SCHEDULE 14A
SCHEDULE 14 INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Name of Registrant as Specified in Its Charter:
Paul Mueller Company
Name of Person(s) Filing Proxy Statement:
Sheet Metal Workers International Association
Payment of Filing Fee (check the appropriate box)
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
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Proxy Statement
The enclosed form is not a proxy voting card, but only a
voluntary survey.
Released to Shareholders 11/5/99
Sheet Metal Workers International Association
1750 New York Avenue NW
Washington, D.C. 20006
Tel. (800) 457-7694
Fax: (202) 662-0891
NOTICE OF INTENDED PROXY CONTEST AT PAUL MUELLER COMPANY
To Fellow Paul Mueller Company shareholders:
I. SHOULD THIS COMPANY HAVE A POISON PILL WITHOUT SHAREHOLDER
APPROVAL?
Our local affiliate owns stock in the Company and also has
interests in the Company going beyond stock ownership, as the
representative of about 380 Company employees.<FN1> We intend to
solicit shareholder proxies for a proposal requiring the Board to
first get shareholder approval before continuing the Company's
poison pill.
Without shareholders' approval, in 1991 the Board of
Directors established a poison pill here. This pill provides that
if someone attempts to buy more than 20% of the stock without
Board approval, then all other shareholders get the right to buy
an additional share at a designated price for each share they
already own--thus diluting the acquirer's stock.
We believe the practical effect of this plan is to force
someone interested in buying more than 20% to get permission from
the Board. We believe this plan represents Board interference in
your ability to decide when (and to whom) to sell your stock.
Proposals like ours have been made at other companies by
leading institutional investors, such as the College Retirement
Equities Fund (part of the nation's largest pension fund,
TIAA-CREF) and several public employee retirement systems. The
Investor Responsibility Research Center reports that shareholder
proposals against poison pills received an average vote of 54.9%
in favor in 1997, 57.4% in 1998, and 61.6% in 1999. (Vote as a
percentage of shares voted for and against, abstentions
excluded.) Even some companies' boards are volunteering
proposals like ours, such as the recent bylaw amendment proposed
by the board of ICF Kaiser International.
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<FN1>These interests include opposition to company management in
proceedings before the National Labor Relations Board. See
"Proxy Solicitation" below.
<PAGE>
The poison pill at Paul Mueller is worse than many others because
it contains a "dead hand" provision -- the only directors who can
approve a merger without triggering the pill are members
of the Board "prior to the date of this Agreement" (1/29/91), or
subsequent directors approved by the prior directors.<FN2>
This type of poison pill, unlike most poison pills, not only
allows the current Board to thwart a merger which may be favored
by a majority of shareholders, but also denies shareholders the
right to replace this board with new directors empowered to
redeem the poison pill, permitting such merger to go forward. A
"dead hand" poison pill has a coercive effect on the
shareholders' basic right to freely elect a new Board and also
takes away normal decision-making authority in this important
area from a newly-elected Board.
Supporters of pills argue they protect shareholders by
allowing the Board to resist offers which are not high enough to
reflect a stock's true value (the Board can push the buyer to
offer more). However, we think shareholders are capable of
deciding on their own whether an offer is adequate. Also, would
Board members use their veto power to keep themselves (or their
friends in management) from losing their positions? Pill
supporters note that rejecting an offer simply for
self-entrenchment would breach directors' fiduciary duties.
However, we believe fear of a change in control may have an
unconscious effect on how a board responds to an offer. We also
believe that proving a breach of fiduciary duty in court is
extraordinarily difficult, expensive, and time-consuming for
shareholders and the Company. We believe the temptation offered
by a pill should be eliminated.
The current pill at Paul Mueller Company is scheduled to
expire January 29, 2001. Join us in pressing for the pill to not
be renewed without shareholder approval.
II. COMPANY PERFORMANCE
When asked to consider a poison pill plan, many shareholders
look only at whether such plan represents sound corporate
governance. However, some also consider how the Company has been
performing:
A. STOCK PRICES:
GRAPH: Company vs. S&P 500.
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<FN2>The poison pill is labeled by management the "shareholder
rights agreement." A copy of the Agreement is available free of
charge from the Company, according to the Company's Form 8-A of
February, 1991 filed with the SEC. The phone number of the
Company's headquarters is (417) 831-3000. A copy is also
available from us at no charge, or from SEC files at your own
expense.
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B. LATEST FINANCIALS:
For 9 months ending 9/30/99: Earnings per share: $0.41,
down from $3.00 in same period of 1998 . Net income: $483,000,
down from $3.5 million in same period of 1998.
C. RECENT EVENTS:
In 1999, the Company paid its customer Alcon Labs $1,875,000
resulting from Alcon's lawsuit for breach of warranty and breach
of contract over the rusting of tanks supplied by the Company.
