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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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THE TURNER CORPORATION
(NAME OF SUBJECT COMPANY)
THE TURNER CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
SERIES C 8 1/2% CONVERTIBLE PREFERENCE STOCK, PAR VALUE $1.00 PER SHARE
SERIES D 8 1/2% CONVERTIBLE PREFERENCE STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
900273103
(CUSIP NUMBER OF CLASS OF SECURITIES)
ELLIS T. GRAVETTE, JR.
THE TURNER CORPORATION
375 HUDSON STREET
NEW YORK, NEW YORK 10014
(212) 229-6450
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
KENNETH R. BLACKMAN, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004
(212) 859-8000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is The Turner Corporation, a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 375 Hudson Street, New York, New York 10014. The title of the
classes of equity securities to which this Statement relates is the Company's
common stock, par value $1.00 per share (the "Common Stock"), the Company's
Series C 8 1/2% Convertible Preference Stock, par value $1.00 per share (the
"Series C Preferred"), and the Company's Series D 8 1/2% Convertible Preference
Stock, par value $1.00 per share (the "Series D Preferred" and, together with
the Series C Preferred, the "Preferred Stock" and together with the Common
Stock, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer by Beta Acquisition Corp., a
Delaware corporation (the "Offeror"), which is a wholly owned indirect
subsidiary of HOCHTIEF AG, a German corporation (the "Parent"). The tender offer
by the Offeror is being made pursuant to a Tender Offer Statement on Schedule
14D-1, dated August 20, 1999 (the "Schedule 14D-1"), to purchase all of the
outstanding shares of Common Stock, at a price of $28.625 per share, net to the
seller in cash, without interest, including the associated rights issued
pursuant to the Rights Agreement dated as of September 21, 1998, between the
Company and First Chicago Trust Company of New York as rights agent of the
Company. The tender offer is being made upon the terms and subject to the
conditions set forth in the Offeror's Offer to Purchase, dated August 20, 1999
(the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with the Offer to Purchase, constitute the "Offer"). The Offer to
Purchase also includes an offer to purchase the Preferred Stock for an amount in
cash per share equal to $28.625 multiplied by the number of shares of Common
Stock issuable upon conversion of the Preferred Stock.
As set forth in the Schedule 14D-1, the principal executive offices of the
Offeror are located at Opernplatz 2, 45128 Essen, Germany.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 16, 1999 (the "Merger Agreement"), among the Company, Parent and
the Offeror. Pursuant to the terms of the Merger Agreement, following the
consummation of the Offer and the satisfaction or waiver of certain conditions
set forth in the Merger Agreement and in accordance with the General Corporation
Law of the State of Delaware (the "DGCL"), the Offeror will be merged with and
into the Company (the "Merger"), the separate existence of the Offeror will
cease and the Company will continue as the surviving corporation following the
Merger (the "Surviving Corporation"). At the effective time of the Merger (the
"Effective Time"), each outstanding share of Common Stock or Preferred Stock
(other than shares held in the treasury of the Company, shares owned by any
subsidiary of the Company, shares owned by the Offeror or Parent or shares with
respect to which appraisal rights are properly exercised under the DGCL (the
"Dissenting Shares")) will be converted into and represent the right to receive,
in the case of the Common Stock, the price per share paid in the Offer for the
Common Stock and in the case of the Preferred Stock, the price per share paid in
the Offer for the Preferred Stock, in each case in cash without interest. The
Merger Agreement is summarized in Item 3(b). A copy of the Merger Agreement is
filed herewith as Exhibit 1 and is incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b)(i) Certain arrangements with its Executive Officers, Directors and its
Affiliates.
1. Proxy Statement Disclosures
Certain contracts, agreements, arrangements and understandings between the
Company and its executive officers, directors and affiliates are described on
pages 1-14 of the Company's proxy statement relating to the annual meeting of
the Company's stockholders held on May 7, 1999 (the "1999 Proxy Statement") in
the
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sections, "Election of Directors," "Remuneration of Executive Officers," "Change
in Control Arrangements," "Retirement Plans," "Compensation Committee Interlocks
and Insider Participation" and "Compensation Committee Report." Pages 1-14 of
the 1999 Proxy Statement are filed as Exhibit 2 hereto and are incorporated
herein by reference. The information incorporated by reference is considered to
be a part of this document, except for any information that is superseded by
information that is included directly in this document.
2. Employment Agreements with Thomas C. Leppert
Effective June 9, 1999, the Company entered into two employment agreements
with Thomas C. Leppert.
Under the first of these agreements, Mr. Leppert agreed to serve as the
Vice Chairman of the Company's Board of Directors (the "Board") through
September 30, 1999. This agreement provides for a monthly base salary of $5,000,
for the award, without further payment, of 150,000 restricted stock units
(representing 150,000 shares of Common Stock), and for the award of options to
acquire 150,000 shares of Common Stock at $17.375 per share. On June 9, 1999,
the day these agreements were entered into, the closing price for the Common
Stock as quoted on the New York Stock Exchange (the "NYSE") was $17.375 per
share. The restricted stock units and the options granted to Mr. Leppert will
fully vest and be cashed out in connection with the Offer unless Offeror makes
available a mechanism to provide for the exercise of these restricted stock
units and options which does not prejudice Mr. Leppert with respect to economics
or the risk of holding Common Stock (the "Cash-Out Alternative"). If the
Cash-Out Alternative is available, Offeror may in its discretion require Mr.
Leppert to exercise and tender his options and restricted stock units in lieu of
a cash out.
Under the second of these agreements, Mr. Leppert agreed to serve as
Chairman of the Board from October 1, 1999 through December 31, 2003. This
agreement provides for an annual base salary of $850,000, for a signing bonus of
$750,000, and for participation in the Company's incentive and other employee
benefit plans (with a guaranteed incentive award of at least $550,000 for each
year of the term).
Both of these agreements provide for severance payments to be made to Mr.
Leppert in connection with a qualifying termination of his employment following
a change of control of the Company. In general, these agreements provide that,
in the event of termination of his employment following a change of control, Mr.
Leppert will be entitled to receive, among other things (1) a lump sum payment
equal to three times (x) his annual base salary plus (y) the bonus received for
the immediately preceding twelve month operating period (but not less than
$550,000), (2) full vesting of any unvested equity awards, and (3) continued
eligibility for certain employee welfare benefits. Consummation of the Offer or
the Merger would constitute a change of control for this purpose.
The employment agreements and related restricted stock and option
agreements between the Company and Thomas C. Leppert are filed as Exhibits 5, 6,
7, 8 and 9 hereto and are incorporated herein by reference.
3. Change of Control Arrangements
The Company or its subsidiaries have entered into change of control
agreements with all of their executive officers (other than Mr. Leppert and
Ellis T. Gravette, Jr., Chairman and Chief Executive Officer) and certain
employees of the Company or its subsidiaries. These agreements expire on
November 25, 2000 and will be automatically extended for one year each on each
November 25 thereafter unless the Company shall have given written notice to the
executive at least ninety days prior to the expiration date. They provide that,
in the event of a qualifying termination of employment following a change of
control of the Company, the executive will be entitled to receive (1) a lump sum
payment equal to 2.99 years (in the case of 13 senior executives) or one year
(in the case of 65 other executives) of compensation, (2) a lump sum payment
equal to the executive's average bonus, and (3) continued eligibility for
certain employee welfare benefits. Consummation of the Offer or the Merger would
constitute a change of control for this purpose.
The forms of the change in control agreements are filed as Exhibits 10 and
11 hereto and are incorporated herein by reference.
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4. Options and Stock Units
Options granted under all of the Company's incentive plans will fully vest
and be cashed out in connection with the Offer, so long as the Cash-Out
Alternative is not made available to option holders. In addition, share rights
to which certain of the Company's directors are entitled because of the
termination of the Company's Retirement Plan in August 1997, will be cashed out
in connection with the Offer. If the Cash-Out Alternative is available, Offeror
may in its discretion require holders to exercise and tender options and share
rights in lieu of a cash out.
5. Special Awards upon a Change of Control
At a meeting on July 20, 1999, the Board authorized the establishment of
special awards to be paid if there is a change of control of the Company by
October 31, 1999. Consummation of the Offer or the Merger would constitute a
change of control for this purpose. The special awards aggregating $3.45 million
are to be paid to 22 employees of the Company or its subsidiaries in recognition
of their exceptional leadership capabilities as exhibited over the last several
years. Among the employees to receive these special awards are two executive
officers of the Company, Robert E. Fee, President and Chief Operating Officer,
and Donald G. Sleeman, Senior Vice President, Chief Financial Officer and Chief
Accounting Officer. Messrs. Fee and Sleeman would receive $389,391 and $194,695,
respectively, under these special awards.
6. Cash Award to Ellis T. Gravette, Jr.
Also at the July 20, 1999 Board meeting, the Board authorized a payment of
$3 million to Mr. Gravette in recognition of his 15 years of service as a
director of the Company and his service as Chairman and Chief Executive Officer
over the past three years in which the Company has had increasing profits,
earnings per share and stock price.
7. Waiver of Non Compete with Karl Steiner Holding AG
On August 13, 1999, the Company and Karl Steiner Holding AG ("KS Holding"),
a company owned 50% each by Peter K. Steiner and the wife of Heinrich
Baumann-Steiner (Mr. Steiner and Mr. Baumann-Steiner are directors of the
Company), entered into an agreement under which Turner Steiner International,
LLC ("TSI"), a joint venture between the Company and KS Holding, waived the
benefit of certain non-compete arrangements in order to permit the Parent and
its subsidiaries and affiliates to continue to do business in certain
territories outside of the United States where TSI is permitted to do business
in accordance with the TSI limited liability company agreement between the
Company and KS Holding. The agreement of August 13, 1999 is filed as Exhibit 12
hereto and is incorporated herein by reference.
(ii) Certain arrangements with Parent, Offeror or their Affiliates.
Capitalized terms used but not defined in this Section 3(b)(ii) shall have the
definitions used in the Schedule 14D-1.
1. The Merger Agreement
THE FOLLOWING IS A SUMMARY OF THE MERGER AGREEMENT, A COPY OF WHICH IS
FILED AS AN EXHIBIT TO THE SCHEDULE 14D-1 FILED BY PURCHASER AND PARENT WITH THE
COMMISSION IN CONNECTION WITH THE OFFER. SUCH SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than within five
business days after the initial public announcement of Purchaser's intention to
commence the Offer. The obligation of Purchaser to accept for payment Shares
tendered pursuant to the Offer is subject to the satisfaction of the Minimum
Condition and certain other conditions that are described in Section 14 of the
Schedule 14D-1. Purchaser and Parent have agreed that no change in the Offer may
be made which decreases the price per Share payable in the Offer, which reduces
the maximum number of Shares to be purchased in the Offer, which changes the
form of consideration paid by Purchaser for the Shares, which imposes conditions
to the Offer in addition to those set
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forth in Section 14 of the Schedule 14D-1 or which makes any other change in the
terms of the Offer that is materially adverse to the holders of the Shares,
without the prior consent of the Company.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Delaware Law, at the Effective
Time, Purchaser shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Purchaser will cease and the Company
will continue as the Surviving Corporation and will become an indirect wholly
owned subsidiary of Parent. Upon consummation of the Merger (i) each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than any shares of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Purchaser, Parent or any
direct or indirect wholly owned subsidiary of Parent or of the Company and other
than shares of Company Common Stock held by stockholders who shall have demanded
and perfected appraisal rights under Delaware Law) shall be canceled and shall
be converted automatically into the right to receive $28.625 in cash (the
"Common Stock Merger Consideration"), or any greater price that may be paid per
share of Company Common Stock in the Offer, without interest, and (ii) each
share of Company Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Preferred Stock held in the
treasury of the Company and each share of Company Preferred Stock owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or
of the Company and other than shares of Company Preferred Stock held by
stockholders who shall have demanded and perfected appraisal rights under
Delaware Law) shall be canceled and shall be converted automatically into the
right to receive an amount in cash equal to the product of the Common Stock
Merger Consideration multiplied by the number of shares of Company Common Stock
into which such share of Company Preferred Stock shall be convertible
immediately prior to the Effective Time, in each case, without interest.
Pursuant to the Merger Agreement, each share of common stock, par value
$.01 per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
The Merger Agreement provides that the initial directors of the Surviving
Corporation shall be two directors designated by the Board prior to the
Effective Time, three directors designated by Purchaser (who may be employees of
Parent or an affiliate) and four independent directors, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified or
until their earlier death, resignation or removal. The Merger Agreement provides
that, at the Effective Time, the Certificate of Incorporation of Purchaser, as
in effect immediately prior to the Effective Time, will be the Certificate of
Incorporation of the Surviving Corporation; provided, however, that, at the
Effective Time, Article I of the Certificate of Incorporation of the Surviving
Corporation will be amended to read as follows: "The name of the corporation is
The Turner Corporation". The Merger Agreement also provides that the By-laws of
Purchaser, as in effect immediately prior to the Effective Time, will be the
By-laws of the Surviving Corporation.
Stockholders' Meeting. Pursuant to the Merger Agreement, the Company
shall, if required by applicable law in order to consummate the Merger, duly
call, give notice of, convene and hold an annual or special meeting of its
stockholders as soon as practicable following consummation of the Offer for the
purpose of considering and taking action on the Merger Agreement and the
Transactions (the "Stockholders' Meeting"). If Purchaser acquires at least the
number of shares of Company Common Stock and shares of Company Preferred Stock
(determined as if shares of Company Preferred Stock have been converted into
shares of Company Common Stock) that, when added to the Shares already owned by
Parent, constitute two-thirds of the outstanding shares of Company Common Stock,
then Purchaser will have sufficient voting power to approve the Merger, even if
no other stockholder votes in favor of the Merger.
Proxy Statement. The Merger Agreement provides that the Company shall, if
required by applicable law, promptly following consummation of the Offer, file
with the Commission under the Exchange Act, and use its reasonable best efforts
to have cleared by the Commission as promptly as practicable, a proxy
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statement and related proxy materials (the "Proxy Statement") with respect to
the Stockholders' Meeting and shall cause the Proxy Statement to be mailed to
stockholders of the Company at the earliest practicable time. The Company has
agreed, subject to its fiduciary duties under applicable law based upon advice
of outside legal counsel, to include in the Proxy Statement the unanimous
recommendation of the Board that the stockholders of the Company approve and
adopt the Merger Agreement and the Transactions and to use its best efforts to
obtain such approval and adoption. Parent and Purchaser have agreed to cause all
Shares then owned by them and their subsidiaries to be voted in favor of
approval and adoption of the Merger Agreement and the Transactions. The Merger
Agreement provides that, in the event that Purchaser shall acquire at least 90%
of the then outstanding shares of Company Common Stock and at least 90% of the
then outstanding shares of each series of Company Preferred Stock, Purchaser and
the Company agree, at the request of Purchaser, to take all necessary and
appropriate action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the Company's
stockholders, in accordance with Delaware Law.
Conduct of Business by the Company Pending the Merger. Pursuant to the
Merger Agreement, the Company has covenanted and agreed that, between the date
of the Merger Agreement and the Effective Time, unless Parent shall otherwise
agree in writing, the businesses of the Company and its subsidiaries (the
"Subsidiaries" and, individually, a "Subsidiary") shall be conducted only in,
and the Company and the Subsidiaries shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
the Company shall use its best efforts to preserve substantially intact the
business organization of the Company and the Subsidiaries, to keep available the
services of the current officers, employees and consultants of the Company and
the Subsidiaries and to preserve the current relationships of the Company and
the Subsidiaries with customers, suppliers and other persons with which the
Company or any Subsidiary has significant business relations. The Merger
Agreement provides that by way of amplification and not limitation, and except
as contemplated therein, neither the Company nor any Subsidiary shall, between
the date of the Merger Agreement and the Effective Time, directly or indirectly
do, or propose to do, any of the following, without the prior written consent of
Parent: (a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents, (b) issue, sell, pledge, dispose
of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant
or encumbrance of (i) any shares of any class of capital stock of the Company or
any Subsidiary, or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the Company
or any Subsidiary (except for the issuance of a maximum of 2,021,875 shares of
Company Common Stock issuable pursuant to employee stock options outstanding on
the date of the Merger Agreement and the issuance of a maximum of 2,400,000
shares of Company Common Stock upon conversion of Company Preferred Stock
outstanding on the date of the Merger Agreement) or (ii) any assets of the
Company or any Subsidiary, except in the ordinary course of business and in a
manner consistent with past practice, (c) declare, set aside, make or pay any
dividend or other distribution, payable in cash, stock, property or otherwise,
with respect to any of its capital stock (other than dividends and distributions
by a wholly owned Subsidiary to the Company or another wholly owned Subsidiary),
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock, (e) (i) acquire
(including, without limitation, by merger, consolidation, or acquisition of
stock or assets or any other business combination) any corporation, partnership,
other business organization or any division thereof or any material amount of
assets, (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances, or grant any security interest in any of its assets except in the
ordinary course of business and consistent with past practice, (iii) authorize
any single capital expenditure or capital expenditures which are, in the
aggregate, not disclosed in the Company's capital expenditure budget previously
delivered by the Company to Parent, or (iv) enter into or amend any contract,
agreement, commitment or arrangement with respect to any of the foregoing
matters, (f) (i) increase the compensation payable or to become payable or the
benefits provided to its current or former directors or executive officers, or
increase the compensation payable or to become payable or the benefits provided
to its current or former non-executive officers or employees other than in the
ordinary course in accordance with past practices, (ii) grant any severance or
termination pay to, or enter into any
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employment, retention, stay bonus or severance agreement with any director or
executive officer, or grant any severance or termination pay to, or enter into
any employment, retention, stay bonus or severance agreement with any
non-executive officer or employee other than in the ordinary course in
accordance with past practices, (iii) establish, adopt, enter into or amend any
collective bargaining, bonus, profit-sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director or executive officer, or take any
such action for the benefit of any non-executive officer or employee other than
in the ordinary course in accordance with past practices, or (iv) amend or
modify any employee benefit plan, except as required by law (g) take any action,
other than as required by generally accepted accounting principles, with respect
to accounting policies or procedures (including, without limitation, procedures
with respect to the payment of accounts payable and collection of accounts
receivable), (h) make any material tax election or settle or compromise any
material federal, state, local or foreign income tax liability, (i) amend,
modify or consent to the termination of any material contract, or amend, waive,
modify or consent to the termination of the Company's or any Subsidiary's rights
thereunder, other than in the ordinary course of business and consistent with
past practice, (j) settle any material litigation, suit, claim, action,
proceeding or investigation (other than any settlement which involves only the
payment of damages in an immaterial amount and does not involve injunctive or
other equitable relief), or (k) announce an intention, enter into any formal or
informal agreement or otherwise make a commitment, to do any of the foregoing.
