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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(Amendment No. 1)
SOLICITATION/RECOMMENDATION STATEMENT
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
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CALMAT CO.
(Name of Subject Company)
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CALMAT CO.
(Name of Person(s) Filing Statement)
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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)
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Paul Stanford
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, NY 10019-7475
(212) 474-1000
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<PAGE>
INTRODUCTION
The Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") originally filed on November 20, 1998, by CalMat Co., a
Delaware corporation (the "Company"), 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 of the common stock,
par value $1.00 per share (including the associated common share purchase
rights), of the Company. All capitalized terms used herein without
definition have the respective meanings set forth in the Schedule 14D-9.
Item 8. Additional Information to be Furnished
The response to Item 8 is hereby amended by adding the following
after the first paragraph thereof:
On November 25, 1998, a purported class action suit was filed on
behalf of Paul Green, who alleges that he is a stockholder of the Company,
against the Company, the members of the Board, Parent and the Purchaser in
the Delaware Court of Chancery. This complaint is captioned Paul Green v.
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,
CalMat Co., Vulcan Materials Co. and ALB Acquisition Corporation (the
"Green Complaint"). The Green Complaint alleges, among other things, that
the individual defendants abetted by Parent have breached their fiduciary
duties to the Company's stockholders by failing to maximize stockholder
value and by failing to make adequate disclosure. The Green Complaint
seeks, among other things, an order enjoining consummation of the Offer and
the Merger.
In addition, on November 30, 1998, a purported class action suit
was filed on behalf of Lauri Livingstone, who alleges that she is a
stockholder of the Company, against the Company and the members of the
Board in the Superior Court of the State of California for the County of
Los Angeles. This complaint is captioned Lauri Livingstone v. John C.
Argue, Arthur Brown, Denis R.. Brown, Harry M. Conger, Rayburn S. Dezember,
A. Frederick Gerstell, Richard A. Grant, Jr., William T. Huston, Edward A.
Landry, Thomas L. Lee, Thomas M. Linden, Stuart T. Peeler, CalMat Co., Inc.
and Does 1 through 100 (the "Livingstone Complaint"). The Livingstone
Complaint alleges, among other things, that the individual defendants have
breached their fiduciary duties to the Company's stockholders by failing to
maximize stockholder value. The Livingstone Complaint seeks, among other
things, an order enjoining consummation of the Offer and the Merger. The
Company believes both the Green Complaint and the Livingstone Complaint are
without merit. The Green Complaint and the Livingstone Complaint are
attached hereto as Exhibits (c)(5) and (c)(6), respectively, and are
incorporated herein by reference in their entirety.
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Item 9. Exhibits
The response to Item 9 is hereby amended by adding the following
new Exhibit:
(c)(5) Complaint captioned Paul Green v. 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, CalMat Co., Vulcan Materials Co. and ALB Acquisition
Corporation.
(c)(6) Complaint captioned Lauri Livingstone v. John C. Argue, Arthur
Brown, Denis R. Brown, Harry M. Conger, Rayburn S. Dezember, A.
Frederick Gerstell, Richard A. Grant,, Jr., William T. Huston,
Edward A. Landry, Thomas L. Lee, Thomas M. Linden, Stuart T.
Peeler, CalMat Co., Inc. and Does 1 through 100.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
CALMAT CO.
By /s/ PAUL STANFORD
---------------------------------
Name: Paul Stanford
Title: Executive Vice President,
General Counsel and
Secretary
Dated as of December 4, 1998
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EXHIBIT INDEX
Exhibit Description Page No.
(c)(5) Complaint captioned Paul Green v. 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, CalMat Co., Vulcan Materials Co. and
ALB Acquisition Corporation.
(c)(6) Complaint captioned Lauri Livingstone v. John C.
Argue, Arthur Brown, Denis R. Brown, Harry M.
Conger, Rayburn S. Dezember, A. Frederick
Gerstell, Richard A. Grant,, Jr., William T.
Huston, Edward A. Landry, Thomas L. Lee, Thomas M.
Linden, Stuart T. Peeler, CalMat Co., Inc. and
Does 1 through 100.
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Exhibit (c)(5)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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PAUL GREEN, on behalf of himself and
all others similarly situated, C.A. No. 16802NC
Plaintiff,
-against- CLASS ACTION
COMPLAINT
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, CALMAT CO., VULCAN
MATERIALS CO. and ALB ACQUISITION
CORPORATION,
Defendants.