The jury verdict resulted in a judgment of approximately $1.7
million, but then liability increased due to the Company's appeal
(adding interest and attorneys fees). The Texas Court of Appeals
rejected the Company's appeal, noting "the evidence at trial
showed that the rust and corrosion problems were caused by
Mueller's use of defective stainless steel, and Mueller does not
challenge that evidence on appeal." Paul Mueller Company v. Alcon
Laboratories, 993 S.W.2d 851, 857 (Tex. App. May 1999).
D. BOARD COMPOSITION:
As of the Company's 1999 proxy statement, the Board had 7
members, including Chairman Mueller, his grandson, and the
Company's top two executives.
III. IS ANOTHER ANTI-TAKEOVER DEVICE NEEDED AT THIS COMPANY?
If you think a takeover may not be in your best interests,
consider whether a poison pill is necessary to prevent one here:
The Company's Articles contain a provision banning business
combinations with any acquirer of more than 20% of the stock
without first obtaining a supermajority of shareholder support
(80% of the outstanding stock, not counting the acquirer's
stock), unless the transaction is approved by 2/3 of the
Continuing Directors (i.e., board members prior to the 20%
acquisition, or later board members whom they approved).
The Articles provide for a "classified" board of directors
(that is, board elections are staggered so less than half the
board is up for election any year). The Articles also prohibit
shareholders from calling a special meeting. None of the above
provisions of the Articles can be amended without a supermajority
vote (again, 80% of the outstanding).<FN3>
The Company's long-term incentive plan contains provisions
accelerating benefits in the event of a change in control.
Missouri law also imposes many restrictions on potential mergers
and acquisitions. See e.g., Missouri Revised Statutes sections
351.347, 351.407, 351.459.<FN3>
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<FN3>The Company has the legal duty to supply shareholders with
copies of its Articles and other documents. However, copies of
all documents cited here are available from us at no charge.
Also, these documents were filed with the SEC and are available
from it (and from other agencies involved) at your own expense.
<PAGE>
IV. PROXY VOTING:
The enclosed form is not a proxy voting card, but only a
voluntary survey. We intend to solicit votes for the proposal in
a few months using our own proxy card and proxy statement. These
probably cannot be sent you until after you receive a proxy
statement from the Company. The Company's proxy card may not
include our proposal. IF YOU SUPPORT OUR PROPOSAL, DO NOT SEND
BACK A PROXY CARD UNLESS IT INCLUDES OUR PROPOSAL.
Passage of the proposal will require a favorable vote by a
majority of outstanding stock -- thus it is important that
everyone vote. We intend to solicit at least a majority of the
voting power of the outstanding stock. The Company's annual
shareholders meeting occurs the first Monday of May, generally at
Company headquarters (1600 West Phelps Street, Springfield MO
65802).
V. PROXY SOLICITATION:
This solicitation is conducted by Sheet Metal Workers
International Association (SMWIA). Its local affiliate (Local
208) owns 90 shares of Paul Mueller Company stock and represents
approximately 380 Mueller employees for collective bargaining
purposes. We do not seek your support in labor matters.
Regardless of the outcome of labor matters, SMWIA will vote each
proxy card it receives in accordance with the shareholder's
instructions. SMWIA will not seek any discretionary voting
authority for the shareholders meeting: rather, it will vote your
stock solely as you direct. SMWIA will bear all solicitation
costs (anticipated at $5000) and will not seek reimbursement from
the Company.
If you consider labor matters relevant to this proposal,
consider the following: Administrative Law Judges (ALJ's) of the
National Labor Relations Board (NLRB) have issued three decisions
finding Company management violated federal labor laws.
Management appealed the first two decisions to the full Board in
Washington D.C., where they are pending. These decisions came
after trial on complaints issued Company by the NLRB General
Counsel. The first ALJ found the 1995 strike by SMWIA Local 208
was caused by management's unfair labor practices: that is, its
violations of the law by taking unilateral actions regarding the
workforce "as though the Union did not exist" (including
transferring work from its unionized plant to its non-union one,
offering new hires a wage higher than long-term employees and
higher than offered in negotiations), and making threats and
discriminating against union supporters.
At SMWIA's urging, most strikers made an unconditional offer
to return to work in May 1996, but management refused to
reinstate most at that time. It is established labor law that an
employer must reinstate unfair labor practice strikers who make
an unconditional offer to return to work. The ALJ thus held the
Company liable for back pay and benefits to 89 strikers. The ALJ
ordered the Company to make employees whole for unilateral
changes in medical care, pensions and wages. SMWIA estimates the
liability currently at over $1,000,000, with interest accruing at
the short-term federal rate plus 3%.
While not essential to the decision, ALJ Ladwig discredited
the testimony of Personnel Director Young's testimony on at least
two issues, on one finding it "a fabrication". The ALJ also
analyzed the testimony of Operations Manager Shaw in support of
management's claim to have shifted production because of unused
capacity. The ALJ found such testimony and supporting document
"designed to deceive", and found the defense "a falsification."