Company Board Representation. The Merger Agreement provides that, promptly
upon the purchase by Purchaser of Shares pursuant to the Offer, and from time to
time thereafter, the Board shall consist of two directors designated by the
Board prior to such purchase of Shares, three directors designated by Purchaser
(who may be employees of Parent or an affiliate of Parent) and four independent
directors, and the Company shall, at such time, promptly take all actions
necessary to cause Purchaser's designees and new independent directors, if any,
to be elected as directors of the Company, including increasing the size of the
Board or securing the resignations of incumbent directors, or both. The Merger
Agreement also provides that, at such times, the Company shall use its best
efforts to cause persons designated by Purchaser and new independent directors,
if any, to constitute the same percentage as persons designated by Purchaser and
new independent directors, if any, shall constitute of the Board of (i) each
committee of the Board, (ii) each board of directors of each domestic Subsidiary
and (iii) each committee of each such board, in each case only to the extent
permitted by applicable law. Notwithstanding the foregoing, until the earlier of
(i) the time Purchaser acquires two-thirds of the voting power of the
outstanding Shares, and (ii) the Effective Time, the Company has agreed not take
any action to induce any member of the Board, as of the date hereof, who are not
employees of the Company to resign from the Board.
The Merger Agreement provides that following the election or appointment of
Purchaser's designees in accordance with the immediately preceding paragraph and
prior to the Effective Time, any amendment of the Merger Agreement or the
Certificate of Incorporation or By-laws of the Company, any termination of the
Merger Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Parent or Purchaser
or waiver of any of the Company's rights thereunder, will require the
concurrence of a majority of those directors of the Company then in office who
were neither designated by Purchaser nor are employees of the Company.
Access to Information. Pursuant to the Merger Agreement, until the
Effective Time, the Company shall, and shall cause the Subsidiaries and the
officers, directors, employees, auditors and agents of the Company and the
Subsidiaries to, afford the officers, employees and agents of Parent and
Purchaser complete access at all reasonable times to the officers, employees,
agents, properties, offices, plants, building sites and other facilities, books
and records of the Company and each Subsidiary, and shall furnish Parent and
Purchaser with such financial, operating and other data and information as
Parent or Purchaser, through its officers, employees or agents, may reasonably
request and Parent and Purchaser have agreed to keep such information
confidential, except in certain circumstances.
No Solicitation of Transactions. The Company has agreed that neither it
nor any Subsidiary shall, directly or indirectly, through any officer, director,
agent or otherwise, (a) solicit, initiate, accept or knowingly encourage the
submission of, any Acquisition Proposal. "Acquisition Proposal" is defined to
mean (i) any
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bona fide proposal or offer from any person relating to any direct or indirect
acquisition of (A) all or a substantial part of the assets of the Company or of
any Subsidiary or (B) 30% or more of the then outstanding shares of Company
Common Stock and Company Preferred Stock (determined as if shares of Company
Preferred Stock have been converted into shares of Company Common Stock), (ii)
any tender offer or exchange offer as defined pursuant to the Exchange Act that,
if consummated, would result in any person beneficially owning 30% or more of
the then outstanding shares of Company Common Stock and Company Preferred Stock
(determined as if shares of Company Preferred Stock have been converted into
shares of Company Common Stock), (iii) any merger, consolidation, business
combination, sale of all or a substantial part of the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company and any
Subsidiary, other than the Transactions, or (iv) any other transaction the
consummation of which would reasonably be expected to impede, interfere with,
prevent or materially delay the Transaction, or (b) except to the extent
required by fiduciary obligations under applicable law based upon advice of
outside legal counsel, participate in any discussions or negotiations regarding,
or furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any proposal that constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal). Except to the extent required by fiduciary obligations
under applicable law based upon advice of outside legal counsel, the Merger
Agreement requires the Company immediately to cease and cause to be terminated
any discussions or negotiations with any parties that may be ongoing with
respect to any of the foregoing. The Company has also agreed to promptly advise
Parent orally and in writing of any Acquisition Proposal or any request for
information with respect to any Acquisition Proposal, the material terms and
conditions of such Acquisition Proposal or request and to also advise Purchaser
of the identity of the person making such Acquisition Proposal or request. The
Company has also agreed not to release any third party from any confidentiality
or standstill agreement to which the Company is a party.
Employee and Director Stock Options. The Merger Agreement provides that,
immediately prior to the Effective Time, the Company shall terminate the Company
Stock Plans and that the Company shall amend the provisions of any other company
plans, or related trust or funding vehicle, providing for the issuance, holding,
transfer or grant of any Shares, or any interest in respect of any Shares, to
provide no continuing rights to acquire, hold, transfer, or grant any Shares or
any interest in any Shares. Parent and the Company agree to take all action
necessary to provide that each option (an "Option") to purchase shares of
Company Common Stock that is an "incentive stock option" becomes fully vested
and exercisable as soon as practicable following the date of the Merger
Agreement (whether or not previously vested or exercisable). Parent and the
Company have also agreed to take all action necessary to provide that each
Option and each stock unit or other right to receive Shares (a "Unit") pursuant
to the Company Stock Plans or any stock option or stock unit agreement or other
arrangement to which the Company is a party which is outstanding immediately
prior to the acceptance of the Shares by the Purchaser pursuant to the Offer,
shall become fully exercisable and vested, whether or not previously exercisable
or vested, immediately prior to such acceptance and to provide that, with
respect to each such Option and Unit, the holder thereof becomes entitled to
either, at the election of Purchaser, (i) to receive from the Company, at the
time payment is made for the Shares tendered pursuant to the Offer, an amount in
cash equal to the Cash-Out Value (as defined below), or (ii) exercise any Option
or Unit prior to the time payment is made for the Shares tendered pursuant to
the Offer, provided, however, that any Option or Unit that is not cashed out or
exercised will terminate as of the Effective Time, and provided further that
Purchaser may elect clause (ii) above only if it provides a mechanism therefor
which the Company in its good faith judgment deems to not prejudice the holders
of Options with respect to economics or the risk of holding shares. The Merger
Agreement defines the "Cash-Out Value" to be: (i) with respect to each such
Option, an amount of cash in cancellation of such Option equal to the difference
between the Common Stock Merger Consideration and the per share exercise price
of such Option, multiplied by the number of shares of Company Common Stock to
which such Option remains unexercised, and (ii) with respect to each such Unit,
an amount of cash in cancellation of such Unit equal to the Common Stock Merger
Consideration (less, in the case of both Options and Units, any income or
employment tax withholding required under the Internal Revenue Code of 1986, as
amended or any provision of state or local law). The Company and Parent have
agreed to cooperate, and take all reasonable steps to share in advance
information, to effect the transactions contemplated by the foregoing.
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Employee Benefit Matters. The Merger Agreement also provides that,
following the Effective Time, Parent will cause the Company to honor all exiting
company plans which have been disclosed to Parent. Parent also agrees, through
at least December 31, 2000, to cause the Company to continue in effect the
annual incentive program of the Company, subject to such adjustments to the
targets under such program as shall be necessary or advisable to take into
account the Transactions and the business of the Company following the Effective
Time. The Merger Agreement provides that, following the Effective Time, Parent
shall cause the Company to establish a phantom option plan and a phantom
restricted stock plan for senior officers of the Company that will replace the
Company's existing option and restricted stock plans. Such phantom option plan
shall be similar in nature and scope to the Company's existing option plan.
Parent agrees to cause the Company to continue to maintain through December
31, 2000 compensation and benefits (including severance but excluding stock
based plans except as otherwise contemplated by the foregoing) for all
continuing directors, officers and employees of the Company and the Subsidiaries
which are, in the aggregate, at least substantially equivalent to the
compensation and benefits (including severance but excluding stock based plans
except as otherwise contemplated by the foregoing) that these persons had
immediately prior to the Effective Time. For purposes of determining eligibility
and vesting under any Purchaser benefit plans, employees of the Company and the
Subsidiaries will be credited with their years of service with the Company or
the Subsidiaries. To the extent that any Purchaser benefit plan in which a
Company employee participates after the Effective Time provides medical, dental,
vision or other welfare benefits, Purchaser has agreed to cause all pre-existing
condition exclusions and actively at work requirements of such plan to be waived
for such employee and his or her covered dependents except to the extent such
employee and his or her covered dependents were subject to such requirements
under the applicable Company Plans, and Purchaser has agreed to cause any
eligible expenses incurred by such employee on or before the Effective Time to
be taken into account under such plan for purposes of satisfying all deductible,
co-insurance and maximum out-of-pocket requirements applicable to such employee
and his or her covered dependents for the applicable plan year.
Directors' and Officers' Indemnification and Insurance. The Merger
Agreement further provides that the By-laws of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in Article VIII of the by-laws of the Company, which provisions shall
not be amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who at the Effective Time were directors, officers,
employees, fiduciaries or agents of the Company, unless such modification shall
be required by law.
Parent has agreed to indemnify, and to cause the Surviving Corporation to
indemnify, all officers, directors, employees or agents of the Company or any of
its Subsidiaries (collectively, the "Indemnified Parties") to the fullest extent
permitted by applicable law with respect to all acts and omissions arising out
of such individuals' services as officers, directors, employees or agents of the
Company or any of its subsidiaries or as trustees or fiduciaries of any plan for
the benefit of employees of the Company or any of its subsidiaries, occurring
prior to the Effective Time including, without limitation, the transactions
contemplated by the Merger Agreement. Without limitation of the foregoing, in
the event any such Indemnified Party is or becomes involved in any capacity in
any action, proceeding or investigation in connection with any matter,
including, without limitation, the transactions contemplated by the Merger
Agreement occurring prior to and including, the Effective Time, Parent, from and
after the Effective Time, will pay as incurred such Indemnified Party's
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith.
In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), the Merger Agreement
provides that (i) Parent or the Surviving Corporation shall have the right, from
and after the Effective Time, to assume the defense thereof (with counsel
engaged by Parent or the Surviving Corporation to be reasonably acceptable to
the relevant Indemnified Party) and Parent shall not be liable to such
Indemnified Parties for any legal expense of other counsel or any other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof; (ii) such Indemnified Party will cooperate in the defense of any such
matter; and (iii) Parent or the Surviving Corporation shall not be liable to any
settlement effected without its prior written consent; and provided further that
Parent shall not have any
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<PAGE> 10
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
The Merger Agreement provides that the Surviving Corporation shall use its
best efforts to maintain in effect for six years from the Effective Time the
current directors' and officers' liability insurance policies maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which are
not materially less favorable) with respect to matters occurring prior to the
Effective Time; provided, however, that in no event shall the Surviving
Corporation be required to expend more than an amount per year equal to 225% of
the current annual premiums paid by the Company for such insurance (which
premiums the Company has represented to Parent and Purchaser to be $269,400 in
the aggregate).
Parent, Purchaser and the Company have also agreed that in the event the
Company or the Surviving Corporation or any of their respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in each such case, proper provision shall be made so
that the successors and assigns of the Company or the Surviving Corporation, as
the case may be, or at Parent's option, Parent, shall assume the foregoing
indemnity obligations.
Further Action; Reasonable Best Efforts. The Merger Agreement provides
that, subject to its terms and conditions, each of the parties thereto shall (i)
make promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Merger Agreement and the
transactions contemplated thereby, including each of the Offer and the Merger,
and the transactions contemplated by the Stockholders Agreement (collectively,
the "Transactions") and (ii) use its reasonable best efforts to take, or cause
to be taken, all appropriate action, and to do or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions, including, without limitation,
using its reasonable best efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with the Company and the Subsidiaries as are necessary
for the consummation of the Transactions and to fulfill the conditions to the
Offer and the Merger.
In case, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of the Merger Agreement, the
proper officers and directors of each party to the Merger Agreement are required
to use their reasonable best efforts to take all such action.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to the absence of certain changes or events
concerning the Company's business, compliance with law, litigation, employee
benefit plans, labor matters, real property and leases, intellectual property,
Year 2000 compliance, environmental matters and taxes.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) the Merger
Agreement and the Transactions shall have been approved and adopted by the
affirmative vote of the stockholders of the Company to the extent required by
Delaware Law and the Company's Certificate of Incorporation, (b) no United
States federal, state, county or local or any foreign government, governmental,
regulatory or administrative authority, agency, instrumentality or commission or
any court, tribunal, or judicial or arbitral body (hereinafter, a "Governmental
Authority") shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the acquisition of Shares by Parent or Purchaser or any
affiliate of either of them illegal or otherwise restricting in any material
manner, preventing or prohibiting consummation of the Transactions; and (c)
Purchaser or its permitted assignee shall have purchased all Shares validly
tendered and not withdrawn pursuant to the Offer; provided, however, that
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<PAGE> 11
this condition shall not be applicable to the obligations of Parent or Purchaser
if, in breach of the Merger Agreement, Purchaser fails to purchase any Shares
validly tendered and not withdrawn pursuant to the Offer.
Termination; Fees and Expenses. The Merger Agreement provides that it may
be terminated and the Merger and the other Transactions may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and the Transactions by the stockholders of the
Company: (a) by mutual written consent duly authorized by the Boards of
Directors of Purchaser and the Company and the Management Board of Parent, (b)
by either Parent, Purchaser or the Company if (i) the Effective Time shall not
have occurred on or before March 31, 2000; provided, however, that the right to
terminate the Merger Agreement shall not be available to any party whose failure
to fulfill any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date
or (ii) any Governmental Authority in the United States or the European Union
shall have enacted, issued, promulgated, enforced or entered any injunction,
order, decree or ruling which has the effect of making consummation of the
Merger illegal or otherwise preventing or prohibiting consummation of the
Merger, which injunction, order, decree or ruling has become final and
nonappealable, (c) by Parent if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in Section 14 of
the Schedule 14D-1, Purchaser shall have (A) failed to commence the Offer within
60 days following the date of the Merger Agreement, (B) terminated the Offer
without having accepted any Shares for payment thereunder, or (C) failed to pay
for Shares pursuant to the Offer within 90 days following the commencement of
the Offer, unless such action or inaction under (A), (B) or (C) shall have been
caused by or resulted from the failure of Parent or Purchaser to perform, in any
material respect, any material covenant or agreement of either of them contained
in the Merger Agreement or the material breach by Parent or Purchaser of any
material representation or warranty of either of them contained in the Merger
Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the
Board or any committee thereof shall have withdrawn or modified in a manner
adverse to Purchaser or Parent its approval or recommendation of the Offer, the
Merger Agreement, the Merger or any other Transaction, or shall have recommended
or approved any Acquisition Proposal, or shall have resolved to do any of the
foregoing, or (d) by the Company, upon approval of the Board, if (i) due to an
occurrence or circumstance that would result in a failure to satisfy any of the
conditions set forth in Section 14 of the Schedule 14D-1, Purchaser shall have
(A) failed to commence the Offer within 60 days following the date of the Merger
Agreement, (B) terminated the Offer without having accepted any Shares for
payment thereunder or (C) failed to pay for Shares pursuant to the Offer within
90 days following the commencement of the Offer, unless such action or inaction
under (A), (B) or (C) shall have been caused by or resulted from the failure of
the Company to perform, in any material respect, any material covenant or
agreement of it contained in the Merger Agreement or the material breach by the
Company of any material representation or warranty of it contained in the Merger
Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, (A) any
representation or warranty of Parent or Purchaser in the Merger Agreement shall
not be true and correct except to the extent that the failure of such
representation or warranty to be true and correct could not reasonably be
expected to prevent or materially delay consummation of the Offer or the Merger
or otherwise prevent or materially delay Parent or Purchaser from performing its
obligations under this Agreement, or (B) Parent or Purchaser shall have failed
to perform any obligation or to comply with any agreement or covenant to be
performed or complied with by it under the Merger Agreement, except to the
extent such non-performance or non-compliance could not reasonably be expected
to prevent or materially delay consummation of the Offer or the Merger or
otherwise materially reduce Purchaser's or Parent's obligations under the
Agreement, (iii) the Offer has not been timely commenced (except as a result of
actions or omissions by the Company), or (iv) prior to the purchase of Shares
pursuant to the Offer, the Board determines in good faith that it is required to
do so by its fiduciary duties under applicable law, based upon advice of outside
legal counsel in order to enter into a definitive agreement with respect to a
Superior Proposal. For purposes of the Merger Agreement, a "Superior Proposal"
means any Acquisition Proposal on terms which the Board determines, in its good
faith judgment (after consultation with a financial advisor of internationally
recognized reputation), to be more favorable to the Company's stockholders than
the Offer and the Merger and as to which, to the extent financing is required,
there shall have been obtained from a responsible financing source or sources
one or more commitment letters containing customary terms and conditions.
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In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it shall forthwith become void and there shall be no
liability thereunder on the part of any party thereto except under the
provisions of the Merger Agreement related to fees and expenses described below
and under certain other provisions of the Merger Agreement which survive
termination.
The Merger Agreement provides that in the event that (a) any person
(including, without limitation, the Company or any affiliate thereof), other
than Parent or any affiliate of Parent, shall have become the beneficial owner
of 30% or more of the then outstanding Shares of Company Common Stock and
Company Preferred Stock (determined as if shares of Company Preferred Stock have
been converted into shares of Company Common Stock and the Merger Agreement
shall have been terminated pursuant to the provisions described in the second
preceding paragraph above; or in the event that (b) the Merger Agreement is
terminated (x) pursuant to section (c)(ii) or (d)( iv) of the second preceding
paragraph above or (y) pursuant to section (c)(i) or (d)(i) of the second
preceding paragraph above, to the extent that the failure to commence, the
termination or the failure to accept any Shares for payment, as set forth in
section (c)(i) or (d)(i) of the second preceding paragraph above, as the case
may be, shall relate to the failure of the Company to perform, in any material
respect, any of its material covenants or agreements contained in the Merger
Agreement or the material breach by the Company of any of its material
representations or warranties contained in the Merger Agreement, then, in any
such event, the Company shall pay Parent a fee of $10 million, which amount
shall be payable in immediately available funds. The Merger Agreement also
provides that in the event that any person shall have commenced, publicly
proposed or communicated to the Company an Acquisition Proposal that is publicly
disclosed and (x) the Offer shall have remained open for at least 20 business
days, (y) the Minimum Condition shall not have been satisfied and (z) the Merger
Agreement shall have been terminated pursuant to section (c) or (d)of the second
preceding paragraph above, then, in any such event, the Company shall pay
Parent: (i) a fee of $5 million within one business day following termination of
the Merger Agreement and (ii) if the Company enters into an agreement in respect
of an Acquisition Proposal within 12 months of the termination of the Merger
Agreement, an additional fee of $7 million payable within one business day
following consummation of an Acquisition Proposal.
The Merger Agreement also provides that all costs and expenses incurred in
connection with the Merger Agreement, the Stockholders Agreement and the
Transactions shall be paid by the party incurring such expenses, whether or not
any Transaction is consummated.
The Merger Agreement is filed as Exhibit 1 hereto and is incorporated
herein by reference.
2. The Stockholders Agreement
THE FOLLOWING IS A SUMMARY DESCRIPTION OF THE STOCKHOLDERS AGREEMENT, A
COPY OF WHICH IS FILED AS AN EXHIBIT TO THE SCHEDULE 14D-1. SUCH SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE STOCKHOLDERS AGREEMENT.