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Plaintiff alleges upon information and belief, except
paragraph 1 which is alleged on knowledge, as follows:
PARTIES
1. Plaintiff Paul Green is, and at all relevant times was,
the owner of shares of common stock of Calmat Co. ("Calmat" or the
"Company").
2. Calmat is incorporated in Delaware. Calmat manufactures,
produces, distributes and sells construction materials and also owns,
leases and manages industrial and office buildings.
3. Defendants John C. Argue, Arthur Brown, Denis R. Brown,
Harry M. Conger, Rayburn S. Dezember, A. Frederick Gerstell
("Gerstell"), Richard A. Grant, Jr., Edward
<PAGE>
A. Landry, Thomas L. Lee, Thomas M. Linden, Georgia R. Nelson and
Stuart T. Peeler (collectively referred to herein as the "Individual
Defendants") constitute the board of directors of Calmat.
4. Defendant Vulcan Materials Co. ("Vulcan") is pursuing an
acquisition of Calmat through Vulcan's wholly-owned subsidiary,
defendant ALP Acquisition Corporation ("ALP"), a Delaware corporation,
which has been organized solely for purposes of the proposed
transaction.
CLASS ACTION ALLEGATIONS
5. Plaintiff brings this action on his own behalf and,
pursuant to Rule 23 of the Rules of this Court on behalf of all
stockholders of the Company (except the defendants herein and any
person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants) and their successors in
interest, who are or will be threatened with injury arising from
defendant's actions as more fully described herein.
6. This action is properly maintainable as a class action.
7. The class is so numerous that joinder of all members is
impracticable. The Company has more than 23 million shares of common
stock issued and outstanding, owned by hundreds, if not thousands, of
members of the Class.
8. There are questions of law and fact which are common to
the class including, inter alia, the following:
(a) whether the Individual Defendants have breached their
fiduciary duties by agreeing to the proposed transaction complained of
herein, aided and abetted by Vulcan; and
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(b) whether plaintiff and the other members of the Class
would be irreparably damaged were defendants not enjoined.
9. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature.
The claims of the plaintiff are typical of the claims of other members
of the class and the plaintiff has the same interests as the other
members of the class. Accordingly, plaintiff is an adequate
representative of the class.
10. The prosecution of separate actions would create a risk
of either inconsistent or varying adjudications concerning individual
members of the class which would establish incompatible standards of
conduct for defendants, and adjudications concerning individual
members of the class would, as a practical matter, be dispositive of
the interests of other members of the class who are not parties to the
adjudications or substantially impair or impede their ability to
protect their interests.
11. The defendants have acted on grounds generally
applicable to all members of the class, making injunctive or
declaratory relief concerning the class as a whole appropriate.
SUBSTANTIVE ALLEGATIONS
12. Calmat is a leading producer of asphalt, ready-mixed
concrete and "aggregates," or the crushed rock, sand and gravel that
go into asphalt and concrete. Calmat's materials are used in a
plethora of sites--from freeways to houses to airports--in California,
Arizona and New Mexico, with the bulk of its business in Southern
California. The Company's major markets are housing, commercial
construction and infrastructure projects such as highways.
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13. Recently the federal government has approved a more than
$200 billion highway spending program and many major construction
projects have been approved in California and other Western states in
which Calmat operates. These include the $1.9-billion Alameda
Corridor, a rail and truck expressway connecting downtown Los Angeles
and the ports of Los Angeles and Long Beach. This resurgence in
spending has caused the Company's future business prospects to
substantially improve. As an October 15, 1998, article in the Los
Angeles Times reported:
To hear Calmat tell it, all of its major markets
are recovering: housing, commercial construction
and infrastructure projects such as highways. "We
think all those things are coming back
simultaneously," Gerstell said.
14. This growing demand for construction aggregates and
materials has also led to increases in the prices for such materials.
Such increasing prices are likely to lead to increased profitability
for the Company.
15. In a further effort to increase its profitability,
Calmat has been engaging in an extensive effort to cut its costs of
producing materials which have traditionally been high compared to
industry norms and the source of both a competitive disadvantage and a
drag on earnings.
16. These improved market conditions and company operations
coalesced on October 15, 1998 when the Company reported "record
results for the third quarter" of net income of $16.0 million, or
$0.67 per share, 72% more than the prior year's third quarter of $9.3
million, or $0.39 per share. The press release announcing the earnings
quoted defendant Gerstell as stating that:
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
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evident as the 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% . .
