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:
[X] Preliminary Proxy Statement
[ ] 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.
<PAGE>
[Revised Preliminary proxy statement]
For release to shareholders 10/5/99
Sheet Metal Workers International Association
1750 New York Avenue NW
Washington, D.C. 20078-2412
Tel. (800) 457-7694
Fax: (202) 662-0895
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
represents about 380 Company employees. We intend to
solicit shareholder proxies for a proposal to require 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 approval from the Board, 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 [/R]more than 20%[/R]
to get permission from the Board.
We believe this plan represents Board
interference in your right to decide when and to
whom to sell your stock. We believe restrictions on the
marketability of stock are likely to keep its value down in the
marketplace.
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 were supported by
shareholders at over 50% of the companies facing such proposals
in 1996, 1997 and 1998. Even some companies' boards are
volunteering proposals like ours, such as the recent bylaw
amendment proposed by the board of ICF Kaiser International.
A poison pill is labeled by management a "shareholder rights
agreement" -- but in reality it diminishes shareholders' rights
to sell stock to whomever they wish.
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.<FN1>
As CREF said in support of its shareholder proposal
against a dead-hand pill at Mylan Laboratories:
"[T]his type of poison pill, unlike most poison pills, not
only allows the current Board to thwart acquisition offers which
may be favored by a majority of shareholders, but also denied
shareholders the right to replace this board with new directors
empowered to redeem the poison pill, permitting such offers 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; * * *
Traditional poison pills have been defended with the argument
that directors can generally be trusted to act in the
shareholders' interest, and if they do not, they can be replaced
by the shareholders with other directors.
Adoption of "dead hand" poison pills, however, is different.
The purpose is entrenchment, by coercing shareholders into voting
for incumbent directors to preserve the possibility of
redemption of the pill. Their intended effect is to preclude
proxy contests for corporate control, which are appropriate
means to challenge incumbent management.
We believe the right of shareholder freely to elect a board
of directors with full power to represent the shareholders'
interests is the foundation-stone of good corporate governance.
Yet this Board has unilaterally deprived shareholders of their
only real protection against a board that acts against their
interests -- the ability to freely elect a board of their
choosing with full powers to represent them in all respects."
<FN1>A copy of the Rights 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.
<PAGE>
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 (and thus 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. Pill
supporters also argue shareholders should not worry that Board
members will use their veto power
>/R> to
keep themselves
or their friends in management from losing their
own positions > because 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 [/R]consider a[/R] 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.
B. LATEST FINANCIALS:
For 6 months ending 6/30/99:
Earnings per share: $0.54, down from $2.04 in same period of 1998
Net income: $633,000, down from $2.4 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
<\/R> (
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).<FN*>
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.<FN*>
IV. PROXY VOTING:
The enclosed survey 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 will probably not be
sent you until after you receive a proxy statement from the
Company. The proxy card you receive may not include our
proposal. IF YOU SUPPORT OUR PROPOSAL, DO NOT SEND BACK A
PROXY CARD UNLESS IT INCLUDES OUR PROPOSAL.
<FN*>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>
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 the Company's 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 of
the National Labor Relations Board (NLRB) have issued three
decisions finding Company management violated federal labor laws.
Management has appealed the first two of these decisions to the
full Board in Washington D.C., where they are still pending.
These decisions came after trial on complaints issued against the
Company by the NLRB's General Counsel. The first ALJ found the
1995 strike by SMWIA Local 208 at the Company 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 of them 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 on this decision currently at over
$1,000,000, with interest still 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, even finding his testimony on one issue "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 a supporting graph were "designed to deceive", and
found the defense "a falsification."
After the first ALJ decision, management committed
additional violations of federal labor laws, according to
the decisions of a different 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. 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.
The NLRB General Counsel has issued two complaints against
the Company which await hearing before an ALJ, one over the cut
in a union leader's pay, and another over subcontracting
employees' work without prior negotiation.
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 as 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 future shareholder vote.
YOUR VIEW OF THE SHAREHOLDER PROPOSAL AGAINST THE POISON PILL:
[ ] Strongly support
[ ] Likely to support
[ ] Likely to oppose because _____________________
[ ] Undecided
[ ] 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 by November 10, 1999 in the enclosed envelope, or
fax to (202) 662-0895.