Parent and Purchaser have also entered into the Stockholders Agreement with
the Principal Stockholders pursuant to which the Principal Stockholders have
agreed (i) to tender their Shares into the Offer, (ii) to vote their Shares in
favor of the Merger, if applicable, in each case subject to the conditions set
forth in the Stockholders Agreement, and (iii) to grant to Purchaser an option
to purchase their shares of Company Common Stock at the Per Share Amount and
their shares of Company Preferred Stock at an amount in cash equal to the
product of the Per Share Amount multiplied by the number of shares of Company
Common Stock issuable upon the conversion of such shares of Company Preferred
Stock, in each case subject to the conditions set forth in the Stockholders
Agreement.
Tender of Shares. Each Principal Stockholder has agreed to tender,
pursuant to and in accordance with the terms of the Offer, and not withdraw, all
such Principal Stockholder's Shares, provided, however, that any Principal
Stockholder who would incur liability under Section 16(b) of the Exchange Act as
a result thereof is not required to tender such Shares to the extent necessary
to avoid such liability.
Voting Agreement. Each Principal Stockholder has also agreed that, from
and after the date of the Merger Agreement and until the close of business on
the 180th day following termination of the Merger
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Agreement, at any meeting of the stockholders of the Company, however called,
and in any action by consent of the stockholders of the Company, such Principal
Stockholder will vote (or will cause to be voted) such Stockholder's Shares (a)
in favor of the approval and adoption of the Merger Agreement, the Merger and
all the transactions contemplated by the Merger Agreement and the Stockholders
Agreement and otherwise in such manner as may be necessary to consummate the
Merger, (b) against any action, proposal, agreement or transaction that would
result in a breach of any covenant, obligation, agreement, representation or
warranty of the Company contained in the Merger Agreement (whether or not
theretofore terminated) or of the Principal Stockholder contained in the
Stockholders Agreement, and (c) against any action, proposal, agreement or
transaction (other than the Merger Agreement or the Transactions) that could
result in any of the conditions to the Company's obligations under the Merger
Agreement (whether or not theretofore terminated) not being fulfilled or that is
intended, or could reasonably be expected, to impede, interfere or be
inconsistent with, delay, postpone, discourage or adversely affect the Merger
Agreement (whether or not theretofore terminated), the Offer, the Merger or the
Stockholders Agreement, including, but not limited to, any Superior Proposal.
Irrevocable Proxy. The Stockholders Agreement also provides that, if any
Principal Stockholder fails to comply with the foregoing voting agreement (as
determined by Parent in its sole discretion), such Principal Stockholder agrees
to the irrevocable appointment of Parent, and each of its officers, as such
Principal Stockholder's attorney and proxy pursuant to the provisions of Section
212(c) of Delaware Law, with full power of substitution, to vote and otherwise
act (by written consent or otherwise) with respect to such Principal
Stockholder's Shares at any meeting of stockholders of the Company, or consent
in lieu of any such meeting, or otherwise, on the matters and in the manner
specified in the foregoing paragraph.
Grant of Option. The Stockholders Agreement provides that each Principal
Stockholder grants to Purchaser an irrevocable option (each, an "Option" and,
collectively, the "Options") to purchase all, and not less than all, of such
Principal Stockholder's shares of Company Common Stock and/or such Principal
Stockholder's shares of Company Preferred Stock at the applicable Purchase
Price, net to such Principal Stockholder in cash. The Stockholders Agreement
provides further that each Option shall expire if not exercised prior to the
close of business on the 180th day following termination of the Merger
Agreement. Purchaser may exercise any or all of the Options as to any Principal
Stockholder, at any time and from time to time, following termination of the
Merger Agreement, under circumstances in which any fee (or any portion thereof)
shall be payable and prior to the expiration of such Options.
Option Closing. Under the Stockholders Agreement, if Purchaser wishes to
exercise an Option, Purchaser shall send a written notice to the applicable
Principal Stockholder of its intention to exercise the Option, specifying the
place, and, if then known, the time and the date of the closing (the "Option
Closing") of the purchase. At the Option Closing, (i) each Principal Stockholder
whose Shares are being purchased shall deliver to Purchaser (or its designee)
all of such Principal Stockholder's Shares by delivery of a certificate or
certificates evidencing such Shares, in the denominations designated by
Purchaser, duly endorsed to Purchaser or accompanied by stock powers duly
executed in favor of Purchaser, with all necessary stock transfer stamps
affixed, and (ii) Purchaser shall pay to each such Principal Stockholder the
aggregate Purchase Price for such Principal Stockholder's Shares.
Conditions to Option Closing. The Option Closing is subject to the
conditions that (i) no Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any foreign or domestic statute, law,
ordinance, regulation, rule, code, executive order, injunction, judgment, decree
or other order ("Law") (whether temporary, preliminary or permanent) which is
then in effect and has the effect of making the acquisition of Shares by
Purchaser pursuant to the exercise of the Options illegal, or otherwise
restricting, preventing or prohibiting consummation of the purchase and sale of
the Shares pursuant to the exercise of the Options, and (ii) any waiting period
applicable to the consummation of the purchase and sale of the Shares pursuant
to the exercise of the Options under the HSR Act shall have expired or been
terminated.
Recapture. The Stockholders Agreement also provides that, in the event
Purchaser sells any Shares acquired pursuant to the exercise of an Option within
the two-year period following the applicable Option Closing at a price in excess
of the Purchase Price for such Shares, Purchaser shall promptly pay to the
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<PAGE> 14
applicable Principal Stockholder an amount equal to such excess (less any taxes
incurred by Purchaser in connection therewith).
No Solicitation of Transactions. Each Principal Stockholder has agreed
that between the date of the Stockholders Agreement and the date of termination
of the Merger Agreement, such Principal Stockholder will not, directly or
indirectly, through any officer, agent or otherwise, (a) solicit, initiate,
accept or knowingly encourage the submission of any Acquisition Proposal, or (b)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or otherwise cooperate in any way, or
assist or participate in, facilitate or encourage any proposal that constitutes,
or may reasonably be expected to lead to, an Acquisition Proposal. Each
Principal Stockholder has agreed to, and has agreed to direct or cause its
directors, officers, employees, representatives and agents to, immediately cease
and cause to be terminated any discussions or negotiations with any parties that
may be ongoing with respect to any Acquisition Proposal. Each Principal
Stockholder has agreed to promptly advise Parent orally and in writing of any
Acquisition Proposal or any request for information with respect to any
Acquisition Proposal, the material terms and conditions of such Acquisition
Proposal or request and the identity of the person making such Acquisition
Proposal or request.
Termination. The Stockholders Agreement provides that the Principal
Stockholders' obligation thereunder to tender, and not withdraw, their Shares
pursuant to the Offer shall terminate on the expiration date of the Offer. The
Options (including any Option as to which an exercise notice has been delivered
but for which the Option Closing has not occurred) shall expire if not exercised
prior to the close of business on the 180th day following termination of the
Merger Agreement. The remaining provisions of the Stockholders Agreement
terminate upon the earliest of (a) the effective time of the Merger and (b) the
close of business on the 180th day following the termination of the Merger
Agreement.
The Stockholders Agreement is filed as Exhibit 3 hereto and is incorporated
herein by reference.
3. Confidentiality Agreement
THE FOLLOWING IS A SUMMARY OF THE CONFIDENTIALITY AGREEMENT, DATED APRIL 1,
1999, BETWEEN THE COMPANY AND PARENT (THE "CONFIDENTIALITY AGREEMENT"), A COPY
OF WHICH HAS BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO SCHEDULE 14D-1. THE
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CONFIDENTIALITY
AGREEMENT.
Pursuant to the Confidentiality Agreement, Parent has agreed, among other
things, (i) not to use any of the Evaluation Material for any reason other than
to evaluate a possible transaction between Parent and the Company, (ii) that the
Evaluation Material will be kept strictly confidential by Parent and its
representatives and, except with the specific prior written consent of the
Company or as expressly otherwise permitted by the terms of the Confidentiality
Agreement, will not be disclosed by Parent or by its representatives. The
Confidentiality Agreement provides that Parent may disclose the Evaluation
Material to those representatives of Parent that require such material for the
purpose of evaluating a possible transaction. For purposes of the
Confidentiality Agreement, "Evaluation Material" is defined to mean non-public
information regarding the Company and any other non-public, confidential or
proprietary information concerning the Company that the Company and its advisors
furnish to Parent; provided, however, that Evaluation Material does not include
information which (i) becomes generally available to the public other than as a
result of disclosures by Parent or its representatives, (ii) was already in
Parent's possession or was independently developed by Parent without violation
of the Confidentiality Agreement prior to its disclosure to Parent by the
Company, its representatives or its agents, or (iii) becomes available to Parent
on a non-confidential basis from a source other than the Company, its
representatives or its agents, provided that such source is not, to Parent's
knowledge after reasonable investigation, bound by a confidentiality agreement
with the Company, its representatives or its agents or otherwise prohibited from
transmitting the information to Parent or Parent's representatives by a
contractual, legal or fiduciary obligation.
Pursuant to the Confidentiality Agreement, Parent has also agreed that for
a period of two years from the date of the Confidentiality Agreement, unless
Parent shall have been specifically invited in writing by the Company, neither
Parent nor any of its affiliates will in any manner, directly or indirectly, (a)
effect or seek,
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offer or propose to effect, or cause or participate in or in any way assist any
person to effect or seek, offer or propose (whether publicly or otherwise) to
effect or cause or participate in, (i) any acquisition of any securities or
assets of the Company or any of its subsidiaries, (ii) any tender or exchange
offer, merger or other business combination involving the Company or any of its
subsidiaries, (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company or
any of its subsidiaries, or (iv) any "solicitation" of "proxies" (as such terms
are used in the proxy rules of the Commission) or consents to vote any voting
securities of the Company, (b) form, join or in any way participate in a "group"
(as defined under the Exchange Act) with respect to any voting securities of the
Company, (c) otherwise act, alone or in concert with others, to seek to control
or influence the management, Board of Directors or policies of the Company, and
(d) take any action which might force the Company to make a public announcement
or arrangements with any third party with respect to any of the foregoing.
The Confidentiality Agreement is filed as Exhibit 4 hereto and is
incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) At a meeting held on August 13, 1999, the Board unanimously approved
and adopted the Offer, the Merger, the Merger Agreement and the transactions
contemplated thereby, and unanimously recommended that the stockholders of the
Company accept the Offer and tender their Shares pursuant thereto.
As part of its ongoing analysis of its business strategy and operations,
Parent continually analyzes new markets into which it might expand. By the end
of 1998, Parent had concluded that it would be strategically important to be
present in a significant way in the United States market, because of both the
potential opportunities within the U.S. market and the cross-selling
opportunities between Parent's existing construction business in Europe and
multinational customers located in the United States.
Parent analyzed whether it would be optimal to build its own business in
the U.S. market or to acquire a significant construction company in the U.S.
Parent identified the Company, as its leading candidate for a business
combination due to its strong market presence, its reputation for high quality,
its strong management team and its prospects for further growth.
On March 10, 1999, Hans-Peter Keitel, President and Chief Executive Officer
of Parent and Harald Peipers, a former Member of the Executive Board of Parent,
met in New York City with Ellis T. Gravette, Jr., Chairman and Chief Executive
Officer of the Company, and Robert E. Fee, President and Chief Operating Officer
of the Company, and discussed, in general terms, the Company's business and
prospects and the possibility of an investment by Parent in the Company or other
strategic alliances between Parent and the Company. These discussions were
principally in the context of a proposal made by Parent to acquire all or some
of the Shares of the Company then the subject of a Registration Statement on
Form S-3 filed with the Commission on March 4, 1999 in connection with a
contemplated public offering of Shares then held by Karl Steiner Holding AG (the
predecessor to EBSPSW Holding AG) and the Company's pension plan.
On March 17 and 18, 1999, Hans-Wolfgang Koch, Member of the Executive Board
of Parent, and Bernhard Burklin, then Head of Corporate Development of Parent
and currently Vice President of Hochtief International, met in New York City
with Mr. Fee, President and Chief Operating Officer of the Company, and Donald
G. Sleeman, Senior Vice President and Chief Financial Officer of the Company, to
discuss further, in general terms, the business of the Company and a possible
Parent investment in, or other strategic transaction with, the Company.
On March 25, 1999, Mr. Koch, Mr. Burklin and Hanno Bastlein, Comptroller of
Parent, had further discussions in New York with Messrs. Gravette, Fee and
Sleeman.
On March 31, 1999, Mr. Koch, Mr. Burklin and Busso Peus, Member of the
Executive Board of Parent, continued discussions with Messrs. Gravette, Fee and
Sleeman regarding a transaction between the parties and the Company's business,
including the possible acquisition of 100% of the Company.
On April 1, 1999, the Company and Parent entered into a confidentiality
agreement.
15
<PAGE> 16
On April 5, 1999, Mr. Gravette had a conversation with Mr. Burklin and on
April 9, 1999, Mr. Gravette met with Messrs. Koch and Burklin.
On April 7, 1999, at a telephonic meeting of the Board, the Board was
advised as to the previous discussions with Parent.
On April 14, 1999, the Company entered into an engagement letter with
PaineWebber Incorporated ("PaineWebber") to represent the Company as its
exclusive financial advisor in connection with the potential sale of the
Company.
From April 15 through April 17, 1999, Parent engaged in a limited due
diligence evaluation of the business and affairs of the Company. At the
conclusion of preliminary due diligence, Parent undertook to make a written
proposal for an acquisition of the Company.
From April 25 through April 27, 1999, representatives of the Company met in
Essen, Germany with representatives of Parent to gain a better understanding of
Parent's business.
On April 28, 1999, Mr. Keitel transmitted to Mr. Gravette a written
proposal to acquire the Company for total consideration of $270 million or
approximately $21.65 per share of Company Common Stock based upon the number of
shares of Company Common Stock outstanding on a fully diluted and as converted
basis. Mr. Keitel's letter indicated that further due diligence would be
required and attached a term sheet setting forth the principal terms of Parent's
offer, including Parent's requirement that the Company's significant
stockholders agree to tender their Shares pursuant to the Offer and that the
Company agree to pay a termination fee of $10 million in the event the Merger
Agreement is terminated under certain circumstances.
On April 30, 1999, during a telephonic meeting of the Board, the Board was
updated as to the discussions with Parent.
During the week of May 3, 1999, several conversations took place between
Mr. Keitel and Mr. Gravette regarding Parent's offer and the possible benefits
to be achieved by a combination. Messrs. Keitel and Gravette agreed to continue
their discussions in New York City on May 24 and 25. On May 7, 1999, during a
Board meeting in New York City, the Board was further updated as to the
discussions with Parent.
On May 12, 1999, Mr. Keitel sent a letter to Mr. Gravette in which he
confirmed their conversations of the previous week (including the meetings
scheduled for May 24 and 25) and increased Parent's offer by $15 million to an
aggregate purchase price of $285 million, or approximately $23 per share of
Company Common Stock based upon the number of shares of Company Common Stock
outstanding on a fully diluted and as converted basis.
On May 24 and 25, 1999, several meetings took place in New York City
between representatives of the two companies regarding the benefits of a
possible combination. On May 25, Parent's representatives, in a meeting with the
Company's representatives, orally increased its offer to acquire the Company for
total consideration of $310 million, or approximately $25 per share of Company
Common Stock based on the number of shares of Company Common Stock outstanding
on a fully diluted and as converted basis, on the terms and conditions set forth
in Mr. Keitel's previous letters of April 28 and May 12.
On June 9, 1999, at a Board meeting in Seattle, Washington, the Board held
a further discussion concerning a possible business combination with Parent.
On June 15, 1999, Mr. Keitel sent a letter to Mr. Gravette in which he
requested that Mr. Gravette inform him of the results of the Board's
deliberations on Parent's offer and in which he confirmed in writing the
increase in the offer price made orally on May 25, 1999. Later that day, Mr.
Gravette responded with a letter informing Mr. Keitel that the Board determined
that the offer was inadequate for further consideration. Mr. Gravette also
informed Mr. Keitel that Thomas Leppert had been elected by the Board to succeed
Mr. Gravette as Chairman of the Board of the Company effective October 1, 1999.
On June 18, 1999, Mr. Keitel and Mr. Gravette spoke by telephone. Mr.
Keitel requested that the Company inform Parent of the price at which it would
be willing to enter into a transaction with Parent.
16
<PAGE> 17
Mr. Gravette said that this was an issue for the Board to determine and that he
would undertake to provide a proposal to Parent in July.
On July 12, 1999, Mr. Keitel delivered a letter to Messrs. Gravette and
Leppert in which Parent, having refined its valuation analysis, particularly its
evaluation of the revenue opportunities available to the combined company, and
taking into account the Company's expected 1999 after-tax income, increased its
offer to $347 million in the aggregate, or approximately $28 per share of
Company Common Stock based on the number of shares of Company Common Stock
outstanding on a fully diluted and as converted basis. The letter indicated that
it was Parent's intention to keep the Company's management team intact for the
foreseeable future. Parent further stated in the letter that its offer would
expire if not accepted by the Board by July 30. Parent attached to the letter a
revised term sheet setting forth the principal terms of Parent's offer.
On July 16, 1999, Peter Steiner and Heinrich Baumann-Steiner, each members
of the Board, and their affiliates, EBSPSW Holding AG, PSW Holding AG, EBS
Holding AG and Esther Baumann-Steiner (collectively, the "Steiner Affiliates"),
filed an amendment to the Statement on Schedule 13D with respect to the Shares
previously filed by them and others. In the amended Schedule 13D, the Steiner
Affiliates disclosed that they had learned that an offer had been made to
purchase all the Shares of the Company at a substantial premium in excess of the
highest market price at which the shares of Company Common Stock had ever traded
in the public markets. The Steiner Affiliates also stated that they intended to
urge the Board to accept the offer and believed that the offer was fair to all
stockholders of the Company from a financial point of view.
On July 20, 1999, the Board met to address Parent's offer. At that meeting,
the Board appointed a committee of independent directors (the "Special
Committee"), to consider Parent's offer and other strategic alternatives. The
Special Committee consisted of all of the directors of the Company except
Messrs. Gravette, Leppert, Steiner, Baumann-Steiner and Fieger. At the meeting,
the Board also discussed the status of Parent's proposal. A representative of
the legal advisors, Fried, Frank, Harris, Shriver & Jacobson ("Fried Frank"),
participated in the meeting.
On July 22, 1999, Messrs. Leppert, Fee and Sleeman of the Company and
Messrs. Koch and Burklin of Parent met in Frankfurt, Germany. At that meeting,
the participants discussed various issues relating to the transaction, including
matters relating to the governance of the Company following the Merger. The
Company's representatives also informed Parent's representatives of recent
changes to certain compensation and benefits arrangements for employees and
officers of the Company. The Company's representatives further informed Parent
that Parent's offer of $28 per share of Company Common Stock was not acceptable.
From July 23 through July 25, 1999, Messrs. Koch and Leppert had several
conversations regarding price, in which Parent increased its offer to $370
million in the aggregate.
On July 28, 1999, the Special Committee held a telephonic meeting to
discuss the proposal by Parent. Representatives of Fried Frank participated in
these discussions. The Special Committee determined to accept Parent's offer,
subject to agreement on various matters and full Board approval.
