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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14D-9/A
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
CRSS Inc.
(Name of Subject Company)
CRSS Inc.
(Name of Person(s) Filing Statement)
Common Stock, $1.00 par value
(Title of Class of Securities)
126 270 10 7
(CUSIP Number)
CRSS Inc.
1177 West Loop South, Suite 800
Houston, Texas 77027
Attn: William J. Gardiner, Senior Vice President,
Chief Financial Officer and Treasurer
(713) 552-2160
(Name, Address and Telephone Number
of Person Authorized to Receive
Notices and Communications)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is CRSS Inc., a Delaware corporation
(the "Company"), and the address of the Company is 1177 West Loop South, Suite
800, Houston, Texas 77027-9096. The title of the class of equity securities to
which this statement relates is the Common Stock, $1.00 par value (the
"Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to a tender offer from ATC Acquisition Corp., a
Delaware corporation (the "Purchaser"), and a wholly owned subsidiary of
American Tractebel Corporation, a Delaware corporation ("Parent"), disclosed in
a Tender Offer Statement on Schedule 14D-1, dated May 18, 1995 (the "Schedule
14D-1") to purchase all the outstanding Shares, at a price of $14.50 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated May 18, 1995 (the "Offer to Purchase")
and the related Letter of Transmittal (which together constitute the "Offer"
and are contained within the Schedule 14D-1).
The Offer is being made pursuant to an Agreement of Merger, dated as
of May 16, 1995 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the expiration of the Offer and fulfillment or waiver of all
remaining conditions, Purchaser will be merged with and into the Company (the
"Merger") and the Company will continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement has been filed
herewith as Exhibit 1 and is incorporated herein by reference.
Based on information in the Schedule 14D-1, the principal executive
offices of Purchaser and Parent are located at 12 East 49th Street, New York,
New York 10017.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the
person filing this statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and
understanding and actual or potential conflict of interest between the Company
or its affiliates and (i) the Company's executive officers, directors or
affiliates or (ii) Purchaser, its executive officers, directors or affiliates,
is described below or incorporated herein by reference as provided below.
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Certain contracts, agreements, arrangements and understandings between
the Company and certain of its directors and executive officers are described
in "EXECUTIVE COMPENSATION AND OTHER INFORMATION" in the Company's Proxy
Statement dated September 21, 1994 (the "1994 Proxy Statement"). Certain pages
of the 1994 Proxy Statement have been filed herewith as Exhibit 2 and are
incorporated herein by reference.
THE MERGER AGREEMENT
The summary of the Merger Agreement contained in the Offer to Purchase
which has been filed with the Securities and Exchange Commission (the
"Commission") as an exhibit to the Schedule 14D-1, a copy of which is being
provided to stockholders with this Schedule 14D-9, is incorporated herein by
reference. Such summary should be read in its entirety for a more complete
description of the terms and provisions of the Merger Agreement. The following
is a summary of certain portions of the Merger Agreement which relate to
arrangements among the Company, Purchaser, Parent and the Company's executive
officers and directors.
BOARD REPRESENTATION. The Merger Agreement provides that upon the
purchase by Parent or Purchaser of at least a majority of the outstanding
Shares, Parent shall be entitled, subject to compliance with applicable law, to
designate up to a number of directors on the Board of Directors (the "Board")
of the Company, rounded up to the next whole number (the "Purchaser
Designees"), such that Parent will have representation on the Board equal to
the percentage of outstanding shares of Common Stock held by Parent and any of
its direct or indirect wholly-owned subsidiaries (including Purchaser).
Further, the Merger Agreement provides that the Company will, upon the request
of Parent, increase the size of the Board and/or use its reasonable efforts to
secure the resignation of such number of directors as is necessary to enable
Parent's designees to be elected to the Company's Board, and to cause Parent's
designees to be so elected, provided that, prior to the Merger, the Company
will use its reasonable efforts to assure that the Company's Board always has
(at the Company's election) at least three members who are directors of the
Company as of the date of the Merger Agreement.
AGREEMENT WITH RESPECT TO DIRECTOR AND OFFICER INDEMNIFICATION AND
INSURANCE. The Merger Agreement provides that from and after the earlier of
the consummation of the Merger or the Parent's designees constituting a
majority of the Board (the "D&O Initial Date"), the Parent will cause to be
maintained in effect the Company's current directors' and officers' insurance
and indemnification policies or provide or cause to be provided benefits under
one or more equivalent policies, subject to terms and provisions no less
advantageous, for all present and former directors and officers of the Company,
covering the claims made within three years after the D&O Initial Date, if
such policies are available on a commercially reasonable basis. After the
Merger, the Parent will cause to be maintained the right to indemnification,
and to advancement of expenses, of officers and directors as provided for in
the Certificate of Incorporation and By-Laws of the Company, with respect to
indemnification for acts and
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omissions occurring prior to the Merger. Without limiting the foregoing, the
Merger Agreement provides that in the event any officer or director becomes
involved in any capacity in any action, proceeding or investigation in
connection with any matter, including without limitation, the transactions
contemplated by the Merger Agreement, occurring prior to, and including, the
Merger, Parent will cause the Company to pay as incurred such officer's or
director's legal and other expenses incurred in connection therewith in
accordance with the procedures authorized by the Bylaws of the Company and the
Delaware General Corporation Law. The Merger Agreement also provides that
Parent will cause the Company to pay all expenses, including reasonable
attorneys' fees, that may be incurred by any officer or director in enforcing
the indemnity and other obligations provided in the Merger Agreement.