. .
We believe that 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 thereafter.
17. Gerstell also emphasized that the Company had a program
to sell excess real estate and that there was "almost $90 million
currently under contract and scheduled to close during the next
several months." The Los Angeles Times in its October 15, 1998 article
on Calmat stated that the Company is "shedding nearly 10,000 acres of
land that are unrelated to its core business, which should provide up
to $170 million in gross proceeds."
18. As a result of these improved results and excellent
future business prospects, Calmat's stock price steadily increased
from a closing price of approximately $18.50 per share to
approximately $28.00 per share.
19. On November 16, 1998, Calmat and Vulcan announced that
they entered into a definitive merger agreement (the "Merger
Agreement") providing for the acquisition of all of the shares of
Calmat by Vulcan at a per-share price of $31 in cash through a tender
offer which is expected to expire on January 1, 1999, followed by a
merger for untendered shares. This agreed upon price represents only
approximately a 10% premium over the Company's previous trading price
and is inadequate. In addition, the $170 million in gross proceeds
expected from the sale of some of the Company's real estate assets can
be expected to finance more than 20% of the total value of the
transaction.
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20. That Vulcan is getting a bargain in the transaction is
further demonstrated by the fact that Vulcan expects the transaction
to be neutral for 1999 earnings and accretive to earnings per share in
2000.
21. The inadequacy of the $31 per share price is further
heightened by Calmat's having agreed to not pay its regular quarterly
dividend of $0.10 per share for the fourth quarter.
22. One of the primary motivations for the Individual
Defendants' entering into the Merger Agreement was to procure
approximately $43 million in severance payments by reason of a sale of
Calmat for the Company's senior executives, principally defendant
Gerstell, although defendant Gerstell will serve as Vice Chairman of
the Board of Directors of Vulcan following completion of the
transaction.
23. Calmat did not solicit alternative bids for the purchase
of the Company or its assets. Further, defendants agreed on a purchase
price only $1.00 more per share than that offered by Vulcan.
24. By entering into the agreement with Vulcan, Calmat's
Board has initiated a process to sell the Company which imposes
heightened fiduciary responsibilities and requires enhanced scrutiny
by the Court. However, the terms of the proposed transaction were not
the result of an auction process or active market check; they were
arrived at without a full and thorough investigation by the Individual
Defendants; and they are intrinsically unfair and inadequate from the
standpoint of Calmat's public shareholders.
25. The Individual Defendants failed to make an informed
decision, as no market check of the Company's value was obtained. In
agreeing to the merger, the Individual Defendants failed to properly
inform themselves of Calmat's highest transactional value.
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26. The Individual Defendants have violated the fiduciary
duties owed to the public shareholders of Calmat. The Individual
Defendants' agreement to the terms of the transaction, its timing, and
the failure to auction the Company and invite other bidders, and
defendants' failure to provide a market check demonstrate a clear
absence of the exercise of due care and of loyalty to Calmat's public
shareholders.
27. The Individual Defendants' fiduciary obligations under
these circumstances require them to:
(a) Undertake an appropriate evaluation of Calmat's net
worth as a merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in
an attempt to obtain the best value for Calmat's public shareholders.
28. The Individual Defendants have breached their fiduciary
duties by reason of the acts and transactions complained of herein,
including their decision to merge with Vulcan without making the
requisite effort to obtain the best offer possible.
29. The consideration to be paid to class members in the
proposed merger is unfair and inadequate because, among other things:
(a) the intrinsic value of Calmat's common stock is
materially in excess of the amount offered for those securities in the
merger giving due consideration to the anticipated operating results,
net asset value, cash flow, and profitability of the Company;
(b) the merger price is not the result of an appropriate
consideration of the value of Calmat because the Calmat Board approved
the proposed merger without undertaking
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steps to accurately ascertain Calmat's value through open bidding or
at least a "market check mechanism"; and
(c) by entering into the agreement with Vulcan, the
Individual Defendants have allowed the price of Calmat stock to be
capped, therby depriving plaintiff and the Class of the opportunity to
realize any increase in the value of Calmat stock.