On July 30, 1999, Mr. Gravette informed Mr. Keitel in writing of the
Special Committee's action.
Following several follow-up conversations clarifying certain aspects of
Parent's offer, Parent indicated its willingness to move forward with its
confirmatory due diligence investigation of the Company and to begin the
negotiation of definitive agreements.
On August 2, 1999, during a telephonic meeting of the Board, the Board was
updated as to the status of the discussions with Parent. Representatives of
Fried Frank and PaineWebber participated in the meeting.
From August 3 through August 5, 1999, representatives of Parent and its
financial and legal advisors conducted a due diligence investigation of the
business and affairs of the Company. Also on August 3, Parent's legal advisors
furnished to the Company's legal advisors a draft of the Merger Agreement and
the Stockholders Agreement. In addition, on August 3, representatives of Parent
and representatives of the Company met to arrive at a price per Share given an
aggregate offer price of $370 million and determined a price per share of
Company Common Stock to be $28.625, based on the then number of outstanding
shares of
17
<PAGE> 18
Company Common Stock on a fully diluted and as converted basis and the average
exercise price per share of Company Common Stock issued upon the exercise of
outstanding stock options.
Several conversations took place during the period from August 5 through
August 12, 1999 between the legal advisors to the parties regarding the
principal issues on the Merger Agreement and the Stockholders Agreement.
On August 12, 1999, senior executives of Parent and the Company met at the
Company's headquarters to address the principal open issues between the parties.
On Friday, August 13, 1999, Parent received the requisite approval of the
Supervisory Board of RWE. Also on August 13, the Board met in person in New
York. After consideration of the presentations of legal counsel concerning the
Board's duties and the terms of the Offer, the Merger Agreement and the
Stockholders Agreement and of PaineWebber concerning its fairness opinion, the
Board unanimously approved and declared advisable the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, subject
to final negotiation of the terms of the Merger Agreement. The Principal
Stockholders indicated that, subject to the execution of the Merger Agreement,
they were prepared to enter into the Stockholders Agreement.
During the weekend of August 14 and 15, 1999, representatives of Parent and
Purchaser and their legal advisors worked out all remaining open issues.
On August 16, 1999, Parent, Purchaser and the Company entered into the
Merger Agreement and Parent and the Principal Stockholders entered into the
Stockholders Agreement. Immediately thereafter, Parent and the Company made a
public announcement to this effect.
(b) As set forth above, prior to approving the Offer and the Merger and
authorizing the Company to enter into the Merger Agreement, the Board received
presentations from representatives of PaineWebber regarding the financial
aspects of the proposed Offer and the Merger, and from representatives of Fried
Frank regarding the legal aspects of the proposed Offer and the Merger. In
reaching its conclusion that the Offer and the Merger is in the best interests
of the Company and its stockholders, the Board principally considered, among
other things, the following:
(i) the terms and conditions of the Offer and the Merger Agreement;
(ii) the trading history of the shares of Common Stock during the past
several years and a comparison of the trading history with those of other
comparable companies;
(iii) the purchase price of $28.625 per share of Common Stock in cash
represents a premium over recent and historical market prices for the
shares of Common Stock (on July 15, 1999, the last trading day before the
Company announced that it has received a proposal to acquire all of the
outstanding Common Stock, the closing price for the Common Stock as quoted
on the NYSE was $17.50 per share);
(iv) the opinion of PaineWebber to the Board to the effect that, as of
August 13, 1999, the proposed cash consideration to be received by the
stockholders of the Company pursuant to the Offer and Merger is fair to
such stockholders from a financial point of view. A copy of the PaineWebber
written opinion that was delivered to the Board is set forth as Exhibit 14
to this Schedule 14D-9. STOCKHOLDERS ARE URGED TO READ THE PAINEWEBBER
OPINION IN ITS ENTIRETY;
(v) the fact that the Offer is not contingent on Parent obtaining
financing and contains no other terms or conditions that, in the view of
the Board, could reasonably be expected to impair materially the
consummation of the Offer or the Merger;
(vi) other potential third party acquirors had the opportunity to
contact the Company or its advisors after the Company's public announcement
on July 16, 1999 that the Company had received a proposal to acquire all of
the outstanding Shares;
(vii) the terms and conditions of the Merger Agreement, including the
right of the Board to terminate the Merger Agreement if its fiduciary
duties require that action in the event a superior proposal
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<PAGE> 19
from a third party is made (subject to payment of a $10 million termination
fee to the Parent) and adopt the more favorable transaction;
(viii) the fact that EBSPSW Holding AG (the Company's largest
stockholder) and certain directors and executive officers of the Company
(who together beneficially hold in the aggregate approximately 23.8% of the
outstanding shares of Common Stock, assuming conversion of the Preferred
Stock) were willing to enter into the Stockholders Agreement pursuant to
which such stockholders agreed to tender into the Offer all of the Shares
beneficially owned by them or to vote in favor of the Merger;
(ix) the financial condition, results of operations, business and
prospects of the Company; and
(x) the fact that the Parent presently intends to operate the Company
as an autonomous division of the Parent, will maintain the Company's
current annual incentive program until at least December 31, 2000, and will
establish a phantom stock plan for the Company's senior executive officers.
Because of the variety of factors considered, the Board did not find it
practicable to, and did not make specific assessments of, quantify or otherwise
assign relative weights to the specific factors considered in reaching their
determination. The determination was made after consideration of all of the
factors together. In addition, individual members of the Board may have given
different weights to different factors.
The Board recognized that, while the consummation of the Offer gives the
Company's stockholders the opportunity to realize a premium over the prices at
which the shares of Common Stock were traded prior to the public announcement of
the Merger and Offer, consummation of the Offer and the Merger will eliminate
the Company's stockholders' ability to participate in the future growth and
possible profits of the Company.
The Board anticipates that if the Shares are not purchased in accordance
with the terms of the Offer or if the Merger is not consummated, the Company's
current management, under the general direction of the Board, will continue to
manage the Company as an ongoing business in accordance with the Company's
current business plan.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained PaineWebber pursuant to a letter agreement dated April
14, 1999 (the "PaineWebber Engagement Letter") to act as its exclusive financial
advisor in connection with any proposed sale transaction involving, among other
things, the acquisition by a third party of more than 50.0% of the capital stock
or assets of the Company. Pursuant to the PaineWebber Engagement Letter, the
Company has agreed to pay PaineWebber a fee of $250,000 upon delivery of the
opinion set forth as Exhibit 14 to this Schedule 14D-9. In addition, the Company
agreed to pay PaineWebber an additional fee if (a) during the term of the
agreement, the Company enters into a definitive agreement with a purchaser, (b)
within one year after the termination of the agreement, the Company enters into
a definitive agreement which subsequently results in a sale transaction, or (c)
within one year after the termination of the agreement, a sale transaction is
consummated with a purchaser in which PaineWebber advised the Company or had
discussions with the Company regarding a sale transaction. This fee is payable
in cash upon the closing of the sale transaction. The amount of the fee is based
upon an increasing percentage of the product of the number of outstanding shares
of Common Stock on a fully diluted basis and the purchase price per share of
Common Stock in excess of $14.125 (which percentage ranges from 0.7% for a
purchase price per share of Common Stock between $14.125 and $25.00 to 1% for a
purchase price per share of Common Stock above $27.00). In the case of the Offer
and the Merger, the transaction fee will be approximately $2.2 million
(including the $250,000 fee for the delivery of the fairness opinion). The
Company has also agreed to reimburse PaineWebber for all of its out-of-pocket
expenses incurred in connection with this engagement, including the fees,
disbursements, and other charges of legal counsel. The Company also agreed to
indemnify PaineWebber against certain liabilities relating to or arising out of
PaineWebber's engagement as financial advisor, including liabilities under the
federal securities laws.
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<PAGE> 20
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth below or pursuant to the Stockholders Agreement
(see Item 3 hereof), during the past 60 days, neither the Company nor any
subsidiary of the Company nor, to the best of the Company's knowledge, any
executive officer, director or affiliate of the Company has effected a
transaction in the Shares.
- On June 29, 1999, Walter G. Ehlers, a director of the Company, exercised
an option for 1,500 shares of Common Stock at an exercise price of
$17.2917 per share and an option for 5,250 shares of Common Stock at an
exercise price of $15.50 per share.
- On August 4, 1999, Sara J. Gozo, Vice President, Secretary and Counsel of
the Company, exercised an option for 3,700 shares of Common Stock at an
exercise price of $5.25 per share and an option for 1,800 shares of
Common Stock at an exercise price of $5.7917 per share.
- On August 3, 1999, Mr. Gravette made a gift of 15,000 shares of Common
Stock to his grandchildren.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries presently intend to tender to the Offeror
all Shares held of record or beneficially owned by such persons (other than
shares of Common Stock issuable upon exercise of stock options and Shares, if
any, which, if tendered, could cause such persons to incur liability under the
provisions of Section 16(b) of the Securities Exchange Act of 1934). Reference
is also made to the Stockholders Agreement described in Item 3 herein.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Statement, no negotiation is being
undertaken or is underway by the Company in response to the Offer which relates
to or would result in:
(1) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company;
(2) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company;
(3) a tender offer for or other acquisition of securities by or of the
Company; or
(4) any material change in the present capitalization or dividend
policy of the Company.
(b) Not applicable.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
20
<PAGE> 21
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
- ----------- --------
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of August 16, 1999,
among The Turner Corporation, and HOCHTIEF AG.(1)
Exhibit 2 Pages 1-14 of the Proxy Statement, dated May 7, 1999, of The
Turner Corporation.
Exhibit 3 Form of Stockholders Agreement, dated as of August 16, 1999,
among certain directors and executive officers of The Turner
Corporation, EBSPSW Holding AG, HOCHTIEF AG and Beta
Acquisition Corp.(2)
Exhibit 4 Confidentiality Agreement, dated April 1, 1999, between The
Turner Corporation and HOCHTIEF AG.(3)
Exhibit 5 Employment Agreement, dated as of June 9, 1999, between The
Turner Corporation and Thomas C. Leppert.
Exhibit 6 Employment Agreement, dated as of June 9, 1999, as
supplemented, between The Turner Corporation and Thomas C.
Leppert.
Exhibit 7 Restricted Stock Unit Agreement, dated as of June 9, 1999,
between The Turner Corporation and Thomas C. Leppert.
Exhibit 8 Non-Qualified Stock Option Agreement for 50,000 Shares,
dated June 9, 1999, between The Turner Corporation and
Thomas C. Leppert.
Exhibit 9 Non-Qualified Stock Option Agreement for 100,000 Shares,
dated June 9, 1999, between The Turner Corporation and
Thomas C. Leppert.
Exhibit 10 Form of Change of Control Agreement, dated November 25,
1997, between The Turner Corporation and certain senior
executives.(4)
Exhibit 11 Form of Change of Control Agreement, dated November 25,
1997, between The Turner Corporation and other
executives.(5)
Exhibit 12 Letter Agreement, dated August 13, 1999, between The Turner
Corporation and Karl Steiner Holding AG.
Exhibit 13 Press release, dated August 16, 1999.
Exhibit 14* Opinion, dated August 13, 1999, of PaineWebber Incorporated.
Exhibit 15* Letter to Stockholders from E. T. Gravette, Jr., dated
August 20, 1999.
</TABLE>
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* Included in copies of Schedule 14D-9 mailed to stockholders.
(1) Incorporated herein by reference to Exhibit (c)(1) of the Schedule 14D-1 of
the Parent and the Offeror.
(2) Incorporated herein by reference to Exhibit (c)(2) of the Schedule 14D-1 of
the Parent and the Offeror.
(3) Incorporated herein by reference to Exhibit (c)(3) of the Schedule 14D-1 of
the Parent and the Offeror.
(4) Incorporated herein by reference from Exhibit 10(g) to the Company's Form
10-K for the year ended December 31, 1998 (File No. 1-8719).
(5) Incorporated herein by reference from Exhibit 10(h) to the Company's Form
10-K for the year ended December 31, 1998 (File No. 1-8719).
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<PAGE> 22
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.
THE TURNER CORPORATION
By /s/ DONALD G. SLEEMAN
------------------------------------
Donald G. Sleeman
Senior Vice President,
Chief Financial Officer and
Chief Accounting Officer
Dated: August 20, 1999
22
<PAGE> 1
EXHIBIT 2
THE TURNER CORPORATION
375 HUDSON STREET
NEW YORK, NEW YORK 10014
PROXY STATEMENT
-------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 1999
----------
This Proxy Statement is being furnished beginning March 30,
1999 in connection with the solicitation of proxies for use at the 1999 Annual
Meeting of Stockholders of The Turner Corporation (the "Company") to be held at
the time and place and for the purposes set forth in the attached notice.
ELECTION OF DIRECTORS
The Company's directors who are elected by the holders of the
Common Stock (voting together with the holders of the Company's Series B ESOP
Convertible Preference Stock ("Series B ESOP Preferred Stock") and Series D
8-1/2% Convertible Preference Stock ("Series D Preferred Stock")) are divided
into three classes. They serve three-year terms, with the directors in one class
being elected each year. At the date of this Proxy Statement, Karl Steiner
Holding AG or its sister company EBSPSW Holding AG (collectively, "Steiner
Holding") as the holder of the Company's Series C 8-1/2% Convertible Preference
Stock ("Series C Preferred Stock") has the right to elect three directors, who
serve one year terms and who are in addition to the directors elected by the
holders of the Common Stock, the Series B ESOP Preferred Stock and the Series D
Preferred Stock. As regards voting on directors, Steiner Holding as the holder
of the Series D Preferred Stock is required, pursuant to an agreement with the
Company, to vote the Series D Preferred Stock for directors in the same
proportion as the shares of Common Stock not owned by Steiner Holding or its
affiliates are voted for directors.
At the 1999 Annual Meeting of Stockholders, three directors
are to be elected. Election of a director requires a plurality of the votes
cast. Because no minimum vote is required, shares which are present at the
meeting but are not voted (whether due to abstentions, broker non-votes or
otherwise) will not directly affect the outcome of the election.
The Board of Directors' nominees for the three directorships
and the directors who will continue in office are listed in the following table.
The table also shows the directors expected to be elected by Steiner Holding as
the holder of the Company's Series C Preferred Stock, if that stock remains
outstanding. The Company has filed a registration statement, which as of the
date of this Proxy Statement has not become effective, with the Securities and
Exchange Commission relating to, among other things, a public offering by
Steiner Holding of the 2,400,000 shares of the Company's Common Stock issuable
upon conversion of the Series C Preferred Stock and the Series D Preferred
Stock. The offering will be made only by means of a prospectus filed with the
Securities and Exchange Commission. If and when the offering is completed (which
may be before or after the 1999 Annual Meeting of Stockholders), the Series C
Preferred Stock and the Series D Preferred Stock will no longer be outstanding.
The Company anticipates that, at that time, Mr. A. Gary Fieger and Mr. Peter K.
Steiner will leave the Board of Directors. Further, at that time, the Company
anticipates that it will expand the regular Board by one person and appoint Mr.
Heinrich Baumann-Steiner to fill that vacancy.
<PAGE> 2
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
SERVED AS
DIRECTOR SINCE TERM
NAME AND AGE PRINCIPAL OCCUPATION OR DURING WILL
AND OTHER DIRECTORSHIPS THE PERIOD EXPIRE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NOMINEES FOR ELECTION AS
DIRECTORS TO SERVE UNTIL 2002:
Ellis T. Gravette, Jr., 73 (1) Chairman and Chief Executive Officer, The Turner Corporation; 1981 2002
President, Ardath Associates, Inc., 1986-1996; Retired Chairman
of the Board and Chief Executive Officer, The Bowery Savings
Bank, 1981-86; Director of MidFirst Bank, SSB
Charles H. Moore, Jr., 69 Director of Athletics, Cornell University; Chairman and Chief 1990 2002
Executive Officer, Xpander Pak, Inc.; Executive Vice President,
Illinois Tool Works, Inc., 1991-92; President and Chief Executive
Officer, Ransburg Corporation 1988-92; Director of Elcotel, Inc.
and United States Olympic Committee
Gordon A. Walker, 71 (1) Former Chairman and Chief Executive Officer, Hollinee, Inc., 1984 2002
1987-1997; Former Chairman, President and Chief Executive
Officer, U.S. Industries, Inc., 1981-1986
DIRECTORS WHO WILL CONTINUE
IN OFFICE:
Walter G. Ehlers, 66 Retired President, Chief Operating Officer and Trustee, Teachers 1985 2000
Insurance and Annuity Association and College Retirement Equities
Fund, 1984-88; Director of Neuberger & Berman -- Advisors
Management Trust; Trustee of China Medical Board of New York, Inc.
Robert E. Fee, 62 President and Chief Operating Officer, The Turner Corporation; 1997 2000
President and Chief Operating Officer, Turner Construction
Company, 1997-1998; Executive Vice President, 1996-97; Senior
Vice President, 1994-96; Vice President 1986-1994
Leif Lomo, 69 Former President, Marley Pump Company, 1994-1995; Retired 1992 2001
Chairman and Chief Executive Officer, A.B. Chance Company
1987-1994; Director of Young Broadcasting, Inc. and Mercantile
Bank of Boone County
Thomas C. Leppert, 44 Trustee of the Estate of James Campbell; Vice Chairman, Bank of 1998 2001
Hawaii and Pacific Century Financial Corp, 1996-1997; President
and Chief Executive Officer, Castle & Cooke Hawaii and Castle &
Cooke Properties, Inc., 1989-1996; President, Residential and
Hawaii: Commercial Operations, and Director, Castle & Cooke,
1995-1996
Harold J. Parmelee, 61 President-Asset Management, The Turner Corporation; President and 1988 2001
Chief Operating Officer, The Turner Corporation, 1994-1998
G. Jeffrey Records, Jr., 39 Chairman and Chief Executive Officer, MidFirst Bank; President 1997 2001
and Chief Executive Officer, MidFirst Bank, 1995-February 1998;
President and Chief Executive Officer, Midland Mortgage,
1987-1995; Director of Midland Financial Company, Midland
Mortgage Company and Homeshield Insurance Company
John O. Whitney, 71 (1) Professor and Executive Director, The Deming Center for 1988 2000
Quality Management, Columbia Business School; Director of
Atchison Castings and Church & Dwight Co., Inc.
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
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SERVED AS
DIRECTOR SINCE TERM
PRINCIPAL OCCUPATION OR DURING WILL
NAME AND AGE AND OTHER DIRECTORSHIPS THE PERIOD EXPIRE
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DIRECTORS EXPECTED TO BE ELECTED
BY HOLDER OF SERIES C PREFERRED
STOCK, IF OUTSTANDING:
Heinrich Baumann-Steiner, 57 Chairman, Karl Steiner Holding AG; Vice Chairman, Karl Steiner 1992 2000
AG (an affiliate of Karl Steiner Holding AG)
A. Gary Fieger, 71 President, Fieger International and A. Gary Fieger Associates, 1992 2000
Inc.; Former President and Chief Executive Officer, Hammerson
Property Corporation
Peter K. Steiner, 53 Vice Chairman, Karl Steiner Holding AG; Chairman, Karl Steiner 1992 2000
AG (an affiliate of Karl Steiner Holding AG)
</TABLE>
- ----------------------------------
(1) In keeping with the Company's policy with regard to directors who are 70
years old or older, although Messrs. Gravette and Walker are seeking election
for three-year terms, and Mr. Whitney was elected for a three year term, each
has committed that he will resign effective at the time of any Annual Meeting of
Stockholders unless the Board of Directors requests that he serve for the year
following that Annual Meeting of Stockholders.