After the first ALJ decision, management committed
additional violations of federal labor laws, according to
decisions of a second ALJ. The second ALJ found management failed
to give the union any opportunity to bargain over changing work
schedules, failed to respond to any grievances filed by the union
and discriminatorily disciplined a union supporter. Management
has not appealed the discriminatory discipline finding. The NLRB
General Counsel has issued two complaints which await hearing
before an ALJ, one over a cut in a union leader's pay, another
over subcontracting employees' work without negotiation. There
is no collective bargaining agreement between Local 208 and the
Company; the Company implemented portions of its final offer in
1995; there are still about 20 employees who have not sought to
return to work. The Union has not engaged in any boycott
activities for at least 2 years.
In SMWIA's experience, even managers who are anti-union
generally avoid the conduct engaged in here -- if for no other
reason that such conduct is likely to have significant financial
consequences and tie everyone up in litigation (management and
employees alike). We therefore do not believe management has
acted in shareholders' best interests in this area, but we do not
ask for your support in this regard.
VI. FURTHER INFORMATION ABOUT THE COMPANY'S CURRENT POISON PILL:
In January 1991, the Board adopted the poison pill
by declaring a dividend of one common stock purchase
right for each outstanding share of common stock. Each
Right entitles the registered holder to purchase from
the Company one share of Common stock (or in some
circumstances, other securities, cash or other assets),
at a price of $125 per common share, subject to
adjustment. The Rights are not exercisable until the
Distribution Date, defined as 10 days following an
announcement that a person or group of affiliated or
associated persons has acquired 20% or more of the
Company's stock, or that they intend to make a tender
offer or exchange offer for 20% or more of the stock.
The Board in its discretion may redeem the Rights
prior to any acquisition of 20% or more at a price of
one (1) cent per Right. The Rights may also be
redeemed in the following exceptional situation: if a
bidder is interested in acquiring all the shares of the
company for cash only, and such bidder does not own
more than 1% of the Company's stock (and has not owned
more than 1% in the prior year and never disclosed any
intent to influence or acquire the Company), and has
written financing commitments and an investment
banker's opinion that the price he offers is fair, then
the Board must put the bidder's proposal up for a
shareholder vote in 60-90 days. If a majority of
outstanding stock votes in favor of the proposal, then
the Rights will be redeemed if the bidder pays in full
within 60 days. We incorporate by reference the
Company's Summary of Rights to Purchase Common Shares
(provided all shareholders of record and filed with the
SEC on Form 8-A on 2/1/91).
VII. YOUR RIGHT TO MAKE SHAREHOLDER PROPOSALS:
If a shareholder has owned more than $2000 worth of stock
for more than a year and meets the other criteria of SEC Rule
14a-8, then he or she has the legal right to have a proposal
appear in management's upcoming proxy statement and proxy card.
The deadline for shareholders to submit proposals for inclusion
in management's proxy materials in year 2000 is November 29,
1999.
VIII. TEXT OF OUR PROPOSAL:
RESOLVED, the shareholders of Paul Mueller Company
hereby amend its Bylaws and Articles to add the
following additional section to each:
Poison Pills (Shareholder Rights Plans)
A. The Corporation shall not adopt or maintain a
shareholder rights plan, rights agreement or any other
form of "poison pill" which is designed to or has the
effect of making acquisition of large holdings of the
Corporation's shares of stock more difficult or
expensive (such as the 1991 "Rights Agreement"), unless
such plan is first approved by a majority shareholder
vote.
B. The affirmative vote of a majority of shares voted
shall suffice to approve such a plan.
C. The Corporation shall redeem any such rights now
in effect.
D. Notwithstanding any other bylaw provision, the
Board may not amend any of the above provisions without
shareholder ratification.
IT IS FURTHER RESOLVED, that the above provisions
are intended to be severable: if any application or
provision is beyond the legal power of shareholders,
then it shall be severed from the rest. If shareholders
have no authority under Missouri law to impose such
restriction in either bylaws or articles, then this
resolution shall be deemed a recommendation that the
Board not adopt a poison pill without prior shareholder
approval.
PLEASE RETURN THE ENCLOSED SURVEY TODAY.
For more information, contact SMWIA Education Director
Anthony Picarazzi: (800) 457-7694.
<PAGE>
SURVEY OF SHAREHOLDERS OF PAUL MUELLER COMPANY
This is a voluntary survey, not a proxy card, and cannot be
used to vote on the shareholder proposal. Your identity will be
kept confidential unless you specifically authorize to the
contrary. The information from your response will be used solely
for communicating about matters for shareholder vote.
YOUR VIEW OF THE SHAREHOLDER PROPOSAL AGAINST THE POISON PILL:
____ Strongly support
____ Likely to support
___ Likely to oppose because ______________________
___ Undecided
MORE INFORMATION?
___ Please send me more information about the issues on
which shareholders will be voting:
Mailing address: _________________________________________
_________________________________________
E-mail address: _________________________________________
Telephone: __________________________________________
Fax: __________________________________________
___________________________________________ _______________
PRINT SHAREHOLDER NAME # SHARES (optional)
Please return to SMWIA by November 24, 1999 in the enclosed
envelope, or fax to (202) 662-0895.
