<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------------
DRAVO CORPORATION
(Name of Subject Company)
DRAVO CORPORATION
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
261471 10 6
-----------
(CUSIP Number of Class of Securities)
---------------------
EARL J. BELLISARIO
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
DRAVO CORPORATION
11 STANWIX STREET
PITTSBURGH, PA 15222
412-995-5500
(Name, Address and Telephone Number of Person Authorized to
Receive Notice and Communications on Behalf of the Person Filing the Statement)
---------------------
Copies to:
MICHAEL J. FLINN, ESQ.
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
ONE OXFORD CENTRE
301 GRANT STREET, 20TH FLOOR
PITTSBURGH, PA 15219-1410
412-562-1027
================================================================================
<PAGE> 2
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Dravo Corporation, a Pennsylvania
corporation ("Dravo" or the "Company"). The principal executive offices of the
Company are located at 11 Stanwix Street, Pittsburgh, PA 15222. The title of the
class of equity securities to which this Solicitation/Recommendation Statement
on Schedule 14D-9 relates is the common stock, par value $1.00 per share, of the
Company ("Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer disclosed in the Tender Offer
Statement on Schedule 14D-1 dated September 21, 1998 (the "Schedule 14D-1")
filed by Carmeuse Lime, Inc., a Delaware corporation ("Carmeuse" or "Parent"),
and DLC Acquisition Corp., a Pennsylvania corporation and a wholly-owned
subsidiary of Parent ("Purchaser"), to purchase all of the outstanding shares of
Common Stock (the "Shares") at $13.00 per Share, net to the seller in cash,
without interest and less any required withholding taxes (the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated September 21, 1998 (the "Offer to Purchase") and the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
together constitute the "Offer"), copies of which are filed as Exhibits hereto.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 15, 1998, by and among Parent, Purchaser and the Company (the
"Merger Agreement"). The obligations of Parent and Purchaser under the Merger
Agreement are guaranteed by Carmeuse SA, which, as disclosed in the Schedule
14D-1, is a Belgian corporation and an affiliate of Parent and Purchaser.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Merger Agreement.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and Purchaser are located at 390 East Joe Orr Road, Chicago Heights,
Illinois 60411-0488.
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) (1) The election and designation of directors to the Board of Directors
of the Company, as provided for in the Merger Agreement (a summary of which is
contained in this Schedule 14D-9), is subject to Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which requires the
Company to mail to its shareholders an Information Statement (the "Information
Statement") containing the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. The Information Statement is attached
as Schedule I hereto and is incorporated herein by reference. Certain contracts,
agreements, arrangements or understandings between the Company and certain of
its executive officers, directors or affiliates are described in Schedule I
hereto under the headings "Directors' Compensation," "Beneficial Security
Ownership of Directors and Executive Officers," "Executive Officers'
Compensation," "Severance Agreements" and "Executive Benefit Plan." Except as
set forth in this Item 3(b), to the knowledge of the Company, there are no
material contracts, agreements, arrangements or understanding and no actual or
potential conflicts of interest between (i) the Company or its affiliates and
the Company's executive officers, directors or affiliates; or (ii) Parent or
Purchaser and their respective executive officers, directors or affiliates.
(b) (2) THE MERGER AGREEMENT.
The Merger Agreement provides, among other things, for the making of the
Offer by Purchaser and further provides that, following consummation of the
Offer and subject to the satisfaction or waiver of certain conditions, Purchaser
will be merged with and into the Company (the "Merger") with the Company being
the surviving corporation in the Merger as a wholly owned subsidiary of the
Parent. As a result of the Merger, each outstanding Share (other than Shares
held by the Company in treasury, Shares held by the Purchaser or Parent and
Shares held by shareholders who have properly exercised their dissenters' rights
under Pennsylvania law) will be converted into the right to receive the Offer
Price at the date and time when properly executed Articles of Merger
2
<PAGE> 3
are duly filed with the Department of State of the Commonwealth of Pennsylvania
(or such later time as may be specified in the Articles of Merger) (the
"Effective Time").
The following is a summary of the material provisions of the Merger
Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text of the Merger Agreement which is incorporated herein by reference and a
copy of which has been filed with the Securities and Exchange Commission (the
"Commission") as an Exhibit to this Schedule 14D-9.
The Offer. The Merger Agreement provides that Purchaser will, and Parent
shall cause Purchaser to, commence the Offer as promptly as practical but in no
event later than five Business Days after the date of the publication of the
Offer. The Offer will be subject only to a number of shares of Common Stock
being validly tendered and not properly withdrawn prior to the expiration of the
Offer which would result in Purchaser's owning such number of shares of Common
Stock that represents at least a majority of (i) the actual outstanding shares
of Common Stock on a fully diluted basis including shares issuable upon exercise
of outstanding options (whether or not exercisable) and other securities
convertible into Common Stock and (ii) the voting power of the Company's
outstanding voting securities entitled to vote on the Merger (the "Minimum
Condition") and satisfaction or waiver of the further conditions set forth in
Annex I to the Merger Agreement, any of which conditions may be waived in the
sole discretion of Purchaser. Subject to the terms and conditions of the Offer,
Purchaser shall pay, as soon as reasonably practicable, for all Shares validly
tendered.
The Offer shall remain open (unless Purchaser elects to terminate the Offer
upon the occurrence of an Event (as defined in Annex I to the Merger Agreement))
for a period of twenty (20) Business Days from the commencement of the Offer
(the "Expiration Date"), unless Purchaser shall have extended the period of time
for which the Offer is open as may be permitted or required by the Merger
Agreement, or applicable law, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by Purchaser,
shall expire.
The Merger Agreement provides that Purchaser shall extend the Offer (i) for
ten Business Days beyond the initial Expiration Date if the Minimum Condition
has not been satisfied; and (ii) on one or more occasions, in each instance for
up to ten Business Days beyond the then scheduled Expiration Date, but not
beyond the Termination Date. If the Company, Parent or Purchaser receives a
request for additional information from a Governmental Agency with respect to
the Company's and Parent's filing under the HSR Act, the Offer shall be extended
until the waiting period under the HSR Act is terminated or until the Merger
Agreement is terminated in accordance with its terms.
Purchaser shall not, without the prior written consent of the Company, (i)
decrease or change the form of the Offer Price, (ii) reduce the number of shares
of Common Stock sought pursuant to the Offer, (iii) amend the conditions or
impose additional conditions to the Offer, (iv) amend any term of the Offer, (v)
amend the Minimum Condition, or (vi) amend any other term of the Offer in a
manner adverse to the holders of the Common Stock. Subject to the last sentence
of the preceding paragraph, Purchaser may at any time, in its sole discretion,
extend the Offer, provided, however, that Purchaser shall consummate the Offer
as promptly as possible after all conditions to the Offer have been satisfied or
waived.
Directors. The Merger Agreement provides that promptly upon the purchase
by Purchaser, pursuant to the Offer, of such number of Shares (rounded up to the
next whole number) as represents at least a majority of the outstanding shares
of Common Stock (on a fully diluted basis) and from time to time thereafter,
Purchaser shall be entitled to designate such number of directors as will give
Purchaser representation equal to the product of (a) the number of directors on
the Board of Directors of the Company (after giving effect to the appointment of
such directors) and (b) the percentage that such number of shares of Common
Stock so purchased bears to the number of shares of Common Stock outstanding;
provided, that in no event shall such number of directors be less than a
majority of the total number of directors of the Company. In connection with the
foregoing, the Company shall, upon written request by Purchaser, promptly (i)
increase the size of the Board of Directors of the Company to the extent
permitted by its Articles of Incorporation and By-Laws (as amended if
necessary); and/or (ii) take all steps necessary and appropriate to secure the
resignations of such number of directors as is necessary to enable Purchaser's
designees to be elected to the Board of Directors of the Company (and shall hold
a Board meeting for such purpose); and (iii) cause Purchaser's designees to be
so elected; provided, however, that, in the event that
3
<PAGE> 4
Parent's designees are appointed or elected to the Board of Directors, until the
Effective Time, the Board of Directors shall have at least two directors who are
directors on the date hereof and who are neither an officer of the Company or
its subsidiaries nor a designee, stockholder, affiliate or associate (within the
meaning of the federal securities laws) of Parent (the "Independent Directors");
provided further, that if the number of Independent Directors shall be reduced
below two for any reason, any remaining Independent Directors (or Independent
Director if there is only one) shall be entitled to fill such vacancy(ies) and
if no Independent Directors remain, the other directors shall designate one
person who shall not be either an officer of the Company or its subsidiaries or
a designee, shareholder, affiliate or associate of Parent to fill one of the
vacancies which person shall be deemed to be an Independent Director for
purposes of the Merger Agreement and who shall be entitled to fill any remaining
vacancy in the number of Independent Directors as provided in the Merger
Agreement. Pursuant to the Merger Agreement, and subject to applicable law, the
Company has agreed to take, at its expense, all action necessary to effect any
such election or appointment of Purchaser's designees, including mailing to all
holders of record of its outstanding securities the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
Purchaser and Parent are obligated to supply to the Company all information with
respect to themselves and their officers, directors and affiliates required by
such Section and Rule and will be solely responsible for any information
disseminated to shareholders with respect to either of them and their respective
nominees.
Upon consummation of the Offer and prior to the Effective Time, in addition
to any other approval of the directors required by applicable law or the
Articles of Incorporation or By-Laws of the Company, the Merger Agreement
provides that the affirmative vote of a majority of the Independent Directors
shall be required (i) to amend or terminate the Merger Agreement by the Company,
(ii) to waive any of the Company's rights or to exercise any of its remedies
under the Merger Agreement, (iii) to extend the time for performance of
Purchaser's obligations under the Merger Agreement or (iv) to take any other
action by the Company in connection with the Merger Agreement required to be
taken by the Board of Directors of the Company, whether or not such Independent
Directors constitute a quorum.
The Merger. Upon the terms and subject to the conditions of the Merger
Agreement, at the Effective Time, Purchaser shall be merged into the Company and
the separate existence of Purchaser shall thereupon cease, and the Company, as
the surviving corporation in the Merger, shall by virtue of the Merger continue
its corporate existence under the laws of the Commonwealth of Pennsylvania with
all of its rights, privileges, immunities, powers and franchises unaffected
thereby. The Merger shall become effective at the Effective Time when properly
executed Articles of Merger are duly filed with the Department of State of the
Commonwealth of Pennsylvania, which filing shall be made as soon as practicable
following fulfillment of the conditions set forth in the Merger Agreement, or at
such time thereafter as is provided in such Articles of Merger. The Articles of
Incorporation of the Company shall, after the Effective Time, be the Articles of
Incorporation of the Company and thereafter may be amended in accordance with
their terms and as provided by applicable law. The By-laws of Purchaser as in
effect at the Effective Time shall, after the Effective Time, be the By-laws of
the Company. The directors of Purchaser immediately prior to the Effective Time
shall, after the Effective Time, be the directors of the Company and the
officers of the Company immediately prior to the Effective Time shall, after the
Effective Time, be the officers of the Company, in each case until their
respective successors are duly elected and qualified.
Consideration to be Paid in the Merger. In the Merger, each share of
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares of Common Stock held by Purchaser, Parent or in the treasury
of the Company, all of which shall be canceled, and other than shares of Common
Stock held by shareholders exercising their dissenters' rights) shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into the right to receive $13.00 per Share, in cash, without interest
(subject to any applicable withholding tax).
Preference Stock Unaffected
As of the Effective Time, each issued and outstanding share of the
Company's Cumulative Convertible Series B Preference Stock and Series D
Cumulative Convertible Changeable Preference Stock (together, the "Preference
Stock") shall remain outstanding and unaffected by the Merger unless redeemed or
converted
4
<PAGE> 5
pursuant to the terms and conditions of the Company's Articles of Incorporation
and the applicable statement of designation of preferences and rights for such
Preference Stock.
Company Stock Options. At the Effective Time, each option (an "Option") to
purchase Common Stock issued by the Company which is outstanding shall be
canceled by virtue of the Merger and shall cease to exist. Each holder of an
Option, whether or not such Option is immediately exercisable, shall be entitled
to receive at the Effective Time, for each share of Common Stock issuable upon
exercise of such Option, an amount (subject to any applicable withholding tax)
in cash equal to the excess of (x) the Offer Price over (y) the per share
exercise price of the Option as in effect immediately prior to the Effective
Time. No consideration shall be payable with respect to any Option if the
exercise price of such Option exceeds the Offer Price.
Approval Required. The Merger Agreement provides that if required by
applicable law to approve the Merger, the Company will, promptly following
consummation of the Offer, take all action necessary in accordance with the PBCL
and its Articles of Incorporation and By-Laws to convene a meeting of its
shareholders to consider and vote upon the Plan of Merger contained in the
Merger Agreement and the transactions contemplated thereby. If a meeting of the
Company's shareholders is to be called, the Company shall, if and to the extent
requested by Purchaser but subject to the fiduciary duties of the Independent
Directors, use all reasonable efforts to solicit from such shareholders proxies
in favor of the adoption of the Plan of Merger and shall take all other action
reasonably necessary, or which otherwise may be reasonably requested by
Purchaser, to secure a vote of such shareholders in favor of adoption of the
Merger Agreement. The Company's Board of Directors has agreed to include in its
Proxy or Information Statement relating to that meeting the recommendation of
its Board of Directors that the shareholders of the Company vote in favor of the
adoption of the Merger Agreement.
Purchaser and Parent have each agreed to vote or cause to be voted all of
the Common Stock then owned by it in favor of the Merger and the Company has
agreed to vote or cause to be voted all securities entitled to vote at such
meeting with respect to which proxies in the form distributed by the Company
have been given, and not voted against the adoption of the Merger Agreement, in
favor of adoption of the Merger Agreement.
In the event that Purchaser or Parent shall acquire at least 80% or more of
the outstanding shares of each class of the Company's capital stock, the parties
have agreed to take all necessary and appropriate action, to cause the Merger to
become effective as soon as practicable after the expiration of the Offer
without a meeting of shareholders of the Company in accordance with Section
1924(b)(ii) of the PBCL.
Dissenting Shareholders--Common Stock. Notwithstanding anything in the
Merger Agreement to the contrary, shares of Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by
shareholders who (i) have not voted such shares in favor of the Merger and (ii)
have delivered timely a written demand for appraisal of such shares in the
manner provided in Subchapter D of Chapter 15 of the PBCL ("Subchapter D") shall
not be canceled and converted into the right to receive the Offer Price, unless
and until such shareholder shall have failed to perfect, or effectively shall
have withdrawn or lost, such shareholder's right to appraisal and payment under
the PBCL, but rather, such shareholders shall be entitled to payment of the fair
value of their shares determined and payable in accordance with the provisions
of Subchapter D. If such shareholder shall have so failed to perfect, or
effectively shall have withdrawn or lost such right, the Common Stock owned by
such shareholder shall thereupon be deemed to have been canceled and converted
at the Effective Time, into the right to receive the Offer Price. From and after
the Effective Time, no shareholder who has demanded appraisal rights as provided
in Subchapter D shall be entitled to vote his or her shares of Common Stock for
any purpose or to receive payment of dividends or other distributions with
respect to such shares (except dividends and other distributions payable to
shareholders of record at a date which is prior to the Effective Time). The
Company shall give Purchaser prompt notice of all written demands received by it
for appraisal of Common Stock and shall not settle or compromise any such demand
without the prior written consent of Purchaser.
Dissenting Shareholders--Preference Stock. Notwithstanding anything in the
Merger Agreement to the contrary, shares of Preference Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by holders
of shares of Preference Stock who (i) have not voted such shares in favor of the
Merger and (ii) have delivered timely a written demand for appraisal of such
shares in the manner provided in
5
<PAGE> 6
Subchapter D, unless and until such shareholder shall have failed to perfect, or
effectively shall have withdrawn or lost, such shareholder's right to appraisal
and payment under the PBCL, shall be entitled to payment of the fair value of
their shares determined and payable in accordance with the provisions of
Subchapter D. If such shareholder shall have so failed to perfect, or
effectively shall have withdrawn or lost such right, the Preference Stock owned
by such shareholder shall remain outstanding and unaffected by the Merger. From
and after the Effective Time, no shareholder who has demanded appraisal rights
as provided in Subchapter D shall be entitled to vote his or her shares of
Preference Stock for any purpose or to receive payment of dividends or other
distributions with respect to such shares (except dividends and other
distributions payable to shareholders of record at a date which is prior to the
Effective Time). The Company shall give Purchaser prompt notice of all written
demands received by it for appraisal of Preference Stock and shall not settle or
compromise any such demand without the prior written consent of Purchaser.
Interim Operations. The Company has agreed that, except as expressly
contemplated by the Merger Agreement, during the period from the date of the
Merger Agreement to the Effective Time, the Company will conduct and will cause
each of its subsidiaries to conduct its operations according to its ordinary and
usual course of business and consistent with past practice and the Company will
use and cause each of its subsidiaries to use its best efforts to preserve
intact its business organization and to maintain its existing relationships with
customers, suppliers, employees, creditors and business partners.
In addition, without limiting the generality of the foregoing and except as
otherwise expressly provided in the Merger Agreement, the Company has agreed
that, without the prior written consent of Parent:
1. the Company shall not, directly or indirectly, amend its or any of
its subsidiaries' Articles or Certificate of Incorporation or By-laws or
similar organizational documents;
2. the Company shall not, and it shall not permit any of its
subsidiaries to: (i) (A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the
Company's capital stock or that of any of its subsidiaries (other than
regularly scheduled dividends on the Preference Stock in accordance with
the terms of the Preference Stock) or (B) redeem, purchase or otherwise
acquire directly or indirectly any of the Company's capital stock (or
options, warrants, calls, commitments or rights of any kind to acquire any
shares of capital stock) or that of any of its subsidiaries, other than
redemptions of Preference Stock required by the Company's Articles of
Incorporation; (ii) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of capital stock of any class of the Company or any of its
subsidiaries, other than Common Stock issuable upon the exercise of the
Options, or upon the conversion of the Series B Preferred or Series D
Preferred outstanding on the date hereof or (iii) split, combine or
reclassify the outstanding capital stock of the Company or of any of its
subsidiaries;
3. the Company shall not, and it shall not permit any of its
subsidiaries to, acquire or agree to acquire, or dispose of or agree to
dispose of, any material assets other than in the ordinary course of
business, either by purchase, merger, consolidation, sale of shares in any
of its subsidiaries or otherwise;
4. the Company shall not, and it shall not permit any of its
subsidiaries to, transfer, lease, license, sell, mortgage, pledge, dispose
of, or encumber any of the Owned Real Property or Leased Property (except
for mortgages on such real property existing on the date hereof) or, other
than in the ordinary course of business, intellectual properties;
5. neither the Company nor any of its subsidiaries shall: (i) grant
any increase in the compensation payable or to become payable by the
Company or any of its subsidiaries to any of its officers, directors or key
employees, except for (A) increases in the ordinary course of business
consistent with past practices or to the extent required by any contract,
and (B) payment immediately prior to consummation of the Offer, of a pro
rata portion of the 1998 target award under the Company's Annual Incentive
Plan for which amounts have been accrued on the Company's financial
statements, or (ii) (A) adopt any new, (B) grant any award under any, or
(C) amend or otherwise increase, or accelerate the payment or vesting of
the amounts payable or to become payable under, any existing employee
benefit or compensation plan other than as contemplated by the Merger
Agreement or in accordance with the provisions of such benefit plan; or
(iii) increase the
6
<PAGE> 7
number of directors of the Company, enter into or modify or amend any
existing employment or severance agreement with or, grant any severance or
termination rights to any officer, director or employee of the Company or
any of its subsidiaries or terminate any of the employees of the Company
other than in the ordinary course of business; or (iv) enter into or modify
in any material respect any collective bargaining agreement;
6. neither the Company nor any of its subsidiaries shall modify, amend
or terminate in any material respect any of its Material Contracts or
waive, release or assign any material rights or claims;
7. neither the Company nor any of its subsidiaries shall: (i) incur or
assume any indebtedness other than indebtedness with respect to working
capital in amounts consistent with past practice; (ii) materially modify
any existing indebtedness or obligation; (iii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person (other than a
subsidiary), other than immaterial amounts in the ordinary course of
business consistent with past practice; (iv) make any loans, advances or
capital contributions to, or investments in, any other person (other than
to wholly owned subsidiaries of the Company or customary advances to
employees in accordance with past practice); or (v) enter into any material
commitment or transaction other than in the ordinary course of business;
8. neither the Company nor any of its subsidiaries shall change any of
the accounting methods, practices or policies used by it, unless required
by generally accepted accounting principles or SEC rules and regulations;
9. the Company shall not, and it shall not permit any of its
subsidiaries to, make or agree to make any capital expenditures, except for
capital expenditures that are not materially inconsistent with the 1998
Plan;
10. the Company shall not, and it shall not permit any of its
subsidiaries to, make any material tax election (unless required by law) or
settle or compromise any material income tax liability;
11. the Company shall not, and it shall not permit any of its
subsidiaries to, (i) waive the benefits of, or agree to modify in any
material manner, any confidentiality, standstill or similar agreement to
which the Company or any of its subsidiaries is a party, or (ii) pay,
discharge or satisfy any legal proceeding, other than a payment, discharge
or satisfaction, (A) involving payments by the Company or its subsidiaries
of less than $100,000, or (B) for which liabilities are fully reflected on
or are fully reserved against in the Company's most recent consolidated
financial statements (or the notes thereto) included in the Company SEC
Reports, in each case in complete satisfaction, and with a complete
release, of such matter with respect to all parties to such matter;
12. the Company shall not, and it shall not permit any of its
subsidiaries to, make any payment or incur any liability or obligation for
the purpose of obtaining any consent from any third party to the
transactions contemplated under the Merger Agreement; and
13. neither the Company nor any of its subsidiaries shall enter into
an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to
do any of the foregoing.
Employee Benefits. Until at least December 31, 1999, Parent will cause the
Company to maintain, at its option, either (i) the employee benefit plans of the
Company and its subsidiaries in effect on the date of the Merger Agreement or
(ii) other benefits to employees of the Company and its subsidiaries that are
not materially less favorable in the aggregate to such employees than those in
effect on September 15, 1998; provided, however, that the Company will not
maintain any plan or arrangement that provides for the issuance of securities of
the Company.
Notwithstanding anything in the Merger Agreement to the contrary, prior to
consummation of the Merger, Purchaser and Parent have agreed that the Company
may pay eligible participants a pro rata portion (from January 1, 1998 through
the Effective Time) of the 1998 target award under the Company's Annual
Incentive Plan, for which amounts have been accrued on the Company's financial
statements through such date.
7
<PAGE> 8
Parent has acknowledged the existence of those certain agreements between
the Company and various employees and former employees of the Company which
provide for the payment of severance benefits in certain circumstances, and
Parent has agreed that after the Effective Time such agreements shall continue
to be an obligation of the Company and shall remain in full force and effect.
Parent and Purchaser have agreed that until at least March 31, 2000, Parent
or its affiliates shall maintain the Company's Pittsburgh, Pennsylvania office.
No Solicitation. The Company has agreed that it will not and will not
permit any of its subsidiaries or its Company Representatives to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any Takeover Proposal; (ii) participate in any discussions or negotiations
regarding any Takeover Proposal; or (iii) enter into any agreement with respect
to any Takeover Proposal; provided, however, that, if at any time prior to the
Effective Time, the Board of Directors of the Company determines in good faith,
in consultation with its legal counsel, that it is necessary to do so in order
to comply with its fiduciary duties, the Company may, in response to an
unsolicited Takeover Proposal, (x) furnish information with respect to the
Company to any person pursuant to a confidentiality agreement and (y)
participate in negotiations regarding such Takeover Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set forth
in the preceding sentence by any Company Representative shall be deemed to be a
breach by the Company.
The Company has agreed that neither the Board of Directors of the Company
nor any committee thereof shall: (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Parent, the approval or recommendation by such
Board of Directors or such committee of the Merger Agreement or the Offer or the
Merger; (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal; or (iii) cause the Company to enter into any agreement with
respect to any Takeover Proposal. Notwithstanding the foregoing, in the event
that prior to the Effective Time the Board of Directors of the Company
determines in good faith, in consultation with its legal counsel as to legal
matters, that it is necessary to do so in order to comply with its fiduciary
duties, the Board of Directors of the Company may withdraw or modify its
approval or recommendation of the Merger Agreement, the Offer and the Merger,
approve or recommend a Superior Proposal or cause the Company to enter into an
agreement with respect to a Superior Proposal, but in each case only at a time
that is after the fifth Business Day following Parent's receipt of written
notice advising Parent that the Board of Directors of the Company has received a
Superior Proposal.
In addition, the Company shall promptly advise Parent orally of any request
for information or of any Takeover Proposal, including the terms of such
Takeover Proposal.
For the purposes of the preceding paragraphs in this section (The Merger
Agreement -- No Solicitation) "Takeover Proposal" means any inquiry, proposal or
offer from any person relating to any: (A) merger, consolidation or similar
transaction involving the Company, (B) sale, lease or other disposition directly
or indirectly by merger, consolidation, share exchange or otherwise of assets of
the Company or its subsidiaries outside the ordinary course of business
representing 10% or more of the consolidated assets of the Company and its
subsidiaries, (C) issue, sale, or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 20% or more of the voting power of the Company or (D)
transaction in which any person shall acquire beneficial ownership (as such term
is defined in Rule 13d-3 under the Exchange Act), or the right to acquire
beneficial ownership or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of more than 20% of the outstanding Common Stock, in each
case, other than the transactions with Parent contemplated by the Merger
Agreement.
Indemnification. Purchaser and Parent have agreed that until and after the
Effective Time, Purchaser's By-laws shall contain indemnification and limitation
of liability provisions which are substantially identical to the indemnification
and limitation of liability provisions of Article XVII of the By-laws of the
Company, and such provisions shall not be amended, repealed or otherwise
modified in any manner that would make any of such provisions less favorable to
the directors, officers and employees of the Company than pertain to such
persons on
8
<PAGE> 9
the date thereof. Without limiting the foregoing, from the Effective Time and
for a period of six years after the Effective Time, Parent shall, (i) indemnify,
defend and hold harmless the present and former officers, directors, employees
and agents of the Company and its subsidiaries and of Purchaser (collectively,
the "Indemnified Parties"), from and against, and pay or reimburse the
Indemnified Parties for, all losses, obligations, expenses, claims, damages or
liabilities resulting from third-party claims (and involving claims by or in the
right of the Company) and including interest, penalties, out-of-pocket expenses
and attorneys' fees incurred in the investigation or defense of any of the same
or in asserting any of their rights hereunder resulting from or arising out of
actions or omissions of such Indemnified Parties occurring on or prior to the
Effective Time (including, without limitation, the transactions contemplated by
the Merger Agreement) to the fullest extent permitted or required under (A)
applicable law, (B) the Articles of Incorporation or By-laws of the Company or
Purchaser in effect on the date of the Merger Agreement, including, without
limitation, provisions relating to advances of expenses incurred in the defense
of any action or suit, or (C) any indemnification agreement between the
Indemnified Party and the Company; and (ii) advance to any Indemnified Parties
expenses incurred in defending any action or suit with respect to such matters,
in each case to the extent such Indemnified Parties are entitled to
indemnification or advancement of expenses under the Company's or Purchaser's
Articles of Incorporation and By-laws in effect on the date thereof and subject
to the terms of such Articles of Incorporation and By-laws; provided, however,
that in the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of each such claim shall
continue until final disposition of such claim.
If Parent or the Company, as the case may be, or any of their respective
successors or assigns (i) reorganizes or consolidates with or merges into any
other person and is not the resulting, continuing or surviving corporation or
entity of such reorganization, consolidation or merger, or (ii) liquidates,
dissolves or transfers all or substantially all of its properties and assets to
any person or persons, then, and in such case, proper provision will be made so
that the successors and assigns of Parent or the Company assume all of the
indemnification obligations of Parent or the Company, as the case may be.
Parent shall use commercially reasonable efforts for a period of six years
after the Effective Time to provide officers' and directors' liability insurance
coverage for acts or omissions occurring prior to the Effective Time, including
but not limited to the transactions contemplated by the Merger Agreement,
covering each person currently covered by the Company's existing officers' and
directors' liability insurance policy, or who becomes covered by such policy
prior to the Effective Time, on terms with respect to coverage and amount no
less favorable than those of such policy in effect on September 15, 1998,
provided that in satisfying such obligation, Parent shall not be obligated to
pay premiums in excess of 150% of the amount per annum the Company paid in 1997,
and provided further that Parent shall nevertheless be obligated to provide such
coverage as may be obtained for such amount.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the fulfillment at
or prior to the Effective Time of the following conditions: (i) the Offer shall
have been consummated in accordance with its terms; (ii) the waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated; (iii) the Merger Agreement shall have been adopted
by the requisite vote of the Company's shareholders or, if permitted by Section
1924(b)(1)(ii) of the PBCL, by the Board of Directors of the Company; and (iv)
no preliminary or permanent injunction or other order by any federal or state
court in the United States which prevents the consummation of the Merger shall
have been issued and remain in effect (each party agreeing to use its best
efforts to have any such injunction lifted).
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company and its subsidiaries with respect to (i) corporate organization,
good standing and corporate power, (ii) capitalization, (iii) corporate
authority to enter into the Merger Agreement (iv) consents and approvals, (v)
accuracy of Commission reports and financial statements, (vi) absence of certain
changes or events, (vii) litigation and liabilities, (viii) accuracy of
information supplied by the Company for the Offer Documents, Schedule 14D-9, the
Rule 14f-1 Information Statement, the Proxy Statement (if required), and other
documents and any amendments or supplements thereto, (ix) ERISA matters, (x)
brokers' and finders' fees and expenses, (xi) obtaining the opinions of
financial advisors as to the fairness of the Offer Price to be received by the
shareholders pursuant to the Offer from a financial point of view,
9
<PAGE> 10
(xii) compliance with laws and permits, (xiii) environmental matters, (xiv) tax
matters, (xv) contracts, (xvi) changes in equity and (xvii) real property.
Parent and Purchaser have also made certain representations and warranties
with respect to (i) corporate organization, good standing and corporate power,
(ii) corporate authority to enter into the Merger Agreement, (iii) consents and
approvals, (iv) brokers' and finders' fees and expenses and (v) financing.
All representations and warranties set forth in the Merger Agreement shall
terminate at the Effective Time. All covenants and agreements set forth in the
Merger Agreement shall survive in accordance with their terms.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the Company's
shareholders: (i) by mutual consent of the Board of Directors of Parent and the
Board of Directors of the Company; (ii) by either Parent or the Company if the
Offer shall not have been consummated on or before December 14, 1998 (the
"Termination Date") (provided the terminating party is not otherwise in material
breach of its representations, warranties or obligations under the Merger
Agreement); (iii) by the Company if any of the conditions specified in the
Merger Agreement have not been satisfied or waived by the Company at such time
as such condition is no longer capable of satisfaction; (iv) by Parent if any of
the conditions specified in the Merger Agreement have not been satisfied or
waived by Parent at such time as such condition is no longer capable of
satisfaction; (v) by the Company, if Parent or Purchaser shall have breached or
failed to perform in any material respect any of its representations, warranties
or covenants contained in the Merger Agreement, which breach or failure to
perform (A) would give rise to a failure of condition, and (B) cannot be or has
not been cured within thirty (30) days after the giving of notice to Parent of
such breach; and (vi) by the Company, in connection with entering into an
agreement for a Superior Proposal, provided the Company has complied with all
provisions thereof, including the notice provisions therein.
In the event of termination of the Merger Agreement by either Parent or the
Company, the Merger Agreement shall forthwith become void and of no further
force and effect; provided, however, that each of the parties shall be entitled
to pursue, exercise and enforce any and all remedies, rights, powers and
privileges available to it at law or in equity for any breach of the Merger
Agreement which occurred prior to such termination unless Parent is entitled to
payment of a $9,500,000 topping fee (the "Topping Fee"), in which case the
Merger Agreement shall be of no further force or effect, the Company shall have
no other or further obligation to Parent or Purchaser (except payment of such
fee) and neither Purchaser nor Parent shall have any Remedies against Company or
any subsidiary under the Merger Agreement.
Fees and Expenses. Except as provided in the following paragraph, whether
or not the Merger is consummated, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated by the Merger
Agreement shall be paid by the party incurring such expenses.
If either (A)(i) the Company receives a bona fide Takeover Proposal at any
time after the date of the Merger Agreement and prior to the termination of the
Merger Agreement, (ii) the Merger Agreement terminates prior to the consummation
of the Offer for any reason (other than a breach of the Merger Agreement by
Parent or Purchaser), and (iii) the Company enters into a definitive agreement
for a Takeover Proposal (as defined below) with a third party within six (6)
months after the termination of this Agreement which is thereafter consummated,
or (B) the Company terminates the Merger Agreement in connection with a Superior
Proposal, then, in either event, the Company shall pay to Parent, by wire
transfer of immediately available funds, within two days after the consummation
of the Takeover Proposal or Superior Proposal, as the case may be, the Topping
Fee.
For the purposes of determining whether or not the Topping Fee is payable
only, the term "Takeover Proposal" shall mean any proposal or offer from any
person relating to any: (A) merger, consolidation or similar transaction
involving the Company, (B) sale, lease or other disposition directly or
indirectly by merger, consolidation, share exchange or otherwise of assets of
the Company or its subsidiaries outside the ordinary course of business
representing 10% or more of the consolidated assets of the Company and its
subsidiaries, (C) issue, sale, or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 20% or more of the voting power of the Company or (D)
transaction in which any person shall acquire beneficial ownership (as such term
is defined in Rule 13d-3 under the Exchange Act), or the right to
10
<PAGE> 11
acquire beneficial ownership or any "group" (as such term is defined under the
Exchange Act) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of more than 50% of the outstanding Common Stock,
in each case, other than the transactions with Parent contemplated by the Merger
Agreement.
Amendment. Subject to applicable law, the Merger Agreement may be amended
by the parties, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after approval thereof by the shareholders of
the Company, but, after such approval, no amendment shall be made which changes
the Offer Price or which in any way materially adversely affects the rights of
such shareholders, without the further approval of such shareholders. The Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties thereto.
(b)(3) ARRANGEMENTS WITH DIRECTORS, OFFICERS AND EMPLOYEES.
Certain directors, officers and employees of the Company may be deemed to
have interests in the transactions contemplated by the Merger Agreement that are
in addition to their interests as shareholders of the Company generally. The
Company's Board of Directors was aware of these interests when it considered and
approved the Merger Agreement and the transactions contemplated thereby. In
considering the recommendation of the Board in respect of the Offer, the
shareholders of the Company should be aware of these interests.
The Company has granted options to purchase shares of Common Stock to
non-employee directors, executive officers and certain other key employees of
the Company and its subsidiaries pursuant to the terms of the Company's Long
Term Incentive Award Plan of 1983, the Employee Stock Option Plan of 1988 and/or
the Stock Option Plan of 1994. Such stock options were intended to provide a
long-range incentive and a shareholder's perspective to those persons
principally responsible for the continued growth and financial success of the
Company. Pursuant to the Merger Agreement, each option to purchase Common Stock
issued by the Company which is outstanding at the Effective Time shall be
canceled by virtue of the Merger and shall cease to exist and each holder of an
Option, whether or not such Option is immediately exercisable, shall be entitled
to receive at the Effective Time, for each share of Common Stock issuable on
exercise of such Option, an amount in cash equal to the excess of (x) the Offer
Price over (y) the per share exercise price of the Option as in effect
immediately prior to the Effective Time. No consideration shall be payable with
respect to any Option if the exercise price of such Option exceeds the Offer
Price. The consideration due shall be payable without interest after (x)
verification by the Paying Agent of the ownership and terms of the particular
Option by reference to the Company's records and (y) delivery of a written
instrument duly executed by the owner of the Option, in a form to be provided by
the Paying Agent promptly after the Effective Time, setting forth (i) the
aggregate number of shares of Common Stock acquirable by such Option holder upon
exercise of all Options held by such holder, whether or not such Options are
immediately exercisable, the respective issue dates of each Option and the
exercise price of each Option; (ii) a representation by the person that he or
she is the owner of all Options described pursuant to clause (i), and that none
of those Options has expired or ceased to be exercisable; and (iii) a consent to
the treatment of such Options pursuant to the Merger Agreement in full
satisfaction of all rights relating to such Options.
The Company has entered into agreements with the executive officers of the
Company, as well as certain other officers and employees of the Company, that
provide for the payment of severance benefits to such officers and employees in
certain circumstances. Specifically, under those agreements, such officers and
employees are entitled to receive continued compensation and benefits, including
eligibility, coverage, vesting and benefit provisions under the Company's
benefit plans as if they were still an employee of the Company, for a period of
two years following the date of their termination in the event that their
employment is terminated by the Company other than "for cause" (as defined in
those agreements). In the Merger Agreement, Parent has acknowledged the
existence of these agreements and has agreed that after the Effective Time, such
agreements shall continue to be an obligation of the Company and shall remain in
full force and effect.
Under the Merger Agreement, Parent has agreed (i) to maintain in
Purchaser's By-laws after the Effective Time indemnification provisions which
are substantially similar to the indemnification provisions in the
11
<PAGE> 12
Company's By-laws immediately prior to the Effective Time; (ii) to indemnify,
defend and hold harmless for six years after the Effective Time the Company's
present and former directors, officers, employees and agents against any
liability or expenses they may incur resulting from or arising out of any
actions or omissions prior to the Effective Time to the fullest extent permitted
by law, the Company's or Purchaser's Articles of Incorporation or By-laws, or by
any agreement; and (iii) to use commercially reasonable efforts for a period of
six years after the Effective Time to provide officers' and directors' liability
insurance coverage for acts or omissions prior to the Effective Time covering
each person currently covered by the Company's existing officers' and directors'
liability insurance policy, or who becomes covered by such policy prior to the
Effective Time, on terms and in amounts no less favorable than the Company's
policy in effect on September 15, 1998, subject to certain limitations. See Item
3(b)(2), "The Merger Agreement -- Indemnification," above.
(b)(4) CONFIDENTIALITY AGREEMENT.
The following is a summary of certain provisions of the Confidentiality
Agreement, dated April 29, 1998 (the "Confidentiality Agreement"), between the
Company and Parent. This summary is qualified in its entirety by reference to
the Confidentiality Agreement, which is filed as an Exhibit hereto and
incorporated herein by reference.
In reliance on the Confidentiality Agreement, the Company supplied Parent
and its directors, officers, employees, agents or advisors (collectively,
"Representatives") with certain non-public, confidential and proprietary
information about the Company ("Evaluation Material"). Parent and its
Representatives have agreed in the Confidentiality Agreement not to use any such
Evaluation Material (whether prepared by the Company, its advisors or otherwise
and irrespective of the form of communication) which has been furnished to
Parent or to its Representatives in any manner that is detrimental to the
Company. Parent has also agreed that, without the prior written consent of the
Company, neither it nor its Representatives would disclose to any other person
the fact that the Evaluation Material has been made available, that discussions
or negotiations were taking place concerning a possible transaction involving
the companies or any of the terms, conditions or other facts with respect
thereto, unless in the written opinion of counsel to a party that such
disclosure is required by law and then only with as much prior written notice to
the Company as is practical under the circumstances. Parent also agreed that it
would not, without the prior written consent of the Company, directly or
indirectly, enter into any agreement, arrangement or understanding, with any
other person regarding a possible transaction involving the Company. In
addition, Parent agreed (with certain exceptions) that it would not, without the
prior written consent of the Board of Directors of the Company, for a period of
eighteen months from the date of the Confidentiality Agreement, acquire or offer
or agree to acquire, directly or indirectly, by purchase or otherwise, any
voting securities of the Company, or otherwise seek to influence or control, in
any manner whatsoever, the management or policies of the Company.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
At a meeting held on September 14, 1998, at which all the directors were
present, the Board of Directors of the Company unanimously approved and adopted
the Merger Agreement, including the Offer, the Merger and the other transactions
contemplated thereby. The Board of Directors has determined that the Merger
Agreement is fair to and in the best interests of the Company and its
shareholders. The Board recommends that shareholders accept the Offer and tender
their shares of Common Stock pursuant to the Offer and if a meeting of the
Company's shareholders is required to be called and held in accordance with
applicable law, recommends that shareholders approve the Merger Agreement and
the transactions contemplated thereby, including the Merger. For a discussion of
the Board's reasons for its recommendation, see "Reasons for Recommendation,"
below.
A joint press release announcing the Merger Agreement and related
transactions and a letter to the shareholders of the Company communicating the
Board's recommendation are filed as Exhibits to this Schedule 14D-9 and are
incorporated herein by reference.
(b) BACKGROUND TO THE OFFER; REASONS FOR THE RECOMMENDATION OF THE COMPANY'S
BOARD OF DIRECTORS
Background of the Offer
In October 1996, Dravo announced that, with the assistance of its financial
advisor, Lehman Brothers Inc., it intended to investigate its strategic
alternatives. Dravo desired to expand the scope of its business and thereby
12
<PAGE> 13
lessen the sensitivity of Dravo's financial results to its customers'
utilization of lime. This process, which included exploring business
combinations with several potential buyers, ultimately did not result in a shift
from Dravo's fundamental strategy. Instead, in July 1997, Dravo announced that
it would pursue internal growth through implementation of its strategic plan.
In December 1997, Dravo retained Salomon Smith Barney Inc. ("Salomon Smith
Barney") as its financial advisor for the purpose of providing Dravo with
general financial advice as well as further assisting Dravo in its evaluation of
strategic alternatives.
In early March 1998, it became generally known in the industry that Global
Stone Corporation, a major Canadian lime and aggregates producer, was for sale
and was actively seeking a buyer. On April 15, 1998, it was announced that
Oglebay Norton Corporation, a Cleveland-based company engaged in marine
transportation and materials handling, had entered into an agreement for the
acquisition of Global Stone Corporation. This transaction confirmed that the
consolidation trend in the North American lime industry would likely continue
and it became apparent that critical mass would be important to future success
in the industry.
In early April 1998, a company with interests in the lime industry
("Company A") approached Dravo regarding a possible business combination. Prior
to this time, several companies, including Company A, had informally indicated
an interest in acquiring Dravo but none of those contacts moved beyond the very
preliminary stages. In response to Company A's approach, Dravo asked Company A
to execute a confidentiality agreement and invited Company A to conduct a due
diligence investigation of Dravo. Dravo made available to Company A certain
nonpublic information regarding Dravo, and Dravo's management made presentations
to Company A and its representatives regarding Dravo's business and prospects.
In late April 1998, while Dravo continued its discussions with Company A,
Carmeuse approached Dravo to determine whether Dravo would be interested in
discussing a business combination. Dravo indicated that it would be interested
in discussing such a transaction and, after having Carmeuse execute the
Confidentiality Agreement, Dravo made available to Carmeuse the same information
that it had made available to Company A. On May 14 and 15, 1998, members of
Dravo's management made a presentation to members of Carmeuse's management
regarding the business and prospects of Dravo. Dravo indicated to Carmeuse that
time was of the essence because of Dravo's ongoing discussions with Company A.
Ultimately, Company A informed Dravo that it was not comfortable with several
due diligence issues and it withdrew from the process in May 1998. At the same
time, Carmeuse indicated that it was still interested in a transaction, but for
internal reasons Carmeuse ceased actively pursuing such a transaction.