EMPLOYMENT AGREEMENTS. The Merger Agreement provides that after the
Merger, the Company will honor, in accordance with their respective terms in
effect on the date of the Merger Agreement, the employment agreements of the
Company with Mr. Bruce W. Wilkinson, Mr. James T. Stewart, Mr. William J.
Gardiner, Mr. William P. Utt, Mr. Werner E. Schattner and Mr. Timothy R. Dunne.
Discussions between Purchaser and Mr. Wilkinson currently contemplate
liquidation of his Employment Agreement effective upon consummation of the
Offer, and its replacement with an agreement having a duration of 12 months
covering transitional responsibilities at a salary of 50% of Mr. Wilkinson's
current salary; however, terms of the replacement agreement have not been
finalized.
EMPLOYEE BENEFITS. The Merger Agreement provides that the Company's
employees after the Merger will continue to receive employee benefits which in
the aggregate are at least as favorable as those provided by Parent from time
to time to its employees who are similarly situated; provided that such
employee benefits shall be, in the aggregate, at least as favorable as those
currently provided by the Company to its employees. "Employee benefits" for
this purpose means all pension, profit sharing, Section 401(k), excess benefit,
deferred compensation, incentive compensation, cash bonus, severance pay,
cafeteria, flexible compensation, life insurance, medical, dental, disability,
welfare or vacation plans or arrangements of any kind and any other employee,
pension benefit plan or employee welfare benefit plan (as such terms are
defined in Section 3(2) and 3(1), respectively, of the Employee Income
Retirement Securities Act of 1974, as amended ("ERISA")) in which employees of
the Company or any of its subsidiaries participate, other than defined benefit
pension plans or any stock-based plans, agreements, or arrangements or
stock-based provisions and plans, agreements or arrangements or any
change-of-control provisions in any plans, agreements, or arrangements other
than change-of-control provisions that solely apply to the Merger. The Merger
Agreement also provides that (i) the Company's employees after the Merger will
be credited with all of their years of service with the Company and its
subsidiaries for purposes of all Employee Benefits, (ii) the Company's Senior
Management Deferred Compensation Plan (the "SMDCP"), Supplemental Executive
Retirement Plan (the "SERP"), and Senior Executive Officer Early Retirement
Plan (the "SEOERP") will be maintained by the Company after the Merger on at
least as favorable terms as are in effect on the date of the Merger Agreement
(other than change-of-control provisions that do not apply to the Merger), and
(iii) the Company's remaining
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obligations under its Leaders' Incentive Compensation Plan will be fulfilled
after the Merger with respect to the current fiscal year.
STOCK OPTIONS. Pursuant to the Merger Agreement, the Company has
agreed with respect to the stock options granted under the Company's 1990
Long-Term Incentive Plan, 1984 Non-Qualified Stock Option Plan and 1981
Incentive Stock Option Plan (collectively, the "Stock Option Plans") which are
outstanding prior to the consummation of the Offer, (a) with respect to all
stock options which are exercisable in consideration of a cash payment
prescribed by the change-of-control provisions of the respective Stock Option
Plan, to use its commercially reasonable efforts to procure the surrender of
all outstanding stock options to purchase Shares of the Company pursuant to the
respective Stock Option Plan for the cash consideration prescribed by the
change-of-control provisions, and (b) with respect to all outstanding stock
options for which change-of-control provisions do not apply, after acceptance
of Shares for payment and payment therefor and prior to the Merger, to use its
commercially reasonably efforts to procure the surrender of all such stock
options prior to the Merger. As to stock options not so surrendered, the
Company has agreed under the Merger Agreement, if requested by Purchaser, to
use its commercially reasonable efforts to obtain, prior to the Merger, the
consent of any holder of any such outstanding stock options to acquire upon
payment of the exercise price an amount of cash equal to the Merger Price (as
defined in the Merger Agreement) in lieu of each Share formerly covered
thereby. In accordance with the terms of the Merger Agreement, as a condition
to the consummation of the Merger, except for stock options to acquire 100,000
Shares, all stock options shall have been exercised or surrendered for the cash
consideration prescribed by the applicable Stock Option Plan upon a
change-of-control of the Company or, as to any stock option not so surrendered
or exercised in excess of stock options to acquire 100,000 Shares, the holder
shall have consented to acquire upon payment of the exercise price an amount of
cash equal to the Merger Price in lieu of each Share formerly covered thereby.
