<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------------
CALMAT CO.
(Name of Subject Company)
------------------------
CALMAT CO.
(Name of Person(s) Filing Statement)
------------------------
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(INCLUDING THE ASSOCIATED COMMON SHARE
PURCHASE RIGHTS)
(Title of Class of Securities)
131271 10 8
(CUSIP Number of Class of Securities)
------------------------
PAUL STANFORD
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
3200 SAN FERNANDO ROAD
LOS ANGELES, CA 90065
(323) 258-2777
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
WITH A COPY TO:
ROBERT A. KINDLER, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
(212) 474-1000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule
14D-9") relates to an offer by ALB Acquisition Corporation, a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Vulcan Materials
Company, a New Jersey corporation ("Parent"), to purchase all of the Shares (as
defined below) of CalMat Co., a Delaware corporation (the "Company").
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name and address of the principal executive offices of the Company is
CalMat Co., 3200 San Fernando Road, Los Angeles, California 90065. This Schedule
14D-9 relates to the Company's Common Stock, par value $1.00 per share (the
"Common Stock"), including the associated common share purchase rights (the
"Rights" and, together with the Common Stock, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the tender offer made by the Purchaser,
disclosed in a Tender Offer Statement on Schedule 14D-1 (as amended or
supplemented from time to time, the "Schedule 14D-1") dated November 20, 1998,
to purchase all the outstanding Shares at a price (the "Offer Price") of $31.00
per Share, net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated November 20,
1998 (as amended or supplemented from time to time, the "Offer to Purchase"),
and the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), copies of which are
filed as Exhibits (a)(1) and (a)(2) hereto, respectively, and incorporated
herein by reference.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of November 14, 1998, among the Company, the Purchaser and Parent (the "Merger
Agreement"), which provides for the making of the Offer by the Purchaser,
subject to the conditions and upon the terms of the Merger Agreement, and for
the subsequent merger of the Purchaser with and into the Company (the "Merger").
In the Merger, each Share outstanding at the Effective Time (as defined in the
Merger Agreement) (other than Shares held in the treasury of the Company or held
by Parent, the Purchaser or any other wholly owned subsidiary of Parent or the
Purchaser, or Shares held by stockholders validly exercising appraisal rights
pursuant to the General Corporation Law of the State of Delaware) will, by
virtue of the Merger and without any action by the holder thereof, be converted
into the right to receive, without interest, an amount in cash equal to $31.00
(or any higher price Purchaser determines in its sole discretion to pay in the
Offer) per Share (the "Merger Consideration"). The Merger Agreement, a copy of
which is filed as Exhibit (c)(1) hereto, is summarized in Section 11 of the
Offer to Purchase and incorporated herein by reference.
The Schedule 14D-1 states that the principal executive offices of the
Purchaser and Parent are located at One Metroplex Drive, Birmingham, Alabama
35209.
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, which information is incorporated
herein by reference.
(b)(1) GENERAL. The information contained in Section 11 of the Offer to
Purchase is incorporated herein by reference. Certain contracts, agreements,
arrangements and understandings between the Company and certain of its executive
officers are described in the Information Statement dated November 20, 1998,
included as Exhibit A to this Schedule 14D-9 and incorporated herein by
reference. The Information Statement will be furnished to the Company's
stockholders pursuant to Section 14(f) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Rule 14f-1 issued under the Exchange Act in
connection with Parent's right (after consummation of the Offer) to designate
persons to be appointed to the Board of Directors of the Company (the "Board")
other than at a meeting of the stockholders of the Company.
<PAGE>
Each member of the Board signed a support agreement (collectively, the
"Support Agreements") with Parent whereby each of them agreed, subject to the
terms and conditions of the Support Agreements, to tender the Shares owned by
them in the Offer. A form of Support Agreement is filed as Exhibit (c)(2)
hereto, is summarized in Section 11 of the Offer to Purchase and is incorporated
herein by reference. Other such contracts, arrangements and understandings known
to the Company are described below or are summarized in Sections 10 and 11 of
the Offer to Purchase, which are incorporated herein by reference.
(2) CERTAIN EXECUTIVE COMPENSATION AND OTHER EMPLOYEE-RELATED MATTERS IN
CONNECTION WITH THE MERGER.
EMPLOYMENT AGREEMENTS. Prior to the execution of the Merger Agreement, the
Company and A. Frederick Gerstell, Scott J Wilcott, Paul Stanford, H. James
Gallagher, George H. Gilmore and Edward J. Kelly (collectively, the "Senior
Officers") were parties to employment, severance or change in control agreements
which provided for, among other things, the payment of severance amounts and
benefits upon certain terminations of employment. The Merger Agreement provides
that, upon consummation of the transactions contemplated by the Merger
Agreement, each of the Senior Officers will be deemed to have terminated
employment with the Company under circumstances that would entitle them to the
severance benefits provided under their respective agreements. The amount
payable to the six Senior Officers under their respective agreements (excluding
any required golden parachute excise tax payment gross-up to which the
executives are entitled, if necessary, under their respective agreements and any
outstanding stock options which are to be cashed out) will not exceed
approximately $43 million in the aggregate. This amount includes approximately
$14.55 million in respect of amounts accrued under the Company's deferred
compensation plan and supplemental executive retirement plan which were already
vested without regard to the transactions contemplated by the Merger Agreement.
EFFECT OF THE MERGER ON EMPLOYEE BENEFIT AND STOCK PLANS. The Merger
Agreement contemplates that certain actions will be taken in respect of employee
benefit and stock plans in which executive officers of the Company are eligible
to participate. Parent shall cause the Company (the "Surviving Corporation") to
honor all benefit obligations accrued as of the Effective Time and will give
past service credit to each Company employee under Parent's plans for service
rendered by such employee with the Company or its affiliates prior to the Merger
(other than for purposes of benefit accruals under any defined benefit pension
plans).
The Merger Agreement provides that the Company may take certain actions
prior to the Merger, including the adoption of a broad-based severance plan
which would provide severance benefits to any employee (excluding the Senior
Officers) of the Company and its subsidiaries whose employment is involuntarily
or constructively terminated following the Merger. The Merger Agreement also
provides that, if requested by Parent, the Company will terminate certain
existing executive compensation arrangements of the Company which cover the
Senior Officers and accelerate distribution of amounts accrued thereunder and
take certain other related actions.
In accordance with the Merger Agreement, the Company will use its reasonable
best efforts to cause each option to purchase Shares (whether or not
exercisable) to be surrendered and canceled as of the Effective Time for a cash
payment equal to the product of (i) the number of Shares subject to the option
and (ii) the difference between the Merger Consideration and the per Share
exercise price of the option.
In addition, the transactions contemplated by the Merger Agreement will
constitute a "Change in Control" for purposes of certain compensation and
benefit programs of the Company. As a result, all outstanding options will
become vested and exercisable upon the occurrence of a "Change in Control" (as
respectively defined in such programs). The Company also has the right to
accelerate the vesting and exercisability of such options at any time prior to
the consummation of Merger.
2
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
At a meeting held on November 11, 1998, the Board unanimously (i) approved
the Offer and the Merger Agreement, (ii) determined that the terms of the Offer
and the Merger are fair to, and in the best interest of, holders of Shares and
(iii) recommended that holders of Shares accept the Offer and tender their
Shares pursuant to the Offer. Accordingly, the Board unanimously recommends that
the stockholders of the Company tender their Shares pursuant to the Offer.
Copies of the Company's press release announcing the Merger Agreement and the
transactions contemplated thereby and a letter to the stockholders of the
Company communicating the Board's recommendation are filed as Exhibits (a) (3)
and (a) (4) hereto, respectively, and are incorporated herein by reference.
(b)(1) BACKGROUND.
From time to time over the past ten years, Parent and the Company have
engaged in discussions on various matters relating to their respective
companies, including the possibility of a business combination or other
strategic transaction between Parent and the Company. In late August, 1998,
Donald M. James, Chairman and Chief Executive Officer of Parent, telephoned A.
Frederick Gerstell, Chairman and Chief Executive Officer of the Company, to
request a meeting.
On September 8, 1998, Messrs. James and Gerstell met and discussed generally
a business combination. At the meeting, Mr. James indicated that Parent was
willing to consider an acquisition of the Company for cash, but that Parent
would need to conduct a due diligence investigation of the Company before it
would be in a position to make or proceed with any proposal regarding such a
transaction. Mr. Gerstell indicated that he might be willing to consider such a
possible transaction between the companies and that he would confer with the
Board and its advisors regarding Parent's interest in such a possible
transaction. Following the meeting, the parties agreed that, although specific
terms with respect to a possible transaction had not been discussed, it would be
appropriate to enter into an agreement relating to the exchange of confidential
information, which was executed by Parent and the Company on September 24, 1998.
After conferring with and receiving authorization to proceed from the Board
in early October, Mr. Gerstell contacted Mr. James and indicated that the
Company was willing to continue discussions regarding a possible acquisition of
the Company by Parent and to permit Parent to commence a preliminary due
diligence review of the Company. Between October 12 and October 31, 1998, the
Company provided Parent with information relating to the Company and its
businesses, and representatives of Parent and the Company continued to discuss
generally the possible structures and potential valuations of an acquisition
transaction. During these discussions, representatives of Parent proposed
potential ranges of valuation for the Company which representatives of the
Company indicated were insufficient.
At a meeting of Parent's Board of Directors held on November 1, 1998, Mr.
James and other members of Parent's senior management discussed with the
directors the results of the discussions between the parties and of the
preliminary due diligence review of the Company. Following deliberation thereon,
the Board authorized Mr. James and senior management to continue discussions
regarding the possible acquisition of the Company by Parent and to make a
definitive proposal to the Company. On November 1, 1998, Mr. James made a
proposal to Mr. Gerstell for an acquisition of the Company by Parent at a per
Share price of $30.00 in cash, subject to completion of its due diligence review
of the Company and negotiation and execution of definitive documentation and
board approval thereof.
A meeting of the Board was held on November 4, 1998, at which Parent's
proposal was considered by the Company's directors, and presentations relating
thereto were given by senior management and financial and legal advisors.
Following that meeting, at the request of the Board, Mr. Gerstell informed Mr.
James that the Company was prepared to permit Parent to complete its due
diligence and to negotiate
3
<PAGE>
definitive terms with respect to the acquisition of the Company by Parent at a
per Share price of $31.00 in cash, subject to approval of the Board of the terms
and conditions to be contained in the definitive documentation. After consulting
with Parent's Board of Directors, senior management and advisors, Mr. James
informed Mr. Gerstell on November 5, 1998, that Parent was prepared to increase
the proposed per Share price to $31.00, subject to the conditions previously
discussed.
Between November 5 and November 10, 1998, representatives of Parent
continued their due diligence review of the Company at the Company's
headquarters in Los Angeles, California. On November 7, 1998, Parent furnished
the Company with a draft Merger Agreement. Additional discussions between
Parent, the Company and their respective advisors took place between November 7
and November 11, 1998, during which the significant terms of the Merger
Agreement were negotiated. At a meeting of the Board held on November 11, 1998,
Mr. Gerstell, other members of the Company's management and the Company's
financial and legal advisors discussed the terms and conditions of the
contemplated transaction. At that meeting a form of the Merger Agreement was
presented to, and unanimously approved by, the Board of Directors of the
Company, subject to approval by Parent's Board of Directors of the Merger
Agreement and subject to satisfactory resolution of the final terms of the
Merger Agreement.
From November 12 through November 14, 1998, Parent, the Company and their
respective advisors negotiated the remaining provisions of the Merger Agreement
on the terms authorized by the Board at its November 11 meeting. At a meeting of
Parent's Board of Directors held on November 14, 1998, Mr. James, other members
of Parent's senior management and Parent's financial and legal advisors
presented the terms of the proposed Merger Agreement and discussed with the
Board various factors relating to the transactions contemplated thereby,
including the per Share price. After due consideration, the Board of Directors
of Parent unanimously approved the Merger Agreement. The Merger Agreement was
executed later that day by Parent and the Company. On November 16, 1998, the
parties issued a joint press release announcing the execution of the Merger
Agreement.
(2) REASONS FOR RECOMMENDATION.