Non-employee members of the Board of Directors are paid annual
fees of $21,000, plus $1,000 and travel expenses for each meeting attended.
Non-employee chairmen of committees of the Board of Directors receive additional
annual fees of $2,100. All non-employee Directors also receive stock option
grants totaling 6,750 shares each year. Employee members of the Board of
Directors do not receive any directors' fees.
During 1998, the Board of Directors held nine meetings. Each
director attended at least 75% of the meetings of the Board of Directors and of
each Committee of which he was a member.
Effective August 7, 1997, the Board of Directors terminated
the Directors' Retirement Plan (the "Directors' Plan "). Under the Directors'
Plan, each non-employee Director was entitled to receive, beginning on the later
of the person's seventieth birthday or the time the person ceased to be a
Director, annual benefits equal to the annual fee paid to non-employee
Directors, reduced proportionally to the extent a Director served for less than
five years. Any retired non-employee Director who was receiving retirement
payments under the Directors' Plan as of August 7, 1997 is entitled to continue
to receive such retirement payments. Each Director who was a non-employee
Director as of August 7, 1997, but who had not retired as of that date (the
"Eligible Directors"), was granted the right to receive 17,175 shares of Common
Stock of the Company (the "Share Right") in lieu of vested retirement benefits
under the Directors' Plan. Mr. Gravette, who was a non-employee Director from
1981 until 1996, is also entitled to the Share Right. The Share Right is to be
paid on the ninetieth day following the later of such Eligible Director's
seventieth birthday or such Eligible Director's ceasing to be a Director for any
reason.
The Committees of the Board of Directors include an Executive
Committee, a Compensation and Stock Option Committee, an Audit Committee, and a
Committee on Corporate Governance (formerly the Committee on Directors'
Affairs).
3
<PAGE> 4
The members of the Executive Committee are Messrs. Gravette
(Chairman), Fee, Fieger, Moore and Parmelee. The Executive Committee may
exercise the authority of the Board during the intervals between the meetings of
the Board, except in respect of certain matters specified in the Company's
By-Laws. The Executive Committee met once during 1998.
The Compensation and Stock Option Committee, which is composed
of Messrs. Walker (Chairman), Baumann-Steiner, Ehlers, Lomo and Moore, approves
the salaries of all executive officers of The Turner Corporation (other than the
Chairman and President, whose salaries are approved by the Board), makes or
recommends awards under the Company's Incentive Compensation Plan and authorizes
the grant of stock options under the Company's stock option plans. The
Compensation and Stock Option Committee also reviews senior management
organizational plans. The Compensation and Stock Option Committee met four times
in 1998.
The Audit Committee, which is composed of Messrs. Lomo
(Chairman), Fieger, Leppert, Records and Whitney, recommends the firm of
independent public accountants to act as the Company's independent auditors,
confers with the Company's independent auditors as to the scope of their
proposed audit, reviews the findings and recommendations of the independent
auditors, reviews with the Company's accounting personnel the auditors'
recommendations regarding the Company's financial controls, procedures and
practices, and reviews the Company's compliance with its operating policy
statement. The Audit Committee met three times during 1998.
The Committee on Corporate Governance (formerly the Nominating
Committee and more recently the Committee on Directors' Affairs), which is
composed of Messrs. Whitney (Chairman), Fieger, Leppert, Moore and Steiner,
selects and recommends nominees for directorships to the Board. Pursuant to a
resolution adopted by the Board in 1989, the Committee, in nominating members of
the Board for reelection, will consider any material changes which have occurred
in their employment relationships, memberships on other boards and other
circumstances affecting their availability for and participation in board
activities, and any material changes which have occurred in the Company's
business or affairs. The Committee will consider nominees recommended by
stockholders. Any such recommendation should be submitted to the Secretary of
the Company at its principal executive offices no later than December 1, 1999,
together with information concerning the nominee which would be required to be
included in a proxy statement prepared under the proxy rules of the Securities
and Exchange Commission and other information required by the Company's By-Laws.
The Committee on Corporate Governance also establishes goals and objectives for
the Board of Directors and the process for reviewing the performance of the
Chief Executive Officer, the full Board and individual Directors. The Committee
on Corporate Governance met three times in 1998.
4
<PAGE> 5
As of March 22, 1999, the Company's directors (including
nominees), its five highest compensated executive officers (including its Chief
Executive Officer) and its directors and officers as a group, beneficially owned
the following numbers of shares of Common Stock of the Company:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(6)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Heinrich Baumann-Steiner 17,250 (2)
Walter G. Ehlers 56,750
Robert E. Fee 34,218
A. Gary Fieger 30,850 (3)
Ellis T. Gravette, Jr. 194,855 2.4%
Ralph W. Johnson 33,637
Thomas C. Leppert 9,750
Leif Lomo 21,750
Charles H. Moore, Jr. 25,150
Harold J. Parmelee 104,067 1.3%
G. Jeffrey Records, Jr. 132,998 1.7%
Donald G. Sleeman 5,616
Peter K. Steiner 2,448,000 (4) 23.7% (7)
Gordon A. Walker 33,900
John O. Whitney 32,250 (5)
Directors and Officers as a Group 3,230,230 (4) 30.3%
(23 persons)
- ------------
</TABLE>
(1) Includes shares issuable on exercise of currently exercisable stock
options as follows: Robert E. Fee 16,068; Ellis T. Gravette, Jr.
84,000; Ralph W. Johnson 10,310; Harold J. Parmelee 54,063; Donald G.
Sleeman 5,331; G. Jeffrey Records, Jr., and Thomas C. Leppert 9,750
each; Walter G. Ehlers 6,750; all other non-employee Directors, Messrs.
Baumann-Steiner, Fieger, Lomo, Moore, Steiner, Walker and Whitney
17,250 each and Directors and Officers as a group 343,978. Does not
include 1,258,097 shares of Common Stock issuable on conversion of
Series B ESOP Preferred Stock shares or shares issuable on exercise of
options which are not exercisable prior to 60 days after March 22,
1999. The Series B ESOP Preferred Stock is held by The Turner
Corporation Employee Stock Ownership Plan, under which Messrs.
Gravette, Fee, Parmelee, Sleeman, Johnson and Directors and Officers as
a Group have allocated to them Series B ESOP Preferred Stock
convertible into 210, 1,344, 1,429, 797, 1,222 and 10,500 shares of
Common Stock, respectively. Also does not include for Messrs.
Baumann-Steiner, Ehlers, Fieger, Gravette, Lomo, Moore, Steiner, Walker
and Whitney, a right to receive 17,175 shares of Common Stock each,
which right was granted in lieu of vested retirement benefits under the
Directors' Retirement Plan.
(2) Does not include 1,500,000 shares of Common Stock issuable on
conversion of Series C Preferred Stock, 900,000 shares of Common Stock
issuable on conversion of Series D Preferred Stock or 30,750 shares of
Common Stock, held by Steiner Holding. Heinrich Baumann-Steiner's wife
is the beneficial owner of 50% of the shares of Steiner Holding.
(3) Includes 4,500 shares owned by A. Gary Fieger Associates, Inc., of
which Mr. Fieger is the President and sole owner.
(4) Includes 1,500,000 shares of Common Stock issuable on conversion of
Series C Preferred Stock, 900,000 shares of Common Stock issuable on
conversion of Series D Preferred Stock and 30,750 shares of Common
Stock, held by Steiner Holding. Peter K. Steiner is the beneficial
owner of 50% of the shares of Steiner Holding.
(5) Includes 15,000 shares held by the Marcia Whitney Trust of which Mr.
Whitney and his wife are co-trustees.
(6) Computed in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934. Unless noted, less than 1%.
(7) Assumes that Steiner Holding converts all convertible securities held
by it and that no other convertible securities, including Series B ESOP
Preferred Stock, are converted. If the Series B ESOP Preferred Stock
were also converted, Mr. Steiner's beneficial ownership would be 21.1%.
5
<PAGE> 6
The following persons are known by the Company to have owned
beneficially more than 5% of any of the Company's voting securities as of March
22, 1999.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock The Turner Corporation 1,162,500 14.7%
Employees' Cash Balance Retirement
Plan
375 Hudson Street
New York, New York 10014
Common Stock Granite Capital 632,550 8.0%(1)
126 East 56th Street, 25th Floor
New York City, New York 10022
Common Stock Dimensional Fund Advisors Inc. 483,798 6.1%(1)
1299 Ocean Avenue
Santa Monica, California 90401
Series B ESOP The Turner Corporation Employee 838,731 100%(2)
Preferred Stock Stock Ownership Plan
375 Hudson Street
New York, New York 10014
Series C Preferred Stock Karl Steiner Holding AG 9,000 100%(3)
Hagenholzstrasse 60
CH-8050 Zurich
Switzerland
Series D Preferred Stock Karl Steiner Holding AG 6,000 100%(3)
Hagenholzstrasse 60
CH-8050 Zurich
Switzerland
</TABLE>
(1) Information is based on Schedules 13F or 13G filed with the Securities
and Exchange Commission.
(2) The Series B ESOP Preferred Stock is convertible into 1,258,097 shares
and, assuming conversion solely of the Series B ESOP Preferred Stock,
would represent 13.7% of the outstanding Common Stock on March 22,
1999, and assuming conversion of the Series C Preferred Stock and the
Series D Preferred Stock, would represent 10.9% of the outstanding
Common Stock.
(3) The 9,000 shares of Series C Preferred Stock are convertible into
1,500,000 shares of Common Stock and the 6,000 shares of Series D
Preferred Stock are convertible into 900,000 shares of Common Stock.
Steiner Holding also owned 30,750 shares of Common Stock. Based on the
Common Stock outstanding on March 22, 1999 and assuming conversion
solely of the Series C Preferred Stock and Series D Preferred Stock,
Steiner Holding would have owned 23.6% of the outstanding Common Stock,
and 21.0% of the outstanding Common Stock, assuming all of the Series B
ESOP Preferred Stock had been converted. The Company understands that,
as of March 22, 1999, the Turner securities held by Karl Steiner
Holding AG were in the process of being transferred to its sister
company EBSPSW Holding AG.
The shares of Series B ESOP Preferred Stock and the Series D
Preferred Stock vote together with the Common Stock on all matters, including
election of directors, with each share of Series B ESOP Preferred Stock entitled
to one and one-half votes and each share of Series D Preferred Stock entitled to
150 votes. The Series B ESOP Preferred Stock will constitute 12.5% and the
Series D Preferred Stock 8.9% of the shares entitled to vote in the election of
directors. However, as noted above, Steiner Holding as the holder of the Series
D Preferred Stock is required, pursuant to an agreement with the Company, to
vote the Series D
6
<PAGE> 7
Preferred Stock for directors in the same proportion as the shares of Common
Stock not owned by Steiner Holding or its affiliates are voted for directors.
The holders of the Series C Preferred Stock, voting
separately, are entitled to elect three directors (decreasing to no directors if
the holders of the outstanding Series C Preferred Stock, in the aggregate, hold
less than a specified portion of the Company's Common Stock on a diluted basis,
as determined pursuant to the terms of the Series C Preferred Stock). While the
holders of the Series C Preferred Stock are entitled to elect any directors,
they cannot vote the Series C Preferred Stock with regard to directors to be
elected by the holders of the Common Stock. If the holders of the Series C
Preferred Stock become no longer entitled to elect directors as a separate
class, they will be entitled to vote as part of the same class as the Common
Stock, the Series B ESOP Preferred Stock and the Series D Preferred Stock, and
will be entitled to 1,500 votes for each 9 shares of Series C Preferred Stock (a
total of 1,500,000 votes for the entire 9,000 shares). The holders of the Series
C Preferred Stock are at all times entitled to 1,500 votes for each 9 shares of
Series C Preferred Stock with regard to all matters other than the election of
directors. Peter K. Steiner, who is a director of the Company, is the beneficial
owner of 50% of the shares of Steiner Holding. Esther Baumann-Steiner, who is
the sister of Peter K. Steiner and the wife of Heinrich Baumann-Steiner, is the
beneficial owner of the other 50% of the shares of Steiner Holding. As noted
above, the Company has filed a registration statement with the Securities and
Exchange Commission relating to, among other things, the public offering by
Steiner Holding of the 2,400,000 shares of Common Stock issuable upon the
conversion of the Series C Preferred Stock and Series D Preferred Stock. If and
when that offering is completed, the Series C Preferred Stock and Series D
Preferred Stock will no longer be outstanding.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Walter G. Ehlers, a Director of the Company, was 39 days late
in filing one Form 4 report with the Securities and Exchange Commission
regarding the exercise of options for 11,500 shares of Common Stock on June 3,
1998.
Harold J. Parmelee, an Executive Officer of the Company, was
62 days late in filing one Form 4 report with the Securities and Exchange
Commission regarding the exercise of one option for 4,500 shares of Common Stock
on May 11, 1998.
Ralph W. Johnson, an Executive Officer of the Company, was 230
days late in filing one Form 4 report with the Securities and Exchange
Commission regarding the exercise of options to purchase 2,000 shares of Common
Stock on December 22, 1997.
7
<PAGE> 8
REMUNERATION OF EXECUTIVE OFFICERS
The following table sets forth the annual compensation, long-term
compensation and all other compensation during each of the three years
ended December 31, 1998, for the Company's chief executive officer and
for the four additional most highly compensated executive officers for
the year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS
------
SECURITIES
RESTRICTED UNDERLYING
STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL SALARY BONUS AWARD(S) SARS (1) COMPENSATION
POSITION YEAR ($)(2) ($)(3) ($)(4) (#) ($) (5)
-------- ---- ------ ------ ------ --- -------
<S> <C> <C> <C> <C> <C> <C>
Ellis T. Gravette, Jr. (6) 1998 625,000 1,500,000 0 75,000 2,313
Chairman and 1997 625,000 180,000 1,828,125 168,750 1,720
Chief Executive Officer 1996 259,091 0 0 1,500 0
- ---------------------------------------------------------------------------------------------------------
Robert E. Fee 1998 375,200 400,000 0 41,790 4,951
President and Chief 1997 314,230 90,000 0 15,165 5,829
Operating Officer 1996 255,833 0 0 2,250 5,128
- ---------------------------------------------------------------------------------------------------------
Harold J. Parmelee 1998 375,200 270,000 0 10,545 8,374
President, Asset 1997 375,200 90,000 0 10,545 8,651
Management 1996 367,700 0 0 4,500 6,865
- ---------------------------------------------------------------------------------------------------------
Donald G. Sleeman 1998 208,325 175,000 0 17,025 4,713
Senior Vice President, 1997 190,825 60,000 0 17,025 3,390
and Chief Financial 1996 146,042 0 0 1,200 4,895
Officer and Chief
Accounting Officer
- ---------------------------------------------------------------------------------------------------------
Ralph W. Johnson 1998 223,629 75,000 0 3,645 5,209
Senior Vice President 1997 219,150 60,000 0 3,645 5,723
1996 202,375 0 0 2,250 4,296
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has not granted any stock appreciation rights. Options are
restated to reflect the 50% stock dividend distributed on August 14,
1998 (the "Stock Dividend").
(2) Until 1995, the annual salaries of all staff employees, other than
officers, included a holiday supplement equal to 1/2 month's pay.
Effective in 1995, officers also received this automatic addition to
their annual pay.
(3) Represents bonuses under the Company's Incentive Compensation Plan.
(4) Mr. Gravette received a grant of 112,500 Restricted Stock Units
("RSUs"), pursuant to action of the Board on August 7, 1997. In March
1998, the Board authorized the immediate distribution to Mr. Gravette
of the 112,500 shares of Common Stock (168,750 shares after giving
effect to the Stock Dividend) subject to the RSUs. In conjunction with
this distribution, 42,930 shares (64,395 shares after giving effect to
the Stock Dividend) were withheld to satisfy tax withholding
requirements.
(5) Includes matching contributions by the Company to its 401(k) plan which
in 1998 were $2,400 each for Messrs. Fee, Parmelee, Sleeman and
Johnson, respectively; allocations under the Company's Employee Stock
Ownership Plan which in 1998 were 81 shares each valued at $2,313, for
Messrs. Gravette, Fee, Parmelee, Sleeman and Johnson, and the interest
earned, calculated at 4-1/2%, on supplemental retirement accounts which
in 1998 was $238, $3,661, and $496, for Messrs. Fee, Parmelee, and
Johnson respectively. Mr. Gravette did not participate in the 401(k)
plan.
(6) Mr. Gravette was employed by the Company effective August 9, 1996.
8
<PAGE> 9
The following table sets forth certain information with regard to
options granted during the fiscal year ended December 31, 1998 and potential
realizable values. No stock appreciation rights (SARs) were granted during that
year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
(1)(2) POTENTIAL REALIZABLE
NUMBER OF VALUE
SECURITIES PERCENT OF AT ASSUMED ANNUAL RATES
UNDERLYING TOTAL EXERCISE OF STOCK PRICE
OPTIONS/SARS OPTIONS/SARS OR APPRECIATION
GRANTED GRANTED TO BASE PRICE MARKET EXPIRATION FOR OPTION TERM
NAME (#) EMPLOYEES ($/SH)(2) PRICE DATE
IN FISCAL YEAR (3)
5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ellis T. Gravette, Jr. 75,000 16.09% 18.875 18.875 5/08/08 $890,280 $2,256,143
Robert E. Fee 41,790 8.97% 18.875 18.875 5/08/08 $496,064 $1,257,123
Harold J. Parmelee 10,545 2.26% 18.875 18.875 5/08/08 125,173 $317,214
Donald G. Sleeman 17,025 3.65% 18.875 18.875 5/08/08 $202,094 $512,144
Ralph W. Johnson 3,645 0.78% 18.875 18.875 5/08/08 $43,268 $109,649
</TABLE>
(1) The options granted in 1998 were priced at 100% of the fair market
value on the date of the grant and became fully exercisable for Mr.
Gravette six months after the grant date. The other grants are
exercisable as follows: Mr. Fee's, 13% immediately, 13% on each of the
first and second anniversaries of the grant date and 61% on the third
anniversary; Mr. Parmelee's, 49% on the second anniversary, 51% on the
third anniversary; Mr. Sleeman's, 7% immediately, 31% on each of the
first, second and third anniversaries; Mr. Johnson's, 100% on the third
anniversary. All options become exercisable upon a "change in control".
(2) The option price and the number of securities underlying the options
have been adjusted for the Stock Dividend.
(3) Market price on date of grant.