In early May 1998, another company with interests in the lime industry
("Company B") indicated that it would be interested in exploring a business
combination with Dravo. Dravo indicated it would be interested in discussing
such a transaction and, after having Company B execute a confidentiality
agreement, Dravo made available to Company B the same information that it had
previously made available to Company A and to Carmeuse. In late July 1998,
Company B concluded its due diligence on Dravo and in early August 1998, Dravo
commenced discussions with Company B regarding a stock-for-stock merger with
Company B. Negotiations with Company B terminated in August 1998 after Dravo's
Board determined, among other things, that the exchange ratio in Company B's
proposed stock-for-stock merger was not in the best interests of Dravo or its
shareholders.
At that time, Carmeuse, together with its announced North American joint
venture partner, Lafarge Aluminates, Lime & Admixtures ("Lafarge") (together,
Carmeuse and Lafarge are referred to herein as "Carmeuse/Lafarge"), expressed in
writing a renewed interest in acquiring all of Dravo's outstanding Common Stock
for $13.00 per Share, in cash, subject to a number of conditions, including
further due diligence, board approvals and the negotiation of a definitive
merger agreement. Also, during August 1998, Company A contacted Dravo to
indicate its willingness to reopen discussions regarding a possible business
combination. Dravo's Board directed Dravo's management and Salomon Smith Barney
to contact Carmeuse/Lafarge to pursue their indication of interest and to
contact Company A to discuss their renewed interest in exploring a business
combination.
Given Lafarge's proposed involvement with Carmeuse, Dravo asked Lafarge to
agree to be bound by Carmeuse's Confidentiality Agreement with Dravo and then
invited Carmeuse/Lafarge to conduct due diligence on Dravo. On August 11, Dravo
sent to Carmeuse/Lafarge a draft of a merger agreement and related disclosure
schedules. In the ensuing weeks, Carmeuse/Lafarge conducted due diligence on
Dravo. From August 27 through September 1, 1998, members of Dravo's management
made a presentation to members of Carmeuse's
13
<PAGE> 14
management and Lafarge's management regarding the business and prospects of
Dravo. During this period, Dravo also had several meetings with representatives
of Company A to discuss various forms that a possible transaction might take.
On September 2, 1998, as Carmeuse/Lafarge was completing its due diligence
investigation of Dravo, Carmeuse/Lafarge and its advisors and Dravo and its
advisors commenced negotiation of a definitive merger agreement. After the
parties had reached a tentative agreement on most of the terms of the
transaction, other than price, Dravo scheduled a special meeting of its Board of
Directors for September 14, 1998, which was also the earliest day that Lafarge
could schedule a meeting of its Board to consider the transaction. Immediately
preceding the start of Dravo's September 14, 1998 Board meeting, Carmeuse
confirmed in writing its offer to acquire all of the outstanding Common Stock of
Dravo for $13.00 per Share, in cash, on the terms set forth in the Merger
Agreement. At the Dravo Board meeting, Dravo's senior management, together with
Salomon Smith Barney and Buchanan Ingersoll Professional Corporation, counsel to
Dravo, reviewed the proposed transaction with the Board of Directors. The Board
then unanimously approved the Merger Agreement. The Merger Agreement was
executed as of September 15, 1998 by representatives of Dravo and Carmeuse and
publicly announced on September 15, 1998.
Reasons for Recommendation
The Company's Board of Directors determined that the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, taken
together, are fair to, and in the best interests of, the Company and its
shareholders. In arriving at its decision regarding its recommendation set forth
above, the Board of Directors considered, among other things, the following:
(1) the terms and conditions of the Merger Agreement, the Offer and
the Merger, including the amount and form of the consideration being
offered, the parties' representations, warranties and covenants and the
conditions to their respective obligations;
(2) the financial condition, results of operations, cash flows and
prospects of the Company, as well as the Board of Directors' knowledge of
the business, operations, assets and properties of the Company on both a
historical and prospective basis;
(3) the recent and historical market prices and trading volume of the
Company Common Stock and the premium to such market prices represented by
the Offer Price;
(4) the current status of the industry in which the Company competes
and the Company's position in that industry;
(5) the financial condition and business reputation of Parent (and
Lafarge), and the ability of Parent and Purchaser, together with Lafarge,
to complete the Offer and the Merger in a timely manner;
(6) the extensive arms-length negotiations between the Company and the
Parent that resulted in the Merger Agreement and the Offer Price;
(7) the process that resulted in the Merger Agreement, including
possible alternative transactions to the Offer and the Merger (including
the status of discussions with Company A) and the number of other parties
contacted;
(8) the fact that the Merger Agreement permits the Company's Board of
Directors, in the exercise of its fiduciary duties, to terminate the Merger
Agreement in favor of a Superior Proposal (Upon the consummation of a
transaction resulting from a Superior Proposal, the Company must pay Parent
a topping fee of $9,500,000.); and
(9) the oral opinion of Salomon Smith Barney (which opinion was
confirmed by delivery of a written opinion dated September 15, 1998, the
date of the Merger Agreement) to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
Offer Price to be received in the Offer and the Merger by holders of
Company Common Stock (other than Parent and its affiliates) was fair, from
a financial point of view, to such holders. The full text of Salomon Smith
Barney's written opinion dated September 15, 1998, which sets forth the
assumptions made, matters considered and limitations on the review
undertaken by Salomon Smith Barney, is attached hereto as an Exhibit and is
incorporated herein by reference. Salomon Smith Barney's opinion is
directed only to the fairness, from a financial point of view, of
14
<PAGE> 15
the Offer Price to be received in the Offer and the Merger by holders of
Company Common Stock (other than Parent and its affiliates) and is not
intended to constitute, and does not constitute, a recommendation as to
whether any shareholder should tender shares of Company Common Stock
pursuant to the Offer. HOLDERS OF COMPANY COMMON STOCK ARE URGED TO
CAREFULLY READ SUCH OPINION IN ITS ENTIRETY.
The foregoing discussion of factors considered by the Board of Directors is
not intended to be exhaustive. The Company's Board of Directors did not assign
relative weights to the above factors or determine that any factor was of
particular importance. Rather, the Board viewed its position and recommendations
as being based on the totality of the information presented and considered by
it. In addition, it is possible that different members of the Board assigned
different weights to the factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained Salomon Smith Barney as its financial advisor in
connection with the Offer and the Merger. Pursuant to the terms of Salomon Smith
Barney's engagement, the Company has agreed to pay Salomon Smith Barney for its
services an aggregate financial advisory fee based on a percentage of the total
consideration (including liabilities assumed) payable in connection with the
Offer and the Merger. The fee payable to Salomon Smith Barney is currently
estimated to be approximately $2,700,000. The Company also has agreed to
reimburse Salomon Smith Barney for reasonable travel and other out-of-pocket
expenses, including the reasonable fees and disbursements of its legal counsel,
and to indemnify Salomon Smith Barney and certain related parties against
certain liabilities, including liabilities under the federal securities laws,
arising out of Salomon Smith Barney's engagement. In the ordinary course of
business, Salomon Smith Barney and its affiliates (including Travelers Group
Inc. and its affiliates) may actively trade or hold the securities of the
Company for their own account or for the account of customers and, accordingly,
may at any time hold a long or short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to the shareholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in Shares have been effected
by the Company or, to the best of the Company's knowledge, by any of its
executive officers, directors, affiliates or subsidiaries, except that executive
officers of the Company may have acquired beneficial ownership of Shares under
the Company's 401(k) Savings Plan, which acquisitions are not material.
(b) To the best of the Company's knowledge, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by such persons (other
than shares issuable upon the exercise of stock options and Shares, if any,
which if tendered could cause such persons to incur liability under the
provisions of Section 16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Statement, the Company is not engaged in
any negotiation in response to the Offer that 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) Except as described in Items 3(b) or 4, there are no transactions,
Board of Director resolutions, agreements in principle, or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
(A) SUBCHAPTER 25E RIGHTS
Holders of Common Stock have certain rights ("Subchapter 25E Rights") under
Subchapter 25E of the Pennsylvania Law ("Subchapter 25E") which will become
applicable prior to the Effective Time in the event that
15
<PAGE> 16
Purchaser (or a group of related persons, or any other person or group of
related persons) were to acquire Shares representing at least 20% of the voting
power of the Company, in connection with the Offer or otherwise (a "Control
Transaction"). In such event, shareholders of the Company would have the right
to demand "fair value" of such shareholders' Shares and to be paid such fair
value upon compliance with the requirements of Subchapter 25E. Under Subchapter
25E, "fair value" may not be less than the highest price per Share paid by the
controlling person or group at any time during the 90-day period ending on and
including the date of the Control Transaction, plus an increment, if any,
representing any value, including, without limitation, any proportion of value
payable for acquisition of control of the Company, that may not be reflected in
such price. Purchaser states in its Schedule 14D-1 that it believes that the
Offer Price represents fair value of the Shares within the meaning of Subchapter
25E. Subchapter 25E Rights would attach immediately upon consummation of a
Control Transaction and require that any shareholder seeking such appraisal must
make a demand for fair value within a reasonable time after the notice to
shareholders that a Control Transaction has occurred is given by the controlling
person or group in accordance with Subchapter 25E, which time period may be
specified in such notice, as well as comply with the other procedures of
Subchapter 25E. Subchapter 25E Rights are available only with respect to shares
of a registered corporation held by a shareholder after the occurrence of a
Control Transaction; accordingly, Subchapter 25E Rights would not be available
with respect to any Shares tendered in the Offer and accepted for payment.
Although under the terms of the Merger Agreement, Parent and Purchaser may waive
the Minimum Condition, they have stated in their Schedule 14D-1 that they do not
currently intend to do so; and Parent and Purchaser may terminate the Merger
Agreement and the transactions contemplated thereby (including, without
limitation, the Offer) if the Minimum Condition is not satisfied. The foregoing
summary of rights under Subchapter 25E is qualified in its entirety by reference
to the full text of Subchapter 25E.
(B) ANTITRUST
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules that have been promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
and the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by the Purchaser pursuant to the Offer is subject to such
requirements. Pursuant to the requirements of the HSR Act, Parent and the
Company filed their respective required Notification and Report Forms (the
"Forms") with the Antitrust Division and the FTC on September 17, 1998 and
September 21, 1998, respectively. The statutory waiting period applicable to the
purchase of Shares pursuant to the Offer is scheduled to expire at 11:59 P.M.,
New York City time, on the fifteenth day after Parent filed its Form, unless
early termination of the waiting period is granted or Parent and the Company
receive a request for additional information or documentary material prior
thereto. Pursuant to the HSR Act, Parent has requested early termination of the
applicable waiting period. However, prior to such date, the Antitrust Division
or the FTC may extend the waiting period by requesting additional information or
documentary material relevant to the acquisition. If such a request is made, the
waiting period will be extended until 11:59 P.M., New York City time, on the
tenth day after substantial compliance by Parent with such request. Thereafter,
such waiting periods can be extended only by court order. There can be no
assurance that the waiting period will be terminated early. The Antitrust
Division and the FTC frequently scrutinize the legality under the antitrust laws
of transactions. At any time before or after the consummation of any such
transaction, the Antitrust Division or the FTC could, notwithstanding
termination of the waiting period, take such action under the antitrust laws as
either deems necessary or desirable in the public interest, including seeking to
enjoin the purchase of Shares pursuant to the Offer or seeking divestiture of
the Shares so acquired or divestiture of substantial assets of Parent or the
Company. Private parties may also bring legal actions under the antitrust laws.
There can be no assurance that a challenge to the Offer on antitrust grounds
will not be made, or if such a challenge is made, what the results will be.
(C) PURCHASER'S DESIGNATION OF PERSONS TO BE ELECTED TO THE COMPANY'S BOARD
The Information Statement attached as Schedule I hereto is being furnished
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 shareholders.
16
<PAGE> 17
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
99.1 Agreement and Plan of Merger dated as of September 15, 1998 by and
among Parent, Purchaser and the Company.
99.2 Offer to Purchase dated September 21, 1998.
99.3 Confidentiality Agreement dated April 29, 1998 by and between Parent
and the Company.
99.4 Joint Press Release issued by Parent and the Company on September 15,
1998.
99.5 Opinion of Salomon Smith Barney Inc. dated September 15, 1998*.
99.6 Letter to the Shareholders dated September 21, 1998.*
99.7 Reference is made to the information under the captions "Directors'
Compensation," "Beneficial Security Ownership of Directors and Executive
Officers," "Executive Officers' Compensation," "Executive Benefit Plan," and
"Severance Agreements" which are included in Schedule I hereto.
- ---------------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
17
<PAGE> 18
SIGNATURES
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: September 21, 1998 DRAVO CORPORATION
/s/ CARL A. GILBERT
--------------------------------------
Name: Carl A. Gilbert
Title: President and Chief Executive
Officer
18
<PAGE> 19
SCHEDULE I
DRAVO CORPORATION
11 STANWIX STREET
PITTSBURGH, PA 15222
INFORMATION STATEMENT PURSUANT
TO SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND
RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about September 21, 1998
as part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9"). You are receiving this Information Statement in
connection with the possible election of persons designated by Purchaser to a
majority of seats on the Board of Directors of the Company (the "Board"). The
Merger Agreement requires the Company, upon the purchase by the Purchaser of a
majority of the outstanding shares of common stock, par value $1.00 per share of
the Company (the "Shares"), pursuant to the Offer, promptly to cause the
Purchaser's designees to be elected to the Board under the circumstances
described therein. See "Rights to Designate Directors; Purchaser's Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on Monday,
September 21, 1998. The Offer is scheduled to expire at 12:00 midnight on
Monday, October 19, 1998, New York City time, unless the Offer is extended. The
consummation of the Offer and the Merger pursuant to the terms of the Merger
Agreement would result in a change in control of the Company.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent and Purchaser, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
BOARD OF DIRECTORS
GENERAL
The Company had outstanding on September 15, 1998, 14,718,694 shares of
common stock, par value $1.00 per share (the "Common Stock"), 16,000 shares of
$2.475 Cumulative Convertible Series B Preference Stock, par value $1.00 per
share (the "Series B Preference Stock"), and 200,000 shares of Series D
Cumulative Convertible Exchangeable Preference Stock, par value $1.00 per share
(the "Series D Preference Stock").
Holders of Common Stock, Series B Preference Stock and Series D Preference
Stock are entitled to one vote for each share of any class held and to
cumulative voting rights in the election of directors. Under cumulative voting,
each shareholder, or the shareholder's proxy, is entitled, in the election of
directors, to that number of votes as determined by multiplying the number of
directors to be elected by the number of shares held by the shareholder. The
shareholder may then accumulate such votes and give to one or distribute to
either nominee as many votes as shall equal the total number of votes to which
the shareholder is entitled. The nominees receiving the greatest number of votes
are elected directors.
The shareholders of each class of the Company's outstanding capital stock
vote together as a single class on those matters brought to the shareholders of
the Company for their vote or approval, including the elections of directors.
I-1
<PAGE> 20
The Company has a classified Board of Directors, meaning that the Directors
of the Company are divided into three classes with the terms of one class
expiring each year. The term of each class of directors is three years.
RIGHTS TO DESIGNATE DIRECTORS; PURCHASER'S DESIGNEES
The Merger Agreement provides that promptly upon the purchase by Purchaser,
pursuant to the Offer, of such number of Shares (rounded up to the next whole
number) as represents at least a majority of the outstanding shares of Common
Stock (on a fully diluted basis) and from time to time thereafter, Purchaser
shall be entitled to designate such number of directors as will give Purchaser
representation equal to the product of (a) the number of directors on the Board
of Directors of the Company (after giving effect to the appointment of such
directors) and (b) the percentage that such number of shares of Common Stock so
purchased bears to the number of shares of Common Stock outstanding; provided,
that in no event shall such number of directors be less than a majority of the
total number of directors of the Company. In connection with the foregoing, the
Company shall, upon written request by Purchaser, promptly (i) increase the size
of the Board of Directors of the Company to the extent permitted by its Articles
of Incorporation and By-Laws (as amended if necessary); and/or (ii) take all
steps necessary and appropriate to secure the resignations of such number of
directors as is necessary to enable Purchaser's designees to be elected to the
Board of Directors of the Company (and shall hold a Board meeting for such
purpose); and (iii) cause Purchaser's designees to be so elected; provided,
however, that, in the event that Parent's designees are appointed or elected to
the Board of Directors, until the Effective Time the Board of Directors shall
have at least two directors who are directors on the date hereof and who are
neither an officer of the Company or its subsidiaries nor a designee,
shareholder, affiliate or associate (within the meaning of the federal
securities laws) of Parent (the "Independent Directors"); provided further, that
if the number of Independent Directors shall be reduced below two for any
reason, any remaining Independent Directors (or Independent Director if there is
only one) shall be entitled to fill such vacancy(ies) and if no Independent
Directors remain, the other directors shall designate one person who shall not
be either an officer of the Company or its subsidiaries or a designee,
shareholder, affiliate or associate of Parent to fill one of the vacancies which
person shall be deemed to be an Independent Director for purposes of the Merger
Agreement and who shall be entitled to fill any remaining vacancy in the number
of Independent Directors as provided in the Merger Agreement. Pursuant to the
Merger Agreement, and subject to applicable law, the Company has agreed to take,
at its expense, all action necessary to effect any such election or appointment
of Purchaser's designees, including mailing to all holders of record of its
outstanding securities the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. Purchaser and Parent are obligated to
supply to the Company all information with respect to themselves and their
officers, directors and affiliates required by such Section and Rule and are
solely responsible for any information disseminated to shareholders with respect
to either of them and their respective nominees.
Upon consummation of the Offer and prior to the Effective Time, in addition
to any other approval of the directors required by applicable law or the
Articles of Incorporation or By-Laws of the Company, the Merger Agreement
provides that the affirmative vote of a majority of the Independent Directors
shall be required (i) to amend or terminate the Merger Agreement by the Company,
(ii) to waive any of the Company's rights or to exercise any of its remedies
under the Merger Agreement, (iii) to extend the time for performance of
Purchaser's obligations under the Merger Agreement or (iv) to take any other
action by the Company in connection with the Merger Agreement required to be
taken by the Board of Directors of the Company, whether or not such Independent
Directors constitute a quorum.
PURCHASER'S DESIGNEES
Pursuant to the terms of the Merger Agreement, it is expected that
Purchaser's designees will take office as directors of the Company upon
Purchaser's payment for such number of Shares as represents at least a majority
of the outstanding Shares (on a fully diluted basis) in the Offer.
I-2
<PAGE> 21
Purchaser has advised the Company that its designees will be the persons
named in the following table and has provided the information below regarding
such individuals.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AGE MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --- --------------------------------------------------
<S> <C> <C>
Jacques A. Germay............................ 55 Chairman of Parent and Purchaser; Chief Executive
47 Rue de L'Abbaye Officer of Alpha, S.A.
4432 Alleur, Belgium
(citizen of Belgium)
Yves Willems................................. 39 Vice President of Parent and Purchaser; Managing
Parc Scientifique Athena Director of Carmeuse Coordination Center, S.A.;
Boulevard de Lauzelle 65 Chief Financial Officer of The Carmeuse Group;
1348 Louvain-la-Neuve Nord Director of Coil, S.A.
Belgium
(citizen of Belgium)
Richard C. Kraus............................. 52 President and Chief Executive Officer of Parent
and Purchaser; President and Chief Executive
Officer of Echo Bay Mines from 1981 to April,
1997; Director of St. Mary Land and Exploration
Company
William S. Brown III......................... 62 Director of Strategic Development of Parent; Vice
President of Carmeuse North America Group and
Chairman of Marblehead Lime Company since July,
1998; President and Chief Executive Officer of
Carmeuse North American Group from November, 1994
to July, 1998; President and Chief Executive
Officer of Brown Group from July, 1991 to
November, 1994
</TABLE>
The business address of each of Purchaser's designees is c/o Parent, 390
East Joe Orr Road, Chicago Heights, Illinois 60411-0488. Purchaser has advised
the Company that each of the persons listed in the table above has consented to
act as a director, and that none of such persons has during the last five years
been convicted in a criminal proceeding or was party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was, or is, subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violation of such laws. Parent and
Purchaser have also advised the Company that none of the persons listed in the
table above is a director of, or holds any position with, the Company, and that
none of such persons beneficially owns any equity securities, or rights to
acquire any equity securities, of the Company or has been involved in any
transactions with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). The election
of Purchaser's designees will be accomplished at a meeting or by written consent
of the Board.
BOARD OF DIRECTORS OF THE COMPANY
DIRECTORS WHOSE TERMS EXPIRE IN 2001
CARL A. GILBERT
President and Chief Executive Officer of the Company
Director since 1994 Age: 56
Mr. Gilbert has served as President and Chief Executive Officer of the
Company since January 1, 1995. Prior to such date, Mr. Gilbert served as
President and Chief Operating Officer of the Company from March 31, 1994 to
December 31, 1994. Mr. Gilbert has served as President of Dravo Lime Company
since February 1983. Mr. Gilbert also served as a Senior Vice President of the
Company from October 1988 to December 1994.
I-3
<PAGE> 22
WILLIAM G. ROTH
Former Chairman of the Board of Directors
and Chief Executive Officer of the Company
Director since 1987 Age: 59
Member -- Audit Committee, Compensation Committee, Finance Committee and
Nominating Committee
Mr. Roth served as Chairman of the Board of Directors of the Company from
June 1987 until his retirement in May 1994. Mr. Roth also served as Chief
Executive Officer of the Company from June 1987 until December 1989 and as
President from June 1987 to June 1988. In addition to his position on the Board
of Directors of the Company, Mr. Roth also serves on the boards of directors of
Amcast Industrial Corporation, Teknowledge Corporation and Service Experts Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
ARTHUR E. BYRNES
Chairman of the Board of Directors of the Company
Director since 1993 Age: 53
Member -- Audit Committee, Compensation Committee, Finance Committee and
Nominating Committee
Mr. Byrnes has served as a director of the Company since December 9, 1993
and Chairman since January 23, 1997. In addition to his position as Chairman of
the Board of Directors of the Company, Mr. Byrnes is Chairman of Deltec Asset
Management Corp. (independent investment counselors) and is a member of the
boards of directors of Deltec International S.A. and Argo Bancorp, Inc.
JAMES C. HUNTINGTON, JR.
Director
Director since 1988 Age: 70
Member -- Audit Committee, Compensation Committee, Finance Committee and
Nominating Committee
Mr. Huntington has served as a director of the Company since January 28,
1988. Since his retirement as a Senior Vice President with American Standard,
Incorporated (manufacturers of air conditioning, building products and
transportation equipment) where he served from January 1977 until August 1988,
Mr. Huntington has pursued a career as an independent businessman and also
serves as a member of the boards of directors of Alumax Inc. and Westinghouse
Air Brake Company.
PETER T. KROSS
Director
Director since 1997 Age 56
Member -- Audit Committee, Compensation Committee, Finance Committee and
Nominating Committee
Mr. Kross has served as a director of the Company since April 24, 1997. Mr.
Kross has served as Senior Vice President, Investments, Everen Securities, Inc.
(independent investment counselors) since 1987.
I-4
<PAGE> 23
DIRECTOR WHOSE TERM EXPIRES IN 1999
WILLIAM E. KASSLING
Chairman, Chief Executive Officer
and President, Westinghouse Air Brake Company
Director since 1993 Age: 54
Member -- Audit Committee (Chairman), Compensation Committee, Finance Committee
(Chairman) and Nominating Committee
Mr. Kassling has served as Chairman, Chief Executive Officer and President
of Westinghouse Air Brake Company (supplier of air brake systems and related
products) since March 9, 1990. Prior to assuming his duties with Westinghouse
Air Brake, Mr. Kassling served as Vice President/Group Executive of the Railway
Products Group of American Standard, Incorporated. Mr. Kassling also serves as a
member of the boards of directors of Scientific Atlantic, Inc. and Commercial
Intertech.
Mr. Konrad M. Weis notified the Company prior to the 1998 Annual Meeting of
Shareholders of his intent to resign from the Board effective with the date of
the 1998 Annual Meeting of Shareholders, at which time the size of the board was
reduced from seven to six.
The Board held 7 meetings during 1997. Each incumbent director attended at
least 75% of the aggregate of the total number of meetings of the Board and
meetings (13 in total during 1997) of the standing Audit, Compensation, Finance
and Nominating Committees on which each such director served.
DIRECTORS' COMPENSATION
The Chairman of the Board, who is not an officer or employee of the
Company, receives cash compensation of $50,000 per year. Under the Non-Employee
Retainer Fee Plan approved by the shareholders at the 1996 Annual Meeting of
Shareholders, each director of the Company who is not an officer or employee
receives as compensation for his services to the Company, in lieu of an annual
retainer, 1,000 shares of the Company's Common Stock. In addition, directors
receive as compensation $1,000 for every meeting of the Board and meetings of
committees of the Board at which they are in attendance. The chairmen of the
standing committees of the Board are compensated an additional $1,000 per year
for serving as chairmen. Directors who are also officers or employees of the
Company do not receive any additional remuneration for so serving. Under the
Stock Option Plan of 1994, directors who are not officers or employees of the
Company are granted on an annual basis, an option to purchase up to 1,500 shares
of Common Stock, priced as of the day following each annual meeting of the
shareholders of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The By-laws of the Company provide that there shall be, as standing
committees of the Board, an Audit Committee, a Compensation Committee, a Finance
Committee and a Nominating Committee, each comprised exclusively of directors
who are not current officers or employees of the Company. The committees receive
their authority and assignments from the Board and report to the Board.
Audit Committee -- The Committee is comprised of Messrs. Kross (Chairman),
Kassling, Byrnes, Huntington, and Roth. The Committee held 2 meetings in 1997.
The Committee's duties include recommending, for nomination by the Board and
election at the annual shareholders' meeting, the firm of independent auditors
to audit the Company's financial records and review the overall approach
followed by the independent auditors and the Company's internal auditors to
insure the integrity of the Company's published financial statements. In
discharging these duties the Committee reviews the audit plans for the fiscal
year and reviews reports from the independent auditors to determine, among other
things, whether there have been any material changes in accounting principles
and, if so, the effect of such changes on the valuation of the Company's assets
or the determination of its earnings. After the end of each fiscal year, the
Committee meets separately with the
I-5
<PAGE> 24
independent auditors and with the Chief Financial Officer of the Company to
review the audit report prepared by the independent auditors and their comments
with respect thereto.
Compensation Committee -- The Committee is comprised of Messrs. Kassling
(Chairman), Byrnes, Huntington, Kross and Roth. The Committee held 3 meetings in
1997. The Committee is empowered to fix the compensation of the executives of
the Company. The Committee also selects the participants in the Company's
Executive Benefit Plan, performs the functions of the committee under the
Company's Incentive Compensation Plan and the Stock Incentive Plan encompassed
therein, and performs the functions of the committee which determines awards
under the Company's Employee Stock Option Plan of 1988 (the "1988 Plan") and
Stock Option Plan of 1994 (the "1994 Plan").
Finance Committee -- The Committee is comprised of Messrs. Kross
(Chairman), Byrnes, Huntington, and Roth. The Committee did not meet in 1997.
The Committee assists and counsels the Chief Executive Officer and Chief
Financial Officer of the Company in the formulation and development of financial
policies and plans.
Nominating Committee -- The Committee is comprised of Messrs. Kassling
(Chairman), Byrnes, Huntington, Kross and Roth. The Committee held 1 meeting in
1997. The Committee recommends, for nomination by the Board and election by the
shareholders, individuals to serve as members of the Board. The Committee
considers shareholder recommendations for positions on the Board. Any
shareholder wishing to recommend a nominee for consideration by the Committee
may do so by letter addressed to the Secretary of the Company, 11 Stanwix
Street, Pittsburgh, Pennsylvania 15222.
I-6
<PAGE> 25
BENEFICIAL SECURITY OWNERSHIP OF
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
beneficial ownership, direct or indirect, of shares of the Company's outstanding
securities, including shares of Common Stock as to which a right to acquire
beneficial ownership exists (for example, through the exercise of stock options,
conversions of securities or various trust arrangements) within the meaning of
Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), by (i) each director, (ii) each of the five most highly
compensated executive officers of the Company during the last completed fiscal
year named in the Summary Compensation Table (hereinafter, the "Named Executive
Officers") and (iii) all directors and executive officers as a group, as of
September 15, 1998. No shares of Series B Preference Stock or Series D
Preference Stock are beneficially owned by any director or Named Executive
Officer of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED BY DIRECTORS, NOMINEES AND
NAMED EXECUTIVE OFFICERS ON SEPTEMBER 15, 1998
----------------------------------------------------------
NO. OF PERCENT OF
NO. OF SHARES SUBJECT OUTSTANDING
SHARES TO STOCK COMMON
BENEFICIALLY OPTIONS AND AGGREGATE STOCK
NAME OF BENEFICIAL OWNER OWNED (#)(1) SARS (#)(2) TOTAL (#) OWNED (%)
------------------------ ------------ -------------- --------- -----------
<S> <C> <C> <C> <C>
Earl J. Bellisario........................ 3,000 0 3,000 *
Senior Vice President, Chief Financial
Officer and Secretary
Arthur E. Byrnes.......................... 15,000 6,000 21,000 *
Chairman of the Board and Director
Carl A. Gilbert........................... 10,033 230,000 240,033 1.6%
Director, President and Chief Executive
Officer
James C. Huntington, Jr. ................. 21,000 6,000 27,000 *
Director
William E. Kassling....................... 7,000 6,000 13,000 *
Director
Peter T. Kross............................ 536,700(3) 1,500 538,200 3.7%
Director
John R. Major............................. 4,571 71,000 75,571 *
Senior Vice President, Chief Operating
Officer
James J. Puhala........................... 4,934(4) 71,000 75,934 *
Former Vice President, General Counsel &
Secretary
William G. Roth........................... 72,000 124,500 196,500 1.3%
Director
Donald H. Stowe, Jr....................... 1,235(5) 59,000 60,235 *
Former Vice President, Sales and
Technology
Marshall S. Johnson,...................... 1,733 61,500 63,233 *
Vice President, Operations & Engineering
All directors and executive officers as a
group (13 persons)...................... 678,875 723,300 1,402,175 9.1%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the beneficial owner has sole voting and
investment power over such securities. Amounts shown do not include shares
acquired by certain officers since December 31, 1997 under the Company's
401(K) Savings Plan, the number of which shares is not material.
(2) Includes stock options granted to each of the persons and the group
identified above which are currently exercisable as well as those options
which will become exercisable within 60 days after September 15, 1998. No
separately granted SARs are presently outstanding.
(3) Includes 7,200 shares owned by his wife, and 29,000 and 20,500 shares held
by his daughter and son respectively.
(4) Includes 800 shares owned jointly with his wife.
(5) Includes 27 shares owned jointly with his wife.
I-7
<PAGE> 26
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Roth, a former executive officer of the Company, serves on the
Compensation Committee.
EXECUTIVE OFFICERS' COMPENSATION
The following table shows the compensation received by the Chief Executive
Officer and the Named Executive Officers for services to the Company and its
subsidiaries during the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
SALARY BONUS COMPENSATION STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) AWARD(S) SARS(1) PAYOUTS COMPENSATION
--------------------------- ---- ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carl A. Gilbert................. 1997 290,000 0 0 0 40,000 0 0
President & Chief 1996 290,000 93,850 0 0 0 0 0
Executive Officer 1995 225,000 111,900 0 0 140,000 0 0
Donald H. Stowe, Jr.(2)......... 1997 120,840 0 0 0 7,000 0 $24,260(3)
Former Vice President, 1996 145,000 22,920 0 0 0 0 0
Sales & Technology 1995 140,000 27,300 0 0 35,000 0 0
John R. Major(4)................ 1997 145,000 0 0 0 10,000 0 0
Senior Vice President, 1996 145,000 22,920 0 0 0 0 0
Chief Operating Officer 1995 140,000 27,300 0 0 35,000 0 0
James J. Puhala(5).............. 1997 140,000 0 0 0 10,000 0 0
Former Vice President, 1996 140,000 22,920 0 0 0 0 0
General Counsel & Secretary 1995 135,000 27,300 0 0 35,000 0 0
Marshall S. Johnson............. 1997 140,000 0 0 0 10,000 0 0
Vice President, 1996 140,000 22,920 0 0 0 0 0
Operations & Engineering 1995 135,000 27,300 0 0 35,000 0 0
</TABLE>
- ---------------
(1) In 1995, stock options awarded to Named Executive Officers were intended to
represent two years' worth of awards. There were no additional stock option
awards made to any Named Executive Officers during 1996.
(2) Mr. Stowe's employment as an executive officer terminated on October 31,
1997.
(3) Includes payments made under Mr. Stowe's Severance Agreement.
(4) Mr. Major was elected to his present position on October 21, 1997. Prior
thereto, he was Vice President, Administration.
(5) Mr. Puhala's employment as an executive officer terminated on December 31,
1997.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding the grant of stock
options during 1997 under the 1988 Plan and the 1994 Plan to each of the Named
Executive Officers:
<TABLE>
<CAPTION>
PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE PRESENT
NAME GRANTED(#)(1) FISCAL YEAR(%) PRICE ($/SHARE) EXPIRATION DATE VALUE($)(2)
---- ------------- ---------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Carl A. Gilbert.............. 40,000 20.8 10.1875 7/25/07 165,694
Donald H. Stowe, Jr.......... 7,000 3.6 10.1875 7/25/07 28,980
John R. Major................ 10,000 5.2 10.1875 7/25/07 41,400
James J. Puhala.............. 10,000 5.2 10.1875 7/25/07 41,400
Marshall S. Johnson.......... 10,000 5.2 10.1875 7/25/07 41,400
</TABLE>
- ---------------
(1) All options are to purchase shares of Dravo Common Stock and vest and become
exercisable one year after the grant date.
I-8
<PAGE> 27
(2) In accordance with Securities and Exchange Commission rules, the estimated
grant date present values were determined using the Black-Scholes model. The
material assumptions and adjustments incorporated in the model include: an
option term of six years, volatility of 29.89%, a risk free rate of return
of 6.11% and a reduction of 3% to reflect the probability that the above
options will be forfeited prior to the vesting date. The ultimate value of
the options will depend on the future market price of the Company's Common
Stock which cannot be forecast with reasonable accuracy.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information regarding the exercise of stock
options during 1997 and the unexercised options held as of the end of 1997 by
each of the Named Executive Officers:
<TABLE>
<CAPTION>
SECURITIES UNDERLYING VALUE OF UNEXERCISED,
UNEXERCISED IN-THE-MONEY
VALUE REALIZED OPTIONS/SARS OPTIONS/SARS
SHARES (MARKET PRICE AT AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON EXERCISE LESS ------------------------- -------------------------
NAME EXERCISE(#) EXERCISE PRICE)($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Carl A. Gilbert............ 0 0 200,000/40,000 114,531/32,500
John R. Major.............. 0 0 67,000/10,000 32,313/8,125
James J. Puhala............ 0 0 67,000/10,000 32,313/8,125
Donald H. Stowe, Jr........ 0 0 52,000/7,000 6,874/5,688
Marshall S. Johnson........ 0 0 51,500/10,000 20,688/8,125
</TABLE>
SEVERANCE AGREEMENTS
The Company has entered into severance agreements with Messrs. Gilbert,
Major, Puhala, Stowe, Johnson and three other executive officers. An executive
receives benefits under these agreements only in the event of the termination of
such executive's employment by the Company other than for cause (as defined in
the agreements). In such event, the executive is entitled to receive continued
compensation and benefits, including eligibility, coverage, vesting and benefit
provisions under the Company's benefit plans, as if he were still an employee of
the Company, for a period of two years following the date of the executive's
termination.
EXECUTIVE BENEFIT PLAN
The Company's Executive Death and Disability Income Plan, as adopted in
October 1980, was amended and restated by the Board effective July 1, 1984, and
redesignated the Executive Benefit Plan (the "Plan"). The Plan was further
amended in 1994 to reflect changes in IRS limitations.
Participation in the Plan is limited to high-ranking officers of the
Company and its subsidiaries as selected by the Compensation Committee. The
Plan, which is noncontributory, affords retirement, pre-retirement death, and
disability benefits. The benefits under the Plan supplement, and are offset by,
benefits payable from the Company's broad-based benefit programs.
Retirement benefits are calculated pursuant to a final average earnings
formula reduced by benefits payable under the Company's pension plan at normal
retirement (age 65). The Compensation Committee has approved early retirement
benefits for current participants in the plan after age 55. The following chart
shows the estimated straight-life annual benefits payable at normal retirement
age to eligible participants in specified earnings and years of service
classifications. These estimates are before reduction for benefits payable under
the Company's pension plan and are not subject to any deduction for Social
Security benefits or other offset amounts. Messrs. Gilbert, Major, Puhala, Stowe
and Johnson are participants in the Plan, having 24, 12, 23, 24 and 17 years of
credited service, respectively. One other executive is a participant in the
Plan.
I-9
<PAGE> 28
ANNUAL RETIREMENT BENEFIT BASED ON SERVICE
<TABLE>
<CAPTION>
AVERAGE FINAL COMPENSATION
(OVER 5 YEARS PRECEDING RETIREMENT)*
YEARS OF ---------------------------------------------------------------
SERVICE $100,000 $200,000 $300,000 $400,000 $500,000 $600,000
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
5 $15,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000
10 30,000 60,000 90,000 120,000 150,000 180,000
15 45,000 90,000 135,000 180,000 225,000 270,000
20 47,500 95,000 142,500 190,000 237,500 285,000
25 50,000 100,000 150,000 200,000 250,000 300,000
30 52,500 105,000 157,500 210,000 262,500 315,000
35 55,000 110,000 165,000 220,000 275,000 330,000
40 57,500 115,000 172,500 230,000 287,500 345,000
</TABLE>
- ---------------
* Earnings for this purpose are amounts reported as Annual Compensation in the
Summary Compensation Table, averaged over the five years preceding retirement.
In the event of the participant's death, the Plan provides a surviving
spouse an annual benefit equal to 45% of the participant's compensation (basic
annual salary at death plus any incentive compensation paid in the 12-month
period preceding death), reduced by the periodic surviving spouse benefit
payable under the Company's pension plan, if applicable.
The disability benefit provided under the Plan is an annual amount equal to
60% of the participant's compensation (basic annual salary at the onset of
disability plus any incentive compensation paid in the 12-month period preceding
the onset of disability), reduced by benefits payable under, and by amounts used
as an offset in, the Company's long-term disability plan.
I-10
<PAGE> 29
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth each person or entity who may be deemed to
have beneficial ownership of more than 5% of the Company's outstanding Common
Stock, Series B Preference Stock and Series D Preference Stock as of September
15, 1998 based upon information furnished to the Company:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP(1)
-------------------------------
NAME AND ADDRESS AGGREGATE PERCENT
CLASS OF BENEFICIAL OWNER SHARES HELD OF CLASS(2)
----- ------------------- ----------- ------------
<S> <C> <C> <C>
Common Stock Cowen & Company 1,654,424(3) 11.2%
Financial Square
New York, NY 10005-3597
Common Stock The Prudential Insurance 1,621,676(4) 11.0%
Company of America, Inc.
751 Broad Street
Newark, NJ 07102-3777
Common Stock Norwest Corporation 1,061,909 7.2%
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-1026
Common Stock Mellon Bank Corporation 818,469(6) 5.6%
One Mellon Bank Center
Pittsburgh, PA 15258
Series B Preference Stock Floyd A. Mechling 16,000 100%
5 North Calibogue Cay
Hilton Head Island, SC 29928-2913
Series D Preference Stock The Prudential Insurance 200,000(4) 100%
Company of America, Inc.
Prudential Plaza
Newark, NJ 07102-3777
</TABLE>
- ---------------
(1) For purposes of the foregoing table, a "beneficial owner" includes any
person who directly or indirectly has or shares the power to vote or to
direct the voting of shares of the Company's stock or who directly or
indirectly has or shares the power to dispose of or to direct the
disposition of such shares.
(2) As of September 15, 1998 there were 14,718,693 shares of Common Stock,
16,000 shares of Series B Preference Stock and 200,000 shares of Series D
Preference Stock of the Company issued and outstanding.
(3) Cowen & Company, Cowen Incorporated, the parent holding company of Cowen &
Company, and Joseph M. Cohen, an individual who may be deemed to control
Cowen Incorporated, jointly filed with the Securities and Exchange
Commission under the Exchange Act Amendment No. 3 to Schedule 13G which
disclosed that as of December 31, 1997 Cowen & Company had sole voting and
investment power with respect to 157,400 shares, shared voting power with
respect to 1,069,500 shares, and shared investment power with respect to
1,497,024 shares of Common Stock of the Company. Cowen & Company is a
registered broker-dealer and investment advisor that holds a portion of the
shares of Common Stock covered by the Schedule 13G on behalf of its clients.
(4) The Prudential Insurance Company of America has filed with the Securities
and Exchange Commission under the Exchange Act Amendment No. 11 to Schedule
13G which disclosed that the 200,000 shares of Series D Preference Stock
owned by it are presently convertible into a total of 1,600,000 shares of
Common Stock of the Company. Said Amendment No. 11 also disclosed that as of
December 31, 1997, The Prudential Insurance Company of America had sole
investment and voting power with respect to 6,900 additional shares and
shared investment power with respect to 14,776 additional shares of Common
Stock. The total of the foregoing, 1,621,676 shares, would represent 11.0%
of the Company's Common Stock.
(5) Norwest Corporation and its subsidiary, Norwest Bank Colorado, N.A. ("NBC"),
have jointly filed with the Securities and Exchange Commission under the
Exchange Act Amendment No. 14 to Schedule 13G. NBC's principal place of
business is, 1740 Broadway, Denver, Colorado 80274-8677. In its filing, NBC
disclosed that as of December 31, 1997, it was the beneficial owner of
1,048,500 shares of the Company's Common
I-11
<PAGE> 30
Stock, including 830,000 shares held for the ATTIMCO Long-Term Investment
Trust with respect to a portion of whose assets NBC acts as an investment
advisor, such amount representing 7.1% of the Company's outstanding Common
Stock. Norwest Corporation, as the parent holding company of NBC and other
various subsidiaries, may be deemed to own the shares of the Company's
Common Stock beneficially owned by such subsidiaries.
(6) Mellon Bank Corporation, a holding company for various direct or indirect
subsidiaries identified on a Schedule 13G filed by it with the Securities
and Exchange Commission under the Exchange Act, disclosed that it, as the
parent holding company of such subsidiaries, none of which individually hold
in excess of 5% of the Company's outstanding Common Stock, may be deemed to
be the beneficial owner of in excess of 5% of the Company's outstanding
Common Stock as a result of the aggregation of the holdings of its
subsidiaries. In its Schedule 13G, Mellon Bank Corporation disclosed that it
may be deemed to have sole voting power with respect to 673,369 shares, sole
dispositive power with respect to 718,569 shares and shared dispositive
power with respect to 99,600 shares of the Company's Common Stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of Shares and other equity
securities of the Company. Executive officers, directors and greater than ten
percent shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms which they file.
To the Company's knowledge, based solely on review of information furnished
to the Company, reports filed through the Company and representations that no
other reports were required, all Section 16(a) filing requirements applicable to
its executive officers, directors and greater than ten percent beneficial owners
were complied with during the year ended December 31, 1997.