In making the determinations and recommendations set forth in subparagraph
(a) above, the Board considered a number of factors, including, without
limitation, the following:
(i) the amount of consideration to be received by the Company's
stockholders in the Offer and the Merger;
(ii) the Company's prospects if it were to remain independent, including
the risks and benefits inherent in remaining independent, including the risk
that the aggregates industry in southern California may become increasingly
competitive with the entry of larger companies able to achieve higher
margins, due to their larger size, than the Company;
(iii) the possible alternatives to the Offer and the Merger (including
the possibility of continuing to operate the Company as an independent
entity), the range of possible benefits to the Company's stockholders of
such alternatives and the timing and likelihood of accomplishing the goal of
any of such alternatives;
(iv) information with regard to the financial condition, results of
operations, business and prospects of the Company, the regulatory approvals
required to consummate the Offer and the Merger as well as current economic
and market conditions (including current conditions in the industry in which
the Company is engaged);
(v) the historical and recent market prices of the Shares and the fact
that the Offer and the Merger will enable the holders of the Shares to
realize a premium over the prices at which the Shares traded prior to the
execution of the Merger Agreement;
4
<PAGE>
(vi) the financial analysis and presentation of Credit Suisse First
Boston to the Board on November 3, 4 and 14, 1998, and the oral opinion of
Credit Suisse First Boston delivered November 11, 1998 (which opinion was
subsequently confirmed in writing on November 14, 1998, the date of
execution of the Merger Agreement), to the effect that, as of the date of
such opinion and based upon and subject to certain matters stated in such
opinion, the $31.00 per Share cash consideration to be received by holders
of Shares in the Offer and the Merger was fair, from a financial point of
view, to such holders. The full text of Credit Suisse First Boston's written
opinion, which sets forth the assumptions made, matters considered and
limitations on the review undertaken by Credit Suisse First Boston, is
attached hereto as Exhibit B and is incorporated herein by reference. Credit
Suisse First Boston's opinion is directed only to the fairness, from a
financial point of view, of the consideration to be received in the Offer
and the Merger by holders of Shares and is not intended to constitute, and
does not constitute, a recommendation as to whether any stockholders should
tender Shares pursuant to the Offer. Holders of Shares are urged to read
such opinion carefully in its entirety;
(vii) the high likelihood that the proposed acquisition would be
consummated, in light of the experience, reputation and financial
capabilities of Parent, and that the proposed acquisition would be
consummated more quickly than a cash merger; and
(viii) the terms of the Merger Agreement, including the circumstances
under which the Board may terminate the Merger Agreement in accordance with
its fiduciary obligations under applicable law and the parties'
representations, warranties and covenants and the conditions to their
respective obligations.
The Board did not assign relative weights to the above factors or determine
that any factor was of special importance. Rather, the Board viewed its position
and recommendations as being based on the totality of the information presented
to and considered by it. In addition, it is possible that different members of
the Board assigned different weights to the various factors described above.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Credit Suisse First Boston as its financial advisor
in connection with the Offer and the Merger. Pursuant to the terms of Credit
Suisse First Boston's engagement, the Company has agreed to pay Credit Suisse
First Boston for its services an aggregate financial advisory fee equal to 0.50%
of the total consideration (including liabilities assumed) payable in connection
with the Offer and the Merger. The Company also has agreed to reimburse Credit
Suisse First Boston for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, and to indemnify Credit Suisse First Boston and
certain related parties against certain liabilities, including liabilities under
the federal securities laws, arising out of Credit Suisse First Boston's
engagement. Credit Suisse First Boston has in the past provided investment
banking services to the Company unrelated to the Offer and the Merger, for which
services Credit Suisse First Boston has received compensation. In the ordinary
course of business, Credit Suisse First Boston and its affiliates may actively
trade or hold the securities of the Company and Parent for their own account and
those of their customers and, accordingly, may 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 person to make solicitations or recommendations
to stockholders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth below, during the past 60 days, neither the Company
nor any subsidiary of the Company nor, to the best of the Company's knowledge,
any executive officer, director or affiliate of the Company has effected a
transaction in Shares. On October 16, 1998, Thomas M. Linden, a director of the
Company, disposed of 8,832 Shares as a gift.
5
<PAGE>
(b) To the best of the Company's knowledge, its executive officers,
directors and affiliates currently intend to tender their Shares to the
Purchaser pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Other than as set forth in Item 3(b) or 4, no negotiation is being
undertaken or is underway by the Company in response to the Offer which relates
to or would result in:
(1) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company;
(2) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company;
(3) a tender offer for or other acquisition of securities by or of the
Company; or
(4) any material change in the present capitalization or dividend policy
of the Company.
(b) Except as described above or in Item 3(b) of this Schedule 14D-9, 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 matters referred to in Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
On November 16 and 17, 1998, two purported stockholder class action suits
were filed on behalf of William Steiner and Charles Miller, who allege that they
are stockholders of the Company, against the Company and the members of the
Board and, in the case of the suit filed on behalf of Mr. Miller, Parent in the
Delaware Court of Chancery. These complaints are captioned WILLIAM STEINER V.
CALMAT CO., A. FREDERICK GERSTELL, JOHN C. ARGUE, ARTHUR BROWN, DENIS R. BROWN,
HARRY M. CONGER, RAYBURN S. DEZEMBER, WILLIAM P. HUSTON, EDWARD A. LANDRY,
THOMAS L. LEE, THOMAS M. LINDEN, GEORGIA R. NELSON AND STUART T. PEELER and
CHARLES MILLER V. A. FREDERICK GERSTELL, ARTHUR BROWN, DENIS R. BROWN, RAYBURN
S. DEZEMBER, HARRY M. CONGER, EDWARD A. LANDRY, THOMAS M. LINDEN, RICHARD A.
GRANT, JR., GEORGIA R. NELSON, STUART T. PEELER, JOHN C. ARGUE, THOMAS L. LEE,
CALMAT CO. AND VULCAN MATERIALS COMPANY (collectively, the "Complaints"). The
Complaints allege, among other things, that the defendants have breached their
fiduciary duties to the Company's stockholders by failing to maximize
stockholder value. The Complaints seek, among other things, an order enjoining
consummation of the Offer and the Merger. The Company believes that the
Complaints are without merit. The Complaints are attached as Exhibits (c)(4) and
(c)(5) and are incorporated herein by reference in their entirety.
Reference is hereby made to the Offer to Purchase and the related Letter of
Transmittal which are attached as Exhibits (a) (1) and (a) (2), respectively,
and are incorporated herein by reference in their entirety.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
*+ (a)(1) Offer to Purchase dated November 20, 1998.
*+ (a)(2) Letter of Transmittal.
+ (a)(3) Text of press release issued by the Company dated November 16, 1998.
* (a)(4) Letter to stockholders of the Company dated November 20, 1998.
+ (a)(5) Form of Summary Advertisement dated November 20, 1998.
* (a)(6) Opinion of Credit Suisse First Boston.
(b) Not applicable.
6
<PAGE>
+ (c)(1) Agreement and Plan of Merger dated as of November 14, 1998.
+ (c)(2) Form of Support Agreement entered into between Parent and John C.
Argue, Arthur Brown, Denis R. Brown, Harry M. Conger, Rayburn S. Dezember, A.
Frederick Gerstell, Richard A. Grant, Jr., Edward A. Landry, Thomas L. Lee,
Thomas M. Linden, Georgia R. Nelson, Stuart T. Peeler.
+ (c)(3) Confidentiality Agreement, dated as of September 24, 1998, between the
Company and Parent
(c)(4) Complaint captioned William Steiner v. CalMat Co., A. Frederick
Gerstell, John C. Argue, Arthur Brown, Denis R. Brown, Harry M. Conger, Rayburn
S. Dezember, William P. Huston, Edward A. Landry, Thomas L. Lee, Thomas M.
Linden, Georgia R. Nelson and Stuart T. Peeler.
(c)(5) Complaint captioned Charles Miller v. A. Frederick Gerstell, Arthur
Brown, Denis R. Brown, Rayburn S. Dezember, Harry M. Conger, Edward A. Landry,
Thomas M. Linden, Richard A. Grant, Jr., Georgia R. Nelson, Stuart T. Peeler,
John C. Argue, Thomas L. Lee, CalMat Co. and Vulcan Materials Company.
- ------------------------
* Included in materials delivered to stockholders of the Company.
+ Filed as an exhibit to the Purchaser's Tender Offer Statement on Schedule
14D-1 dated November 20, 1998, and incorporated herein by reference.
7
<PAGE>
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.
<TABLE>
<S> <C> <C>
CALMAT CO.
By: /s/ A. FREDERICK GERSTELL
-----------------------------------------
Name: A. Frederick Gerstell
Title: Chairman and Chief Executive
Officer
</TABLE>
Dated as of November 20, 1998
8
<PAGE>
ANNEX A
CALMAT CO.
3200 SAN FERNANDO ROAD
LOS ANGELES, CA 90065
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14F-1 THEREUNDER
------------------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING
SOLICITED AND YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
------------------------
This Information Statement is being mailed on or about November 20, 1998, as
a part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of CalMat Co. (the "Company") to the holders of record of
shares of Common Stock, par value $1.00 per share (including the associated
common share purchase rights, the "Shares"), of the Company. You are receiving
this Information Statement in connection with the possible election of persons
designated by the Purchaser (as defined below) to a majority of the seats on the
Board of Directors of the Company (the "Board"). Capitalized terms used herein
and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9.
On November 14, 1998, the Company, Vulcan Materials Company, a New Jersey
corporation ("Parent"), and ALB Acquisition Corporation, a Delaware corporation
and a wholly owned subsidiary of Parent ("the Purchaser"), entered into an
Agreement and Plan of Merger (the "Merger Agreement"), in accordance with the
terms and subject to the conditions on which the Purchaser commenced the Offer.
The Offer is scheduled to expire at 12:00 Midnight, New York City time, on
Friday, January 1, 1999, unless the Offer is extended.
The Merger Agreement requires the Company to cause the directors designated
by Parent to be elected to the Board under the circumstances described therein
following consummation of the Offer.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action at this time.
The information contained in the Information Statement (including
information incorporated by reference) concerning Parent and the Purchaser and
the Parent Designees (as defined herein) has been furnished to the Company by
Parent and the Purchaser, and the Company assumes no responsibility for the
accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of November 17, 1998, there were
23,797,779 Shares outstanding. The Board currently consists of one class with
twelve members. At each annual meeting of stockholders, all the directors are
elected for one-year terms. The officers of the Company serve at the discretion
of the Board.
INFORMATION WITH RESPECT TO PARENT DESIGNEES
Pursuant to the Merger Agreement, immediately following the payment for any
Shares by the Purchaser pursuant to and subject to the conditions (including the
Minimum Condition, which condition
A-1
<PAGE>
may not be waived by the Purchaser) of the Offer, the Company shall take all
necessary actions to cause such number of such persons designated by Parent to
become members of the Board (the "Parent Designees") as is at least equal to the
product of (x) the number of directors on the Board and (y) the percentage of
outstanding Shares accepted for payment and paid for plus Shares beneficially
owned by Parent or Parent's affiliates, subject to compliance with Section 14(f)
of the Exchange Act; PROVIDED, HOWEVER, that prior to the Effective Time the
Board shall always have at least two directors (the "Independent Directors") who
are neither officers of Parent nor designees, stockholders or affiliates of the
Purchaser or its affiliates ("Purchaser Insiders"); and, PROVIDED FURTHER that,
in such event, if the number of Independent Directors shall be reduced below
two, the remaining Independent Director shall be entitled to designate a person
to fill such vacancy who shall be deemed to be an Independent Director for
purposes of the Merger Agreement.
Parent has informed the Company that it will choose the Parent Designees
from the persons listed below. Parent has informed the Company that each of the
persons listed below has consented to act as a director, if so designated.
Biographical information concerning each of the Parent Designees is presented
below.
Unless otherwise indicated, the business address of each such executive
officer is One Metroplex Drive, Birmingham, Alabama 35209. Unless otherwise
indicated below, each occupation set forth opposite an individual's name refers
to employment with Parent.
<TABLE>
<CAPTION>
POSITION WITH PARENT; BUSINESS ADDRESS; PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AGE 5-YEAR EMPLOYMENT HISTORY
- ------------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
John K. Greene................ 69 Director since 1974. Special Principal, William Blair & Company, Chicago,
Illinois (an investment banking firm), since 1995; Partner of that company
prior thereto.
Committee memberships: Audit Review; Governance and Succession; Finance and
Pension Funds.
