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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
SCHEDULE 14D-9
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Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
KERR GROUP, INC.
--------------------------------
(Name of Subject Company)
Kerr Group, Inc.
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(Name of Person(s) Filing Statement)
Common Stock, Par Value $.50 Per Share (and Preferred Stock Purchase Rights)
and $1.70 Class B Cumulative Convertible Preferred Stock, Series D,
Par Value $.50 Per Share
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(Title of Class of Securities)
492376108 and
492376207
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(CUSIP Number of Class of Securities)
D. Gordon Strickland
President and Chief Executive Officer
KERR GROUP, INC.
500 New Holland Avenue
Lancaster, Pennsylvania 17602
(717) 299-6511
--------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notice and Communications on Behalf of the Person(s) Filing Statement)
Copies to:
Steven J. Gartner, Esq.
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(212) 821-8000
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Kerr Group, Inc., a Delaware corporation (the "Company"), hereby amends and
supplements it Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), filed with the Securities and Exchange Commission on February
14, 1997, with respect to the tender offer of Fremont Acquisition Company, LLC,
a Delaware limited liability company ("Fremont"), and its wholly owned
subsidiary, Kerr Acquisition Corporation ("Purchaser"), to purchase all of the
outstanding shares of the $1.70 Class B Cumulative Convertible Preferred Stock,
Series D, par value $.50 per share (the "Preferred Stock"), and the Common
Stock, par value $.50 per share (and the associated Preferred Stock Purchase
Rights).
Item 8. Additional Information
The information set forth in Item 8 is hereby amended and supplemented by the
following:
(d) Pending Litigation
On July 30, 1997, a purported holder of the Preferred Stock filed a
complaint entitled Dr. Alan Laties vs. Kerr Group, Inc. et al., Civil Action
No. 15825-NC, against the Company and its directors (the "Defendants") in
the Court of Chancery of the State of Delaware in and for New Castle County.
The complaint seeks certification of the action as a class action and
declaratory judgment that the acquisition is unfair to the holders of the
Preferred Stock. In addition, the complaint seeks an order (i) enjoining
the Defendants and any entities acting in concert with them from taking any
action to consummate any of the transactions contemplated by the Merger
Agreement; (ii) awarding plaintiff and the class damages against the
Defendants jointly and severally and directing the Defendants to account to
the Class for their profits; and (iii) awarding costs and expenses to
plaintiff including reasonable attorneys' fees.
The Defendants believe that the suit is without merit and intend to defend
the suit vigorously.
(e) Pension Benefit Guaranty Corporation
On August 1, 1997, the Pension Benefit Guaranty Corporation (the
"PBGC") published a Notice of Determination (the "Notice") to terminate
the Company's Retirement Income Plan (the "Retirement Plan"). According to
the Notice, the PBGC intends to apply to the United States District Court for
the Eastern District of Pennsylvania for an order to (i) terminate the
Retirement Plan effective as of August 1, 1997 and (ii) appoint the PBGC as
statutory trustee of the Retirement Plan.
Item 10. Material to be Filed as Exhibits.
Exhibit 10 Complaint entitled Dr. Alan Laties vs. Kerr Group, Inc. et al.
Civil Action No. 15825-NC.
Exhibit 11 Notice of Determination, dated August 1, 1997, by the Pension
Benefit Guaranty Corporation.
Exhibit 12 Press Release issued by the Company, dated August 1, 1997.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Kerr Group, Inc.
By: /s/ Geoffrey A. Whynot
------------------------
Name: Geoffrey A. Whynot
Title: Vice President Finance and
Chief Financial Officer
Dated: August 1, 1997
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Exhibit 10
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------x
DR. ALAN LATIES,
Plaintiff, Civil Action No. 15825
- v. -
KERR GROUP, INC., HERBERT ELISH,
HARVEY L. SPERRY, D. GORDON STRICKLAND, CLASS ACTION
JAMES R. MELLOR, ROBERT M. O'HARA, COMPLAINT
GORDON C. HURLBERT, MICHAEL C. JACKSON, ------------
and JOHN D. KYLE,
Defendants.