I-12
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
SEPTEMBER 15, 1998
BY AND AMONG
CARMEUSE LIME, INC.
DLC ACQUISITION CORP.
AND
DRAVO CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I THE OFFER......................................... 1
Section 1.1. The Offer.................................... 1
Section 1.2. Company Action............................... 2
Section 1.3. Directors.................................... 3
ARTICLE II THE MERGER....................................... 4
Section 2.1. The Merger................................... 4
Section 2.2. Closing...................................... 4
Section 2.3. Effective Time of the Merger................. 5
Section 2.4. Articles of Incorporation.................... 5
Section 2.5. By-Laws...................................... 5
Section 2.6. Board of Directors; Officers................. 5
Section 2.7. Effects of Merger............................ 5
ARTICLE III CONVERSION OF COMMON STOCK...................... 5
Section 3.1. Conversion of Common Stock................... 5
Section 3.2. Preference Stock Unaffected.................. 5
Section 3.3. Stock Options................................ 6
Section 3.4. Closing of Company Transfer Books............ 6
Section 3.5. Exchange of Certificates..................... 6
Section 3.6. Funding of Paying Agent...................... 7
Section 3.7. Action of Shareholders....................... 7
Section 3.8. Merger Without Meeting of Shareholders....... 8
Section 3.9. No Further Ownership Rights in Common
Stock.................................................. 8
Section 3.10. Dissenting Shareholders -- Common Stock..... 8
Section 3.11. Dissenting Shareholders -- Preference
Stock.................................................. 8
Section 3.12. Assistance in Consummation of the Merger.... 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.... 9
Section 4.1. Organization and Qualification............... 9
Section 4.2. Capitalization of the Company and its
Subsidiaries........................................... 9
Section 4.3. Authority Relative to this Agreement......... 10
Section 4.4. SEC Reports; Financial Statements; Title to
Assets; Liens.......................................... 11
Section 4.5. Information Supplied......................... 12
Section 4.6. Consents and Approvals; No Violations........ 12
Section 4.7. No Default................................... 13
Section 4.8. No Undisclosed Liabilities................... 13
Section 4.9. Litigation................................... 13
Section 4.10. Compliance with Applicable Law.............. 13
Section 4.11. Employee Plans.............................. 14
Section 4.12. Environmental Matters....................... 15
Section 4.13. Tax Matters................................. 18
Section 4.14. Intangible Property......................... 18
Section 4.15. Opinion of Financial Advisor................ 19
Section 4.16. Brokers..................................... 19
Section 4.17. Labor Matters............................... 19
Section 4.18. Absence of Certain Changes.................. 19
Section 4.19. Millennium.................................. 20
Section 4.20. Full Disclosure............................. 21
Section 4.21. Real Property............................... 21
Section 4.22. Contracts................................... 22
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT......................................................... 22
Section 5.1. Organization and Qualification.............................................................. 22
Section 5.2. Authority Relative to this Agreement........................................................ 22
Section 5.3. No Conflict or Violation; Consents.......................................................... 23
Section 5.4. Adequate Financing.......................................................................... 23
Section 5.5. Ownership of Common Stock................................................................... 23
Section 5.6. Full Disclosure............................................................................. 23
Section 5.7. Information Supplied........................................................................ 23
ARTICLE VI REPRESENTATIONS AND WARRANTIES REGARDING PURCHASER.............................................. 24
Section 6.1. Organization................................................................................ 24
Section 6.2. Capitalization.............................................................................. 24
Section 6.3. Authority Relative to this Agreement........................................................ 24
ARTICLE VII CONDUCT OF BUSINESS PENDING THE MERGER......................................................... 24
Section 7.1. Conduct of Business by the Company Pending the Merger....................................... 24
Section 7.2. No Solicitation............................................................................. 26
ARTICLE VIII ADDITIONAL AGREEMENTS......................................................................... 27
Section 8.1. Access and Information...................................................................... 27
Section 8.2. Indemnification............................................................................. 27
Section 8.3. HSR Act..................................................................................... 28
Section 8.4. Additional Agreements Regarding Consents and Approvals...................................... 28
Section 8.5. Takeover Statutes........................................................................... 29
Section 8.6. Benefits.................................................................................... 29
Section 8.7. Effect of Knowledge of Breach............................................................... 30
Section 8.8. Certain Deliveries.......................................................................... 30
ARTICLE IX CONDITIONS PRECEDENT............................................................................ 30
Section 9.1. Conditions to Each Party's Obligation to Effect the Merger.................................. 30
ARTICLE X TERMINATION AND FEES............................................................................. 31
Section 10.1. Termination................................................................................ 31
Section 10.2. Effect of Termination...................................................................... 31
Section 10.3. Fees and Expenses.......................................................................... 31
ARTICLE XI GENERAL PROVISIONS.............................................................................. 32
Section 11.1. Non-Survival of Representations, Warranties and Agreements................................. 32
Section 11.2. Amendment.................................................................................. 32
Section 11.3. Notices.................................................................................... 32
Section 11.4. Specific Performance....................................................................... 33
Section 11.5. Publicity.................................................................................. 33
Section 11.6. Interpretation............................................................................. 33
Section 11.7. Counterparts............................................................................... 34
Section 11.8. Entire Agreement; No Third Party Beneficiaries............................................. 34
Section 11.9. Severability............................................................................... 34
Section 11.10. Governing Law............................................................................. 34
Section 11.11. Assignment................................................................................ 34
Section 11.12. Descriptive Headings...................................................................... 34
ANNEX
I Conditions to the Offer
COMPANY DISCLOSURE SCHEDULE
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
DEFINED TERMS LOCATION
- ------------- --------
<S> <C>
Agreement.................................... Agreement and Plan of Merger
Business Day................................. Section 1.1(a)
Closing...................................... Section 2.2
Closing Date................................. Section 2.2
Commission................................... Section 1.1(c)
Common Stock................................. Agreement and Plan of Merger
Company...................................... Agreement and Plan of Merger
Company Disclosure Schedule.................. Article IV--Representations and Warranties of the
Company
Company Representatives...................... Section 7.2(a)
Company SEC Reports.......................... Section 4.4(a)
Effective Time............................... Section 2.3
Environmental Laws........................... Section 4.12
Event........................................ Annex I--Conditions to the Offer
Exchange Act................................. Section 1.1(a)
Expiration Date.............................. Section 1.1(c)
Governmental Entity.......................... Section 4.6
HSR Act...................................... Section 4.6
Indemnified Parties.......................... Section 8.2(a)
Independent Directors........................ Section 1.3
Interested Stockholder....................... Section 4.3
Knowledge.................................... Section 11.6
Leased Property.............................. Section 4.21
Leases....................................... Section 21
Liens........................................ Section 4.21
Material Adverse Effect...................... Section 4.1(c)
Material Legal Requirements.................. Section 5.3(b)
Merger....................................... Agreement and Plan of Merger
Minimum Condition............................ Section 1.1(a)
Offer........................................ Agreement and Plan of Merger
Option....................................... Section 3.3(a)
Owned Real Property.......................... Section 4.21
Parent....................................... Agreement and Plan of Merger
Paying Agent................................. Section 3.5
PBCL......................................... Agreement and Plan of Merger
Per Share Amount............................. Agreement and Plan of Merger
Permitted Liens.............................. Section 4.21
Preference Stock............................. Section 3.2
Prohibited Result............................ Annex I(a)
Proxy Statement.............................. Section 3.7(c)
Purchaser.................................... Agreement and Plan of Merger
Release...................................... Section 4.12
Remedies..................................... Section 10.2
Schedule 14D-1............................... Section 1.1(c)
Schedule 14D-9............................... Section 1.2(c)
Securities Act............................... Section 4.3(a)
Series B Preference Stock.................... Section 3.2
Series D Preferred Stock..................... Section 3.2
Shareholders................................. Section 1.1(c)
Superior Proposal............................ Section 7.2(e)
Takeover Proposal............................ Section 7.2(d); Section 10.3(b)(ii)
Tender Offer Documents....................... Section 1.1(c)
Termination Date............................. Section 10.1(b)
</TABLE>
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of September
15, 1998, by and among Carmeuse Lime, Inc., a Delaware corporation ("Parent"),
DLC Acquisition Corp., a Pennsylvania corporation and a wholly owned subsidiary
of Parent ("Purchaser"), and Dravo Corporation, a Pennsylvania corporation (the
"Company"):
W I T N E S S E T H:
WHEREAS, the Boards of Directors of each of the Parent and the Purchaser
have determined that it is in the best interests of their respective
shareholders and the Board of Directors of the Company has determined that it is
in the best interest of the Company for the Parent to acquire the Company upon
the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof, it is proposed that Purchaser will make a
cash tender offer to acquire all issued and outstanding shares of common stock,
$1.00 par value, of the Company (the "Common Stock"), at a cash purchase price
of $13.00 per share (the "Per Share Amount"), without interest thereon, in
accordance with the terms and subject to the conditions of this Agreement (the
"Offer");
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of the Company, Parent and Purchaser have each approved the merger (the
"Merger") of Purchaser with and into the Company following consummation of the
Offer in accordance with the Pennsylvania Business Corporation Law (the "PBCL")
upon the terms and subject to the conditions set forth herein and as a result of
which the holders of Common Stock will receive the Per Share Amount for each
share of Common Stock held by them at the effective time of the Merger and the
Company will thereafter become a wholly owned subsidiary of Parent;
WHEREAS, the Board of Directors of the Company has resolved to recommend
acceptance of the Offer and the Merger to the holders of the Common Stock, has
determined that the Per Share Amount to be paid for each share of Common Stock
in the Offer and the Merger is fair to the holders of such Common Stock, and has
resolved to recommend that the holders of such Common Stock accept the Offer and
approve this Agreement and the Merger, if required by the PBCL, and each of the
transactions contemplated hereby, each upon the respective terms and subject to
the applicable conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements set forth herein, Parent,
Purchaser and the Company, intending to be legally bound hereby, agree as
follows:
ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER
(a) Purchaser shall, and Parent shall cause Purchaser to, commence, within
the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended,
including the rules and regulations promulgated thereunder (the "Exchange Act"),
the Offer, as promptly as practical but in no event later than five (5) business
days (as such term is defined in Rule 14e-1 under the Exchange Act (a "Business
Day")) after the date of this Agreement. The Offer will be subject only to a
number of shares of Common Stock being validly tendered prior to the expiration
of the Offer and not properly withdrawn which would result in Purchaser's
ownership of such number of shares of Common Stock that represents at least a
majority of (i) the actual outstanding shares of Common Stock on a fully diluted
basis including shares issuable upon exercise of outstanding options (whether or
not exercisable) and other securities convertible into Common Stock and (ii) the
voting power of the Company's outstanding voting securities entitled to vote on
the Merger (the "Minimum Condition") and satisfaction or waiver of the further
conditions set forth in Annex I hereto, any of which conditions may be waived in
the sole discretion of Purchaser, subject in the case of the Minimum Condition
to the limitation set forth in (d) below. Assuming all of the conditions to
consummation of the Offer that have not otherwise been waived are satisfied,
Parent and Purchaser shall consummate the Offer as promptly as possible.
<PAGE> 6
(b) Upon the terms and subject to the conditions of the Offer, Purchaser
shall, and Parent shall cause Purchaser to, purchase all shares of Common Stock
which are validly tendered on or prior to the expiration of the Offer and not
timely withdrawn as promptly as practicable. Purchaser may, at any time,
transfer or assign to one or more corporations, which are direct or indirect
subsidiaries of Parent, the right to purchase all or any portion of the Common
Stock tendered pursuant to the Offer, but any such transfer or assignment shall
not relieve Parent or Purchaser of its obligations under this Agreement or
prejudice the rights of tendering holders of Common Stock to receive payment for
shares of Common Stock properly tendered and accepted for payment.
(c) The Offer shall remain open (unless the Purchaser elects to terminate
the Offer upon the occurrence of an Event (as defined in Annex I)) for a period
of twenty (20) Business Days from the commencement of the Offer (the "Expiration
Date"), unless Purchaser shall have extended the period of time for which the
Offer is open as may be permitted or required by this Agreement, or applicable
law, in which event the term "Expiration Date" shall mean the latest time and
date at which the Offer, as so extended by Purchaser, shall expire. On or prior
to the date the Offer is commenced, Purchaser shall file, and Parent shall cause
Purchaser to prepare and file, with the Securities and Exchange Commission (the
"Commission") a Tender Offer Statement on Schedule 14D-1 (together with all
exhibits, amendments and supplements thereto, the "Schedule 14D-1") with respect
to the Offer that shall contain (as an exhibit) or incorporate by reference the
Offer (or portions thereof) and forms of the related letter of transmittal and
summary advertisement (the "Tender Offer Documents"). The Schedule 14D-1 shall
comply in all material respects with the provisions of all applicable federal
securities laws and, on the date filed with the Commission and on the date first
published, sent or given to the holders of Common Stock (the "Shareholders"),
shall not contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except with respect to information furnished by the Company for
inclusion in the Schedule 14D-1. Parent and Purchaser agree to promptly correct,
by preparing an amendment or supplement, any information provided by them for
use in the Tender Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and Parent and
Purchaser further agree to cause the Tender Offer Documents, as so amended or
supplemented, to be filed with the Commission and disseminated to the
Shareholders, in each case, as and to the extent required by applicable federal
securities laws. Parent and Purchaser agree to provide the Company and its
counsel with any comments Parent, Purchaser or their counsel may receive from
the Commission or its staff with respect to the Tender Offer Documents and any
amendments or supplements thereto, promptly after receipt of such comments.
(d) Purchaser shall not, without the prior written consent of the Company,
(i) decrease or change the form of the Per Share Amount, (ii) reduce the number
of shares of Common Stock sought pursuant to the Offer, (iii) amend the
conditions or impose additional conditions to the Offer, (iv) amend any term of
the Offer, (v) amend the Minimum Condition, or (vi) amend any other term of the
Offer in a manner adverse to the holders of the Common Stock. Subject to the
last sentence of paragraph (a), Purchaser may at any time, in its sole
discretion, extend the Offer.
(e) Parent shall provide or cause to be provided to Purchaser (or its
transferee or assignee pursuant to the last sentence of (b) above) on a timely
basis the funds necessary to purchase any shares of Common Stock that Purchaser
becomes obligated to purchase under this Agreement.
(f) Notwithstanding the first sentence of Section 1.1(c), Purchaser shall
extend the Offer (i) for ten Business Days beyond the initial Expiration Date if
the Minimum Condition has not then been satisfied; and (ii) on one or more
occasions, in each instance for up to ten Business Days, beyond the then
scheduled Expiration Date, but not beyond the Termination Date, if the Company,
Parent or Purchaser receives a request for additional information from a
Government Agency with respect to the Company's and Parent's filing under the
HSR Act, in which case the Offer shall be extended until the waiting period
under the HSR Act is terminated or until this Agreement is terminated in
accordance with Section 10.1.
SECTION 1.2. COMPANY ACTION
(a) The Company hereby approves of and consents to the Offer and represents
and warrants that its Board of Directors, at a meeting duly called and held on
September 14, 1998, at which a majority of the Directors were
-2-
<PAGE> 7
present either in person or by telephone: (i) duly approved and adopted this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, (ii) determined that this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, are fair to and in the best
interests of the Shareholders, (iii) recommended that the Shareholders accept
the Offer and tender their shares of Common Stock pursuant to the Offer and (iv)
if a meeting of the Company's shareholders is required to be called and held in
accordance with applicable law, recommended that the shareholders approve this
Agreement and the transactions contemplated hereby, including the Merger.
(b) The Company further represents that Salomon Smith Barney Inc. has
opined to the Board of Directors of the Company to the effect that, as of the
date of this Agreement, the Per Share Amount to be received by holders of Common
Stock (other than Parent and its affiliates) pursuant to the Offer and the
Merger is fair to such holders from a financial point of view.
(c) The Company shall file with the Commission, concurrent with the filing
by Purchaser of the Schedule 14D-1, a Tender Offer Solicitation/Recommendation
Statement on Schedule 14D-9 (together with any and all amendments or supplements
thereto, and including the exhibits thereto, the "Schedule 14D-9") with respect
to the Offer. The Schedule 14D-9 shall comply in all material respects with the
provisions of all applicable federal securities law and, on the date filed with
the Commission and on the date first published, sent or given to the
Shareholders, shall not contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except with respect to information furnished by Parent or
Purchaser for inclusion in the Schedule 14D-9. The Company further agrees to
take all steps necessary to cause the Schedule 14D-9 to be filed with the
Commission and to be disseminated to the Shareholders, in each case as and to
the extent required by applicable federal securities laws. The Company shall
mail, or cause to be mailed, such Schedule 14D-9 to the Shareholders at the same
time and together with the Tender Offer Documents. The Schedule 14D-9 and the
Tender Offer Documents shall contain the recommendations of the Board of
Directors described in Section 1.2(a) hereof. The Company agrees promptly to
correct the Schedule 14D-9 if and to the extent that it shall have become false
or misleading in any material respect (and each of Parent and Purchaser, with
respect to written information supplied by it specifically for use in the
Schedule 14D-9, shall promptly notify the Company of any required corrections of
such information and cooperate with the Company with respect to correcting such
information) and to amend or supplement the information contained in the
Schedule 14D-9 to include any information that shall become necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9, as so corrected, to be filed with the
Commission and disseminated to the Shareholders, in each case, as and to the
extent required by applicable federal securities laws. Purchaser and its counsel
shall be given a reasonable opportunity to review and comment on the Schedule
14D-9 before it is filed with the Commission. In addition, the Company agrees to
provide Purchaser and its counsel with any comments, whether written or oral,
that the Company or its counsel may receive from time to time from the
Commission or its staff with respect to the Schedule 14D-9, and any amendments
or supplements thereto, promptly after the receipt of such comments or
communications.
(d) In connection with the Offer, the Company, promptly upon execution of
this Agreement, shall furnish or cause to be furnished to Purchaser mailing
labels containing the names and addresses of all record holders of the Common
Stock and security position listings of shares of Common Stock held in stock
depositories, each as of a recent date, and shall promptly furnish Purchaser
with such additional information (including, but not limited to, updated lists
of Shareholders and their addresses, mailing labels and security position
listings) and such other information and assistance as Purchaser or its agents
may reasonably request for the purpose of communicating the Offer to the record
and beneficial holders of shares of Common Stock.
SECTION 1.3. DIRECTORS
Promptly upon the purchase by Purchaser, pursuant to the Offer, and in
accordance with this Agreement of such number of shares of Common Stock as
represents at least a majority of the outstanding shares of Common Stock (on a
fully diluted basis) and from time to time thereafter, Purchaser shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as will give
-3-
<PAGE> 8
Purchaser, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board of Directors of the Company equal to the product of
(a) the number of directors on the Board of Directors of the Company (after
giving effect to the appointment of such directors) and (b) the percentage that
such number of shares of Common Stock so purchased bears to the number of shares
of Common Stock outstanding; provided, that in no event shall such number of
directors be less than a majority of the total number of directors of the
Company. In connection with the foregoing, the Company shall, upon written
request by Purchaser, promptly (i) increase the size of the Board of Directors
of the Company to the extent permitted by its Articles of Incorporation and
By-Laws (and amend the Articles of Incorporation and By-Laws, if so required, to
increase the size of the Board of Directors, to allow for such additional
directors); and/or (ii) take all steps necessary and appropriate to secure the
resignations of such number of directors as is necessary to enable Purchaser's
designees to be elected to the Board of Directors of the Company (and shall hold
a Board meeting for such purpose); and (iii) cause Purchaser's designees to be
so elected; provided, however, that, in the event that Parent's designees are
appointed or elected to the Board of Directors, until the Effective Time the
Board of Directors shall have at least two directors who are directors on the
date hereof and who are neither an officer of the Company or its subsidiaries
nor a designee, stockholder, affiliate or associate (within the meaning of the
federal securities laws) of Parent (the "Independent Directors"); provided
further, that if the number of Independent Directors shall be reduced below two
for any reason, any remaining Independent Directors (or Independent Director if
there is only one) shall be entitled to fill such vacancy(ies) and if no
Independent Directors remain, the other directors shall designate one person who
shall not be either an officer of the Company or its subsidiaries or a designee,
shareholder, affiliate or associate of Parent to fill one of the vacancies which
person shall be deemed to be an Independent Director for purposes of this
Agreement and who shall be entitled to fill any remaining vacancy in the number
of Independent Directors as provided herein. At any time after the execution
hereof, at the request of Purchaser, the Company shall promptly take, at its
expense, all action necessary to effect any such election, including mailing to
all holders of record of its outstanding securities the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in form
and substance reasonably satisfactory to Purchaser and its counsel and filing
the same with the Commission. Parent or Purchaser shall supply the Company and
be responsible for any information included in the filings with the Commission
with respect to Purchaser and its nominees, officers, directors and affiliates
required by said Section 14(f) and Rule 14f-1 of the Exchange Act.
Notwithstanding anything in this Agreement to the contrary, upon consummation of
the Offer and prior to the Effective Time, in addition to any other approval of
the directors required by applicable law or the Articles of Incorporation or
By-Laws of the Company, the affirmative vote of a majority of the Independent
Directors shall be required (i) to amend or terminate this Agreement by the
Company, (ii) to waive any of the Company's rights or to exercise any of its
remedies hereunder, (iii) to extend the time for performance of Purchaser's
obligations hereunder or (iv) to take any other action by the Company in
connection with this Agreement required to be taken by the Board of Directors of
the Company, whether or not such Independent Directors constitute a quorum.
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER
Upon the terms and subject to the conditions hereof, at the Effective Time,
Purchaser shall be merged into the Company and the separate existence of
Purchaser shall thereupon cease, and the Company, as the surviving corporation
in the Merger, shall by virtue of the Merger continue its corporate existence
under the laws of the Commonwealth of Pennsylvania with all of its rights,
privileges, immunities, powers and franchises unaffected thereby.
SECTION 2.2. CLOSING
The closing (the "Closing") of the Merger shall take place at the offices
of Buchanan Ingersoll Professional Corporation in Pittsburgh, Pennsylvania at
10:00 a.m. on the second Business Day after the conditions set forth in Article
IX have been satisfied (or, to the extent permitted by applicable law, waived by
the parties entitled to the
-4-
<PAGE> 9
benefits thereof), or at such other place, time and date as shall be agreed
between the Parent and the Company (the "Closing Date").
SECTION 2.3. EFFECTIVE TIME OF THE MERGER
The Merger shall become effective at the date and time (the "Effective
Time") when properly executed Articles of Merger are duly filed with the
Department of State of the Commonwealth of Pennsylvania, which filing shall be
made as soon as practicable following fulfillment of the conditions set forth in
Article IX hereof, or at such time thereafter as is provided in such Articles of
Merger.
SECTION 2.4. ARTICLES OF INCORPORATION
The Articles of Incorporation of the Company shall, after the Effective
Time, be the Articles of Incorporation of the Company and thereafter may be
amended in accordance with their terms and as provided by applicable law.
SECTION 2.5. BY-LAWS
The By-laws of Purchaser as in effect at the Effective Time shall, after
the Effective Time, be the By-laws of the Company.
SECTION 2.6. BOARD OF DIRECTORS; OFFICERS
The directors of Purchaser immediately prior to the Effective Time shall,
after the Effective Time, be the directors of the Company and the officers of
the Company immediately prior to the Effective Time shall, after the Effective
Time, be the officers of the Company, in each case until their respective
successors are duly elected and qualified.
SECTION 2.7. EFFECTS OF MERGER
The Merger shall have the effects set forth in Section 1929 of the PBCL.
ARTICLE III
CONVERSION OF COMMON STOCK
SECTION 3.1. CONVERSION OF COMMON STOCK
At the Effective Time, by virtue of the Merger and without any action on
the part of any Shareholder:
(a) All shares of Common Stock issued and outstanding immediately
prior to the Effective Time which are held by the Company or any subsidiary
of the Company, and any shares of Common Stock issued and outstanding
immediately prior to the Effective Time owned by Parent, Purchaser or any
other subsidiary of Parent, shall be canceled.
(b) Each remaining share of Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of Common Stock
with respect to which the provisions of Section 3.10 are applicable) shall
automatically be canceled and extinguished and be converted into and become
solely a right to receive the Per Share Amount in cash, without interest.
(c) Each share of capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted and exchanged
into one validly issued, fully paid and nonassessable share of Common Stock
of the Company.
SECTION 3.2. PREFERENCE STOCK UNAFFECTED
Each issued and outstanding share of the Company's $2.475 Cumulative
Convertible Series B Preference Stock, par value $1.00 per share ("Series B
Preference Stock"), and Series D Cumulative Convertible
-5-
<PAGE> 10
Changeable Preference Stock, par value $1.00 per share ("Series D Preferred
Stock"), (together, the "Preference Stock") shall remain outstanding and
unaffected by the Merger unless redeemed or converted pursuant to the terms and
conditions of the Company's Articles of Incorporation and the applicable
statement of designation preferences and rights for such Preference Stock.
SECTION 3.3. STOCK OPTIONS
(a) Subject to paragraph (b) below, each option (an "Option") to purchase
Common Stock issued by the Company which is outstanding at the Effective Time
shall be canceled by virtue of the Merger, without consideration except as
provided in this Section 3.3(a), and shall cease to exist. Each holder of an
Option, whether or not such Option is immediately exercisable, shall be entitled
to receive at the Effective Time, for each share of Common Stock issuable on
exercise of such Option, an amount in cash equal to the excess of (x) the Per
Share Amount over (y) the per share exercise price of the Option as in effect
immediately prior to the Effective Time. No consideration shall be payable with
respect to any Option if the exercise price of such Option exceeds the Per Share
Amount.
(b) The consideration due under this Section 3.3 shall be payable without
interest after (x) verification by the Paying Agent of the ownership and terms
of the particular Option by reference to the Company's records and (y) delivery
in the manner provided in Section 3.5 of a written instrument duly executed by
the owner of the Option, in a form to be provided by the Paying Agent promptly
after the Effective Time, setting forth (i) the aggregate number of shares of
Common Stock acquirable by such Option holder upon exercise of all Options held
by such holder, whether or not such Options are immediately exercisable, the
respective issue dates of each Option and the exercise price of each Option;
(ii) a representation by the person that he or she is the owner of all Options
described pursuant to clause (i), and that none of those Options has expired or
ceased to be exercisable; and (iii) a consent to the treatment of such Options
pursuant to this Section 3.3 in full satisfaction of all rights relating to such
Options.
SECTION 3.4. CLOSING OF COMPANY TRANSFER BOOKS
At the Effective Time, the stock transfer books of the Company shall be
closed with respect to Common Stock issued and outstanding immediately prior to
the Effective Time and no further transfer of such Common Stock shall thereafter
be made on such stock transfer books. If, after the Effective Time, valid
certificates previously representing such Common Stock are presented to the
Company or the Paying Agent, they shall be exchanged as provided in Section 3.5.
SECTION 3.5. EXCHANGE OF CERTIFICATES
Prior to the Effective Time, Purchaser shall, and Parent shall cause
Purchaser to, designate a bank or trust company to act as agent (the "Paying
Agent") for the Shareholders to receive the funds necessary to effect the
exchange for cash of certificates which, immediately prior to the Effective
Time, represented Common Stock entitled to payment pursuant to Section 3.1(b).
As soon as practicable after the Effective Time, the Paying Agent shall mail a
transmittal form to each holder of record of certificates theretofore
representing such Common Stock advising such holder of the procedure for
surrendering to the Paying Agent such certificates. If a check for the Per Share
Amount is to be issued in the name of a person other than the person in whose
name the certificates for Common Stock surrendered for exchange are registered
on the books of the Company, it shall be a condition of the exchange that the
person requesting such exchange shall pay to the Paying Agent all transfer or
other taxes required by reason of the issuance of such check in the name of a
person other than the registered owner of the certificates surrendered, or shall
establish to the satisfaction of the Paying Agent that such taxes have been paid
or are not applicable. Upon the surrender and exchange of a certificate
theretofore representing Common Stock, the holder shall be paid by check,
without interest thereon, the Per Share Amount for each share of Common Stock
theretofore represented by such certificate and to which he or she is entitled
hereunder, less only such amount required to be withheld under applicable backup
withholding federal income tax regulations, and such certificate shall forthwith
be canceled. Until so surrendered and exchanged, each such certificate shall
represent solely the right to receive the Per Share Amount into which the Common
Stock it theretofore represented shall have been converted pursuant to Section
3.1, without interest, and the Company shall not be required to pay the holder
-6-
<PAGE> 11
thereof the Per Share Amount to which such holder otherwise would be entitled.
Notwithstanding the foregoing, neither the Paying Agent nor any party hereto
shall be liable to a holder of certificates theretofore representing Common
Stock for any amount paid to a public official pursuant to any applicable
abandoned property, escheat or similar laws. If any certificates representing
any Common Stock shall not have been surrendered immediately prior to such date
on which any payment in respect thereof would otherwise escheat to or become the
property of any governmental authority of applicable jurisdiction, the payment
in respect of such certificates shall, to the extent permitted by applicable
law, become the property of the Company, free and clear of all claims or
interest of any person previously entitled thereto. Parent shall use reasonable
and customary efforts to locate holders of record of Common Stock who are
entitled to receive the Per Share Amount for their shares but who have not
surrendered their certificates for exchange in accordance with this Section 3.5
within six (6) months after the Effective Time. In the case of any lost,
mislaid, stolen or destroyed certificate, the holder of such certificate may be
required, as a condition precedent to delivery to such holder of the Per Share
Amount, to deliver to Purchaser a bond in such reasonable sum as security for or
a reasonable indemnity agreement as indemnity against any claim that may be made
against Parent, Purchaser or the Company with respect to the certificate alleged
to have been lost, mislaid, stolen or destroyed.
SECTION 3.6. FUNDING OF PAYING AGENT
Parent shall transmit by wire, or other acceptable means to the Paying
Agent, at or prior to the Effective Time funds required for the exchange of all
Common Stock and cancellation of all Options in accordance with this Agreement.
The Paying Agent shall agree to hold such funds in trust and deliver such funds
(in the form of checks of the Paying Agent) in accordance with this Section and
Sections 3.3 and 3.5. Any portion of such funds which has not been paid to
Shareholders or holders of outstanding Options pursuant to Section 3.3 or 3.5
within six months after the Effective Time shall promptly be paid to the party
which provided such funds, and thereafter holders of certificates representing
the right to receive the cash into which Common Stock or Options formerly
represented by such certificates shall have been converted pursuant to Section
3.1(b) or 3.3 who have not theretofore complied with Section 3.3 or 3.5 shall
look solely to the Parent for payment of the amount of cash to which they are
entitled pursuant to this Agreement.
SECTION 3.7. ACTION OF SHAREHOLDERS
(a) If required by applicable law to approve the Merger, the Company shall
take all action necessary in accordance with the PBCL and its Articles of
Incorporation and By-Laws to convene a meeting of its shareholders promptly
after the consummation of the Offer to consider and vote upon this Agreement and
the Merger. If a meeting of the Company's shareholders is to be called, the
Company shall, if and to the extent requested by Purchaser but subject to the
fiduciary duties of the Independent Directors, use all reasonable efforts to
solicit from such shareholders proxies in favor of the adoption of this
Agreement and shall take all other action reasonably necessary, or which
otherwise may be reasonably requested by Purchaser, to secure a vote of such
shareholders in favor of adoption of this Agreement.
(b) At any such meeting, Purchaser shall vote or cause to be voted all of
the Common Stock then owned by it or its subsidiaries in favor of adoption of
this Agreement and the Company shall vote or cause to be voted all securities
entitled to vote at such meeting with respect to which proxies in the form
distributed by the Company have been given, and not voted against the adoption
of this Agreement, in favor of adoption of this Agreement.
(c) If necessary, the Company shall file with the Commission, and shall use
all reasonable efforts to have processed to completion by the Commission, in
each case at the earliest practicable date, a proxy statement or information
statement, as Purchaser shall designate (the "Proxy Statement"), with respect to
the adoption by the Company's shareholders of this Agreement in form and
substance reasonably satisfactory to Purchaser and its counsel. The information
provided by Purchaser and the Company, respectively, for use in the Proxy
Statement shall be true and correct in all material respects and shall not omit
to state any material fact necessary in order to make such information and the
Proxy Statement not misleading as of the date of the Proxy Statement. The Proxy
Statement shall contain the determination and recommendation of the Board of
Directors of the Company referred to in Section 1.2.
-7-
<PAGE> 12
SECTION 3.8. MERGER WITHOUT MEETING OF SHAREHOLDERS
Notwithstanding Section 3.7, in the event that Purchaser shall acquire at
least 80% or more of the outstanding shares of each class of the Company, the
parties hereto agree to take all necessary and appropriate action, to cause the
Merger to become effective as soon as practicable after the expiration of the
Offer without a meeting of shareholders of the Company in accordance with
Section 1924(b)(ii) of the PBCL.
SECTION 3.9. NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK
From and after the Effective Time, the holders of Common Stock which was
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Common Stock except as otherwise provided in this
Agreement or by law. All cash paid upon the surrender of certificates in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to Common Stock of the Company.
SECTION 3.10. DISSENTING SHAREHOLDERS -- COMMON STOCK
Notwithstanding anything in this Agreement to the contrary, shares of
Common Stock that are issued and outstanding immediately prior to the Effective
Time and that are held by Shareholders who (i) have not voted such shares in
favor of the Merger and (ii) have delivered timely a written demand for
appraisal of such shares in the manner provided in Chapter 15 of the PBCL shall
not be canceled and converted into the right to receive the Per Share Amount
described in Section 3.1(b), unless and until such Shareholder shall have failed
to perfect, or effectively shall have withdrawn or lost, such Shareholder's
right to appraisal and payment under the PBCL, but rather, such Shareholders
shall be entitled to payment of the fair value of their shares determined and
payable in accordance with the provisions of Chapter 15, Subchapter D of the
PBCL. If such Shareholder shall have so failed to perfect, or effectively shall
have withdrawn or lost such right, the Common Stock owned by such Shareholder
shall thereupon be deemed to have been canceled and converted as described in
Section 3.1(b) at the Effective Time, and each share of Common Stock owned by
such Shareholder shall represent solely the right to receive the Per Share
Amount, without interest. From and after the Effective Time, no Shareholder who
has demanded appraisal rights as provided in Subchapter D of the PBCL shall be
entitled to vote his or her shares of Common Stock for any purpose or to receive
payment of dividends or other distributions with respect to such shares (except
dividends and other distributions payable to Shareholders of record at a date
which is prior to the Effective Time). The Company shall give Purchaser prompt
notice of all written demands received by it for appraisal of Common Stock and
shall not settle or compromise any such demand without the prior written consent
of Purchaser.
SECTION 3.11. DISSENTING SHAREHOLDERS -- PREFERENCE STOCK
Notwithstanding anything in this Agreement to the contrary, shares of
Preference Stock that are issued and outstanding immediately prior to the
Effective Time and that are held by holders of shares of Preference Stock who
(i) have not voted such shares in favor of the Merger and (ii) have delivered
timely a written demand for appraisal of such shares in the manner provided in
Chapter 15 of the PBCL, unless and until such shareholder shall have failed to
perfect, or effectively shall have withdrawn or lost, such shareholder's right
to appraisal and payment under the PBCL, shall be entitled to payment of the
fair value of their shares determined and payable in accordance with the
provisions of Chapter 15, Subchapter D of the PBCL. If such shareholder shall
have so failed to perfect, or effectively shall have withdrawn or lost such
right, the Preference Stock owned by such shareholder shall remain outstanding
and unaffected by the Merger. From and after the Effective Time, no shareholder
who has demanded appraisal rights as provided in Subchapter D of the PBCL shall
be entitled to vote his or her shares of Preference Stock for any purpose or to
receive payment of dividends or other distributions with respect to such shares
(except dividends and other distributions payable to shareholders of record at a
date which is prior to the Effective Time). The Company shall give Purchaser
prompt notice of all written demands received by it for appraisal of Preference
Stock and shall not settle or compromise any such demand without the prior
written consent of Purchaser.
-8-
<PAGE> 13
SECTION 3.12. ASSISTANCE IN CONSUMMATION OF THE MERGER
Each of Parent, Purchaser and the Company shall provide all reasonable
assistance to, and shall cooperate with, each other to bring about the
consummation of the Offer, the Merger, and the other transactions contemplated
by this Agreement as soon as possible in accordance with the terms and
conditions of this Agreement. Parent shall cause Purchaser to perform all of its
obligations in connection with this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows
(which representations and warranties are qualified by the disclosure schedule
delivered by the Company to Parent prior to the date of this Agreement, a copy
of which is attached hereto (the "Company Disclosure Schedule"), and by the
Company SEC Reports (as defined in Section 4.4(a)):
SECTION 4.1. ORGANIZATION AND QUALIFICATION
(a) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and subsisting under the laws of the jurisdiction of
its incorporation or organization and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
businesses as now being conducted.
(b) Except as set forth in Section 4.1(b) of the Company Disclosure
Schedule, the Company has no subsidiaries and does not own, directly or
indirectly, beneficially or of record, any shares of capital stock or other
security of any other entity or any other investment in any other entity.
(c) The Company has heretofore made available to Parent accurate and
complete copies of its Articles of Incorporation and Bylaws (or similar
governing documents), as currently in effect, of the Company and each of its
subsidiaries. Each of the Company and its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing has not had and would not reasonably be expected to have a Material
Adverse Effect (as defined below) on the Company. When used in connection with
any party to this Agreement, the term "Material Adverse Effect" means a material
adverse effect on (i) the business, financial condition or results of operations
of such party and its subsidiaries, taken as whole, except effects that are (x)
generally applicable in the United States economy and/or the economy in any
other region of the world which do not have a disproportionate effect on such
party and its subsidiaries (as the case may be) or, (y) relate to the securities
market in general, or (z) relate to such party's industry in general or (ii) the
ability of such party to consummate the transactions contemplated hereby without
unreasonable delay; provided, however, that (I) the institution of a lawsuit by
a shareholder of Parent or the Company challenging this Agreement or the
transactions contemplated hereby (or any threat to do so) shall not be deemed to
be a Material Adverse Effect, and (II) with respect to the Company, the
commencement, public proposal, public disclosure or communication to the Company
of any Takeover Proposal shall not be deemed to be a Material Adverse Effect.
SECTION 4.2. CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES
(a) The authorized capital stock of the Company consists of: (i) 35,000,000
shares of Common Stock, par value $1.00 per share, of which, as of August 5,
1998, 14,718,508 shares were issued and outstanding, and (ii) (x) 1,878,870
shares of Series B Preference Stock, of which 16,000 shares are issued and
outstanding; (y) 200,000 shares, of Series C Preferred Stock, par value $ 1.00
per share, of which no shares are issued and outstanding; and (z) 200,000 shares
of Series D Preferred Stock, of which 200,000 shares are issued and outstanding.
All of the issued and outstanding shares of Common Stock and Preference Stock
have been duly authorized, validly issued, and are fully paid, nonassessable and
free of preemptive rights. As of August 5, 1998, 1,373,300 shares of Common
Stock were reserved for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding options granted by the Company to
purchase shares of Common Stock issued pursuant to the Company stock incentive
plans listed on Section 4.2(a) of the Company Disclosure Schedule (the "Company
-9-
<PAGE> 14
Stock Incentive Plans") and 1,651,456 shares of Common Stock were reserved for
issuance and issuable upon conversion of the Preference Stock in accordance with
its terms. Since August 5, 1998, except as set forth on Section 4.2(a) of the
Company Disclosure Schedule, no shares of the Company's capital stock have been
issued otherwise than pursuant to the exercise of options granted by the Company
to purchase shares of Common Stock already in existence on such date, and, since
July 23, 1998, no options to purchase shares of the Company Common Stock have
been granted. Except as set forth above in this Section 4.2(a), there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or its subsidiaries convertible into
or exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options or other rights to acquire from the Company or its
subsidiaries, and no other contract, understanding, arrangement or obligation
(whether or not contingent) of the Company or its subsidiaries to issue or sell,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company and (iv) no
equity equivalents, or interests in the ownership or earnings, of the Company or
its subsidiaries (including stock appreciation rights) (collectively, the
"Company Securities"). There are no contracts, understandings, arrangements or
obligations (whether or not contingent) of the Company or its subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities. Except as set
forth in Section 4.2(a) of the Company Disclosure Schedule, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or to which it is bound relating to the voting of
any shares of capital stock of the Company.
(b) Except as set forth in Section 4.2(b) of the Company Disclosure
Schedule, (i) all of the outstanding capital stock of the Company's subsidiaries
is validly issued, fully paid and nonassessable and is owned beneficially and of
record by the Company, directly or indirectly, free and clear of any Lien and
(ii) there are no securities of the Company or its subsidiaries convertible into
or exchangeable for, no options or other rights to acquire from the Company or
its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) of the Company or its subsidiaries to
issue or sell any capital stock or other ownership interests in, or any other
securities of, any subsidiary of the Company. There are no contracts,
understandings, arrangements or obligations (whether or not contingent) of the
Company or its subsidiaries to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other ownership interests in any
subsidiary of the Company. There are no stockholder agreements, voting trusts or
other agreements or understandings to which the Company or its subsidiaries is a
party or to which it is bound relating to the voting of any shares of capital
stock of any subsidiary of the Company.
(c) The Company has no bonds, debentures, notes or other instruments or
evidence of indebtedness having the right to vote (or convertible into, or
exercisable or exchangeable for, securities having the right to vote) on any
matters on which holders of the Company's outstanding securities may vote issued
or outstanding.
(d) The Company is not subject to a "rights agreement," poison pill, or
similar obligation. That certain Shareholders Rights Agreement, dated April 14,
1986, by and between the Company and PNC Bank, N.A., as Rights Agent, has
expired in accordance with its terms, no longer has any force or effect
whatsoever and the rights issued thereunder have expired. The Company has not
declared a dividend on its Common Stock since May 1987.
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company (the "Company Board") and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby (other than, with respect
to the Merger, the approval and adoption of the Merger by the affirmative vote
of the holders of a majority of the votes cast by the then outstanding shares of
Common Stock and Preference Stock, voting together as a single class, voting at
the meeting of the Company stockholders referred to in Section 3.7 hereof). Such
approval and adoption is the only vote of the holders of any class or series of
the Company's capital stock necessary (under Pennsylvania law, the Company's
charter or otherwise) to approve the Merger and this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and
-10-
<PAGE> 15
delivered by the Company and constitutes a valid, legal and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding therefore may
be brought.
(b) The Company Board has, by a majority vote of its directors, duly and
validly approved, and taken all corporate actions required to be taken by the
Company Board for the consummation of the transactions contemplated hereby
(including, without limitation, the Merger) and resolved to recommend that the
stockholders of the Company approve and adopt the Merger. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been (i) duly authorized by the Board
of Directors of the Company prior to Parent or Purchaser becoming an "Interested
Stockholder" as defined in Section 2553 of the Pennsylvania Law and, (ii)
approved in such a manner as to avoid the application of Subchapter F of Chapter
25 of the Pennsylvania Law. The Company has taken all necessary corporate action
so that no "business combination," "fair price," "control share acquisition" or
"moratorium" statute or other similar statute or regulation of any state "blue
sky" or securities law statute (including, without limitation, the provisions of
Section 2538 and Subchapters F, G, H, I and J of Chapter 25 of the Pennsylvania
Law) (each, a "Takeover Statute") or any applicable anti-takeover provision in
the Company's Articles of Incorporation or By-Laws is applicable to the Company
or the transactions contemplated hereby.