Douglas J. McGregor........... 57 Director since 1992. Formerly Chairman and Chief Executive Officer, M.A.
Hanna Company, Cleveland, Ohio (an international specialty chemicals
company with interests in formulated polymers), from July, 1997; President
and Chief Executive Officer from January, 1997 to July, 1997; President and
Chief Operating Officer prior thereto.
Other directorships: KeyCorp.
Committee memberships: Audit Review; Compensation; Safety, Health and
Environmental Affairs.
Donald B. Rice.......... 59 Director since 1986.*President and Chief Executive Officer
of UroGenesys, Inc., Santa Monica, California (a
biotechnology company developing therapeutics and diagnostic
testing for urogenital cancer), since 1996; President and
Chief Operating Officer of Teledyne, Inc., Los Angeles,
California (a manufacturer of aviation, electronic,
industrial, specialty metal and consumer products), from
1993 to 1996; Secretary of the Air Force, from 1989 to 1993.
Other directorships: Scios Inc.; UroGenesys, Inc.; Wells
Fargo & Company and Pilkington Aerospace.
Committee memberships: Audit Review; Executive; Finance and
Pension Funds; Governance and Succession.
</TABLE>
- ------------------------
* Dr. Rice was first elected a director in 1986, and served until May, 1989,
when he was appointed Secretary of the Air Force. He was reelected a
director of Parent by the Board of Directors on February 12, 1993.
A-2
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PARENT; BUSINESS ADDRESS; PRINCIPAL OCCUPATION
NAME AGE OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
- ------------------------ --- ------------------------------------------------------------
<S> <C> <C> <C>
Orin R. Smith................. 63 Director since 1983. Chairman and Chief Executive Officer of Engelhard
Corporation, Iselin, New Jersey (provider of environmental technologies,
performance products, engineered materials and related services), since
January, 1995; President and Chief Executive Officer of that company prior
thereto.
Other Directorships: Engelhard Corporation; Ingersoll-Rand Company;
Perkin-Elmer Corporation; Summit Bancorporation.
Committee memberships: Compensation; Executive; Governance and Succession;
Safety, Health and Environmental Affairs.
Marion H. Antonini............ 68 Director since 1983. Principal, Kohlberg & Company, Mount Kisco, New York
(a private merchant banking firm), since January, 1998; Chairman, Chief
Executive Officer and President of Welbilt Corporation, Stamford,
Connecticut (a manufacturer and distributor of commercial food service
equipment and residential furnaces) prior thereto.
Other directorships: Engelhard Corporation; Scientific-Atlanta, Inc. Turbo
Chef; Northwestern Steel and Wire.
Committee memberships: Compensation; Executive; Governance and Succession;
Finance and Pension Funds.
James V. Napier............... 61 Director since 1983. Chairman of the Board of Scientific-Atlanta, Inc.,
Atlanta, Georgia (a manufacturer and designer of telecommunication systems,
satellite-based communications networks, and instrumentation for
industrial, telecommunications and government applications).
Other directorships: Engelhard Corporation; HBO & Co.; Intelligent Systems,
Inc.; Personnel Group of America, Inc.; Scientific-Atlanta, Inc.;
Westinghouse Air Brake Co.
Committee memberships: Audit Review; Compensation; Finance and Pension
Funds.
Livio D. DeSimone............. 62 Director since 1987. Chairman and Chief Executive Officer of Minnesota
Mining & Manufacturing Company, St. Paul, Minnesota (a diversified
manufacturer).
Other directorships: Cargill, Incorporated; Dayton Hudson Corporation;
General Mills, Inc.; Minnesota Mining & Manufacturing Company.
Committee memberships: Compensation; Executive; Governance and Succession;
Safety, Health and Environmental Affairs.
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PARENT; BUSINESS ADDRESS; PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AGE 5-YEAR EMPLOYMENT HISTORY
- ------------------------------ --- ---------------------------------------------------------------------------
Donald M. James............... 49 Director since 1996. Chairman and Chief Executive Officer of the Parent
since May, 1997; President and Chief Executive Officer from February, 1997
to May, 1997; President and Chief Operating Officer from February, 1996 to
February, 1997; President of the Parent's Southern Division from 1994 to
1996; Senior Vice President, South, Construction Materials Group of the
Parent from 1995 to 1996; Senior Vice President and General Counsel of the
Parent from December, 1992 through 1993.
<S> <C> <C> <C>
Other directorships: Protective Life Corporation.
Committee memberships: Executive.
Ann D. McLaughlin............. 57 Director since 1990. Chairman, The Aspen Institute, Aspen, Colorado (an
independent, nonprofit organization whose programs are designed to enhance
the ability of leaders to understand national and international issues),
since 1996; Vice Chairman of that organization from 1993 to 1996;
President, Federal City Council, Washington, D.C. (a nonpartisan, nonprofit
organization which is dedicated to improving the nation's capital), from
1990 until 1995; President and Chief Executive Officer, New American
Schools Development Corporation, Arlington, Virginia (a private
organization which supports the design and establishment of
high-performance learning environments), from 1992 until 1993.
Other directorships: AMR Corporation; Donna Karan International, Inc.;
Fannie Mae; General Motors Corporation; Harman International Industries,
Inc.; Host Marriott Corporation; Kellogg Company; Nordstrom, Inc.; Union
Camp Corporation.
Committee memberships: Audit Review; Executive; Finance and Pension Funds;
Safety, Health and Environmental Affairs.
Herbert A. Sklenar............ 67 Director since 1973. Chairman Emeritus of the Company since May, 1997;
Chairman of the Board from February, 1997 to May, 1997; Chairman and Chief
Executive Officer from May, 1992 to February, 1997; President and Chief
Executive Officer prior thereto.
</TABLE>
Each such person is a citizen of the United States. Parent has advised the
Company that each of the Parent Designees has consented to act as a director.
Parent has also advised the Company that none of the Parent Designees (i) has
during the last five years been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was, or is, subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws, (ii) is
currently a director of, or holds any position with, the Company, (iii)
beneficially owns any securities (or rights to acquire any securities) of the
Company, or (iv) has been involved in any transaction with the Company or any of
its directors, executive officers or affiliates which is required to be
disclosed pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"), except as may be disclosed herein or in the Schedule
14D-9.
A-4
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Biographical information concerning each of the Company's current directors
and executive officers as of October 31, 1998, is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
A. Frederick Gerstell................................ 60 Chairman and Chief Executive Officer
John C. Argue........................................ 66 Director
Arthur Brown......................................... 58 Director
Denis R. Brown....................................... 59 Director
Harry M. Conger...................................... 68 Director
Rayburn R. Dezember.................................. 67 Director
Richard A. Grant, Jr................................. 58 Director
Edward A. Landry..................................... 59 Director
Thomas L. Lee........................................ 56 Director
Thomas M. Linden..................................... 55 Director
Georgia R. Nelson.................................... 48 Director
Stuart T. Peeler..................................... 69 Director
George H. Gilmore, Jr................................ 49 President and Chief Operating Officer
Scott J Wilcott...................................... 60 Executive Vice President, Law and Property
H. James Gallagher................................... 51 Executive Vice President, Finance, Chief Financial
Officer and Treasurer
Paul Stanford........................................ 56 Executive Vice President, General Counsel and
Secretary
Edward J. Kelly...................................... 43 Senior Vice President, Corporate Development
</TABLE>
JOHN C. ARGUE. Of Counsel to the Los Angeles law firm of Argue Pearson
Harbison & Myers where he has worked since 1972. He has practiced law since
1957. Mr. Argue is a Director of Avery Dennison, Inc., Nationwide Health
Properties, Inc., TCW Funds, Inc., CVT and Apex Mortgage Capital, and the TCW/DW
Family of Funds. He also serves as Chairman of The Rio Hondo Memorial Foundation
and of the Advisory Directors of LAACO, Ltd.
ARTHUR BROWN. Chairman of the Board, Chief Executive Officer and President
of Hecla Mining Company ("Hecla"), producers of gold, silver, lead, zinc and
industrial minerals. Prior to being named President in 1986, Mr. Brown served as
Hecla's Chief Operating Officer and Executive Vice President in addition to
various other positions as an officer of Hecla. Mr. Brown is also a Director of
Southern Africa Minerals Corporation, AMCOL International Corporation and Idaho
Independent Bank.
DENIS R. BROWN. President and Chief Executive Officer, since 1994, of
Pinkerton's, Inc., a global provider of total security services. From 1990 to
1993, Mr. Brown was Chairman and Chief Executive Officer of Concurrent Computer
Corporation. Mr. Brown is a Director of Pinkerton's, Inc. and Farr Company.
HARRY M. CONGER. Chairman of the Board and Chief Executive Officer,
emeritus, of Homestake Mining Company ("Homestake"), an international company
engaged in gold mining and related activities. Mr. Conger was Chairman of the
Board of Homestake from 1982 to 1998 and Chief Executive Officer of Homestake
from 1982 to 1996. From 1978 to 1982, he was President and Chief Executive
Officer of Homestake. Mr. Conger is a Director of ASA, Ltd., Pacific Gas and
Electric Company, Apex Silver
A-5
<PAGE>
Mines and the National Mining Association. He is also a Trustee of the
California Institute of Technology. Mr. Conger retired as a Director of Baker
Hughes, Inc. in 1997 and was Chairman of the World Gold Council from 1995 to
1997.
RAYBURN S. DEZEMBER. Served on the boards of Wells Fargo & Co. and Wells
Fargo Bank until November 1998. Chairman of Tejon Ranch Co. Mr. Dezember is also
a Director of The Bakersfield Californian and Bolthouse Farms. He served as
Chairman of the Board and Chief Executive Officer of Central Pacific Corp. from
1981 to 1990. He is also a former Trustee of Whittier College.
A. FREDERICK GERSTELL. Chairman of the Board and Chief Executive Officer of
the Company. From 1984 to 1988, Mr. Gerstell was President and Chief Operating
Officer of the Company. In 1988, he was elected Chief Executive Officer and, in
1991, he was elected Chairman of the Board. From 1981 to 1984, he was President
and Chief Operating Officer and a Director of California Portland Cement Company
("CPC"), a predecessor constituent company, and, prior to 1981, a Vice President
of CPC. Mr. Gerstell is also a Director of Ameron, Inc.
RICHARD A. GRANT, JR. Private investor and Co-Trustee of M. B. Scott
Trusts. Mr. Grant is also a Co-Trustee of the P. D. Byrne Trust, which owns
296,273 shares of the Company's Common Stock. Mr. Grant is also Secretary,
Treasurer and a Trustee of the Dan Murphy Foundation, a non-profit foundation
which owns 3,821,691 shares of the Company's Common Stock.
EDWARD A. LANDRY. Senior partner of the Los Angeles law firm of Musick,
Peeler & Garrett, where he has practiced law since 1965. The Company retained
the services of Musick, Peeler & Garrett during 1997 and has retained such
services in 1998. Mr. Landry is a Trustee of the Dan Murphy Foundation, a
non-profit foundation, which owns 3,821,691 shares of the Company's Common
Stock. He also serves as a trustee for other non-profit foundations.
THOMAS M. LEE. Chief Executive Officer, Director and, since July 1989,
Chairman of The Newhall Land and Farming Company, a publicly traded California
limited partnership. Mr. Lee served as its President and Chief Executive Officer
from 1987 to 1989, and as President and Chief Operating Officer from 1985 to
1987. He also is a Director of Blue Shield of California and a Trustee of
California Institute of the Arts.
THOMAS M. LINDEN. Private investor. Mr. Linden was Executive Vice President
and General Manager - Properties Division of the Company from May 1985 through
May 1989. Before that time, he was a partner with Smith, Linden and Basso,
certified public accountants.
GEORGIA R. NELSON. President, Edison Mission Energy Americas, and Senior
Vice President, Worldwide Operations, Edison Mission Energy, one of the world's
largest independent power producers. Prior to 1996, Ms. Nelson was Senior Vice
President of Southern California Edison. Prior to 1995, Ms. Nelson was Vice
President and Special Assistant to the Chairman and Chief Executive Officer of
EIX (Edison International).
STUART T. PEELER. Petroleum industry consultant and independent oil and gas
producer since the beginning of 1989. Mr. Peeler was Chairman of the Board and
Chief Executive Officer of Statex Petroleum, Inc., from 1982 through 1989 and
was its President from 1983 to 1986. Mr. Peeler is a Director of Chieftan
International, Inc., Chieftan International Funding Corp. and Homestake Mining
Company. He is also a Trustee of the J. Paul Getty Trust.