The following table sets forth certain information with regard to
exercises of options during 1998 and options held at December 31, 1998. No SARs
have been granted by the Company.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS/SARS AT VALUE OF UNEXERCISED
FISCAL YEAR-END IN-THE-MONEY
(#) OPTIONS/SARS
AT FISCAL YEAR-END (1) ($)
SHARES
ACQUIRED ON VALUE EXERCISABLE (E)/ EXERCISABLE (E)/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE ( U) UNEXERCISABLE (U)
<S> <C> <C> <C> <C>
Ellis T. Gravette, Jr. ___ ___ 84,000 (E) 105,567 (E)
168,750 (U) 1,276,256 (U)
Robert E. Fee ___ ___ 16,068 (E) 92,622 (E)
51,657 (U) 165,576 (U)
Harold J. Parmelee 14,850 135,151 64,563 (E) 695,099 (E)
21,090 (U) 115,133 (U)
Donald G. Sleeman ___ ___ 5,331 (E) 53,903 (E)
32,919 (U) 185,884 (U)
Ralph W. Johnson 7,400 79,108 12,310 (E) 118,075 (E)
7,290 (U) 39,797 (U)
</TABLE>
(1) Includes only those options whose exercise prices are lower than the
closing price of $18.313 on December 31, 1998.
9
<PAGE> 10
CHANGE IN CONTROL ARRANGEMENTS
The Company or its subsidiaries have entered into change of
control agreements with a number of their executive officers, including the
executive officers named above other than Mr. Gravette. These agreements expire
on November 25, 2000 and will be automatically extended for one year each on
each November 25 thereafter unless the Company shall have given written notice
to the executive officer at least ninety days prior to the expiration date. They
provide that in the event of "termination" (as defined) of an executive's
employment after a "change of control" (as defined) of the Company, the
executive will be entitled to receive a lump sum payment equal to 2.99 years'
(in the case of fourteen senior executives including Messrs. Parmelee, Fee,
Sleeman and Johnson) or one year's (in the case of other executives)
compensation, including average bonus, as well as continued eligibility for
certain employee welfare benefits. Options granted under the 1997 and 1998 Stock
Option Plans also become immediately exercisable in the event of a change in
control.
RETIREMENT PLANS
Until March 31, 1991, the Company had an Employees' Retirement
Plan (the "Retirement Plan"), a Supplemental Executive Defined Benefit
Retirement Plan, and a Defined Benefit Retirement Equalization Plan under which
an employee would receive retirement benefits under a formula based upon years
of service, salary during the years preceding retirement and the Social Security
wage base. Effective March 31, 1991, the Company curtailed these Retirement
Plans so that no years of service or salary past that date would be considered
in determining retirement benefits. This froze the benefits employees who
continued working for the Company past March 31, 1991 will receive under these
Retirement Plans. The annual benefits Messrs. Fee, Parmelee, Sleeman and Johnson
will receive under the Retirement Plan, the Supplemental Executive Defined
Benefit Retirement Plan and the Defined Benefit Retirement Equalization Plan,
assuming retirements at age 65, will be $87,034, $131,730, $2,847 and $85,594,
respectively. Mr. Gravette was employed after March 31, 1991.
Effective April 1, 1991, the Company instituted a new defined
contribution plan, the Employee's Retirement Income Plan (the "Income Plan"), to
replace the Retirement Plan. Effective December 31, 1993, the Company froze the
benefits under the Income Plan. There will be no further contributions to the
Income Plan. The lump sum benefits (as of January 31, 1995) that Messrs. Fee,
Parmelee, Sleeman and Johnson had accrued under the Income Plan were $51,466,
$51,986, $11,357 and $50,582, respectively. Mr. Gravette was not eligible for
the Income Plan. The Income Plan benefits were transferred to the Company's
401(k) plan as of February 1, 1995.
The Income Plan lump sum benefits (shown above) do not include
the non-qualified Supplemental Plan benefits associated with the Income Plan
which, as of December 31, 1998, were $5,527, $85,022, and $11,524 for Messrs.
Fee, Parmelee and Johnson, respectively. Mr. Sleeman was not eligible for the
Supplemental Plan benefits. These benefits are payable upon retirement or
termination.
Effective January 1, 1994, the Company introduced the
Employees' Cash Balance Retirement Plan (the "Cash Balance Plan"), a defined
benefit plan. Amounts allocated to their respective accounts under the Cash
Balance Plan during 1998 for Messrs. Gravette, Fee, Parmelee, Sleeman and
Johnson were, $44,336, $54,779, $58,063, $15,542 and $34,475, respectively. The
estimated lump sum benefits Messrs. Fee, Parmelee, Sleeman and Johnson, will
receive under the Cash Balance Plan, assuming no change in their current salary
levels, a fixed rate of return of 4-1/2% and retirement at age 65 will be
$369,799, $522,082, $776,242 and $293,024, respectively. Upon retirement, Mr.
Gravette will receive the value of his account which is currently $101,934 plus
interest accrued until his retirement date.
10
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Heinrich Baumann-Steiner who is a member of the Compensation
Committee is chairman of Karl Steiner Holding AG.
In connection with Karl Steiner Holding AG's purchase in September 1992
of 9,000 shares of Series C Preferred Stock and 6,000 shares of Series D
Preferred Stock from the Company for an aggregate purchase price of $15,000,000,
the Company and Karl Steiner Holding AG entered into an Agreement Regarding
Security Holder's Rights, Obligations and Options, dated as of July 20, 1992
(the "Steiner Agreement"). The Steiner Agreement includes, among other things:
(i) a standstill provision which restricted Steiner Holding's ability to
accumulate additional equity in the Company and to take certain other actions
relating to seeking control of the Company; (ii) a provision giving Steiner
Holding the option to maintain its percentage ownership interest in the Company
(the "Position Maintenance Option"); (iii) a provision giving the Company a
right of first refusal under certain circumstances with regard to transfers by
Steiner Holding of more than 5% of the Company's outstanding Common Stock; (iv)
a provision giving Steiner Holding a right of first refusal under certain
circumstances with regard to issuances by the Company of more than 5% of its
outstanding Common Stock; and (v) provisions giving Steiner Holding the option
in 2002 to either sell certain securities to or purchase additional securities
from the Company.
In August 1998, the Company irrevocably waived the standstill provision
referred to above. As a result, the dividend formula on the Series C Preferred
Stock and Series D Preferred Stock changed so that in lieu of being entitled to
dividends at the rate of 8-1/2% per year, holders of the Series C Preferred
Stock and Series D Preferred Stock became entitled to receive only an amount
equal to the dividends, if any, paid on the number of shares of Common Stock
into which the Series C Preferred Stock and Series D Preferred Stock could be
converted.
On December 29, 1998, the Company paid Karl Steiner Holding AG
approximately $1.57 million in consideration of the waiver of its rights to
purchase Common Stock which had accrued through December 28, 1998 under the
Position Maintenance Option. In February 1999, Karl Steiner Holding AG requested
that the Company register, under the Securities Act of 1933, the 2,400,000
shares of Common Stock issuable upon conversion of the Series C Preferred Stock
and Series D Preferred Stock. Under the terms of the Steiner Agreement, the
Company is required to file with the Securities and Exchange Commission a
registration statement relating to the offering of such Common Stock and pay all
expenses related thereto (other than underwriting commissions).
Karl Steiner Holding AG and the Company each own 50% of Turner Steiner
International, LLC ("TSI"), an entity formed to engage in construction-related
activities in most of the world, other than North and Central America,
Switzerland, Germany and France. During 1998, the Company made employees and
space available to TSI for which the Company was reimbursed. The Company also
has guaranteed $2,750,000 of a $5,000,000 letter of credit facility and $275,000
of a $500,000 line of credit facility of TSI. From time to time the Company has
made working capital loans to TSI (at December 31, 1998, the outstanding balance
of these loans, including the balance from prior years and accrued interest, was
$7,172,681). These guarantees and loans were matched by Karl Steiner Holding AG.
COMPENSATION COMMITTEE REPORT
11
<PAGE> 12
TO THE SHAREHOLDERS OF THE TURNER CORPORATION
The purpose of this report is to describe the compensation
policies applied by the Compensation Committee of the Board of Directors of The
Turner Corporation with regard to the Company's executive officers and the basis
for the compensation of Ellis T. Gravette, Jr., the Chief Executive Officer of
the Company, for the year ended December 31, 1998.
The Board of Directors and management of the Company recognize
the necessity to offer competitive compensation to its senior executives. The
Company initiated a study in late 1996 to review the compensation market for
senior construction executives. The conclusion of the study was that the Company
needed to revise its compensation formula to fairly reward its senior officers
and to avoid the possible loss of high performing senior executives to
competitors.
As a result of the review, the Compensation Committee
recommended, and the Board of Directors approved, a new compensation program
designed to reward senior executives based on their individual performance as
well as the performance of the business unit or department where they are
assigned. There are three elements to the compensation program for senior
executives, which are:
- BASE SALARY -- the fundamental compensation to a senior
executive for fulfilling his or her job responsibilities.
- INCENTIVE COMPENSATION PLAN -- In 1997, the Company adopted a
new Incentive Compensation Plan (the "ICP"), which authorizes
payments of awards to executive officers and other designated
employees of the Company solely in cash.
- STOCK OPTIONS -- stock options enable key employees to profit
from increases in the price of the Company's stock.
In 1997, the Compensation Committee accepted management's
recommendation to amend the Stock Option program by placing more emphasis on
granting options based on promotions and performance rather than to provide
stock awards on a once a year automatic approach to all officers. Toward that
end, the Committee approved a Performance Based Bonus Compensation Plan designed
to offer stock based incentives at the business unit level by rewarding
successful performers based on measurable accomplishments.
Consistent with this program, in March 1998, the Committee
recommended to the board, on management's recommendation, the adoption of the
1998 Stock Incentive Plan. The options granted under this plan become
exercisable on the third anniversary of the grant date for employees and will
have a term of 10 years except that the Committee has the discretion to grant
options with different vesting periods and for different terms which cannot
exceed 10 years. Options granted to non-employee Directors are immediately
exercisable. Subsequent to approval of the 1998 Stock Incentive plan by the
shareholders in May of 1998, the Committee approved option grants previously
recommended for officers and an option grant to Mr. Gravette of 50,000 shares
(75,000 after giving effect to the Stock Dividend). Mr. Gravette's option became
fully exercisable 6 months from the date of the grant but would have accelerated
if Mr. Gravette had retired.
Each year the Compensation Committee reviews recommendations
from management as to base salaries of senior executives (other than the Chief
Executive Officer and the President), total awards to senior executives and
other designated employees under the ICP, and numbers of stock options to be
awarded to executives in particular positions. It then makes recommendations to
the entire Board as to the following year's salaries of the Chief Executive
Officer and of the President, the total amount (as a percentage of the Company's
earnings) to be awarded under the ICP and the portions of that total amount to
12
<PAGE> 13
be allocated to the Chief Executive Officer and the President. In addition, it
determines, without action of the Board, the following year's salaries of senior
executives other than the Chief Executive Officer and the President and the
portion of the total amount awarded under the ICP to be allocated to each of
those senior executives.
In 1998, the Compensation Committee reviewed with management the
policies regarding compensation of senior executives. It discussed possible
types of bonuses for executives who had rendered outstanding service, but
ultimately left it to management to determine the form these bonuses would take.
It approved promotions recommended by management and management's
recommendations regarding stock options. It also approved management's
recommendations regarding 1998 salaries for senior executives. In doing this,
the Compensation Committee reaffirmed that management is principally responsible
for compensation decisions, except with regard to the Chief Executive Officer
and the President. Consistent with this, it authorized management to make any
changes it deemed appropriate in salaries which had not been presented to the
Compensation Committee. The Compensation Committee expressed general approval of
the fact that recommended salary increases were based on individuals'
performance, not solely on the positions held by them. In December of 1998, the
Committee reviewed and approved the Incentive Compensation levels established
for the officers of the Company. It also approved and recommended to the Board
of Directors Incentive Compensation awards for Messrs. Gravette, Fee, Parmelee
and Sleeman.
As relates to Mr. Gravette, his Incentive Compensation award reflected
the improved performance of the Company in 1998. In March 1998, the Compensation
Committee recommended to the Board for approval the immediate distribution to
Mr. Gravette of the 112,500 shares of Common Stock (168,750 shares after giving
effect to the Stock Dividend) subject to the Restricted Stock Units which had
been granted in 1997. In conjunction with this distribution, 42,930 shares
(64,395 shares after giving effect to the Stock Dividend) were withheld to
satisfy tax withholding requirements.
Section 162(m) of the Internal Revenue Code places a limit on the
amount of certain types of compensation for the chief executive officer and each
of the four other most highly compensated executive officers which may be tax
deductible by the Company. The Company's policy is, primarily, to design and
administer compensation plans which support the achievement of the Company's
objectives and enhance stockholder value. Where it is consistent with this
compensation philosophy, the Compensation Committee will also take into
consideration structuring compensation programs that are tax deductible by the
Company. The stock option, stock appreciation rights and performance award
provisions of the 1998 Stock Incentive Plan that was approved by the
shareholders at the 1998 Annual Meeting have been designed so that compensation
attributable to such awards can qualify as "performance based compensation" for
purposes of Section 162(m) and consequently be tax deductible.
GORDON A. WALKER
CHARLES H. MOORE, Jr. LEIF LOMO
WALTER G. EHLERS HEINRICH BAUMANN-STEINER
13
<PAGE> 14
THE TURNER CORPORATION
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
AMONG THE TURNER CORPORATION, THE S & P 500 INDEX,
THE AMEX MARKET VALUE INDEX AND CONSTRUCTION PEER GROUP
Cumulative Total Return
-------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
12/93 12/94 12/95 12/96 12/97 12/98
THE TURNER CORPORATION 100 105 106 130 335 349
PEER GROUP 100 106 116 106 158 116
S & P 500 100 101 139 171 229 294
AMEX MARKET VALUE 100 91 115 122 148 151
</TABLE>
COMPANIES IN PEER GROUP ARE WEIGHTED BY MARKET CAPITALIZATION; INDEXED TO 100 AT
DECEMBER 31, 1993. DIVIDENDS REINVESTED OVER PERIOD.
The Turner Corporation has one active business segment: Construction.
The Construction Peer Group is made up of companies with market capitalization
of not more than $500 million that are engaged primarily in providing
construction/engineering services for business sectors other than home building
and infrastructure: Michael Baker Corp., Perini Corp. and Stone & Webster Inc.
The Construction Peer Group has dropped CRSS, Inc. and Guy F. Atkinson which no
longer meet the group criteria.
Until 1996, the chart included a Real Estate Peer Group. Since the
Company has substantially reduced its real estate holdings over the past five
years and its real estate holdings no longer have a significant impact on the
Company's earnings, the Company decided it would no longer be relevant to
compare the Company to a Real Estate Peer Group.
14
<PAGE> 1
EXHIBIT 5
THE TURNER CORPORATION
EMPLOYMENT AGREEMENT FOR THOMAS C. LEPPERT
<PAGE> 2
THE TURNER CORPORATION
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT FOR THOMAS C. LEPPERT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Term of Employment................................................... 1
2. Position, Duties and Responsibilities................................ 1
3. Base Salary.......................................................... 2
4. Annual Incentive Awards.............................................. 2
5. Long-Term Stock Incentive Programs................................... 2
6. Employment Bonus..................................................... 2
7. Employee Benefit Programs............................................ 3
8. Disability........................................................... 3
9. Reimbursement of Business and Other Expenses......................... 4
10. Termination of Employment............................................ 4
11. Confidentiality; Cooperation with Regard to Litigation;
Non-disparagement.................................................... 13
12. Non-competition...................................................... 14
13. Non-solicitation..................................................... 15
14. Remedies............................................................. 15
15. Resolution of Disputes............................................... 15
16. Indemnification...................................................... 16
17. Excise Tax Gross-Up.................................................. 17
18. Effect of Employment Agreement on Other Benefits..................... 18
19. Assignability; Binding Nature........................................ 19
20. Representation....................................................... 19
21. Conflict between Employment Agreements............................... 19
22. Amendment or Waiver.................................................. 19
23. Severability......................................................... 19
24. Survivorship......................................................... 20
25. Beneficiaries/References............................................. 20
26. Notices.............................................................. 20
27. Governing Law/Jurisdiction........................................... 20
28. Headings............................................................. 20
29. Counterparts......................................................... 21
</TABLE>
<PAGE> 3
EMPLOYMENT Employment Agreement
Agreement, made and entered into as of the 9th day of June, 1999 by and
between The Turner Corporation, a Delaware corporation (together with its
successors and assigns, the "Company" or "Turner"), and Thomas C. Leppert (the
"Executive").
W I T N E S S E T H:
WHEREAS, effective October 1, 1999 Turner desires to employ Executive as
its Chairman and Chief Executive Officer pursuant to an agreement embodying the
terms of such employment (this "Employment Agreement") and Executive desires to
enter into this Employment Agreement and to accept such employment, subject to
the terms and provisions of this Employment Agreement, and
WHEREAS, Executive has executed, on the same date of execution of this
Employment Agreement, a separate agreement governing Executive's employment as
Vice Chairman of Turner for the period commencing today and ending September 30,
1999.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Turner and Executive (individually a "Party" and
together the "Parties") agree to be bound in accordance with the terms of this
Employment Agreement.
1. Term of Employment.
The term of Executive's employment under this Employment Agreement
shall commence on October 1, 1999 (the "Effective Date") and end on December 31,
2003 (the "Original Term of Employment"), unless terminated earlier in
accordance herewith. The Original Term of Employment shall be automatically
renewed for successive one-year terms (the "Renewal Terms") unless at least 180
days prior to the expiration of the Original Term of Employment or any Renewal
Term, either Party notifies the other Party in writing that he or it is electing
to terminate this Employment Agreement at the expiration of the then current
Term of Employment. "Term of Employment" shall mean the Original Term of
Employment and all Renewal Terms.
2. Position, Duties and Responsibilities.
(a) Generally. Executive shall serve as Chairman of Turner's board
of directors (the "Board") and as its Chief Executive Officer. Executive shall
have and perform such duties, responsibilities, and authorities as are customary
for the Chairman of the Board and Chief Executive Officer of corporations of
similar size and businesses as Turner, as they each may exist from time to time
and as are consistent with such positions and status. Executive shall devote
substantially all of his business time and attention (except for periods of
vacation or absence due to illness), and his best efforts, abilities,
experience, and talent to the positions of Chairman of the Board and Chief
Executive Officer of Turner.
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<PAGE> 4
(b) Other Activities. Anything herein to the contrary
notwithstanding, nothing in this Employment Agreement shall preclude Executive
from (i) serving on the boards of directors of a reasonable number of other
corporations or the boards of a reasonable number of trade associations and/or
charitable organizations, provided that Executive shall notify the Board prior
to accepting any such position, (ii) engaging in charitable activities and
community affairs, and (iii) managing his personal investments and affairs,
provided that such activities do not materially interfere with the proper
performance of Executive's duties and responsibilities under this Employment
Agreement.
(c) Place of Employment. Executive's principal place of
employment shall be Turner's corporate offices.
