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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement Under Section 14(d)(4)
of the Securities Exchange Act of 1934
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JOHNS MANVILLE CORPORATION
(Name of Subject Company)
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JOHNS MANVILLE CORPORATION
(Name of Person(s) Filing Statement)
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Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
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478129 10 9
(CUSIP Number of Class of Securities)
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Dion Persson, Esq.
Vice President,
Assistant General Counsel and Secretary
Johns Manville Corporation
717 17th Street
Denver, Colorado 80202
Telephone: (303) 978-2000
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and
Communications on Behalf of Person(s) Filing Statement)
With a Copy to:
Stephen F. Arcano, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Telephone: 212-735-3000
[_]Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Item 1. Subject Company Information.
(a) Name and Address.
The name of the subject company is Johns Manville Corporation, a Delaware
corporation ("Johns Manville"). The address and telephone number of the
principal executive offices of Johns Manville is 717 17th Street, Denver,
Colorado 80217-5108, (303) 978-2000.
(b) Securities.
The title of the class of equity securities to which this Statement (as
defined below) relates is the common stock, par value $0.01 per share, of
Johns Manville (the "Common Stock"). As of December 28, 2000, there were
approximately 137,417,416 shares of the Common Stock outstanding.
Item 2. Identity and Background of Filing Person.
(a) Name and Address.
This Solicitation/Recommendation Statement (this "Statement") is being filed
by Johns Manville. The address and telephone number of Johns Manville are set
forth in Item 1 above.
(b) Tender Offer.
This Statement relates to the offer to purchase all of the outstanding
shares of Common Stock which is described in a Tender Offer Statement on
Schedule TO (the "Schedule TO") of J Acquisition Corporation (the
"Purchaser"), a Delaware corporation and a wholly owned subsidiary of
Berkshire Hathaway Inc. ("Parent"), filed with the Securities and Exchange
Commission (the "Commission") on December 29, 2000. According to the Schedule
TO, the Purchaser is offering, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated December 29, 2000 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which, together with the
Offer to Purchase, and any amendments or supplements thereto constitute the
"Offer"), to purchase any and all of the outstanding shares of Common Stock
for $13.00 per share, net to the seller in cash, without interest thereon (the
"Offer Price"). The address of the Parent and Purchaser, as set forth in the
Schedule TO, is 1440 Kiewit Plaza, Omaha, Nebraska 68131. Copies of the Offer
to Purchase and the Letter of Transmittal have been filed as Exhibits 1 and 2,
respectively, hereto and are incorporated herein by reference.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 19, 2000 (the "Merger Agreement"), among Johns Manville, Parent
and Purchaser. The Merger Agreement provides, among other things, that as soon
as practicable following the satisfaction or waiver of the conditions set
forth in the Merger Agreement, Purchaser shall be merged with and into Johns
Manville (the "Merger"), and Johns Manville shall continue as the surviving
corporation (the "Surviving Corporation"). The Merger Agreement further
provides that those shares of Common Stock that are not acquired in the Offer
(other than shares of Common Stock held by Parent, Purchaser and their
subsidiaries and other than shares as to which dissenters' rights of appraisal
have been exercised) shall be converted in the Merger into the right to
receive $13.00 per share of Common Stock in cash (the "Merger Consideration").
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
(a) Conflicts of Interest.
Certain contracts, agreements, arrangements or understandings between Johns
Manville and its affiliates and certain of its directors and executive
officers are, except as noted below, described in the Information Statement
pursuant to Schedule 14f-1 which is attached as Annex B hereto and is
incorporated herein by reference. Except as described in this Statement
(including in the Exhibits and in Annex B hereto) or incorporated by reference
herein, to the knowledge of Johns Manville, as of the date hereof there exists
no material agreement, arrangement or understanding and no actual or potential
conflict of interest between Johns Manville or its affiliates and (i) Johns
Manville's executive officers, directors or affiliates or (ii) Parent,
Purchaser or their respective executive officers, directors or affiliates.
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The Merger Agreement. The summary of the Merger Agreement contained in the
Offer to Purchase, which has been filed with the Securities and Exchange
Commission (the "Commission") as an exhibit to the Schedule TO and a copy of
which is enclosed with this Schedule 14D-9, is incorporated herein by
reference. Such summary should be read in its entirety for a more complete
description of the terms and provisions of the Merger Agreement. A copy of the
Merger Agreement has been filed as Exhibit 3 hereto and is incorporated herein
by reference.
Stockholder Agreement. The summary of the Stockholder Agreement, dated as of
December 19, 2000 (the "Stockholder Agreement"), among Parent, Purchaser and
Manville Personal Injury Settlement Trust (the "Trust"), contained in the
Offer to Purchase, which has been filed with the Commission as an exhibit to
the Schedule TO and a copy of which is enclosed with this Schedule 14D-9, is
incorporated herein by reference. Such summary should be read in its entirety
for a more complete description of the terms and provisions of the Stockholder
Agreement. A copy of the Stockholder Agreement has been filed as Exhibit 4
hereto and is incorporated herein by reference.
Amended and Restated Tax Matters and Amended Trust Relationship
Agreement. The summary of the Amended and Restated Tax Matters and Amended
Trust Relationship Agreement, dated as of December 19, 2000 (the "Tax Matters
Agreement"), between Johns Manville and the Trust, contained in the Offer to
Purchase, which has been filed with the Commission as an exhibit to the
Schedule TO and a copy of which is enclosed with this Schedule 14D-9, is
incorporated herein by reference. Such summary should be read in its entirety
for a more complete description of the terms and provisions of the Tax Matters
Agreement. A copy of the Tax Matters Agreement has been filed as Exhibit 5
hereto and is incorporated herein by reference.
Amendment to the Supplemental Agreement. The summary of the Third Amended
and Restated Supplemental Agreement, an agreement to be entered into between
the Trust and Johns Manville (the "Amended Supplemental Agreement") at the
closing of the transactions contemplated by the Tax Matters Agreement,
contained in the Offer to Purchase, which has been filed with the Commission
as an exhibit to the Schedule TO and a copy of which is enclosed with this
Schedule 14D-9, is incorporated herein by reference. Such summary should be
read in its entirety for a more complete description of the terms and
provisions of the Amended Supplemental Agreement. A copy of the form of the
Amended Supplemental Agreement has been filed as a part of Exhibit 5 hereto
and is incorporated herein by reference.
Amendment to the Trust Agreement. The summary of the amendment to the
Manville Trust Amended and Restated Trust Agreement, an amendment to be
entered into between Johns Manville and the trustees to the Trust (the
"Amendment to the Trust Agreement") at the closing of the transactions
contemplated by the Tax Matters Agreement, contained in the Offer to Purchase,
which has been filed with the Commission as an exhibit to the Schedule TO and
a copy of which is enclosed with this Schedule 14D-9, is incorporated herein
by reference. Such summary should be read in its entirety for a more complete
description of the terms and provisions of the Amendment to the Trust
Agreement. A copy of the form of the Amendment to the Trust Agreement has been
filed as a part of Exhibit 5 hereto and is incorporated herein by reference.
Escrow Agreement. The summary of the escrow agreement to be entered into by
and among Johns Manville, the Trust and an escrow agent (the "Escrow
Agreement") at the closing of the transactions contemplated by the Tax Matters
Agreement, contained in the Offer to Purchase, which has been filed with the
Commission as an exhibit to the Schedule TO and a copy of which is enclosed
with this Schedule 14D-9, is incorporated herein by reference. Such summary
should be read in its entirety for a more complete description of the terms
and provisions of the Escrow Agreement. A copy of the form of the Escrow
Agreement has been filed as a part of Exhibit 5 hereto and is incorporated
herein by reference.
Trust Letter Agreement. The summary of the letter agreement, dated December
19, 2000, between Johns Manville and the Trust (the "Trust Letter Agreement"),
contained in the Offer to Purchase, which has been filed with the Commission
as an exhibit to the Schedule TO and a copy of which is enclosed with this
Schedule 14D-9, is incorporated herein by reference. Such summary should be
read in its entirety for a more complete description
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of the terms and provisions of the Trust Letter Agreement. A copy of the Trust
Letter Agreement has been filed as Exhibit 6 hereto and is incorporated herein
by reference.
Share Purchase Agreement. The summary of the Share Purchase Agreement, dated
December 19, 2000, between Johns Manville and the Trust (the "Share Purchase
Agreement"), contained in the Offer to Purchase, which has been filed with the
Commission as an exhibit to the Schedule TO and a copy of which is enclosed
with this Schedule 14D-9, is incorporated herein by reference. Such summary
should be read in its entirety for a more complete description of the terms
and provisions of the Share Purchase Agreement. A copy of the Trust Letter
Agreement has been filed as Exhibit 7 hereto and is incorporated herein by
reference.
Interests of Certain Persons in the Transaction. Certain members of Johns
Manville's Board of Directors (the "Board") and management may be deemed to
have certain interests in the Offer and the Merger that are in addition to
their interest as stockholders of Johns Manville generally. The Board was
aware of and discussed these interests in connection with its consideration
and approval of the Merger Agreement. In considering the recommendation of the
Board with respect to the Offer and the Merger, the stockholders should be
aware of these interests which may present actual or potential conflicts of
interest.
Employment Arrangements. Existing arrangements with executive officers and
certain other salaried executives of Johns Manville are described in Annex B.
There is a possibility that Mr. Henry will be employed by the Surviving
Corporation following the consummation of the Merger, however, no employment
agreement has been entered into and no specific terms of employment have
otherwise been offered or finalized.
Employee Awards. Pursuant to the Merger Agreement, immediately following the
acceptance for payment of shares of Common Stock by Purchaser tendered in the
Offer, the following will occur with respect to all employee equity awards of
Johns Manville. The holders of outstanding employee stock options will be
entitled to receive an amount of cash computed by multiplying (i) the excess,
if any, of (A) the greater of (x) $13.00 and (y) the highest fair market value
per share at any time during the 60-day period preceding the acceptance for
payment of shares of Common Stock tendered in the Offer, over (B) the exercise
price per share subject to such option by (ii) the number of shares subject to
such option. Each share of deferred stock will be cancelled and the holder
will be entitled to receive an amount in cash equal to the greater of
(x) $13.00 and (y) the highest fair market value per share at any time during
the 60-day period preceding the acceptance for payment of shares of Common
Stock tendered in the Offer. Finally, cash payments of $13.00 per unit deemed
invested in Common Stock will be made in settlement of deferral accounts under
Johns Manville's Deferred Compensation Plan and Non-Employee Directors'
Deferred Compensation Plan.
Agreement to Maintain Benefits. Pursuant to the Merger Agreement, the
Surviving Corporation will honor all employee, officer and director contracts,
agreements, arrangements, policies, plans and commitments of Johns Manville in
effect on December 19, 2000 and will assume all of Johns Manville's
employment, retention, consulting and severance agreements in effect on
December 19, 2000 and maintain for a period of one year after the Effective
Time certain core benefits that are no less favorable than those currently
provided, except for any employee benefits which provide for the issuance of
equity securities in the Surviving Corporation. In addition, the Surviving
Corporation will continue to maintain the Johns Manville Separation Policy in
effect on December 19, 2000 for a period of eighteen months following the
Effective Time, without amending it in any way as to be adverse to the
participants.
Incentive Bonuses. Pursuant to the Merger Agreement, if the Merger shall
then have occurred, the Surviving Corporation will pay, no later than February
15, 2001, bonuses under Johns Manville's annual incentive compensation plans
previously approved by the compensation committee of the Board. If the Merger
shall not then have occurred, the Company will pay such bonuses.