EXECUTIVE OFFICERS OF THE COMPANY
GEORGE H. GILMORE, JR. President and Chief Operating Officer. Mr. Gilmore,
49, was elected to his current position in May 1998. Prior to joining the
Company, from December 1995 he served as President of Moore Document Solutions,
a division of Moore Corporation. He previously served as President of Moore
Business Systems from August 1994 to December 1995. From 1990 to 1994 he was
A-6
<PAGE>
President of AM Multigraphics, a division of AM International and President of
AM's International Division.
SCOTT J WILCOTT. Executive Vice President, Law and Property. Mr. Wilcott,
60, was elected to his current position in August 1990. He also serves as
President of CalMat Properties Co., and CalMat Land Co., subsidiaries of the
Company. In 1989, he served as Executive Vice President, General Counsel and
Secretary of the Company. From 1984 to 1989, he served as Senior Vice President,
Legal Counsel and Secretary. From 1968 until the formation of the Company in
1984, Mr. Wilcott was employed by Conrock.
PAUL STANFORD. Executive Vice President, General Counsel and Secretary. Mr.
Stanford, 55, was elected to his current position in August 1996. From February
1995 to August 1996, he served as Executive Vice President-Administration,
General Counsel and Secretary. From June 1993 until February 1995, he served as
Senior Vice President-Administration, General Counsel and Secretary. From August
1990 until June 1993, he served as Vice President, General Counsel and
Secretary. Before joining the Company, from 1981, he was engaged in the practice
of business law with the firm of Paul, Hastings, Janofsky & Walker.
H. JAMES GALLAGHER. Executive Vice President, Finance, Chief Financial
Officer and Treasurer. Mr. Gallagher, 51, was elected to his current position in
November 1996. From August 1993 to November 1996, he served as Executive Vice
President, Finance and Chief Financial Officer. From 1987 to August 1993, he
served concurrently as Executive Vice President, Chief Financial Officer and
Director of Pacific Enterprises Oil Co., and Senior Vice President, Chief
Financial Officer and Director of Pacific Interstate Company. He previously
served as Vice President, Controller and Chief Financial Officer of Pacific
Interstate Company from 1979, and Manager of Internal Audits of Pacific
Enterprises, Inc. from 1975.
EDWARD J. KELLY. Senior Vice President, Corporate Development. Mr. Kelly,
42, was elected to his current position in November 1996. From January 1994 to
November 1996, he served as Senior Vice President, Treasurer and Chief
Accounting Officer. He served as Senior Vice President, Controller and Chief
Accounting Officer from June 1993 to January 1994. From December 1990 until June
1993, he served as Vice President and Controller. He was employed by Superior
Industries International, Inc., a manufacturer of automotive products, as Vice
President, Corporate Controller and Secretary, from 1985 to 1990.
All officers serve at the discretion of the Board. There are no family
relationships between directors or executive officers of the Company.
GENERAL INFORMATION ABOUT THE BOARD
COMMITTEES OF THE BOARD AND DIRECTOR COMPENSATION
During 1997, the Board of Directors met seven times. Directors who are not
Company employees were paid a quarterly retainer fee of $4,000 for service on
the Board--$4,500 if the director also served as a Committee Chairman. In
addition, non-employee directors were paid a fee of $1,600 for each Board
meeting and $800 for each Committee meeting attended. Also, at its January 1998
meeting, the Board adopted a resolution to permit directors to borrow
interest-free funds from the Company to purchase up to 1,000 shares per year of
the Company's stock. Such loans, if made, will be repaid within one year through
the retention by the Company of the director's compensation as it is earned.
The Board of Directors has an Audit Committee, an Executive Committee, a
Finance Committee, a Management Development and Compensation Committee, a
Nominating and Corporate Governance Committee and a Property Committee. During
1997, the Audit, Finance, Management Development and Compensation and Property
Committees each met three times. The Executive and Nominating and Corporate
Governance Committees each met once. All directors attended at least 75% of all
meetings of the Board and any Committees on which they served.
A-7
<PAGE>
AUDIT COMMITTEE
The Audit Committee recommends the selection of independent auditors and
approves their fee arrangement. The Audit Committee reviews the plan and scope
of the audit and the resulting audit report and management letter. The Audit
Committee also monitors the Company's ethics programs and other compliance
policies, and discusses with management and the outside auditors the effect of
recently issued accounting standards on the Company's financial statements.
<TABLE>
<S> <C>
1997 MEMBERS
John C. Argue, Chairman Edward A. Landry
Denis R. Brown Georgia R. Nelson
William T. Huston Stuart T. Peeler
</TABLE>
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
The Management Development and Compensation Committee ("Compensation
Committee") approves and recommends to the Board of Directors director
compensation, remuneration for senior management of the Company, and the
adoption of any compensation plans. The Compensation Committee also makes
recommendations to the Board concerning succession planning and management
development policies for the Company. The Compensation Committee's Stock Option
Sub-Committee administers the Company's stock option plans and approves the
granting of stock options or other benefits under such plans.
<TABLE>
<S> <C>
1997 MEMBERS
Stuart T. Peeler, Chairman* Harry M. Conger*
John C. Argue* Thomas L. Lee*
Arthur Brown* Thomas M. Linden
</TABLE>
*Also members of the Stock Option Sub-Committee.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee ("Corporate Governance
Committee") recommends to the Board of Directors nominees to fill Board
vacancies, and a slate of nominees for election at the Annual Meeting of
Stockholders. The Corporate Governance Committee establishes criteria for Board
membership, including criteria relating to tenure and age limitation, and
reviews qualifications of candidates for Board membership. The Corporate
Governance Committee also recommends to the Board candidates to fill vacancies
on the Board which occur between annual meetings of stockholders. In addition,
the Corporate Governance committee monitors corporate governance practices and
makes recommendations for changes when appropriate, annually reviews the duties
and responsibilities of each Board Committee, and reviews recommendations by the
Chairman of the Board for membership on board Committees. The Corporate
Governance Committee has no formal procedures for consideration of
recommendations for nominees that may be submitted by stockholders.
<TABLE>
<S> <C>
1997 MEMBERS
Thomas L. Lee, Chairman Richard A. Grant, Jr.
Harry M. Conger William T. Huston
</TABLE>
A-8
<PAGE>
FINANCE COMMITTEE
The Finance Committee monitors the performance of investments in the
Company's pension plans and selects and recommends managers, financial advisors
and trustees for pension fund investments. The Finance Committee also reviews
and makes recommendations regarding the capital structure of the Company,
specific major borrowings, the Company's debt-to-equity ratio and the
relationship of long-term debt to short-term debt.
<TABLE>
<S> <C>
1997 MEMBERS
Richard A. Grant, Jr., Chairman Rayburn S. Dezember
Arthur Brown Thomas M. Linden
Denis R. Brown Georgia R. Nelson
</TABLE>
EXECUTIVE COMMITTEE
The Executive Committee reviews and makes recommendations regarding
corporate objectives and policies, the Company's long-range plan, major Company
acquisitions or divestitures and the Company's dividend policy. When necessary,
the Executive Committee may act in lieu of the Board of Directors, exercising
all the powers of the Board of Directors in the management of the business and
affairs of the Company, except where limited by Section 141 of the Delaware
General Corporation Law.
<TABLE>
<S> <C>
1997 MEMBERS
A. Frederick Gerstell, Chairman Thomas L. Lee
John C. Argue Thomas M. Linden
Harry M. Conger Stuart T. Peeler
Richard A. Grant, Jr.
</TABLE>
PROPERTY COMMITTEE
The Property Committee oversees the development and disposition of the
Company's real estate.
<TABLE>
<S> <C>
1997 MEMBERS
Rayburn S. Dezember, Chairman Edward A. Landry
John C. Argue Thomas L. Lee
William T. Huston Thomas M. Linden
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee are present or former
members of management except Mr. Thomas M. Linden, who was Executive Vice
President and General Manager--Properties Division of the Company from May 1985
through May 1989.
A-9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation for
fiscal 1997, 1996 and 1995 for services in all capacities to the Company and its
subsidiaries by persons who, as of December 31, 1997, were the Chief Executive
Officer and four most highly compensated executive officers of the Company other
than the Chief Executive Officer (collectively, the "Senior Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------
(A) NUMBER OF
--------------------- SECURITIES
SALARY BONUS UNDERLYING OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) GRANTED (#)(B) COMPENSATION ($)(C)
- -------------------------------------- --------- ---------- ---------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
A. FREDERICK GERSTELL................. 1997 $ 530,000 $ 332,840 84,400 $ 101,357
Chairman of the Board, Chief 1996 $ 500,000 $ 79,000 53,400 $ 91,798
Executive Officer and Director 1995 $ 485,000 $ 100,000 40,000 $ 93,030
SCOTT J WILCOTT....................... 1997 $ 257,400 $ 98,842 24,000 $ 53,171
Executive Vice President, Law and 1996 $ 247,500 $ 75,000 15,000 $ 45,605
Property 1995 $ 240,000 $ 32,500 15,000 $ 45,098
H. JAMES GALLAGHER.................... 1997 $ 245,000 $ 102,573 29,000 $ 62,433
Executive Vice President, Finance, 1996 $ 230,000 $ 24,000 15,000 $ 39,557
Chief Financial Officer and 1995 $ 220,000 $ 30,000 15,000 $ 39,560
Treasurer
PAUL STANFORD......................... 1997 $ 240,000 $ 100,480 24,000 $ 65,400
Executive Vice President, General 1996 $ 230,000 $ 20,000 15,000 $ 40,553
Counsel and Secretary 1995 $ 220,000 $ 30,000 15,000 $ 40,514
R. BRUCE RIESER*...................... 1997 $ 310,000 $ 162,233 39,000 $ 207,901
President and Chief Operating 1996 $ 267,200 $ 31,000 40,000 $ 45,926
Officer 1995 $ 175,000 $ 32,750 35,000 $ 884
</TABLE>
- ------------------------
* Mr. Rieser resigned from the Company effective January 27, 1998.
(a) Amounts shown include cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers.
(b) 1995 options granted in January 1996 are shown in 1995 and not included in
1996.
(c) The amounts shown in this column for the last fiscal year include the
following items: (i) Mr. Gerstell: $20,500--Company accrual to the Thrift
and Profit-Sharing Retirement Plan and Money Purchase Pension Plan for
Employees of CalMat Co., a defined contribution plan (DCP); $71,317--paid by
the Company to a trust for the Non-qualified Deferred Compensation Plan for
Selected Executives of CalMat Co., a non-qualified defined contribution plan
(NDCP); and $9,540--Company-paid term life insurance (TLI); (ii) Mr.
Wilcott: $20,500--Company accrual to DCP; $24,720--Company accrual to NDCP;
$1,101--Company-paid TLI; and $6,850--Company-paid split dollar insurance;
(iii) Mr. Gallagher: $21,200--Company accrual to DCP; $21,038--Company
accrual to NDCP; $480-- Company-paid TLI; and $19,715--Company-paid
split-dollar insurance; (iv) Mr. Stanford: $20,500-- Company accrual to DCP;
$21,156--Company accrual to NDCP; $691--Company-paid TLI; and
$23,053--Company-paid split-dollar insurance; and (v) Mr. Rieser:
$20,500--Company accrual to DCP; $33,298--Company accrual to NDCP;
$510--Company-paid TLI; $125,561--Company-paid
A-10
<PAGE>
relocation-related expenses; $2,841 Company-paid housing allowance; and
$25,191--Company-paid split-dollar insurance.
OPTION GRANTS FOR 1997
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR BASE
OPTIONS TO EMPLOYEES IN PRICE GRANT DATE PRESENT
NAME GRANTED (#)(A) FISCAL YEAR ($/SHARE)(B) EXPIRATION DATE VALUE ($)(C)
- ------------------------------- --------------- ----------------- ----------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
A. Frederick Gerstell.......... 84,400 21.04 $ 25.875 11-24-07 $ 655,298.48
Scott J Wilcott................ 24,000 5.98 $ 25.875 11-24-07 $ 186,340.80
H. James Gallagher (e)......... 5,000 1.25 $ 18.000 03-24-07 $ 21,602.00
24,000 5.98 $ 25.875 11-24-07 $ 186,340.80
Paul Stanford.................. 24,000 5.98 $ 25.875 11-24-07 $ 186,340.80
R. Bruce Rieser................ 39,000(d) 9.72 $ 25.875 11-24-07 $ 302,803.80
</TABLE>
- ------------------------
(a) Options granted are exercisable from the first anniversary of the grant
date, at which time 25% of the shares granted becomes exercisable, with an
additional 25% of the option shares becoming exercisable on each successive
anniversary date and full vesting occurring on the fourth anniversary date.