STOCK OPTION AND INCENTIVE PLANS
On May 11, 1995, the Board adopted resolutions authorizing the
purchase by the Company, upon consummation of the Offer, of all outstanding
Options for a cash purchase price per Share into which such Options are
exercisable equal to the highest price per Share paid by Purchaser pursuant to
the Offer less the Exercise Price of such Option, such offer to purchase by the
Company to expire upon the Merger or its earlier abandonment.
RIGHTS AGREEMENT
The Company has in place a stockholder rights plan pursuant to a
Rights Agreement between the Company and First Chicago Trust Company of New
York, as Rights Agent, dated as of November 29, 1988, as amended by amendments
dated January 27, 1994 and May 16, 1995 (the "Rights Plan"). The Rights Plan
was adopted by the Board of Directors of the Company for the purpose
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of protecting the Company and the stockholders from coercive or otherwise
unfair takeover attempts.
Under the Rights Plan, upon certain "Triggering Events," each
stockholder of the Company, other than stockholders who have acquired
beneficial ownership of 20% or more of the Company's shares (defined by the
Rights Plan as "Acquiring Persons"), are entitled to exercise certain Rights,
and receive upon such exercise Shares of the Company having a value equal to
two times the exercise price of the Rights. These Rights, if exercised,
significantly dilute the value of the Acquiring Person's Shares, thus making it
very expensive for the Acquiring Person to acquire control of the Company
without the consent of the Company.
The Triggering Events under the Rights Plan, generally speaking, are
events that affect control of the Company, including, among other events,
mergers with an Acquiring Person, the acquisition by any person of 30% or more
of the Shares, and certain significant asset sales.
The Offer and the Merger normally would constitute Triggering Events
under the Rights Plan. However, the Board of Directors, because it has
determined that the Offer and Merger are in the best interests of the Company's
stockholders, and in order to facilitate the Offer and the Merger, has amended
the Rights Plan to provide that neither Purchaser nor Parent is an Acquiring
Person (as defined under the Rights Plan), and that the Offer, Merger, and
other transactions contemplated by the Merger Agreement are not Triggering
Events (as defined under the Rights Plan) so as to trigger the Rights issued
under the Rights Plan, and do not otherwise result in any of the consequences
contemplated by the Rights Plan. This amendment to the Rights Plan is required
as a condition to the Merger Agreement; however, the Company has the right to
amend the Rights Plan in the future to reverse the effect of this amendment,
and to potentially cause the Parent and Purchaser to become Acquiring Persons,
and to cause the Offer, the Merger and the other transactions contemplated by
the Merger Agreement to be Triggering Events, if the Board of Directors of the
Company determines that such action is necessary in order for members of the
Board of Directors to satisfy their fiduciary duties to the stockholders of the
Company. A copy of the Rights Plan, including the amendments to same, is
filed herewith as Exhibits 4 through 6 and is incorporated herein by reference,
and the foregoing summary is qualified in its entirety by reference thereto.
LIMITATION OF LIABILITY
The Company's Certificate of Incorporation provides that a director of
the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director unless, and
only to the extent that, such director is liable (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or are in
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or any amendment thereto or successor provision thereto in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or (iv)
for any transactions from which the director derived an improper personal
benefit. The effect of this provision of the Company's Certificate of
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Incorporation is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of his fiduciary duty (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. This provision does
not limit or eliminate the rights of the Company or any stockholder to seek
non-monetary relief such as an injunction or rescission in the event of a
breach of a director's fiduciary duty.
CERTAIN CONFLICTS
STOCK OPTIONS. As of the date of filing of this Schedule 14D-9, the
current directors and executive officers of the Company as a group hold stock
options to purchase an aggregate of 498,037 Shares at exercise prices ranging
from $4.335 to $17.625 per Share granted under the Stock Option Plans. The
Stock Option Plans each provide that upon a change-of-control of the Company,
the outstanding Options shall vest in full and be immediately exercisable in
full. In contemplation of the Offer and the Merger, the Stock Option Plans
have been amended to provide that, in the event of a change-of-control of the
Company which is followed within one year by a merger of (a) the beneficial
owner which has, directly or indirectly, acquired securities of the Company
constituting the change-of-control of the Company with (b) the Company, in
which the Company is the surviving entity, all outstanding stock options under
the Stock Option Plans shall become exercisable only for the cash, property,
stock, securities and other consideration that a holder of the number of shares
of the Company's common stock subject to such stock option would have been
entitled to receive in such merger or consolidation.