(c) The Company Common Stock is listed on the New York Stock Exchange (the
"NYSE"). None of the Preference Stock is currently registered under the
Securities Act (as defined below) nor listed on any national securities exchange
and, with the exception of the Common Stock into which the Series D Preference
Stock is convertible, the Preference Stock has no registration rights. The
Common Stock underlying the Series D Preference Stock is subject to a
Registration Rights Agreement dated September 21, 1988.
SECTION 4.4. SEC REPORTS; FINANCIAL STATEMENTS; TITLE TO ASSETS; LIENS
(a) The Company has filed all required forms, reports and documents with
the Commission since January 1, 1995, each of which has complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), each as in effect on the dates such forms, reports
and documents were filed. The Company has heretofore delivered to Parent, in the
form filed with the Commission (including any amendments thereto), (i) its
Annual Reports on Form 10-K for each of the fiscal years ended December 31,
1995, 1996 and 1997, (ii) all definitive proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
January 1, 1995 and (iii) all other reports or registration statements filed by
the Company with the Commission since January 1, 1995 (the "Company SEC
Reports"). None of such forms, reports or documents, including, without
limitation, any financial statements or schedules included or incorporated by
reference therein, contained, when filed, any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements of the Company included in the Company SEC
Reports complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in conformity with generally accepted
accounting principles, consistently applied ("GAAP") (except, in the case of
unaudited consolidated quarterly statements, which have been prepared in
accordance with the instructions to Form 10-Q of the Commission and Article 10
of Regulation S-X) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto), and fairly present the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and their consolidated results of operations and cash
flows for the periods then ended (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end adjustments). Since December
31, 1997, except as set forth in the Company SEC Reports, there has not been any
change, or any application or request for any change, by the Company or any of
its subsidiaries in accounting principles, methods or policies for financial
accounting or tax purposes. The financial statements of the Company have been
prepared from, and are in accordance with, the books and records of the Company
and its subsidiaries in all material respects.
-11-
<PAGE> 16
(b) The Company and its subsidiaries have good and marketable title to
their assets, except where failure to have such good and marketable title to
such assets would not have a Material Adverse Effect on the Company. Section
4.4(b) of the Company Disclosure Schedule sets forth a list of all Liens on the
assets of the Company and its subsidiaries except Permitted Liens and Liens that
do not have a Material Adverse Effect on the Company.
SECTION 4.5. INFORMATION SUPPLIED
None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in (i) Schedule 14D-1 to be filed with
the Commission by Parent and/or Purchaser in connection with the Offer will, at
the time the Schedule 14D-1 is filed with the Commission contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(ii) the Proxy Statement will, at the date mailed to stockholders of the Company
and at the times of the meetings of stockholders of the Company to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time, any
event with respect to the Company, its officers and directors or any of its
subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, the Schedule 14D-1 or the Proxy Statement, the Company shall
promptly so advise Parent and such event shall be so described, and such
amendment or supplement (which Purchaser and Parent shall have a reasonable
opportunity to review) shall be promptly filed with the Commission and, as and
to the extent required by law, disseminated to the stockholders of the Company.
The Proxy Statement, insofar as it relates to the meeting of the Company's
stockholders to vote on the Merger, will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made with respect to
statements made or incorporated by reference therein based on information
supplied by Parent specifically for inclusion or incorporation by reference in
such document.
SECTION 4.6. CONSENTS AND APPROVALS; NO VIOLATIONS
Except for filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Securities Act, the
Exchange Act, state securities or blue sky laws, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the filing and recordation
of the Articles of Merger as required by the PBCL and as otherwise set forth in
Section 4.6 to the Company Disclosure Schedule, no filing with or notice to, and
no permit, authorization, consent or approval of, any court or tribunal or
administrative, governmental or regulatory body, agency or authority (a
"Governmental Entity") is necessary for the execution and delivery by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company. Except as set forth in Section
4.6 to the Company Disclosure Schedule, and assuming all filings, notifications,
permits, authorizations, consents and approvals referred to in the immediately
preceding sentence are duly and timely obtained or made, neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective certificate or articles
of incorporation or bylaws (or similar governing documents) of the Company or
any of its subsidiaries, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of indemnification, termination, amendment, cancellation or
acceleration or Lien) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their respective properties or assets
may be bound, or (iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to the Company or any of its subsidiaries
or any of their respective properties or assets, except in the case of (ii) and
(iii) for violations, breaches or defaults which, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect on the Company.
-12-
<PAGE> 17
SECTION 4.7. NO DEFAULT
Neither the Company nor any of its subsidiaries is in default or violation
(and no event has occurred which with or without due notice or the lapse of time
or both would constitute a default or violation) of any term, condition or
provision of (i) its articles of incorporation or bylaws (or similar governing
documents), (ii) any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is now a party or by which any of them or any of their respective
properties or assets may be bound or (iii) any order, writ, injunction, decree,
law, statute, rule or regulation applicable to the Company, its subsidiaries or
any of their respective properties or assets, except in the case of (ii) and
(iii) for violations, breaches or defaults which, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect on the Company.
SECTION 4.8. NO UNDISCLOSED LIABILITIES
Except as and to the extent disclosed by the Company in the Company SEC
Reports and for any liabilities or obligations arising out of matters disclosed
in Section 4.8 of the Company Disclosure Schedule, none of the Company or its
subsidiaries had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, and whether due or to become due or asserted
or unasserted, which would be required by GAAP to be reflected in, reserved
against or otherwise described in the consolidated financial statements of the
Company (including the notes thereto) as of the date of such Company SEC
Reports, other than any such liabilities or obligations which, individually or
in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 4.9. LITIGATION
Except as publicly disclosed by the Company in the Company SEC Reports, or
disclosed in Section 4.9 of the Company Disclosure Schedule, there is no suit,
claim, action, proceeding or investigation pending or, to the Knowledge of the
Company, threatened against the Company or any of its subsidiaries or any of
their respective properties or assets which (a) individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on the Company or (b) questions the validity of this Agreement or any
action to be taken by the Company in connection with the consummation of the
transactions contemplated hereby. Except as publicly disclosed by the Company in
the Company SEC Reports, none of the Company or its subsidiaries is subject to
any outstanding order, writ, injunction or decree which, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on the Company.
SECTION 4.10. COMPLIANCE WITH APPLICABLE LAW
Except as publicly disclosed by the Company in the Company SEC Reports or
disclosed in Section 4.10 of the Company Disclosure Schedule, the Company and
its subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on the Company. Except as publicly
disclosed by the Company in the Company SEC Reports, the Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply, individually or in the aggregate, has not had
and would not reasonably be expected to have a Material Adverse Effect on the
Company. Except as publicly disclosed by the Company in the Company SEC Reports,
the businesses of the Company and its subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity, except
for violations or possible violations which, individually or in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect on the Company. Except as publicly disclosed by the Company in the
Company SEC Reports, no investigation or review by any Governmental Entity with
respect to the Company or its subsidiaries is pending or, to the Knowledge of
the Company, threatened, nor, to the Knowledge of the Company, has any
Governmental Entity indicated an intention to conduct the same, other than, in
each case, those the outcome of which, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse
-13-
<PAGE> 18
Effect on the Company. No representation or warranty is made in this Section
4.10 with respect to Environmental Laws (as defined and addressed in Section
4.12(a)).
SECTION 4.11. EMPLOYEE PLANS
(a) Section 4.1l(a) of the Company Disclosure Schedule lists, with respect
to the Company or any of its subsidiaries (or their respective predecessors) or
any trade or business (whether or not incorporated) (y) currently or formerly
under common control (within the meaning of Section 4001(b) of ERISA) with the
Company or (z) which together with the Company is or was treated as a single
employer under Section 414(t) of the Internal Revenue Code of 1986, as amended
(the "Code") (the "Controlled Group"), all (i) "employee benefit plans," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), (ii) all other severance pay, salary continuation, annual
or long-term incentive, stock, phantom stock, stock appreciation right or stock
option, retirement, pension, profit sharing or deferred compensation plans,
contracts, programs, funds, or arrangements of any kind, (iii) all other
employee compensation or benefit plans, contracts, programs, funds, arrangements
(whether written or oral, qualified or nonqualified, funded or unfunded, foreign
or domestic, currently effective or terminated) which the Company or any of the
Controlled Group maintains, is a party to, contributes to or has any obligation
to or liability for or which cover its or their employees or former employees,
(iv) all trust, escrow or similar agreements or other funding arrangements (the
"Funding Arrangements") related to the plans, contracts, programs, funds or
arrangements described in clauses (i) through (iii) (the "Employee Benefit
Plans") whether or not funded to which the Company or any of the Controlled
Group has or is required to make payments, transfers or contributions except
Employee Benefit Plans mandated by law ("Statutory Plans"). Neither the Company,
nor any of the Controlled Group has any liability with respect to any plan,
contract, program, fund, arrangement or practice of the type described in this
Section 4.11(a) other than the Employee Benefit Plans and the Funding
Arrangements.
(b) Copies of the following materials have been delivered or made available
to Parent: (i) all current and prior plan documents for each Employee Benefit
Plan or Funding Arrangement, or in the case of an unwritten Employee Benefit
Plan or Funding Arrangement, a written description thereof, (ii) all
determination letters from the Internal Revenue Service with respect to any of
the Employee Benefit Plans or Funding Arrangements, (iii) all current and prior
summary plan descriptions, summaries of material modifications, annual reports,
and summary annual reports, (iv) all current and prior trust agreements,
insurance contracts, and other documents relating to the funding or payment of
benefits under any Employee Benefit Plan or Funding Arrangement, and (v) any
other documents, forms or other instruments relating to any Employee Benefit
Plan or Funding Arrangement reasonably requested by Parent. All financial
information furnished with respect to any Employee Benefit Plan or Funding
Arrangement is true and accurate in all material respects.
(c) As of the date hereof, except for exceptions which, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect on the Company, (i) all payments required to be made by
or under any Employee Benefit Plan, any Funding Arrangement, or any collective
bargaining agreement have been made; (ii) the Company and its subsidiaries have
performed all obligations required to be performed by them under any Employee
Benefit Plan or Funding Arrangement; (iii) the Employee Benefit Plans and
Funding Arrangements have been administered in compliance with their terms and,
if applicable, the requirements of ERISA, the Code and other applicable laws;
(iv) there are no actions, suits, arbitrations or claims (other than routine
claims for benefit) pending or, to the Knowledge of the Company, threatened with
respect to any Employee Benefit Plan or Funding Arrangement; (v) the Company and
its subsidiaries have no liability as a result of any "prohibited transaction"
(as defined in Section 406 of ERISA and Section 4975 of the Code) for any excise
tax or civil penalty; and (vi) except as set forth in the Company SEC Reports,
or in Section 4.11(c) of the Company Disclosure Schedule, the assets of each
Funding Arrangement for each Employee Benefit Plan required to be funded equal
or exceed the vested and unvested projected benefit liabilities under such
Employee Benefit Plan.
(d) If and to the extent applicable, no Employee Benefit Plan has or has
incurred an accumulated funding deficiency within the meaning of Section 302 of
ERISA or Section 412 of the Code, nor has any waiver of the minimum funding
standards of Section 302 of ERISA and Section 412 of the Code been requested of
or granted
-14-
<PAGE> 19
by the Internal Revenue Service with respect to any Employee Benefit Plan or
Funding Arrangement, nor has any lien in favor of any such plan arisen under
Section 412(n) of the Code or Section 302(f) of ERISA.
(e) Except for exceptions which, individually or in the aggregate, have not
had and would not reasonably be expected to have a Material Adverse Effect on
the Company, the Company and its subsidiaries have not incurred any unsatisfied
withdrawal liability with respect to any Multiemployer Plan, as defined in ERISA
("Multiemployer Plan"). Except as set forth in Section 4.11(e) of the Company
Disclosure Schedule, no withdrawal liability would be assessed upon partial or
complete withdrawal from any Multiemployer Plan to which the Company or any of
the Controlled Group is obligated to contribute or guarantees contributions
other than any such withdrawal liability which has not had and would not
reasonably be expected to have a Material Adverse Effect on the Company.
(f) Except for exceptions which, individually or in the aggregate, have not
had and would not reasonably be expected to have a Material Adverse Effect on
the Company, each of the Employee Benefit Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified,
and each trust created thereunder is exempt from tax under the provisions of
Section 501(a) of the Code.
(g) Except as set forth on Section 4.11(g) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby either alone or together
with the occurrence or nonoccurrence of any other event or condition will (i)
result in any payment becoming due, or increase the amount of compensation or
benefit due, to any current or former employee of the Company or any of the
Controlled Group; (ii) increase any compensation or benefits otherwise payable
under any Employee Benefit Plan or Funding Arrangement; or (iii) result in the
acceleration of the time of payment or vesting of any such compensation or
benefits.
(h) Except as disclosed on Section 4.11(h) of the Company Disclosure
Schedule and for exceptions which, individually or in the aggregate, have not
had and would not reasonably be expected to have a Material Adverse Effect on
the Company, with respect to any insurance policy providing funding for benefits
under any Employee Benefit Plan, there is no liability of the Company in the
nature of a retroactive rate adjustment, loss sharing arrangement, or other
actual or contingent liability, there will be no such liability arising wholly
or partially out of events occurring prior to the execution of this Agreement,
nor would there be any such liability if the Company canceled such policy as of
the date hereof.
SECTION 4.12. ENVIRONMENTAL MATTERS
(a) As used in this Agreement:
(i) "Environmental Law" means any applicable federal, state or local
law, statute, code, ordinance, rule, regulation or other governmental
requirement from any U.S. or foreign jurisdiction concerning the Release
(as defined herein), handling, storage, processing, transportation,
manufacture, distribution, treatment, disposal, permitting, remediation or
other use of any solid waste, industrial waste or Hazardous Substance (as
defined herein), or concerning the protection of the health or safety of
employees or the public, including, by way of example but not limitation,
the Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. sec. 9601 et seq.), the Hazardous Materials Transportation Act
(49 U.S.C. sec. 1801 et seq.), the Resource Conservation and Recovery Act
(42 U.S.C. sec. 6901 et seq.), the Clean Water Act (33 U.S.C. sec. 1251),
the Clean Air Act (42 U.S.C. sec. 7401), the Toxic Substances Control Act
(15 U.S.C. sec. 2601 et seq.), and the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. sec. 136 et seq.), the Mine Safety and Health Act
(30 U.S.C. sec. 801 et seq.) and the Occupational Safety and Health Act (29
U.S.C. sec. 651 et seq.), and the regulations promulgated pursuant to each
of them.
(ii) "Environmental Claim" means any written notice of violation,
action, claim, lien, demand, order, injunction, judgment, decree, ruling,
assessment or arbitration award or directive (conditional or otherwise) by
any Governmental Entity or any person for personal injury (including
sickness, disease or death), tangible or intangible property damage,
diminution in value, damage to the environment or natural resources,
nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions resulting from or
based upon (a) the existence, or the continuation of the existence, of a
Release
-15-
<PAGE> 20
(including, without limitation, sudden or non-sudden accidental or
non-accidental Release) of, or exposure to, any Hazardous Substance, odor,
audible noise, or any solid or industrial waste; (b) the transportation,
storage, treatment or disposal of solid waste, industrial waste or
Hazardous Substances, in connection with the past or present operations of
any person, any of its subsidiaries or, to the Knowledge of such person,
any of their respective predecessors or assigns; or (c) the violation, or
alleged violation, of any Environmental Laws, orders, injunctions,
judgments, decrees, rulings, assessments, arbitration awards, Environmental
Permits or ruling, order or decision of any court, arbitrator or
Governmental Entity relating to such person and its environmental matters.
(iii) "Environmental Permit" means any permit, approval,
authorization, license, variance, registration, permit application,
notification, program development and implementation, or permission
required under any applicable Environmental Law.
(iv) "Hazardous Substance" means any substance, material or waste
which is regulated (A) under any Environmental Law or (B) by any applicable
Governmental Entity in the jurisdictions in which a person or any
subsidiary or any of their respective predecessors or assigns conducts or
has conducted business, or (C) by the United States, including, without
limitation, any material or substance which is defined as a "hazardous
waste," "hazardous material," "hazardous substance," "extremely hazardous
waste" or "restricted hazardous waste," "subject waste," "pollutant,"
"contaminant," "toxic waste," "toxic substance" or "residual waste" under
any Environmental Law, including, but not limited to, radioactive
materials, petroleum products, asbestos and polychlorinated biphenyls.
(v) "Property" means, with respect to any person, any land, facility
or operations currently or previously owned or otherwise used by such
person, any of its subsidiaries or any of their respective predecessors.
(vi) "Release" means, with respect to any person, any intentional or
unintentional, continuous or intermittent release, spill, emission,
seepage, leaking, pumping, uncontrolled loss, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the environment, or any
building surface, or onto or from any Property of such person, of any
Hazardous Substance, including the movement of any Hazardous Substance
through or in the air, soil, surface water, ground water or otherwise.
(vii) "Remedial Action" means, with respect to any person, all
actions, including, without limitation, any capital expenditures, required
or voluntarily undertaken by such person to (i) clean up, remove, treat, or
in any other way address any Hazardous Substance or any other material
required pursuant to applicable Environmental Law or Environmental Permit;
(ii) prevent the Release or threat of Release, or minimize the further
Release of any Hazardous Substance or any other material required pursuant
to applicable Environmental Law or Environmental Permit; (iii) perform
pre-remedial studies and investigations or post-remedial monitoring and
care including the conduct of risk assessments and negotiation with
applicable Governmental Entities regarding any Hazardous Substance or any
other material required pursuant to applicable Environmental Law or
Environmental Permit; or (iv) bring the Properties of such person into
compliance with all applicable Environmental Laws and Environmental
Permits.
(b) Except as disclosed in any Company SEC Report or as disclosed in
Section 4.12 of the Company Disclosure Schedule, the Company and each of its
subsidiaries and, to the Knowledge of the Company, each other permitted user of
a Property and its use of and operations at each Property is in compliance with
all applicable Environmental Laws and Environmental Permits, except where the
failure to so be in compliance, individually or in the aggregate, has not had
and would not reasonably be expected to have a Material Adverse Effect on the
Company.
(c) Except as disclosed in any Company SEC Report or as disclosed in
Section 4.12 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries or, to the Knowledge of the Company, any of their respective
predecessors or any other user of a Property, has received any written
communication from a court, Governmental Entity or any other person that alleges
that the Company or any such subsidiary or predecessor or other person is not in
compliance, with any Environmental Law or Environmental Permit or has liability
thereunder, and, to the Knowledge of the Company, there is no basis for any such
allegation except with
-16-
<PAGE> 21
respect to failures to so be in compliance which, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect on the Company.
(d) Except as disclosed in any Company SEC Report or as disclosed in
Section 4.12 of the Company Disclosure Schedule, (i) none of the Properties or
operations of the Company or any of its subsidiaries or, to the Knowledge of the
Company, any of their respective predecessors, is the subject of any
investigation by any Governmental Entity, whether federal, state, local or
foreign, with respect to (A) any Environmental Law or Environmental Permit, (B)
any Remedial Action or (C) any Environmental Claim, which in each case,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Company and (ii) the Company and each of
its subsidiaries have filed all notices, obtained all Environmental Permits and
conducted all Remedial Actions required under all Environmental Laws and
Environmental Permits, except where the failure to file such notices, obtain
such Environmental Permits or take such Remedial Actions, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect on the Company. The Company and each of its subsidiaries are in
compliance with the terms and conditions of each of their Environmental Permits,
except for any such noncompliance which, individually and in the aggregate, has
not had and would not reasonably be expected to have, a Material Adverse Effect
on the Company, and, except as disclosed in Section 4.12 of the Company
Disclosure Schedule, to the Knowledge of the Company, no change in the facts or
circumstances reported or assumed in the application for or granting of any such
Environmental Permit exists.
(e) Except as disclosed in any Company SEC Report or as disclosed in
Section 4.12 of the Company Disclosure Schedule, the Company and each of its
subsidiaries and, to the Knowledge of the Company, each of their respective
predecessors, have filed all notices required to be filed by them under all
Environmental Laws and Environmental Permits reporting any Release, except where
failure to file such notices, individually or in the aggregate, has not had and
would not reasonably be expected to have a Material Adverse Effect on the
Company.
(f) Except as disclosed in any Company SEC Report or as disclosed in
Section 4.12 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries has any contingent liabilities with respect to its business or,
to the Knowledge of the Company, that of its predecessors, in connection with
any Hazardous Substance or Environmental Law or Environmental Permit which,
individually or in the aggregate, have had or would reasonably be expected to
have a Material Adverse Effect on the Company.
(g) Except as disclosed in any Company SEC Report or as disclosed in
Section 4.12 of the Company Disclosure Schedule, underground storage tanks are
not located on or under any Property for which the Company or any of its
subsidiaries would be responsible or potentially responsible under any
Environmental Law or Environmental Permit and there have been no Releases of
Hazardous Substances on, in or under any Property for which the Company or any
of its subsidiaries would be responsible or potentially responsible under any
Environmental Law or Environmental Permit that in either case, individually or
in the aggregate, have had or would reasonably be expected to have a Material
Adverse Effect on the Company.
(h) Except as disclosed in any Company SEC Report or as disclosed in
Section 4.12 of the Company Disclosure Schedule, none of the Company, any of its
subsidiaries or, to the Knowledge of the Company, any of their respective
predecessors or any other user of a Property, is subject to any judicial,
administrative or arbitral actions, suits, proceedings (public or private),
written claims or governmental proceedings alleging the violation of any
Environmental Law or Environmental Permit, and, to the Knowledge of the Company,
there is no basis for any such claim or proceeding that, individually or in the
aggregate, have had or would reasonably be expected to have a Material Adverse
Effect on the Company.
(i) Except as disclosed in any Company SEC Report or as disclosed in
Section 4.12 of the Company Disclosure Schedule, none of the Company, any of its
subsidiaries or, to the Knowledge of the Company, any of their respective
predecessors or any other permitted user of a Property of the Company or any of
its subsidiaries, as a result of their respective past and current operations,
has caused or permitted any Hazardous Substances to remain or be disposed of,
either on or under any Property of the Company or any of its subsidiaries or on
any real property, otherwise than in compliance with all applicable
Environmental Laws and Environmental Permits, in a manner that, individually or
in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect on the Company.
-17-
<PAGE> 22
SECTION 4.13. TAX MATTERS
Except as disclosed in Section 4.13 of the Company Disclosure Schedule or
as disclosed in any Company SEC Report:
(a) Subject to such exceptions which, individually or in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect on the Company, (i) the Company and each of its subsidiaries, and each
affiliated group (within the meaning of Section 1504 of the Code) of which the
Company or any of its subsidiaries is or has been a member, has timely filed all
federal income tax returns and all other Tax (as defined below) returns and
reports required to be filed by it, (ii) all such Tax returns are complete and
correct in all respects and (iii) the Company, and each of its subsidiaries paid
(or the Company has paid on its subsidiaries behalf) all Taxes due in respect of
the taxable periods covered by such Tax returns. The Company has previously
delivered to Parent copies of all U.S. federal income Tax returns filed by the
Company and each of its subsidiaries for their taxable years ended in 1995 and
1996. The liability for Taxes reflected on the balance sheet dated July 31,
1998, of the Company is sufficient for the payment of all unpaid Taxes that are
accrued or applicable for any period ended on or before July 31, 1998, except
for any deficiency which has not had and would not reasonably be expected to
have a Material Adverse Effect on the Company. For purposes of this Agreement,
(1) "Tax" or "Taxes" shall mean all taxes, charges, fees, imposts, levies,
gaming or other assessments, including, without limitation, all net income,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever, together with any interest and any penalties, fines,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign) and shall include any transferee liability in respect of taxes and
any liability in respect of taxes imposed by contract, tax sharing agreement,
tax indemnity agreement or any similar agreement and (2) "Tax returns" shall
mean any report, return, document, declaration or any other information or
filing required to be supplied to any taxing authority or jurisdiction (foreign
or domestic) with respect to Taxes, including without limitation, information
returns, any document with respect to or accompanying payments of Taxes or
estimated Taxes, or with respect to or accompanying requests for the extension
of time in which to file any such report, return document, declaration or other
information.
(b) Subject to such exceptions which, individually or in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect on the Company, no deficiencies for any Taxes have been proposed,
asserted or assessed against the Company or any of its subsidiaries that have
not been fully paid or adequately provided for in the appropriate financial
statements of the Company and its subsidiaries.
(c) Subject to such exceptions which, individually or in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect on the Company, no issues relating to Taxes have been raised in writing
by the relevant taxing authority (whether federal, state, local or other) during
any pending audit or examination. The federal income Tax returns of the Company
and each of its subsidiaries consolidated in such Tax returns have been reviewed
by the Internal Revenue Service for all years through its fiscal year ended
December 31, 1984.
(d) None of the Company or any of its subsidiaries has taken or agreed to
take any action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
(e) None of the Company or any of its subsidiaries is a party to or is
bound by any Tax sharing agreement, Tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes (including any advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any taxing authority).
(f) The Company and each of its subsidiaries are not currently, have not
been within the last five years, and do not anticipate becoming a "United States
real property holding company" within the meaning of Section 897(c) of the Code.
SECTION 4.14. INTANGIBLE PROPERTY
Subject to such exceptions which, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
on Company, the Company and its subsidiaries own or possess
-18-
<PAGE> 23
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights,
service marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the business of the Company and its subsidiaries as currently
conducted or as contemplated to be conducted, and, except as set forth in the
Company SEC Reports, or Section 4.14 of the Company Disclosure Schedule, the
Company has no Knowledge of any assertion or claim challenging the validity or
enforceability of any of the foregoing which, individually or in the aggregate,
has had or would reasonably be expected to have a Material Adverse Effect on the
Company. Except as disclosed in Section 4.14 of the Company Disclosure Schedule
or in any Company SEC Report and subject to such exceptions which, individually
or in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect on the Company, there have been no claims made or
notices that the manufacture and sale of any of the Company's products infringes
the patents of any third party. To the Knowledge of the Company, each of the
federal, state and international registrations pertaining to the proprietary
rights and information owned by the Company and its subsidiaries is valid and in
full force and effect and all required filings in association with such
registrations have been properly made and all required fees have been paid,
except where the failure to be in full force and effect, to have made the
required filings or to have paid the required fees has not had and would
reasonably not be expected to have a Material Adverse Effect on the Company.
SECTION 4.15. OPINION OF FINANCIAL ADVISOR
Salomon Smith Barney Inc. (the "Company Financial Advisor") has delivered
to the Company's Board its opinion, dated the date of this Agreement, to the
effect that, as of such date, the Per Share Amount is fair to the holders of the
Common Stock from a financial point of view, and such opinion has not been
withdrawn or adversely modified.
SECTION 4.16. BROKERS
No broker, finder or investment banker (other than the Company Financial
Advisor) is entitled to any brokerage, finder's or other fee or commission or
expense reimbursement in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company or any of
its affiliates. The fees and commissions payable to the Company Financial
Advisor, as contemplated by this Section, shall not exceed the aggregate amount
set forth in that certain letter dated December 1, 1997 from the Company
Financial Advisor to the Company, a true and current copy of which has been
provided for Parent.
SECTION 4.17. LABOR MATTERS
Except as set forth in Section 4.17 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to any employment,
severance compensation, labor or collective bargaining agreement and there are
no employment, severance compensation, labor or collective bargaining agreements
which pertain to employees of the Company or any of its subsidiaries. No labor
organization or group of employees of the Company or any of its subsidiaries has
made a pending written demand for recognition or certification. There is no
labor strike, slowdown or stoppage pending or, to the Knowledge of the Company,
threatened against or involving the Company or any of its subsidiaries which
would have or would reasonably be expected to have a Material Adverse Effect on
the Company.
SECTION 4.18. ABSENCE OF CERTAIN CHANGES
Since December 31, 1997 and except as set forth in the Company SEC Reports
and Section 4.18 of the Company Disclosure Schedule, the Company and its
subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or development of a state of circumstances
or facts which has had or is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of Company Common Stock, or any
repurchase, redemption or other acquisition by the Company or
-19-
<PAGE> 24
any of its subsidiaries of any amount of outstanding shares of capital
stock or other securities of, or other ownership interests in, the Company
or any of its subsidiaries;
(c) any amendment of any material term of any outstanding security of
the Company or any of its subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or any of
its subsidiaries of any indebtedness from any third party for borrowed
money other than guarantees by the Company for the benefit of any of its
subsidiaries and other than in the ordinary course of business and in
amounts and on terms consistent with past practices;
(e) any creation or assumption by the Company or any of its
subsidiaries of any Lien on any material asset other than in the ordinary
course of business consistent with past practices;
(f) any making of any loan, advance or capital contribution to or
investment in any person other than loans, advances or capital
contributions to or investments in wholly-owned subsidiaries or to
employees of the Company made in the ordinary course of business consistent
with past practices;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or
any of its subsidiaries which, individually or in the aggregate, has had or
is reasonably likely to have a Material Adverse Effect on the Company;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its subsidiaries relating to its
assets or business (including, without limitation, the acquisition or
disposition of any assets) (other than transactions and commitments
contemplated by this Agreement) inconsistent with the Company's 1998
Strategic and Annual Operating Plan dated February 18, 1998 (the "1998
Plan"), which was disclosed to Parent and Purchaser prior to the date of
this Agreement, or any relinquishment by the Company or any of its
subsidiaries of any material contract, license or right;
(i) any change in any method of accounting or accounting principle or
practice by the Company or any of its subsidiaries, except for any such
change required by GAAP or Regulation S-X promulgated under the Exchange
Act ("Regulation S-X"); or
(j) any (i) grant by the Company or any of its subsidiaries of any
severance or termination pay to, or entry into any employment, termination
or severance arrangement with, any director, officer or employee of the
Company or any subsidiaries other than any such grant or arrangement to or
with any employee of any subsidiary of the Company in the ordinary course
in an amount not exceeding an amount equal to the annual compensation plus
expenses relating to "COBRA" and out-placement benefits of such employee;
(ii) entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with
any director, officer or employee of the Company or any of its
subsidiaries, (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements or (iv)
increase in compensation, bonus or other benefits payable to directors,
officers or employees of the Company or any of its subsidiaries, other than
in the ordinary course of business.
SECTION 4.19. MILLENNIUM
(a) The Company is in the process of conducting an inventory and assessment
of all software, computers, network equipment, technical infrastructure,
production equipment and other equipment and systems that are material to the
operation of its business and the businesses of its subsidiaries and that rely
on, utilize or perform date or time processing ("Systems").
(b) Any failure of any of the Company's Systems to be Year 2000 Complaint
has not had and is not reasonably expected to have a Material Adverse Effect on
the Company.
(c) "Year 2000 Compliant" means a System will at all times: (i)
consistently and accurately handle and process date and time information and
data values before, during and after January 1, 2000, including but not limited
to accepting date input, providing date output, and performing calculations on
or utilizing dates or
-20-
<PAGE> 25
portions of dates; (ii) function accurately and in accordance with its
specifications without interruption, abnormal endings, degradation, change in
operation or other impact, or disruption of other Systems, resulting from
processing date or time data with values, before, during and after January 1,
2000; (iii) respond to and process two-digit date input in a way that resolves
any ambiguity as to century; and (iv) store and provide output of date
information in ways that are unambiguous as to century.
SECTION 4.20. FULL DISCLOSURE
None of the representations or warranties of the Company contained in this
Article 4 nor any of the disclosures contained in the Company Disclosure
Schedule contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they are to be made, not misleading, subject to such exceptions which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on the Company. The documents
furnished by the Company pursuant to this Agreement are in all material respects
true and correct copies of such documents.
SECTION 4.21. REAL PROPERTY
(a) Section 4.21(a) of the Company Disclosure Schedule lists all material
real property owned by the Company or any of its subsidiaries (the "Owned Real
Property"). The Company has good and marketable title in fee simple to the Owned
Real Property and, except as indicated in Section 4.21(a) of the Company
Disclosure Schedule, the Owned Real Property and all mineral reserves located
thereon are owned free and clear of any charge, claim, community property
interest, equitable interest, lien, option, pledge, security interest, mortgage,
lease, license, easement, right of first refusal or other encumbrance ("Liens")
other than for Permitted Liens.
(b) Section 4.21(b) of the Company Disclosure Schedule contains a list of
all leases and subleases (the "Leases"), with respect to all material real
property leased by the Company or any of its subsidiaries (the "Leased
Property").
(c) The Company and its Subsidiaries have the mineral reserves disclosed in
pages 1-7 of the 1997 Form 10-K. There are no material zoning or land use
restrictions or covenants which would materially inhibit the surface or
subsurface mining or quarrying process where such mineral reserves are located.
(d) The Liens affecting the Owned Real Property or Leased Property do not
and will not, with respect to each Owned Real Property or Leased Property,
individually or in the aggregate, materially impair the Company's or its
subsidiary's ability to use the Owned Real Property or Leased Property in the
operation of the Company's or its subsidiary's business as presently conducted.
To the Knowledge of the Company, the Company or its subsidiary has access to
public roads, streets or the like or valid easements over private streets, roads
or other private property for such ingress to and egress from the Owned Real
Property and the Leased Property, except as would not materially impair the
Company's or its subsidiary's ability to use any such Owned Real Property or
Leased Property in the operation of the Company's or its subsidiary's business
as presently conducted or for the purposes for which such Owned Real Property or
Leased Property is held by the Company or its subsidiary.
(e) Neither the Company nor any of its subsidiaries has received any notice
of any violation of any applicable building, zoning, land use or other similar
statutes, laws, ordinances, regulations, permits or other requirements in
respect of the Owned Real Property and the Leased Property, and to the Knowledge
of the Company, there does not exist any such violations which adversely affect
the ability of the Company and its subsidiaries to use the Owned Real Property
or Leased Property in the manner and scope in which it is now being used except
for violations which have not had and would not reasonably be expected to have a
Material Adverse Effect on the Company. Neither the Company nor any of its
subsidiaries has received any notice that any, and to the Knowledge of the
Company, no operations on or uses of the Owned Real Property and the Leased
Property constitute non-conforming uses under any applicable building, zoning,
land use or other similar statutes, laws, ordinances, regulations, permits or
other requirements other than (i) non-conforming uses that are legal non-
conforming uses, (ii) non-conforming uses that have been conducted with
sufficient continuity so as to preserve the right to continue the existing
operations and uses and any similar operations and uses for such property in the
future, and (iii) non-conforming uses which, individually and in the aggregate,
have not had and would not
-21-
<PAGE> 26
reasonably be expected to have, a Material Adverse Effect on the Company.
Neither the Company nor any of its subsidiaries has Knowledge of or has received
notice of any pending or contemplated condemnation, eminent domain or rezoning
proceeding affecting the Owned Real Property or the Leased Property.
(f) Neither the Company nor any of its subsidiaries has received any notice
from any insurance carrier regarding defects or inadequacies in the Owned Real
Property or Leased Property which, if not corrected, would result in termination
of the Company's or its subsidiaries' insurance coverage or any material
increase in the cost thereof, and the Company has no Knowledge of any such
defects or inadequacies.
(g) "Permitted Liens" means, with respect to any asset, (i) covenants,
conditions, restrictions, encroachments, encumbrances, easements, rights of way,
licenses, grants, building or use restrictions, exceptions, reservations,
limitations or other imperfections of title (other than a Lien securing any
indebtedness) with respect to such asset which, individually or in the
aggregate, do not materially detract from the value of, or materially interfere
with the present occupancy or use of, such asset and the continuation of the
present occupancy or use of such asset or the use or occupancy for which such
asset is held by a person; (ii) unfiled mechanic's, materialmen's and similar
Liens with respect to amounts not yet due and payable or which are being
contested in good faith through appropriate proceedings; (iii) Liens for taxes
not yet delinquent or which are being contested in good faith through
appropriate proceedings; and (iv) Liens securing rental payments under capital
lease arrangements.
SECTION 4.22. CONTRACTS
Section 4.22 of the Company Disclosure Schedule sets forth a list of all
material sales contracts and agreements to which the Company or any subsidiary
is a party (the "Material Contracts"). All such contracts and agreements are in
full force and effect and are binding on the parties thereto. No default by the
Company or any of its subsidiaries has occurred thereunder, and to the Knowledge
of the Company, no default by the other contracting parties has occurred
thereunder, other than defaults which, individually and in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
on the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION
Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power to
carry on its business as it is now being conducted or currently proposed to be
conducted.
SECTION 5.2. AUTHORITY RELATIVE TO THIS AGREEMENT
Parent has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder. The submission of the Offer, the
negotiation, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by Parent's Board
of Directors. This Agreement constitutes a valid and binding obligation of
Parent enforceable in accordance with its terms except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceeding therefor may be brought. No other
corporate proceedings on the part of Parent are necessary to authorize this
Agreement and the transactions contemplated hereby.
-22-
<PAGE> 27
SECTION 5.3. NO CONFLICT OR VIOLATION; CONSENTS
(a) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated hereby by
Parent will, directly or indirectly (with or without notice or lapse of time)
(i) contravene, conflict with, or result in a violation of (A) any provision of
the Certificate of Incorporation or By-Laws of Parent, or (B) any resolution
adopted by the board of directors or the shareholders of Parent; or (ii)
contravene, conflict with, or result in a violation of, or give any Governmental
Entity or other person the right to challenge any of the transactions
contemplated hereby or to exercise any remedy or obtain any relief under, any
material order, permit, regulation, statute or rules ("Material Legal
Requirements") to which Parent, its subsidiaries, or any of the assets owned or
used by Parent or its subsidiaries, may be subject;
(b) Except as referred to herein or in connection, or in compliance, with
the provisions of the HSR Act, the Securities Act, the Exchange Act, the
Exon-Florio Act, filing of the Articles of Merger and the environmental,
corporation, securities or blue sky laws or regulations of the various states,
no consent, approval, or authorization of, or registration or filing with, any
Governmental Entity or any other person is required for the execution and
delivery of this Agreement by the Parent and the Purchaser or the consummation
of the Offer and the Merger.
SECTION 5.4. ADEQUATE FINANCING
Parent has adequate funds to consummate the Offer and the Merger and
perform its other obligations under this Agreement, to refinance the existing
indebtedness of the Company and its subsidiaries and to satisfy the reasonably
anticipated working capital requirements of the Company and its subsidiaries
after the Closing.
SECTION 5.5. OWNERSHIP OF COMMON STOCK
Neither Parent nor Purchaser beneficially owns or otherwise has an interest
in any Common Stock or Preference Stock.
SECTION 5.6. FULL DISCLOSURE
None of the representations or warranties of Parent or Purchaser contained
in this Article 5 or Article 6 contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
in order to make the statements contained herein or therein, in light of the
circumstances under which they are to be made, not misleading, subject to such
exceptions which, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on Parent.
SECTION 5.7. INFORMATION SUPPLIED
None of the information supplied or to be supplied by Parent for inclusion
or incorporation by reference into (i) the Company's Schedule 14D-9 or, if
necessary (ii) the Proxy Statement will at the time they are filed with the
Commission contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary to make the statements,
therein not misleading. If at any time prior to the Effective Time, any event
with respect to Parent, its officers and directors or any of its subsidiaries
should occur which is required to be described in an amendment to the Schedule
14D-1, 14D-9 or Proxy Statement, Parent shall promptly so advise the Company and
such event shall be so described, and such amendment or supplement (which if not
prepared by the Company shall be reviewed by the Company) shall be promptly
filed with the Commission and, as and to the extent required by law,
disseminated to the shareholders of the Company.
-23-
<PAGE> 28
ARTICLE VI
REPRESENTATIONS AND WARRANTIES REGARDING PURCHASER
Parent and Purchaser jointly and severally represent and warrant to the
Company as follows:
SECTION 6.1. ORGANIZATION
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. Purchaser has not
engaged in any business (other than certain organizational matters) since it was
incorporated.
SECTION 6.2. CAPITALIZATION
The authorized capital stock of Purchaser consists of 20,000,000 shares of
Common Stock, par value $0.01 per share, of which 14,718,508 shares are validly
issued and outstanding, fully paid and nonassessable and are owned by Parent
free and clear of all liens, charges, claims, security interests or
encumbrances.
SECTION 6.3. AUTHORITY RELATIVE TO THIS AGREEMENT
Purchaser has the corporate power to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by its Board of Directors and sole shareholder, and no other
corporate proceedings on the part of Purchaser are necessary to authorize this
Agreement and the transactions contemplated hereby. Except as referred to herein
or in connection, or in compliance, with the provisions of the HSR Act, the
Securities Act, the Exchange Act, the Exon-Florio Act, filing of the Articles of
Merger, and the environmental, corporation, securities or blue sky laws or
regulations of the various states, no filing or registration with, or
authorization, consent or approval of, any Governmental Entity is necessary for
the consummation by Purchaser of the Offer, the Merger or the transactions
contemplated by this Agreement, other than filings, registrations,
authorizations, consents or approvals as will be timely made or obtained or the
failure to make or obtain would not prevent the consummation of the transactions
contemplated hereby.