30. In addition, plaintiff and the other members of the
Class are not being provided with material information concerning the
proposed transaction. The tender offer materials include a fairness
opinion from Credit Suisse First Boston, the Company's financial
adviser, which states that: "[w]e have also reviewed certain other
information, including financial forecasts, provided to us by the
Company. . . ." However, that information is not disclosed anywhere in
the tender offer materials being distributed to plaintiff and other
members of the Class, effectively depriving them of the information
necessary to intelligently decide whether to tender their shares of
Calmat stock.
31. In addition, the tender offer materials fail to disclose
the following facts:
(a) the Company's financial results for the most recent
fiscal quarter;
(b) the current fair market value of the Company's
extensive real estate holdings;
(c) the expected proceeds from currently planned sales
of Calmat's real estate holdings; and
(d) any synergies expected to be achieved from combining
Calmat's operations with those of Vulcan.
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32. As a result of the actions of the Individual Defendants,
plaintiff and the other members of the Class have been and will be
damaged in that they will not receive their fair proportion of the
value of the Company's assets and business and have been and will be
prevented from obtaining a fair price for their shares of Calmat
common stock.
33. Defendant Vulcan has knowingly aided and abetted the
breaches of fiduciary duty committed by the other defendants to the
detriment of Calmat's public shareholders. Indeed, the proposed merger
could not take place without the active participation of Vulcan.
Furthermore, Vulcan and its shareholders are the intended
beneficiaries of the wrongs complained of and would be unjustly
enriched absent relief in this action.
34. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment, as follows:
A. Declaring this to be a proper class action;
B. Ordering the Individual Defendants to carry out their
fiduciary duties to plaintiff and the other members of the class by
announcing their intention to:
1. cooperate fully with any person or entity, having a bona
fide interest in proposing any transaction which would maximize
shareholder value, including, but not limited to, a buyout or takeover
of the Company;
2. undertake an appropriate evaluation of the Company's
worth as a merger/acquisition candidate;
3. take all appropriate steps to enhance the Company's value
and attractiveness as a merger/acquisition candidate;
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4. take all appropriate steps to effectively expose the
Company to the marketplace in an effort to create an active auction
for the Company;
5. take proper action to maximize the value of the
consideration that the Company's shareholders will receive for their
shares.
6. act independently so that the interests of the Company's
public stockholders will be protected; and
7. adequately disclose all material information concerning
the fairness of the transaction and the valuation of the Company and
its assets by Calmat's financial advisers.
C. temporarily and permanently enjoining the transaction
complained of;
D. in the event that the proposed transaction is consummated,
rescinding it and setting it aside, or awarding rescissory damages to
the class;
E. awarding compensatory damages against defendants, individually
and severally, in an amount to be determined at trial, together with
pre-judgment and post-judgment interest at the maximum rate allowable
by law, arising from the proposed transaction;
F. awarding plaintiff the costs and disbursements of the action,
including a reasonable allowance for plaintiff's attorneys' and
experts' fees; and
G. granting such other and further relief as may be just and
proper.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By:
Mellon Bank Center, Suite 1401
P.O. Box 1070
Wilmington, Delaware 19899
OF COUNSEL: Attorneys for Plaintiff
LAW OFFICES OF JEFFREY S. ABRAHAM
60 East 42nd Street, Suite 4700
New York, N.Y. 10165
(212) 692-0555
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Exhibit (c)(6)
Kevin J. Yourman (147159)
James E. Tullman (175008)
Donald S. Urrabazo (189509)
WEISS & YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, California 90024
Tel: (310) 208-2800
Michael D. Braun (167416)
STULL, STULL & BRODY
10940 Wilshire Blvd.
23rd Floor
Los Angeles, California 90024
Tel: (310) 209-2468
Attorneys for Plaintiff
(Additional Counsel Listed On Signature Page)
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
LAURI LIVINGSTONE, individually and on ) CASE NO. BC201484
behalf of all persons similarly situated, )
) CLASS ACTION
Plaintiff, ) COMPLAINT FOR BREACH
v. ) OF FIDUCIARY DUTIES
)
JOHN C. ARGUE, ARTHUR BROWN, DENIS R. )
BROWN, HARRY M. CONGER, RAYBURN S. )
DEZEMBER, A. FREDERICK GERSTELL, )
RICHARD A. GRANT, JR., WILLIAM T. HUSTON, )
EDWARD A. LANDRY, THOMAS L. LEE, )
THOMAS M. LINDEN, STUART T. PEELER, )
CALMAT CO., INC., AND DOES 1 through 100, )
inclusive, )
)
Defendants. )
- -------------------------------------------)
Plaintiff alleges the following based upon the investigation
of her counsel, which included a review of documents filed with the
Securities Exchange Commission ("SEC") by CalMat Co. Inc. ("CalMat"),
press releases issued by CalMat and securities analyst and media
reports about CalMat, and believes that, after a reasonable
opportunity for discovery, substantial evidence will exist to support
the allegations set forth in this complaint.