Directors' and Officers' Indemnification. Pursuant to the Merger Agreement,
the articles of incorporation and bylaws of the Surviving Corporation will
contain the same provisions on indemnification of officers and directors that
Johns Manville's articles of incorporation and by-laws contained at the date
of the Merger Agreement. The indemnification provisions are not to be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights of individuals who
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prior to the Effective Time were directors or officers of Johns Manville. The
Merger Agreement also provides that the Surviving Corporation will indemnify
any employee, agent, director or officer of Johns Manville to the fullest
extent permitted by applicable law, with respect to any claim, liability,
loss, damage, cost or expense, whenever asserted or claimed, based in whole or
in part on, or arising in whole or in part out of, any matter existing or
occurring at or prior to the Effective Time. Parent also agrees, pursuant to
the Merger Agreement, to indemnify any directors, officers, employees and
agents of Johns Manville, provided that, such indemnification will not be
applicable to any claims made against the indemnified parties if a judgment
established that their acts or omissions were (i) committed in bad faith or
(ii) arising out of any improper profit or advantage.
Item 4. The Solicitation or Recommendation.
(a) Recommendation of the Johns Manville Board of Directors
THE BOARD OF DIRECTORS OF JOHNS MANVILLE (1) HAS DETERMINED THAT THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND
THE MERGER, ARE ADVISABLE AND ARE IN THE BEST INTERESTS OF STOCKHOLDERS OF
JOHNS MANVILLE, (2) HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, AND (3) HAS RECOMMENDED THAT STOCKHOLDERS TENDER THEIR
SHARES OF COMMON STOCK PURSUANT TO THE OFFER.
A letter to Johns Manville's stockholders communicating the Board's
recommendations and the press release announcing the Merger Agreement and
related transactions are filed as Exhibits 8 and 9 hereto, respectively, and
are incorporated herein by reference.
(b)(i) Background of the Offer; Contacts with Parent
The Board, as part of its ongoing oversight and planning, has from time to
time considered various financial and other alternatives that might be
available to increase the value of the Common Stock to all of John Manville's
stockholders. In the context of review of these alternatives, the Board
considered Johns Manville's statutory liability for federal income taxes
imposed on the designated settlement fund portion of the Trust, and its
contractual liability to the Trust for other income taxes and tentatively
agreed to a payment of $90,000,000 to be made by Johns Manville to the Trust,
subject to the consummation of a merger or sale transaction, in return for the
Trust's agreement to indemnify Johns Manville against its statutory liability
for federal income taxes accruing on income of the designated settlement fund
portion of the Trust and to eliminate Johns Manville's contractual liability
to the Trust for the payment of the Trust's income taxes.
On January 25, 1999, Johns Manville issued a press release publicly
announcing that it would undertake a review of strategic alternatives
available to maximize stockholder value and that such alternatives included a
possible sale or merger of Johns Manville. Following the issuance of the
January 25 press release and through early February 1999, J.P. Morgan
Securities Inc. ("J.P. Morgan") and Goldman, Sachs & Co., the Trust's
financial advisor, contacted potentially interested parties. By mid-April
1999, it became apparent that the process would not result in acceptable bids
being obtained. The Board was updated as to these developments at a meeting
held on April 19, 1999, and on April 20, 1999, Johns Manville issued a press
release to that effect. The press release also stated that Johns Manville and
the Trust would explore other options to maximize stockholder value.
From June 1999 through September 1999, Johns Manville engaged in discussions
with a leveraged buyout firm concerning a possible acquisition of Johns
Manville. In July 1999, the leveraged buyout group advised representatives of
Johns Manville that it would be prepared to pursue a transaction at a cash
price of $15.63 in cash.
In September 1999, the leveraged buyout firm informed representatives of
Johns Manville that it was not willing to pursue a transaction at the price
level previously indicated, although it would be willing to consider a
transaction at a lower price. Thereafter, talks with the leveraged buyout firm
were terminated.
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Later in 1999 and in 2000, Johns Manville received oral and written
indications of interest relating to the acquisition of Johns Manville.
On June 22, 2000, Johns Manville entered into a merger agreement with an
investor group led by affiliates of Hicks, Muse, Tate & Furst Incorporated and
Bear Stearns Merchant Banking (the "Hicks, Muse/Bear Stearns Group"). This
agreement provided for a merger transaction in which each share of Common
Stock held by stockholders of Johns Manville (other than with respect to a
portion of the shares of Common Stock held by the Trust and some members of
Johns Manville management) would be converted into the right to receive
$13.625 in cash and .02 of share of a 13% redeemable pay-in-kind preferred
stock of the surviving corporation having a liquidation value of $100 per full
preferred share. A portion of the shares of Common Stock held by the Trust and
management would be retained as common stock in the surviving corporation.
On October 19, 2000, when Johns Manville announced its financial results for
its third quarter, it also announced that it did not believe that it would
complete on the previously announced terms its merger agreement with the Hicks
Muse/Bear Stearns Group. Shortly thereafter, a subsidiary of Parent began
buying shares of Common Stock in ordinary open market purchases without notice
to Johns Manville. As of December 8, 2000, Parent beneficially owned
approximately 3.2% of the then-outstanding shares of Common Stock.
On December 8, 2000, Johns Manville announced the termination of that prior
merger agreement. Johns Manville and the other parties to that prior agreement
had been unable to renegotiate acceptable terms for the merger, and had
mutually agreed to its termination as a result of weak industry conditions, an
increasingly negative outlook for the economy, and unfavorable financing
markets.
On December 11, 2000, Charles T. Munger, Vice-Chairman of Parent, telephoned
Robert A. Falise, a member of the Board of Directors of Johns Manville (the
"Board") and Chairman and Managing Trustee of the Trust. Mr. Munger told Mr.
Falise that Parent would be interested in making an offer to acquire Johns
Manville. Later that day, Mr. Munger and Warren E. Buffett, Chairman and Chief
Executive Officer of Parent, spoke by telephone with Mr. Falise and William E.
Mayer, a director of Johns Manville, and proposed that Parent would acquire
the entire equity interest in Johns Manville for $13.00 per share in cash,
with no financing contingency and on definitive terms and conditions to be
negotiated. Messrs. Buffett and Munger stated that Parent was in a position to
quickly negotiate and execute a definitive agreement, and did not need to
conduct a due diligence review other than its review of publicly available
information.
On December 12, 2000, the Board held a special meeting and reviewed the
proposal from Parent. At that meeting, the Board received a presentation from
representatives of J.P. Morgan as to analyses conducted by it with respect to
Johns Manville. The Board determined to continue discussions with Parent in
order to ascertain whether a mutually acceptable transaction could be
obtained. In that regard, the Board appointed a special committee composed of
Messrs. Falise and Mayer, Todd Goodwin and Michael N. Hammes to review,
negotiate, evaluate and recommend to the board what action should be taken
with respect to Parent's proposal.
Following the December 12, 2000 Board meeting, Mr. Falise and Mr. Mayer
telephoned Mr. Buffett and Mr. Munger and indicated Johns Manville's and the
Trust's interest in pursuing Parent's proposal. While Messrs. Falise and Mayer
attempted to negotiate an increased price, Mr. Buffett declined to increase
the consideration for Parent's proposal. That day, Parent's legal counsel
contacted Johns Manville's legal counsel to commence the preparation of
definitive acquisition agreements. Johns Manville's counsel provided a draft
merger agreement to Parent's counsel and the Trust's counsel on December 13,
2000. The Trust's counsel shortly thereafter provided drafts of the
Stockholder Agreement and the Tax Matters Agreement, together with the
agreements contemplated thereby, to Parent and Johns Manville. From that day
through December 19, 2000, representatives of Parent, Johns Manville, and the
Trust, and their respective legal counsel, negotiated the terms and conditions
of the Merger Agreement, Stockholder Agreement, Tax Matters Agreement and the
agreements contemplated thereby.
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During the same period, Johns Manville and the Trust negotiated the terms of
(i) the Share Purchase Agreement providing for Johns Manville to repurchase
from the Trust prior to December 31, 2000, 10,500,000 shares of Common Stock
at a price equal to $13.00 per share (or $136,500,000 in the aggregate) and
(ii) the Trust Letter Agreement providing, among other things, that Johns
Manville would not amend the Merger Agreement or consent to the waiver of any
condition to the Offer without the prior written consent of the Trust, and
that under certain circumstances the Trust would reimburse Johns Manville for
the termination fee, if any, required to be paid by Johns Manville to Parent
under the Merger Agreement.
On December 16, 2000, the special committee of the Board met to discuss the
proposed transaction. At this meeting, the special committee received an
update as to the progress of negotiations with Parent's counsel, as well as a
summary of the proposed structure and terms of the transaction, and
outstanding issues. The special committee also received a presentation from
representatives of J.P. Morgan as to its financial analyses of the proposed
transactions.
Negotiation of the transaction agreements continued following this meeting
through December 19, 2000.
A special meeting of the Board was held on December 19, 2000 to consider the
proposed transaction. At this meeting, the Board was updated on the progress
of negotiations since the last board meeting. The Board received a financial
presentation from J.P. Morgan and received the opinion of J.P. Morgan to the
effect that the $13.00 in cash to be received by holders of Common Stock
(other than the Trust) in the Offer and the Merger was fair, from a financial
point of view, to such stockholders. The Board reviewed the terms of the
proposed Merger Agreement, the Stockholder Agreement, the Tax Matters
Agreement and the agreements contemplated thereby, the Trust Letter Agreement
and the Share Purchase Agreement. The Board also received a report from
Mr. Falise as to a meeting of the trustees of the Trust earlier in the day.
The Board also received the recommendation of the special committee with
respect to the proposed transaction.
Without the directors present who are trustees of the Trust, the Board
considered approval of the Tax Matters Agreement and related agreements, and
the directors received a presentation from J.P. Morgan regarding its analysis
of the Tax Matters Agreement and received the opinion of J.P. Morgan to the
effect that the $90,000,000 consideration to be paid to the Trust pursuant to
the Tax Matters Agreement was fair, from a financial point of view, to the
holders of Common Stock other than the Trust for the assumption by the Trust
of the tax liabilities.
When the directors who are also trustees of the Trust rejoined the meeting,
they advised the Board that the Trust had approved the proposed transaction
subject to approval by the Board. Following the conclusion of its
consideration, the Board approved the Merger Agreement and the other relevant
agreements.
Also on December 19, 2000, Parent's board of directors met and approved the
Merger Agreement, the Stockholder Agreement, and the transactions contemplated
by those agreements.
Following the Board meeting and the meeting of the trustees of the Trust,
Parent, Johns Manville, and the Trust finalized all of the agreements. Johns
Manville and the Trust executed the Share Purchase Agreement. Following that,
Parent, Purchaser, and Johns Manville executed the Merger Agreement; Parent
and the Trust executed the Stockholder Agreement; and Johns Manville and the
Trust executed the Tax Matters Agreement and the Letter Agreement. A joint
press release announcing the transaction was issued early on December 20,
2000.
(ii) Reasons for the Johns Manville Board's Recommendation
In reaching its conclusions and determining to make the recommendations
described above, the Board considered a number of factors, including, without
limitation, the following material factors:
(1) The Board's review of Johns Manville's business, operations, financial
condition, earnings and prospects and the general economic and industry
conditions affecting Johns Manville.
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(2) The Board's review of possible alternatives to the proposed Offer and
Merger, the potential value to stockholders of these alternatives and the
timing and likelihood of actually consummating any of these alternatives,
particularly in light of the termination of the proposed merger transaction
with the Hicks, Muse/ Bear Stearns Group, or achieving additional value from
these alternatives, including the possibility that Johns Manville's future
performance might not lead to a stock price having a higher present value than
the Offer Price to be received by holders of Common Stock pursuant to the
Offer.