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER
Prior to the Effective Time, unless Parent shall otherwise agree in
writing:
(a) the business of the Company and its subsidiaries shall be
conducted only in the ordinary and usual course and in compliance with all
applicable Material Legal Requirements and, to the extent consistent
therewith, each of the Company and its subsidiaries shall use its
commercially reasonable efforts to preserve its business organization
intact and to maintain its existing relations with customers, suppliers,
employees, creditors and business partners;
(b) the Company shall not, directly or indirectly, amend its or any of
its subsidiaries', articles or certificate of incorporation or bylaws or
similar organizational documents;
(c) the Company shall not, and it shall not permit any of its
subsidiaries to: (i) (A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the
Company's capital stock or that of any of its subsidiaries (other than
regularly scheduled dividends on the Preference Stock in accordance with
the terms of the Preference Stock) or (B) redeem, purchase or otherwise
acquire directly or indirectly any of the Company's capital stock (or
options, warrants, calls, commitments or rights of any kind to acquire any
shares of capital stock) or that of any of its subsidiaries, other than
redemptions of Preference Stock required by the Company's Articles of
Incorporation; (ii) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of capital stock of any class of the Company
-24-
<PAGE> 29
or any of its subsidiaries, other than Common Stock issuable upon the
exercise of the Options, or upon the conversion of the Series B Preferred
or Series D Preferred outstanding on the date hereof; or (iii) split,
combine or reclassify the outstanding capital stock of the Company or of
any of its subsidiaries;
(d) the Company shall not, and it shall not permit any of its
subsidiaries to, acquire or agree to acquire, or dispose of or agree to
dispose of, any material assets other than in the ordinary course of
business, either by purchase, merger, consolidation, sale of shares in any
of its subsidiaries or otherwise;
(e) the Company shall not, and it shall not permit any of its
subsidiaries to, transfer, lease, license, sell, mortgage, pledge, dispose
of, or encumber any of the Owned Real Property or Leased Property (except
for mortgages on such real property existing on the date hereof) or, other
than in the ordinary course of business, intellectual properties;
(f) neither the Company nor any of its subsidiaries shall: (i) grant
any increase in the compensation payable or to become payable by the
Company or any of its subsidiaries to any of its officers, directors or key
employees, except for (A) increases in the ordinary course of business
consistent with past practices or to the extent required by any contract,
and (B) payment immediately prior to consummation of the Offer, of a pro
rata portion of the 1998 target award under the Company's Annual Incentive
Plan for which amounts have been accrued on the Company's financial
statements, or (ii) (A) adopt any new, (B) grant any award under any, or
(C) amend or otherwise increase, or accelerate the payment or vesting of
the amounts payable or to become payable under, any existing employee
benefit or compensation plan other than as contemplated by this Agreement
or in accordance with the provisions of such benefit plan; or (iii)
increase the number of directors of the Company, enter into or modify or
amend any existing employment or severance agreement with or, grant any
severance or termination rights to any officer, director or employee of the
Company or any of its subsidiaries or terminate any of the employees of the
Company other than in the ordinary course of business; or (iv) enter into
or modify in any material respect any collective bargaining agreement;
(g) neither the Company nor any of its subsidiaries shall modify,
amend or terminate in any material respect any of its Material Contracts or
waive, release or assign any material rights or claims;
(h) neither the Company nor any of its subsidiaries shall: (i) incur
or assume any indebtedness other than indebtedness with respect to working
capital in amounts consistent with past practice; (ii) materially modify
any existing indebtedness or obligation; (iii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person (other than a
subsidiary), other than immaterial amounts in the ordinary course of
business consistent with past practice; (iv) make any loans, advances or
capital contributions to, or investments in, any other person (other than
to wholly owned subsidiaries of the Company or customary advances to
employees in accordance with past practice); or (v) enter into any material
commitment or transaction other than in the ordinary course of business;
(i) neither the Company nor any of its subsidiaries shall change any
of the accounting methods, practices or policies used by it, unless
required by generally accepted accounting principles or SEC rules and
regulations;
(j) the Company shall not, and it shall not permit any of its
subsidiaries to, make or agree to make any capital expenditures, except for
capital expenditures that are not materially inconsistent with the 1998
Plan;
(k) the Company shall not, and it shall not permit any of its
subsidiaries to, make any material tax election (unless required by law) or
settle or compromise any material income tax liability;
(l) the Company shall not, and it shall not permit any of its
subsidiaries to, (i) waive the benefits of, or agree to modify in any
material manner, any confidentiality, standstill or similar agreement to
which the Company or any of its subsidiaries is a party, or (ii) pay,
discharge or satisfy any legal proceeding, other than a payment, discharge
or satisfaction, (A) involving payments by the Company or its subsidiaries
of less than $100,000 in the aggregate, or (B) for which liabilities are
fully reflected on or are fully reserved against in the Company's most
recent consolidated financial statements (or the notes thereto) included in
the
-25-
<PAGE> 30
Company SEC Reports, in each case in complete satisfaction, and with a
complete release, of such matter with respect to all parties to such
matter;
(m) the Company shall not, and it shall not permit any of its
subsidiaries to, make any payment or incur any liability or obligation for
the purpose of obtaining any consent from any third party to the
transactions contemplated hereby; and
(n) neither the Company nor any of its subsidiaries shall enter into
an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to
do any of the foregoing.
SECTION 7.2. NO SOLICITATION
(a) The Company shall, and shall cause its subsidiaries, officers,
directors, employees, counsel, investment bankers, financial advisers,
accountants, other representatives and agents (collectively, the "Company
Representatives") to immediately as of the date hereof cease any discussions or
negotiations with any parties that may be ongoing with respect to a Takeover
Proposal (as defined below). The Company shall not, and shall not authorize or
permit any Company Representative to, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal; (ii) participate
in any discussions or negotiations regarding any Takeover Proposal; or (iii)
enter into any agreement with respect to any Takeover Proposal; provided,
however, that, if at any time prior to the Effective Time, the Board of
Directors of the Company determines in good faith, in consultation with its
legal counsel, that it is necessary to do so in order to comply with its
fiduciary duties, the Company may, in response to an unsolicited Takeover
Proposal, and subject to compliance with Section 7.2(c), (x) furnish information
with respect to the Company to any person pursuant to a confidentiality
agreement and (y) participate in negotiations regarding such Takeover Proposal.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any Company Representative
shall be deemed to be a breach of this Section 7.2(a) by the Company.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall: (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by such Board of Directors or
such committee of this Agreement or the Offer or the Merger; (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal; or (iii)
cause the Company to enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, in the event that prior to the
Effective Time the Board of Directors of the Company determines in good faith,
in consultation with its legal counsel as to legal matters, that it is necessary
to do so in order to comply with its fiduciary duties, the Board of Directors of
the Company may withdraw or modify its approval or recommendation of this
Agreement, the Offer and the Merger, approve or recommend a Superior Proposal
(as defined below) or cause the Company to enter into an agreement with respect
to a Superior Proposal, but in each case only at a time that is after the fifth
Business Day following Parent's receipt of written notice advising Parent that
the Board of Directors of the Company has received a Superior Proposal.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 7.2, the Company shall promptly advise Parent orally
of any request for information or of any Takeover Proposal (including the terms
of such Takeover Proposal).
(d) "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to any: (A) merger, consolidation or similar transaction
involving the Company, (B) sale, lease or other disposition directly or
indirectly by merger, consolidation, share exchange or otherwise of assets of
the Company or its subsidiaries outside the ordinary course of business
representing 10% or more of the consolidated assets of the Company and its
subsidiaries, (C) issue, sale, or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 20% or more of the voting power of the Company or (D)
transaction in which any person shall acquire beneficial ownership (as such term
is defined in Rule 13d-3 under the Exchange Act), or the right to acquire
beneficial ownership or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of more than 20% of the
-26-
<PAGE> 31
outstanding Common Stock, in each case, other than the transactions with Parent
contemplated by this Agreement.
(e) "Superior Proposal" means any bona fide written offer for a Takeover
Proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 20% of the outstanding Common Stock on a fully
diluted basis or all or substantially all the assets of the Company and
otherwise on terms which the Board of Directors of the Company determines in its
good faith judgment in consultation with a financial advisor of nationally
recognized reputation that the consideration offered pursuant to such Takeover
Proposal is more favorable to the Shareholders than the Offer and the Merger
from a financial point of view.
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1. ACCESS AND INFORMATION
The Company and its subsidiaries shall (a) afford to Parent and its
accountants, counsel and other representatives full access during normal
business hours (and at such other times as the parties may mutually agree)
throughout the period prior to the Effective Time to all of their properties,
books, contracts, commitments, records and personnel, and (b) during such
period, furnish promptly to Parent (i) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal or
state securities laws, and (ii) all other information concerning its business,
properties and personnel as Parent may reasonably request. Parent shall hold,
and shall cause its employees and agents to hold, in confidence all such
information in accordance with the terms of the Confidentiality Agreement dated
April 28, 1998 between Parent and the Company.
SECTION 8.2. INDEMNIFICATION
(a) Until, and after, the Effective Time, the Purchaser's Bylaws shall
contain indemnification and limitation of liability provisions which are
substantially identical to the indemnification and limitation of liability
provisions of Article XVII of the By-laws of the Company, and such provisions
shall not be amended, repealed or otherwise modified in any manner that would
make any of such provisions less favorable to the directors, officers and
employees of the Company than pertain to such persons on the date hereof.
Without limiting the foregoing, from the Effective Time and for a period of six
years after the Effective Time, Parent shall, (i) indemnify, defend and hold
harmless the present and former officers, directors, employees and agents of the
Company and its subsidiaries and of Purchaser (collectively, the "Indemnified
Parties"), from and against, and pay or reimburse the Indemnified Parties for,
all losses, obligations, expenses, claims, damages or liabilities resulting from
third-party claims (and involving claims by or in the right of the Company) and
including interest, penalties, out-of-pocket expenses and attorneys' fees
incurred in the investigation or defense of any of the same or in asserting any
of their rights hereunder resulting from or arising out of actions or omissions
of such Indemnified Parties occurring on or prior to the Effective Time
(including, without limitation, the transactions contemplated by this Agreement)
to the fullest extent permitted or required under (A) applicable law, (B) the
articles of incorporation or by-laws of the Company or Purchaser in effect on
the date of this Agreement, including, without limitation, provisions relating
to advances of expenses incurred in the defense of any action or suit, or (C)
any indemnification agreement between the Indemnified Party and the Company; and
(ii) advance to any Indemnified Parties expenses incurred in defending any
action or suit with respect to such matters, in each case to the extent such
Indemnified Parties are entitled to indemnification or advancement of expenses
under the Company's or Purchaser's articles of incorporation and by-laws in
effect on the date hereof and subject to the terms of such articles of
incorporation and by-laws; provided, however, that in the event any claim or
claims are asserted or made within such six-year period, all rights to
indemnification in respect of each such claim shall continue until final
disposition of such claim.
(b) Any Indemnified Party wishing to claim indemnification under Section
8.2(a) shall provide notice to the Parent promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and the
Indemnified Party shall permit the Parent (at its expense) to assume the defense
of any claim or
-27-
<PAGE> 32
any litigation resulting therefrom; provided, however, that (i) counsel for the
Parent who shall conduct the defense of such claim or litigation shall be
reasonably satisfactory to the Indemnified Party and the Indemnified Party may
participate in such defense at such Indemnified Party's expense, and (ii) the
omission by any Indemnified Party to give notice as provided herein shall not
relieve the Parent of its indemnification obligation under this Agreement,
except to the extent that such omission results in a failure of actual notice to
the Parent, and the Parent is actually prejudiced as a result of such failure to
give notice. In the event that the Parent does not accept the defense of any
matter as above provided, or counsel for the Indemnified Parties advises the
Indemnified Parties in writing that there are issues that raise conflicts of
interest between the Parent and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and the Parent shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; provided, however, that the Parent shall not
be liable for any settlement effected without its prior written consent (which
consent shall not be unreasonably withheld); provided, further, however, that
the Parent shall not be responsible for the fees and expenses of more than one
counsel for all of the Indemnified Parties. In any event, the Parent and the
Indemnified Parties shall cooperate in the defense of any action or claim. The
Parent shall not, in the defense of any such claim or litigation, except with
the consent of the Indemnified Party, consent to entry of any judgment or enter
into any settlement that provides for injunctive or other nonmonetary relief
affecting the Indemnified Party or that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability with respect to such claim or litigation.
(c) This Section 8.2 is intended for the benefit of, and to grant third
party rights to, persons entitled to indemnification under this Section 8.2 and
the benefits of Article XVII of the By-laws of the Company, whether or not
parties to this Agreement, and each of such persons shall be entitled to enforce
the covenants contained in this Section 8.2.
(d) If Parent or the Company, as the case may be, or any of their
respective successors or assigns (i) reorganizes or consolidates with or merges
into any other person and is not the resulting, continuing or surviving
corporation or entity of such reorganization, consolidation or merger, or (ii)
liquidates, dissolves or transfers all or substantially all of its properties
and assets to any person or persons, then, and in such case, proper provision
will be made so that the successors and assigns of Parent or the Company assume
all of the obligations of Parent or the Company, as the case may be, as set
forth in this Section 8.2.
(e) Parent shall use commercially reasonable efforts for a period of six
years after the Effective Time to provide officers' and directors' liability
insurance in respect of acts or omissions occurring prior to the Effective Time,
including but not limited to the transactions contemplated by this Agreement,
covering each person currently covered by the Company's existing officers' and
directors' liability insurance policy, or who becomes covered by such policy
prior to the Effective Time, on terms with respect to coverage and amount no
less favorable than those of such policy in effect on the date hereof, provided
that in satisfying its obligation under this paragraph (e), Parent shall not be
obligated to pay premiums in excess of 150% of the amount per annum the Company
paid in 1997, and provided further that Parent shall nevertheless be obligated
to provide such coverage as may be obtained for such amount.
SECTION 8.3. HSR ACT
The Company and Parent shall use their best efforts to file as soon as
practicable notifications under the HSR Act in connection with the Offer, the
Merger and the transactions contemplated by this Agreement and to respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters. The
Company and Parent agree to coordinate and, to the extent not inconsistent with
their respective legal obligations, cooperate with each other in making all such
filings and responses.
SECTION 8.4. ADDITIONAL AGREEMENTS REGARDING CONSENTS AND APPROVALS
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary,
-28-
<PAGE> 33
proper or advisable under applicable law to consummate and make effective the
transactions contemplated by this Agreement, including using all reasonable
efforts to obtain all necessary waivers, consents and approvals, to effect all
necessary registrations and filings (including, but not limited to, filings
under the HSR Act and with all applicable Governmental Agencies) and to lift any
injunction or other legal bar to the Offer and the Merger (and, in such case, to
proceed with the Offer and the Merger as expeditiously as possible) subject,
however, in the case of this Agreement, to the appropriate vote (if required) of
the Company's shareholders. Notwithstanding the foregoing, without Parent's
prior written consent, the Company shall not obtain any consent that will affect
Parent or the Company to either of their economic detriment, including any
modification of any Material Contract or Company license or permit. Each party
shall promptly inform the other of any communication with, and any proposed
understanding, undertaking, or agreement with, any Governmental Entity regarding
any such filing or any such transaction. Neither party shall participate in any
meeting with any Governmental Entity in respect of any such filing,
investigation, or other inquiry without giving the other party notice of the
meeting and, to the extent permitted by such Governmental Entity, the
opportunity to attend and participate.
(b) Parent and the Company shall cooperate in the preparation, execution
and filing of all returns, applications or other documents regarding any real
property transfer, stamp, recording, documentary or other taxes and any other
fees and similar taxes which may become payable in connection with the Offer or
the Merger.
(c) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and/or directors of Parent or the Company shall take all such necessary
action.
SECTION 8.5. TAKEOVER STATUTES
If any "business combination," "fair price," "control share acquisition" or
"moratorium" statute or other similar statute or regulation or any state "blue
sky" or securities law statute shall become applicable to the transactions
contemplated hereby, the Company and the Board of Directors of the Company
shall, to the extent consistent with applicable law, grant such approvals and
take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to minimize the effects of such statute or
regulations on the transactions contemplated hereby; provided, that this Section
8.5 shall not require the Company to seek to amend its Articles of Incorporation
to opt out of Subchapter E of Chapter 25 of the PBCL.
SECTION 8.6. BENEFITS
(a) Until at least December 31, 1999, Parent will cause the Company (and
its successors or assigns) to maintain, at its option, either (i) the employee
benefit plans of the Company and its subsidiaries in effect on the date of this
Agreement or (ii) other benefits to employees of the Company and its
subsidiaries that are not materially less favorable in the aggregate to such
employees than those in effect on the date of this Agreement; provided, however,
that the Company will not maintain any plan or arrangement that provides for
issuance of securities of the Company.
(b) Notwithstanding anything in this Agreement to the contrary, prior to
consummation of the Merger, the Company may pay eligible participants a pro rata
portion (from January 1, 1998 through the Effective Time) of the 1998 target
award under the Company's Annual Incentive Plan, for which amounts have been
accrued on the Company's financial statements through such date.
(c) Parent acknowledges the existence of those certain agreements between
the Company and various employees and former employees of the Company set forth
in Section 8.6(c) of the Company Disclosure Schedule, and Parent agrees that
after the Effective Time such agreements shall continue to be an obligation of
the Company and shall remain in full force and effect.
(d) Until at least March 31, 2000, Parent or its affiliates shall maintain
the Company's Pittsburgh, Pennsylvania office.
-29-
<PAGE> 34
SECTION 8.7. EFFECT OF KNOWLEDGE OF BREACH
(a) Notwithstanding anything to the contrary contained in this Agreement,
including, without limitation, the Company's failure to disclose any matter
required to be disclosed on the Company Disclosure Schedule, Parent and
Purchaser agree that no representation or warranty made by the Company in this
Agreement shall be deemed to be inaccurate or incorrect, and the Company shall
not be deemed to be in breach of this Agreement, if the Parent, Purchaser or its
representatives had actual knowledge on the date hereof of any such undisclosed
matter or that any such representation or warranty was inaccurate or incorrect.
(b) The Company shall give prompt notice to Parent and Parent shall give
prompt notice to the Company of (i) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time, (ii) any
material failure of the Company, or the Parent as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any notice of, or other communication relating
to, a default or event which, with notice or lapse of time or both, would become
a default, received by it or any of its subsidiaries subsequent to the date of
this Agreement and prior to the Effective Time, under any contract or agreement
material to the business, financial condition, or results of operations of it
and its subsidiaries taken as a whole to which it or any of its subsidiaries is
a party or is subject, (iv) any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, or (v) any
material adverse change in business, financial condition or results of
operations of it and its subsidiaries taken as a whole, other than changes
resulting from general economic conditions; provided, however, that the delivery
of any notice pursuant to this Section 8.7(b) shall not cure such breach or
non-compliance or limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
SECTION 8.8. CERTAIN DELIVERIES
After consummation of the Offer and prior to the Merger, the Company shall
deliver or cause to be delivered to Parent and Purchaser (i) a certificate of
the Company, signed by the Company's President and Chief Executive Officer and
by the Company's Senior Vice President and Chief Financial Officer, to the
effect that (a) all of the representations and warranties of the Company
contained in this Agreement are true and correct on the Closing Date in all
respects, expect for such breaches which, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect,
and (b) the Company has performed in all material respects all obligations and
complied with all material agreements and covenants to be performed or complied
with by it under the Agreement, other than failures to perform or comply which
have not had and would not reasonably be expected to have, a Material Adverse
Effect; and (ii) an opinion of counsel as to such matters regarding this
Agreement, the Company and the Merger as Parent and Purchaser may reasonably
request.
ARTICLE IX
CONDITIONS PRECEDENT
SECTION 9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) The Offer shall have been consummated in accordance with its
terms.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) This Agreement shall have been adopted by the requisite vote of
the Company's shareholders or, if permitted by Section 1924(b)(1)(ii) of
the PBCL, by the Board of Directors of the Company.
-30-
<PAGE> 35
(d) No preliminary or permanent injunction or other order by any
federal or state court in the United States which prevents the consummation
of the Merger shall have been issued and remain in effect (each party
agreeing to use its best efforts to have any such injunction lifted).
ARTICLE X
TERMINATION AND FEES
SECTION 10.1. TERMINATION
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval by the Company's shareholders:
(a) by mutual consent of the Board of Directors of Parent and the
Board of Directors of the Company;
(b) by either Parent or the Company if the Offer shall not have been
consummated on or before 90 days from date of Agreement (the "Termination
Date") (provided the terminating party is not otherwise in material breach
of its representations, warranties or obligations under this Agreement);
(c) by the Company if any of the conditions specified in Section 9.1
have not been satisfied or waived by the Company at such time as such
condition is no longer capable of satisfaction;
(d) by Parent if any of the conditions specified in Section 9.1 have
not been satisfied or waived by Parent at such time as such condition is no
longer capable of satisfaction;
(e) by the Company, if Parent or Purchaser shall have breached or
failed to perform in any material respect any of its representations,
warranties or covenants contained in this Agreement, which breach or
failure to perform (i) would give rise to a failure of condition set forth
in Section 9.1 or Annex I, and (ii) cannot be or has not been cured within
thirty (30) days after the giving of notice to Parent of such breach;
(f) by the Company, in connection with entering into an agreement for
a Superior Proposal as expressly permitted by Section 7.2, provided the
Company has complied with all provisions thereof, including the notice
provisions therein.
SECTION 10.2. EFFECT OF TERMINATION
In the event of termination of this Agreement by either Parent or the
Company, as provided in Section 10.1, this Agreement shall forthwith become void
and of no further force and effect; provided, however, that each of the parties
shall be entitled to pursue, exercise and enforce any and all remedies, rights,
powers and privileges available to it at law or in equity for any breach of this
Agreement ("Remedies") which occurred prior to such termination unless Parent is
entitled to payment of the fee provided for in Section 10.3(b), in which case
this Agreement shall be of no further force or effect, the Company shall have no
other or further obligation to Parent or Purchaser (except payment of such fee)
and neither Purchaser nor Parent shall have any Remedies against Company or any
subsidiary under this Agreement.
SECTION 10.3. FEES AND EXPENSES.
(a) Except as provided in subsection (b) below, whether or not the Merger
is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) (i) If either (A)(i) the Company receives a bona fide Takeover Proposal
at any time after the date of this Agreement and prior to the termination of
this Agreement, (ii) this Agreement terminates prior to the consummation of the
Offer for any reason (other than a breach of this Agreement by Parent or
Purchaser), and (iii) by the date which is six months after the date of
termination of this Agreement, either (1) a Takeover Proposal with a third party
is consummated, or (2) the Company enters into an agreement for a Takeover
Proposal with a third party which is thereafter consummated, or (B) the Company
terminates this Agreement pursuant to
-31-
<PAGE> 36
Section 10.1(f), then, in either event, the Company shall pay to Parent, by wire
transfer of immediately available funds, within two days after the consummation
of the Takeover Proposal or Superior Proposal, as the case may be, a fee of
$9,500,000 (the "Topping Fee").
(ii) For the purposes of subparagraph (b)(i)(A)(iii) of this Section 10.3
only, the term "Takeover Proposal" shall mean any proposal or offer from any
person relating to any: (A) merger, consolidation or similar transaction
involving the Company, (B) sale, lease or other disposition directly or
indirectly by merger, consolidation, share exchange or otherwise of assets of
the Company or its subsidiaries outside the ordinary course of business
representing 10% or more of the consolidated assets of the Company and its
subsidiaries, (C) issue, sale, or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 20% or more of the voting power of the Company or (D)
transaction in which any person shall acquire beneficial ownership (as such term
is defined in Rule 13d-3 under the Exchange Act), or the right to acquire
beneficial ownership or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of more than 50% of the outstanding Common Stock, in each
case, other than the transactions with Parent and Purchaser contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All representations and warranties set forth in this Agreement shall
terminate at the Effective Time. All covenants and agreements set forth in this
Agreement shall survive in accordance with their terms.
SECTION 11.2. AMENDMENT
This Agreement may be amended by the parties hereto, by or pursuant to
action taken by their respective Boards of Directors, at any time before or
after approval hereof by the shareholders of the Company, but, after such
approval, no amendment shall be made which changes the Per Share Amount or which
in any way materially adversely affects the rights of such shareholders, without
the further approval of such shareholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
SECTION 11.3. NOTICES
All notices, demands or other communications to be given or delivered under
or by reason of the provisions of this Agreement shall be in writing and shall
be deemed to have been given (a) when delivered personally to the recipient, (b)
when sent to the recipient by telecopy (receipt electronically confirmed by
sender's telecopy machine) if during normal business hours of the recipient,
otherwise on the next Business Day, or (c) one Business Day after the date when
sent to the recipient by reputable same day or next day courier service (charges
prepaid). Such notices, demands and other communications shall be sent to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to the Company:
Dravo Corporation
11 Stanwix Street
11th Floor
Pittsburgh, PA 15222
Attention: Carl E. Gilbert, President and Chief Executive Officer
-32-
<PAGE> 37
With a copy to:
Buchanan Ingersoll Professional Corporation
301 Grant Street
Pittsburgh, Pennsylvania 15219
Attention: Michael J. Flinn
Telecopy No.: (412) 562-1041
If to Parent or Purchaser:
Carmeuse Lime, Inc.
390 E. Joe Orr Road
Chicago Heights, IL 60411
Attention: President
Telecopy: (708) 757-1300
with a copy to:
Carmeuse Lime, Inc.
390 E. Joe Orr Road
Chicago Heights, IL 60411
Attention: General Counsel
Telecopy: (708) 757-1300
SECTION 11.4. SPECIFIC PERFORMANCE
The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
SECTION 11.5. PUBLICITY
Each party's initial press release with respect to the execution of this
Agreement has been previously approved by the other parties. Following such
initial press releases, so long as this Agreement is in effect, neither the
Company, Parent nor any of their respective affiliates shall issue or cause the
publication of any press release or other public announcement with respect to
the Offer, the Merger, this Agreement or the other transactions between the
parties contemplated hereby without the prior consultation of the other parties,
except as may be required by law or by any listing agreement with a national
securities exchange or trading market.
SECTION 11.6. INTERPRETATION
The language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction will be applied against any party. Any references to any federal,
state, local or foreign statute or law shall also refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Unless the context otherwise requires: (a) a term has the meaning assigned to it
by this Agreement; (b) including means "including but not limited to"; (c) "or"
is disjunctive but not exclusive; (d) words in the singular include the plural,
and in the plural include the singular; (e) "$" means the currency of the United
States of America; (f) "person" means any individual or entity; and (g)
"Knowledge" of any person that is an entity (or similar language) means the
actual knowledge of its executive officers after reasonable investigation. When
a reference is made in this Agreement to Sections or paragraphs, such reference
shall be to a Section or paragraphs of this Agreement unless otherwise
indicated.
-33-
<PAGE> 38
SECTION 11.7. COUNTERPARTS
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties.
SECTION 11.8. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES
This Agreement and the Confidentiality Agreement between the parties dated
April 28, 1998: (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) other than the provisions of
Section 8.2, nothing expressed or implied in this Agreement is intended or will
be construed to confer upon or give to any person other than the parties hereto
any rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
SECTION 11.9. SEVERABILITY
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, then to the
maximum extent permitted by law, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
instrument. Furthermore, in lieu of any such invalid or unenforceable term or
provision, the parties hereto intend that there shall be added as a part of this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 11.10. GOVERNING LAW
This Agreement and the legal relations between the parties hereto will be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to the choice of law principles thereof.
SECTION 11.11. ASSIGNMENT
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties,
except Purchaser may assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
SECTION 11.12. DESCRIPTIVE HEADINGS
The descriptive headings of the several sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
-34-
<PAGE> 39
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
<TABLE>
<S> <C>
ATTEST: CARMEUSE LIME, INC.
/s/ SUZANNE E. RITZLER /s/ JACQUES GERMAY
- -------------------------------------------- --------------------------------------------
By: Suzanne E. Ritzler By: Jacques Germay
Title: Secretary Title: Chairman
ATTEST DLC ACQUISITION CORP.
/s/ SUZANNE E. RITZLER /s/ JACQUES GERMAY
- -------------------------------------------- --------------------------------------------
By: Suzanne E. Ritzler By: Jacques Germay
Title: Secretary Title: Chairman
ATTEST: DRAVO CORPORATION
/s/ EARL J. BELLISARO /s/ CARL A. GILBERT
- -------------------------------------------- --------------------------------------------
By: Earl J. Bellisaro By: Carl A. Gilbert
Title: Secretary Title: President and Chief Executive Officer
</TABLE>
Carmeuse S.A. hereby unconditionally and jointly and severally guarantees
the obligations of Parent and Purchaser under this Agreement.
<TABLE>
<S> <C>
ATTEST CARMEUSE S.A.
/s/ YVES WILLIEMS /s/ DOMINIQUE COLLINET
- -------------------------------------------- --------------------------------------------
By: Yves Williems By: Dominique Collinet
Title: Managing Director Title: Administrateor Delegue
</TABLE>
-35-
<PAGE> 40
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-l(c) promulgated under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
shares of Common Stock promptly after termination or withdrawal of the Offer),
pay for, and (subject to any such rules or regulations) may delay the acceptance
for payment of any tendered shares of Common Stock and (except as provided in
this Agreement) amend or terminate the Offer as to any shares of Common Stock
not then paid for if (i) the Minimum Condition is not satisfied, (ii) any
applicable waiting period under the HSR Act or the Exon-Florio Act shall not
have expired or been terminated prior to the expiration of the Offer or (iii) at
any time after the date of this Agreement and before the time of acceptance of
payment for any such shares (whether or not any shares have theretofore been
accepted for payment or paid for pursuant to the Offer) of Common Stock any of
the following events (each, an "Event") shall have occurred (each of paragraphs
(a) through (h) providing a separate and independent condition to Purchaser's
obligations pursuant to the Offer):
(a) there shall be pending or in effect an injunction or other order,
decree, judgment or ruling by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission of
competent jurisdiction or a statute, rule, regulation, executive order or
other action shall have been promulgated, enacted, or taken by a
governmental authority or a governmental, regulatory or administrative
agency or commission of competent jurisdiction which in any such case (i)
restrains or prohibits the making or consummation of the Offer or the
consummation of the Merger, (ii) prohibits or restricts the ownership or
operation by Parent (or any of its affiliates or subsidiaries) of any
portion of its or the Company's business or assets which is material in
light of the size and scope of the business of the Company and its
subsidiaries taken as a whole, or compels Parent (or any of its affiliates
or subsidiaries) to dispose of or hold separate any portion of its or the
Company's business or assets which is material to the business of the
Company and its subsidiaries taken as a whole, (iii) imposes material
limitations on the ability of Parent effectively to acquire or to hold or
to exercise full rights of ownership of the Common Stock, including,
without limitation, the right to vote the Common Stock purchased by
Purchaser on all matters properly presented to the shareholders of the
Company, or (iv) imposes any material limitations on the ability of Parent
or any of its affiliates or subsidiaries effectively to control in any
material respect the business and operations of the Company and its
subsidiaries (each of clauses (i) through (iv) being referred to as a
"Prohibited Result"); or
(b) an action or a proceeding shall have been commenced by a
Governmental Entity under federal or state antitrust laws or any other
applicable law before any court or any governmental or other administrative
or regulatory authority or agency, domestic or foreign, which would
reasonably be expected to have a Prohibited Result; or
(c) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or the over-the-counter market for a period in excess of 24 hours
(excluding suspensions or limitations resulting solely from physical damage
or interference with such exchanges not related to market conditions), (ii)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (iv) any
limitation (whether or not mandatory) by any United States governmental
authority on the extension of credit generally by banks or other financial
institutions, (v) a change in general financial, bank or capital market
conditions which materially and adversely affects the ability of financial
institutions in the United States to extend credit or syndicate loans, or
(vi) in the case of any of the foregoing existing at the time of the
execution of this Agreement, a material acceleration or worsening thereof;
or
(d) the representations and warranties of the Company contained in the
Agreement shall not be true and correct on and as of the Expiration Date,
with the same force and effect as if made on and as of the Expiration Date,
in all respects, except for such breaches which, individually or in the
aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect on the Company; or
<PAGE> 41
(e) the Company shall have failed to perform in all material respects
any obligation or to comply with any material agreement or covenant to be
performed or complied with by it under the Agreement, which failure to
perform has had or would reasonably be expected to have a Material Adverse
Effect on the Company; or
(f) the Company shall have failed to obtain any consent from any
third-party required to be obtained by it in order to permit consummation
of the Offer, other than those consents the failure of which to obtain
would not have and would not reasonably be expected to have, a Material
Adverse Effect on the Company;
(g) the Agreement shall have been terminated by the Company or Parent
in accordance with its terms; or
(h) the Offer shall not have been consummated by the Termination Date.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent and Purchaser regardless of the circumstances
giving rise to such Event (not including any action or inaction by Parent) or
may be waived by Parent or Purchaser in whole at any time or in part from time
to time in its reasonable discretion. The failure by Parent or Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right and may be
asserted at any time and from time to time.
-2-
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DRAVO CORPORATION
AT
$13.00 NET PER SHARE
BY
DLC ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CARMEUSE LIME, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, OCTOBER 19, 1998
UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER DATED
AS OF SEPTEMBER 15, 1998, AMONG DRAVO CORPORATION (THE "COMPANY"), CARMEUSE
LIME, INC. ("PARENT") AND DLC ACQUISITION CORP. ("PURCHASER"). THE BOARD OF
DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT EACH OF THE OFFER AND
THE MERGER (AS HEREINAFTER DEFINED) IS FAIR TO, AND IN THE BEST INTERESTS OF,
THE SHAREHOLDERS OF THE COMPANY, AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE SHARES ARE
LISTED FOR TRADING ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL "DRV." SEE
"SECTION 6 -- PRICE RANGE OF SHARES; DIVIDENDS."
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
SHARES WHICH CONSTITUTES AT LEAST A MAJORITY OF THE ACTUAL SHARES OUTSTANDING ON
A FULLY DILUTED BASIS AND OF THE VOTING POWER OF THE COMPANY'S OUTSTANDING
VOTING SECURITIES ENTITLED TO VOTE ON THE MERGER (AS HEREINAFTER DEFINED) (THE
"MINIMUM CONDITION"). ALTHOUGH UNDER THE TERMS OF THE MERGER AGREEMENT (AS
HEREINAFTER DEFINED) PARENT AND PURCHASER MAY WAIVE THE MINIMUM CONDITION, THEY
DO NOT CURRENTLY INTEND TO DO SO, AND PARENT AND PURCHASER MAY TERMINATE THE
MERGER AGREEMENT IF THE MINIMUM CONDITION IS NOT SATISFIED. THE OFFER IS ALSO
SUBJECT TO OTHER TERMS AND CONDITIONS. SEE "SECTION 14 -- CONDITIONS OF THE
OFFER."
------------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
shares of common stock, $1.00 par value, of the Company (the "Shares") should
either (i) complete and sign the Letter of Transmittal (or a facsimile thereof)
in accordance with the instructions in the Letter of Transmittal and mail or
deliver it together with the Certificates(s) evidencing tendered Shares, and any
other required documents, to the Depositary, or tender such Shares pursuant to
the procedures for book-entry transfer set forth in "Section 3 -- Procedure for
Tendering Shares" or (ii) request such shareholder's broker, dealer, commercial
bank, trust company or other nominee to effect the transaction for such
shareholder. A shareholder whose Shares are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
broker, dealer, commercial bank, trust company or other nominee if such
shareholder desires to tender such Shares.
A shareholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply with
the procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, may tender such Shares by following the procedures for guaranteed
delivery set forth in "Section 3 -- Procedure for Tendering Shares."
Questions and requests for assistance, or for additional copies of this
Offer to Purchase, the Letter of Transmittal or other tender offer materials,
may be directed to the Information Agent or the Dealer Manager at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. A shareholder may also contact brokers, dealers, commercial
banks and trust companies for assistance concerning the Offer.
------------------------
The Dealer Manager for the Offer is:
ING BARING FURMAN SELZ LLC
September 21, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION................................................ 1
THE TENDER OFFER............................................ 3
1. Terms of the Offer................................. 3
2. Acceptance for Payment and Payment for Shares...... 4
3. Procedures for Tendering Shares.................... 5
4. Withdrawal Rights.................................. 7
5. Certain Federal Income Tax Consequences............ 8
6. Price Range of Shares; Dividends................... 9
7. Certain Information Concerning the Company......... 9
8. Certain Information Concerning Purchaser, Parent,
Carmeuse NA, Carfin, LVI and
Carmeuse SA........................................ 11
9. Source and Amount of Funds......................... 13
10. Background of the Offer; Contacts with the
Company............................................... 14
11. Purpose of the Offer; Plans for the Company; Merger
Agreement; and Other Agreements....................... 15
12. Dividends and Distributions; Changes in Stock...... 23
13. Effect of the Offer on the Market for the Shares;
NYSE Listing and Exchange Act
Registration........................................ 24
14. Conditions of the Offer............................ 25
15. Regulatory Approvals; State Takeover Laws.......... 26
16. Fees and Expenses.................................. 30
17. Miscellaneous...................................... 30
SCHEDULE I -- Information Concerning the Directors and
Executive Officers of Parent, Purchaser and LVI........... I-1
ANNEX A -- Text of Subchapter 25E of the Pennsylvania
Business Corporation Law.................................. A-1
</TABLE>
<PAGE> 3
TO THE HOLDERS OF COMMON STOCK OF
DRAVO CORPORATION:
INTRODUCTION
DLC Acquisition Corp. ("Purchaser"), a Pennsylvania corporation and wholly
owned subsidiary of Carmeuse Lime, Inc. ("Parent"), a Delaware corporation and
indirect subsidiary of LVI Holding N.V. ("LVI"), a Dutch corporation, hereby
offers to purchase all outstanding shares of common stock, $1.00 par value (the
"Shares"), of Dravo Corporation, a Pennsylvania corporation (the "Company"), at
a price of $13.00 per Share, net to the seller in cash, without interest thereon
(the "Offer Price"), upon the terms and subject to the conditions set forth in
this Offer to Purchase and in the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 15, 1998 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. The Merger Agreement provides that, among other
things, as soon as practicable after the purchase of Shares pursuant to the
Offer and the satisfaction of the other conditions set forth in the Merger
Agreement and in accordance with the relevant provisions of the Pennsylvania
Business Corporation Law ("Pennsylvania Law"), Purchaser will be merged with and
into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving Corporation")
and will be a wholly owned subsidiary of Parent. At the effective time of the
Merger (the "Effective Time"), which will occur when Articles of Merger are
filed with the Pennsylvania Department of State, each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held by
the Company or any subsidiary of the Company or owned by Purchaser, Parent or
any other subsidiary of Parent, or Shares held by dissenting shareholders who
perfect their dissenter's rights under Pennsylvania Law), will be converted into
the right to receive the Offer Price, without interest thereon. The Merger
Agreement is more fully described in "Section 11 -- Purpose of the Offer; Plans
for the Company; Merger Agreement; and Other Agreements."
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), BY UNANIMOUS VOTE, HAS
APPROVED EACH OF THE OFFER AND THE MERGER (AS HEREINAFTER DEFINED), HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY'S SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Offer is conditioned upon, among other things, there having been
validly tendered and not withdrawn prior to the expiration of the Offer at least
a majority of the actual Shares outstanding on a fully diluted basis and of the
voting power of the Company's outstanding voting securities entitled to vote on
the Merger (the "Minimum Condition"). Although under the terms of the Merger
Agreement (as hereinafter defined) Parent and Purchaser may waive the Minimum
Condition, they do not currently intend to do so, and Parent and Purchaser may
terminate the Merger Agreement if the Minimum Condition is not satisfied. See
"Section 14 -- Conditions of the Offer." The Offer is not conditioned upon
obtaining financing. See "Section 9 -- Source and Amount of Funds."
The Company has advised Purchaser and Parent that Salomon Smith Barney Inc.
("Salomon Smith Barney"), the Company's financial advisor, has delivered to the
Board its written opinion dated September 15, 1998 to the effect that, as of
such date and based upon and subject to certain matters stated therein, the
$13.00 per Share cash consideration to be received in the Offer and the Merger
by holders of Shares (other than Parent and its affiliates) was fair, from a
financial point of view, to such holders. A copy of the written opinion dated
September 15, 1998 of Salomon Smith Barney, which sets forth the assumptions
made, matters considered and limitations on the review undertaken by Salomon
Smith Barney, is contained in the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to the
Company's shareholders together with this Offer to Purchase.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase by Purchaser of Shares
pursuant to the Offer. However, any tendering shareholder or other payee who
fails to complete and sign the
<PAGE> 4
Substitute Form W-9 included in the Letter of Transmittal may be subject to a
required backup federal income tax withholding of 31% of the gross proceeds
payable to such shareholder or other payee pursuant to the Offer. Purchaser will
pay all charges and expenses of ING Baring Furman Selz LLC ("ING Barings"), as
Dealer Manager (the "Dealer Manager"), Continental Stock Transfer & Trust
Company, as Depositary (the "Depositary"), and Morrow & Co., Inc., as
Information Agent (the "Information Agent") incurred in connection with the
Offer. See "Section 16 -- Fees and Expenses."
The Merger Agreement provides that, promptly upon the purchase by
Purchaser, pursuant to the Offer and in accordance with the Merger Agreement, of
such number of Shares as represents a majority of the Shares, on a fully diluted
basis, Purchaser will be entitled to designate such number of directors, rounded
up to the next whole number, on the Board as is equal to the product of (a) the
total number of directors (after giving effect to the appointment of such
directors) and (b) the percentage that such number of Shares so purchased bears
to the number of Shares outstanding; provided that in no event will the number
of directors be less than a majority of the total number of directors of the
Company. The Company must, upon written request of Purchaser, increase the size
of the Board and/or take all action necessary to secure the resignations of such
number of its incumbent directors as is necessary to enable Parent's designees
to be so elected or appointed to the Board, and to cause Parent's designees to
be so elected or appointed. The Merger Agreement requires that, in the event
that Purchaser's designees are elected or appointed to the Board, until the
Effective Time the Board must have at least two directors who are neither an
officer of the Company or its subsidiaries nor a designee, stockholder,
affiliate or associate of Parent (the "Independent Directors"); provided that if
the number of Independent Directors is reduced below two for any reason, any
remaining Independent Directors will be entitled to fill such vacancy(ies) and
if no Independent Directors remain, the other directors will designate one
person who will not be either an officer of the Company or its subsidiaries or a
designee, shareholder, affiliate or associate of Parent to fill one of the
vacancies, which person will be deemed to be an Independent Director for
purposes of the Merger Agreement and will be entitled to fill any remaining
vacancy in the number of Independent Directors.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including, if required by law, the approval and adoption of
the Merger Agreement by the requisite vote of the shareholders of the Company.
See "Section 11 -- Purpose of the Offer; Plans for the Company; Merger
Agreement; and Other Agreements." Under Pennsylvania Law, except as otherwise
described below, the Merger contemplated by the Merger Agreement must be
approved by the affirmative vote of a majority of the shares voted on a proposal
to approve the Merger at a duly convened meeting of the shareholders of the
Company. However, under Pennsylvania Law, if Purchaser acquires at least 80% of
each class of the then outstanding shares of the Company, the parties will be
able to cause the Merger under the Merger Agreement to become effective without
the approval of the Company's shareholders. In the event that Parent, Purchaser
or any permitted assignee of Purchaser acquires at least 80% of each class of
the then outstanding shares of the Company, Parent, Purchaser and the Company
have agreed to take, at the request of Parent and subject to the conditions of
the Merger Agreement, all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after such acquisition, without
approval of the Company's shareholders. See "Section 11 -- Purpose of the Offer;
Plans for the Company; Merger Agreement; and Other Agreements." If, however,
Purchaser does not acquire at least 80% of each class of the then outstanding
shares of the Company and a vote of the Company's shareholders is required under
Pennsylvania Law, a significantly longer period of time will be required to
effect the Merger. Although under the terms of the Merger Agreement, Parent and
Purchaser may waive the Minimum Condition, they do not currently intend to do so
and Parent and Purchaser may terminate the Merger Agreement if the Minimum
Condition is not satisfied.
The obligations of Parent and Purchaser under the Merger Agreement are
guaranteed by Carmeuse S.A., a Belgian corporation and an affiliate of Parent
and Purchaser ("Carmeuse SA").