<PAGE>
1. Plaintiff brings this action, individually and as a class
action on behalf of all persons similarly situated who own the common
stock of CalMat, other than defendants, to enjoin the consummation of
the proposed $760 million acquisition of CalMat by Vulcan Materials
Co. ("Vulcan"). Alternatively, in the event that the transaction is
consummated, plaintiff seeks to recover damages caused by the director
defendants' breach of fiduciary duties described herein. The proposed
transaction and the acts of the director defendants constitute a
breach of their fiduciary duties to plaintiff and the class to take
all necessary and appropriate steps to obtain the maximum value
realizable for the shareholders of CalMat.
PARTIES
2. Plaintiff Lauri Livingstone is, and has been since prior
to the announcement of the proposed transaction described herein, the
beneficial owner of 200 shares of common stock of CalMat.
3. Defendant CalMat Co., Inc. is a Delaware corporation that
has its principal executive office located at 3200 San Fernando Road,
Los Angeles, California 90065. CalMat is comprised of two business
segments. The Construction Materials Division manufactures, produces,
distributes, and sells construction materials. The Properties Division
owns, leases, and manages industrial and office buildings, owns and
leases undeveloped real property, and sells real property.
4. Defendant John C. Argue ("Argue") is, and at all relevant
times has been, a director of CalMat since 1990.
5. Defendant Arthur Brown is, and at all relevant times has
been, a director of CalMat since 1994.
6. Defendant Denis R. Brown is, and at all relevant times
has been, a director of CalMat since 1997.
7. Defendant Harry M. Conger ("Conger") is, and at all
relevant times has been, a director of CalMat since 1984.
8. Defendant Rayburn S. Dezember ("Dezember") is, and at all
relevant times has been, a director of CalMat since 1989.
9. Defendant A. Fredrick Gerstell ("Gerstell") is, and at
all relevant times has been,
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Chairman of the Board of Directors and Chief Executive Officer of
CalMat. From 1984 to 1988, Gerstell was President and Chief Operating
Officer of CalMat. In 1988, he was elected Chief Executive Officer
and, in 1991, he was elected Chairman of the Board.
10. Defendant Richard A. Grant, Jr. ("Grant") is, and at all
relevant times has been, a director of CalMat since 1984.
11. Defendant William T. Huston ("Huston") is, and at all
relevant times has been, a director of CalMat since 1984.
12. Defendant Edward A. Landry ("Landry") is, and at all
relevant times has been, a director of CalMat since 1994.
13. Defendant Thomas L. Lee ("Lee") is, and at all relevant
times has been, a director of CalMat since 1990.
14. Defendant Thomas M. Linden ("Linden") is, and all
relevant times has been, a director of CalMat since 1984.
15. Defendant Georgia R. Nelson ("Nelson") is, and at all
relevant times has been a director of CalMat since 1997.
16. Defendant Stuart T. Peeler ("Peeler") is, and at all
relevant times has been, a director of CalMat since 1984.
17. Defendants Argue, Arthur Brown, Denis R. Brown, Conger,
Dezember, Gerstell, Grant, Huston, Landry, Lee, Linden, Nelson, and
Peeler (the "Individual Defendants"), by reason of their corporate
directorship and/or executive positions, stand in a fiduciary position
relative to CalMat's shareholders, which fiduciary relationship, at
all times relevant herein, required the Individual Defendants to
exercise their best judgment and to act prudently and in the best
interests of CalMat's shareholders. The Individual Defendants are not
permitted to act in their own self-interest to the detriment of CalMat
shareholders.
18. Each defendant herein is sued individually as a
conspirator and aider and abettor, and, in such defendant's capacity
as an officer, director or controlling stockholder of CalMat, and the
liability of each arises from the fact that he or it has engaged in
all or part of the unlawful acts, plans, schemes, or transactions
complained of herein.