The option term is ten years; however, unless modified by the Stock Option
Subcommittee of the Compensation Committee, no option that is unexercisable
at termination of employment will become exercisable.
(b) The exercise price may be paid by cash, by delivery of shares of the
Company's Common Stock owned by the optionee, or, with consent of the
Compensation Committee, by delivery of a full-recourse promissory note.
(c) The Modified Black-Scholes Option Valuation Model modifies the Black-Scholes
formula to include the impact of cash dividend payments and the right to
exercise options prior to maturity. The volatility factor, risk-free rate of
return and the Company's dividend yield at the November 25, 1997 grant date
used in the modified model were 28.21%, 5.84% and 1.55%, respectively. At
the March 25, 1997 grant date, the same factors were 19.53%, 6.71% and
2.22%, respectively. The model assumes that options are exercised
approximately 4.75 years from vesting, based on analyses of historical
exercise patterns for all optionees.
(d) Because of Mr. Rieser's resignation from the Company effective January 27,
1998, the option granted to him in 1997 will not vest or become exercisable.
(e) Mr. Gallagher received two grants for 1997: 5,000 option shares were granted
for exceptional performance in March 1997 and 24,000 shares were granted in
November 1997.
A-11
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE
SECURITIES REALIZED
ACQUIRED ON AT DATE NUMBER OF VALUE OF UNEXERCISED
EXERCISE OF EXERCISE SECURITIES UNDERLYING IN-THE-MONEY OPTIONS AT
NAME (#) ($)(A) OPTIONS AT FY-END (#) FY-END ($)(B)
- ------------------------- ----------- ------------- -------------------------------- --------------------------------
<S> <C> <C> <C> <C>
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
-------------------------------- --------------------------------
A. Frederick Gerstell.... -- -- 299,641/169,450 $ 1,833,329/$1,003,025
Scott J Wilcott.......... 2,946 $ 23,638 129,304/52,750 $ 825,998/$332,063
H. James Gallagher....... 12,084 $ 105,672 56,166/57,750 $ 538,629/$387,438
Paul Stanford............ 10,000 $ 87,500 68,000/52,750 $ 523,313/$332,063
R. Bruce Rieser.......... -- -- 23,750/90,250 $ 230,938/$585,813
</TABLE>
- ------------------------
(a) Market value of the underlying securities at exercise date minus the
exercise price of the options.
(b) Market value of the underlying securities at year-end minus the exercise
price of in-the-money options.
PENSION PLANS
Under the Supplemental Executive Retirement Plan ("SERP") in effect for
1997, Messrs. Gerstell, Wilcott, Gallagher and Stanford would receive, upon
retirement, a supplemental benefit added to amounts received from Social
Security, the DCP and the NDCP. Because of Mr. Rieser's resignation in January
1998, he is no longer eligible to receive a benefit under this plan.
The formula for the net SERP benefit is equal to the "SERP Target Percent"
(65% for Mr. Gerstell and 60% for all other named executives) multiplied by
"Final Average Earnings" at retirement reduced by the level annual benefits
provided by the employer contributions to the Qualified and Non-qualified
defined contribution plans and one-half of the actuarial equivalent of the
estimated Social Security benefit. "Final Average Earnings" is defined as the
highest compensation for three out of the last five calendar years of
employment. Compensation includes total cash compensation paid to the executive.
The estimated annual net SERP benefit for the following executive officers
are: Mr. Gerstell-- $446,791; Mr. Wilcott--$21,404; Mr. Gallagher--$272,298; and
Mr. Stanford--$214,173. The Estimated Annual Net SERP Benefit is based on the
following assumptions: interest on defined contribution balances and conversion
of account balances to annuities--7%; salary increases--6.5%; mortality--85% of
1983 group annuity mortality; Social Security wage base increases--3%;
retirement--at age 62; and future employer contributions to defined contribution
plans--15% of base compensation.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total return of the Standard & Poor's
500 Stock Index (the "S&P 500") and a composite industry index (the "Industry
Index") consisting of seven public companies in the building materials
industry.* The graph assumes that $100 was invested on December 31, 1991, in
each of the Company's stock, the S&P 500 and the Industry Index, and that all
dividends were reinvested.
A-12
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG CALMAT CO., S&P 500 INDEX AND PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD AVERAGE OF
(FISCAL YEAR COVERED) CALMAT S&P 500 INDEX COMPOSITE
- ---------------------------------------------------------------------- ----------- --------------- -------------
<S> <C> <C> <C>
Measurement Pt-12/31/92............................................... $ 100 $ 100 $ 100
FYE 12/31/93.......................................................... $ 96.12 $ 109.98 $ 138.90
FYE 12/31/94.......................................................... $ 80.30 $ 111.36 $ 114.20
FYE 12/31/95.......................................................... $ 86.40 $ 152.83 $ 140.50
FYE 12/31/96.......................................................... $ 90.56 $ 187.49 $ 163.10
FYE 12/31/97.......................................................... $ 137.14 $ 249.53 $ 286.80
</TABLE>
* Industry Index includes Florida Rock Industries, Granite Construction, Inc.,
Lafarge Corp., Martin Marietta Materials, Southdown, Inc., Texas Industries,
Inc., and Parent. Information for Martin Marietta Materials begins in 1993
when such information first became publicly available. CalMat Co. is the
only company, when compared against companies in the Industry Index, whose
primary market area is Southern California, an area that has experienced a
severe recession affecting the construction industry throughout much of the
period depicted in the Performance Graph.
A-13
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following shows information as of November 17, 1998 (i) with respect to
the only persons known to the Company to be the beneficial owners of more than
5% of the Company's outstanding stock, based on the Company's records and a
review of filings made pursuant to Sections 13 and 16 of the Securities Exchange
Act of 1934 (the "Exchange Act"); (ii) for the directors and executive officers
named in this Information Statement under the caption "Director and Executive
Officers"; and (iii) for directors and executive officers as a group. Unless
noted otherwise, beneficial owners listed have sole voting and investment power
with respect to the shares reported.
<TABLE>
<CAPTION>
NUMBER OF SHARES
DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT STOCKHOLDERS BENEFICIALLY OWNED PERCENTAGE
- ------------------------------------------------------------------------------- -------------------- -----------
<S> <C> <C>
Dan Murphy Foundation.......................................................... 3,821,691 16.06
Post Office Box 711267
Los Angeles, CA 90071
FMR Corp. ..................................................................... 1,685,200 7.08
82 Devonshire Street
Boston, MA 02109
David L. Babson & Co., Inc.*................................................... 1,512,960 6.36
One Memorial Drive
Cambridge, MA 02142-1300
Royce & Associates, Inc. ...................................................... 1,372,300 5.77
1414 Avenue of the Americas
New York, NY 10019
A. Frederick Gerstell.......................................................... 302,761(a) 1.27
Chairman of the Board, Chief Executive Officer and Director
George H. Gilmore.............................................................. 0 (b)
President and Chief Operating Officer
Scott J Wilcott................................................................ 104,438(a) (b)
Executive Vice President, Law and Property
H. James Gallagher............................................................. 87,595(a) (b)
Executive Vice President, Finance, Chief Financial Officer and Treasurer
Paul Stanford.................................................................. 91,032(a) (b)
Executive Vice President, General Counsel and Secretary
John C. Argue.................................................................. 9,000(c) (b)
Director
Arthur Brown................................................................... 5,750(d) (b)
Director
Denis R. Brown................................................................. 2,750(f) (b)
Director
Harry M. Conger................................................................ 12,500(c) (b)
Director
Rayburn S. Dezember............................................................ 11,900(c)(h) (b)
Director
Richard A. Grant, Jr. ......................................................... 44,000(c)(i) (b)
Director
Edward A. Landry............................................................... 8,500(e)(j) (b)
Director
Thomas L. Lee.................................................................. 10,500(c) (b)
Director
Thomas M. Linden............................................................... 551,142(c)(k) 2.32
Director
Georgia R. Nelson.............................................................. 3,250(f) (b)
Director
Stuart T. Peeler............................................................... 23,500(l) (b)
Director
Director and executive officers as a group (19 persons)........................ 1,349,725(a) 5.67
</TABLE>
- ------------------------
* Includes 2,700 shares for which Babson has shared voting power.
A-14
<PAGE>
(a) The amounts shown include the following shares that may be acquired within
60 days pursuant to outstanding stock option grants: A. Frederick Gerstell,
288,504 shares; Scott J Wilcott, 94,464 shares; H. James Gallagher, 77,166
shares; Paul Stanford, 87,750 shares; and all directors and executive
officers as a group, 679,784 shares.
(b) Less than 1%.
(c) Of the shares shown, 7,500 are shares that the director has the right to
acquire under the director's stock option agreements.
(d) Of the shares shown, 3,500 are shares that the director has the right to
acquire under the director's stock option agreements.
(e) Of the shares shown, 4,500 are shares that the director has the right to
acquire under the director's stock option agreements.
(f) Of the shares shown, 750 are shares that the director has the right to
acquire under the director's stock option agreements.
(g) Includes service as a director of CPC. Each of these nominees for director
became a director upon formation of the Company in 1984 by the combination
of CPC and Conrock Co.
(h) Mr. Dezember has shared voting and investment power with respect to 4,400 of
the shares shown. The shares are held in a family trust, of which Mr.
Dezember and his wife are Co-Trustees.
(i) Also, does not include, and Mr. Grant disclaims any beneficial interest in,
the 3,821,691 shares owned by the Dan Murphy Foundation, of which he is
Secretary, Treasurer and a Trustee, and the 296,273 shares owned by the P.D.
Byrne Trust, of which he is a Co-Trustee. Mr. Grant also disclaims any
beneficial interest in the 4,000 shares owned by one of his children, also
not shown, who still shares his household.
(j) Does not include, and Mr. Landry disclaims any beneficial interest in, the
3,821,691 shares owned by the Dan Murphy Foundation, of which he is a
Trustee, and the 1,868 shares held in the Philip Marlow Trust, of which he
is a Trustee.
(k) Mr. Linden has shared voting and investment power with respect to 182,876
shares of the shares shown. Mr. Linden disclaims beneficial ownership,
except to the extent of his pro-rata pecuniary interest, with respect to the
187,640 shares held in his name as Trustee of revocable trusts for the
benefit of his children, 132,470 shares held by the R.F. and D.A. Ingold
Trust and 50,400 shares held by the Milton S. and Margaret I. Linden Trust,
of both of which he is a Co-Trustee, and the six shares held by the Ingold
Liquidating Partnership, of which he is a Co-Managing Partner.
(l) Of the shares shown, 3,000 are shares that Mr. Peeler has the right to
acquire under the director's stock option agreements.
The closing sale price per Share on November 19, 1998, as reported by the
New York Stock Exchange, was $30.75.
EMPLOYMENT AGREEMENTS
The Company has executed the following employment agreements with certain
executive officers according to the terms summarized below:
The Company has executed employment agreements with Messrs. Gerstell,
Wilcott and Stanford that provide for compensation at an annual rate of
$560,000, $266,400 and $250,000, respectively, for 1998. In addition to
providing benefits in the case of disability, the agreements provide that the
compensation and other benefits (including bonus, retirement plan contributions
and insurance coverages) will continue unabated for the period specified in each
agreement (four years for Mr. Gerstell and three years for Messrs. Wilcott and
Stanford) from the date of notice of termination by the Company. In the event
the Company significantly reduces the importance of their responsibilities,
reduces their compensation or benefits, relocates the Company's principal
executive offices outside Los Angeles or reassigns them to a location other than
the principal executive offices, each executive's agreement provides that the
executive may terminate the agreement and receive the salary and benefits that
would have been provided to him
A-15
<PAGE>
under the agreement (four years for Mr. Gerstell and three years for Messrs.
Wilcott and Stanford). In the event of a change of control, the executive may
accelerate the exercisability of all options to acquire shares covered by any
outstanding stock option agreements he has with the Company.