3. Base Salary.
Executive shall be paid an annualized salary ("Base Salary"),
payable in accordance with the regular payroll practices of Turner, of not less
than $850,000, subject to annual adjustment as determined in the sole and
absolute discretion of the Compensation Committee (the "Committee") of the
Board, provided that Executive's initial salary review shall occur on or before
January 1, 2001.
4. Annual Incentive Awards.
Executive shall be eligible to participate in Turner's annual
incentive compensation plan with a target annual incentive award opportunity
equal to 6% of the bonus pool as established in the sole and absolute discretion
of the Committee. From the period commencing on the Effective Date and ending
December 31, 2001, Executive's annual incentive award is guaranteed to be no
less than $550,000 per annum (any annual incentive attributable to 1999 shall be
calculated on a pro rata basis). Payment of Executive's annual incentive award
shall be made by the Company at the same time that other senior-level executives
receive their annual incentive awards.
5. Long-Term Incentive Programs.
Executive shall be eligible to participate in Turner's long term
incentive compensation programs on a similar basis as Turner's other
senior-level executives.
6. Employment Bonus.
In consideration of Executive losing certain perquisites and
benefits with his previous employer, Turner shall provide Executive with a
$750,000 employment bonus, payable on January 3, 2000, provided that Executive
has not terminated his employment without Good Reason as of that date.
7. Employee Benefit Programs.
During the Term of Employment, except as otherwise noted below,
Executive shall be entitled to participate in such employee pension and welfare
benefit plans and programs of Turner as are made available to Turner's employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, health, medical, dental, long-term disability,
section 401(k) retirement plan, supplemental retirement plan or plans, and tax
and financial planning services. Executive shall be entitled to 4 weeks of
vacation and shall take holidays in accordance with Turner's standard holiday
schedule as amended from time to time.
2
<PAGE> 5
8. Disability.
(a) During the Term of Employment, as well as during the Severance
Period, Executive shall be entitled to disability coverage in accordance with
the terms of Turner's Long- Term Disability Program. In the event Executive
becomes disabled, as that term is defined under Turner's Long-Term Disability
Program ("Disability") Executive shall be entitled to receive pursuant to
Turner's Long-Term Disability Program or otherwise, and in place of his Base
Salary, an amount equal to 67% of Executive's Base Salary, at the annual rate in
effect on the commencement date of his eligibility for Turner's long-term
disability benefits ("Commencement Date") up to a maximum benefit of $17,000 per
month. In the event Executive's Disability lasts, or Turner reasonably
determines is likely to last (based on the written opinion of a board certified
physician), for a period of 180 days from the onset of such Disability, Turner
may terminate Executive's employment hereunder. If Executive is terminated due
to Disability, (i) Executive shall be entitled to receive all earned awards;
(ii) all of Executive's outstanding but unvested stock options shall vest
immediately and remain exercisable for 1 year from the Termination Date; and
(iii) all restrictions regarding Executive's restricted or deferred stock shall
immediately lapse.
(b) Executive shall be entitled to a pro rata annual incentive
award at $550,000 for the year in which the Commencement Date occurs, payable in
a lump sum not later than 15 days after the Commencement Date. Executive shall
not be entitled to any annual incentive award with respect to the period
following the Commencement Date. If Executive recommences his position after a
leave for Disability, he shall be entitled to a pro rata annual incentive award
for the year he resumes such position and shall thereafter be entitled to annual
incentive awards in accordance with Section 4 hereof.
(c) During the period Executive is receiving Disability benefits
pursuant to Section 8(a) above, he shall continue to be treated as an employee
for purposes of all employee benefits and entitlements in which he was
participating on the Commencement Date, including without limitation, the
benefits and entitlements referred to in Sections 5, 6 and 7 above, except that
Executive shall not be entitled to receive any annual salary increases or any
new long-term incentive plan grants following the Commencement Date.
(d) In the event that Executive is terminated due to Disability
prior to receipt of the bonus due Executive pursuant to Section 6 of this
Employment Agreement, Executive shall also receive a cash payment of $750,000.
9. Reimbursement of Business and Other Expenses.
Executive is authorized to incur reasonable expenses in carrying out
his duties and responsibilities under this Employment Agreement, and Turner
shall promptly reimburse him for all reasonable business expenses incurred in
connection therewith, subject to documentation in accordance with Turner's
applicable policies.
10. Termination of Employment.
(a) Termination Due to Death. In the event Executive's employment
with Turner is terminated due to his death, Executive's estate or his
beneficiaries, as the case may be, shall be entitled to and their sole remedies
under this Employment Agreement shall be:
(i) Base Salary through the date of death, which shall be
paid in a cash lump sum not later than 15 days following
the date of termination of Executive's employment (the
"Termination Date");
3
<PAGE> 6
(ii) any incentive awards earned as of December 31 of the
prior year (but not yet paid), which shall be paid in a
cash lump sum not later than 15 days following the
Termination Date;
(iii) pro rata annual incentive award for the year in which
the termination occurs, assuming that Executive would
have received an award equal to $550,000 for the year
and which shall be payable in a cash lump sum promptly
(but in no event later than 15 days) after the
Termination Date. Upon completion of the year in which
Executive's employment hereunder has been terminated,
the Committee shall determine the bonus amount Executive
would have been entitled to had his employment not been
terminated. In the event the Committee determines
Executive would have been entitled to a larger pro rata
bonus based upon the performance criteria typically used
by the Committee, the Company shall pay to Executive (or
Executive's estate), in a lump sum, within 15 days of
such determination, the amount of such bonus minus any
pro rata bonus previously paid to Executive (or
Executive's estate) pursuant to this paragraph on or
after the Termination Date;
(iv) immediate vesting of any of Executive's outstanding
stock options. Executive (or Executive's estate) shall
have the right to exercise all stock options for a
period of one (1) year following the Termination Date or
for the remainder of the exercise period, if less;
(v) elimination of all restrictions on any restricted stock
or deferred stock awards;
(vi) other or additional benefits then due or earned in
accordance with applicable plans and programs of Turner;
(vii) settlement of all deferred compensation arrangements in
accordance with any then applicable deferred
compensation or election form; and
(viii)provided that Executive's death occurs after the
execution of this Employment Agreement, but prior to
Executive's receipt of the bonus payable to Executive
pursuant to Section 6 of this Employment Agreement, a
cash payment of $750,000.
(b) Termination by Turner for Cause.
(i) "Cause" shall mean:
(A) Executive is convicted of, or pleads nolo
contendere to, a felony which is materially and
demonstrably injurious to Turner's financial
condition or reputation;
(B) Executive engages in conduct that constitutes
willful gross neglect or willful gross misconduct
which result in material losses to Turner in
carrying out his duties under this
4
<PAGE> 7
Employment Agreement;
(C) Executive's refusal to comply with any lawful
order of the Board; or
(D) Executive's willful breach of Sections 11, 12 or
13 of this Employment Agreement, which would
result in material losses to Turner.
For purposes of this Employment Agreement, an act or failure to act on
Executive's part shall be considered "willful" if it was done or omitted to be
done by him in bad faith, but shall not include any act or failure to act which
(i) results from Executive's incapacity, or (ii) Executive reasonably believes
is in Turner's best interests.
(ii) A termination for Cause shall not take effect
unless the provisions of this paragraph (ii) are
complied with. Executive shall be given written
notice by Turner of its intention to terminate
him for Cause, such notice (A) to state in
detail the particular act or acts or failure or
failures to act that constitute the grounds on
which the proposed termination for Cause is
based and (B) to be given within 90 days of
Turner's learning of such act or acts or failure
or failures to act. Executive shall have 30
days after the date that such written notice has
been given to him in which to cure such conduct,
to the extent such cure is possible. If he
fails to cure such conduct, Executive shall then
be entitled to appear at a hearing before the
Committee. Such hearing shall be held within 25
days of such notice to Executive, provided he
requests such hearing within 10 days of the
written notice from Turner of the intention to
terminate Executive for Cause. If, within five
(5) days following such hearing, Executive is
furnished written notice by no less than 2/3's
of the Board confirming that, in its good faith
judgment, grounds for Cause on the basis of the
original notice exist, he shall thereupon be
terminated for Cause.
5
<PAGE> 8
(iii) In the event Turner terminates Executive's employment
for Cause prior to a Change in Control, Executive shall
be entitled to and his sole remedies under this
Employment Agreement shall be:
(A) Base Salary through the date of the termination of
his employment for Cause, which shall be paid in a
cash lump sum not later than 15 days following the
Termination Date;
(B) any incentive awards earned as of December 31 of
the prior year (but not yet paid), which shall be
paid in a cash lump sum not later than 15 days
following the Termination Date; and
(C) other or additional benefits then due or earned in
accordance with applicable plans or programs of
Turner.
(c) Termination Without Cause or by Executive for Good Reason prior
to Change in Control. In the event Turner terminates Executive's employment
without Cause (which termination shall be effective as of the date specified by
Turner in a written notice to Executive), other than due to death or Disability,
or in the event Executive terminates this Employment Agreement for Good Reason
(as defined below), in either case prior to a Change in Control (as defined
below), Executive shall be entitled to and his sole remedies under this
Employment Agreement shall be:
(i) Base Salary through the Termination Date; payable in a
lump sum within 15 days of the Termination Date;
(ii) 1/12th of the sum of (A) Executive's Base Salary
at the annualized rate in effect on the
Termination Date (or, in the event a Base salary
reduction is the basis for a Good Reason
termination, the Base Salary in effect
immediately prior to such reduction), plus (B)
$550,000 (Executive's target annual incentive
for purposes of this provision), such amount
payable monthly for the longer of (x) the
remaining duration of the Original Employment
Term, or (y) 24 months (the "Severance Period");
(iii) pro rata annual incentive award for the year in which
the termination occurs assuming Executive would have
received an award equal to $550,000 for the year,
payable in a lump sum within 15 days of the Termination
Date;
(iv) immediate vesting of any outstanding stock options which
would have vested by the conclusion of the Severance
Period. Executive shall have the right to exercise all
vested stock options for a period of one (1) year from
the termination date or for the remainder of the
exercise period, if less;
(v) elimination of all restrictions on any restricted stock
or deferred stock awards which would have vested through
the conclusion of the Severance Period;
6
<PAGE> 9
(vi) the balance of any incentive awards earned as of
December 31 of the prior year (but not yet paid), which
shall be paid in a cash lump sum within 15 days
following the Termination Date;
(vii) immediate vesting of Executive's accrued benefits under
any supplemental retirement benefit plan ("SERP")
maintained by Turner, with the payments to be made in
accordance with the terms and conditions of the SERP;
(viii)other or additional benefits then due or earned in
accordance with applicable plans and programs of Turner;
(ix) settlement of all deferred compensation arrangements in
accordance with any then applicable deferred
compensation or election form; and
(x) continued participation in all medical, health and life
insurance plans at the same benefit level at which
Executive was participating on the Termination Date
until the earlier of:
(A) the end of the Severance Period; or
(B) the date, or dates, Executive receives
equivalent coverage and benefits under the
plans and programs of a subsequent
employer (such coverage and benefits to be
determined on a coverage-by-coverage, or
benefit-by-benefit, basis); provided that
(1) if Executive is precluded from
continuing his participation in any
employee benefit plan or program as
provided in this clause (x) of this
Section 10(c), he shall receive cash
payments equal on an after-tax basis to
the cost to him of obtaining the benefits
provided under the plan or program in
which he is unable to participate for the
period specified in this clause (x) of
this Section 10(c), (2) such cost shall be
deemed to be the lowest reasonable cost
that would be incurred by Executive in
obtaining such benefit himself on an
individual basis, and (3) payment of such
amounts shall be made quarterly in advance.
"Termination Without Cause" shall mean Executive's employment is
terminated by Turner for any reason other than Cause (as defined in Section
10(b)) or due to Executive's death.
"Good Reason" shall mean Executive's termination of his employment
following the occurrence, without Executive's written consent, of one or more of
the following events (except as a result of a prior termination):
(A) a material diminution or adverse change in
Executive's positions, titles, or offices
(as set forth in Section 2(a)), status,
rank, nature of responsibilities, or
authority within Turner, or a removal of
Executive from or any failure to elect or
re-elect or, as the case may be, nominate
Executive to any such positions or
offices, including
7
<PAGE> 10
Executive's position as Chairman of the Board,
after delivery of written notice to the Board by
Executive and 20 days to cure;
(B) an assignment of any duties to Executive which are
inconsistent with his status as Chairman of the
Board and Chief Executive Officer of Turner and
other positions held under Section 2(a);
(C) any decrease in Executive's (i) annual
Base Salary or (ii) target annual
incentive award opportunity (or for each
of 1999, 2000, and 2001, except as
permitted hereunder, any failure to pay
Executive an annual incentive equal to
$550,000 (such amount to be prorated for
1999));
(D) a relocation of Executive to a location more than
35 miles from Turner's corporate offices (except
any planned relocation of Turner of which
Executive has been notified prior to entering into
this Employment Agreement);
(E) any failure to secure the agreement of any
successor corporation or other entity to Turner to
fully assume Turner's obligations under this
Employment Agreement; or
(F) any other failure by Turner to perform any
material obligation under, or breach by Turner of
any material provision of, this Employment
Agreement that is not cured within 30 days of
receipt of written notice from Executive.
A "Change in Control" shall be deemed to occur upon any of the
following:
(i) any Person becomes the Beneficial Owner,
directly or indirectly, of either (1) 35% or
more of Turner's outstanding common stock, or
(2) 35% of the outstanding securities of any
other class or classes which individually or
together have the power (other than upon a
failure to pay dividends, unless that failure
has occurred) to elect a majority of the members
of the Board, except that an acquisition of
securities by an employee benefit plan of Turner
or a subsidiary will never be a Change of
Control; or
(ii) the Board determines that a tender offer statement filed
by any person with the Securities and Exchange
Commission indicates an intention on the part of that
person to acquire control of the Company; or
(iii) there is a change in the membership of the Board and
immediately following the change a majority of the
members of the Board are not persons who (1) had been
directors of Turner for at least the preceding 24
consecutive months or (2) when they initially were
elected to the Board, (x) were nominated (if they were
elected by the stockholders) or elected (if they were
elected by the directors) with the affirmative vote of
two-thirds of the
8
<PAGE> 11
directors who were Continuing Directors at the time of
the nomination or election by the Board; and (y) were
not elected as a result of an actual or threatened
solicitation of proxies or consents by a person other
than Turner's Board or an agreement intended to avoid or
settle such proxy solicitation (the directors described
in clauses (1) and (2) of this subsection being
"Continuing Directors"); or
(iv) Turner ceases to be required to file reports under
Section 13 of the Exchange Act.
For purposes of this definition:
(A) The term "Beneficial Owner" shall have the meaning
ascribed to such term in Rule 13d-3 under the
Exchange Act (including any successor to such
Rule).
(B) The term "Exchange Act" means the Securities
Exchange Act of 1934, as amended from time to
time, or any successor act thereto.
(C) The term "Person" shall have the meaning ascribed
to such term in Section 3(a)(9) of the Exchange
Act and used in Sections 13(d) and 14(d) thereof,
including "group" as defined in Section 13(d)
thereof.
(d) Voluntary Termination Prior to a Change of Control. Prior to a
Change of Control, in the event of a termination of employment by Executive on
his own initiative after delivery of 10 business days advance written notice,
other than a termination due to death, by Executive for Good Reason, or Approved
Early Retirement or Normal Retirement pursuant to Section 10(f) below, Executive
shall have the same entitlements as provided in Section 10(b)(iii) above for a
termination for Cause.
(e) Termination after a Change in Control. In the event a Change in
Control occurs after October 1, 1999 and Executive's employment is terminated by
Turner or by Executive for any reason whatsoever, Executive shall be entitled to
the following payments:
(i) Base Salary through the Termination Date; payable in a
lump sum within 15 days of the Termination Date;
(ii) 3 times the sum of (A) Executive's Base Salary,
at the annualized rate in effect on the
Termination Date (or in the event a Base Salary
reduction is the basis for a Good Reason
termination, the Base Salary in effect
immediately prior to such reduction) plus (B)
the greater of (1) the annual incentive received
by Executive for the most recently completed
twelve-month operating period, or (2) $550,000,
such amount payable in a lump sum within 15 days
of the Termination Date;
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<PAGE> 12
(iii) pro rata annual incentive award for the year in which
termination occurs assuming that Executive would have
received an award equal to Executive's target bonus for
such year; payable in a lump sum within 15 days of the
Termination Date;
(iv) immediate vesting of all outstanding stock options and
the right to exercise such stock options for a period of
three years or the remainder of the exercise period, if
less;
(v) elimination of all restrictions on any restricted stock
or deferred stock awards;
(vi) the balance of any incentive awards earned as of
December 31 of the prior year (but not yet paid), which
shall be paid in a single lump sum not later than 15
days following the Termination Date;
(vii) immediate vesting of Executive's accrued benefits under
any SERP maintained by Turner, with the payments to be
made in accordance with the terms and conditions of the
SERP;
(viii)other or additional benefits then due or earned in
accordance with applicable plans and programs of Turner;
(ix) settlement of all deferred compensation arrangements in
accordance with any then applicable deferred
compensation or election form;
(x) continued participation in all medical, health and life
insurance plans at the same benefit level at which he
was participating on the date of termination of his
employment until the earlier of:
(A) the end of the Severance Period; or
(B) the date, or dates, Executive receives
equivalent coverage and benefits under the
plans and programs of a subsequent
employer (such coverage and benefits to be
determined on a coverage-by-coverage, or
benefit-by-benefit, basis); provided that
(1) if Executive is precluded from
continuing his participation in any
employee benefit plan or program as
provided in this clause (x) of this
Section 10(e), he shall receive cash
payments equal on an after-tax basis to
the cost to him of obtaining the benefits
provided under the plan or program in
which he is unable to participate for the
period specified in this clause (x) of
this Section 10(e), (2) such cost shall be
deemed to be the lowest reasonable cost
that would be incurred by Executive in
obtaining such benefit himself on an
individual basis, and (3) payment of such
amounts shall be made quarterly in
advance, and
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(xi) In the event that Executive is terminated prior to
receipt of the bonus due Executive pursuant to Section 6
of this Employment Agreement, Executive shall also
receive a cash payment of $750,000.
For purposes of any termination pursuant to this Section 10(e), the term
"Severance Period" shall mean the period of 36 months following the termination
of Executive's employment.
In the event Executive is terminated for any reason (including without
limitation by the Company for death or Disability) after a Change of Control has
occurred, Executive's entitlement to the payments due him pursuant to this
paragraph (e) of this Section 10 shall be instead of, and not in addition to,
payments otherwise payable to Executive pursuant to this Employment Agreement.
However, Executive shall continue to be entitled to any additional payments
which may be due him pursuant to any other plans or policies maintained by the
Company.