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JURISDICTION AND VENUE
19. This Court has jurisdiction over this action pursuant to
ss. 410.10 of the California Code of Civil Procedure. The violations
of law complained of herein occurred in this county. Furthermore, the
amounts in controversy exceed the jurisdictional minimum of this
Court.
20. Venue is proper in the Superior Court of the County of
Los Angeles pursuant to California Code of Civil Procedure ss.ss. 395
and 395.5.
CLASS ACTION ALLEGATIONS
21. Plaintiff brings this action individually on his own
behalf and as a class action, on behalf of all stockholders of CalMat
(except defendants herein, and any person, firm, trust, corporation,
or other entity related to or affiliated with any of the defendants)
and their successors in interest, who are or will be threatened with
injury arising from defendants' actions as more fully described herein
(the "Class").
22. This action is properly maintained as a class action.
23. The Class is so numerous that joinder of all members is
impracticable. As of November 16, 1998, there were 23,796,000 shares
of CalMat common stock outstanding. The disposition of their claims in
a class action will be of benefit to the parties and the Court. The
record holders of Cal Mat's common stock can be easily determined from
the stock transfer journals maintained by CalMat or its agents.
24. 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 action as a class action.
25. There is a well-defined community of interests in the
questions of law and fact affecting the members of the Class. Among
the questions of law and fact which are common to the Class and which
predominate over questions affecting any individual class member are,
among other things, the following:
a. whether defendants have engaged in conduct
constituting unfair dealing and have engaged in a plan and scheme to
deceive the public stockholders of CalMat and to enrich themselves at
the expense of CalMat's public stockholders;
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b. whether the proposed transaction is grossly unfair to
the public stockholders of CalMat;
c. whether defendants have failed to disclose all
material facts relating to the proposal including the potential
positive future financial benefits which they expect to derive from
CalMat;
d. whether defendants have engaged and are continuing to
engage in a plan and scheme to eliminate the public stockholders of
CalMat through fraudulent, deceptive, and coercive means and devices;
e. whether defendants willfully and wrongfully failed or
refused to obtain or attempt to obtain a purchaser for the assets of
CalMat at a higher price than the Vulcan proposal;
f. whether plaintiff and the other members of the Class
would be irreparably damaged were the transaction complained of herein
consummated;
g. whether defendants have breached or aided and abetted
the breach of the fiduciary and other common law duties owed by them
to plaintiff and the members of the Class; and
h. whether plaintiff and the Class members have been
damaged and what the proper measure of damages is.
26. Plaintiff is a member of the Class and is committed to
prosecuting this action and has retained competent counsel experienced
in litigation of this nature. Plaintiff's claims are typical of the
claims of the other members of the Class and plaintiff has the same
interests as the other members of the Class. Plaintiff does not have
interests antagonistic to or in conflict with those they seek to
represent. Plaintiff is an adequate representative of the Class.
27. The likelihood of individual class members prosecuting
separate individual actions is remote due to the relatively small loss
suffered by each Class member as compared to the burden and expense of
prosecuting litigation of this nature and magnitude. Absent a class
action, the defendants are likely to avoid liability for their
wrongdoing, and Class members are unlikely to obtain redress for their
wrongs alleged herein. This Court is an appropriate forum for this
dispute.
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SUBSTANTIVE ALLEGATIONS
28. On or about November 16, 1998, CalMat and Vulcan announced
that they had reached a definitive agreement whereby Vulcan would
acquire CalMat in a merger transaction. Under the terms of the
agreement, Vulcan will purchase all outstanding shares of CalMat for
$31 per share in cash.
29. The terms further provide CalMat will merge with and into
Vulcan, and become an subsidiary of Vulcan.
30. Defendants' intention to pursue the above transaction is in
breach of their fiduciary duties owed to CalMat's stockholders to take
all necessary steps to ensure that CalMat stockholders will receive
the maximum value realizable for their shares in any extraordinary
transaction involving CalMat.
31. The offer being advanced and the consideration offered --
$31.00 per share of CalMat common stock -- is an unfair price, does
not reflect the fair value of CalMat's equity or the significant
advantages to be obtained by CalMat as a result of the transaction and
does not offer any control premium. CalMat stock is currently selling
on the open market for essentially the same price -- $30.625 per
share. Furthermore, the intrinsic value of the equity of CalMat is
materially greater than the consideration proposed, taking into
account, among other things, CalMat's asset value, liquidation value,
expected growth, full extent of its future earnings potential,
expected increase in profitability, strength of its business, its
revenues, cash flow, and earnings power. For example, CalMat expects
to close on about $90 million in sales over the next few months.