The Company has executed agreements with Messrs. Gallagher, Gilmore and
Kelly with respect to severance that provides for the payment of two years' base
salary (determined as of the date of termination) in the event of termination
without cause. Messrs. Gallagher's, Gilmore's and Kelly's base salaries for 1998
are $258,000 $425,000 and $204,765, respectively. Messrs. Gallagher, Gilmore and
Kelly have also executed agreements with the Company which provide that
compensation and other benefits (including bonus, retirement plan contributions
and insurance coverages) will continue unabated for three years from the day
preceding any change of control of the Company. In addition, the agreements
provide that in the event of a change of control, Messrs. Gallagher, Gilmore and
Kelly may accelerate the exercisability of all options to acquire shares covered
by any outstanding stock option agreements they have with the Company.
Mr. Rieser resigned from the Company effective January 27, 1998. During
1997, he was employed pursuant to an agreement similar to Mr. Gallagher's, which
provided for two years' base salary in the event of termination without cause.
Upon his resignation in January 1998, he entered into a Severance Agreement and
General Release with the Company pursuant to which he was paid two years' base
salary ($620,000) and a housing allowance ($46,870) and will receive an EVA/(R)/
bonus for 1997 of $162,233.
A change in control triggers for all of the Company's employees an
acceleration of vesting of stock options and the payment of the spread between
the exercise price of options and the fair market value of the Shares.
Consummation of the Offer as contemplated would constitute such a change in
control if Purchaser acquires 80% or more of the Shares in the Offer.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
designated Section 16 officers and persons who own more than 10% of the
Company's Common Stock (collectively "Reporting Persons") to file reports of
ownership and changes in ownership of the Company's Common Stock. Reporting
Persons are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) reports that they file.
To the Company's knowledge, based solely on its review of copies of such
reports furnished to the Company and written statements of its directors and
executive officers to the effect that no other reports were required to be filed
during the 1997 fiscal year, all Section 16(a) filing requirements applicable to
its directors, executive officers and 10% owners were complied with, except that
Ms. Nelson filed a late report covering the purchase of 2,500 shares for her
spouse's individual retirement trust account.
REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS OF THE COMPANY
The Compensation Committee is responsible for setting and administering all
policies that govern salaries, salary increases and bonuses for the Company's
executive officers and key managerial employees, for approval by the Company's
Board of Directors. In 1997, the Compensation Committee met three times.
The Compensation Committee's purpose is to ensure that the Company is able
to attract and retain well-qualified executives who will manage the Company for
the benefit of stockholders and contribute to the Company's success. The policy
of the Compensation Committee is to provide compensation to executive-level
officers that is appropriate to each executive's level of responsibility, and
will both reward the executive for past performance and provide an incentive to
the executive for future performance.
A-16
<PAGE>
The Compensation Committee also oversees the Management Stock Ownership
Program that establishes guidelines for stock ownership for Company executives
and managers. The ownership goals of the Program vary for each level of
management and are expressed as a percentage of the individual's salary.
1997 COMPENSATION AND BONUSES--EXECUTIVE OFFICERS
The primary focus of the Compensation Committee in making its salary
decisions for executive officers in fiscal 1997 was its subjective review of
each executive officer's individual performance. The Compensation Committee did
not establish predetermined performance standards for executive officers, but
rather reviewed each executive officer's individual performance in the context
of the Company's performance. In making this evaluation, the Compensation
Committee considered the earnings performance of the Company and evaluated
whether the specific performance of the area over which an executive officer had
control contributed to the earnings performance or otherwise supported the
Company's overall performance. The Compensation Committee also reviewed the
individual performance of the executive in the executive's role as a manager and
leader within the Company.
Additionally, as part of its subjective determination of the appropriateness
of salary with regard to an executive's level of responsibility, the
Compensation Committee reviewed salary surveys of companies within the Company's
peer group of twelve U.S. companies within the sand, gravel, mining and general
construction industries. In reviewing these peer industry surveys, the
Compensation Committee primarily considered the salary being paid to executives
with similar responsibilities in comparable businesses with similar business
cycles. For example, the Compensation Committee especially considered the
surveys of mining companies whose business cycles, like the Company's, are tied
to the construction industry. The Compensation Committee also reviewed
professional surveys of non-industry-related companies, primarily in California,
which have comparable revenue, location density in California and number of
employees. In reviewing these non-industry surveys, the Compensation Committee
considered the salary being paid to executives with similar responsibilities in
similarly sized California companies, with a heavier focus on Southern
California companies, so as to determine competitive wages within the geographic
region. The professional surveys reviewed include surveys produced by William M.
Mercer, Inc., Towers Perrin and Watson Wyatt. The Compensation Committee did not
target any predetermined relationship between the salaries of the Company's
executives and those of the executives of the surveyed companies. In 1997, the
named executive officers as a group received salaries that were at or above the
mean for executive officers in their peer group, and at or above the mean of
executives within non-industry-related comparable companies in California.
After its evaluation of these factors, the Compensation Committee
subjectively determined the appropriate salary to be paid.
The Compensation Committee also oversees the Company's bonus plan, which the
Company uses to reward individual employee performance for the prior year. In
January 1996, the Company's Economic Value Added ("EVA/(R)/") Incentive
Compensation Program was adopted to provide key employees with an incentive
based upon increase in stockholder value. All bonuses awarded to executive
officers are now determined based on improvement in EVA/(R)/.
At the beginning of the year, target bonuses, expressed as a percentage of
an executive's base salary, were established using competitive information
obtained from compensation surveys for key positions. Actual bonuses were
determined by multiplying the Target Bonus by a bonus multiple. The multiple was
derived by comparing target and actual EVA/(R)/ for the year, adjusted by a
"leverage factor" that reflects the expected variability of the Company's
performance based on historical factors. In 1997, corporate participants were
evaluated based on improvement in EVA/(R)/ for the Company as a whole, and
business unit participants were evaluated based on improvement in their business
unit's EVA/(R)/. A portion of EVA/(R)/ bonuses for certain positions are paid
currently, with the balance "banked" for future payout dependent upon Company
performance. EVA/(R)/ calculations are reviewed by independent auditors.
A-17
<PAGE>
1997 COMPENSATION AND BONUS--CHIEF EXECUTIVE OFFICER
In 1997, the Compensation Committee determined the salary for the Chief
Executive Officer ("CEO") by subjectively evaluating his performance with regard
to the performance of the Company as a whole. The Compensation Committee did not
predetermine performance goals for the CEO, but subjectively evaluated his
performance in the following areas: (i) establishment of clear and sound
objectives; (ii) achievement of those objectives; (iii) creation of overall
management strength; (iv) development of successor management; and (v)
communication with the Board of Directors and senior management. Additionally,
the Compensation Committee considered particular accomplishments of the CEO in
1997, which have contributed to long-term stockholder value. Specifically, the
Compensation Committee subjectively evaluated the following accomplishments:
maintaining profitability, success in reducing costs, acquisition and expansion
activities, managing under adverse labor conditions, innovation and creativity,
and improvements in customer service and governmental relations. In evaluating
the CEO's performance, the Compensation Committee compared the Company's
short-term and long-term performance to the short-term and long-term total
stockholder return performance of companies within its peer group. In 1997, the
Company's total stockholder return was below its peer group as shown on the
Performance Graph on page 17. The Compensation Committee also reviewed the same
professional surveys of industry-related and non-industry-related companies in
determining the CEO's salary level as it did for executive officer compensation.
In 1997, the CEO's salary level was at or above the mean for industry-related
companies and at or above the mean for CEOs within non-industry-related
comparable companies in California. The Compensation Committee did not evaluate
these factors using a predetermined formula, but used its subjective discretion
to reach its result.
In 1997, the CEO's bonus amount was determined based on improvements in
EVA/(R)/ for the Company as a whole. At the beginning of the year, the CEO's
target bonus, expressed as a percentage of his base salary, was established
using competitive information obtained from compensation surveys for key
positions. His actual bonus was determined by multiplying the target bonus by a
bonus multiple. The multiple was derived by comparing target and actual EVA/(R)/
for the year, adjusted by a "leverage factor" that reflects the expected
variability of the Company's performance based on historical factors. In 1997,
the bonus multiple was 1.14 due to improved earnings from 1996. The CEO's bonus
for 1997 was $362,520, of which $332,840 will be paid out currently, with the
balance payable in future years under the plan's "banking" feature.
STOCK OPTION GRANTS
The Stock Option Sub-Committee of the Compensation Committee (the
"Sub-Committee"), which is composed of independent directors, met two times in
1997 to determine the amount of any stock options to be granted to Company
employees, including the executive officers and the CEO.
The Sub-Committee uses the award of stock options to provide an incentive
for continued and future performance of executive officers and other key
employees, as part of their total compensation package.
In making its decision in 1997, the Sub-Committee subjectively considered
the performance of the Company as a whole and the extent to which the
performance of a particular employee impacted that performance. The
Sub-Committee also reviewed the same professional surveys of industry-related
and non-industry-related companies in determining the amount of any stock
options to be granted to executive officers. Prior to 1997, stock option grants
to all executive officers were well below the mean for executive officers in
their peer group. In 1997, the named executive officers, including the Chief
Executive Officer, received stock option grants that were above the mean for
executive officers in their peer group, and above the mean for executives within
non-industry-related comparable companies in California.
A-18
<PAGE>
INTERNAL REVENUE CODE SECTION 162(M)
As one of the factors in its review of compensation matters, the
Compensation Committee considers the anticipated tax treatment to the Company
and to the executives of various payments and benefits. The deductibility of
some types of compensation payments depends upon the timing of an executive's
vesting or exercise of previously granted rights. Furthermore, interpretations
of and changes in the tax laws and other factors beyond the Compensation
Committee's control also affect the deductibility of compensation. For these and
other reasons, the Compensation Committee will not necessarily limit executive
compensation to that deductible under Section 162(m) of the Internal Revenue
Code. The Compensation Committee will consider various alternatives to
preserving the deductibility of compensation payments and benefits to the extent
reasonably practicable and to the extent consistent with its other compensation
objectives.
Report submitted by the Management Development and Compensation Committee:
Stuart T. Peeler, Chairman
John C. Argue
Arthur Brown
Harry M. Conger
Thomas L. Lee
Thomas M. Linden
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See also Certain Relationships and Related Transactions.
A-19
<PAGE>
ANNEX B
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON]
November 14, 1998
The Board of Directors
CalMat Co.
3200 San Fernando Road
Los Angeles, CA 90065
Dear Sirs and Madame:
You have asked us to advise you with respect to the fairness to the stockholders
of CalMat Co. (the "Company") from a financial point of view of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, dated as of November 14, 1998 (the "Acquisition
Agreement"), by and among the Company, Vulcan Materials Company, a New Jersey
corporation (the "Acquiror"), and ALB Acquisition Corporation (the "Sub"). The
Acquisition Agreement provides for a tender offer by Sub (the "Offer") for all
of the outstanding shares of common stock, par value $1.00 per share (the
"Common Stock"), including the associated common share purchase rights, of the
Company at a purchase price of $31.00 per share in cash. The Acquisition
Agreement further provides that following completion of the Offer, Sub will be
merged into the Company (the "Merger") pursuant to which the Company will become
a wholly owned subsidiary of the Acquiror and each outstanding share of Common
Stock of the Company will be converted into the right to receive $31.00 in cash.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as the Acquisition
Agreement. We have also reviewed certain other information, including financial
forecasts, provided to us by the Company and have met with the Company's
management to discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared this data with similar data for other publicly held
companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed
B-1
<PAGE>
November 14, 1998
Page 2
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's management as to the future
financial performance of the Company. In addition, we have not been requested to
make, and have not made, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company, nor have we been furnished
with any such evaluations or appraisals. Our opinion is necessarily based upon
financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. We were not requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
We have acted as financial advisor to the Board of Directors of the Company in
connection with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the Merger.
In the ordinary course of our business, we and our affiliates may actively trade
the debt and equity securities of both the Company and the Acquiror for our and
such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the Offer and
the Merger, does not constitute a recommendation to any stockholder as to
whether or not such stockholder should tender shares pursuant to the Offer or
how such stockholder should vote on the Merger and is not to be quoted or
referred to, in whole or in part, in any registration statement, prospectus or
proxy statement, or in any other document used in connection with the offering
or sale of securities, nor shall this letter be used for any other purposes,
without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the stockholders of the Company in
the Offer and the Merger is fair to such stockholders from a financial point of
view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Steven Koch
-----------------------
Steven Koch
Managing Director
B-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- --------- -------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
*+(a)(1) Offer to Purchase dated November 20, 1998...................................................