- ----------------------------------------x
Plaintiff, by his attorneys, alleges upon information and belief, except as
to paragraph 1 which is alleged upon knowledge, as follows:
PARTIES
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1. Plaintiff is and, at all relevant times, has been the owner of shares of
the $1.70 Class B Cumulative Convertible Preferred Stock, Series D, par value
$.50 per share (the "Preferred") of defendant Kerr Group, Inc. ("Kerr" or the
"Company").
2. (a) Kerr is a corporation organized and existing under the laws of the
State of Delaware with offices in Lancaster, Pennsylvania. Kerr produces plastic
packaging products.
(b) The Company has authorized and outstanding about 487,000 shares of
Preferred and 3,933,000 shares of common stock (the "Common"). Both classes are
listed and traded on the New York Stock Exchange.
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(c) Holders of the Preferred are entitled to a cumulative dividend,
payable quarterly, at the annual rate of $1.70 per share. The Preferred is
redeemable at the option of the Company at any time, in whole or in part, at a
price of $20.00 per share plus cumulative unpaid dividends. In the event of a
dissolution, winding up, or liquidation of the Company, voluntary or
involuntary, the holders of Preferred are entitled to receive $20.00 per share,
plus any dividend arrearage on such stock, before any distribution or payment is
made to any holder of Common Stock. In addition, the Preferred is convertible
into Common Stock at the rate of 1.4545 shares of Common Stock for each share of
Preferred. The Preferred have the right to vote only on amendments to the
Certificate of Incorporation that would materially adversely affect their
rights. However, if six quarterly dividends on the Preferred are unpaid, the
holders of Preferred are entitled, voting as a class, to elect two additional
persons to the Board of Directors of the Company until all such dividends have
been paid.
(d) The Company has not declared a dividend on the Preferred since the
first quarter of 1996, or a total of six quarters. The cumulative amount of
undeclared dividends as of June 30, 1997 is $2.55 per Preferred share. At June
30, 1997, the Preferred's liquidation value was $22.55 per share.
3. (a) Defendant Herbert Elish ("Elish") is the Chairman of Kerr's Board of
Directors. The other directors of Kerr are defendants Gordon C. Hurlbert,
Michael C. Jackson ("Jackson"), John D. Kyle, James R. Mellor, Robert M.
O'Hara, Harvey L.
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Sperry, and D. Gordon Strickland ("Strickland"), the President and Chief
Executive Officer of the Company.
(b) Each director owns a substantial number of
shares of Common Stock, as follows:
DIRECTOR COMMON SHARES OWNED
- -------- -------------------
Harvey L. Sperry 22,696
D. Gordon Strickland 12,410
James R. Mellor 23,197
Gordon C. Hurlbert 14,455
Herbert Elish 20,685
Michael C. Jackson 9,850
Robert M. O'Hara 12,069
John D. Kyle 9,363
(c) In 1996 defendants Strickland and Elish each received options to
purchase 10,000 shares of Common Stock at a price of $3.9375 per share. Except
in the case of a change in control of the Company, these options are not
exercisable unless and until the closing price of the Common Stock on the New
York Stock Exchange reaches $10.00 per share and remains at or above that level
for at least 10 consecutive trading days.
(d) Defendant Jackson, an Advisory Director of Lehman Brothers, Inc.
("Lehman"), owns 748 Preferred and is the only Kerr Director who owns any
Preferred.
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CLASS ACTION ALLEGATIONS
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4. Plaintiff brings this action for declaratory, injunctive and other
relief on his own behalf and as a class action, pursuant to Rule 23 of the Rules
of this Court on behalf of a class (the "Class") consisting of all stockholders
of Kerr (except defendants herein and any person, firm, trust, corporation or
other entity related to or affiliated with any of the defendants or their
successors in interest) who have or will be harmed as a result of defendants'
action.
5. This action is properly maintainable as a class action for the
following reasons:
(a) The Class of stockholders for whose benefit this action is brought
is so numerous that joinder of all Class members is impracticable. The
Preferred is owned by hundreds of stockholders who are scattered throughout the
United States.