32. For the past two fiscal quarters, CalMat has shown continued
and steady increases in revenue and net income due to strong demand
for its products.
33. For example, on August 4, 1998 in a PR Newswire article,
CalMat announced the financial results for its second quarter 1998:
CalMat Co. today reported net income of $6.2 million, or
$0.26 per share, for the second quarter of 1998, compared
with $5.5 million, or $0.23 per share, for the prior year's
second quarter.
* * *
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A. Frederick Gerstell, Chairman and Chief Executive Officer
commented, "We continue to be optimistic about our 1998
business prospects as well as 1999 and thereafter. In the
first six months aggregate prices increased 5% and asphalt
margins improved. Continued strong demand and improving
pricing bodes well for CalMat for the balance of the year. On
June 10, President Clinton signed the nation's new highway
bill (TEA-21) which provides over $200 billion in
transportation funds. This highway bill will result in a
transportation funding increase of 60% for Arizona and 45%
for California and New Mexico, over the next six years as
compared to the previous six year period."
34. On October 15, 1998, in a PR Newswire article, CalMat
announced the financial results for its third quarter 1998:
CalMat Co. Today reported net income of $16.0 million, or
$0.67 per share, for the third quarter of 1998, 72% more than
the prior year's third quarter of $9.3 million, or $0.39 per
share.
A. Frederick Gerstell, Chairman and Chief Executive Officer
comments, "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.
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 thereafter."
Net income was $19.7 million, or $0.82 per share, for the
nine months ended September 30, 1998, compared with $14.1
million, or $0.60 per share, for the comparable period in
1997, a near 40% increase in results.
Pre-tax income from operations improved to $23.2 million in
the third quarter of 1998, compared with $13.3 million for
the same quarter in 1997.
35. As a result of the second and third quarter results
announcement, the price of CalMat stock climbed from a close of $19.00
on August 4, 1998 to a high of $27.6875 on November 13, 1998.
36. The surge in CalMat's stock price has also caused analysts to
upgrade their ratings
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of CalMat stock. For example, on November 6, 1998, Merrill Lynch & Co.
analyst John O. Bermudez raised his rating from "neutral" to
"accumulate."
37. The upward trend in CalMat's financial results
notwithstanding, the Individual Defendants agreed to accept Vulcan's
offer price of $31.00 per share.
38. The Individual Defendants have considerably more knowledge
and economic power compared to that of the investing public because
they control the business and corporate affairs of CalMat, and they
are in possession of material, non-public information concerning
CalMat's assets, businesses, and future prospects. This disparity
makes it inherently unfair for the Individual Defendants to transfer
the ownership of CalMat from its public stockholders at this time and
at such an unfair and grossly inadequate price.
39. The proposed transaction is not the result of arm's-length
negotiations, but was fixed arbitrarily by Vulcan and agreed to by
defendants as part of the unlawful plan and scheme to obtain the
entire ownership of CalMat at the lowest price. These facts have not
been disclosed by defendants.
40. Furthermore, the Individual Defendants' willingness to
entertain the proposed offer requires them to take all reasonable
steps to assure the maximization of stockholder value, including the
implementation of a bidding mechanism to foster a fair auction of
CalMat to the highest bidder or the exploration of strategic
alternatives which will return greater or equivalent short-term value
to the plaintiff and the Class.
41. There is no indication that the Individual Defendants have
taken any steps to ensure that CalMat's stockholders' interest in
maximizing the value of their holdings were protected by conducting an
auction for CalMat or otherwise seeking out other potential purchasers
or the highest possible bid for CalMat, or exploring strategic
alternatives which will obtain the highest possible price for CalMat's
stockholders or return greater or equivalent short-term value to the
plaintiff and the Class. If the transaction is consummated, CalMat
shareholders will be deprived of the opportunity for substantial gains
which CalMat may realize.
42. By the acts, transactions, and courses of conduct alleged
herein, defendants, individually and as part of a common plan and
scheme and/or aiding and abetting one another in
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total disregard of their fiduciary duties, are attempting to deceive
plaintiff and the Class and deprive them unfairly of their investment
in CalMat.