*+(a)(2) Letter of Transmittal.......................................................................
+(a)(3) Text of press release issued by the Company dated November 16, 1998.........................
(a)(4) Letter to stockholders of the Company dated November 20, 1998...............................
+(a)(5) Form of Summary Advertisement dated November 20, 1998.......................................
*(a)(6) Opinion of Credit Suisse First Boston Corporation...........................................
(b) Not applicable..............................................................................
+(c)(1) Agreement and Plan of Merger dated as of November 14, 1998..................................
+(c)(2) Form of Support Agreement entered into between Parent and John C. Argue, Arthur Brown, Denis
R. Brown, Harry M. Conger, Rayburn S. Dezember, A. Frederick Gerstell, Richard A. Grant,
Jr., Edward A. Landry, Thomas L. Lee, Thomas M. Linden, Georgia R. Nelson, Stuart T.
Peeler......................................................................................
+(c)(3) Confidentiality Agreement, dated as of September 24, 1998, between the Company and Parent...
(c)(4) Complaint captioned William Steiner v. CalMat Co., A. Frederick Gerstell, John C. Argue,
Arthur Brown, Denis R. Brown, Harry M. Conger, Rayburn S. Dezember, William P. Huston,
Edward A. Landry, Thomas L. Lee, Thomas M. Linden, Georgia R. Nelson and Stuart T. Peeler...
(c)(5) Complaint captioned Charles Miller v. A. Frederick Gerstell, Arthur Brown, Denis R. Brown,
Rayburn S. Dezember, Harry M. Conger, Edward A. Landry, Thomas M. Linden, Richard A. Grant,
Jr., Georgia R. Nelson, Stuart T. Peeler, John C. Argue, Thomas L. Lee, CalMat Co. and
Vulcan Materials Company....................................................................
</TABLE>
- ------------------------
* Included in materials delivered to stockholders of the Company.
+ Filed as an exhibit to the Purchaser's Tender Offer Statement on Schedule
14D-1 dated November 20, 1998, and incorporated herein by reference.
<PAGE>
[LOGO]
November 20, 1998
To the Stockholders of CalMat Co.:
I am pleased to report that on November 14, 1998, CalMat Co. (the "Company")
entered into an Agreement and Plan of Merger (the "Merger Agreement") with ALB
Acquisition Corporation, a Delaware corporation (the "Purchaser") and a wholly
owned subsidiary of Vulcan Materials Company, a New Jersey corporation
("Parent"), that provides for the acquisition of all of the Common Stock, par
value $1.00 per share (including the associated common share purchase rights,
the "Shares"), of the Company by the Purchaser at a price of $31.00 per Share
net to the seller in cash, without interest. Under the terms of the proposed
transaction, the Purchaser has commenced a tender offer (the "Offer") for all
outstanding Shares at $31.00 per Share net to the seller in cash, without
interest. The Offer is currently scheduled to expire at 12:00 Midnight, New York
City time, on January 1, 1999, unless the Offer is extended.
Following the successful completion of the Offer and upon approval by
stockholder vote, if required, the Purchaser will be merged with and into the
Company (the "Merger") and all Shares not purchased in the Offer will be
converted into the right to receive, without interest, an amount in cash equal
to $31.00 per Share or such greater amount which may be paid pursuant to the
Offer.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND
IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES AND RECOMMENDS THAT ALL HOLDERS
OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 and the Company's
Information Statement pursuant to Section 14(f), each filed by the Company with
the Securities and Exchange Commission. The Board of Directors of the Company
has received an opinion of Credit Suisse First Boston Corporation, financial
advisor to the Company, as to the fairness from a financial point of view of the
$31.00 per Share cash consideration to be received by the holders of Shares in
the Offer and the Merger.
Also accompanying this letter is a copy of the Offer to Purchase and related
materials of Parent, including a Letter of Transmittal for use in tendering
Shares. These documents set forth the terms and conditions of the Offer and
provide instructions as to how to tender your Shares.
WE URGE YOU TO READ EACH OF THE ENCLOSED MATERIALS CAREFULLY.
The management and directors of CalMat Co. thank you for the support you
have given the Company.
Sincerely,
[LOGO]
A. Frederick Gerstell
Chairman and Chief Executive Officer
<PAGE>
Exhibit (a)(6)
[Letterhead of Credit Suisse First Boston]
November 14, 1998
The Board of Directors
CalMat Co.
3200 San Fernando Road
Los Angeles, CA 90065
Dear Sirs and Madame:
You have asked us to advise you with respect to the fairness to the stockholders
of CalMat Co. (the "Company") from a financial point of view of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, dated as of November 14, 1998 (the "Acquisition
Agreement"), by and among the Company, Vulcan Materials Company, a New Jersey
corporation (the "Acquiror"), and ALB Acquisition Corporation (the "Sub"). The
Acquisition Agreement provides for a tender offer by Sub (the "Offer") for all
of the outstanding shares of common stock, par value $1.00 per share (the
"Common Stock"), including the associated common share purchase rights, of the
Company at a purchase price of $31.00 per share in cash. The Acquisition
Agreement further provides that following completion of the Offer, Sub will be
merged into the Company (the "Merger") pursuant to which the Company will become
a wholly owned subsidiary of the Acquiror and each outstanding share of Common
Stock of the Company will be converted into the right to receive $31.00 in cash.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as the Acquisition
Agreement. We have also reviewed certain other information, including financial
forecasts, provided to us by the Company and have met with the Company's
management to discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared this data with similar data for other publicly held
companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed
<PAGE>
November 14, 1998
Page 2
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's management as to the future
financial performance of the Company. In addition, we have not been requested to
make, and have not made, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company, nor have we been furnished
with any such evaluations or appraisals. Our opinion is necessarily based upon
financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. We were not requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
We have acted as financial advisor to the Board of Directors of the Company in
connection with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the Merger.
In the ordinary course of our business, we and our affiliates may actively trade
the debt and equity securities of both the Company and the Acquiror for our and
such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the Offer and
the Merger, does not constitute a recommendation to any stockholder as to
whether or not such stockholder should tender shares pursuant to the Offer or
how such stockholder should vote on the Merger and is not to be quoted or
referred to, in whole or in part, in any registration statement, prospectus or
proxy statement, or in any other document used in connection with the offering
or sale of securities, nor shall this letter be used for any other purposes,
without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the stockholders of the Company in
the Offer and the Merger is fair to such stockholders from a financial point of
view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Steven Koch
-----------------------
Steven Koch
Managing Director
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------x
WILLIAM STEINER, :
:
Plaintiff, :
:
v. : C.A. No. 16783
: -------
CALMAT CO., A. FREDERIC GERSTELL, :
JOHN C. ARGUE, ARTHUR BROWN, DENIS R. :
BROWN, HARRY M. CONGER, RAYBURN S. :
DEZEMBER, WILLIAM P. HUSTON, EDWARD A. :
LANDRY, THOMAS L. LEE, THOMAS M. LINDEN, :
GEORGIA R. NELSON, and STUART T. PEELER, :
:
Defendants. :
- ------------------------------------------x
CLASS ACTION COMPLAINT
Plaintiff, by has attorneys, allege upon information and belief,
except with respect to his ownership of Calmat Co. ("Calmat" or the "Company")
common stock as follows:
PARTIES
1. Plaintiff is the owner of shares of defendant Calmat.
2. Calmat Co. is a Delaware corporation with executive offices at
3200 San Fernando Road, Los Angeles, California 90065-1415. Calmat
manufactures, produces, distributes and sells asphalt and aggregates and
concretes, owns and leases undeveloped real property, sells real property, and
operates landfills. As of July 29, 1998, Calmat had approximately 23,795,779
shares of common stock outstanding held by over 1,000 shareholders of record.
<PAGE>
3. Defendant A. Frederic Gerstell is Chairman of the Board, Chief
Executive Officer and a Director of Calmat.
4. Defendant John C. Argue is a Director of Calmat.
5. Defendant Arthur Brown is a Director of Calmat.
6. Defendant Denis R. Brown is a Director of Calmat.
7. Defendant Harry M. Conger is a Director of Calmat.
8. Defendant Rayburn S. Dezember is a Director of Calmat.
9. Defendant William P. Huston is a Director of Calmat.
10. Defendant Edward A. Landry is a Director of Calmat.
11. Defendant Thomas L. Lee is a Director of Calmat.
12. Defendant Thomas M. Linden is a Director of Calmat.
13. Defendant Georgia R. Nelson is a Director of Calmat.
14. Defendant Stuart T. Peeler is a Director of Calmat.
15. The foregoing individual directors of Calmat (collectively the
"Director Defendants"), owe fiduciary duties to Calmat and its shareholders.
16. Vulcan Materials Co. ("Vulcan") is a New Jersey corporation with
executive offices at 1 Metroplex Drive, Birmingham, Alabama 35209-6893. Vulcan
produces, distributes and
2
<PAGE>
sells construction materials and other industrial chemical products.
CLASS ACTION ALLEGATIONS
17. Plaintiff brings this action on his own behalf and as a class
action on behalf of all shareholders of Calmat (except defendants herein and any
person, firm, trust, corporation or other entity related to or affiliated with
any of the defendants) or their successors in interest, who have been or will be
adversely affected by the conduct of defendants alleged herein.
18. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. As of
July 29, 1998, Calmat had over 23 million shares of common stock outstanding
held by over 1,000 shareholders of record scattered throughout the United
States.
(b) There are questions of law and fact which are common to
members of the Class and which predominate over any questions affecting any
individual members. The common questions include, inter alia, the following:
i. Whether the Defendant Directors have breached their
fiduciary duties owed by them to plaintiff and members of the Class, and/or have
aided and abetted in such breach, by virtue of their participation and/or
acquiescence and by their other conduct complained of herein;
3
<PAGE>
ii. Whether the Defendant Directors have wrongfully failed to
seek a purchaser of Calmat at the highest available price and, instead, have
allowed the valuable assets of defendant Calmat to be acquired by Vulcan at an
unfair and inadequate price;
iii. Whether plaintiff and the other members of the Class will
be irreparably damaged by the conduct complained of herein; and
vii. Whether defendants have breached or aided and abetted the
breaches of the fiduciary and other common law duties owed by them to plaintiff
and the other members of the Class.
19. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interest as the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class and will fairly and
adequately protect the interests of the Class.
20. Plaintiff anticipates that there will not be any difficulty in
the management of this litigation.
21. For the reasons stated herein, a class action is superior to
other available methods for the fair and efficient adjudication of this action.
4
<PAGE>
SUBSTANTIVE ALLEGATIONS
22. On November 16, 1998, it was announced that Vulcan would acquire
Calmat in a transaction pursuant to which each Calmat share would be exchanged
for $31 per share (the "Transaction"). The Transaction reportedly is structured
to include a first step tender offer at $31 per share cash.
23. On Friday, November 13, 1998, Calmat stock closed at $27-3/16
per share. Thus, the $31 per share transaction price represents a mere 14
percent premium over the pre-announcement trading price of Calmat.
24. The proposed Transaction is wrongful, unfair and harmful to
Calmat's public stockholders, the Class members. The proposed Transaction will
deny plaintiff and other Class members the right to obtain the best transaction
price available on a sale of the Company.
25. Defendants, acting in concert, have violated their fiduciary
duties owed to the public shareholders of Calmat and put certain of defendants'
own personal interests and the interests of defendant Vulcan ahead of the
interests of the Calmat public shareholders.
26. The Director Defendants failed to (1) undertake an adequate
evaluation of Calmat's worth as a potential merger/acquisition candidate; (2)
take adequate steps to enhance Calmat's value and/or attractiveness as a
merger/acquisition
5
<PAGE>
candidate; or (3) effectively expose Calmat to the marketplace in an effort to
create an active and open auction for Calmat.
27. While the Director Defendants of Calmat should continue to seek
out other possible purchasers of the assets of Calmat or its stock in a manner
designed to obtain the best transaction reasonably available for Calmat's
shareholders, or seek to enhance the value of Calmat for all its current
shareholders, they have instead resolved to wrongfully allow Vulcan to obtain
the valuable assets of Calmat at an inadequate price.