RESTRICTED STOCK. As of the date of filing this Schedule 14D-9,
various current directors and executive officers of the Company hold 2,600
shares of restricted stock granted under the Stock Option Plans. In the event
of a change-of-control of the Company, the Stock Option Plans provide that all
restrictions with respect to the restricted stock shall lapse immediately and
immediately such stock shall vest, except with respect to the restriction
provided in Section 7(b)(ii) of the 1990 Long-Term Incentive Plan, which
provides that the Company may repurchase such Shares if the holder of such
Shares has not paid to the Company an amount equal to any federal, state, local
or foreign income or other taxes which the Company determines is required to be
withheld in respect of such Shares.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. In April 1995, the Company's
SERP, in which Mr. Bruce W. Wilkinson, Mr. Truitt Garrison and certain former
executive officers of the Company participate, was amended to extend the time
period from six months to one year following a change-of-control during which
an employee can terminate his or her employment for good cause and still
receive benefits under the SERP. It is currently contemplated that Mr.
Wilkinson will terminate his employment for good cause within one year
following the Merger, in which case he will be entitled to receive $400,000 in
a lump sum payment pursuant to the SERP.
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IRREVOCABLE GRANTOR TRUSTS. In April 1995, the Board authorized the
establishment of irrevocable grantor trusts for the SERP, the SMDCP (in which
Mr. Bruce W. Wilkinson, Mr. James T. Stewart, Mr. Werner E. Schattner and
certain former management personnel of the Company participate), and SEOERP (in
which Mr. Thomas A. Bullock and Mr. C. Herbert Paseur, each a director of the
Company, and certain former executive officers of the Company participate), to
secure fully its obligations under those plans. These trusts have not been
funded yet, but it is contemplated that they will be funded prior to
consummation of the Offer.
EMPLOYMENT AGREEMENTS. The Company maintains an employment agreement
(the "Wilkinson Agreement") with Mr. Bruce W. Wilkinson, its Chairman and
Chief Executive Officer, described under the section captioned "EXECUTIVE
COMPENSATION AND OTHER INFORMATION" in Exhibit 2 hereto, a copy of which
agreement is filed herewith as Exhibit 7 and is incorporated herein by
reference. The Wilkinson Agreement contains provisions which state that if
within three years after a change-of-control the Company terminates Mr.
Wilkinson's employment other than for cause or Mr. Wilkinson terminates
employment with the Company for good reason within six months after such good
reason arises or prior to the earlier expiration of the term of the Wilkinson
Agreement, the Company shall pay to Mr. Wilkinson a cash amount equal to 2.5
multiplied by the sum of Mr. Wilkinson's annual base salary and aggregate bonus
for the 12-month period prior to the change-of-control or prior to such
termination (whichever is greater). If the payments and benefits that Mr.
Wilkinson has a right to receive would result in "excess parachute payments",
as defined in the Internal Revenue Code of 1986, as amended (the "Code"), and
Mr. Wilkinson would be required to pay an excise tax pursuant to the Code in
respect of such payments and benefits, the Company shall also pay Mr. Wilkinson
an additional amount such that Mr. Wilkinson would retain the amount of such
payments and benefits as if such excise tax had not been payable thereon.
Termination other than for cause or resignation for good reason include
termination or resignation after certain events, such as (i) a demotion, (ii)
the assignment to Mr. Wilkinson of any duties or responsibilities that are
inconsistent with his position, (iii) layoff or involuntary termination, except
for cause or as a result of Mr. Wilkinson's retirement, disability or death,
(iv) a reduction in compensation or benefits, (v) the failure of any acquiror
of the Company to assume the Wilkinson Contract and (vi) a breach of the
Company's obligations under the Wilkinson Contract. The acquisition of Shares
pursuant to the Offer and Merger will constitute a change-of-control for
purposes of the Wilkinson Agreement. The lump sum amount that would have been
payable to Mr. Wilkinson under the Wilkinson Agreement if the Wilkinson
Agreement were terminated in accordance with the change-of-control provision
at May 10, 1995 is approximately $1,200,000 (not including amounts payable to
Mr. Wilkinson for excise taxes). See "--THE MERGER AGREEMENT--Employment
Agreement" for a discussion of current intentions with respect to
Mr. Wilkinson's employment agreement.
OTHER MATTERS. Certain other transactions have occurred, or
relationships exist, between the Company and its directors, executive officers
or affiliates. See "EXECUTIVE COMPENSATION AND OTHER INFORMATION" in Exhibit 2
hereto.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) THE RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors has, by the unanimous vote of the directors
present and voting at the meeting of the Board held May 11, 1995, called for
such purpose, approved the Merger Agreement in substantially the form presented
to and reviewed by the Board, and the transactions contemplated thereby and
recommends that all holders of Shares tender such Shares pursuant to the Offer;
however, since as of the date of the Board meeting, an offer had not yet been
made by Purchaser or Parent, the Board's approval was conditioned on receipt of
such an offer on the terms contemplated by the draft of the Merger Agreement
presented to and reviewed by the Board, as well as on receipt of the final
written fairness opinion from Morgan Stanley & Co. Incorporated ("Morgan
Stanley") and the continuing recommendation of the Offer and Merger by Mr.