The Company has informed Purchaser that, as of September 15, 1998, there
were 14,718,693 Shares issued and outstanding, 392,413 Shares issued and held in
the treasury of the Company, 51,456 Shares reserved for issuance upon conversion
of the issued and outstanding shares of Series B Preference Stock, par value
$1.00 per share (the "Series B Preference Stock") and 1,600,000 Shares reserved
for issuance upon conversion of the issued and outstanding shares of Series D
Preferred Stock, par value $1.00 per share (the
2
<PAGE> 5
"Series D Preferred Stock" and, together with the Series B Preference Stock, the
"Preference Stock") and 1,373,300 Shares reserved for issuance upon exercise of
outstanding options granted under the Company's option plans.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including
without limitation the Minimum Condition and, if the Offer is extended or
amended, the terms and conditions of any extension or amendment), Purchaser will
accept for payment and pay for all Shares validly tendered prior to the
Expiration Date (as hereinafter defined) and not withdrawn, subject to the
Minimum Condition and in accordance with "Section 4 -- Withdrawal Rights." The
term "Expiration Date" means 12:00 Midnight, New York City time, on Monday,
October 19, 1998, unless and until Purchaser, in its sole discretion (but
subject to the terms of the Merger Agreement), has extended the period of time
during which the Offer is open, in which event the term "Expiration Date" will
mean the latest time and date at which the Offer, as so extended by Purchaser,
will expire.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms of the Merger Agreement), at any time and from time to time, to
extend for any reason the period of time during which the Offer is open,
including the occurrence of any of the events specified in "Section
14 -- Conditions of the Offer," by giving oral or written notice of such
extension to the Depositary. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
rights of a tendering shareholder to withdraw its Shares. See "Section
4 -- Withdrawal Rights." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE TO BE PAID BY PURCHASER FOR THE TENDERED SHARES, REGARDLESS OF
ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), Purchaser expressly reserves the right, in its
sole discretion (but subject to the terms of the Merger Agreement), at any time
and from time to time, (i) to delay acceptance for payment of, or, regardless of
whether such Shares were theretofore accepted for payment, payment for, any
Shares pending receipt of any regulatory approval specified in "Section
15 -- Regulatory Approvals; State Takeover Laws" or in order to comply in whole
or in part with any other applicable law, (ii) to terminate the Offer and not
accept for payment any Shares if any of the conditions referred to in "Section
14 -- Conditions of the Offer" has not been satisfied or upon the occurrence of
any of the events specified in "Section 14 -- Conditions of the Offer" and (iii)
to waive any condition or otherwise amend the Offer in any respect by giving
oral or written notice of such delay, termination, waiver or amendment to the
Depositary and by making a public announcement thereof.
The Merger Agreement provides that, without the consent of the Company,
Purchaser will not decrease, or change the form of, the Offer Price, decrease
the number of Shares sought, amend any condition of or impose additional
conditions on the Offer, amend any term of the Offer, amend the Minimum
Condition, or amend any other term of the Offer in any manner adverse to the
shareholders, except that Purchaser must extend the Offer (i) for ten business
days beyond the initial scheduled Expiration Date until Monday, November 2, 1998
if the Minimum Condition has not then been satisfied; and (ii) on one or more
occasions, in each instance for up to ten business days, beyond the then
scheduled Expiration Date, but not beyond December 14, 1998, if the Company,
Parent or Purchaser receives a request for additional information with respect
to their filings under the Hart-Scott Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), in which case the Offer will be extended until the
waiting period under the HSR Act is terminated or until the Merger Agreement is
terminated in accordance with its terms.
Purchaser acknowledges that (i) Rule 14e-1(c) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), requires Purchaser to pay the
consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer, and (ii) Purchaser may not delay
acceptance for payment of, or payment for (except as provided in clause (i) of
the first sentence of the second preceding
3
<PAGE> 6
paragraph), any Shares upon the occurrence of any of the conditions specified in
"Section 14 -- Conditions of the Offer" without extending the period of time
during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d)
and 14e-1 under the Exchange Act, which require that material changes be
promptly disseminated to shareholders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which Purchaser may
choose to make any public announcement, Purchaser will have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to decrease the number of Shares being sought or
to increase or decrease the consideration being offered in the Offer, such
decrease in the number of Shares being sought or such increase or decrease in
the consideration being offered will be applicable to all shareholders whose
Shares are accepted for payment pursuant to the Offer and, if at the time notice
of any such decrease in the number of Shares being sought or such increase or
decrease in the consideration being offered is first published, sent or given to
holders of such Shares, the Offer is scheduled to expire at any time earlier
than the period ending on the tenth business day from and including the date
that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business day period. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or Federal holiday and consists of the time period from 12:01 a.m.
through 12:00 Midnight, New York City time.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase, the related Letter of Transmittal, and other
relevant materials, will be mailed to record holders of Shares whose names
appear on the Company's shareholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the shareholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will purchase, by accepting for payment, and will pay
for, all Shares validly tendered prior to the Expiration Date (and not properly
withdrawn in accordance with "Section 4 -- Withdrawal Rights") promptly after
the later to occur of (i) the Expiration Date and (ii) the satisfaction or
waiver of the conditions set forth in "Section 14 -- Conditions of the Offer."
Subject to applicable rules of the Commission and the terms of the Merger
Agreement, Purchaser expressly reserves the right, in its discretion, to delay
acceptance for payment of, or payment for, Shares pending receipt of any
regulatory approvals specified in "Section 15 -- Regulatory Approvals; State
Takeover Laws."
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Share Certificates") or timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Shares, if such
procedure is available, into the Depositary's account at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in "Section 3 -- Procedures for Tendering Shares," (ii) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed and
(iii) any other documents required by the Letter of Transmittal.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, tendered Shares if, as and when Purchaser gives
oral or written notice to the Depositary of
4
<PAGE> 7
Purchaser's acceptance of such Shares for payment. Payment for Shares accepted
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering shareholders for the
purpose of receiving payments from Purchaser and transmitting payments to such
tendering shareholders. Under no circumstances will interest on the purchase
price for Shares be paid by Purchaser, regardless of any extension of the Offer
or any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedure set forth in "Section 3 -- Procedures for Tendering Shares," such
Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable following the expiration, termination or
withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay such increased
consideration for all such Shares purchased pursuant to the Offer, whether or
not such Shares were tendered prior to such increase in consideration.
Purchaser reserves the right to transfer or assign, in whole at any time,
or in part from time to time, to one or more direct or indirect subsidiaries of
Parent, the right to purchase all or any portion of the Shares tendered pursuant
to the Offer, but any such transfer or assignment will not relieve Purchaser of
its obligations under the Offer and will in no way prejudice the rights of
tendering shareholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender of Shares. In order for Shares to be validly tendered pursuant
to the Offer, either (i) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents, must be received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date and either the Share Certificates evidencing tendered Shares must be
received by the Depositary at such address or Shares must be tendered pursuant
to the procedure for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary, in each case prior to the
Expiration Date, or (ii) the tendering shareholder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other required documents, must, in any case, be
transmitted to and received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date or the
tendering shareholder must comply with the guaranteed delivery procedures
described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
5
<PAGE> 8
Signature Guarantee. Signatures on all Letters of Transmittal must be
guaranteed by a participant in the Securities Transfer Association Medallion
Program or the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (each, an "Eligible Institution"), unless
the Shares tendered thereby are tendered (i) by a registered holder of Shares
who has not completed either the box entitled "Special Delivery Instructions" or
the box entitled "Special Payment Instructions" on the Letter of Transmittal, or
(ii) for the account of an Eligible Institution. See Instruction 1 of the Letter
of Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) in the case of a guarantee of Shares, the Share Certificates for
all tendered Shares, in proper form for transfer, or a Book-Entry
Confirmation, together with a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile thereof) with any required
signature guarantee and any other documents required by such Letter of
Transmittal, are received by the Depositary within three New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, if available, (ii) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) and (iii) any other documents required by the Letter of
Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by Purchaser, in its sole discretion, whose determination will be
final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, to waive any of the conditions of the
Offer or any defect or irregularity in any tender with respect to Shares of any
particular shareholder, whether or not similar defects or irregularities are
waived in the case of other shareholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived.
Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. None of Parent, Purchaser, the Dealer Manager, the
6
<PAGE> 9
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by Purchaser (and any and all non-cash
dividends, distributions, rights, other Shares, or other securities issued or
issuable in respect of such Shares on or after September 15, 1998). All such
proxies will be considered coupled with an interest in the tendered Shares. This
appointment will be effective if, when, and only to the extent that, Purchaser
accepts such Shares for payment pursuant to the Offer. Upon such acceptance for
payment, all prior proxies given by such shareholder with respect to such Shares
and other securities will, without further action, be revoked, and no subsequent
proxies may be given. The designees of Purchaser will, with respect to the
Shares and other securities for which the appointment is effective, be empowered
to exercise all voting and other rights of such shareholder as they in their
sole discretion may deem proper at any annual, special, adjourned or postponed
meeting of the Company's shareholders, by written consent or otherwise, and
Purchaser reserves the right to require that, in order for Shares or other
securities to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Shares Purchaser must be able to exercise full
voting rights with respect to such Shares, except as otherwise limited by
applicable Pennsylvania Law.
Backup Withholding. To prevent federal income tax "backup withholding" with
respect to payment to certain shareholders of the purchase price of Shares
purchased pursuant to the Offer, each such shareholder must provide the
Depositary with such shareholder's correct taxpayer identification number
("TIN") and certify that such shareholder is not subject to federal income tax
backup withholding by completing the substitute Form W-9 in the Letter of
Transmittal. If backup withholding applies with respect to a shareholder, the
Depositary is required to withhold 31% of any payments made to such shareholder.
Certain shareholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign shareholders should complete and sign the main signature
form and a Form W-8, certificate of foreign status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See
Instruction 9 of the Letter of Transmittal.
Acceptance of Shares. Purchaser's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
shareholder and Purchaser upon the terms and subject to the conditions of the
Offer.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after November 20, 1998. If Purchaser extends the
Offer, is delayed in its acceptance for payment of Shares or is unable to accept
Shares for payment pursuant to the Offer for any reason, then, without prejudice
to Purchaser's rights under the Offer, the Depositary may, nevertheless, on
behalf of Purchaser, retain tendered Shares, and such Shares may not be
withdrawn except to the extent that tendering shareholders are entitled to
withdrawal rights as described in this Section 4. Any such delay will be by an
extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in "Section 3 -- Procedures for Tendering Shares," any notice of
7
<PAGE> 10
withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Parent, Purchaser, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification. Any Shares properly withdrawn will thereafter be deemed to not
have been validly tendered for purposes of the Offer. However, withdrawn Shares
may be re-tendered at any time prior to the Expiration Date by following one of
the procedures described in "Section 3 -- Procedures for Tendering Shares."
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer or in the Merger will
be a taxable transaction for Federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign tax laws. In
general, a shareholder will recognize gain or loss for Federal income tax
purposes equal to the difference between the amount of cash received in exchange
for the Shares sold and the shareholder's adjusted tax basis in such Shares.
Assuming the Shares constitute capital assets in the hands of the shareholder,
such gain or loss will be capital gain or loss and will be long term capital
gain or loss if the holder has held the Shares for more than one year at the
time of the sale. Gain or loss will be calculated separately for each block of
Shares tendered pursuant to the Offer.
The foregoing discussion may not be applicable to certain types of
shareholders, including shareholders who acquired Shares pursuant to the
exercise of stock options or otherwise as compensation, individuals who are not
citizens or residents of the United States and foreign corporations, or entities
that are otherwise subject to special tax treatment under the Internal Revenue
Code of 1986, as amended (the "Code").
A shareholder (other than certain exempt shareholders including, among
others, all corporations and certain foreign individuals) that tenders Shares
may be subject to 31% backup withholding unless the shareholder provides its TIN
and certifies that such number is correct or properly certifies that it is
awaiting a TIN and certifies as to no loss of exemption from backup withholding
and otherwise complies with the applicable requirements of the backup
withholding rules. A shareholder that does not furnish its correct TIN or that
does not otherwise establish a basis for exemption from backup withholding may
be subject to a penalty imposed by the Internal Revenue Service ("IRS"). Each
shareholder should complete and sign the Substitute Form W-9 included as part of
the Letter of Transmittal so as to provide the information and certification
necessary to avoid backup withholding.
If backup withholding applies to a shareholder, the Depositary is required
to withhold 31% from payments to such shareholder. Backup withholding is not an
additional tax. Rather, the amount of backup withholding can be credited against
the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained by
the shareholder upon filing an income tax return.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
8
<PAGE> 11
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are quoted on the NYSE under the symbol "DRV." The following
table sets forth, for the quarters indicated, the high and low sales prices per
Share on the NYSE as reported in publicly available sources for each of the
quarters indicated.
<TABLE>
<CAPTION>
SALES PRICES
----------------------------------
HIGH LOW
-------------- ------------
<S> <C> <C> <C> <C>
1996:
First Quarter...................................... $13 3/4 $11 1/4
Second Quarter..................................... $14 7/8 $12 3/4
Third Quarter...................................... $14 5/8 $12
Fourth Quarter..................................... $15 3/4 $12 1/2
1997
First Quarter...................................... $14 1/8 $10 1/8
Second Quarter..................................... $11 3/4 $ 8 3/4
Third Quarter...................................... $11 15/16 $10
Fourth Quarter..................................... $12 9/16 $ 9 1/2
1998
First Quarter...................................... $11 5/8 $ 9 3/4
Second Quarter..................................... $12 $ 9
Third Quarter through September 14, 1998........... $ 9 5/8 $ 6 1/2
</TABLE>
On September 14, 1998, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the reported closing
sales price of the Shares on the NYSE was $6 15/16 per Share. On September 18,
1998, the last full trading day prior to the date of this Offer to Purchase, the
reported closing sales price of the Shares on the NYSE was $12 7/16 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
The Company has not paid a dividend on the Shares since April, 1987. In the
Merger Agreement, the Company has agreed that it will not declare, set aside or
pay any dividends on or make other distributions in respect of any shares of its
capital stock (other than regularly scheduled dividends on the Preference Stock
in accordance with the terms of the Preference Stock). Moreover, under certain
loan agreements, the Company would be required to obtain the lenders' consent
prior to paying dividends in excess of certain amounts.
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
The information concerning the Company contained in this Offer to Purchase,
including financial information, has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Neither Parent nor Purchaser assumes any responsibility for the
accuracy or completeness of the information concerning the Company contained in
such documents and records or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Parent or Purchaser.
The Company is a Pennsylvania corporation and its principal executive
offices are located at 11 Stanwix Street, Pittsburgh, Pennsylvania 15222. The
telephone number of the Company at such offices is (412) 995-5535. The Company,
through a wholly owned subsidiary, produces lime for utility, metallurgical,
pulp and paper, municipal, construction and miscellaneous chemical and
industrial applications. The Company also develops and markets related
environmental technologies, products and services.
Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the financial statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997
(the "1997 Form 10-K") and the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 (the "June 30, 1998 Form 10-Q"). More comprehensive
financial information is included in such reports and other
9
<PAGE> 12
documents filed by the Company with the Commission. The financial information
that follows is qualified in its entirety by reference to such reports and other
documents, including the financial statements and related notes contained
therein. The 1997 Form 10-K, the June 30, 1998 Form 10-Q and other documents may
be examined and copies may be obtained from the offices of the Commission in the
manner set forth below.
DRAVO CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ --------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income Statement Data
Revenue................................... $84,257 $80,059 $162,476 $158,133 $146,067
Gross profit.............................. 20,905 19,300 40,835 39,968 36,526
Earnings from operations.................. 10,948 8,519 16,971 18,998 15,289
Other income (expense), net............... (3,125) (2,723) (5,928) (4,870) (3,968)
Earnings before taxes..................... 7,823 5,796 11,043 14,128 11,321
Net earnings.............................. 6,376 5,386 15,116 14,128 10,981
Preference dividends...................... 1,255 1,259 2,517 2,529 2,535
Per share information
Earnings per share -- diluted............. $ .35 $ .28 $ .85 $ .78 $ .57
Number of shares used in computation...... 14,758 14,851 14,835 14,894 14,875
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, --------------------------------
1998 1997 1996 1995
----------- ---- ---- ----
<S> <C> <C> <C> <C>
Balance Sheet Data
Total current assets.............................. $ 41,342 $ 45,655 $ 43,018 $ 43,072
Total assets...................................... 249,556 255,230 225,409 213,261
Current portion of long-term notes................ 9,767 9,736 6,166 6,099
Total current liabilities......................... 41,198 41,745 34,541 33,307
Long-term notes................................... 64,549 74,396 63,535 64,292
Redeemable preference stock....................... 15,000 15,000 20,000 20,000
Total shareholders' equity........................ 114,845 109,666 93,915 79,855
</TABLE>
The Company is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's shareholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
also should be available for inspection and copying at prescribed rates at the
following regional offices of the Commission: Seven World Trade Center, New
York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of this material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains an Internet
web site at http://www.sec.gov that contains reports, proxy statements and other
information. Reports, proxy statements and other information concerning the
Company should also be available for inspection at the offices of the NYSE.
Except as otherwise noted in this Offer to Purchase, all of the information with
respect to the Company and its affiliates set forth in this Offer to Purchase
has been derived from publicly available information.
10
<PAGE> 13
8. CERTAIN INFORMATION CONCERNING PURCHASER, PARENT, CARMEUSE NA, CARFIN,
LVI AND CARMEUSE SA.
Purchaser. Purchaser, a newly incorporated Pennsylvania corporation, has
not conducted any business other than in connection with the Offer and the
Merger Agreement. All of the issued and outstanding shares of capital stock of
Purchaser are beneficially owned by Parent. The principal executive offices of
Purchaser are located at 390 E. Joe Orr Road, Chicago Heights, Illinois 60411.
The telephone number of Purchaser at such offices is (708) 757-6201.
Parent. Parent is a Delaware corporation. All of the issued and outstanding
shares of capital stock of Parent are beneficially owned by Carmeuse NA. The
principal executive offices of Parent are located at 390
E. Joe Orr Road, Chicago Heights, Illinois 60411. The telephone number of Parent
at such offices is (708) 757-6201. Parent is the principal holding company for
the U.S. operations of LVI.
Carmeuse NA. Carmeuse North America, B.V. ("Carmeuse NA") is a Dutch
corporation. All of the issued and outstanding shares of capital stock of
Carmeuse NA are beneficially owned by Carfin. The principal executive offices of
Carmeuse NA are located at Nijverheidsstraat 34, P.O. Box 648, 2800 AP Gouda,
The Netherlands. The telephone number of Carmeuse NA at such offices is
011-31-182-527-255. Carmeuse NA is a holding company for Parent and certain
other subsidiaries of LVI.
Carfin. Carfin S.A. ("Carfin") is a Belgian corporation, 99.9% of the
issued and outstanding shares of capital stock of which are beneficially owned
by LVI. The principal executive offices of Carfin are located at Parc
Scientifique Athena, Boulevard de Lauzelle 65, 1348 Louvain-la-Neuve Nord,
Belgium. The telephone number of Carfin at such offices is 011-32-10-48-1600.
Carfin is a holding company for Carmeuse NA, the parent company of Parent, and
certain other subsidiaries of LVI.
LVI. LVI is a Dutch corporation. The principal executive offices of LVI are
located at Nijverheidsstraat 34, P.O. Box 648, 2800 AP Gouda, The Netherlands.
The telephone number of LVI at such offices is 011-31-182-527-255. Through its
subsidiaries, LVI is a leading worldwide manufacturer and marketer of limestone,
lime and lime-related products.
Carmeuse SA. Carmeuse SA is a Belgian corporation and an affiliate of
Parent and Purchaser, 99.9% of the issued and outstanding shares of capital
stock of which are beneficially owned by LVI. The principal executive offices of
Carmeuse SA are located at Parc Scientifique Athena, Boulevard de Lauzelle 65,
1348 Louvain-la-Neuve Nord, Belgium. The telephone number of Carmeuse SA at such
offices is 011-32-10-48-1600. Carmeuse SA is the principal European operating
company of LVI and has guaranteed the obligations of Parent and Purchaser under
the Merger Agreement.
None of Purchaser, Parent or LVI is subject to the informational and
reporting requirements of the Exchange Act. However, in connection with the
Offer, Purchaser and Parent have filed a Tender Offer Statement on Schedule
14D-1 (the "Schedule 14D-1") with the Commission. The Schedule 14D-1 should be
available for inspection and copies may be obtained from the Commission in the
same manner as set forth for the Company in Section 7.
11
<PAGE> 14
Set forth below are certain selected consolidated financial data with
respect to Parent and its subsidiaries for Parent's last three fiscal years,
excerpted or derived from audited financial statements and, for Parent's fiscal
quarter ended June 30, 1998, excerpted or derived from unaudited financial
statements. Parent's audited financial statements have been filed with the
Commission as an exhibit to the Schedule 14D-1. Parent's audited financial
statements have been prepared in accordance with generally accepted accounting
principles; however, because Parent is not a reporting company under the
Exchange Act, its financial statements have not been prepared in accordance with
the Commission's Regulation S-X. The financial information summary set forth
below is qualified in its entirety by reference to the Schedule 14D-1 which has
been filed with the Commission and all the financial information and related
notes contained therein.
CARMEUSE LIME, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ----------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income Statement Data
Revenue..................................... $62,175 $56,663 $124,550 $80,695 $91,727
Gross profit................................ 8,633 7,100 16,665 6,667 5,982
Earnings (loss) from operations............. 4,428 2,699 8,512 308 (2,127)
Other income (expense), net................. (2,289) (2,631) (4,845) (316) (841)
Earnings (loss) before taxes................ 2,139 68 3,667 (8) (2,968)
Net earnings (loss)......................... 1,343 42 3,511 (130) (1,820)
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, -------------------------------
1998 1997 1996 1995
----------- ---- ---- ----
<S> <C> <C> <C> <C>
Balance Sheet Data
Total current assets............................... $ 42,569 $ 46,345 $ 45,791 $35,927
Total assets....................................... 110,297 112,755 103,047 44,902
Total current liabilities.......................... 18,594 23,843 23,301 19,269
Long-term debt..................................... 61,000 70,000 64,500 12,000
Total shareholder's equity......................... 27,615 16,230 12,683 12,790
</TABLE>
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Purchaser, Parent and LVI are set forth in Schedule I hereto.
Except as described in this Offer to Purchase, (i) none of Carmeuse SA,
LVI, Carfin, Carmeuse NA, Purchaser, Parent or, to the best knowledge of
Purchaser and Parent, any of the persons listed in Schedule I to this Offer to
Purchase or any associate or majority-owned subsidiary of Carmeuse SA, LVI,
Carfin, Carmeuse NA, Purchaser, Parent or any of the persons so listed (other
than William S. Brown III who currently beneficially owns 125 Shares, an
insignificant percentage of the outstanding Shares) beneficially owns or has any
right to acquire, directly or indirectly, any Shares and (ii) none of Carmeuse
SA, LVI, Carfin, Carmeuse NA, Purchaser, Parent nor, to the best knowledge of
Purchaser and Parent, any of the persons or entities referred to above nor any
director, executive officer or subsidiary of any of the foregoing has effected
any transaction in the Shares during the past 60 days. Except as provided in the
Merger Agreement and as otherwise described in this Offer to Purchase, none of
Carmeuse SA, LVI, Carfin, Carmeuse NA, Purchaser, Parent or, to the best
knowledge of Purchaser and Parent, any of the persons listed in Schedule I to
this Offer to Purchase, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, since January 1, 1995, none of Carmeuse SA,
LVI, Carfin, Carmeuse NA,
12
<PAGE> 15
Purchaser, Parent or, to the best knowledge of Purchaser and Parent, any of the
persons listed on Schedule I hereto, has had any business relationship or
transaction with the Company or any of its executive officers, directors or
affiliates that is required to be reported under the rules and regulations of
the Commission applicable to the Offer. Except as set forth in this Offer to
Purchase, since January 1, 1995, there have been no contacts, negotiations or
transactions between any of Carmeuse SA, LVI, Carfin, Carmeuse NA, Purchaser,
Parent, or any of their respective subsidiaries, or, to the best knowledge of
Purchaser and Parent, any of the persons listed in Schedule I to this Offer to
Purchase, on the one hand, and the Company or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets.
9. SOURCE AND AMOUNT OF FUNDS.
The amount required to fund the purchase of Shares tendered in the Offer,
consummate the Merger, refinance existing indebtedness of the Company and to pay
all related fees and expenses of the transaction, is estimated to be
approximately $311 million.
Purchaser plans to obtain the necessary funds through capital contributions
made by Parent. Parent plans to obtain the funds for such capital contributions
from advances made by Carmeuse SA pursuant to a loan agreement dated September
18, 1998 between Parent and Carmeuse SA (the "Intercompany Loan Agreement"),
which agreement is incorporated herein by reference and a copy of which has been
filed with the Commission as an Exhibit to the Schedule 14D-1. Pursuant to the
Intercompany Loan Agreement, Parent will be permitted to borrow an amount up to
US $350 million. Interest is payable at a rate equal to the London Interbank
Offered Rate ("LIBOR") plus 0.75%, for interest periods of one, three or six
months. Amounts borrowed pursuant to the Intercompany Loan Agreement, together
with accrued and unpaid interest, are required to be repaid in six months.
Carmeuse SA plans to obtain the funds for advances made to Parent pursuant to
the Intercompany Loan Agreement from borrowings under the Lafarge Facility (as
hereinafter defined) and the BBL Facility (as hereinafter defined).
LVI and Lafarge S.A. (Lafarge S.A., together with its affiliates,
"Lafarge"), a French corporation, have entered into a Memorandum of
Understanding dated June 3, 1998 (the "Memorandum of Understanding") pursuant to
which they have agreed to establish a joint venture (the "Joint Venture") to
which each party has agreed to contribute its North American lime operations. As
described below, LVI and Lafarge currently intend that, following establishment
of the Joint Venture, the business of the Company will be contributed by LVI to
the Joint Venture. See "Section 10 -- Purpose of the Offer; Plans for the
Company; Merger Agreement; and Other Agreements." Consummation of the Offer is
not subject to the timing or the consummation of the Joint Venture.
Pursuant to a letter dated September 14, 1998 from Olivier Legrain, Deputy
General Manager of Lafarge, to Dominique Collinet, Chairman of the Board of
Directors of LVI, which letter is incorporated herein by reference and a copy of
which has been filed with the Commission as an Exhibit to the Schedule 14D-1,
Lafarge has agreed to provide financing to Carmeuse SA for up to 40% of the
funds required to consummate the Offer and the Merger, not to exceed US$124
million (the "Lafarge Facility"). Under the Lafarge Facility, Carmeuse SA is not
required to pay interest on amounts borrowed unless LVI and Lafarge are unable
to establish the Joint Venture. If LVI and Lafarge are unable for any reason to
establish the Joint Venture, Carmeuse SA has agreed (i) to pay interest on the
amounts borrowed at a rate equal to LIBOR plus 0.25%, determined on the basis of
three month interest periods, (ii) to repay such amounts at any time upon six
months prior notice and, in any event, no later than December 31, 1999, and
(iii) to pledge, or cause to be pledged, the shares of common stock of the
Company or equivalent security, equivalent to the value of the credit, until
such amounts are repaid.
In connection with the Offer and the Merger, Bank Brussels Lambert SA
("BBL") has agreed to provide credit to Carmeuse SA in the amount of US $230
million (the "BBL Facility") pursuant to a letter dated September 14, 1998 from
BBL to Carmeuse SA, which letter is incorporated herein by reference and a copy
of which has been filed with the Commission as an Exhibit to the Schedule 14D-1.
Proceeds of the BBL Facility will be used by Carmeuse SA to advance funds to
Parent pursuant to the Intercompany Loan Agreement, which in turn will be used
by Parent to finance the purchase of Shares pursuant to the Offer and the
Merger.
13
<PAGE> 16
Under the BBL Facility, amounts may be borrowed by Carmeuse SA for a period
ending on December 14, 1998, which period may be renewed at the option of
Carmeuse SA for an additional three month period ending on March 14, 1999. Full
repayment of amounts borrowed is required at the end of the three or six month
period, as the case may be. Under the BBL Facility, interest rates for
outstanding loans are based upon three month LIBOR plus 0.25%.
It is anticipated that the indebtedness incurred by Carmeuse SA under the
BBL Facility will be refinanced with permanent financing. It is anticipated that
the indebtedness incurred by Carmeuse SA under the Lafarge Facility will be
assumed by, or converted into capital in, the Joint Venture when established. If
LVI and Lafarge are unable to establish the Joint Venture and the indebtedness
incurred under the Lafarge Facility is required to be repaid, it is anticipated
that such indebtedness will be refinanced with permanent financing. In each
case, no final decisions have been made concerning the amount or terms of such
permanent financing. Such decisions, when made, will be based on a review from
time to time of the advisability of particular actions, as well as on prevailing
interest rates and financial and other economic conditions.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. INFORMATION SET
FORTH BELOW REGARDING THE COMPANY, OR DISCUSSIONS TO WHICH REPRESENTATIVES OF
LVI, PARENT AND PURCHASER WERE NOT PARTICIPANTS, WAS PROVIDED BY THE COMPANY.
In April, 1998, Parent learned that the Company was receptive to
acquisition proposals. Following informal telephone conversations between Mr.
Brown, then President of Carmeuse North American Group, and Mr. Carl A. Gilbert,
President and Chief Executive Officer of the Company, Parent was invited to
conduct due diligence of the Company and its operations. On April 29, 1998,
Parent and the Company entered into the Confidentiality Agreement (as
hereinafter defined).
On May 14 and 15, 1998, members of Parent's senior management and legal and
accounting representatives conducted a due diligence review of certain
non-public information regarding the Company at the offices of the Company's
attorneys and participated in due diligence discussions with the Company's
senior officers, legal counsel and accountants. Subsequent to the due diligence
meetings, informal discussions continued between senior officers of Parent and
the Company during which Parent expressed continued interest in the Company;
however, Parent and the Company did not engage in substantive discussions
regarding the terms and conditions of a potential transaction.
Following the execution of the Memorandum of Understanding with Lafarge,
Parent renewed its discussions with the Company. On August 6, 1998, Mr.
Dominique Collinet, President of LVI, and Mr. Alain R. Crouy, President and
Chief Executive Officer of Lafarge, delivered a letter to Mr. Arthur E. Byrnes,
Chairman of the Board of the Company, setting forth the interest of LVI and
Lafarge to acquire all of the outstanding shares of capital stock of the Company
for $13 per share in cash, subject to negotiation of a definitive agreement,
approval of the transaction by the Board of Directors of each party and certain
other conditions. Messrs. Collinet and Crouy requested a meeting to discuss more
fully the proposed transaction.
On August 10, 1998, Mr. Gilbert indicated to Mr. Brown that the Company
desired to pursue negotiations with Parent regarding a potential transaction and
Mr. Brown requested an update to the previous due diligence conducted by Parent.
On August 11, 1998, the Confidentiality Agreement was amended to include
Lafarge.
From August 27 through September 1, 1998, senior management of Parent and
Lafarge met with senior management and legal counsel of the Company to conduct
further due diligence, including an investigation of the financial performance
of the Company since the May, 1998 due diligence meetings. In addition, a
representative of Lafarge conducted a physical inspection of Company facilities.
Thereafter, on September 2 and 3, 1998, Parent and the Company, together with
their legal and financial advisors, conducted negotiations regarding the terms
of a proposed tender offer and merger.
On September 8, 1998, Carmeuse SA's Board of Directors authorized the
proposed transaction, on September 11, 1998, Parent's Board of Directors
authorized the proposed transaction, and on September 14, 1998, Lafarge
authorized the Lafarge Facility. In the afternoon of September 14, 1998,
immediately prior to a meeting of the Company's Board of Directors, Mr. Jacques
Germay, Chairman of the Board of Parent,
14
<PAGE> 17
delivered a letter to the Company's Board of Directors reasserting Parent's
intent to commence a tender offer to purchase all of the outstanding shares of
common stock of the Company for a purchase price of $13 per share in cash upon
the terms and conditions set forth in the form of the Merger Agreement
previously negotiated by the parties and their respective counsel. The letter
further indicated that the Boards of Directors of Purchaser, Parent and Carmeuse
SA had each approved the tender offer and the Merger Agreement and executed the
Merger Agreement, and enclosed an executed signature page to the Merger
Agreement. The letter also indicated that unless Parent's offer was accepted by
the Company prior to 11:59 p.m. (Pittsburgh time) on September 14, 1998, Parent
would not proceed with its offer.
On September 14, 1998, Mr. Gilbert called Mr. Brown and Mr. Germay to
inform Parent that the Company's Board of Directors unanimously had accepted
Parent's proposal, authorized the execution of the Merger Agreement and agreed
to recommend that the Company's shareholders accept the Offer and tender their
Shares pursuant thereto. The Merger Agreement was executed by the Company as of
September 15, 1998, and on September 15, 1998, Parent and the Company issued a
joint press release announcing the Offer and the execution of the Merger
Agreement.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; MERGER AGREEMENT; AND
OTHER AGREEMENTS.
Purpose of the Offer. The purpose of the Offer, the Merger and the Merger
Agreement is to enable Parent to acquire control of the Board and all of the
Shares. Upon consummation of the Merger, the Company will become a wholly owned
subsidiary of Parent. The Offer is being made pursuant to the Merger Agreement.
Plans for the Company. As promptly as practicable following the purchase of
and payment for Shares representing a majority of the outstanding Shares of
Common Stock, on a fully diluted basis, under the Offer, Parent intends (i) to
exercise its right under the Merger Agreement to designate such number of
directors for the Board as it is then entitled to designate and (ii) cause a
merger of Purchaser and the Company under Pennsylvania Law.
It is expected that initially following the Merger, except as set forth
below, the business and operations of the Company will be conducted in a manner
substantially similar to how they are conducted currently.
Pursuant to the Memorandum of Understanding, LVI and Lafarge have agreed to
establish a Joint Venture to which LVI and Lafarge will contribute each of their
businesses within North America relating to lime, dolomite and limestone, but
not including construction, buildings and public works (the "Limestone
Businesses"). In each case, the Limestone Businesses to be contributed will
include title to deposits and quarries, title to industrial extraction and
production facilities, permits and authorizations to operate, production
quantities, customers, personnel, and all other assets required by the Joint
Venture to operate such business. The Limestone Businesses will also include the
limestone business of each subsidiary in which either party owns a controlling
interest. Pursuant to the Memorandum of Understanding, each party has agreed to
conduct all of its Limestone Businesses exclusively through the Joint Venture.
The Memorandum of Understanding provides that LVI will own 60% of the Joint
Venture and Lafarge will own 40% of the Joint Venture. If, following
contribution by either party of its Limestone Businesses, such party owns less
than its anticipated percentage of the Joint Venture, such party may be required
to make additional contributions in cash in order to achieve the agreed
percentage. LVI and Lafarge currently anticipate that the Joint Venture will be
established following receipt of all necessary regulatory approvals, including
expiration of the applicable waiting period under the HSR Act. Following
establishment of the Joint Venture, and consistent with the Memorandum of
Understanding, LVI plans to cause to be contributed to the Joint Venture all of
the equity interest in or assets of Parent, including its equity interest in or
assets of Purchaser, or, following the Merger, the Company.
Purchaser and Parent have no present plans regarding the Preference Stock,
but prior to the Merger, may engage in discussions with the holders of the
Preference Stock regarding various alternatives including the possible purchase
of the Preference Stock. If those discussions do not result in a satisfactory
resolution, then following the Merger, the Company will consider what, if any,
rights it may exercise under the terms of the Preference Stock and applicable
law.
15
<PAGE> 18
Merger Agreement. The following is a summary of certain provisions of the
Merger Agreement. The summary is qualified in its entirety by reference to the
full text of the Merger Agreement which is incorporated herein by reference and
a copy of which has been filed with the Commission as an exhibit to the Schedule
14D-1. The Merger Agreement may be examined and copies may be obtained at the
place and in the manner set forth in "Section 7 -- Certain Information
Concerning the Company" of this Offer to Purchase.
The Offer. The Merger Agreement provides that Purchaser will commence the
Offer and that, upon the terms and subject to the prior satisfaction or waiver
of the conditions of the Offer, including the valid tender prior to the
expiration of the Offer of such number of Shares that represents at least a
majority of (i) the actual outstanding Shares on a fully diluted basis and (ii)
the voting power of the Company's outstanding voting securities entitled to vote
on the Merger (the "Minimum Condition"), Purchaser will accept for payment and
pay for Shares tendered as soon as practicable after it is legally permitted to
do so under applicable law. The Merger Agreement provides that, without the
written consent of the Company, Purchaser will not decrease, or change the form
of, the Offer Price, decrease the number of Shares sought, amend the conditions
or impose additional conditions to the Offer, amend any term of the Offer, amend
the Minimum Condition, or amend any other term of the Offer in a manner adverse
to the holders of the Common Stock, except that Purchaser may, at any time, in
its sole discretion extend the Offer. In addition, Purchaser must extend the
Offer for (i) ten business days beyond the initial scheduled expiration date if
the Minimum Condition has not then been satisfied; and (ii) on one or more
occasions, in each instance for up to ten business days beyond the then
scheduled expiration date, but not beyond December 14, 1998, if the Company,
Parent or Purchaser receives a request for additional information with respect
to their filings under the HSR Act, in which case, the Offer will be extended
until the waiting period under the HSR Act is terminated or until the Merger
Agreement is terminated in accordance with its terms.
The Merger. The Merger Agreement provides that subject to the terms and
conditions thereof, and pursuant to Pennsylvania Law, at the Effective Time,
Purchaser will be merged with and into the Company. As a result of the Merger,
the separate corporate existence of Purchaser will cease and the Company will
continue as the Surviving Corporation.
The respective obligations of Parent and Purchaser, on the one hand, and
the Company, on the other hand, to effect the Merger are subject to the
conditions that: (i) the Offer shall have been consummated in accordance with
its terms; (ii) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated; (iii) the Merger
Agreement shall have been adopted by the requisite vote of the Company's
shareholders or, if permitted under Pennsylvania law, by the Board; and (iv) no
preliminary or permanent injunction or other order by any Federal or state court
in the United States which prevents the consummation of the Merger shall have
been issued and remain in effect.
The Merger Agreement provides that at the Effective Time, (a) all issued
and outstanding Shares owned by the Company or any subsidiary of the Company or
by Parent, Purchaser or any other subsidiary of Parent will be canceled, and (b)
each remaining Share issued and outstanding immediately prior to the Effective
Time will be converted into the right to receive the Offer Price, without
interest.
Pursuant to the Merger Agreement, each issued and outstanding share of
common stock of Purchaser will be converted into one fully paid and
non-assessable share of common stock of the Company.
After the Effective Time, the Articles of Incorporation of the Company will
remain the Articles of Incorporation of the Company and the Bylaws of the
Purchaser will be the Bylaws of the Company.
Guarantee. Carmeuse SA has executed the Merger Agreement for the limited
purpose of guaranteeing the obligations of Parent and Purchaser under the Merger
Agreement.
The Company's Board of Directors. The Merger Agreement provides that
promptly upon the purchase by Purchaser, pursuant to the Offer and in accordance
with the Merger Agreement, of such number of Shares as represents a majority of
the Shares, on a fully diluted basis, Purchaser will be entitled to designate
such number of directors, rounded up to the next whole number, on the Board as
is equal to the product of (a) the total number of directors (after giving
effect to the appointment of such directors) and (b) the percentage
16
<PAGE> 19
that such number of Shares so purchased bears to the number of Shares
outstanding; provided that in no event will the number of directors be less than
a majority of the total number of directors of the Company. The Company must,
upon written request of Purchaser, increase the size of the Board and/or take
all action necessary to secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be so elected or
appointed to the Board, and cause Parent's designees to be so elected or
appointed. The Merger Agreement requires that, in the event that Purchaser's
designees are elected or appointed to the Board, until the Effective Time the
Board must have at least two directors who are neither an officer of the Company
or its subsidiaries nor a designee, stockholder, affiliate or associate of
Parent (the "Independent Directors"); provided that if the number of Independent
Directors is reduced below two for any reason, any remaining Independent
Directors will be entitled to fill such vacancy(ies) and if no Independent
Directors remain, the other directors will designate one person who will not be
either an officer of the Company or its subsidiaries or a designee, shareholder,
affiliate or associate of Parent to fill one of the vacancies, which person will
be deemed to be an Independent Director and will be entitled to fill any
remaining vacancy in the number of Independent Directors.
The Merger Agreement further provides that, at the request of Purchaser,
the Company will promptly take all actions required pursuant to Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, including mailing to
shareholders as part of the Company's Schedule 14D-9 the information required by
such Section 14(f) and Rule 14f-1, as is necessary to enable Parent's designees
to be elected to the Board. Upon consummation of the Offer and prior to the
Effective Time, any amendment or termination of the Merger Agreement by the
Company, any waiver of any of the Company's rights or exercise of any of its
remedies under the Merger Agreement, any extension of the time for performance
of any of the obligations of Purchaser thereunder, and any other action by the
Company thereunder required to be taken by the Board may be effected only if the
action is approved by the affirmative vote of a majority of the Independent
Directors.
Shareholders Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger: (i) duly call,
give notice of, convene and hold a special meeting of its shareholders (the
"Special Meeting") as soon as practicable following consummation of the Offer
for the purpose of considering and taking action upon the Merger Agreement and
the Merger; (ii) file with the Commission, and use all reasonable efforts to
have processed to completion by the Commission, a proxy or information statement
relating to the Merger and the Merger Agreement; and (iii) include in the proxy
statement or information statement the recommendation of the Board that
shareholders of the Company vote in favor of the approval of the adoption of the
Merger Agreement. Purchaser has agreed that it will vote, or will cause to be
voted, all of the Shares entitled to vote which are then owned by it or any of
its subsidiaries in favor of the Merger and adoption of the Merger Agreement.
The Merger Agreement provides that in the event Purchaser acquires at least
80% of the outstanding shares of each class of the Company, the parties will
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after expiration of the Offer, without approval
of the Company's shareholders. In the event Purchaser does not acquire 80% of
the Shares and 80% of each class of the Preference Stock which remains
outstanding, a shareholder vote will be required. No offer is being made
hereunder to acquire the Preference Stock. There can be no assurance that
Purchaser will acquire 80% of the Shares and 80% of each series of the
Preference Stock.