28. These tactics pursued by the defendants are, and will continue
to be, wrongful, unfair and harmful to Calmat' public shareholders.
29. In contemplating, planning and/or effecting the foregoing
specified acts and in pursuing and timing the Transaction, defendants are not
acting in good faith toward plaintiff and the Class, and defendants have
breached, and are breaching, their fiduciary duties to plaintiff and the Class.
30. Because the Defendant Directors (and those acting in concert
with them) dominate and control the business and corporate affairs of Calmat and
because they are in possession of private corporate information concerning
Calmat' businesses and future prospects, there exists an imbalance and disparity
of knowledge and economic power between the defendants and the
6
<PAGE>
public shareholders of Calmat and other potential bidders for Calmat.
31. By reason of the foregoing acts, practices and course of
conduct, the Director Defendants have failed to use the required care and
diligence in the exercise of their fiduciary obligations owed to Calmat and
their public shareholders.
32. As a result of the actions of the defendants, plaintiff and the
Class have been and will be damaged. Unless enjoined by this Court, the
Defendant Directors will continue to breach their fiduciary duties owed to
plaintiff and the Class, all to the irreparable harm of the Class.
33. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring that this action may be maintained as a class
action;
(b) Declaring that the proposed Transaction is unfair, unjust
and inequitable to plaintiffs and the other members of the Class;
(c) Enjoining preliminarily and permanently the defendants
from taking any steps necessary to accomplish or implement the proposed
Transaction without an adequate process to maximize the sale price of Calmat;
(d) Requiring defendants to compensate plaintiff and the
members of the Class for all losses and damages suffered
7
<PAGE>
and to be suffered by them as a result of the acts and transactions complained
of herein, together with prejudgment and post-judgment interest;
(e) Awarding plaintiff the costs and disbursements of this
action, including reasonable attorneys', accountants', and experts' fees; and
(f) Granting such other and further relief as may be just and
proper.
Dated: November 16, 1998 CHIMICLES & TIKELLIS LLP
/s/ Pamela S. Tikellis
--------------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
Attorneys for Plaintiff
OF COUNSEL:
WOLF HALDENSTEIN ADLER
FREEMAN & HERZ, LLP
270 Madison Avenue
New York, NY 10016
(212) 545-4600
8
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------x
CHARLES MILLER, individually and on :
behalf of all others similarly situated, :
:
Plaintiff, C.A. No. 16785-NC
: --------
- v. - :
:
A. FREDERICK GERSTELL, ARTHUR BROWN, :
DENIS R. BROWN, RAYBURN S. DEZEMBER, :
HARRY M. CONGER, EDWARD A. LANDRY, :
THOMAS M. LINDEN, RICHARD A. GRANT, JR., :
GEORGIA R. NELSON, STUART T. PEELER, :
JOHN C. ARGUE, THOMAS L. LEE, CALMAT :
CO., AND VULCAN MATERIALS CO., :
:
Defendants. :
:
- ------------------------------------------x
CLASS ACTION COMPLAINT
Plaintiff alleges on information and belief, except as to paragraph
2 which is alleged on knowledge, as follows:
1. Plaintiff brings this action as a class action on behalf of
himself and all other stockholders of CalMat Co. ("CalMat" or the "Company") who
are similarly situated, against: (i) the Company and the individual defendants,
each of whom is a director of the Company, for breaches of their fiduciary
duties in connection with an agreement entered into by CalMat and Vulcan
Materials Co. ("Vulcan") on or about November 16, 1998, pursuant to which CalMat
stockholders will receive $3l per share in cash for each CalMat share they own
(the "Vulcan Agreement") and (ii) against Vulcan for aiding and abetting such
breaches.
<PAGE>
THE PARTIES
2. Plaintiff Charles Miller owns and has owned CalMat common stock
at all relevant times.
3. Defendant CalMat is a Delaware corporation with principal
executive offices located at 3200 San Fernando Road in Los Angeles, California
CalMat manufactures, produces, distributes and sells construction materials
including aggregates, hot mix asphalt, and ready mixed concrete. The Company
also owns, leases and manages industrial office buildings and undeveloped real
property, and also sells real property. Its operations are conducted in
California, Arizona and New Mexico. As of March 23, 1998, CalMat had
approximately 23.8 million shares of common stock outstanding and actively
traded on the New York Stock Exchange.
4. Defendant A. Frederick Gerstell ("Gerstell") is and has been at
all relevant times the Chairman and Chief Executive Officer of CalMat.
5. Defendants Arthur Brown, Denis R. Brown, Rayburn S. Dezember,
Harry M. Conger, Edward A. Landry, Thomas M. Linden, Richard A. Grant, Jr.,
Georgia R. Nelson, Stuart T. Peeler, John C. Argue, and Thomas L. Lee are and
have been at all relevant times directors of CalMat.
6. As directors of the Company, the individual defendants referred
to in P.P. 4 and 5 (collectively referred to
-2-
<PAGE>
hereinafter as the "Individual Defendants"), are in a fiduciary relationship
with plaintiff and the public stockholders of CalMat and owe plaintiff and the
other CalMat public stockholders the highest obligations of good faith, fair
dealing, due care, loyalty and full and candid disclosure.
7. Defendant Vulcan is a New Jersey corporation with its principal
executive offices located at One Metroplex Drive in Birmingham, Alabama. Vulcan
produces industrial materials and supplies construction aggregates and
chemicals, including chloralkali and other industrial chemicals. Vulcan also
serves the chemical, paper, and water treatment industries.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action behalf of himself and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all public stockholders of CalMat, and their successors in interest, who are or
will be threatened with injury arising from defendants' actions as more fully
described herein (the "Class"). Excluded from the Class are defendants herein
and any person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants.
9. This action is properly maintainable as a class action.
(a) The Class is so numerous that joinder of all members is
impracticable. As of March 23, 1998, there were
-3-
<PAGE>
approximately 23.8 million shares of CalMat common stock outstanding, held by
over 1000 stockholders of record. CalMat's shares are actively traded on the New
York Stock Exchange. Members of the Class are scattered throughout the United
States;
(b) There are questions of law and fact which are common to
the Class and which predominate over questions affecting any individual Class
member;
(c) Defendants have acted and will continue to act on grounds
generally applicable to the Class, thereby making appropriate final injunctive
or corresponding declaratory relief with respect to the Class as a whole;
(d) A class action is superior to other methods for the fair
and efficient adjudication of the claims herein asserted and no unusual
difficulties are likely to be encountered in the management of this class
action. The likelihood of individual Class members prosecuting separate claims
is remote;
(e) Plaintiff is committed to the prosecution of this action
and has retained competent counsel experienced in litigation of this nature.
Plaintiff's claims are typical of the claims of other members of the Class and
plaintiff has the same interests as the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class and will fairly and
adequately protect the interests of the Class.
-4-
<PAGE>
10. Plaintiff does not anticipate any difficulty in the management
of this litigation as a class action.
FACTUAL BACKGROUND
11. As stated above, CalMat's operations are conducted in
California, Arizona and New Mexico. After being adversely affected by adverse
conditions in the construction industry in California for several quarters and
by unusually wet weather in California in the first quarter of l998, CalMat's
operating performance began to show signs of improvement during the second
quarter of this year.
12. On July 28, l998 CalMat announced its financial results for its
second quarter ended June 30, 1998 which reflected a significant improvement
over the Company's results for the second quarter of 1997, with net income
increasing to $6.2 million, or $.26 per share from $5.5 million or $.23 per
share in the quarter ended June 30, l997.
13. CalMat's financial performance has continued to improve
dramatically, as reflected in the Company's recently reported third quarter
financial results. On October 15, 1998, CalMat announced that its net income had
increased more than 72% over the prior year's third quarter net income, to $16
million, or $.67 per share from $9.3 million, or $.39 per share.
14. Commenting on the dramatic improvement in the Company's
financial performance, defendant Gerstell stated:
-5-
<PAGE>
To put our third quarter operating results in perspective, we earned more from
operations this quarter than in all of 1997. The benefits of the initiatives to
improve the performance and efficiency of our operations are now becoming
evident as operating income almost doubled in the third quarter. Revenue
increased 17% with strong volume and pricing improvements, and operating margins
increased from 17% to 22%. In addition, our program to sell excess real estate
has made excellent progress with almost $90 million currently under contract and
scheduled to close during the next several months.
15. Gerstell further assured investors in the October 15
announcement that greater prosperity lay ahead stating that:
We believe that the strong demand for our products, particularly
due to the recovery in Southern California's construction market, combined
with increasing benefits from our profit improvement program, bodes well for
continuing strong performance for CalMat for the remainder of 1998 as well
as 1999 and hereafter.
16. After languishing in the mid-teens, CalMat's stock price has
more than doubled since late September, driven by its improving financial
performance and Gerstell's assurances that the Company's results will continue
to improve, and reached a high of $27 3/16 on November 13.
17. On November 16, 1998 CalMat announced that its board of
directors and the board of Vulcan had approved an agreement (the "Vulcan
Agreement") pursuant to which defendant Vulcan had agreed to buy the Company
for $890 million in cash and assumed debt. Under the terms of the Vulcan
Agreement, CalMat
-6-
<PAGE>
stockholders will reportedly receive $31 in cash for each CalMat share in a
tender offer scheduled to commence this week and end on January 1, 1999 ("Tender
Offer").
18. Although the $31 Tender Offer price represents a modest premium
to CalMat's closing price of $27 3/16 on Friday, November 13, the last trading
day before the Vulcan Acquisition was announced, the benefits of CalMat's recent
dramatic turnaround which is not yet fully reflected in the price of its shares
and thus does not provide CalMat shareholders with adequate compensation for
their shares.
19. The Vulcan Agreement is not the result of an auction process or
active market check. The Individual Defendants failed to make an informed
decision, or obtain a market check of the Company's value prior to entering into
the Vulcan Agreement and the Individual Defendants thus failed to adequately
inform themselves of CalMat's highest transactional value.
20. The Individual Defendants' approval of the terms of the Vulcan
Agreement, its timing, the failure to auction the Company and invite other
bidders and failure to provide a market check constitutes a violation of their
fiduciary duties owed to the public stockholders of CalMat.
-7-
<PAGE>
21. The actions taken by the defendants are in gross disregard of
the duties each of them owes to plaintiff and the other members of the Class.
22. Defendants' fiduciary obligations require them to undertake an
appropriate evaluation of any bona fide offers, and take appropriate steps to
solicit all potential bids for the Company or its assets or consider strategic
alternatives.
23. Defendants have unique knowledge of CalMat and have access to
information concerning CalMat that has been denied or is unavailable to the
Class.
24. Plaintiff and other Class members are immediately threatened by
the acts and transactions complained of herein which have caused and will cause
irreparable injury to them.
25. Moreover, Vulcan, without whom the transaction could not take
place, with the knowledge of the Individual Defendants' above-described breaches
of fiduciary duty, has aided and abetted and rendered substantial assistance to
the Individual Defendants and stands to profit handsomely from the acquisition.
26. Unless enjoined by this Court, defendants will continue to
breach their fiduciary duties owed to plaintiff and the other members of the
Class to the irreparable harm of the Class, as aforesaid.
27. Plaintiff and the other members of the Class have no adequate
remedy at law.
-8-
<PAGE>
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this to be proper class action; ordering the
Individual Defendants to carry out their fiduciary duties to plaintiff and the
other members of the Class by announcing their intention to undertake an
appropriate and independent evaluation of alternatives designed to maximize
value for CalMat's public stockholders.
(b) enjoining consummation of the Vulcan Agreement and Tender
Offer and ordering defendants, jointly and severally, to account to plaintiff
and the other members of the Class for all damages suffered and to be suffered
by them as a result of the wrongs complained of herein;
(c) awarding plaintiff the costs and disbursements of this
action, including a reasonable allowance for plaintiff's attorney's fees and
experts' fees; and
-9-
<PAGE>
(d) granting such other and further relief as this Court may
deem to be just and proper.
Dated: November 17, 1998
CHIMICLES & TIKELLIS LLP
/s/ Pamela S. Tikellis
----------------------------
Pamela S. Tikellis
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
Attorneys for Plaintiff
OF COUNSEL:
GOODKIND LABATON RUDOFF
& SUCHAROW LLP
100 Park Avenue, 12th Floor
New York, NY 10017
(212) 907-0700
-10-