Wilkinson, the Company's Chief Executive Officer. All of the directors, except
Mr. C. Herbert Paseur, were present and voting at the meeting at which such
approval was given and recommendation was made.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION.
On December 5, 1994, the Company retained Morgan Stanley to conduct a
financial advisory review of the Company's stockholder relations program. In
connection with this review, Morgan Stanley agreed to suggest such steps as
Morgan Stanley believed were appropriate with a view towards increasing the
Company's knowledge of, and responsiveness to, the interests and investment
objectives of the Company's stockholders. As part of this process, Morgan
Stanley thereafter began, among other things, the preliminary process of
identifying and contacting prospective purchasers to assess their level of
interest in a possible transaction with the Company. Morgan Stanley reported
its findings to the Board on January 26, 1995, recommending that the Company
consider a strategic merger as an alternative to remaining independent. A
subsequent engagement letter was entered into with Morgan Stanley on January
30, 1995, under the terms of which Morgan Stanley agreed to provide services in
connection with the proposed sale or merger of the Company. Pursuant to this
subsequent engagement letter, Morgan Stanley provided the Company with
financial advice and assistance in connection with the proposed sale or merger
of the Company, including advice and assistance with respect to defining
objectives, performing valuation analysis, and structuring, planning and
negotiating the transaction.
In connection with this engagement, Morgan Stanley approached or was
contacted by a substantial number of domestic and international companies on a
confidential basis, including Parent, to discuss their interest in exploring a
strategic transaction with the Company. The Company executed confidentiality
agreements, having terms described below, with several of these companies,
including Parent, and provided certain non-public information regarding the
Company to such companies. Virtually all of the companies, including Parent,
that executed confidentiality agreements undertook preliminary on-site
diligence reviews of the Company's
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business and operations. Some of these companies, Parent among them, indicated
to the Company their preliminary assessments of value. The Company's Executive
Committee considered each of these preliminary assessments to be unacceptable
and informed each of the respective companies of this fact. No further offers
were forthcoming from these companies, other than Parent, and so no further
discussions were pursued with any of these companies.
Specifically with respect to Parent, in December 1994 and January 1995,
Philippe van Marcke, President of Parent, received two phone calls from Morgan
Stanley about an opportunity to enter into discussions for the acquisition of,
or merger or other business combination with, the Company. Mr. van Marcke
expressed an interest in pursuing that discussion and, as a condition to
obtaining further information about the Company in order to evaluate a proposed
transaction, Parent executed a confidentiality agreement dated as of January
20, 1995 ("Confidentiality Agreement"). Under the Confidentiality Agreement,
Parent is required to keep confidential certain information relating to the
Company and may not use such information other than in connection with the
Offer and the Merger. In the event Parent decides not to proceed with the
transaction, the Confidentiality Agreement requires Parent to return all such
information to the Company and to destroy all other copies of written
information. The terms of the Confidentiality Agreement also provide that, for
a period of two years from the date of the agreement, Parent and its affiliates
may not, without the prior written consent of the Company, (i) acquire, offer
to acquire or agree to acquire, any voting securities or assets of the Company
or any subsidiary thereof, or of any successor to or person in control of the
Company; (ii) make or participate in any solicitation of proxies to vote, or
seek to advise or influence any person or entity with respect to the voting of,
any voting securities of the Company; or (iii) make any public announcement
with respect to, or submit a proposal for, or offer of, any extraordinary
transaction involving the Company or its securities or assets.
At a meeting in Houston on January 25, 1995, Mr. van Marcke and other
representatives from Parent met with Bruce Wilkinson, James Stewart and William
Gardiner, the Chief Executive Officer, President and Chief Financial Officer,
respectively, of the Company. Each group of representatives made a
presentation about their respective companies. The Company also discussed its
criteria for entering into a business combination with another company. The
parties decided to meet again to discuss the possibility of an acquisition.
On March 6, Mr. van Marcke and other officers of Parent met again with
Mr. Wilkinson and other Company officers in Houston. At that meeting,
Mr. van Marcke indicated that Parent could probably offer no more than the
market price for Company stock, but that Parent wanted to continue to evaluate
the possibility of an acquisition.
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On or about March 14, Mr. Wilkinson telephoned Mr. van Marcke and
indicated that the Company's Executive Committee would be meeting on March 30,
and unless the Company received a stronger indication of interest from Parent,
the Company would proceed with discussions with other parties or decide to
discontinue such discussions with Parent.