Interim Operations. In the Merger Agreement, the Company has agreed that,
prior to the Effective Time, unless Parent otherwise agrees in writing:
(a) the business of the Company and its subsidiaries will be conducted
only in the ordinary and usual course and in compliance with all applicable
material legal requirements and, to the extent inconsistent therewith, each
of the Company and its subsidiaries will use its commercially reasonable
efforts to preserve its business organization intact and to maintain its
existing relations with customers, suppliers, employees, creditors and
business partners;
(b) the Company will not, directly or indirectly, amend its or any of
its subsidiaries' articles or certificates of incorporation or bylaws or
similar organizational documents;
17
<PAGE> 20
(c) the Company will not, and it will not permit any of its
subsidiaries to: (i) (A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the
Company's capital stock or that of any of its subsidiaries (other than
regularly scheduled dividends on the Preference Stock in accordance with
its terms) or (B) redeem, purchase, or otherwise acquire directly or
indirectly any of the Company's capital stock (or options, warrants, calls,
commitments or rights of any kind to acquire any shares of capital stock)
or that of any of its subsidiaries, other than redemptions of Preference
Stock required by the Company's articles of incorporation; (ii) issue,
sell, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital
stock of any class of the Company or any of its subsidiaries, other than
common stock issuable upon the exercise of options, or upon the conversion
of the Series B Preference Stock or the Series D Preferred Stock
outstanding on the date of the Merger Agreement; or (iii) split, combine or
reclassify the outstanding capital stock of the Company or any of its
subsidiaries;
(d) the Company will not, and it will not permit any of its
subsidiaries to, acquire or agree to acquire, or dispose of or agree to
dispose of, any material assets other than in the ordinary course of
business, either by purchase, merger, consolidation, sale of shares in any
of its subsidiaries or otherwise;
(e) the Company will not, and it will not permit any of its
subsidiaries to, transfer, lease, license, sell, mortgage, pledge, dispose
of, or encumber any of its owned real property or leased real property
(except for mortgages on such real property existing on the date of the
Merger Agreement) or, other than in the ordinary course of business,
intellectual properties;
(f) neither the Company nor any of its subsidiaries will: (i) grant
any increase in the compensation payable or to become payable by the
Company or any of its subsidiaries to any of its officers, directors or key
employees, except for (A) increases in the ordinary course of business
consistent with past practices or to the extent required by any contract,
and (B) payment immediately prior to consummation of the Offer, of a pro
rata portion of the 1998 target award under the Company's Annual Incentive
Plan for which amounts have been accrued on the Company's financial
statements; or (ii) (A) adopt any new, (B) grant any award under any, or
(C) amend or otherwise increase, or accelerate the payment or vesting of
the amounts payable or to become payable under, any existing employee
benefit or compensation plan other than as contemplated by the Merger
Agreement or in accordance with the provisions of such benefit plan; or
(iii) increase the number of directors of the Company, enter into or modify
or amend any existing employment or severance agreements with, or grant any
severance or termination rights to any officer, director or employee of the
Company or any of its subsidiaries or terminate any of the employees of the
Company other than in the ordinary course of business; or (iv) enter into
or modify in any material respect any collective bargaining agreement;
(g) neither the Company nor any of its subsidiaries will modify, amend
or terminate in any material respect any of its material contracts or
waive, release or assign any material rights or claims;
(h) neither the Company nor any of its subsidiaries will: (i) incur or
assume any indebtedness other than indebtedness with respect to working
capital in amounts consistent with past practice; (ii) materially modify
any existing indebtedness or obligation; (iii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person (other than a
subsidiary), other than immaterial amounts in the ordinary course of
business consistent with past practice; (iv) make any loans, advances or
capital contributions to, or investments in, any other person (other than
to wholly owned subsidiaries of the Company or customary advances to
employees in accordance with past practice); or (v) enter into any material
commitment or transaction other than in the ordinary course of business;
(i) neither the Company nor any of its subsidiaries will change any of
the accounting methods, practices or policies used by it, unless required
by generally accepted accounting principles or Commission rules and
regulations;
18
<PAGE> 21
(j) the Company will not, and it will not permit any of its
subsidiaries to, make or agree to make any capital expenditures, except for
capital expenditures that are not materially inconsistent with the
Company's 1998 strategic plan;
(k) the Company will not, and it will not permit any of its
subsidiaries to, make any material tax election (unless required by law) or
settle or compromise any material income tax liability;
(l) the Company will not, and it will not permit any of its
subsidiaries to, (i) waive the benefits of, or agree to modify in any
material manner, any confidentiality, standstill or similar agreement to
which the Company or any of its subsidiaries is a party, or (ii) pay,
discharge or satisfy any legal proceeding, other than a payment, discharge
or satisfaction, (A) involving payments by the Company or its subsidiaries
of less than $100,000 in the aggregate or (B) for which liabilities are
fully reflected on or are fully reserved against in the Company's most
recent consolidated financial statements (or the notes thereto) included in
the reports filed by the Company with the Commission, in each case in
complete satisfaction, and with a complete release, of such matter with
respect to all parties to such matter;
(m) the Company will not, and will not permit any of its subsidiaries
to, make any payment or incur any liability or obligation for the purpose
of obtaining any consent from any third party to the transactions
contemplated hereby; and
(n) neither the Company nor any of its subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of
the foregoing.
No Solicitation. In the Merger Agreement, the Company has agreed that the
Company and its subsidiaries and affiliates will not, and will use their
reasonable efforts to ensure that their respective officers, directors,
employees, counsel, investment bankers, financial advisors, accountants, other
representatives and agents do not, directly or indirectly, initiate, solicit,
encourage or participate in, or enter into any agreement with respect to a
Takeover Proposal (as hereinafter defined). The Company has agreed and will
cause its subsidiaries and affiliates, and their respective officers, directors,
employees, counsel, investment bankers, financial advisors, accountants, other
representatives and agents to, immediately cease discussions and negotiations,
if any, with any parties conducted heretofore with respect to such matters.
Nonetheless, the Company may, directly or indirectly, furnish information
concerning the Company to any person pursuant to an appropriate confidentiality
agreement, and may participate in discussions and negotiations with such person
concerning a Takeover Proposal if, in the opinion of the Board after
consultation with legal counsel to the Company, the failure to provide such
information or to engage in such discussions or negotiations would be
inconsistent with their fiduciary duties under applicable law.
Under the Merger Agreement, neither the Board nor any committee thereof may
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation by the Board or such committee of the
Merger Agreement or the Offer or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any Takeover Proposal, or (iii) cause the
Company to enter into any agreement with respect to any Takeover Proposal.
However, in the event that prior to the Effective Time the Board determines in
good faith, in consultation with its legal counsel as to legal matters, that it
is necessary to do so in order to comply with its fiduciary duties, the Board
may withdraw or modify its approval or recommendation of the Merger Agreement,
the Offer and the Merger, approve or recommend a Superior Proposal (as
hereinafter defined) or cause the Company to enter into an agreement with
respect to a Superior Proposal, but in each case only at a time that is after
the fifth business day following Parent's receipt of written notice advising
Parent that the Board has received a Superior Proposal. The Company is also
required to promptly advise Parent orally of any request for information or of
any Takeover Proposal, including the terms of the Takeover Proposal.
"Takeover Proposal" means any inquiry, proposal or offer from any person
relating to any: (A) merger, consolidation or similar transaction involving the
Company, (B) sale, lease or other disposition directly or indirectly by merger,
consolidation, share exchange or otherwise of assets of the Company or its
subsidiaries outside the ordinary course of business representing 10% or more of
the consolidated assets of the Company
19
<PAGE> 22
and its subsidiaries, (C) issue, sale, or other disposition of (including by way
of merger, consolidation, share exchange or any similar transaction) securities
(or options, rights or warrants to purchase, or securities convertible into,
such securities) representing 20% or more of the voting power of the Company or
(D) transaction in which any person will acquire beneficial ownership or the
right to acquire beneficial ownership or any group is formed which beneficially
owns or has the right to acquire beneficial ownership of more than 20% of the
outstanding Shares, in each case, other than the transactions with Parent
contemplated by the Merger Agreement. "Superior Proposal" means any bona fide
written offer for a Takeover Proposal to acquire, directly or indirectly, for
consideration consisting of cash or securities, more than 20% of the outstanding
Shares on a fully diluted basis or all or substantially all of the assets of the
Company and otherwise on terms which the Board determined in its good faith
judgment in consultation with a financial advisor of nationally recognized
reputation that the consideration offered pursuant to such Takeover Proposal is
more favorable to the shareholders than the Offer and the Merger from a
financial point of view.
Directors' and Officers' Indemnification. For six years after the Effective
Time, Parent will indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of the Company and its subsidiaries
(each an "Indemnified Party") against all losses, obligations, expenses, claims,
damages or liabilities (including interest, penalties, out-of-pocket expenses
and attorneys' fees) resulting from or arising out of actions or omissions
occurring on or prior to the Effective Time to the full extent permitted under
applicable law, the Company's Articles of Incorporation or Bylaws in effect as
of the date of the Merger Agreement or certain written indemnification
agreements, including provisions therein relating to the advancement of expenses
incurred in the defense of any action or suit; provided that in the event any
claim or claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims will continue until final
disposition of any and all such claims. If Parent or the Company (i) reorganizes
or consolidates with or merges into any other person and is not the resulting
corporation or (ii) liquidates, dissolves or transfers all or substantially all
of its assets to any person, then in either case, provision will be made so that
the successors and assigns of Parent or the Company assume the indemnification
obligations of Parent or the Company, as the case may be.
Parent must use commercially reasonable efforts for a period of six years
after the Effective Time to provide officers' and directors' liability insurance
in respect of acts or omissions occurring prior to the Effective Time, including
but not limited to the transactions contemplated by the Merger Agreement,
covering each person currently covered by the Company's existing officers' and
directors' liability insurance policy, or who becomes covered by such policy
prior to the Effective Time, on terms with respect to coverage and amount no
less favorable than those of such policy in effect on the date of the Merger
Agreement; provided that in satisfying such obligation, Parent will not be
obligated to pay premiums in excess of 150% of the per annum amount the Company
paid in 1997; and provided further that Parent will nevertheless be obligated to
provide such coverage as may be obtained for such amount.
Benefit Plans and Certain Contracts. Under the Merger Agreement, until at
least December 31, 1999, Parent has agreed to cause the Company to maintain
either the employee benefit plans of the Company and its subsidiaries in effect
on the date of the Merger Agreement or other benefits to employees of the
Company and its subsidiaries that are not materially less favorable in the
aggregate to such employees than those in effect on the date of the Merger
Agreement; provided that the Company will not maintain any plan that provides
for the issuance of securities of the Company. Prior to consummation of the
Merger, the Company may pay eligible participants a pro rata portion of the 1998
target award under the Company's Annual Incentive Plan for which amounts have
been accrued on the Company's financial statements from January 1, 1998 through
the Effective Time. Under the Merger Agreement, Parent has also acknowledged the
existence of certain agreements between the Company and various employees and
former employees of the Company and has agreed that after the Effective Time
such agreements will continue to remain an obligation of the Company and will
remain in full force and effect.
Company Stock Options. Under the Merger Agreement, each option (an
"Option") to purchase Common Stock issued by the Company which is outstanding at
the Effective Time will be canceled by virtue of the Merger, without
consideration, and will cease to exist. Each holder of an Option, whether or not
such Option is immediately exercisable, will be entitled to receive at the
Effective Time, for each share of Common
20
<PAGE> 23
Stock issuable upon exercise of such Option, an amount in cash equal to the
excess of (x) the Offer Price over (y) the per share exercise price of the
Option as in effect immediately prior to the Effective Time. No consideration
will be payable with respect to any Option if the exercise price of such Option
exceeds the Offer Price.
Representations and Warranties. The Company has made customary
representations and warranties to Parent and Purchaser with respect to, among
other things, its organization and qualification, subsidiaries, capitalization,
the reports filed by the Company with the Commission, financial statements,
title to assets, liens, information supplied, consents and approvals, no
violations, no default, no undisclosed liabilities, litigation, compliance with
applicable law, employee plans, environmental matters, tax matters, intangible
property, opinion of financial advisor, brokers, labor matters, absence of
certain changes, millennium, full disclosure, real property and contracts.
Termination; Fees. The Merger Agreement may be terminated at any time prior
to the Effective Time, whether before or after shareholder approval thereof:
(i) by mutual consent of the Board of Directors of Parent and the
Board;
(ii) by either Parent or the Company if the Offer has not been
consummated on or before December 14, 1998 (provided the terminating party
is not otherwise in material breach of its representations, warranties or
obligations under the Merger Agreement);
(iii) by the Company if any of the conditions to the Merger have not
been satisfied or waived by the Company at such time as such condition is
no longer capable of satisfaction;
(iv) by Parent if any of any of the conditions to the Merger have not
been satisfied or waived by Parent at such time as such condition is no
longer capable of satisfaction;
(v) by the Company, if Parent or Purchaser has breached or failed to
perform in any material respect any of its representations, warranties or
covenants contained in the Merger Agreement, which breach or failure to
perform would give rise to a failure of a condition to the Merger or to the
Offer and cannot be or has not been cured within 30 days after the giving
of notice to Parent of such breach; or
(vi) by the Company, in connection with entering into an agreement for
a Superior Proposal as permitted by the Merger Agreement; provided the
Company has complied with all provisions of the Merger Agreement related
thereto.
If either (A)(i) the Company receives a bona fide Takeover Proposal at any
time after the date of the Merger Agreement and prior to the termination of the
Merger Agreement, (ii) the Merger Agreement terminates prior to the consummation
of the Offer for any reason (other than a breach of the Merger Agreement by
Parent or Purchaser), and (iii) by the date which is six months after the date
of termination of the Merger Agreement, either (1) a Takeover Proposal with a
third party is thereafter consummated, or (2) the Company enters into an
agreement for a Takeover Proposal with a third party which is thereafter
consummated, or (B) the Company terminates the Merger Agreement by reason of its
entering into an agreement for a Superior Proposal, then, in either event, the
Company must pay to Parent, by wire transfer of immediately available funds,
within two days after the consummation of the Takeover Proposal or Superior
Proposal, as the case may be, a fee of $9,500,000 (the "Topping Fee"). For
purposes of the requirement regarding payment of the Topping Fee only, "Takeover
Proposal" means any proposal or offer from any person relating to any: (A)
merger, consolidation or similar transaction involving the Company, (B) sale,
lease or other disposition directly or indirectly by merger, consolidation,
share exchange or otherwise of assets of the Company or its subsidiaries outside
the ordinary course of business representing 10% or more of the consolidated
assets of the Company and its subsidiaries, (C) issue, sale, or other
disposition of (including by way of merger, consolidation, share exchange or any
similar transaction) securities (or options, rights or warrants to purchase, or
securities convertible into, such securities) representing 20% or more of the
voting power of the Company or (D) transaction in which any person will acquire
beneficial ownership or the right to acquire beneficial ownership or any group
is formed which beneficially owns or has the right to acquire
21
<PAGE> 24
beneficial ownership of more than 50% of the outstanding Shares, in each case,
other than the transactions with Parent and Purchaser contemplated by the Merger
Agreement.
Confidentiality Agreement. The following is a summary of the material terms
of the confidentiality agreement. This summary is qualified in its entirety by
reference to the full text of the confidentiality agreement which is
incorporated herein by reference and a copy of which has been filed with the
commission as an Exhibit to the Schedule 14D-1. The confidentiality agreement
may be examined and copies may be obtained at the place and in the manner as set
forth in "Section 7 -- Certain Information concerning the Company."
Parent entered into a Letter Agreement dated April 29, 1998 (the
"Confidentiality Agreement") with the Company pursuant to which Parent has
agreed, among other things, to keep confidential certain non-public confidential
or proprietary information of the Company furnished to Parent by or on behalf of
the Company. Pursuant to the Confidentiality Agreement, Parent agreed that,
without the prior written consent of the Board, for a period of eighteen months
from the date of the Confidentiality Agreement, neither Parent nor its
affiliates will acquire or offer or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities of the Company, or otherwise seek
to influence or control the management or policies of the Company.
Notwithstanding the foregoing, Parent and its affiliates are not prohibited from
making an offer to acquire the voting securities of the Company if the Board has
authorized an auction of such securities or Parent is making a counteroffer to a
proposed transaction for such securities.
Vote Required to Approve Merger. Pennsylvania Law provides that the
adoption of any plan of merger or consolidation by the Company requires the
approval of the Board and the affirmative vote of a majority of the votes cast
by all shareholders entitled to vote thereon (including the votes of any Shares
owned by Parent and Purchaser that have voting rights at such time), if the
"short form" merger procedure described below is not available. The Board has
authorized and approved the Offer and the Merger; consequently, the only
additional action of the Company that may be necessary to effect the Merger is
approval by such shareholders at a meeting of the Company's shareholders
convened for that purpose (the "Shareholders Meeting"). If the Minimum Condition
is satisfied, then Purchaser will own a majority of the outstanding Shares on a
fully diluted basis, and upon voting its Shares in favor of the Merger, the
Merger will be approved. Although under the terms of the Merger Agreement,
Parent and Purchaser may waive the Minimum Condition, they do not currently
intend to do so and Parent and Purchaser may terminate the Merger Agreement if
the Minimum Condition is not satisfied. Pennsylvania Law also provides that the
Merger will not require the approval of the Company's shareholders, and can be
adopted by Purchaser's Board of Directors, if Purchaser owns at least 80% of
each class of the outstanding shares of the Company. Consequently, unless
Purchaser acquires 80% of the Shares and 80% of each class of the Preference
Stock which remains outstanding, a shareholder vote will be required. No offer
is being made hereunder to acquire the Preference Stock. There can be no
assurance that Purchaser will acquire 80% of the Shares and 80% of each series
of the Preference Stock.
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which Purchaser seeks
to acquire the remaining Shares not held by it. Purchaser believes, however,
that Rule 13e-3 will not be applicable to the Merger because it is anticipated
that the Merger will be effected within one year following consummation of the
Offer. Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
shareholders in such transaction, be filed with the Commission and disclosed to
shareholders prior to consummation of the transaction.
Appraisal Rights. Notwithstanding anything in the Merger Agreement to the
contrary, any issued and outstanding Shares held by persons who object to the
Merger and comply with all the provisions of Pennsylvania Law concerning the
right of holders of Shares to dissent from the Merger and require appraisal of
their Shares ("Dissenting Shareholder") will not be converted into the right to
receive the Offer Price, without interest, pursuant to the Merger Agreement, but
will be converted into the right to receive such consideration as may be
determined to be due to such Dissenting Shareholder pursuant to Pennsylvania
Law;
22
<PAGE> 25
provided, however, that the Shares outstanding immediately prior to the
Effective Time and held by a Dissenting Shareholder who will, after the
Effective Time, withdraw his demand for appraisal or lose his right of
appraisal, in either case pursuant to the Pennsylvania Law, will be deemed to be
converted as of the Effective Time into the right to receive the Offer Price,
payable to the holder thereof, without interest. In addition, each holder of
issued and outstanding shares of Preference Stock who objects to the Merger and
complies with all the provisions of Pennsylvania Law concerning the right of
holders of shares of Preference Stock to dissent from the Merger and require
appraisal of their shares ("Dissenting Preference Holder") will, unless such
Dissenting Preference Holder withdraws or loses his right of appraisal, be
entitled to payment of the fair value of his shares determined in accordance
with Pennsylvania Law. If such Dissenting Preference Holder withdraws or loses
his right of appraisal, his shares of Preference Stock will remain outstanding
and unaffected by the Merger. The Company will give Parent (i) prompt notice of
any written demands for appraisal of the Shares or shares of Preference Stock
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to any such demands. The Company will not, without the
prior written consent of Parent, voluntarily settle or compromise any such
demands.
In addition to the appraisal rights discussed above, shareholders also have
certain rights ("Subchapter 25E Rights") under Subchapter 25E of the
Pennsylvania Law ("Subchapter 25E") which will become applicable prior to the
Effective Time in the event that the Purchaser (or a group of related persons,
or any other person or group of related persons) were to acquire Shares
representing at least 20% of the voting power of the Company, in connection with
the Offer or otherwise (a "Control Transaction"). In such event, shareholders of
the Company would have the right to demand "fair value" of such shareholders'
Shares and to be paid such fair value upon compliance with the requirements of
Subchapter 25E. Under Subchapter 25E, "fair value" may not be less than the
highest price per share paid by the controlling person or group at any time
during the 90-day period ending on and including the date of the Control
Transaction, plus an increment, if any, representing any value, including,
without limitation, any proportion of value payable for acquisition of control
of the Company, that may not be reflected in such price. Purchaser believes that
the Offer Price represents fair value of the Shares within the meaning of
Subchapter 25E. Subchapter 25E Rights would attach immediately upon consummation
of a Control Transaction and require that any shareholder seeking such appraisal
must make a demand for fair value within a reasonable time after the notice to
shareholders that a Control Transaction has occurred is given by the controlling
person or group in accordance with Subchapter 25E, which time period may be
specified in such notice, as well as comply with the other procedures of
Subchapter 25E. Subchapter 25E Rights are available only with respect to shares
of a registered corporation held by a shareholder after the occurrence of a
Control Transaction; accordingly, Subchapter 25E Rights would not be available
with respect to any Shares tendered in the Offer and accepted for payment.
Although under the terms of the Merger Agreement, Parent and Purchaser may waive
the Minimum Condition, they do not currently intend to do so; and Parent and
Purchaser may terminate the Merger Agreement and the transactions contemplated
thereby (including, without limitation, the Offer) if the Minimum Condition is
not satisfied. The foregoing summary of rights under Subchapter 25E is qualified
in its entirety by reference to the full text of Subchapter 25E, which is
attached hereto as Annex A.
Except as noted in this Offer to Purchase, neither Parent nor Purchaser has
any present plans or proposals that would result in an extraordinary corporate
transaction, such as a merger, reorganization, liquidation, relocation of
operations, or sale or transfer of assets, involving the Company or any material
changes in the Company's corporate structure, business or composition of its
management or personnel.
12. DIVIDENDS AND DISTRIBUTIONS; CHANGES IN STOCK.
The Merger Agreement provides that prior to the Effective Time, unless
Parent otherwise agrees in writing the Company will not, and it will not permit
any of its subsidiaries to: (i) (A) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property with respect to the
Company's capital stock or that of any of its subsidiaries (other than regularly
scheduled dividends on the Preference Stock in accordance with its terms) or (B)
redeem, purchase, or otherwise acquire directly or indirectly any of the
Company's capital stock (or options, warrants, calls, commitments or rights of
any kind to acquire any shares of capital stock) or that of any of its
subsidiaries, other than redemptions of Preference Stock required by the
Company's articles of incorporation; (ii) issue, sell, pledge, dispose of or
encumber any additional shares of, or
23
<PAGE> 26
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class of the Company or any of its subsidiaries, other than Shares issuable upon
the exercise of the Options, or upon the conversion of the Series B Preference
Stock or Series D Preferred Stock outstanding on the date of the Merger
Agreement; or (iii) split, combine or reclassify the outstanding capital stock
of the Company or any of its subsidiaries.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NYSE LISTING AND
EXCHANGE ACT REGISTRATION.
The purchase of Shares by Purchaser pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and will reduce the number
of holders of Shares, which could adversely affect the liquidity and market
value of the remaining Shares held by the public.
According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of at
least 100 Shares should fall below 1,200, the number of publicly held Shares
(exclusive of holdings of officers, directors and their families and other
concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall
below 600,000 or the aggregate market value of publicly held Shares (exclusive
of NYSE Excluded Holdings) should fall below $5,000,000. If, as a result of the
purchase of Shares pursuant to the Offer, the Shares no longer meet the
requirements of the NYSE for continued listing and the listing of Shares is
discontinued, the market for the Shares could be adversely affected. If the NYSE
were to delist the Shares, it is possible that the Shares would continue to
trade on another securities exchange or in the over-the-counter market and that
price or other quotations would be reported by other sources. The extent of the
public market for such and the availability of such quotations would depend,
however, upon such factors as the number of shareholders and/or the aggregate
market value of such securities remaining at such time, the interest in
maintaining a market in the Shares on the part of securities firms, the possible
termination of registration under the Exchange Act as described below, and other
factors. The Purchaser cannot predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for, or marketability of, the Shares or whether it
would cause future market prices to be greater or lesser than the Offer Price.
The Shares are currently "margin securities," as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares could no longer be used as collateral
for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders of the Shares. The termination of registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), and the requirement of
furnishing a proxy statement in connection with shareholders' meetings pursuant
to Section 14(a), no longer applicable to the Shares. In addition, "affiliates"
of the Company and persons holding "restricted securities" of the Company may be
deprived of the ability to dispose of such securities pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be "margin securities" or be eligible for NYSE reporting.
In addition, if registration of the Shares under the Exchange Act is terminated,
Pennsylvania Law provides that the applicability of Chapter 25 thereof to the
Company (see below) shall terminate immediately upon the termination of the
Company's status as a "registered corporation."
24
<PAGE> 27
Purchaser intends to seek to cause the Company to terminate the
registration of the Shares under the Exchange Act as soon after consummation of
the Offer as the requirements for termination of the registration of the Shares
are met.
14. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time in its sole discretion (subject to the provisions of the Merger Agreement),
Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for,
and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payment for, any tendered Shares, and may terminate the
Offer as to any Shares not then paid for, if (i) the applicable waiting period
under the HSR Act or the Exon-Florio Amendment (as hereinafter defined) has not
expired or terminated, (ii) the Minimum Condition has not been satisfied or
waived, or (iii) at any time on or after September 15, 1998 and before the time
for payment of any such Shares, any of the following events occur or are
determined by Purchaser to have occurred:
(a) there shall be pending or in effect an injunction or other order,
decree, judgment or ruling by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission of
competent jurisdiction or a statute, rule, regulation, executive order or
other action shall have been promulgated, enacted, or taken by a
governmental authority or a governmental, regulatory or administrative
agency or commission of competent jurisdiction which in any case (i)
restrains or prohibits the making or consummation of the Offer or the
consummation of the Merger, (ii) prohibits or restricts the ownership or
operation by Parent (or any of its affiliates or subsidiaries) of any
portion of its or the Company's business or assets which is material in
light of the size and scope of the business of the Company and its
subsidiaries taken as a whole, or compels Parent (or any of its affiliates
or subsidiaries) to dispose of or hold separate any portion of its or the
Company's business or assets which is material to the business of the
Company and its subsidiaries taken as a whole, (iii) imposes material
limitations on the ability of Parent effectively to acquire or to hold or
to exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by Purchaser on all
matters properly presented to the shareholders of the Company, or (iv)
imposes any material limitations on the ability of Parent or any of its
affiliates or subsidiaries effectively to control in any material respect
the business and operations of the Company and its subsidiaries (each of
clauses (i) through (iv) being referred to as a "Prohibited Result"); or
(b) an action or a proceeding shall have been commenced by a
governmental entity under federal or state antitrust laws or any other
applicable law before any court or any governmental or other administrative
or regulatory authority or agency, domestic or foreign, which would
reasonably be expected to have a Prohibited Result; or
(c) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or the over-the-counter market for a period in excess of 24 hours
(excluding suspensions or limitations resulting solely from physical damage
or interference with such exchanges not related to market conditions), (ii)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (iv) any
limitation (whether or not mandatory) by any United States governmental
authority on the extension of credit generally by banks or other financial
institutions, (v) a change in general financial, bank or capital market
conditions which materially and adversely affects the ability of financial
institutions in the United States to extend credit or syndicate loans, or
(vi) in the case of any of the foregoing existing at the time of the
execution of the Merger Agreement, a material acceleration or worsening
thereof; or
(d) the representations and warranties of the Company contained in the
Merger Agreement shall not be true and correct on and as of the Expiration
Date, with the same force and effect as if made on and
25
<PAGE> 28
as of the Expiration Date, in all respects, except for such breaches which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect (as hereinafter defined) on the
Company; or
(e) the Company shall have failed to perform in all material respects
any obligations or to comply with any material agreement or covenant to be
performed or complied with by it under the Merger Agreement, which failure
to perform has had or would reasonably be expected to have a Material
Adverse Effect on the Company; or
(f) the Company shall have failed to obtain any consent from any
third-party required to be obtained by it in order to permit consummation
of the Offer, other than those consents the failure of which to obtain
would not have and would not reasonably be expected to have, a Material
Adverse Effect on the Company; or
(g) the Merger Agreement shall have been terminated by the Company or
Parent in accordance with its terms; or
(h) the Offer shall not have been consummated by December 14, 1998.
"Material Adverse Effect" means, in respect of any party, a material
adverse effect on (i) the business, financial condition or results of operations
of such party and its subsidiaries, taken as a whole, except effects that are
(x) generally applicable in the United States economy and/or the economy in any
other region of the world which do not have a disproportionate effect on such
party and its subsidiaries (as the case may be), or (y) relate to the securities
market in general, or (z) relate to such party's industry in general or (ii) the
ability of such party to consummate the transactions contemplated by the Merger
Agreement without unreasonable delay; provided, however, that (I) the
institution of a lawsuit by a shareholder of Parent or the Company challenging
the Merger Agreement or the transactions contemplated thereby (or any threat to
do so) will not be deemed to be a Material Adverse Effect, and (II) with respect
to the Company, the commencement, public proposal, public disclosure or
communication to the Company of any Takeover Proposal will not be deemed to be a
Material Adverse Effect.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be waived by Parent or Purchaser, in whole or in part at any time and
from time to time in the sole discretion of Parent or Purchaser. The failure by
Parent or Purchaser at any time to exercise any of the foregoing rights will not
be deemed a waiver of any such right and each such right will be deemed an
ongoing right which may be asserted at any time and from time to time.
15. REGULATORY APPROVALS; STATE TAKEOVER LAWS.
General. Except as otherwise disclosed herein, based on a review of
publicly available information filed by the Company with the Commission, neither
Purchaser nor Parent is aware of (i) any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Shares
by Purchaser pursuant to the Offer or the Merger or (ii) any approval or other
action by any governmental, administrative or regulatory agency or authority,
domestic or foreign, that would be required for the acquisition or ownership of
Shares by Purchaser as contemplated herein. Should any such approval or other
action be required, Purchaser currently contemplates that such approval or
action would be sought. While Purchaser does not currently intend to delay the
acceptance for payment of Shares tendered pursuant to the Offer pending the
outcome of any such matter, there can be no assurance that any such approval or
action, if needed, would be obtained or would be obtained without substantial
conditions or that adverse consequences might not result to the business of the
Company, Purchaser or Parent or that certain parts of the businesses of the
Company, Purchaser or Parent might not have to be disposed of in the event that
such approvals were not obtained or any other actions were not taken.
Purchaser's obligation under the Offer to accept for payment and pay for Shares
is subject to certain conditions. See "Section 14 -- Conditions of the Offer."
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission ("FTC"), certain acquisition
transactions may not be consummated unless certain
26
<PAGE> 29
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the FTC and certain waiting period
requirements have been satisfied. The acquisition of Shares by Purchaser
pursuant to the Offer is subject to the HSR Act requirements.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, unless early termination of the waiting period is granted
or LVI receives a request for additional information of documentary material
prior thereto, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing under the HSR Act
by LVI. LVI made its required filing on September 17, 1998. Accordingly, the
waiting period under the HSR Act will expire at 11:59 P.M., New York City time,
on October 2, 1998. Pursuant to the HSR Act, LVI has requested early termination
of the waiting period applicable to the Offer. There can be no assurances,
however, that the 15-day HSR Act waiting period will be terminated before such
period is set to expire.
If the FTC or the Antitrust Division issues a request for additional
information or documentary material pursuant to the HSR Act, the waiting period
under the HSR Act will be extended for an additional period of ten days after
the request is substantially complied with, unless sooner terminated by the FTC
or the Antitrust Division, and no Shares will be acquired until such waiting
period has expired. See "Section 2 -- Acceptance for Payment and Payment for
Shares." Only one extension of such waiting period pursuant to a request for
additional information is authorized by the rules promulgated under the HSR Act,
except by court order. Although the Company is required to file certain
information and documentary material with the Antitrust Division and the FTC in
connection with the Offer, neither the Company's failure to make such filings
nor a request to the Company from the Antitrust Division or the FTC for
additional information or documentary material will extend the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after Purchaser's
purchase of Shares, either the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or seeking divestiture of Shares acquired by Purchaser or divestiture of
substantial assets of Parent, the Company or any of their respective
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. Based upon an examination of publicly
available information relating to the businesses in which Parent and its
subsidiaries and the Company and its subsidiaries are involved, Parent and
Purchaser believe that the Offer will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if a challenge is made, what the result
will be.
Exon-Florio Amendment. The acquisition of Shares pursuant to the Offer by
Purchaser and Parent is also subject to the requirements of Section 721 of Title
VII of the Defense Production Act of 1950, as amended by Section 5021 of the
Omnibus Trade and Competitiveness Act of 1988, and commonly referred to as the
"Exon-Florio Amendment." The Exon-Florio Amendment may apply to any merger,
acquisition or takeover that is by or with foreign persons and that could result
in foreign control (or a change in foreign control to a different foreign
person) of an entity engaged in interstate commerce in the United States.
Pursuant to the Exon-Florio Amendment, Purchaser and Parent will provide notice
of the transaction to the Committee on Foreign Investment in the United States
("CFIUS").
Upon the filing of such notice, CFIUS has a 30-day period in which to
review the notice and consider whether the proposed transaction is subject to
the Exon-Florio Amendment and to determine whether the acquisition will impair
the national security of the United States. During such 30-day period, CFIUS
must decide whether to undertake a formal investigation. If no further
investigation is undertaken, the waiting period will terminate at the end of the
30-day review period. If an investigation is undertaken, CFIUS will have up to
45 days to complete its formal investigation and submit a report to the
President of the United States, who will then have an additional 15 days to take
action or to determine that no action is necessary.
Parent made the notice filing under the Exon-Florio Amendment on September
18, 1998. Accordingly, the waiting period under the Exon-Florio Amendment will
expire at 11:59 p.m., New York City time, on October 19, 1998, unless CFIUS
undertakes a further investigation.
27
<PAGE> 30
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in such states. In
Edgar v. Mite Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions.
The Pennsylvania Takeover Disclosure Law ("PTDL") purports to regulate
certain attempts to acquire a corporation which (1) is organized under the laws
of Pennsylvania or (2) has its principal place of business and substantial
assets located in Pennsylvania. In Crane Co. v. Lam, 509 F. Supp. 782 (E.D. Pa.
1981), the United States District Court for the Eastern District of Pennsylvania
preliminarily enjoined, on grounds arising under the United States Constitution,
enforcement of at least the portion of the PTDL involving the pre-offer waiting
period thereunder. Section 8(a) of the PTDL provides an exemption for any offer
to purchase securities as to which the board of directors of the target company
recommends acceptance to its shareholders, if at the time such recommendation is
first communicated to shareholders the offeror files with the Pennsylvania
Securities Commission ("PSC") a copy of the Schedule 14D-1 and certain other
information and materials, including an undertaking to notify security holders
of the target company that a notice has been filed with the PSC which contains
substantial additional information about the offer and which is available for
inspection at the PSC's principal office during business hours. The Board has
unanimously approved the transactions contemplated by the Merger Agreement and
recommended acceptance of the Offer and the Merger to the Company's
shareholders. While reserving and not waiving its right to challenge the
validity of the PTDL or its applicability to the Offer, Purchaser is making a
Section 8(a) filing with the PSC in order to qualify for the exemption from the
PTDL. Pursuant to Section 10 of the PTDL, Purchaser will submit the appropriate
$100 notice filing fee along with the Section 8(a) filing. Additional
information about the Offer has been filed with the Pennsylvania Securities
Commission pursuant to the Pennsylvania Takeover Disclosure Law and is available
for inspection at the Pennsylvania Securities Commission's office at Eastgate
Office Building, 1010 North 7th Street, Harrisburg, PA 17102-1410, during
business hours.
Chapter 25 of Pennsylvania Law contains other provisions relating generally
to takeovers and acquisitions of certain publicly owned Pennsylvania
corporations such as the Company that have a class or series of shares entitled
to vote generally in the election of directors registered under the Exchange Act
(a "registered corporation"). The following discussion is a general and highly
abbreviated summary of certain features of such chapter, is not intended to be
complete or to completely address potentially applicable exceptions or
exemptions, and is qualified in its entirety by reference to the full text of
Chapter 25 of Pennsylvania Law.
In addition to other provisions not applicable to the Offer or the Merger,
Subchapter 25D of Pennsylvania Law includes provisions requiring approval of a
merger of a registered corporation with an "interested shareholder" in which the
"interested shareholder" is treated differently from other shareholders, by the
affirmative vote of the shareholders entitled to cast at least a majority of the
votes that all shareholders other than the interested shareholder are entitled
to cast with respect to the transaction without counting the votes of the
interested shareholders. This disinterested shareholder approval requirement is
not applicable to a transaction (i) approved by a majority of disinterested
directors, (ii) in which the consideration to be received by shareholders is not
less than the highest amount paid by the interested shareholder in acquiring his
shares, or (iii) effected without submitting the Merger to a vote of
shareholders as permitted in Section 1924(b)(1)(ii) of the Pennsylvania Law.
Purchaser currently believes that the disinterested shareholder approval
requirement of Subchapter 25D will not be applicable to the contemplated Merger
because of prior disinterested Board approval.
Subchapter 25E of Pennsylvania Law, which addresses "control transactions,"
requires under certain circumstances any person who acquires at least 20% of the
voting power of a registered corporation to offer to
28
<PAGE> 31
purchase up to the balance of the voting shares of the corporation at the price
determined under the statute, which may not be less than the highest price per
share paid by the controlling person or group at any time during the 90-day
period ending on and including the date of the control transaction, plus an
increment representing any value, including without limitation, any proportion
of value payable for acquisition of control of the corporation, that may not be
reflected in such price. A "control transaction" will occur if Purchaser
acquires voting power over 20% or more of the Shares of the Company by
purchasing Shares pursuant to the Offer. See "Section 11 -- Purpose of the
Offer; Plans for the Company; Merger Agreement; and Other Agreements."
Subchapter 25F of Pennsylvania Law prohibits under certain circumstances
certain "business combinations," including mergers and sales or pledges of
significant assets, of a registered corporation with an "interested shareholder"
for a period of five years. Subchapter 25F exempts business combinations
approved by the board of directors prior to a shareholder becoming an interested
shareholder and transactions with interested shareholders who beneficially owned
shares with at least 15% of the total voting power of a corporation on March 23,
1988 and remain so. The Company has represented to the Purchaser that Subchapter
25F is not applicable to the contemplated Merger.
Subchapter 25G of Pennsylvania Law, relating to "control-share
acquisitions," prevents under certain circumstances the owner of a control-share
block of shares of a registered corporation from voting such shares unless a
majority of the "disinterested" shares approve such voting rights. Failure to
obtain such approval may result in a forced sale by the control-share owner of
the control-share block to the corporation at a possible loss. The purchase by
Purchaser of Shares may be deemed to constitute a control-share acquisition,
with the result that Purchaser would not have voting rights with respect to such
control-shares unless the voting rights are restored by a disinterested
shareholder vote. The Company has represented to the Purchaser that Subchapter
25G is not applicable to the transactions contemplated by the Merger Agreement.
Subchapter 25H of Pennsylvania Law, relating to disgorgement by certain
controlling shareholders of a registered corporation, provides that under
certain circumstances any profit realized by a controlling person from the
disposition of shares of the corporation to any person (including to the
corporation under Subchapter 25G or otherwise) will be recoverable by the
corporation. The Company has represented to the Purchaser that Subchapter 25H is
not applicable to the transactions contemplated by the Merger Agreement.
Subchapter 25I of Pennsylvania Law entitles "eligible employees" of a
registered corporation to a lump sum payment of severance compensation under
certain circumstances if the employee is terminated, other than for willful
misconduct, within 90 days before voting rights lost as a result of a
control-share acquisition are restored by a vote of disinterested shareholders.
Subchapter 25J of Pennsylvania Law provides protection against termination or
impairment under certain circumstances of "covered labor contracts" of a
registered corporation as a result of a "business combination" transaction if
the business operation to which the covered labor contract relates was owned by
the registered corporation at the time voting rights are restored by shareholder
vote after a control-share acquisition. The Company has represented to Purchaser
that Subchapters 25I and 25J are not applicable to the transactions contemplated
by the Merger Agreement.
Section 2504 of Pennsylvania Law provides that the applicability of Chapter
25 of Pennsylvania Law to a registered corporation having a class or series of
shares entitled to vote generally in the election of directors registered under
the Exchange Act or otherwise satisfying the definition of a registered
corporation under Section 2502(1) of Pennsylvania Law shall terminate
immediately upon the termination of the status of the corporation as a
registered corporation. Purchaser intends to seek to cause the Company to
terminate the registration of the Shares under the Exchange Act as soon after
consummation of the Offer as the requirements for termination of the
registration of the Shares are met.
Except for the filing pursuant to Section 8(a) of the PTDL described above,
neither Purchaser nor Parent has currently complied with any state takeover
statute or regulation; however Purchaser intends to comply with Subchapter 25E
to the extent it is applicable upon consummation of the Offer. Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer or the Merger and nothing in this Offer to
Purchase or any action taken in connection with the Offer or the Merger is
intended as a waiver of such right. If it is asserted that any state takeover
statute is applicable to the Offer or
29
<PAGE> 32
the Merger and an appropriate court does not determine that it is inapplicable
or invalid as applied to the Offer or the Merger, Purchaser might be required to
file certain information with, or to receive approvals from, the relevant state
authorities, and Purchaser might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer, or be delayed in consummating the Offer
or the Merger. In such case, Purchaser may not be obliged to accept for payment
or pay for any Shares tendered pursuant to the Offer.
16. FEES AND EXPENSES.
Except as set forth below, neither Parent nor Purchaser will pay any fees
or commissions to any broker, dealer or other person for soliciting tenders of
Shares pursuant to the Offer.
ING Barings is acting as Dealer Manager in connection with the Offer and
has provided certain financial advisory services to Parent and Purchaser in
connection with the Offer and the Merger. As compensation for ING Barings'
services as financial advisor, Parent or its affiliate will pay ING Barings a
transaction fee upon the consummation of the Offer. In addition, Parent has
agreed to reimburse ING Barings for all out-of-pocket expenses, including
reasonable attorneys' fees, incurred by ING Barings in connection with its role
as financial advisor and Dealer Manager, and Parent has agreed to indemnify ING
Barings and certain related persons against certain losses, claims, damages,
liabilities, costs and expenses in connection with its role as financial advisor
and Dealer Manager. In addition, Parent has agreed to pay directly, or reimburse
ING Barings for, (i) all expenses incurred by ING Barings relating to the
preparation, printing, filing, mailing and publishing of all Offer material,
(ii) all fees and expenses of the Depositary and the Information Agent referred
to in this Offer to Purchase, (iii) all advertising charges in connection with
the Offer, (iv) all fees, if any, payable to dealers (including ING Barings),
banks and trust companies as reimbursement for their customary mailing and
handling expenses incurred in forwarding the Offer material to their customers
and (v) all other fees and expenses incurred by ING Barings in connection with
the Offer. All payments to be made by Parent pursuant to the Dealer Manager
Agreement will be made promptly against delivery to Parent of statements
therefor. Parent will be liable for the foregoing payments whether or not the
Offer is made or the Purchaser purchases any Shares pursuant to the Offer.
Purchaser has retained Morrow & Co., Inc. to act as the Information Agent
in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, facsimile, telegraph and personal interviews and may
request brokers, dealers and other nominee shareholders to forward materials
relating to the Offer to beneficial owners of Shares. The Information Agent will
receive reasonable and customary compensation for its services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses in connection therewith, including
certain liabilities under the Federal securities laws.
In addition, Continental Stock Transfer & Trust Company has been retained
as the Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the Federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by Purchaser for customary mailing
and handling expenses incurred by them in forwarding offering material to their
customers.
17. MISCELLANEOUS.
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of the Shares pursuant thereto, Purchaser
will make a good faith effort to comply with such state statute. If, after such
good faith effort, Purchaser cannot comply with any such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer will be deemed to be made on behalf of Purchaser by one or
more registered brokers or dealers which are licensed under the laws of such
jurisdiction.
30
<PAGE> 33
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Parent and Purchaser have filed with the Commission the Schedule 14D-1,
together with Exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Schedule 14D-1
and any amendments thereto, including Exhibits, may be inspected at, and copies
may be obtained from, the same places and in the same manner as set forth in
"Section 7 -- Certain Information Concerning the Company" (except that they will
not be available at the regional offices of the Commission).
DLC Acquisition Corp.