(3) The financial and other terms and conditions of the Merger Agreement and
related agreements and transactions.
(4) The financial presentation of J.P. Morgan and the opinion of J.P. Morgan
to the effect that, as of December 19, 2000, the $13.00 in cash per share of
Common Stock to be paid to holders of shares of Common Stock (other than the
Trust) in the Offer and the Merger was fair, from a financial point of view,
to such stockholders.
(5) The Board considered the fact that the Merger Agreement provides for a
first-step cash tender offer for all outstanding shares of Common Stock,
thereby enabling stockholders who tender their shares of Common Stock to
receive promptly the Offer Price in cash, and that stockholders who do not
tender their shares of Common Stock will receive the same cash price in the
subsequent Merger.
(6) The Board considered that the Merger Agreement was agreed to by the
Board only after issuance by Johns Manville of a press release in January 1999
regarding its review of strategic alternatives, significant publicity
concerning the review by Johns Manville of its strategic alternatives, contact
with, and due diligence by, a number of potential bidders over an extended
period of time and negotiation and execution of a definitive merger agreement
with the Hicks, Muse/Bear Stearns Group, and the termination of the merger
agreement with the Hicks, Muse/Bear Stearns Group.
(7) The Board considered the limited conditions to Purchaser's obligations
to consummate the Offer and the Merger and the likelihood that the Offer and
the Merger will be consummated promptly. In particular, the Board considered
that the Offer is not conditioned upon the receipt of financing. The Board
also considered the financial condition and business reputation of Parent and
Parent's ability to complete the Offer and the Merger in a timely manner and
the fact that Parent was willing to promptly pursue a transaction without
conducting due diligence other than the review of publicly available
information.
(8) The Board considered the fact that the closing price per share of Common
Stock on December 18, 2000, the last trading day prior to the execution of the
Merger Agreement, was $10.06; that the closing price of $13.94 per share of
Common Stock on December 31, 1999 was the highest closing price per share at
which the Common Stock traded in the twelve months prior to execution of the
Merger Agreement; and that the closing price of $7.50 on March 9, 2000 was the
lowest closing price per share at which the Common Stock traded in the twelve
months prior to December 19, 2000.
(9) The Board considered the possibility that if the Offer and the Merger
were not to be consummated, the price of the Common Stock could decline below
the current trading price.
(10) The Board considered the terms of the Stockholder Agreement between
Parent, Purchaser and the Trust, including the fact that following receipt of
an order of the U.S. bankruptcy court, the Trust will be obligated to tender
all of its shares, approximately 74.4% (after giving effect to the
consummation of the transaction contemplated by the Share Purchase Agreement)
of the outstanding shares of Common Stock, in the Offer.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger and the complexity of these matters,
the Board did not attempt to quantify, rank or otherwise assign relative
weights to these factors. In addition, the Board did not undertake to make any
specific determination as to whether any particular factor, or any aspect of
any particular factor, was favorable or unfavorable to the
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Board's ultimate determination, but rather the Board conducted an overall
analysis of the factors described above, including thorough discussions with
and questioning of management and Johns Manville's legal and financial
advisors. In considering the factors described above, individual members of
the Board may have given different weight to different factors. Considering
all these factors as a whole, the Board considered the factors to be favorable
to and to support its determination on balance.
THE JOHNS MANVILLE BOARD OF DIRECTORS RECOMMENDS THAT ALL HOLDERS OF JOHNS
MANVILLE COMMON STOCK TENDER THEIR SHARES PURSUANT TO THE OFFER.
(c) Intent to Tender.
After reasonable inquiry and to the best of Johns Manville's knowledge, each
executive officer, director and affiliate of Johns Manville currently intends
to tender all outstanding shares of Common Stock, held of record or
beneficially owned by such person, to Purchaser at or prior to the expiration
date of the Offer.
Item 5. Persons/Assets, Retained, Employed, Compensated or Used.
Pursuant to an engagement letter dated January 20, 1999, Johns Manville
retained J.P. Morgan to act as its exclusive financial advisor in connection
with any sale, merger or business combination. Pursuant to the terms of J.P.
Morgan's engagement, Johns Manville has agreed to pay J.P. Morgan for its
services an aggregate financial advisory fee of approximately $9.0 million.
Johns Manville also has agreed to reimburse J.P. Morgan for reasonable out-of-
pocket expenses, including the fees and expenses of legal counsel and any
other advisor retained by J.P. Morgan, and to indemnify J.P. Morgan and
certain related parties against certain liabilities, including liabilities
under the federal securities laws, arising out of J.P. Morgan's engagement.
J.P. Morgan has informed Johns Manville that its parent company has entered
into a merger agreement with The Chase Manhattan Corporation ("Chase")
pursuant to which a merger of these two entities is expected to be consummated
in early 2001. J.P. Morgan and its affiliates (including Chase) have in the
past provided, and currently are providing, financial services to certain
affiliates of Johns Manville unrelated to the Offer and the Merger, for which
services J.P. Morgan has received and will receive compensation. In the
ordinary course of business, J.P. Morgan and its affiliates (including Chase)
may actively trade or hold the securities of Johns Manville, Parent and their
affiliates for J.P. Morgan's, its affiliates' and Chase's account or for the
account of customers and, accordingly, may at any time hold a long or short
position in such securities.
Neither Johns Manville nor any person acting on its behalf currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer or the
Merger.
Item 6. Interest in Securities of the Subject Company.
Except as described herein, during the past 60 days, no transactions in
Common Stock have been effected by Johns Manville or, to the best of Johns
Manville's knowledge, by any of its executive officers, directors, affiliates
or subsidiaries.
Item 7. Purposes of the Transaction and Plans or Proposals.
(a) Except as set forth in this Statement, Johns Manville 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, reorganization or
liquidation, involving Johns Manville or any subsidiary of Johns Manville,
(ii) a purchase, sale or transfer of a material amount of assets by Johns
Manville or any subsidiary of Johns Manville, (iii) a tender offer for or
other acquisition of securities by or of Johns Manville or (iv) any material
change in the present dividend policy or indebtedness or capitalization of
Johns Manville.
(b) Except as described in Items 3 or 4 above (the provisions of which are
hereby incorporated by reference), there are no transactions, Board
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.
9
<PAGE>
Item 8. Additional Information.
(a) Antitrust; Competition Filings
The Offer and the Merger are subject to the HSR Act, which provides that
certain acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the Federal Trade Commission (the
"FTC") and certain waiting period requirements have been satisfied.
Parent expects to file its Notification and Report Form with respect to the
Offer and the Merger with the Antitrust Division and the FTC on or about
January 2, 2001. The waiting period under the HSR Act with respect to the
Offer will expire at 11:59 p.m., New York City time, on the fifteenth day
after the date Parent's form is filed, unless early termination of the waiting
period is granted. However, the Antitrust Division or FTC may extend the
waiting period by requesting additional information or documentary material
from Parent or Johns Manville. If such a request is made, such waiting period
will expire at 11:59 p.m., New York City time, on the tenth calendar day after
the date of substantial compliance by Parent with such request. Thereafter,
the waiting period can be extended only by court order or with the consent of
Parent. In practice, complying with a request for additional information or
material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and
may agree to delay consummation of the transaction while such negotiations
continue. Purchaser will not accept for payment shares of Common Stock
tendered pursuant to the Offer unless and until the waiting period
requirements imposed by the HSR Act with respect to the Offer have been
satisfied.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of shares
of Common Stock by Purchaser pursuant to the Offer and the Merger. At any time
before or after Purchaser's purchase of shares of Common Stock, 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 of Common Stock pursuant to the Offer or
seeking divestiture of shares of Common Stock acquired by Purchaser or the
divestiture of substantial assets of Parent, Johns Manville or any of their
respective subsidiaries. Private parties, as well as state governments, may
also bring legal action under the antitrust laws under certain circumstances.
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.
Under the Competition Act (Canada), R.S. 1985, c.C-34, as amended (the
"Canadian Competition Act"), parties to a merger are required to pre-notify
the Commissioner of Competition (the "Commissioner"), who is responsible for
the administration and enforcement of the Canadian Competition Act, and
provide detailed information with respect to the proposed merger, where two
thresholds related to the size of the parties to the transaction and to the
size of the transaction are met or exceeded. Parent, Purchaser and Johns
Manville have determined that the two thresholds set forth in the Canadian
Competition Act have been met, and thus pre-notification is required to the
Commissioner. Accordingly, two Short Form Information Forms for Notifiable
Transactions will be filed by Purchaser/Parent and Johns Manville with the
Commissioner on or about January 5, 2001, or as soon thereafter as
practicable. As provided for under the Canadian Competition Act, where a Short
Form is used, the parties to a merger may not complete the transaction before
the expiration of a waiting period of 14 calendar days following the filing of
the required information with the Commissioner. During such waiting period,
the Commissioner may request that the parties provide additional information
and/or complete a Long Form Information Form. Where a Long Form is requested,
the waiting period of 42 calendar days does not begin until the Long Form is
filed with the Commissioner. Parent, Purchaser and Johns Manville intend to
complete the transaction only upon the expiration of the relevant waiting
period or after they have received a "no action" letter from the Commissioner
indicating that he will not make an application to the Competition Tribunal in
respect of the transaction. Purchaser will not accept for payment shares of
Common Stock tendered pursuant to the Offer unless and until the waiting
period requirements imposed by the Canadian Competition Act with respect to
the Offer have been satisfied. The Commissioner has the authority to challenge
a merger regardless of its size
10
<PAGE>
and regardless of whether the parties are required to pre-notify the
Commissioner of the transaction. Such challenges must be made on the basis
that the transaction is likely to result in a "substantial lessening or
prevention of competition" in a market.
Under the Council Regulation (EEC) No 4064/89 of December 21, 1989 on the
control of concentrations between undertakings, as amended ("EC Merger
Regulation"), parties to a concentration are required to pre-notify the
Directorate-General for Competition of the European Commission ("the European
Commission"), who is responsible for the administration and enforcement inter
alia of the EC Merger Regulation, and provide detailed information with
respect to the proposed concentration, where one of two alternative turnover
thresholds is met or exceeded.
Parent, Purchaser and Johns Manville have determined that the turnover
threshold set forth in Article 1(2) of the EC Merger Regulation is met, and
thus pre-notification is required to the European Commission. Purchaser,
Parent and Johns Manville are currently beginning the pre-notification process
with the European Commission. Article 7 of the EC Merger Regulation provides
that the parties to a merger may not complete the transaction before the
adoption of a decision declaring the transaction compatible under Article
6(1)(b) or Article 8(2) of the EC Merger Regulation, or after the expiry of
one month pursuant to the presumption of Article 10(6) of the EC Merger
Regulation if no decision is adopted by the European Commission. Article 7 of
the EC Merger Regulation also provides that this automatic suspension of the
transaction shall not prevent the implementation of a public bid which has
been notified to the European Commission, provided that the acquiror does not
exercise the voting rights attached to the securities in question and the
acquiror does not exercise any control over the target, until a clearance
decision (or express derogation) is received from the European Commission.
Johns Manville conducts operations in a large number of other jurisdictions
throughout the world, where other antitrust filings or approvals may be
required in connection with the completion of the Offer and the Merger.
Parent, Purchaser and Johns Manville currently intend to make filings or seek
approvals in certain other jurisdictions; however, Parent and Johns Manville
do not expect such filings or approvals to materially delay the consummation
of the transactions contemplated by the Merger Agreement.
(b) State Antitakeover Statutes.