On March 28 and 29, 1995, Mr. van Marcke discussed orally with
Mr. Wilkinson a price range of $11 to $12 per Share. On March 30, 1995, Mr. van
Marcke formally advised Mr. Wilkinson that Parent's preliminary investigation
of the Company indicated a price range of $11 to $12 per Share. Mr. Wilkinson
reported this to the Company's Executive Committee at a meeting held that same
day, and then reported back to Mr. van Marcke that such price range was
considered unacceptable by the Company's Executive Committee.
On April 7, Messrs. van Marcke and Wilkinson met in Houston where they
discussed possible target prices for Company stock. Mr. van Marcke also agreed
to commence more extensive due diligence efforts to determine a target price.
During the week of April 10, Parent's representatives, including its legal and
financial advisors, met with Company representatives to review the Company's
financial and business information. Mr. van Marcke also met with Mr. Wilkinson
during this week to discuss the status of the due diligence efforts.
On April 19, Messrs. Wilkinson and Gardiner gave a presentation in New
York of the Company and its strategies and purposes to Messrs. Loeb and Deroux,
two directors of Parent, and Mr. van Marcke. After the presentation, it was
agreed that Parent would commence the process for seeking the approval
of the proposed tender offer from Powerfin, S.A. ("Powerfin"), the parent of
Parent. It was also decided that Mr. van Marcke would make a presentation at
the Company's April 27 Board meeting at which he would discuss the terms and
the timing for formalizing the proposed tender offer.
At an April 23 meeting in Houston between Messrs. Deroux and van
Marcke and Messrs. Wilkinson, Stewart, Gardiner and other Company officers,
Mr. van Marcke indicated that Parent could not make a final decision to proceed
with the tender offer by the Company's April 27 Board meeting. However, it was
decided that Mr. van Marcke still would make the previously planned
presentation at the Company's April 27 Board meeting.
During the period from May 1 to May 11, Parent's representatives
toured the Company's facilities, continued their evaluation of the Company's
business and operations and entered into discussions about the terms of the
Merger Agreement. During this time, Mr. van Marcke informed Mr. Wilkinson that
he would be meeting with Powerfin's principals in Brussels to discuss final
approval of the proposed tender offer.
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On May 10, 1995, Parent advised the Company that the purchase price of
$14.50 had been authorized, subject to satisfactory resolution of any remaining
contractual issues, and subject to obtaining the approval of Powerfin. Despite
the fact that Parent had not yet made an offer, after consideration and
discussion of the proposed purchase price and the other terms and conditions of
the proposed transactions with Parent and Purchaser, Mr. Wilkinson and other
executive officers of the Company agreed to submit such tentative non-binding
proposal to a meeting of the Board for its consideration on May 11, 1995.
On May 11, 1995, the Company's Board of Directors met to consider such
proposal and receive the oral report of Morgan Stanley. The Board of Directors
had received a substantially final draft of the Merger Agreement, a summary of
the Merger Agreement, and other supporting information, on May 9. At the
meeting, the Company's legal counsel summarized the terms of the Merger
Agreement. Counsel also described the acceleration provisions of and certain
proposed modifications to outstanding options, outstanding benefit plans,
existing management employment plans and related matters.
Representatives of Morgan Stanley then made a presentation to the
Board of Directors and delivered the oral opinion of Morgan Stanley that, as of
May 11, 1995, and based upon and subject to the matters reviewed with the
Board, the $14.50 per Share cash consideration to be received by the holders of
the Shares pursuant to the proposed Merger Agreement is fair from a financial
point of view to such holders.
The Board then analyzed and discussed the possible Offer, the proposed
Merger Agreement, and the modifications to be made or previously made to the
options, benefit plans and related agreements. Following extensive discussion
and consideration, the Board, by unanimous vote of all directors present,
determined (i) that the consideration contemplated to be received by the
holders of the Shares pursuant to the proposed Merger Agreement is fair from a
financial point of view to the holders of Shares, and that the Offer and the
Merger contemplated by the proposed Merger Agreement are fair and in the best
interests of the Company and its stockholders and that the Offer and the Merger
will directly benefit the Company and its stockholders, (ii) to approve and
consent to the proposed Offer and Merger contemplated by the proposed Merger
Agreement, (iii) to authorize the execution and delivery of the proposed Merger
Agreement, in substantially the form presented to and reviewed by the Board,
(iv) to authorize the offer to purchase outstanding stock options of the
Company, which offer will expire upon the closing of the proposed Merger or its
earlier abandonment, and (v) to recommend that the Company's stockholders
accept the proposed Offer, if and when initiated, and approve and adopt the
proposed Merger contemplated by the most recent draft of the Merger Agreement.