September 21, 1998
31
<PAGE> 34
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT, PURCHASER AND LVI
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below is the name,
current business address, citizenship and the present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each director and executive officer of Parent. Unless
otherwise indicated, each person identified below is employed by Parent or its
affiliates, and has been employed by Parent or its affiliates, in positions of
increasing responsibility, for the past five years. The principal address of
Parent and, unless otherwise indicated below, the current business address for
each individual listed below is 390 E. Joe Orr Road, Chicago Heights, Illinois
60411. Except as otherwise noted below, each such person is a citizen of the
United States. Directors are identified by an asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
Yves R. Collinet*............................ Vice President of Parent and Purchaser; Vice
Parc Scientifique Athena President -- Technical of The Carmeuse Group
Boulevard de Lauzelle 65
1348 Louvain-la-Neuve Nord
Belgium
citizen of Belgium
Jacques A. Germay*........................... Chairman of Parent and Purchaser; Chief Executive
47 Rue de L'Abbaye Officer of Alpha, S.A.
4432 Alleur, Belgium
citizen of Belgium
Yves Willems*................................ Vice President of Parent and Purchaser; Managing
Parc Scientifique Athena Director of Carmeuse Coordination Center, S.A.; Chief
Boulevard de Lauzelle 65 Financial Officer of The Carmeuse Group; Director of
1348 Louvain-la-Neuve Nord Coil, S.A.
Belgium
citizen of Belgium
Alfredo Riefkohl Henrichsen*................. Chief Executive Officer of Grupo Calidra, S.A. de
Vasco de Quiroga No. 1800 C.V.
01210 Mexico, D.F.
citizen of Mexico
Richard C. Kraus............................. President and Chief Executive Officer of Parent and
Purchaser; President and Chief Executive Officer of
Echo Bay Mines from 1981 to April, 1997; Director of
St. Mary Land and Exploration Company
William S. Brown III......................... Director of Strategic Development of Parent; Vice
President of Carmeuse North American Group and
Chairman of Marblehead Lime Company since July, 1998;
President and Chief Executive Officer of Carmeuse
North American Group from November, 1994 to July,
1998; President and Chief Executive Officer of Brown
Group from July, 1991 to November, 1994
</TABLE>
I-1
<PAGE> 35
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
Scott A. Deininger........................... Executive Vice President of Parent; Treasurer of
Purchaser; Chief Financial Officer of Carmeuse North
American Group since April, 1998; Group Controller of
the Carmeuse North American Group from March, 1997 to
April, 1998; Region Controller of Tarmac Minerals,
Inc. from March, 1996 to March, 1997; Corporate
Controller of Wimpey Minerals USA, Inc. from January,
1993 to March, 1996
Suzanne E. Ritzler........................... Executive Vice President and Secretary of Parent;
Secretary of Purchaser; Executive Vice President --
Legal and General Counsel of Carmeuse North American
Group since March, 1997; attorney with law firm of
Seyfarth, Shaw, Fairweather & Geraldson from March,
1992 to March, 1997
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. Set forth below is the
name, current business address, citizenship and the present principal occupation
or employment and material occupations, positions, offices or employments for
the past five years of each director and executive officer of Purchaser. The
principal address of Purchaser and the current business address for each
individual listed below, unless otherwise indicated, is 390 E. Joe Orr Road,
Chicago Heights, Illinois 60411. Except as otherwise noted below, each such
person is a citizen of the United States. Directors are identified by an
asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
Jacques A. Germay*........................... Chairman of Parent and Purchaser; Chief Executive
47 Rue de L'Abbaye Officer of Alpha, S.A.
4432 Alleur, Belgium
citizen of Belgium
Yves Willems*................................ Vice President of Parent and Purchaser; Managing
Parc Scientifique Athena Director of Carmeuse Coordination Center, S.A.; Chief
Boulevard de Lauzelle 65 Financial Officer of The Carmeuse Group; Director of
1348 Louvain-la-Neuve Nord Coil, S.A.
Belgium
citizen of Belgium
Richard C. Kraus*............................ President and Chief Executive Officer of Parent and
Purchaser; President and Chief Executive Officer of
Echo Bay Mines from 1981 to April, 1997; Director of
St. Mary Land and Exploration Company
William S. Brown III*........................ Director of Strategic Development of Parent; Vice
President of Carmeuse North America Group and
Chairman of Marblehead Lime Company since July, 1998;
President and Chief Executive Officer of Carmeuse
North American Group from November, 1994 to July,
1998; President and Chief Executive Officer of Brown
Group from July, 1991 to November, 1994
Scott A. Deininger........................... Executive Vice President of Parent; Treasurer of
Purchaser; Chief Financial Officer of Carmeuse North
American Group since April, 1998; Group Controller of
the Carmeuse North American Group from March, 1997 to
April, 1998; Region Controller of Tarmac Minerals,
Inc. from March, 1996 to March, 1997; Corporate
Controller of Wimpey Minerals USA, Inc. from January,
1993 to March, 1996
</TABLE>
I-2
<PAGE> 36
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
Suzanne E. Ritzler........................... Executive Vice President and Secretary of Parent;
Secretary of Purchaser; Executive Vice President --
Legal and General Counsel of Carmeuse North American
Group since March, 1997; attorney with law firm of
Seyfarth, Shaw, Fairweather & Geraldson from March,
1992 to March, 1997
</TABLE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF LVI. Set forth below is the name,
current business address, citizenship and the present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each director and executive officer of LVI. Unless otherwise
indicated, each person identified below is employed by LVI or its subsidiaries,
and has held positions of increasing responsibility at LVI or its subsidiaries,
for the past five years. The principal address of LVI and, unless otherwise
indicated below, the current business address for each individual listed below
is Nijverheids-straat 34, P.O. Box 648, 2800 AP Gouda, The Netherlands.
Directors are identified by an asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
Dominique Collinet*.................. Chairman of LVI and The Carmeuse Group; Director of
Parc Scientifique Athena Compagnie Generale Mosane, S.A., Spadel, S.A. and Banque
Boulevard de Lauzelle 65 Brussels Lambert, S.A.
1348 Louvain-la-Neuve Nord
Belgium
citizen of Belgium
J.J. de Niet......................... Managing Director of LVI and Carmeuse NA
Nijverheidsstraat 34
P. O. Box 648
2800 AP Gouda
The Netherlands
citizen of The Netherlands
</TABLE>
I-3
<PAGE> 37
ANNEX A
PENNSYLVANIA BUSINESS CORPORATION LAW OF 1988
CHAPTER 25
SUBCHAPTER E. CONTROL TRANSACTIONS
2541 Application and Effect of Subchapter. -- (a) General rule. -- Except
as otherwise provided in this section, this subchapter shall apply to a
registered corporation unless: (1) the registered corporation is one described
in section 2502(1)(ii) or (2) (relating to registered corporation status): (2)
the bylaws, by amendment adopted either: (i) by March 23, 1984; or (ii) on or
after March 23, 1988, and on or before June 21, 1988; and, in either event, not
subsequently rescinded by an article amendment, explicitly provide that this
subchapter shall not be applicable to the corporation in the case of a
corporation which on June 21, 1988, did not have outstanding one or more classes
or series of preference shares entitled, upon the occurrence of a default in the
payment of dividends or another similar contingency, to elect a majority of the
members of the board of directors (a bylaw adopted on or before June 21, 1988,
by a corporation excluded from the scope of this paragraph by the restriction of
this paragraph relating to certain outstanding preference shares shall be
ineffective unless ratified under paragraph (3)); (3) the bylaws of which
explicitly provide that this subchapter shall not be applicable to the
corporation by amendment ratified by the board of directors on or after December
19, 1990, and on or before March 19, 1991, in the case of a corporation: (i)
which on June 21, 1988, had outstanding one or more classes or series of
preference shares entitled, upon the occurrence of a default in the payment of
dividends or another similar contingency, to elect a majority of the members of
the board of directors; and (ii) the bylaws of which on that date contained a
provision described in paragraph (2); or (4) the articles explicitly provide
that this subchapter shall not be applicable to the corporation by a provision
included in the original articles, by an article amendment adopted prior to the
date of the control transaction and prior to or on March 23, 1988, pursuant to
the procedures then applicable to the corporation, or by an article amendment
adopted prior to the date of the control transaction and subsequent to March 23,
1988, pursuant to both: (i) the procedures then applicable to the corporation;
and (ii) unless such proposed amendment has been approved by the board of
directors of the corporation, in which event this subparagraph shall not be
applicable, the affirmative vote of the shareholders entitled to cast at least
80% of the votes which all shareholders are entitled to cast thereon. A
reference in the articles or bylaws to former section 910 (relating to right of
shareholders to receive payment for shares following a control transaction) of
the act of May 5, 1933 (P.L. 364, No. 106), known as the Business Corporation
Law of 1933, shall be a reference to this subchapter for the purposes of this
section. See section 101(c) (relating to references to prior statutes).
(b) Inadvertent transactions. -- This subchapter shall not apply to any
person or group that inadvertently becomes a controlling person or group if that
controlling person or group, as soon as practicable, divests itself of a
sufficient amount of its voting shares so that it is no longer a controlling
person or group.
(c) Certain subsidiaries. -- This subchapter shall not apply to any
corporation that on December 23, 1983, was a subsidiary of any other
corporation.
2542 Definitions. -- The following words and phrases when used in this
subchapter shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Control transaction." The acquisition by a person or group of the status
of a controlling person or group.
"Controlling person or group." A controlling person or group as defined in
section 2543 (relating to controlling person or group).
"Fair value." A value not less than the highest price paid per share by the
controlling person or group at any time during the 90-day period ending on and
including the date of the control transaction plus an increment representing any
value, including, without limitation, any proportion of any value payable for
acquisition of control of the corporation, that may not be reflected in such
price.
"Partial payment amount." The amount per share specified in section 2545
(c) (2) (relating to contents of notice).
A-1
<PAGE> 38
"Subsidiary." Any corporation as to which any other corporation has or has
the right to acquire, directly or indirectly, through the exercise of all
warrants, options and rights and the conversion of all convertible securities,
whether issued or granted by the subsidiary or otherwise, voting power over
voting shares of the subsidiary that would entitle the holders thereof to cast
in excess of 50% of the votes that all shareholders would be entitled to cast in
the election of directors of such subsidiary, except that a subsidiary will not
be deemed to cease being a subsidiary as long as such corporation remains a
controlling person or group within the meaning of this subchapter.
"Voting shares." The term shall have the meaning specified in section 2552
(relating to definitions).
2543 Controlling Person or Group. -- (a) General rule. -- For the purpose
of this subchapter, a "controlling person or group" means a person who has, or a
group of persons acting in concert that has, voting power over voting shares of
the registered corporation that would entitle the holders thereof to cast at
least 20% of the votes that all shareholders would be entitled to cast in an
election of directors of the corporation.
(b) Exceptions generally. -- Notwithstanding subsection (a): (1) A person
or group which would otherwise be a controlling person or group within the
meaning of this section shall not be deemed a controlling person or group
unless, subsequent to the later of March 23, 1988, or the date this subchapter
becomes applicable to a corporation by bylaw or article amendment or otherwise,
that person or group increases the percentage of outstanding voting shares of
the corporation over which it has voting power to in excess of the percentage of
outstanding voting shares of the corporation over which that person or group had
voting power on such later date, and to at least the amount specified in
subsection (a), as the result of forming or enlarging a group or acquiring, by
purchase, voting power over voting shares of the corporation. (2) No person or
group shall be deemed to be a controlling person or group at any particular time
if voting power over any of the following voting shares is required to be
counted at such time in order to meet the 20% minimum: (i) Shares which have
been held continuously by a natural person since January 1, 1983, and which are
held by such natural person at such time. (ii) Shares which are held at such
time by any natural person or trust, estate, foundation or other similar entity
to the extent the shares were acquired solely by gift, inheritance, bequest,
devise or other testamentary distribution or series of these transactions,
directly or indirectly, from a natural person who had acquired the shares prior
to January 1, 1983. (iii) Shares which were acquired pursuant to a stock split,
stock dividend, reclassification or similar recapitalization with respect to
shares described under this paragraph that have been held continuously since
their issuance by the corporation by the natural person or entity that acquired
them from the corporation or that were acquired, directly or indirectly, from
such natural person or entity, solely pursuant to a transaction or series of
transactions described in subparagraph (ii), and that are held at such time by a
natural person or entity described in subparagraph (ii). (iv) Control shares as
defined in section 2562 (relating to definitions) which have not yet been
accorded voting rights pursuant to section 2564(a) (relating to voting rights of
shares acquired in a control-share acquisition). (v) Shares, the voting rights
of which are attributable to a person under subsection (d) if: (A) the person
acquired the option or conversion right directly from or made the contract,
arrangement or understanding or has the relationship directly with the
corporation; and (B) the person does not at the particular time own or otherwise
effectively possess the voting rights of the shares. (vi) Shares acquired
directly from the corporation or an affiliate or associate, as defined in
section 2552 (relating to definitions), of the corporation by a person engaged
in business as an underwriter of securities who acquires the shares through his
participation in good faith in a firm commitment underwriting registered under
the Securities Act of 1933. (3) In determining whether a person or group is or
would be a controlling person or group at any particular time, there shall be
disregarded voting power arising from a contingent right of the holders of one
or more classes or series of preference shares to elect one or more members of
the board of directors upon or during the continuation of a default in the
payment of dividends on such shares or another similar contingency.
(c) Certain record holders. -- A person shall not be a controlling person
under subsection (a) if the person holds voting power, in good faith and not for
the purpose of circumventing this subchapter, as an agent, bank, broker, nominee
or trustee for one or more beneficial owners who do not individually or, if they
are a group acting in concert, as a group have the voting power specified in
subsection (a), or who are not deemed a controlling person or group under
subsection (b).
A-2
<PAGE> 39
(d) Existence of voting power. -- For the purposes of this subchapter, a
person has voting power over a voting share if the person has or shares,
directly or indirectly, through any option, contract, arrangement,
understanding, conversion right or relationship, or by acting jointly or in
concert or otherwise, the power to vote, or to direct the voting of, the voting
share.
2544 Right of Shareholders to Receive Payment for Shares. -- Any holder of
voting shares of a registered corporation that becomes the subject of a control
transaction who shall object to the transaction shall be entitled to the rights
and remedies provided in this subchapter.
2545 Notice to Shareholders. -- (a) General rule. -- Prompt notice that a
control transaction has occurred shall be given by the controlling person or
group to: (1) Each shareholder of record of the registered corporation holding
voting shares. (2) To the court, accompanied by a petition to the court praying
that the fair value of the voting shares of the corporation be determined
pursuant to section 2547 (relating to valuation procedures) if the court should
receive pursuant to section 2547 certificates from shareholders of the
corporation or an equivalent request for transfer of uncertificated securities.
(b) Obligations of the corporation. -- If the controlling person or group
so requests, the corporation shall, at the option of the corporation and at the
expense of the person or group, either furnish a list of all such shareholders
to the person or group or mail the notice to all such shareholders.
(c) Contents of notice. -- The notice shall state that: (1) All
shareholders are entitled to demand that they be paid the fair value of their
shares. (2) The minimum value the shareholder can receive under this subchapter
is the highest price paid per share by the controlling person or group within
the 90-day period ending on and including the date of the control transaction,
and stating that value. (3) If the shareholder believes the fair value of his
shares is higher, that this subchapter provides an appraisal procedure for
determining the fair value of such shares, specifying the name of the court and
its address and the caption of the petition referenced in subsection (a) (2),
and stating that the information is provided for the possible use by the
shareholder in electing to proceed with a court-appointed appraiser under
section 2547. There shall be included in, or enclosed with, the notice a copy of
this subchapter.
(d) Optional procedure. -- The controlling person or group may, at its
option, supply with the notice referenced in subsection (c) a form for the
shareholder to demand payment of the partial payment amount directly from the
controlling person or group without utilizing the court-appointed appraiser
procedure of section 2547, requiring the shareholder to state the number and
class or series, if any, of the shares owned by him, and stating where the
payment demand must be sent and the procedures to be followed.
2546 Shareholder Demand for Fair Value. -- (a) General rule. -- after the
occurrence of the control transaction, any holder of voting shares of the
registered corporation may, prior to or within a reasonable time after the
notice required by section 2545 (relating to notice to shareholders) is given,
which time period may be specified in the notice, make written demand on the
controlling person or group for payment of the amount provided in subsection (c)
with respect to the voting shares of the corporation held by the shareholder,
and the controlling person or group shall be required to pay that amount to the
shareholder pursuant to the procedures specified in section 2547 (relating to
valuation procedures).
(b) Contents of demand. -- The demand of the shareholder shall state the
number and class or series, if any, of the shares owned by him with respect to
which the demand is made.
(c) Measure of value. -- A shareholder making written demand under this
section shall be entitled to receive cash for each of his shares in an amount
equal to the fair value of each voting share as of the date on which the control
transaction occurs, taking into account all relevant factors, including an
increment representing a proportion of any value payable for acquisition of
control of the corporation.
(d) Purchases independent of subchapter. -- The provisions of this
subchapter shall not preclude a controlling person or group subject to this
subchapter from offering, whether in the notice required by section 2545 or
otherwise, to purchase voting shares of the corporation at a price other than
that provided in subsection (c), and the provisions of this subchapter shall not
preclude any shareholder from agreeing to sell his voting shares at that or any
other price to any person.
A-3
<PAGE> 40
2547 Valuation Procedures. -- (a) General rule. -- If, within 45 days (or
such other time period, if any, as required by applicable law) after the date of
the notice required by section 2545 (relating to notice to shareholders), or, if
such notice was not provided prior to the date of the written demand by the
shareholder under section 2546 (relating to shareholder demand for fair value),
then within 45 days (or such other time period, if any, required by applicable
law) of the date of such written demand, the controlling person or group and the
shareholder are unable to agree on the fair value of the shares or on a binding
procedure to determine the fair value of the shares, then each shareholder who
is unable to agree on both the fair value and on such a procedure with the
controlling person or group and who so desires to obtain the rights and remedies
provided in this subchapter shall, no later than 30 days after the expiration of
the applicable 45-day or other period, surrender to the court certificates
representing any of the shares that are certificated shares, duly endorsed for
transfer to the controlling person or group, or cause any uncertificated shares
to be transferred to the court as escrow agent under subsection (c) with a
notice stating that the certificates or uncertificated shares are being
surrendered or transferred, as the case may be, in connection with the petition
referenced in section 2545 or, if no petition has theretofore been filed, the
shareholder may file a petition within the 30-day period in the court praying
that the fair value (as defined in this subchapter) of the shares be determined.
(b) Effect of failure to give notice and surrender certificates. -- Any
shareholder who does not so give notice and surrender any certificates or cause
uncertificated shares to be transferred within such time period shall have no
further right to receive, with respect to shares the certificates of which were
not so surrendered or the uncertificated shares which were not so transferred
under this section, payment under this subchapter from the controlling person or
group with respect to the control transaction giving rise to the rights of the
shareholder under this subchapter.
(c) Escrow and notice. -- The court shall hold the certificates surrendered
and the uncertificated shares transferred to it in escrow for, and shall
promptly, following the expiration of the time period during which the
certificates may be surrendered and the uncertificated shares transferred,
provide a notice to the controlling person or group of the number of shares so
surrendered or transferred.
(d) Partial payment for shares. -- The controlling person or group shall
then make a partial payment for the shares so surrendered or transferred to the
court, within ten business days of receipt of the notice from the court, at a
per-share price equal to the partial payment amount. The court shall then make
payment as soon as practicable, but in any event within ten business days, to
the shareholders who so surrender or transfer their shares to the court of the
appropriate per-share amount received from the controlling person or group.
(e) Appointment of appraiser. -- Upon receipt of any share certificate
surrendered or uncertificated share transferred under this section, the court
shall, as soon as practicable but in any event within 30 days, appoint an
appraiser with experience in appraising share values of companies of like nature
to the registered corporation to determine the fair value of the shares.
(f) Appraisal procedure. -- The appraiser so appointed by the court shall,
as soon as reasonably practicable, determine the fair value of the shares
subject to its appraisal and the appropriate market rate of interest on the
amount then owed by the controlling person or group to the holders of the
shares. The determination of any appraiser so appointed by the court shall be
final and binding on both the controlling person or group and all shareholders
who so surrendered their share certificates or transferred their shares to the
court, except that the determination of the appraiser shall be subject to review
to the extent and within the time provided or prescribed by law in the case of
other appointed judicial officers. See 42 Pa.C.S. Section 5105(a)(3) (relating
to right to appellate review) and 5571(b) (relating to appeals generally).
(g) Supplemental payment. -- Any amount owed, together with interest, as
determined pursuant to the appraisal procedures of this section shall be payable
by the controlling person or group after it is so determined and upon and
concurrently with the delivery or transfer to the controlling person or group by
the court (which shall make delivery of the certificate or certificates
surrendered or the uncertificated shares transferred to it to the controlling
person or group as soon as practicable but in any event within ten business days
after the final determination of the amount owed) of the certificate or
certificates representing shares surrendered or the uncertificated shares
transferred to the court, and the court shall then make payment, as soon as
practicable but in any event within ten business days after receipt of payment
from the controlling person or group, to the
A-4
<PAGE> 41
shareholders who so surrendered or transferred their shares to the court of the
appropriate per-share amount received from the controlling person or group.
(h) Voting and dividend rights during appraisal proceedings. --
Shareholders who surrender their shares to the court pursuant to this section
shall retain the right to vote their shares and receive dividends or other
distributions thereon until the court receives payment in full for each of the
shares so surrendered or transferred of the partial payment amount (and,
thereafter, the controlling person or group shall be entitled to vote such
shares and receive dividends or other distributions thereon). The fair value (as
determined by the appraiser) of any dividends or other distributions so received
by the shareholders shall be subtracted from any amount owing to such
shareholders under this section.
(i) Powers of the court. -- The court may appoint such agents, including
the transfer agent of the corporation, or any other institution, to hold the
share certificates so surrendered and the shares surrendered or transferred
under this section, to effect any necessary change in record ownership of the
shares after the payment by the controlling person or group to the court of the
amount specified in subsection (h), to receive and disburse dividends or other
distributions, to provide notices to shareholders and to take such other actions
as the court determines are appropriate to effect the purposes of this
subchapter.
(j) Costs and expenses. -- The costs and expenses of any appraiser or other
agents appointed by the court shall be assessed against the controlling person
or group. The costs and expenses of any other procedure to determine fair value
shall be paid as agreed to by the parties agreeing to the procedure.
(k) Jurisdiction exclusive. -- The jurisdiction of the court under this
subchapter is plenary and exclusive and the controlling person or group and all
shareholders who so surrendered or transferred their shares to the court shall
be made a party to the proceeding as in an action against their shares.
(l) Duty of corporation. -- The corporation shall comply with requests for
information, which may be submitted pursuant to procedures maintaining the
confidentiality of the information, made by the court or the appraiser selected
by the court. If any of the shares of the corporation are not represented by
certificates, the transfer, escrow or retransfer of those shares contemplated by
this section shall be registered by the corporation, which shall give the
written notice required by section 1528(f) (relating to uncertificated shares)
to the transferring shareholder, the court and the controlling shareholder or
group, as appropriate in the circumstances.
(m) Payment under optional procedure. -- Any amount agreed upon between the
parties or determined pursuant to the procedure agreed upon between the parties
shall be payable by the controlling person or group after it is agreed upon or
determined and upon and concurrently with the delivery of any certificate or
certificates representing such shares or the transfer of any uncertificated
shares to the controlling person or group by the shareholder.
(n) Title to shares. -- Upon full payment by the controlling person or
group of the amount owed to the shareholder or to the court, as appropriate, the
shareholder shall cease to have any interest in the shares.
2548 Coordination with Control Transaction. -- (a) General rule. -- A
person or group that proposes to engage in a control transaction may comply with
the requirements of this subchapter in connection with the control transaction,
and the effectiveness of the rights afforded in this subchapter to shareholders
may be conditioned upon the consummation of the control transaction.
(b) Notice. -- The person or group shall give prompt written notice of the
satisfaction of any such condition to each shareholder who has made demand as
provided in this subchapter.
A-5
<PAGE> 42
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the Shares
and any other required documents should be sent by each shareholder of the
Company or his broker, dealer, commercial bank, trust company or other nominee
to the Depositary as follows:
The Depositary for the Offer is:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
2 Broadway
19th Floor
New York, New York 10004
Facsimile (212) 509-5150
Questions or to confirm fax (212) 509-4000, extension 535
(Reorganization Department)
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery or
other tender offer materials may be directed to the Dealer Manager or the
Information Agent at their respective telephone numbers and addresses listed
below. You may also contact your broker, dealer, commercial bank or trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue
Fifth Floor
New York, New York 10022
Banks & Brokers Call Toll-Free (800) 662-5200
All Others Call Toll-Free (800) 566-9061
The Dealer Manager for the Offer is:
ING BARING FURMAN SELZ LLC
230 Park Avenue
New York, New York 10169
Call Collect (212) 309-6469
A-6
<PAGE> 1
DRAVO CORPORATION
11 Stanwix Street
Pittsburgh, PA 15222
412-995-5500 - FAX: 412-995-5594
April 29, 1998
Carmeuse Lime, Inc.
390 East Joe Orr Road
Chicago Heights, IL 60411
Attention: W.S. Brown III
President
Gentlemen:
In connection with Carmeuse Lime, Inc.'s consideration of a possible
business transaction, Dravo is prepared to make available to Carmeuse Lime, Inc.
certain information concerning its business, financial condition, operations,
assets and liabilities. As a condition to such information being furnished by
Dravo, Carmeuse Lime, Inc. and its directors, officers, employees, agents or
advisors (including, without limitation, attorneys, accountants, consultants,
bankers and financial advisors) (collectively, "Representatives") agree to treat
any such information (whether prepared by Dravo, its advisors or otherwise and
irrespective of the form of communication) which has been or will be furnished
to Carmeuse Lime, Inc. or to its Representatives (herein collectively referred
to as the "Evaluation Material") in accordance with the provisions of this
letter agreement, and to take or abstain from taking certain other actions
hereinafter set forth.
The term "Evaluation Material" shall be deemed to include all notes,
analyses, compilations, studies, interpretations or other documents prepared by
Carmeuse Lime, Inc. or its Representatives which contain, reflect or are based
upon, in whole or in part, the information furnished pursuant hereto. The term
"Evaluation Material" does not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by
Carmeuse Lime, Inc. or its Representatives, (ii) was within the possession of
Carmeuse Lime, Inc. prior to its being furnished pursuant hereto, provided that
the source of such information was not known by Carmeuse Lime, Inc. to be bound
by a confidentiality agreement with, or other contractual, legal or fiduciary
obligation of confidentiality to Dravo or any other party with respect to such
information or (iii) becomes available to Carmeuse Lime, Inc. on a
non-confidential basis from a source other than Dravo or any of its
Representatives, provided that such source is not bound by a confidentiality
agreement with, or other contractual, legal or fiduciary obligation of
confidentiality to, Dravo or any other party with respect to such information.
Carmeuse Lime, Inc. and its Representatives shall use the Evaluation
Material solely for the purpose of evaluating a possible transaction between the
companies, the Evaluation Material will be kept confidential and neither
Carmeuse Lime, Inc. nor its Representatives will disclose any of the Evaluation
Material in any manner whatsoever; provided, however, that (i) Carmeuse Lime,
Inc. may make any disclosure of such Evaluation Material to which Dravo gives
its prior written consent and (ii) Evaluation Material may be disclosed only to
such of Carmeuse Lime, Inc.'s Representatives who need to know such information
for the sole purpose of evaluating a possible transaction between the companies,
who agree to keep such information confidential. In any event, Carmeuse Lime,
Inc. shall be responsible for any breach of this letter agreement by any of its
Representatives and agrees, at its sole expense, to take all reasonable measures
(including but not limited to court proceedings) to restrain its Representatives
from prohibited or unauthorized disclosure or use of the Evaluation Material.
Carmeuse Lime, Inc. agrees that neither it nor any of its Representatives
will use any Evaluation Material in any manner that is detrimental to Dravo,
including without limitation, by using any Evaluation Material in connection
with the solicitation of any of the customers of Dravo, or otherwise for the
purpose of obtaining a competitive advantage. In addition, Carmeuse Lime, Inc.
agrees that, without the prior written
<PAGE> 2
consent of Dravo, neither it nor its Representatives will disclose to any other
person the fact that the Evaluation Material has been made available, that
discussions or negotiations are taking place concerning a possible transaction
involving the companies or any of the terms, conditions or other facts with
respect thereto (including the status thereof), unless in the written opinion of
counsel to a party that such disclosure is required by law and then only with as
much prior written notice to Dravo as is practical under the circumstances.
Without limiting the generality of the foregoing, we further agree that, without
the prior written consent of Dravo, Carmeuse Lime, Inc. will not, directly or
indirectly, enter into any agreement, arrangement or understanding, with any
other person regarding a possible transaction involving Dravo. The term "person"
as used in this letter agreement shall be broadly interpreted to include the
media and any corporation, partnership, group, individual or other entity.
In the event that Carmeuse Lime, Inc. or any of its Representatives is
required (by deposition, interrogatories, requests for information or documents
in legal proceedings, subpoena, civil investigative demand or other similar
process) to disclose any of the Evaluation Material, Dravo shall be provided
with prompt written notice of any such request or requirement so that Dravo may
seek a protective order or other appropriate remedy and/or waive compliance with
the provisions of this letter agreement. If, in the absence of a protective
order or other remedy or the receipt of a waiver by Dravo, Carmeuse Lime, Inc.
or any of its Representatives are nonetheless, in the written opinion of its
counsel, legally compelled to disclose Evaluation Material to any tribunal or
else stand liable for contempt or suffer other censure or penalty, Carmeuse
Lime, Inc. or its Representative may, without liability hereunder, disclose to
such tribunal only that portion of the Evaluation Material which such counsel
advises is legally required to be disclosed, provided that Carmeuse Lime, Inc.
exercise its best efforts to preserve the confidentiality of the Evaluation
Material, including, without limitation, by cooperating with Dravo to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Evaluation Material by such tribunal.
If either of us decides not to proceed with a transaction contemplated by
this letter agreement, it will promptly inform the other of that decision. In
that case, or any time upon the request of Dravo for any reason, Carmeuse Lime,
Inc. will promptly deliver to Dravo all documents (and all copies thereof)
furnished pursuant hereto. In the event of such a decision or request, all other
Evaluation Material prepared by Carmeuse Lime, Inc. or its Representatives shall
be destroyed and no copy thereof shall be retained. Notwithstanding the return
or destruction of the Evaluation Material, both Carmeuse Lime, Inc. and its
Representatives will continue to be bound by the obligations of confidentiality
and other obligations hereunder.
Carmeuse Lime, Inc. understands and acknowledges that Dravo makes no
representation or warranty, express or implied, as to the accuracy or
completeness of the Evaluation Material. Neither Dravo nor any of its
Representatives shall have any liability to Carmeuse Lime, Inc. relating to or
resulting from the use of the Evaluation Material. Only those representations or
warranties which are made in a final definitive agreement regarding the
transactions contemplated hereby, when, as and if executed, and subject to such
limitations and restrictions as may be specified therein, will have any legal
effect.
In consideration of the Evaluation Material being furnished hereunder,
Carmeuse Lime, Inc. hereby further agrees that, without the prior written
consent of the Board of Directors of Dravo, for a period of eighteen months from
the date hereof, neither it nor its affiliates (as such term is defined in Rule
12b-2 of the Securities Exchange act of 1934, as amended), acting alone or as
part of a group, will acquire or offer or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities (or direct or
indirect rights or options to acquire any voting securities) of Dravo, or
otherwise seek to influence or control, in any manner whatsoever, the management
or policies of Dravo; provided that nothing in this paragraph shall limit
Carmeuse Lime, Inc. or any affiliates from making an offer to acquire the voting
securities of Dravo if (a) the Board of Directors of Dravo has authorized an
"auction" of such securities, or (b) Carmeuse Lime, Inc. is making a
counteroffer to a proposed transaction for such securities.
Each of us agrees that unless and until a final definitive agreement
regarding a transaction has been executed and delivered, neither of us will be
under any legal obligation of any kind whatsoever with respect to such a
transaction by virtue of this letter agreement except for the matters
specifically agreed to herein.
<PAGE> 3
It is understood and agreed that no failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this letter agreement and that a party shall
be entitled to equitable relief, including injunction and specific performance,
as a remedy for any such breach. Such remedies shall not be deemed to be the
exclusive remedies for a breach of this letter agreement but shall be in
addition to all other remedies available at law or equity. In the event of
litigation relating to this letter agreement, if a court of competent
jurisdiction determines that a party or its Representatives have breached this
letter agreement, then such party shall be liable and pay the reasonable legal
fees incurred by the aggrieved party in connection with such litigation,
including any appeal therefrom.
This letter contains the entire understanding of the parties hereto with
respect to the matter covered hereby and may be amended only by a written
document executed by the party and you.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between us.
Very truly yours,
/s/ CARL A. GILBERT
CAG/pb
Accepted and agreed as of the date first written above:
By: /s/ W.S. BROWN
----------------------------------
Name: W.S. Brown
Title: President/CEO
<PAGE> 4
[DRAVO CORPORATION LETTERHEAD]
August 11, 1998
Lafarge Aluminates, Lime & Admixtures
17 Ter, Rue De La Vanne B.P. 560
92542 Montrouge Cedex
France
Attention: Mr. Alain Crouy
President & CEO
Gentlemen:
In connection with your consideration of a possible business transaction
with Dravo, you agree to be bound by the terms of that certain letter agreement
by and between Carmeuse Lime Inc. and Dravo dated April 29, 1998, a copy of
which is attached hereto and made a part hereof. You also agree that your
affiliated companies will be similarly bound and that you will be responsible
for any breach of the said letter agreement by an affiliate.
Very truly yours,
/s/ CARL A. GILBERT
CAG/pb
Accepted and agreed as of the date first written above:
Lafarge Aluminates, Lime & Admixtures Subject to DRAVO's written approval
of LAFARGE LIME's involvement with
By: /s/ ALAIN B. CROUY CARMEUSE in this possible business
-------------------------------- transaction.
Name: Alain B. Crouy
Title: President and CEO
<PAGE> 1
JOINT PRESS RELEASE
Pittsburgh, PA and Chicago, IL, September 15 -- Dravo Corporation
(NYSE:DRV), Carmeuse Lime, Inc., and Lafarge S.A. today jointly announced
agreement on a merger between Dravo Corporation and Carmeuse Lime, Inc. Under
the merger agreement, the acquiring company, DLC Acquisition Corp., a wholly-
owned subsidiary of Carmeuse Lime, Inc., will make a cash tender offer for all
of the outstanding common stock of Dravo at a price of $13.00 per share. The
Boards of Directors of Carmeuse and Dravo have unanimously approved the
transaction, and Dravo's Board has recommended that their shareholders tender to
the offer.
Under the terms of the agreement, DLC Acquisition Corp. will commence its
tender offer for Dravo's common stock within the next five business days.
Consummation of the offer is subject to a number of conditions, including the
condition that at least a majority of Dravo's outstanding common shares, on a
fully-diluted basis, be tendered into the offer, and the condition that
Hart-Scott-Rodino and other regulatory approvals be obtained. The agreement
provides for the payment of a $9.5 million topping fee in the event Dravo
consummates a transaction with a third party.
Upon consummation of the recently announced North American lime joint
venture between the Carmeuse North American group and Lafarge Lime, a division
of Lafarge S.A., which is anticipated during the fourth quarter of 1998, the
Dravo business would become part of the joint venture. Consummation of the offer
for Dravo is not subject to the timing or the consummation of the joint venture
between Carmeuse and Lafarge.
Commenting on the agreement, Arthur E. Byrnes, chairman of Dravo, said,
"After comprehensive review, we have concluded that this transaction provides
our shareholders with a liquidity opportunity at a substantial premium to the
current market price."
Carl A. Gilbert, president and chief executive officer of Dravo, added
"From a business standpoint, combining with Carmeuse Lime will make us part of a
larger, growth-oriented company. To that extent we will have achieved the
central objective of our strategic plan -- that of bringing about a significant
increase in the critical mass of our business. Such an outcome would represent a
win-win for our shareholders, our customers and our employees."
Jacques Germay, chairman of the Carmeuse North American group, and Alain
Crouy, chief executive officer of Lafarge Aluminates, Lime and Admixtures,
jointly stated that, "The transaction between Carmeuse Lime and Dravo, together
with the anticipated joint venture between Carmeuse and Lafarge, will create a
strong company by combining the resources of Carmeuse, Lafarge and Dravo to
better serve the needs of the marketplace."
Based in Pittsburgh, Dravo is the largest publicly owned company in the
U.S. lime industry, operating 3.4 million tons of annual capacity. Based in
Chicago, Illinois, Carmeuse Lime, Inc. is a privately held North American
company and part of the Carmeuse North American group. The Carmeuse North
American group, which includes eight lime plants in the U.S. and Canada, has
approximately 3 million tons of annual production capacity. Lafarge Lime has
approximately 800,000 tons of annual lime production capacity in the North
American market.
Carmeuse, a Belgian group, was founded in 1860. It posts annual revenues of
more than US $500 million in lime, dolomite and limestone; employs 3,000 people
at more than 50 plants in Europe, North America, and Mexico; and is committed to
a strategy of strong international development in its markets. World leader in
construction materials, Lafarge S.A. holds a top-ranking position in all five of
its core businesses: cement, concrete and aggregates, roofing, gypsum, and
specialty products. Active in 60 countries, Lafarge employs nearly 65,000
people, generating sales of US $10 billion.
For further information, contact Earl J. Bellisario, senior vice president
and chief financial officer of Dravo Corporation, at 412-995-5585; Jacques
Germay, chairman of Carmeuse North America, at 011-32-10-48-16-00; Richard
Kraus, president of Carmeuse North America, at 708-757-1258, or Yves Romesoan,
director of external relations for Lafarge Group at 011-33-1-44-34-11-02.
<PAGE> 1
[SALOMON SMITH BARNEY INC. LETTERHEAD]
September 15, 1998
The Board of Directors
Dravo Corporation
11 Stanwix Street
Pittsburgh, Pennsylvania 15222
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Dravo Corporation ("Dravo") of the
consideration to be received by such holders pursuant to the terms and subject
to the conditions set forth in the Agreement and Plan of Merger, dated as of
September 15, 1998 (the "Merger Agreement"), among Carmeuse Lime, Inc.
("Carmeuse"), DLC Acquisition Corp., a wholly owned subsidiary of Carmeuse
("DLC"), and Dravo. As more fully described in the Merger Agreement, (i) DLC
will make a cash tender offer to acquire all outstanding shares of the common
stock, par value $1.00 per share, of Dravo ("Dravo Common Stock"), at a purchase
price of $13.00 per share in cash, without interest (the "Cash Consideration"
and, such tender offer, the "Tender Offer") and (ii) subsequent to the Tender
Offer, DLC will be merged with and into Dravo (the "Merger" and, together with
the Tender Offer, the "Transaction") and each outstanding share of Dravo Common
Stock not previously tendered will be converted into the right to receive the
Cash Consideration.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Dravo and certain senior officers and other representatives and
advisors of Carmeuse concerning the business, operations and prospects of Dravo.
We examined certain publicly available business and financial information
relating to Dravo as well as certain financial forecasts and other information
and data for Dravo which were provided to or otherwise discussed with us by the
management of Dravo. We reviewed the financial terms of the Transaction as set
forth in the Merger Agreement in relation to, among other things: current and
historical market prices and trading volumes of Dravo Common Stock; the
historical and projected earnings and other operating data of Dravo; and the
capitalization and financial condition of Dravo. We considered, to the extent
publicly available, the financial terms of certain other similar transactions
recently effected which we considered relevant in evaluating the Merger and
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of Dravo. In connection with our
engagement, we were requested to approach, and we held discussions with, third
parties to solicit indications of interest in the possible acquisition of Dravo.
In addition to the forgoing, we conducted such other analyses and examinations
and considered such other information and financial, economic and market
criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of Dravo that such forecasts and other information and
data were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of Dravo as to the future financial
performance of Dravo. We have not made or been provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Dravo nor have we made any physical inspection of the properties or assets of
Dravo. We express no view as to, and our opinion does not address, the relative
merits of the Transaction as compared to any alternative business strategies
that might exist for Dravo or the effect of any other transaction in which Dravo
might engage. Our opinion is necessarily based upon information available to us,
and financial, stock market and other conditions and circumstances existing and
disclosed to us, as of the date hereof.
<PAGE> 2
The Board of Directors
Dravo Corporation
September 15, 1998
Page 2
Salomon Smith Barney has acted as financial advisor to Dravo in connection with
the proposed Transaction and will receive a fee for such services, a significant
portion of which is contingent upon the consummation of the Transaction. We also
will receive a fee upon the delivery of this opinion. In the ordinary course of
our business, we and our affiliates may actively trade or hold the securities of
Dravo for our own account or for the account of our customers and, accordingly,
may at any time hold a long or short position in such securities. In addition,
we and our affiliates (including Travelers Group Inc. and its affiliates) may
maintain relationships with Dravo, Carmeuse and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Dravo in its evaluation of the proposed
Transaction, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to whether such stockholder should tender
shares of Dravo Common Stock in the Tender Offer or how such stockholder should
vote on any matters relating to the proposed Transaction. Our opinion may not be
published or otherwise used or referred to, nor shall any public reference to
Salomon Smith Barney be made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Cash Consideration to be received in
the Transaction by the holders of Dravo Common Stock (other than Carmeuse and
its affiliates) is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ SALOMON SMITH BARNEY
- ------------------------
SALOMON SMITH BARNEY INC.
<PAGE> 1
DRAVO CORPORATION LOGO
September 21, 1998
Dear Shareholder:
We are pleased to advise you that on September 15, 1998, Dravo Corporation
("Dravo") entered into an Agreement and Plan of Merger with Carmeuse Lime, Inc.
("Carmeuse") and one of its subsidiaries, DLC Acquisition Corp., which provides
for the acquisition of all of the outstanding Common Stock of Dravo at a price
of $13.00 per share in cash. Under the terms of the proposed transaction, DLC
Acquisition Corp. has today commenced a tender offer for all of the outstanding
shares of Dravo Common Stock at $13.00 per share. Following the completion of
the tender offer, and any approvals required by law, DLC Acquisition Corp. will
be merged with Dravo and all shares of Common Stock not purchased in the tender
offer (other than those owned by Carmeuse or by shareholders who have perfected
appraisal rights) will be converted into the right to receive $13.00 per share
in cash in the merger.
YOUR BOARD OF DIRECTORS (I) HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE TENDER OFFER AT THE
OFFER PRICE AND THE MERGER, (II) HAS DETERMINED THAT THE TERMS OF THE TENDER
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS SHAREHOLDERS, AND (III) RECOMMENDS THAT SHAREHOLDERS ACCEPT THE TENDER
OFFER, TENDER THEIR SHARES TO DLC ACQUISITION CORP. AND APPROVE AND ADOPT THE
MERGER AGREEMENT AND MERGER, IF REQUIRED.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors more fully described in the accompanying
materials. The Board of Directors has received the written opinion dated
September 15, 1998 of Salomon Smith Barney Inc., financial advisor to Dravo, to
the effect that, as of such date and based upon and subject to certain matters
stated therein, the $13.00 per share cash consideration to be received in the
Offer and the Merger by the holders of Common Stock (other than Carmeuse and its
affiliates) was fair, from a financial point of view, to such holders.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9. Also enclosed is
Carmeuse's Offer to Purchase and related materials, including a Letter of
Transmittal for use in tendering shares. We urge you to read the enclosed
materials carefully.
The management and directors of Dravo thank you for the support you have
given the Company.
On behalf of the Board of Directors,
Arthur E. Byrnes
Arthur E. Byrnes
Chairman of the Board
Carl A. Gilbert
Carl A. Gilbert
President and Chief Executive Officer