Section 203 of the Delaware General Corporation Law ("DGCL"), in general,
prohibits a Delaware corporation, such as Johns Manville, from engaging in a
"Business Combination" (defined to include a variety of transactions,
including mergers) with an "Interested Stockholder" (defined generally as a
person that is the beneficial owner of 15% or more of the outstanding voting
stock of the subject corporation) for a period of three years following the
date that such person became an Interested Stockholder unless, prior to the
date such person became an Interested Stockholder, the board of directors of
the corporation approved either the Business Combination or the transaction
that resulted in the stockholder becoming an Interested Stockholder. The
provisions of Section 203 of the DGCL are not applicable to any of the
transactions contemplated by the Merger Agreement because the Merger Agreement
and the transactions contemplated thereby were approved by the Board prior to
the execution thereof.
(c) Short Form Merger
If Purchaser acquires pursuant to the Offer or otherwise (including
4,786,900 shares of Common Stock beneficially owned by Parent prior to the
Offer) at least 90% of the then-outstanding shares of Common Stock, under the
DGCL Purchaser's board of directors will be able to, and the Merger Agreement
will require it to, adopt a plan of merger to effect the Merger without a vote
of Johns Manville's stockholders, pursuant to Section 253 of the DGCL. If
Purchaser does not acquire (including its prior holdings) at least 90% of the
then-issued and outstanding Shares pursuant to the Offer or otherwise, a vote
of the stockholders will be required under the DGCL to effect the Merger, and
a significantly longer period of time will be required to effect the Merger.
Parent, Purchaser and Johns Manville have agreed to take all necessary and
appropriate action to cause the Merger to become effective as promptly as
practicable after the consummation of the Offer.
11
<PAGE>
Item 9 Exhibits.
<TABLE>
<CAPTION>
Exhibit
No.
-------
<C> <S>
Exhibit 1. Offer to Purchase, dated December 29, 2000.(1)(2)
Exhibit 2. Form of Letter of Transmittal, dated December 29, 2000.(1)(2)
Exhibit 3. Agreement and Plan of Merger, dated as of December 19, 2000, among
Johns Manville Corporation, Berkshire Hathaway Inc. and J
Acquisition Corporation.(1)
Exhibit 4. Stockholder Agreement, dated as of December 19, 2000, among
Manville Personal Injury Settlement Trust, Berkshire Hathaway Inc.
and J Acquisition Corporation.(1)
Exhibit 5. Amended and Restated Tax Matters and Amended Trust Relationship
Agreement, dated as of December 19, 2000, between Manville
Personal Injury Settlement Trust and Johns Manville
Corporation.(1)
Exhibit 6. Trust Letter Agreement, dated as of December 19, 2000, between
Manville Personal Injury Settlement Trust and Johns Manville
Corporation.(4)
Exhibit 7. Share Purchase Agreement, dated as of December 19, 2000, between
Manville Personal Injury Trust and Johns Manville Corporation.(1)
Exhibit 8. Letter to Shareholders, dated December 29, 2000.(2)
Exhibit 9. Press Release of Johns Manville Corporation, issued on December 20
, 2000.(3)
</TABLE>
--------
(1) Filed as an exhibit to the Tender Offer Statement on Schedule TO, dated
December 29, 2000, filed by Berkshire Hathaway Inc. and J Acquisition
Corporation and incorporated herein by reference.
(2) Included in copies mailed to stockholders.
(3) Previously filed on December 20, 2000 as an exhibit to Johns Manville
Corporation's Schedule 14D-9-C.
(4) Filed as Exhibit 4 to Amendment No. 18 to the Schedule 13D filed on
December 22, 2000 by Manville Personal Injury Settlement Trust with
respect to the Common Stock of Johns Manville Corporation and incorporated
herein by reference.
12
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
JOHNS MANVILLE CORPORATION
/s/ Dion Persson
By: ________________________________
Name: Dion Persson
Title: Vice President, Assistant
General Counsel and Secretary
Dated: December 29, 2000
13
<PAGE>
Annex A
December 19, 2000
The Board of Directors
Johns Manville Corporation
717 17th Street
Denver, Colorado 80202
Lady and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders (other than Manville Personal Injury Settlement
Trust (the "Trust")) (the "Public Stockholders") of Johns Manville Corporation
(the "Company") of the consideration to be received by them in connection with
the proposed Transaction (as defined below). We understand that the Company,
Berkshire Hathaway Inc. (the "Buyer") and its wholly owned subsidiary, J
Acquisition Corporation (the "Merger Subsidiary"), have entered into an
Agreement and Plan of Merger, dated as of December 19, 2000 (the "Agreement"),
pursuant to which the Merger Subsidiary will commence a cash tender offer (the
"Offer") to acquire all of the outstanding common stock, par value $.01 per
share, of the Company at a purchase price per share of $13.00 (the
"Consideration"). Pursuant to the Agreement, the Offer will be followed by a
merger of the Merger Subsidiary with and into the Company (the "Merger" and
together with the Offer, the "Transaction") in which the remaining shares of
common stock of the Company not tendered in the Offer will convert into the
right to receive the Consideration.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) certain
publicly available information concerning the business of the Company and of
certain other companies engaged in businesses comparable to those of the
Company, and the reported market prices for certain other companies'
securities deemed comparable; (iii) publicly available terms of certain
transactions involving companies comparable to the Company and the terms of
other transactions we deemed relevant; (iv) current and historical market
prices of the common stock of the Company; (v) the audited financial
statements of the Company for the fiscal year ended December 31, 1999, and the
unaudited financial statements of the Company for the period ended September
31, 2000; (vi) certain agreements with respect to outstanding indebtedness or
obligations of the Company; (vii) certain internal financial analyses and
forecasts prepared by the Company and its management; (viii) the Stockholder
Agreement, dated as of December 19, 2000, among the Buyer, the Merger
Subsidiary and the Trust; (ix) the Amended and Restated Tax Matters and
Amended Trust Relationship Agreement, dated as of December 19, 2000, between
the Trust and the Company; and (x) certain other agreements we deemed
relevant.
In addition, we have held discussions with certain members of the management
of the Company with respect to certain aspects of the Transaction, and the
past and current business operations of the Company, the financial condition
and future prospects and operations of the Company, the effects of the
Transaction on the financial condition and future prospects of the Company,
and certain other matters we believed necessary or appropriate to our inquiry.
We have visited certain representative facilities of the Company, and reviewed
such other financial studies and analyses and considered such other
information as we deemed appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was
publicly available or was furnished to us by the Company or otherwise reviewed
by us, and we have not assumed any responsibility or liability therefor. We
have not conducted any valuation or appraisal of any assets or liabilities,
nor have any such valuations or appraisals been provided to us. In relying on
financial analyses and forecasts provided to us, we have assumed that they
have been reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments by management as to the expected
future results of operations and financial condition of the Company to which
such analyses or forecasts relate. We have also assumed that the Transaction
will have the tax consequences described in discussions with, and materials
furnished to us by, representatives of the Company, and that the other
transactions
A-1
<PAGE>
contemplated by the Agreement will be consummated as described in the
Agreement. We have relied as to all legal matters relevant to rendering our
opinion upon the advice of counsel.
We note that the proposed Transaction follows a full public auction process
in which we broadly solicited offers for the Company from January through
April 1999. Subsequent to such auction process, the Company and we had
discussions with several other potential buyers which did not result in a
business combination transaction, and in June 2000, the Company agreed to
enter into a merger transaction with a company jointly owned by Bear Stearns
Merchant Fund Corp. and Hicks, Muse, Tate & Furst, Inc. (the "Previous
Transaction"). We further understand that the agreement providing for the
Previous Transaction was terminated by mutual agreement of the parties on
December 8, 2000. Subsequent to the termination of the Previous Transaction,
we were not authorized to and did not solicit any expressions of interest from
any other parties with respect to the sale of all or any part of the Company
or any other alternative transaction. We have taken the foregoing
circumstances into account in rendering our opinion.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect this opinion
and that we do not have any obligation to update, revise, or reaffirm this
opinion.
We have acted as financial advisor to the Company and the Special Committee
of the Board of Directors of the Company with respect to the proposed
Transaction and the Previous Transaction and have received a fee from the
Company for our services. We will also receive an additional fee if the
proposed Transaction is consummated.
For your information, our parent company, J.P. Morgan & Co. Incorporated
("J.P. Morgan"), has entered into a merger agreement with The Chase Manhattan
Corporation ("Chase") pursuant to which a merger of these two entities is
expected to be consummated no later than the first quarter of 2001. Please be
advised that we and affiliates of Chase and J.P. Morgan may from time to time
perform certain financial advisory and other commercial and investment banking
services for the Buyer, affiliates thereof or companies in which they have
ownership interests, for which we or they have received customary
compensation. In addition, in the ordinary course of their businesses,
affiliates of J.P. Morgan and Chase may actively trade the debt and equity
securities of the Company or the Buyer or public companies in which the Buyer
or its affiliates have ownership interests, as applicable, for their own
account or for the accounts of customers and, accordingly, they may at any
time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the Consideration to be paid to the Public Stockholders in
the Offer and the Merger is fair, from a financial point of view, to such
Public Stockholders.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Transaction.
This opinion does not constitute a recommendation to any stockholder of the
Company as to whether such stockholder should tender its shares of common
stock of the Company in the Offer or how such stockholder should vote with
respect to the Transaction. This opinion may not be disclosed, referred to, or
communicated (in whole or in part) to any third party for any purpose
whatsoever except with our prior written consent in each instance. This
opinion may be reproduced in full in any Schedule TO, Schedule 14d-9, offer to
purchase, proxy or information statement mailed to stockholders of the Company
but may not otherwise be disclosed publicly in any manner without our prior
written approval and must be treated as confidential.
Very truly yours,
/s/ J.P. MORGAN SECURITIES INC.
A-2
<PAGE>
Annex B
INFORMATION STATEMENT
JOHNS MANVILLE CORPORATION
717 17TH STREET
DENVER, COLORADO 80202
INFORMATION STATEMENT PURSUANT TO SECTION 14F
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement is being furnished to the holders of the common
stock, par value $0.01 per share ("Common Stock"), of Johns Manville
Corporation, a Delaware corporation ("Johns Manville"), in connection with the
designation by J Acquisition Corporation, a Delaware corporation ("Purchaser")
and wholly-owned subsidiary of Berkshire Hathaway Inc., a Delaware corporation
("Parent"), of certain persons as directors of Johns Manville pursuant to the
terms of an Agreement and Plan of Merger, dated as of December 19, 2000 (the
"Merger Agreement"), among Johns Manville, Parent and Purchaser. This
Information Statement is part of the Solicitation/Recommendation Statement on
Schedule 14D-9 (as amended from time to time, the "Schedule 14D-9") of Johns
Manville. Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Schedule 14D-9. THIS INFORMATION IS
BEING PROVIDED SOLELY FOR INFORMATIONAL PURPOSES AND NOT IN CONNECTION WITH A
VOTE OF JOHNS MANVILLE'S STOCKHOLDERS.