Since the Board had not yet received a binding offer, each of the above actions
and authorizations of the Board were conditioned on (i) execution and delivery
by Parent and Purchaser of a Merger Agreement substantially in the form
presented to and reviewed by the Board, with such changes as are approved by
the appropriate officers of the Company, (ii) delivery to the Board of
Directors of the written
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opinion of Morgan Stanley that as of the date of execution of the Merger
Agreement the consideration to be received by the holders of Shares pursuant to
the Merger Agreement is fair from a financial point of view, and (iii) the
continuing recommendation of the Offer and Merger by Mr. Wilkinson, the Chief
Executive Officer of the Company.
On May 16, 1995, the Steering Committee of Powerfin approved the
Offer, Merger and the Merger Agreement, and Parent and Purchaser executed and
delivered the Merger Agreement to the Company. In addition, on May 16, 1995,
the written fairness opinion of Morgan Stanley was received by the Company, and
consequently, the Merger Agreement was executed and delivered by Mr. Wilkinson
on behalf of the Company.
In approving the proposed Merger Agreement and the transactions
contemplated thereby and recommending that all holders of Shares tender such
Shares pursuant to the Offer, if and when initiated, the Board of Directors
considered a number of factors, including:
(i) the terms of the Merger Agreement;
(ii) the financial condition, results of operations, business
and prospects of the Company, and current industry economic
and market conditions;
(iii) that the $14.50 per Share price in the Offer represented
(a) a premium of approximately 57% over the closing price
of the Shares on May 10, 1995 (the day prior to the
meeting), (b) a premium of approximately 36% over the
closing price of the shares on December 30, 1994, and (c) a
price higher than the Shares have traded since the
Company's fourth quarter of fiscal year 1991;
(iv) the oral fairness opinion of Morgan Stanley delivered at
the Board meeting on May 11 to the effect that, as of such
date and based upon and subject to the matters reviewed
with the Board, the $14.50 per Share cash consideration to
be received by the holders of the Shares was fair from a
financial point of view to such holders;
(v) the fact that the Merger Agreement, while not permitting
the Company to solicit or initiate discussions with other
prospective purchasers, permits the Company to furnish
information to, and negotiate or participate in discussions
with, any third party if required by the fiduciary duties
of its directors after consulting with outside counsel to
the Company;
(vi) the fact that the Company and its representatives solicited
possible acquisition interest from a substantial number of
third parties before agreeing to pursue the proposed Offer
and Merger, which solicitations resulted in expressions of
interest and preliminary due diligence reviews by several
companies, but did not result in acceptable price
assessments or further negotiations;
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<PAGE> 14
(vii) the reasonableness of the fee and expense reimbursement
requirements described in Section 7.10 of the Merger
Agreement, which were a condition to the Offer; and
(viii) the limited number of conditions to the obligations of
Parent and Purchaser to consummate the Offer and the
Merger, including the fact that the Offer is not
conditioned on financing.
The Board of Directors did not assign relative weights to the foregoing
factors or determine that any factor was of more importance than other factors.
Rather, the Board of Directors viewed its position and recommendations as being
based on the totality of the information presented to and considered by it.
A copy of the written fairness opinion of Morgan Stanley is attached
hereto as Exhibit 8 and incorporated herein by reference. STOCKHOLDERS ARE
URGED TO READ THE OPINION OF MORGAN STANLEY IN ITS ENTIRETY.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
On January 30, 1995, the Company and Morgan Stanley entered into a
letter agreement (the "Engagement Letter"), pursuant to which Morgan Stanley
agreed to provide the Company with financial advice and assistance in
connection with the proposed sale or merger of the Company, and to render a
fairness opinion with respect to the consideration to be received in the
transaction.
Under the terms of the Engagement Letter, the Company will pay Morgan
Stanley an "Advisory Fee" which was estimated to be between $150,000 and
$250,000 based on time and effort expended. Upon the acquisition by Purchaser
of a majority of the Shares, the Company will pay Morgan Stanley a "Transaction
Fee", against which any Advisory Fee paid will be credited. The Transaction
Fee will be calculated as a percentage of the transaction's Aggregate Value, as
defined in the Engagement Letter. The Offer and the Merger, if consummated,
have an Aggregate Value of approximately $200,000,000 which would result in a
Transaction Fee of approximately $2,000,000. In addition, the Engagement
Letter with Morgan Stanley provides that the Company will reimburse Morgan
Stanley for its reasonable out-of-pocket expenses and will indemnify Morgan
Stanley against certain liabilities incurred in connection with its services.
The Company has been informed that Morgan Stanley, previous to
December 5, 1994, when the Company engaged Morgan Stanley as described in
Item 4(B) above, has not been retained by and does not have any other contract,
agreement, arrangement or understanding giving rise to an actual or potential
conflict of interest, and does not otherwise have any actual or potential
conflict of interest, with the Company, Purchaser, Parent or any of their
respective directors, executive officers or affiliates.