(b) There are questions of law and fact which are common to members of
the Class and which predominate over all questions affecting only individual
members, including (i) whether the Acquisition (hereinafter defined) provides
for unfair treatment of the Preferred; and (ii) whether the approval by Kerr's
directors of the transaction which is the subject of this action constitutes a
violation of their fiduciary duties to the Class.
(c) Plaintiff's claims are typical of the claims of the other members of
the Class and plaintiff has no interests that are adverse or antagonistic to the
interests of the Class.
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(d) Plaintiff is committed to the vigorous prosecution of this action
and has retained competent counsel experienced in litigation of this nature.
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
(e) The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of the Class and establish incompatible standards of
conduct for the party opposing the Class.
(f) Defendants have acted on grounds generally applicable to the Class,
thereby making appropriate final injunctive or corresponding declaratory relief
with respect to the Class as a whole.
SUBSTANTIVE ALLEGATIONS
-----------------------
6. In October 1995, following defaults in covenants contained in loan
agreements governing its senior unsecured debt ("the Debt"), the Company engaged
Lehman to explore a possible sale of the Company. Kerr agreed to pay Lehman a
fee of 1% of the amount received on the sale of the Company, if the Company is
sold during the term of its agreement with Kerr or if it is sold within 24
months thereafter to a buyer identified by Lehman.
7. Lehman contacted an affiliate of Fremont Partners, L.P. ("Fremont") to
determine Fremont's interest in acquiring Kerr. In late 1995 and early 1996,
Fremont reviewed certain public and confidential information concerning the
Company, and indicated an interest in an acquisition. However, the Company and
Fremont
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could not agree as to a proper valuation of the Company, and negotiations for a
buy-out ceased.
8. In April 1996, Lehman informed Fremont that Lehman would no longer be
representing the Company, and that if Fremont had an interest in participating
in the recapitalization of the Company it should contact Kerr directly.
Thereafter, the Company and Fremont had a number of discussions regarding a
possible recapitalization of Kerr. In January 1997, Fremont continued its
discussions of a recapitalization with the Company's new financial advisor, CIBC
Wood Gundy Securities Corp. ("CIBC").
9. During the same period, Kerr and its advisors discussed a restructuring
of the Debt with the Debtholders. Such discussions reached an impasse, and Kerr
retained bankruptcy counsel and began preparations for a possible bankruptcy
filing. However, the Company obtained an extension of the default waiver (the
"waiver"), and sought financing that would enable Kerr to purchase the Debt and
provide it with working capital. The waiver expired on March 7, 1997, with the
Debtholders refusing to grant an extension. In April 1997, Kerr entered into a
revolving credit agreement with Madeleine L.L.C. secured by its receivables, in
order to provide the Company with working capital. However, certain provisions
of the agreement with Madeleine constituted additional defaults under the terms
of the Debt. The Debtholders threatened legal action against the Company, its
officers, directors and advisors, based upon claims of breach of contract and
breach of fiduciary duty. Kerr was notified that the Debt would be accelerated
on June 4, 1997. In
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late May, the Debtholders agreed not to accelerate the Debt until July 3, 1997,
in exchange for $500,000 and the payment by the Company of interest on the Debt
at the default rate.
10. In late May 1997, Kerr and Fremont resumed discussions of a buy-out. On
June 30, 1997, the Company and Fremont entered into an agreement under which a
corporation wholly owned by Fremont would acquire all of the Company's shares of
Preferred for $12.50 per Preferred share and all of the Common Stock shares for
$5.40 per share in cash (the "Acquisition"), by means of a cash tender offer at
those prices for the Preferred and the Common Stock, to be followed by a cash
merger whereby any Preferred or Common shares not previously tendered would be
acquired. Following Fremont's purchase of shares of Common Stock in the tender
offer, Fremont is entitled to designate the number of directors of the Kerr
board which is proportionate to its ownership of the outstanding Common Stock
shares. The tender offer is conditioned upon Fremont receiving at least 51% of
the Common Stock shares. Fremont commenced its tender offer on July 8, 1997.