Pursuant to the Merger Agreement, after Purchaser has accepted for payment,
and paid for, Shares pursuant to the Offer, Parent has the right to designate
such number of directors, rounded up to the next whole number, to serve on the
Board of Directors of Johns Manville (the "Board") as will give Parent
representation on the Board equal to at least that number of directors which
equals the product of (i) the total number of directors on the Board (giving
effect to the election of any additional directors as contemplated below) and
(ii) a fraction, the numerator of which shall be the number of shares of
Common Stock beneficially owned by Parent and/or Purchaser (including shares
of Common Stock accepted for payment and paid for pursuant to the Offer and
the Stockholder Agreement, dated December 19, 2000, among the Manville
Personal Injury Settlement Trust, Parent and Purchaser) and the denominator of
which shall be the number of shares of Common Stock then outstanding. The
Merger Agreement provides that Johns Manville, upon request of Parent, will
take all reasonable actions to cause Parent's designees to be elected or
appointed to the Board, including, without limitation, increasing the size of
the Board and/or securing the resignations of incumbent directors. After the
election or appointment of Parent's designees and until the consummation of
the Merger, Johns Manville, Parent and Purchaser will use their respective
best efforts to ensure that the Board will have at least two directors who
were directors on the date of the Merger Agreement and who are not officers of
Johns Manville or affiliates of Parent (the "Continuing Directors"). Following
the election or appointment of Parent's designees and until the consummation
of the Merger, the approval of a majority of the Continuing Directors is
required to authorize (i) any termination of the Merger Agreement by Johns
Manville, (ii) any amendment of the Merger Agreement, (iii) any extension of
time for performance of any obligation of or action by Parent or Purchaser
under the Merger Agreement, (iv) any enforcement of or any waiver of
compliance with any of the agreements or conditions contained in the Merger
Agreement for the benefit of Johns Manville and (v) any amendment to Johns
Manville's articles of incorporation or bylaws that adversely affects Johns
Manville's stockholders.
The information contained in this Annex B concerning Purchaser and Parent
has been furnished to Johns Manville by Purchaser and Parent, and Johns
Manville assumes no responsibility for the accuracy or completeness of any
such information.
B-1
<PAGE>
VOTING SECURITIES OF JOHNS MANVILLE
As of December 28, 2000, approximately 137,417,416 shares of Common Stock
were issued and outstanding, each of which entitles the holder thereof to one
vote, and no other shares of capital stock were issued and outstanding.
BOARD OF DIRECTORS, PARENT DESIGNEES
AND EXECUTIVE OFFICERS
Board Biographical Information
The persons named below are the current members of the Board. The following
sets forth as to each director, his age, principal occupation and business
experience, the period during which he has served as a director, and any
family relationships with any other director or executive officer of Johns
Manville and the directorships currently held by him in corporations whose
shares are publicly registered.
<TABLE>
<CAPTION>
Served as
Director
Name Age Position Since
---- --- -------- ---------
<S> <C> <C> <C>
Leo Benatar................. 70 Director 1996
Ernest H. Drew.............. 63 Director 1998
Robert A. Falise............ 68 Director 1992
Todd Goodwin................ 69 Director 1991
Michael N. Hammes........... 59 Director 1991
Kathryn Rudie Harrigan...... 49 Director 1995
Charles L. Henry............ 59 Director, Chairman, CEO & President 1996
Louis Klein, Jr. ........... 65 Director 1992
Christian E. Markey, Jr. ... 71 Director 1992
William E. Mayer............ 60 Director 1996
</TABLE>
LEO BENATAR, 70, has been a director since 1996. In June 1996, Mr. Benatar
became an Associated Consultant of A. T. Kearney, Inc., a management
consulting firm. Prior to that, Mr. Benatar was a Director of Sonoco Products
Company and Chairman of Engraph, Inc., a wholly owned subsidiary of Sonoco
Products Company, from October 1993 to June 1996. He was a Senior Vice
President of Sonoco Products Company between 1993and 1996. Mr. Benatar is also
a Director of Aaron Rents, Inc., Interstate Bakeries Corporation,
JPS Packaging, Mohawk Industries, Inc. and Paxar Corporation. Mr. Benatar is
Chairman of the Health, Safety and Environment Committee and is a member of
the Audit and Compensation Committees.
ERNEST H. DREW, 63, has been a director since 1998. From July 1997 to
December 1997, Dr. Drew was Former Chief Executive Officer of the Industries
and Technology Group of Westinghouse Electric Industries and Corporation.
Prior to joining Westinghouse, from January 1995 to June 1997, Dr. Drew served
as a member of the Board of Management of Hoechst AG, a chemical and
pharmaceutical company. Dr. Drew is also a Director of Ashland, Inc., Public
Service Enterprise Group, Thomas & Betts Corporation and Unique Mobility, Inc.
Dr. Drew is also a member of the Board Organization and Operation, Executive,
Finance and Health, Safety and Environment Committees.
ROBERT A. FALISE, 68, has been a director since1992. Mr. Falise was elected
a Trustee of Manville Personal Injury Settlement Trust in December 1991, and
became its Chairman and Managing Trustee in January 1992. Mr. Falise served as
Chairman of the Board of Johns Manville from June to September of 1996. Mr.
Falise
B-2
<PAGE>
is Chairman of the Executive Committee and is a member of the Audit, Board
Organization and Operation, Compensation and Finance Committees.
TODD GOODWIN, 69, has been a director since 1991. Mr. Goodwin has been a
General Partner of the New York investment banking firm Gibbons, Goodwin, van
Amerongen since 1984. Mr. Goodwin is also a Director of Merrill Lynch Funds
for Institutions Series and Merrill Lynch Intermediate Government Bond Fund.
Mr. Goodwin is Chairman of the Compensation Committee and is a member of the
Board Organization and Operation, Executive and Finance Committees.
MICHAEL N. HAMMES, 59, has been a director since 1993. Since January 2000,
Mr. Hammes has been Chief Executive Officer and President of Sunrise Medical
Inc., a manufacturer of medical supplies. Prior to joining Sunrise Medical,
from November 1998 to December 1999, Mr. Hammes was the Chairman and Chief
Executive Officer of The Guide Corporation, an automotive lighting business.
From October 1993 to February 1997, Mr. Hammes was Chairman and Chief
Executive Officer of The Coleman Company, Inc., a manufacturer of products
used in the outdoor recreation and hardware industries. Mr. Hammes is also a
Director of NAVISTAR. Mr. Hammes is a member of the Audit, Compensation,
Executive and Finance Committees.
KATHRYN RUDIE HARRIGAN, 49, has been a director since 1995. Ms. Harrigan is
the Henry R. Kravis Professor of Business Leadership at the Columbia
University Graduate School of Business, where she has been a professor in the
Management and Organizations Division since 1981. Ms. Harrigan is also a
Director of Cambrex Corporation. Ms. Harrigan is a member of the Finance and
Health, Safety and Environment Committees.
CHARLES L. HENRY, 59, was named Chairman of the Board, President and Chief
Executive Officer of Johns Manville in September 1996. Mr. Henry was
previously Chief Financial Officer and Executive Vice President at E.I. du
Pont de Nemours and Company ("DuPont"). He joined DuPont in 1963 and held a
number of positions beginning with Process Engineer. Mr. Henry is a member of
the Board Organization and Operation, Executive, Finance and Health, Safety
and Environmental Committees.
LOUIS KLEIN, JR, 65, has been a director since 1992. Mr. Klein was elected a
Trustee of Manville Personal Injury Settlement Trust in December 1991. Mr.
Klein also serves as a Trustee of WT Mutual Fund. Mr. Klein is Chairman of the
Audit Committee and is a member of the Compensation and Finance Committees.
CHRISTIAN E. MARKEY, JR, 71, has been a director since 1992. Judge Markey
has been a Trustee of Manville Personal Injury Settlement Trust since its
inception in 1988 and is serving as a private judge specializing in dispute
resolution, including trials, arbitrations and mediations. Judge Markey is
Chairman of the Committee on Board Organization and Operation and is a member
of the Health, Safety and Environment Committee.
WILLIAM E. MAYER, 60, has been a director since 1996. In December 1996, Mr.
Mayer formed Development Capital L.L.C., a company which invests in private
and public companies. From October 1992 to December 1996, Mr. Mayer was Dean
of the College of Business and Management of the University of Maryland at
College Park. He is also a Director of Hambrecht & Quist, Inc., Lee
Enterprises, Inc. and Premier, Inc., and serves as Trustee for the Colonial
Group of Mutual Funds. Mr. Mayer is Chairman of the Finance Committee and is a
member of the Audit, Board Organization and Operation and Executive
Committees.
B-3
<PAGE>
PARENT DESIGNEE BIOGRAPHICAL INFORMATION
Parent has informed Johns Manville that it will choose the Parent designees
from the individuals shown in the table below to serve on the Board. The
information contained herein has been furnished to Johns Manville by Parent,
and Johns Manville assumes no responsibility for the accuracy or completeness
of such information. None of the Parent designees is a director of, or holds
any position with, Johns Manville. To the best of Parent's knowledge, no
Parent designee or any of its respective associates beneficially owns any
equity securities or rights to acquire securities of Johns Manville, nor has
any such person been involved in any transaction with Johns Manville or any of
its directors, executive officers or affiliates that is required to be
disclosed pursuant to the rules and regulations of the Commission; provided,
however, that National Indemnity Company, a subsidiary of Parent, owns
4,786,900 shares of Common Stock and Mr. Buffett may be deemed to control
Parent and therefore may be deemed to beneficially own such shares. The name,
age, present principal occupation and five-year employment history of each of
the following individuals are set forth below.
PROPOSED DIRECTOR LIST
<TABLE>
<CAPTION>
Present Principal Occupation or Employment,
Material Positions Held During Past Five
Name Age Years
---- --- -------------------------------------------
<C> <C> <S>
Warren E. Buffett........... 70 Mr. Buffett has been Chairman and Chief
Executive Officer of Parent since 1970. He
is also a director of Parent, The Coca-Cola
Company, The Gillette Company and The
Washington Post Company. His business
address is 1440 Kiewit Plaza, Omaha,
Nebraska 68131.
Charles T. Munger........... 76 Mr. Munger has been a director and Vice
Chairman of Parent's Board of Directors
since 1978. He is Chairman of the Board of
Directors and Chief Executive Officer of
Wesco Financial Corporation, Chairman of the
Board of Directors of Daily Journal
Corporation and a director of Costco
Wholesale Corporation. His business address
is 355 S. Grand Avenue, 34th Floor, Los
Angeles, California 90071.
Howard G. Buffett........... 46 Mr. Buffett is Chairman of the Board of
Directors of The GSI Group, a company
primarily engaged in the manufacture of
agricultural equipment. He is also a
director of Parent, Coca-Cola Enterprises,
Inc., Lindsay Manufacturing Co. and Mond
Industries Inc. His business address is 1004
East Illinois Street, Assumption, Illinois
62510.
Susan T. Buffett............ 68 Mrs. Buffett has been a director of Parent
since 1991. Mrs. Buffett has not been
employed in the past five years. Her
business address is 1440 Kiewit Plaza,
Omaha, Nebraska 68131.
Malcolm G. Chace............ 65 Mr. Chace serves on the board of directors
of Parent. In 1996, Mr. Chace was named
Chairman of the Board of Directors of
BankRI, a community bank located in the
state of Rhode Island. Prior to 1996, Mr.
Chace had been a private investor. Mr.
Chace's business address is One Providence
Washington Plaza, Providence, Rhode Island
02903.
Marc D. Hamburg............. 51 Mr. Hamburg has been the Vice President and
Treasurer of Parent for more than the past
five years. He is also the sole director of
Purchaser. His business address is 1440
Kiewit Plaza, Omaha, Nebraska 68131.
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment,
Material Positions Held During Past Five
Name Age Years
---- --- -------------------------------------------
<C> <C> <S>
Ronald L. Olson............. 59 Mr. Olson has, for more than the past five
years, been a partner in the law firm of
Munger, Tolles & Olson LLP. He is also a
director of Parent, Edison International,
Western Asset Trust, Inc. and Pacific
American Income Shares Inc. His business
address is 355 S. Grand Avenue, 35th Floor,
Los Angeles, California 90071.
Walter Scott, Jr............ 69 Mr. Scott has been Chairman of the Board of
Level 3 Communications, Inc., a
communications and information services
company, since 1979. Level 3 Communications
was formerly known as Peter Kiewit Sons',
Inc., for which, until the spin-off of its
construction operations in March 1998, Mr.