Morgan Stanley is a full service securities firm regularly engaged in a
full range of securities trading and brokerage activities, as well as
investment banking activities, including mergers and acquisitions and the
underwriting and placement of debt and equity securities. Morgan Stanley and
its affiliates provide from time to time financial advisory and/or financing
services for certain of the Parent's affiliates with respect to matters which
are unrelated to the Offer and the Merger and receive fees for the rendering of
these services. In addition, in the ordinary course of its trading and
brokerage activities, Morgan Stanley and its affiliates may at any time hold
long or short positions, and may trade or otherwise effect transactions, for
its own account or the accounts of customers, in debt or equity securities of
the Company or Parent or any of their respective affiliates.
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<PAGE> 15
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in Shares have been effected during the
past 60 days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent
permitted by applicable securities laws, rules or regulations, each executive
officer, director, affiliate and subsidiary of the Company currently intends to
tender all Shares to Purchaser which are held of record or beneficially by such
person or over which he, she or it has sole dispositive power.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, no negotiation
is being undertaken or is underway by the Company in response to the Offer
which relates to or would result in (i) an extraordinary transaction, such as a
merger or reorganization, involving the Company or any subsidiary of the
Company; (ii) a purchase, sale or transfer of a material amount of assets by
the Company or any subsidiary of the Company; (iii) a tender offer for or other
acquisition of securities by or of the Company; or (iv) any material change in
the present capitalization or dividend policy of the Company.
(b) There are no transactions, board resolutions, agreements in
principle, or any signed contracts in response to the Offer, other than as
described in Item 3(b) of this Statement, which relates to or would result in
one or more of the matters referred to in Item 7(a)(i), (ii), (iii) or (iv).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(A) DGCL 203.
Section 203 of the General Corporation Law of Delaware ("DGCL") purports
to regulate certain business combinations of a corporation organized under
Delaware law, such as the Company, with a stockholder beneficially owning 15%
or more of the voting stock of such corporation after the date the relevant
person or entity first becomes a 15% stockholder. Section 203 provides that
the corporation shall not engage for a period of three years in any business
combination with such a stockholder without approval of the holders of
two-thirds of the outstanding shares (other than the shares owned by the 15%
stockholder), with certain exceptions, including (i) prior approval by the
Board of Directors of the Corporation, either of the business combination or
the transaction which results in a stockholder becoming a 15% stockholder, or
(ii) the ownership by the 15% stockholder of at least 85% of the outstanding
voting shares of the corporation, exclusive of shares acquired in a transaction
not approved by
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<PAGE> 16
the Board of Directors. The Company's Board of Directors has approved the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, and therefore, Section 203 of the DGCL is inapplicable to the
Offer and the Merger.
(B) INFORMATION STATEMENT.
The Information Statement required by Section 14(f) and Rule 14(f)-1
of the Exchange Act will be furnished separately to stockholders in connection
with the possible designation by Purchaser, pursuant to the Merger Agreement,
of certain persons to be appointed to the Board of Directors of the Company
other than at a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit No.
- -----------
Exhibit 1** Agreement of Merger dated May 16, 1995 among ATC
Acquisition Corp., American Tractebel Corporation and
CRSS Inc.*
Exhibit 2** Pages 7-22 of the Proxy Statement, dated as of
September 21, 1994, of CRSS Inc.*
Exhibit 3** Joint Press Release issued on May 17, 1995*
Exhibit 4** Rights Agreement dated as of November 28, 1988
between CRSS Inc. and Morgan Shareholder Services
Trust Company, as Rights Agent*
Exhibit 5** Amendment to Rights Agreement dated as of January 27,
1994 between CRSS Inc. and First Chicago Trust
Company of New York, as Rights Agent*
Exhibit 6** Second Amendment to Rights Agreement dated as of
May 16, 1995 between CRSS Inc. and First Chicago
Trust Company of New York, as Rights Agent*
Exhibit 7** Amended and Restated Employment Agreement dated as of
June 30, 1988, by and between CRSS Inc. and Bruce W.
Wilkinson*
Exhibit 8** Opinion of Morgan Stanley & Co. Incorporated dated
May 16, 1995
Exhibit 9** Letter dated May 18, 1995, from Bruce W. Wilkinson,
Chairman of the Board and Chief Executive Officer of
the Company, to the stockholders of CRSS Inc. with
regard to the Offer.
________________________
* Not included in copies mailed to stockholders
** Previously filed
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.
Date: May 18, 1995
CRSS INC.
By: /s/ TIMOTHY R. DUNNE
_____________________________________
Name: Timothy R. Dunne
Title: Vice President, General Counsel
and Secretary
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