11. By reason of the individual defendants' positions as directors and/or
officers of Kerr, those defendants were and are in a fiduciary relationship with
plaintiff and the other public Preferred holders, and owe them the highest
obligations of good faith, full disclosure and fair dealing and to act in an
informed and deliberate manner so that the price paid for the Preferred is fair
and so that the total consideration paid upon the
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acquisition of the Company is apportioned fairly as between the Preferred and
the Common Stock.
12. The Acquisition unduly favors the Common Stock at the expense of the
Preferred. The price to be paid for the Preferred under the Acquisition is
grossly unfair to the Class. Although Kerr's Schedule 14D-9 filing with the
Securities and Exchange Commission (the "14D-9") states that the Board, in
approving the Acquisition, relied upon the market prices of the Preferred and
Common Stock, the allocation of the Acquisition proceeds is more favorable to
the Common Stock than the recent relative market prices of the Preferred and
Common Stock. The price to be paid in the Acquisition for each of the Common
Stock, $5.40, is equal to 43.2% of the $12.50 to be paid for each of the
Preferred. In 1996 and 1997, the Common Stock generally traded at a price which
was less than 43.2% of the Preferred's market price. During the month of June
1997, immediately prior to the announcement of the Acquisition plan, the Common
Stock traded at a high of $4.25, or only 30% of the Preferred's high of $14,
while the lowest price during the month for the Common Stock was $2.25, or 33%
of the Preferred's low of $6.75. On June 30, 1997, the day before the
Acquisition plan was announced, the Common Stock closed at $3.875, or only 31%
of the Preferred's closing price of $12.50.
13. The unfair allocation of Acquisition proceeds is also reflected in the
substantial premium over market paid to the Common Stockholders, and the lack of
any premium to the Preferred holders. The price paid for the Common Stock
holders in the Acquisition provides a premium of about 40% over the
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pre-announcement market price, while no premium is to be paid on the Preferred.
In fact, with respect to the high prices during the month of June 1997, the
Acquisition provides the Common Stock a premium of 27% over the high price
during that month, but relegates the Preferred to a discount of 11% from its
high of $14 per share.
14. Moreover, the priorities and rights granted by the Company's
certificate of incorporation to the Preferred, including the Preferred's
liquidation priority, are valuable legal rights, upon which the Preferred
stockholders relied in acquiring their Preferred. Such priorities are of
particular importance when a corporation is in serious financial distress and
contemplating a bankruptcy filing, as was true of Kerr in 1997. In such
circumstances, the Common Stock's equity is more likely to be entirely wiped out
than the Preferred's and the Common's greater "upside" advantage is eliminated.
Indeed, had the extent of the Company's financial difficulties in the first half
of 1997 been fully disclosed, the Common would have traded at a much lower
percentage of the Preferred than indicated above. The price to be paid for the
Preferred in the Acquisition does not properly reflect the value of the
Preferred's special rights.
15. Although Kerr's directors obtained an opinion from CIBC that the price
"to be received by the holders of Common Stock, on the one hand, and Preferred
Stock, on the other, pursuant to the [Acquisition], is fair to such holders from
a financial point of view," CIBC did not opine as to the fairness of the
relative values to be received by the holders of the Preferred and Common
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Stock. Similarly, the 14D-9 does not disclose the basis upon which the price to
be paid by Fremont was allocated as between the holders of Preferred and Common
Stock.
16. By approving the allocation of the Acquisition proceeds as between the
Preferred and Common Stock provided in the Acquisition, Kerr's directors, in
violation of their fiduciary duty, have benefitted themselves at the expense of
the Class, since they own substantial amounts of Common Stock and almost no
Preferred. Also, the consummation of the Acquisition would enable defendants
Strickland and Elish to realize large profits on the exercise of options on the
Common Stock, and would enable Lehman, of which defendant Jackson is an Advisory
Director, to obtain a large fee.