Scott also served as Chief Executive
Officer. Mr. Scott is also a director of
Parent, Burlington Resources, Inc., ConAgra,
Inc., Valmont Industries, Inc., Commonwealth
Telephone Enterprises, Inc. and RCN
Corporation. His business address is 1440
Kiewit Plaza, Omaha, Nebraska 68131.
</TABLE>
B-5
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Board Attendance
During 1999, the Board of Directors of Johns Manville had three regular
meetings and ten special meetings. In 1999, each Director attended at least a
minimum of 75 percent of the total number of meetings of the Board of
Directors and of the Committees of which the Director was a member.
Committees of the Board of Directors
The Board of Directors of Johns Manville has six standing Committees: Audit,
Board Organization and Operation, Compensation, Executive, Finance and Health,
Safety and Environment.
Audit Committee
The Audit Committee is comprised of Messrs. Benatar, Falise, Hammes, Klein
(Chairman) and Mayer. The Audit Committee met two times during 1999 and,
during such meetings, met with Johns Manville's internal auditors, independent
public accountants and operating and financial management. The principal
functions of the Audit Committee are to review and report to the Board with
respect to: (i) the annual financial statements and filings with the
Securities and Exchange Commission; (ii) accounting issues significant to
Johns Manville; (iii) internal auditing, accounting and financial controls;
(iv) the appointment of independent public accountants, the annual audit by
the independent public accountants, including the scope of the audit, and the
compensation of the independent public accountants for both audit and non-
audit services; (v) Johns Manville's policies governing compliance with laws
and regulations, ethics and conflicts of interest and any significant
instances of employee misconduct; and (vi) travel and entertainment expenses
of all officers of Johns Manville.
Committee on Board Organization and Operation
The Committee on Board Organization and Operation is comprised of Messrs.
Drew, Falise, Goodwin, Markey (Chairman) and Mayer. The Committee on Board
Organization and Operation met one time during 1999. The Committee on Board
Organization and Operation considers and makes recommendations to the Board
with respect to the composition of the Board and matters relating to the
organization, operation, function, compensation and procedures of the Board
and its Committees.
Compensation Committee
The Compensation Committee is comprised of Messrs. Benatar, Falise, Goodwin
(Chairman), Hammes and Klein. The Compensation Committee met one time during
1999. The principal functions of the Compensation Committee are to: (i)
approve and report to the Board with respect to executive compensation,
subject to the approval of the full Board in the case of compensation of the
Chief Executive Officer; (ii) review employee benefit programs and approve or
recommend changes therein to the Board; and (iii) review with the Chief
Executive Officer matters with respect to management development and
succession.
Executive Committee
The Executive Committee is comprised of Messrs. Drew, Falise (Chairman),
Goodwin, Hammes and Mayer. The Executive Committee did not meet in 1999. The
Executive Committee is delegated the authority of the full Board during the
intervals between Board meetings insofar as may be lawful, except for actions
relating to the declaration or payment of dividends. The Executive Committee
has the responsibility to report actions taken by it to the full Board at the
next meeting of the Board.
Finance Committee
The Finance Committee is comprised of Messrs. Drew, Falise, Goodwin, Hammes,
Klein and Mayer (Chairman) and Ms. Harrigan. The Finance Committee did not
meet during 1999. The principal functions of the
B-6
<PAGE>
Finance Committee are to review and report to the Board with respect to: (1)
significant tax issues and treasury matters; (2) Johns Manville's capital
structure; (3) the composition and actions of the Investment Committee; and
(4) Johns Manville's retirement, thrift, health and welfare and other benefit
plans.
Health, Safety and Environment Committee
The Health, Safety and Environment Committee is comprised of Messrs. Benatar
(Chairman), Drew and Markey and Ms. Harrigan. The Health, Safety and
Environment Committee did not meet during 1999. The principal functions of the
Health, Safety and Environment Committee are to provide oversight and to
report and make recommendations to the Board with respect to Johns Manville's
activities relating to health, safety and environmental issues and product
safety.
B-7
<PAGE>
COMPENSATION OF DIRECTORS
Charles L. Henry is the only Director who is employed by Johns Manville. He
receives no fees for serving as a Director in addition to his regular
compensation.
Except for Messrs. Falise, Klein and Markey, all non-employee Directors
receive an annual retainer of $25,000, $1,000 for each Board meeting attended,
$1,000 for each Committee of the Board meeting attended, and reimbursement for
travel expenses related to attendance at Board and Committee meetings. Each
Director (other than Messrs. Falise, Klein and Markey) who serves as a
Committee Chairman is paid an additional $2,500 per year. Director's fees
earned by Johns Manville's Directors who are Trustees of the Trust ("Trustee
Director") are paid directly to the Trust pursuant to the Manville Personal
Injury Settlement Trust Agreement, as amended (the "Trust Agreement").
In addition, non-employee Directors (other than Trustee Directors) are
granted $12,500 annually in deferred shares of Common Stock under Johns
Manville's Non-Employee Directors' Deferred Compensation Plan (the "Directors'
Plan"). Because the Trust Agreement prohibits Trustee Directors from direct
ownership of Common Stock, Trustee Directors are granted $12,500 annually to
be deemed invested in non-Common Stock investment alternatives under the
Directors' Plan. The Directors' Plan provides that if Trustee Directors become
eligible to own Common Stock, the annual grants will automatically be deemed
to be invested in Common Stock. The Directors' Plan also provides for elective
deferral of annual retainers, Board and Committee meeting fees and Committee
Chairman fees.
Messrs. Falise, Goodwin, Hammes and Mayer served on a special committee of
the Board of Directors in connection with the evaluation of strategic
alternatives considered by Johns Manville. The special committee met 17 times
in 1999 and each Director on the special committee was paid $1,000 for each
meeting. In addition, each member of the special committee was paid $50,000 in
June 2000 in connection with his services. Mr. Falise's amounts were paid to
the Trust as described above.
B-8
<PAGE>
MANAGEMENT
Executive Officers
The following table sets forth, as of December 28, 2000, certain information
regarding Johns Manville's senior executive officers, each of whom is expected
to serve in such capacity until consummation of the Merger. Officers are
elected annually by the Board and serve at its discretion.
<TABLE>
<CAPTION>
Name Age Position with Company
---- --- ---------------------
<S> <C> <C>
Charles L. Henry........ 59 Chairman of the Board, President and Chief Financial Officer
John J. Klocko, III..... 61 Senior Vice President and General Counsel
Harvey L. Perry, Jr. ... 46 Senior Vice President, Engineered Products Group
Thomas L. Caltrider..... 50 Senior Vice President, Insulation Group
Kenneth L. Jensen....... 49 Senior Vice President and Chief Financial Officer
</TABLE>
Business Experience
Each of Messrs. Perry and Jensen has been an officer or executive officer of
Johns Manville or its subsidiaries during the past five years. Messrs. Henry,
Caltrider and Klocko have been executive officers of Johns Manville from 1996,
1997 and 1998 respectively. Prior to his joining Johns Manville, Mr Henry
served in various executive positions with DuPont. Between 1993 and 1995,
Mr Caltrider served as President and Chief Executive Officer of Gundle
Environmental Systems, Inc. Between 1995 and the time he joined
Johns Manville, Mr. Klocko served as Associate General Counsel of DuPont.
B-9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth the identity of beneficial owners believed by
Johns Manville to own more than five percent of the outstanding shares of
common stock as of December 28, 2000.
<TABLE>
<CAPTION>
Amount
of Beneficial Percentage
Title of Class Name and Address of Beneficial Owner Ownership of Class
-------------- ------------------------------------ ------------- ----------
<S> <C> <C> <C>
Common Stock............ Manville Personal Injury Settlement Trust 102,230,819 74.4%
143 Bedford Road, Suite 200
Katonah, New York 10536
</TABLE>
--------
(1) At December 28, 2000, the trustees of the Trust were: Robert A. Falise,
Chairman and Managing Trustee, Louis Klein, Jr., Frank J. Macchiarola and
Christian E. Markey, Jr. Messrs. Falise, Klein and Markey serve on Johns
Manville's Board of Directors.
Security Ownership of Management
The following table sets forth the number of shares of common stock
beneficially owned by all directors and senior executive officers and all
directors and executive officers as a group as of December 28, 2000. As of
December 28, 2000, the percentage of common stock beneficially owned by any
director, executive officer or by all directors and executive officers as a
group, did not exceed 1.0 percent of the outstanding shares of the common
stock, excluding the 102,230,819 shares of common stock owned by the Trust
(constituting 74.4% of the outstanding shares of Common Stock) and attributed
to certain directors who disclaim beneficial ownership of such shares.
<TABLE>
<CAPTION>
Common Stock Percentage
Name of Beneficial Owner Beneficial Owned of Class
------------------------ ---------------- ----------
<S> <C> <C>
Leo Benatar..................................... 18,255(1) *
Thomas L. Caltrider............................. 316,103(2) *
Ernest H. Drew.................................. 13,105(3) *
Robert A. Falise................................ 102,230,819(4) 74.4%
Todd Goodwin.................................... 43,218(5) *
Michael N. Hammes............................... 11,633(6) *
Kathryn R. Harrigan............................. 13,737(7) *
Charles L. Henry................................ 1,256,358(8) *
Kenneth L. Jensen............................... 329,272(9) *
Louis Klein, Jr. ............................... 102,230,819(4) 74.4%
John J. Klocko, III............................. 128,564(10) *
Christian E. Markey, Jr. ....................... 102,230,819(4) 74.4%
William E. Mayer................................ 42,347(11) *
Harvey L. Perry, Jr. ........................... 410,434(12) *
All Directors and executive officers as a group
(14 persons)................................... 104,813,745(13) 76.3%
</TABLE>
--------
* Ownership is less than 1 percent.
(1) Includes 13,755 deferred shares issuable under Johns Manville's the Non-
Employee Directors' Deferred Compensation Plan.
(2) Includes options to purchase 233,787 shares and 28,533 deferred shares
issuable under Johns Manville's Deferred Compensation Plan.
(3) Includes 13,105 deferred shares issuable under Johns Manville's Non-
Employee Directors' Deferred Compensation Plan.
B-10
<PAGE>
(4) All of these 102,230,819 shares of common stock are owned by the Trust,
of which Mr. Falise is the Chairman and Managing Trustee, and Messrs.
Klein, Macchiarola and Markey are Trustees. Voting power with respect to
such shares is shared by all four Trustees of the Trust, and none of
Messrs. Falise, Klein, Macchiarola or Markey can vote the shares alone.
Each of Messrs. Falise, Klein, Macchiarola and Markey disclaims
beneficial ownership of any shares of common stock of Johns Manville.
Pursuant to the Amended and Restated Manville Personal Injury Settlement
Trust Agreement, dated as of April 29, 1997, between Johns Manville and
the Trustees, no Trustee may individually own any securities of Johns
Manville or its affiliates or have any other direct or indirect financial
interest in Johns Manville or its affiliates.
(5) Includes 24,118 deferred shares issuable under the Non-Employee
Directors' Deferred Compensation Plan.
(6) Includes 11,633 deferred shares issuable under the Non-Employee
Directors' Deferred Compensation Plan.
(7) Includes 7,737 deferred shares issuable under the Non-Employee Directors'
Deferred Compensation Plan.
(8) Includes options to purchase 949,264 shares and 169,002 deferred shares
issuable under the Johns Manville's Deferred Compensation Plan.
(9) Includes options to purchase 236,621 shares and 36,969 deferred shares
issuable under Johns Manville's Deferred Compensation Plan.