43. The proposed transaction is wrongful, unfair, and harmful to
CalMat's public stockholders, and represents an attempt by defendants
to aggrandize their personal and financial positions and interests and
to enrich themselves, at the expense of and to the detriment of the
CalMat's public stockholders. The proposed transaction will deny Class
members their right to share proportionately in the true value of
CalMat's assets, profitable business, and future growth in profits and
earnings, while usurping the same for the benefit of CalMat at an
unfair and inadequate price.
44. The Individual Defendants stand to profit the most from the
proposed takeover of CalMat by Vulcan. For example, pursuant to the
terms of CalMat's agreement with Vulcan, defendant Gerstell will
become vice chairman and a director of Vulcan.
45. By reason of all of the foregoing, defendants herein have
willfully participated in unfair dealing toward plaintiff and the
other members of the Class and have engaged in and substantially
assisted and aided and abetted each other in breach of the fiduciary
duties owed by them to the Class.
46. Defendants have violated fiduciary and other common law
duties owed to the plaintiff and the other members of the Class in
that they have not and are not exercising independent business
judgment and have acted and are acting to the detriment of the Class
in order to benefit themselves and/or their colleagues.
47. As a result of the actions of defendants, plaintiff and the
Class have been and will be damaged in that they have been deceived,
are the victims of unfair dealing, and are not receiving the fair
value of CalMat's assets and businesses.
48. Unless enjoined by this Court, defendants will continue to
breach their fiduciary duties owed to plaintiff and the Class and will
succeed in their plan to enrich themselves by excluding the Class from
its fair proportionate share of CalMat's assets and businesses, all to
the irreparable harm of the Class.
49. Plaintiff and the Class have no adequate remedy of law.
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FIRST CAUSE OF ACTION
(Against All Defendants)
For Breach of Fiduciary Duty)
50. Plaintiff hereby incorporates by reference paragraphs 1
through 49 above as though fully set forth herein.
51. By virtue of plaintiff's purchase of CalMat's common stock,
and the Individual Defendants' positions of management and control,
and because plaintiff reposed trust and confidence in them, the
Individual Defendants owed to plaintiff a fiduciary duty of the
highest good faith, integrity and fair dealing.
52. In doing the things heretofore alleged, CalMat and the
Individual Defendants violated their fiduciary obligations to
plaintiff.
53. As a proximate result of defendants' aforesaid conduct,
plaintiff and the Class were damaged by injury to their property, lost
profits, loss of future income, and other general and specific
damages.
WHEREFORE, plaintiff prays for judgment and relief as follows:
(1) declaring that this lawsuit is properly maintainable as
a class action and certifying plaintiff as representative of the
Class;
(2) declaring that the defendants and each of them have
committed or aided and abetted a gross abuse of trust and have
breached their fiduciary duties to plaintiff and the other members of
the Class;
(3) declaring the transaction null and void;
(4) preliminarily and permanently enjoining defendants and
all persons acting under, in concert with, or for them from proceeding
with, consummating, or closing the transaction;
(5) in the event the transaction is consummated, rescinding
it and setting it aside;
(6) ordering defendants, jointly and severally, to account
to plaintiff and the Class for all profits realized and to be realized
by them as a result of the transaction complained of and, pending such
accounting, to hold such profits in a constructive trust for the
benefit of plaintiff
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and other members of the Class;
(7) ordering defendants to establish a stockholders'
committee comprised of Class members and their representatives to
ensure fair and adequate procedural safe-guards that allow independent
input by plaintiff and the Class in connection with any transaction
for the shares of CalMat;
(8) awarding compensatory damages against defendants,
jointly and severally, in the amount to be determined at trial,
together with prejudgment interest at the maximum rate allowable by
law;
(9) awarding plaintiff and the Class their costs and
disbursements and reasonable allowances for plaintiff's attorneys' and
experts' fees and expenses; and
(10) granting such other and further relief as may be just
and proper.
Dated: November 18, 1998 Kevin J. Yourman
James E. Tullman
Donald S. Urrabazo
WEISS & YOURMAN
By: ------------------------
Donald S. Urrabazo
10940 Wilshire Blvd., 24th Floor
Los Angeles, CA 90024
(310) 208-2800
Joseph H. Weiss
WEISS & YOURMAN
551 Fifth Avenue
New York, NY 10176
(212) 682-3025
Michael D. Braun
STULL, STULL & BRODY
10940 Wilshire Blvd., 23rd Floor
Los Angeles, California 90024
(310) 209-2468
Jules Brody
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
(212) 687-7230
Attorneys for Plaintiff
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