17. Despite the clear conflict between their own personal interests and
those of the holders of Preferred, Kerr's directors have failed to take measures
to assure that the Preferred's position is protected in the negotiations with
Fremont or the consideration and approval of the Acquisition. The tender offer
is not subject to the tender of any amount of Preferred to Fremont and the
Preferred have no right to vote upon the merger which will follow the tender
offer. Moreover, although the Company has not paid six consecutive quarterly
dividends to the Preferred, the directors have failed to call a meeting of the
Preferred to elect two directors to represent the Preferred's interests on the
Board with respect to the Acquisition.
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18. Plaintiff and the other members of the Class will suffer injury unless
the unlawful actions complained of herein are enjoined.
19. Plaintiff and Class lack an adequate remedy at law.
WHEREFORE, plaintiff prays for judgment:
A. Declaring that this action be maintained as a class action on
behalf of the Class;
B. Declaring that the Acquisition is unfair to the Preferred;
C. Enjoining defendants and all persons and entities acting in concert
with them from taking any action to consummate any of the transactions
contemplated by the Acquisition;
D. Awarding plaintiff and the Class damages against defendants jointly
and severally and directing defendants to account to the Class for their
profits;
E. Awarding costs and expenses to plaintiff including reasonable
attorneys' fees; and
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F. Granting such other and further relief as this Court may deem just
and proper.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/ J. A. Rosenthal
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Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
Harold B. Obstfeld
HAROLD B. OBSTFELD, P.C.
500 Fifth Avenue, 56th Floor
New York, New York 10110-0002
(212) 391-4150
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Exhibit 11
ATTENTION ALL PARTICIPANTS, RETIREES
AND BENEFICIARIES OF THE
KERR GROUP, INC.
RETIREMENT INCOME PLAN
NOTICE OF DETERMINATION
PLEASE TAKE NOTICE that the Pension Benefit Guaranty
Corporation ("PBGC") has determined, pursuant to Section 4042(a)(4) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C.
ss. 1342(a)(4), that the possible long-run loss of the PBGC with respect to Kerr
Group, Inc. Retirement Income Plan (the "Plan") may reasonably be expected to
increase unreasonably if the Plan is not terminated. The PBGC has further
determined, pursuant to Section 4042(c) of ERISA, 29 U.S.C. ss. 1342(c), that
the Plan should therefore be terminated in order to protect the interests of the
PBGC. Accordingly, pursuant to Section 4042 of ERISA, 29 U.S.C. ss. 1342, the
PBGC intends to apply to the United States District Court for the Eastern
District of Pennsylvania for an order terminating the Plan, establishing August
1, 1997 as the date of termination of the Plan, and appointing the PBGC
statutory trustee of the Plan.
Participants of the Plan should not expect to earn additional
benefit eligibility service under the Plan on or after the Plan's termination
date.
The PBGC has completed its decisionmaking process in this
matter. Accordingly, this determination is effective on the date it is issued.
Andrea F. Schneider
[PBGC Logo] Acting Deputy Executive Director
and Chief Negotiator
PENSION BENEFIT GUARANTY CORPORATION
ISSUED: August 1, 1997
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Exhibit 12
LANCASTER, PENNSYLVANIA (August 1, 1997) - Kerr Group, Inc.
(NYSE:KGM), announced today that Pension Benefit Guaranty Corporation ("PBGC")
has published a Notice of Determination to terminate the Kerr Group, Inc.
Retirement Income Plan. According to the Notice, the PBGC intends to apply to
the United States District Court for the Eastern District of Pennsylvania for an
order terminating the Plan, establishing August 1, 1997 as the date of
termination of the Plan and appointing the PBGC statutory trustee of the Plan.
Kerr recently agreed to be acquired by Fremont. A tender offer
for all outstanding shares of Common Stock and Preferred Stock is currently
pending and scheduled to expire on August 4, 1997. The PBGC has advised the
Company that it took this action to insure that the PBGC's interests were
adequately protected in connection with the consummation of the tender offer.
Discussions among the Company, the PBGC and Fremont are continuing.
Kerr, headquartered in Lancaster, Pennsylvania, is a major
producer of plastic packaging products.
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Company Contact: Geoffrey A. Whynot
Vice President, Finance and
Chief Financial Officer
(717) 390-8439