(10) Includes options to purchase 95,825 shares and 7,267 deferred shares
issuable under Johns Manville's Deferred Compensation Plan.
(11) Includes 22,347 deferred shares issuable under the Non-Employee
Directors' Deferred Compensation Plan.
(12) Includes options to purchase 299,343 shares and 53,919 deferred shares
issuable under Johns Manville's Deferred Compensation Plan.
(13) Includes 92,695 deferred shares issuable under the Non-Employee
Directors' Deferred Compensation Plan; 295,690 deferred shares issuable
under Johns Manville's Deferred Compensation Plan, options to purchase
1,814,840 shares and 102,230,819 shares owned by the Trust. See note (4)
above.
B-11
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Report of the Compensation Committee
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of Directors who are not employees of Johns Manville or any
of its subsidiaries. The Board of Directors has delegated to the Committee the
responsibility for establishing and administering Johns Manville's executive
compensation plans subject to the Board's final approval of major new
compensation systems and the Chief Executive Officer's compensation. Johns
Manville consults with outside compensation consultants, attorneys and other
specialists.
Johns Manville's primary objective is to work with management to design and
implement compensation systems that both attract and retain a top quality
management team and motivate that team to build long-term value for
stockholders. The guiding principle of Johns Manville's compensation system is
"Pay for Performance," with an emphasis on variable pay tied to the attainment
of performance goals. Under the Pay for Performance philosophy used throughout
the organization, the combination of annual incentive bonuses, which are
dependent on performance, equity-related long-term awards and base salary
offers the opportunity for executives' average total compensation from all
sources over a number of years to reach competitive levels of total
compensation. However, actual total compensation levels may range below or
above competitive levels based on performance. The compensation system aligns
the interests of executives with the interests of stockholders and encourages
employees to anticipate and respond to business challenges and opportunities
while avoiding an entitlement attitude.
Together with its outside experts, Johns Manville reviews compensation
practices of other companies and the prevailing salary and total compensation
levels. Comparisons are made with compensation levels for a broad group of
companies, including companies included in the Standard & Poor's Building
Materials Index, which reflects Johns Manville's principal lines of business.
Target compensation levels are determined based upon the 50th to 75th
percentile levels of compensation at comparable companies for comparable
performance. Johns Manville considers its mix of businesses, its unique stock
ownership and its strategic and tactical objectives when target compensation
levels are set.
Section 162(m) of the Internal Revenue Code (the "Code") generally disallows
a tax deduction to public companies for compensation over $1 million paid to
the Chief Executive Officer and the other four most highly compensated
individuals who are executive officers as of the end of the year. An exception
is made for qualifying performance-based compensation if certain requirements
are met. Johns Manville's policy is to preserve corporate tax deductions by
qualifying compensation paid over $1 million to named executive officers, but
it also maintains the flexibility to approve compensation arrangements that it
deems to be in the best interests of Johns Manville and its stockholders but
which may not always qualify for full tax deductibility, as was the case in
1999 with respect to a portion of Mr. Henry's compensation.
Compensation Philosophy
The discussion below outlines Johns Manville's philosophy for administering
the three major components of executive pay: base salary, annual incentive and
stock options.
Base Salaries. Johns Manville determines base salaries of executives by
considering the following factors listed in order of importance: the
significance of the executive's position to Johns Manville, the executive's
experience and expertise in his or her position, and competitive marketplace
salaries for similar positions. Johns Manville bases individual salary
increases on each person's performance. Base salaries for current executive
officers increased, on average, 4 percent in 1999. Johns Manville's policy is
to position base salaries at or below competitive levels for similarly
qualified executives in comparable positions.
Annual Incentive Bonus. Since 1987, Johns Manville has had an annual
incentive pay plan that provides above average bonus opportunities when
Company performance merits such awards. Target bonuses for executive officers
in 1999 ranged from 65 percent to 100 percent of their respective base
salaries.
B-12
<PAGE>
For 1999, the maximum bonus potential, according to the formula in the plan,
would be triggered at achievement of 125 percent of 1999 earnings per share
targets and 130 percent of 1998 earnings per share amounts. The minimum bonus
award required the achievement of 75 percent of 1999 earnings per share
targets and 1998 earnings per share amounts. Achievements in excess of 130
percent of earnings per share targets or personal achievements of particular
significance could result in bonuses in excess of 200 percent of target
bonuses. In some cases, after-tax operating income targets are utilized in
addition to earnings per share targets. Johns Manville reviews and approves
the annual performance targets, other performance objectives, and maximum and
minimum performance levels at the beginning of each year.
In 1999, Johns Manville weighted 80 percent of the bonus on financial goals
and 20 percent of the bonus on our assessment of an individual executive's
performance. In approving individual awards, Johns Manville considered the
achievement of record levels of earnings per share at Johns Manville
(68% percent higher than 1998), the substantial additional efforts of
executives in connection with Johns Manville's exploration of strategic
alternatives and the accomplishment of many key strategic initiatives during
1999. For 1999, Johns Manville's various business divisions achieved between
78 percent and 119 percent of their respective after-tax operating income
targets, while Johns Manville as a whole achieved 162 percent of its earnings
per share target. Johns Manville also took into account the Chief Executive
Officer's appraisal of each senior officer and made its decision regarding
individual awards without expressly weighting any of the foregoing criteria
higher than any other of such criteria. Based on the achievements described
above, aggregate annual incentive compensation for executive officers in 1999
was 168 percent of target bonuses. Executive officers who elected to defer
receipt of all or part of their annual incentive bonus and to have such
amounts deemed to be invested in Common Stock for at least two years, will
receive a 15 percent premium grant of Common Stock at the end of the two-year
period if still employed at such time.
Long-Term Incentive Plans. In 1996, Johns Manville adopted the Johns
Manville Corporation 1996 Executive Incentive Compensation Plan (the "Stock
Plan"), which was approved by stockholders at the 1996 Annual Meeting. Options
and awards have been granted under the Stock Plan with the intention to
recognize the joint commitment of the Board of Directors and key management to
a long- term growth strategy and the creation of stockholder value.
Effective January 1, 1996, Johns Manville granted ten-year stock options and
deferred stock awards to executive officers and other members of management in
amounts representing a multi-year long-term incentive grant. The exercise
price of 60 percent of the options was established at $10.625 per share, the
market price of the Common Stock (the "Market Price") on June 7, 1996, the
actual date of grant, and the exercise price of the remaining 40 percent of
the options was established at $13.281 per share, which represents a twenty-
five percent premium over the Market Price. Fifty percent of the options
vested at December 31, 1996 and 50 percent vested at December 31, 1997. The
deferred stock awards represent the right to receive Common Stock or the value
thereof and current dividends thereon. Sixty percent of the deferred stock
vested on December 31, 1998, and the remainder will vest in equal amounts on
December 31, 1999 and December 31, 2000, assuming continued employment.
Executive officers joining Johns Manville since January 1, 1996 have also been
awarded options and deferred stock under the Stock Plan in prorated amounts
based on their starting dates and the stock price at such times.
On December 10, 1998, Johns Manville granted additional ten-year stock
options to executive officers and other members of management. In light of the
multi-year grant described above, these options represented approximately one-
half of a normal annual grant. The exercise price of the options was
established at $15.1875, the market price of the Common Stock on December 10,
1998, the actual date of grant. One-third of the options vested on December
31, 1999 and the remainder will vest equally on each of the two succeeding
anniversaries of such date.
CEO Compensation. Mr. Henry's total compensation has been determined in
accordance with the principles described above which are applicable to all
executive officers of Johns Manville. Mr. Henry's 1999 base salary of $725,000
is in accordance with the average of annual salaries for chief executive
officers of
B-13
<PAGE>
comparable companies. Mr. Henry received an annual incentive bonus for 1999 of
$1,218,084 based upon the factors discussed above and on Johns Manville's
assessment of Mr. Henry's individual accomplishments.
Johns Manville believes the design of its total compensation system
accomplishes Johns Manville's goals of attracting new management talent,
retaining Johns Manville's high quality ongoing management team and aligning
the interests of these executives with those of stockholders.
1999 Compensation Committee
Todd Goodwin, Chairman
Leo Benatar
Ernest H. Drew
Robert A. Falise
Michael N. Hammes
Louis Klein, Jr.
Compensation Summary
The following Summary Compensation Table sets forth the compensation earned
from Johns Manville during 1997 through 1999 by Charles L. Henry, Johns
Manville's Chief Executive Officer, and by each of the other four most highly
compensated executive officers of Johns Manville during 1999 (the "Named
Executive Officers"). Bonuses are shown for the year earned, although these
are generally paid at the beginning of the subsequent year.
JOHNS MANVILLE CORPORATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual
Compensation Long-Term Compensation
---------------- --------------------------
Awards Payouts
Other ------------------------- -------
Annual Securities All
Comp. Restricted Underlying LTIP Other
Name and ($) Stock Award(s) Options/ Payouts Comp.
Principal Position Year Salary ($) Bonus ($) (1) ($) (2) SARs (#) ($) (3) ($) (4)
------------------ ---- ---------- --------- ------ -------------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles L. Henry(5)..... 1999 725,000 1,218,084 6,163 -0- -0- -0- 10,000
Chairman of the Board, 1998 725,000 1,375,000 5,608 -0- 125,000 -0- 9,600
President & CEO 1997 650,000 650,000 26,390 -0- 200 -0- 8,181
Thomas L. Caltrider(6).. 1999 295,000 351,015 3,073 -0- -0- -0- 10,000
Senior Vice President, 1998 275,000 365,750 27,115 -0- 38,300 -0- 18,496
Insulation Group 1997 143,750 130,000 21,751 357,994 197,203 -0- 74,519
John J. Klocko, III(7).. 1999 225,000 231,099 1,210 -0- -0- -0- 10,000
Senior Vice President 1998 93,750 109,687 1,287 199,355 98,174 -0- 45,110
and General Counsel 1997 -0- -0- -0- -0- -0- -0- -0-
John P. Murphy(8)....... 1999 250,000 273,026 23,835 -0- -0- -0- 10,000
Senior Vice President 1998 225,000 277,875 13,076 -0- 30,250 -0- 109,600
and Chief Financial
Officer 1997 18,750 10,000 -0- 254,353 128,02 -0- -0-
Harvey L. Perry, Jr. ... 1999 251,667 300,395 76 -0- -0- -0- 10,000
Senior Vice President, 1998 235,000 260,206 -0- 97,606 91,139 -0- 9,600
Engineered Products
Group 1997 210,000 121,000 15,038 -0- 200 338,842 8,181
</TABLE>
-------
(1) Other Annual Compensation represents amounts reimbursed by Johns Manville
to the Named Executive Officers in respect of the taxable value of
perquisites provided to such officers.
B-14
<PAGE>
(2) The number and value of aggregate deferred Common Stock awards held by
each of the Named Executive Officers at the end of 1999, based on the fair
market value of the Common Stock on December 31, 1999, are as follows: Mr.
Henry--47,059 shares with a value of $655,885; Mr. Caltrider--10,165
shares with a value of $141,675; Mr. Klocko--5,076 shares with a value of
$70,747; Mr. Murphy--7,499 shares with a value of $104,517; and Mr.
Perry--10,997 shares with a value of $153,271.
