the proposed transaction;
c. In the event that the proposed transaction is consummated,
rescinding it and setting it aside, or awarding rescissory
damages to the Class;
d. Awarding compensatory damages against defendants,
individually and severally, in an amount to be determined at
trial, together with pre-judgment and post-judgment interest
at the maximum rate allowable by law, arising from the
proposed transaction;
e. Awarding plaintiff its costs and disbursements and
reasonable allowances for fees of plaintiff's counsel and
experts and reimbursement of expenses; and
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f. Granting plaintiff and the Class such other and further
relief as the Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/ Norman M. Monhait
------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
(212) 779-1414
Dated: June 23, 1998
8