The following table shows the vesting schedule of all shares awarded which,
as of December 31, 1999, had not previously vested for the Named Executive
Officers:
<TABLE>
<CAPTION>
2000
------
<S> <C>
C.L. Henry.......................................................... 47,059
T.L. Caltrider...................................................... 10,165
J.J. Klocko, III.................................................... 5,076
J.P. Murphy......................................................... 7,499
H.L. Perry, Jr. .................................................... 10,997
</TABLE>
Each share of deferred stock is entitled to receive a payment equal to
dividends declared and paid on shares of the Common Stock. Upon the occurrence
of certain events which constitute a Change in Control (as defined under
"Employment Agreements and Other Arrangements") and upon the occurrence of
certain events described in the award agreements (including certain
terminations of employment) all outstanding shares of deferred stock become
immediately vested and, their value may be paid in cash to the holders.
(3) Amounts represent payments made under Johns Manville's 1994 Long Term Cash
Incentive Compensation Plan.
(4) Amounts in this column represent $8,896 paid to Mr. Caltrider in 1998 for
relocation expenses; $42,972 paid to Mr. Klocko in 1998 for relocation
expenses; $100,000 paid to Mr. Murphy in 1998 in lieu of relocation
payments; and $67,092 paid to Mr. Caltrider in 1997 for relocation
expenses. All other amounts in this column of up to $8,181 in 1997, $9,600
in 1998 and $10,000 in 1999 represent Johns Manville's contribution to
each of the Named Executive Officers' accounts in Johns Manville's 401(k)
Plan.
(5) Mr. Henry announced his retirement effective March 31, 2000, which has
been postponed.
(6) Mr. Caltrider joined Johns Manville effective June 5, 1997.
(7) Mr. Klocko joined Johns Manville effective August 1, 1998.
(8) Mr. Murphy joined Johns Manville effective December 1, 1997 and left Johns
Manville effective February 29, 2000.
Option/SAR Grants in Last Fiscal Year
No options were granted to the Named Executive Officers in 1999.
B-15
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION/SAR VALUES
The following table provides information concerning the exercise of stock
options and SARs by the Named Executive Officers during 1999 and the value of
unexercised options and SARs at the end of 1999.
JOHNS MANVILLE CORPORATION
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired on FY-End (#) FY-End ($)
Exercise Value Exercisable/ Exercisable/
Name (#) Realized ($) Unexercisable Unexercisable
---- ----------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C>
Charles L. Henry..... None None 907,497 / 83,533 1,948,209 / 350
Thomas L. Caltrider.. None None 209,770 / 25,733 299,611 / 350
John J. Klocko, III.. None None 44,047 / 54,127 0 / 0
John P. Murphy....... None None 138,105 / 20,166 241,504 / 0
Harvey L. Perry,
Jr.................. None None 275,226 / 25,733 593,156 / 350
</TABLE>
Pension Plan
Salaried employees are participants in the Johns Manville Employees
Retirement Plan (the "Retirement Plan"). Pension benefits under the Retirement
Plan are limited to the amounts allowed by the provisions of the Code. Johns
Manville has adopted a Supplemental Pension Plan ("Supplemental Plan") that
provides for payment of the difference between the benefits earned pursuant to
the Retirement Plan, without regard to Code limits, and the amounts actually
available from the Retirement Plan. Former and current executive officers, and
other employees, are eligible to participate in the Supplemental Plan. In
addition, Mr. Henry is entitled to an individual retirement arrangement under
the terms of his employment agreement. See "Employment Agreements and Other
Arrangements." The Supplemental Plan may be funded by contributions to an
irrevocable Supplemental Pension Plan Trust for the accounts of participants.
The following Pension Plan Table sets forth, as of December 31, 1999, the
estimated annual benefits payable upon retirement, including amounts
attributable to the Supplemental Plan, for specified remuneration levels and
years of service.
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------------
Remuneration 5 10 15 20 25 30
------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 300,000................. $ 20,408 $ 40,817 $ 61,225 $ 81,634 $102,042 $122,450
400,000................. 27,409 54,817 82,226 109,634 137,043 164,452
500,000................. 34,409 68,818 103,226 137,635 172,044 206,453
600,000................. 41,408 82,817 124,225 165,634 207,042 248,450
700,000................. 48,409 96,817 145,226 193,634 242,043 290,452
800,000................. 55,409 110,818 166,226 221,635 277,044 332,453
900,000................. 62,408 124,817 187,225 249,634 312,042 374,450
1,000,000................ 69,409 138,817 208,226 277,634 347,043 416,452
1,200,000................ 83,408 166,817 250,225 333,634 417,042 500,450
1,400,000................ 97,409 194,818 292,226 389,635 487,044 584,453
1,600,000................ 111,409 222,817 334,226 445,634 557,034 668,452
</TABLE>
--------
Notes:
(1) Had the Named Executive Officers retired as of December 31, 1999, their
remuneration, for purposes of the table set forth above, would have been
as follows: Mr. Henry, $1,485,000; Mr. Caltrider, $532,875; Mr. Klocko,
$334,687; Mr. Murphy, $381,438; and Mr. Perry, $395,141.
B-16
<PAGE>
(2) On December 31, 1999, the Named Executive Officers had the following years
of credited service under the Retirement Plan: Mr. Henry, 3; Mr.
Caltrider, 2; Mr. Klocko, 1; Mr. Murphy, 2; and Mr. Perry, 21.
(3) The Retirement Plan provides for payment of a retirement allowance based
on 1.02 percent of the participant's five-year average final salary up to
Covered Compensation (as defined in the Retirement Plan) plus 1.4 percent
of the participant's average final salary greater than Covered
Compensation multiplied by the participant's years of benefit service up
to a maximum of 35 years plus 1.33 percent of the participant's average
final salary multiplied by the participant's years of service over 35 plus
2.5 percent of the value of the participant's refunded contributions and
interest compounded at 5.0 percent until normal retirement age. Salary, as
defined in the Retirement Plan, includes payments under Johns Manville's
annual incentive pay plan, but excludes payments under Johns Manville's
long-term incentive compensation plan. The benefits are determined by
using straight-life annuity amounts and are not subject to reduction for
Social Security benefits.
Employment Agreements and Other Arrangements
Each of the Named Executive Officers and certain other salaried executives
of Johns Manville have entered into three-year employment agreements that
provide for lump sum separation payments upon any termination of employment
other than termination for cause, voluntary resignation without "good reason"
as defined in the employment agreements, or termination as a result of death,
disability or retirement. For the Named Executive Officers, prior to a Change
in Control, as defined below, separation payments under such contracts
generally equal a total of two times the annual salary, the full year bonus at
target levels of performance under Johns Manville's annual incentive pay plan
and certain other benefits. Following a Change in Control, the definitions of
"cause" and "good reason" are liberalized and benefits payable are enhanced.
Following a Change in Control, upon a termination of employment other than (i)
for cause, (ii) a voluntary resignation without "good reason," or (iii) as a
result of death, disability or retirement, benefits include three years'
annual salary, three years' target annual bonus, two years' additional credit
in certain cases under the Supplemental Plan, a pro-rata portion of the target
annual bonus for the year of termination, 36 months of continued welfare
benefits and 24 months of continued perquisites. In addition, Johns Manville
has agreed that if any of the Named Executive Officers is determined to be
subject to any excise tax under Code Section 4999 and related interest and
penalties as a result of any payments made to him ("Excise Tax"), Johns
Manville shall pay such officer an amount which, after taking into account any
federal, state and local income taxes and excise taxes upon such amount, is
equal to the amount of the Excise Tax. Change in Control is defined in the
employment agreements to include a variety of events, including significant
changes in Johns Manville's stock ownership or board of directors and sales of
significant assets by Johns Manville. The consummation of the transactions
contemplated by the Merger Agreement would constitute a Change in Control.
In order to provide Mr. Henry with retirement benefits comparable to the
retirement benefits he would have earned at his prior employer, Mr. Henry's
employment agreement also provides for certain supplemental retirement
benefits, generally equal in value to a single life annuity of approximately
$900,000 per year less the amount of all annual payments which Mr. Henry is
entitled to receive under all defined benefit plans maintained by Johns
Manville and by his prior employer. The retirement benefits are subject to
reduction in the event Mr. Henry's employment terminates prior to his
attaining the age of 62. In connection with his previously announced
retirement and in consideration of his agreement to provide certain
transitional services, Johns Manville agreed to provide Mr. Henry with the
present value of these retirement benefits without any reduction. Pursuant to
this agreement, the present value of these retirement payments, estimated to
be approximately $5.0 million, will be paid to Mr. Henry by January 10, 2001.
In addition, Johns Manville agreed to provide the Change in Control benefit
described above upon the closing of a transaction constituting a Change of
Control, if a binding agreement with respect to such Change of Control was
entered into prior to Mr. Henry's retirement. These payments, estimated to be
an additional amount of approximately $4.5 million, would be paid to Mr. Henry
upon the consummation of the transactions contemplated by the Merger
Agreement. In all other respects, Mr. Henry is entitled to such benefits as
are generally payable to retirees as provided by his employment agreement and
other Company plans. Johns Manville and Mr. Henry are currently considering an
extension of Mr. Henry's employment agreement.
B-17
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is currently comprised of Messrs. Benatar, Drew,
Falise, Goodwin (Chairman), Hammes and Klein. No interlocks existed and no
insider participation occurred during 1999 between the Compensation Committee
and the officers or employees of Johns Manville.
Performance Graph
Presented below is a table comparing the total stockholder return on Common
Stock, assuming full dividend reinvestment, with the Standard & Poor's 500
Index (S&P 500) and the Standard & Poor's Building Materials Index (S&P
Building Materials). The table below compares Johns Manville's performance to
the other indices for the five-year period ended December 31, 1999.
JOHNS MANVILLE CORPORATION
<TABLE>
<CAPTION>
Cumulative Return at Fiscal Year End
-------------------------------------------------
1994 1995 1996 1997 1998 1999
---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Johns Manville.............. 100 144.44 192.79 184.90 306.53 264.27
S&P 500..................... 100 134.11 166.30 225.49 289.93 350.93
S&P Building Materials...... 100 133.39 160.30 189.47 210.73 169.03
</TABLE>
B-18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Trust owns approximately 74.4 percent of the outstanding Common Stock
and by virtue of such stock ownership is able to nominate and elect Directors
of Johns Manville as the Trust determines. Three of Johns Manville's current
Directors, Messrs. Falise, Klein and Markey, are Trustees of the Trust.
In connection with the transactions contemplated pursuant to the Merger
Agreement, including the Offer and the Merger, Johns Manville and the Trust
have entered into the Trust Letter Agreement, the Share Purchase Agreement and
the Tax Matters Agreement and will enter into, at the closing of the
transactions contemplated by the Tax Matters Agreement, the Amended
Supplemental Agreement, the Amendment to the Trust Agreement and the Escrow
Agreement. A summary of each of the Tax Matters Agreement, the Amended
Supplemental Agreement, the Amendment to the Trust Agreement, the Escrow
Agreement, the Trust Letter Agreement and the Share Purchase Agreement is
contained in the Offer to Purchase, which has been filed with the Commission
as an exhibit to the Schedule TO and each summary should be read in its
entirety for a more complete description of the terms and provisions of these
agreements with the Trust.
Policy of the Board of Directors
All ongoing and any future transactions with affiliates of Johns Manville,
if any, will be on terms believed by Johns Manville to be no less favorable
than are available from unaffiliated third parties and will be approved by a
majority of disinterested directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Johns Manville's executive officers and directors, and persons who
beneficially own more than 10% of a registered class of Johns Manville's
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and the New York Stock Exchange. Based
solely on a review of the copies of reports furnished to Johns Manville and
written representations from Johns Manville's executive officers, directors
and persons who beneficially own more than 10% of Johns Manville's equity
securities, Johns Manville believes that, during fiscal year 1999, all filing
requirements applicable to its officers, directors and ten percent beneficial
owners were met, except that Mr. Caltrider filed a late report with respect to
his purchase of 1,500 shares of Common Stock.
B-19