(f) Approved Early Retirement or Normal Retirement. Upon Executive's
Approved Early Retirement or Normal Retirement (each as defined below),
Executive shall be entitled to and his sole remedies under this Employment
Agreement shall be:
(i) Base Salary through the Termination Date, which shall be
paid in a cash lump sum not later than 15 days following
the Termination Date;
(ii) pro rata annual incentive award for the year in which
the termination occurs, assuming that Executive would
have received an award equal to $550,000 for the year
and which shall be payable in a cash lump sum promptly
(but in no event later than 15 days) after the
Termination Date;
(iii) immediate vesting of all outstanding stock options and
the right to exercise such stock options for a period of
one (1) year following the Termination Date or for the
remainder of the exercise period, if less;
(iv) elimination of all restrictions on any restricted stock
or deferred stock awards;
(v) the balance of any incentive awards earned as of
December 31 of the prior year (but not yet paid), which
shall be paid in a single lump sum not later than 15
days following the Termination Date;
(vi) continued participation in all medical, health and life
insurance plans at the same benefit level at which
Executive was participating on the Termination Date
until the earlier of:
(A) Executive's attainment of age [62]; or
(B) the date, or dates, he receives
substantially equivalent coverage and
benefits under the plans and programs of a
subsequent employer (such coverage and
benefits to be determined on a
coverage-by-coverage, or
benefit-by-
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benefit, basis); provided that (1) if Executive is
precluded from continuing his participation in any
employee benefit plan or program as provided in
this clause (vi) of this Section 10(f), he shall
receive cash payments equal on an after-tax basis
to the cost to him of obtaining the benefits
provided under the plan or program in which he is
unable to participate for the period specified in
this clause (vi) of this Section 10(f), (2) such
cost shall be deemed to be the lowest cost that
would be incurred by Executive in obtaining such
benefit himself on an individual basis, and (3)
payment of such amounts shall be made quarterly in
advance; and
(vii) other or additional benefits then due or earned in
accordance with applicable plans and programs of Turner.
"Approved Early Retirement" shall mean Executive's voluntary
termination of employment with Turner at or after attaining (i) age [60], and
(ii) 10 years of service, if such termination is approved in advance by the
Committee.
"Normal Retirement" shall mean Executive's voluntary termination of
employment with Turner at or after attaining age [62].
(g) Mitigation and Offset. Executive shall have no duty to mitigate
any payments due Executive from Turner hereunder.
(h) Nature of Payments. Any amounts due under this Section 10 are in
the nature of severance payments considered to be reasonable by Turner and are
not in the nature of a penalty.
(i) Exclusivity of Severance Payments. Upon termination of
Executive's employment during the Term of Employment, he shall not be entitled
to any severance payments or severance benefits from Turner or any payments by
Turner on account of any claim by him of wrongful termination, including claims
under any federal, state or local human and civil rights or labor laws, other
than the payments and benefits provided in this Section 10.
(j) Release of Employment Claims. Executive agrees, as a condition
to receipt of the termination payments and benefits provided for in this Section
10, that he will execute a mutual release agreement, in a form reasonably
satisfactory to Turner, releasing any and all claims arising out of Executive's
employment (other than enforcement of this Employment Agreement, Executive's
rights under any of Turner's incentive compensation and employee benefit plans
and programs to which he is entitled under this Employment Agreement, and any
claim for any tort for personal injury not arising out of or related to his
termination of employment).
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11. Confidentiality; Cooperation with Regard to Litigation;
Non-disparagement.
(a) During the Term of Employment and thereafter, Executive shall
not, without Turner's prior written consent, disclose to anyone (except in good
faith in the ordinary course of business to a person who will be advised by
Executive to keep such information confidential) or make use of any Confidential
Information except in the performance of his duties hereunder or when required
to do so by legal process, by any governmental agency having supervisory
authority over the business of Turner or by any administrative or legislative
body (including a committee thereof) that requires him to divulge, disclose or
make accessible such information. In the event that Executive is so ordered, he
shall give prompt written notice to Turner to allow Turner the opportunity to
object to or otherwise resist such order.
(b) During the Term of Employment and thereafter, Executive shall
not disclose the existence or contents of this Employment Agreement beyond what
is disclosed in the proxy statement or documents filed with the government
unless and to the extent such disclosure is required by law, by a governmental
agency, or in a document required by law to be filed with a governmental agency
or in connection with enforcement of his rights under this Employment Agreement.
In the event that disclosure is so required, Executive shall give prompt written
notice to Turner to allow Turner the opportunity to object to or otherwise
resist such requirement. This restriction shall not apply to such disclosure by
him to members of his immediate family, his tax, legal or financial advisors,
any lender, or tax authorities, or to potential future employers to the extent
necessary, each of whom shall be advised not to disclose such information.
(c) "Confidential Information" shall mean all information concerning
the business of Turner or any Subsidiary relating to any of their products,
product development, trade secrets, customers, suppliers, finances, and business
plans and strategies. Excluded from the definition of Confidential Information
is information (i) that is or becomes part of the public domain, other than
through the breach of this Employment Agreement by Executive or (ii) regarding
Turner's business or industry properly acquired by Executive in the course of
his career as an executive in Turner's industry and independent of Executive's
employment by Turner. For this purpose, information known or available generally
within the trade or industry of Turner or any Subsidiary shall be deemed to be
known or available to the public.
(d) "Subsidiary" shall mean any corporation controlled directly or
indirectly by Turner.
(e) Executive agrees to cooperate with Turner, during the Term of
Employment and thereafter (including following Executive's termination of
employment for any reason), by making himself reasonably available to testify on
behalf of Turner or any Subsidiary in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, and to assist Turner, or any
Subsidiary, in any such action, suit, or proceeding, by providing information
and meeting and consulting with the Board or its representatives or counsel, or
representatives or counsel to Turner, or any Subsidiary as reasonably requested;
provided, however, that the same does not materially interfere with his then
current professional activities. Turner agrees to reimburse Executive, on an
after-tax basis, for all expenses actually incurred in connection with his
provision of testimony or assistance.
(f) Executive agrees that, during the Term of Employment and
thereafter (including following Executive's termination of employment for any
reason) he will not make statements or representations, or otherwise
communicate, directly or indirectly, in writing, orally, or otherwise, or take
any action which may, directly or indirectly, disparage Turner or any Subsidiary
or their respective officers, directors, employees, advisors, businesses or
reputations. Turner agrees that, during the Term of Employment and thereafter
(including
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following Executive's termination of employment for any reason), Turner will not
make statements or representations, or otherwise communicate, directly or
indirectly, in writing, orally, or otherwise, or take any action which may
directly or indirectly, disparage Executive or his business or reputation.
Notwithstanding the foregoing, nothing in this Employment Agreement shall
preclude either Executive or Turner from making truthful statements or
disclosures that are required by applicable law, regulation or legal process.
12. Non-competition.
(a) During the Restriction Period (as defined in Section 12(b)
below), Executive shall not engage in Competition with Turner or any Subsidiary.
"Competition" shall mean engaging in any activity, except as provided below, for
a Competitor of Turner or any Subsidiary, whether as an employee, consultant,
principal, agent, officer, director, partner, shareholder (except as a less than
one percent shareholder of a publicly traded company) or otherwise. A
"Competitor" shall mean any corporation or other entity which competes, directly
or indirectly, with the business conducted by Turner, as determined on the date
of termination of Executive's employment. If Executive commences employment or
becomes a consultant, principal, agent, officer, director, partner, or
shareholder of any entity that is not a Competitor at the time Executive
initially becomes employed or becomes a consultant, principal, agent, officer,
director, partner, or shareholder of the entity, future activities of such
entity shall not result in a violation of this provision unless (x) such
activities were contemplated by Executive at the time Executive initially became
employed or becomes a consultant, principal, agent, officer, director, partner,
or shareholder of the entity or (y) Executive commences directly or indirectly
overseeing or managing the activities of an entity which becomes a Competitor
during the Restriction Period, which activities are competitive with the
activities of Turner or any Subsidiary. Executive shall not be deemed indirectly
overseeing or managing the activities of such Competitor which are competitive
with the activities of Turner or any Subsidiary so long as he does not regularly
participate in discussions with regard to the conduct of the competing business.
(b) For the purposes of this Section 12, "Restriction Period" shall
mean the period beginning with the Effective Date and ending with:
(i) in the case of a termination of Executive's employment
without Cause or by Executive for Good Reason, in either
case prior to a Change of Control, the earlier of (1) 24
months after such termination and (2) the occurrence of
a Change of Control;
(ii) in the case of a termination of Executive's employment
for Cause, the earlier of (1) 24 months after such
termination and (2) the occurrence of a Change of
Control;
(iii) in the case of a voluntary termination of Executive's
employment pursuant to Section 10(d) above, the date of
such termination;
(iv) in the case of Approved Early Retirement or Normal
Retirement pursuant to Section 10(f) above, the
remainder of the Term of Employment; or
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(v) in the case of termination of Executive's employment
without Cause or by Executive for Good Reason, in either
case following a Change of Control, immediately upon
such termination of employment.
13. Non-solicitation.
During the period beginning with the Effective Date and ending 18
months following the termination of Executive's employment, Executive shall not
induce employees of Turner or any Subsidiary to terminate their employment, nor
shall Executive solicit or encourage any of Turner's or any Subsidiary's
non-retail customers, or any corporation or other entity in a joint venture
relationship (directly or indirectly) with Turner or any Subsidiary, to
terminate or diminish their relationship with Turner or any Subsidiary or to
violate any agreement with any of them. During such period, Executive shall not
hire, either directly or through any employee, agent or representative, any
employee of Turner or any Subsidiary or any person who was employed by Turner or
any Subsidiary within 180 days of such hiring.
14. Remedies.
If Executive breaches any of the provisions contained in Sections
11, 12 or 13 above, Turner (a) subject to Section 15, shall have the right to
immediately terminate all payments and benefits due under this Employment
Agreement and (b) shall have the right to seek injunctive relief. Executive
acknowledges that such a breach of Sections 11,12 or 13 would cause irreparable
injury and that money damages would not provide an adequate remedy for Turner;
provided, however, the foregoing shall not prevent Executive from contesting the
issuance of any such injunction on the ground that no violation or threatened
violation of Section 11, 12 or 13 has occurred.
15. Resolution of Disputes.
Any controversy or claim arising out of or relating to this
Employment Agreement or any breach or asserted breach hereof or questioning the
validity and binding effect hereof arising under or in connection with this
Employment Agreement, other than seeking injunctive relief under Section 14,
shall be resolved by binding arbitration, to be held at an office closest to
Turner's principal offices in accordance with the rules and procedures of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Pending
the resolution of any arbitration or court proceeding, Turner shall continue
payment of all amounts and benefits due Executive under this Employment
Agreement. All costs and expenses of any arbitration or court proceeding
(including fees and disbursements of counsel) shall be borne by the respective
party incurring such costs and expenses, but Turner shall reimburse Executive
for such reasonable costs and expenses in the event he substantially prevails in
such arbitration or court proceeding. Notwithstanding the foregoing, all
reasonable costs and expenses (including fees and disbursements of counsel)
incurred by Executive pursuant to this Section 15 shall be paid on behalf of or
reimbursed to Executive promptly by Turner; provided, however, that no
reimbursement shall be made of such expenses if and to the extent the
arbitrator(s) determine(s) that any of Executive's litigation assertions or
defenses were in bad faith or frivolous.
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16. Indemnification.
(a) Company Indemnity. Turner agrees that if Executive is made a
party, or is threatened to be made a party, to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director, officer or employee of Turner
or any Subsidiary or is or was serving at the request of Turner or any
Subsidiary as a director, officer, member, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether or not the basis of such
Proceeding is Executive's alleged action in an official capacity while serving
as a director, officer, member, employee or agent, Executive shall be
indemnified and held harmless by Turner to the fullest extent legally permitted
or authorized by Turner's certificate of incorporation or bylaws or resolutions
of Turner's Board or, if greater, by the laws of the State of Delaware against
all cost, expense, liability and loss (including, without limitation, attorney's
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by Executive in
connection therewith, and such indemnification shall continue as to Executive
even if he has ceased to be a director, member, officer, employee or agent of
Turner or other entity and shall inure to the benefit of Executive's heirs,
executors and administrators. Turner shall advance to Executive all reasonable
costs and expenses to be incurred by him in connection with a Proceeding within
20 days after receipt by Turner of a written request for such advance. Such
request shall include an undertaking by Executive to repay the amount of such
advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses. The provisions of this Section
16(a) shall not be deemed exclusive of any other rights of indemnification to
which Executive may be entitled or which may be granted to him, and it shall be
in addition to any rights of indemnification to which he may be entitled under
any policy of insurance.
(b) No Presumption Regarding Standard of Conduct. Neither the
failure of Turner (including its Board, independent legal counsel or
stockholders) to have made a determination prior to the commencement of any
proceeding concerning payment of amounts claimed by Executive under Section
16(a) above that indemnification of Executive is proper because he has met the
applicable standard of conduct, nor a determination by Turner (including its
Board, independent legal counsel or stockholders) that Executive has not met
such applicable standard of conduct, shall create a presumption that Executive
has not met the applicable standard of conduct.
(c) Liability Insurance. Turner agrees to continue and maintain a
directors and officers' liability insurance policy covering Executive to the
extent Turner provides such coverage for its other executive officers.
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17. Excise Tax Gross-Up.
Notwithstanding any other provision of this Employment Agreement or
any other agreement between Executive and Turner, if Executive becomes entitled
to one or more payments (with a "payment" including, without limitation, the
vesting of an option or other non-cash benefit or property) pursuant to any
plan, agreement or arrangement of Turner (together, "Severance Payments") which
are or become subject to the tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code")(or any similar tax that may be imposed)
(the "Excise Taxes"), and such Severance Payments are equal to or exceed 120% of
the Safe Harbor Amount (as defined below), Turner will pay to Executive an
additional amount ("Gross-Up Payment") such that, after the payment by Executive
of all taxes (including without limitation all income and employment tax and
Excise Tax and treating as a tax the lost tax benefit resulting from the
disallowance of any deduction of Executive by virtue of the inclusion of the
Gross-Up Payment in Executive's adjusted gross income), and interest and
penalties with respect to such taxes, imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Taxes.
If the Severance Payments exceed, but are less than 120%, of the Safe Harbor
Amount, the Severance Payments shall be reduced to the Safe Harbor Amount. "Safe
Harbor Amount" shall mean 300% of the "base amount" as determined in accordance
with Section 280G(b)(3) of the Code.
For purposes of determining whether any of the Severance Payments will be
subject to the Excise Tax and the amount of such Excise Tax:
(i) The Severance Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of
the Code, and all "excess parachute payments" within
the meaning of Section 280G(b)(1) of the Code shall be
treated as subject to the Excise Tax, unless, and
except to the extent that, in the written opinion of
independent compensation consultants, counsel or
auditors of nationally recognized standing
("Independent Advisors") selected by Turner and
reasonably acceptable to Executive, the Severance
Payments (in whole or in part) do not constitute
parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable
compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of
the base amount within the meaning of Section
280G(b)(3) of the Code or are otherwise not subject to
the Excise Tax;
(ii) The amount of the Severance Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A)
the total amount of the Severance Payments or (B) the total
amount of excess parachute payments within the meaning of
Section 280G(b)(1) of the Code (after applying clause (i)
above); and
(iii) The value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Independent Advisors in
accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed (A) to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made; (B) to pay any applicable state and local income
taxes at the highest marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes if paid in
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such year (determined without regard to limitations on deductions based upon the
amount of Executive's adjusted gross income); and (C) to have otherwise
allowable deductions for federal, state, and local income tax purposes at least
equal to those disallowed because of the inclusion of the Gross-Up Payment in
Executive's adjusted gross income. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time the Gross-Up Payment is made, Executive shall repay to Turner at the
time that the amount of such reduction in Excise Tax is finally determined (but,
if previously paid to the taxing authorities, not prior to the time the amount
of such reduction is refunded to Executive or otherwise realized as a benefit by
Executive) the portion of the Gross-Up Payment that would not have been paid if
such Excise Tax had been applied in initially calculating the Gross-Up Payment,
plus interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time the Gross-Up Payment
is made (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), Turner shall make an
additional Gross-Up Payment in respect of such excess (plus any interest and
penalties payable with respect to such excess) at the time that the amount of
such excess is finally determined.
The Gross-Up Payment provided for above shall be paid on the 30th
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Severance Payments (or
any portion thereof) are subject to the Excise Tax; provided, however, that if
the amount of such Gross-Up Payment or portion thereof cannot be finally
determined on or before such day, Turner shall pay to Executive on such day an
estimate, as determined by the Independent Advisors, of the minimum amount of
such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon as
the amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by Turner to Executive, payable on the fifth
day after demand by Turner (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code). If more than one Gross-Up Payment is made,
the amount of each Gross-Up Payment shall be computed so as not to duplicate any
prior Gross-Up Payment. Turner shall have the right to control all proceedings
with the Internal Revenue Service that may arise in connection with the
determination and assessment of any Excise Tax and, at its sole option, Turner
may pursue or forego any and all administrative appeals, proceedings, hearings,
and conferences with any taxing authority in respect of such Excise Tax
(including any interest or penalties thereon); provided, however, that Turner's
control over any such proceedings shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder, and Executive shall be
entitled to settle or contest any other issue raised by the Internal Revenue
Service or any other taxing authority. Executive shall cooperate with Turner in
any proceedings relating to the determination and assessment of any Excise Tax
and shall not take any position or action that would materially increase the
amount of any Gross-Up Payment hereunder.
18. Effect of Employment Agreement on Other Benefits.
Except as specifically provided in this Employment Agreement, the
existence of this Employment Agreement shall not be interpreted to preclude,
prohibit or restrict Executive's participation in any other employee benefit or
other plans or programs in which he currently participates.
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19. Assignability; Binding Nature.
This Employment Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors, heirs (in the case of
Executive) and permitted assigns. No rights or obligations of Turner under this
Employment Agreement may be assigned or transferred by Turner except that such
rights or obligations may be assigned or transferred in connection with the sale
or transfer of all or substantially all of the assets of Turner, provided that
the assignee or transferee is the successor to all or substantially all of the
assets of Turner and such assignee or transferee assumes the liabilities,
obligations and duties of Turner, as contained in this Employment Agreement,
either contractually or as a matter of law. Turner further agrees that, in the
event of a sale or transfer of assets as described in the preceding sentence, it
shall take whatever action it legally can in order to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of Turner
hereunder. No rights or obligations of Executive under this Employment Agreement
may be assigned or transferred by Executive other than his rights to
compensation and benefits, which may be transferred only by will or operation of
law, except as provided in Section 25 below.
20. Representation.
Turner represents and warrants that it is fully authorized and
empowered to enter into this Employment Agreement and that the performance of
its obligations under this Employment Agreement will not violate any agreement
between it and any other person, firm or organization.
21. Conflict between Agreements.
Executive is party to an agreement dated the date of this Agreement,
which governs Executive's employment as Vice Chairman of Turner. In the event
that any conflict exists between the aforementioned agreement and this
Agreement, this Agreement shall control, provided that if a Change of Control of
Turner occurs prior to October 1, 1999,
22. Amendment or Waiver.
No provision in this Agreement may be amended unless such amendment
is agreed to in writing and signed by Executive and an authorized officer of
Turner. Except as set forth herein, no delay or omission to exercise any right,
power or remedy accruing to any Party shall impair any such right, power or
remedy or shall be construed to be a waiver of or an acquiescence to any breach
hereof. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by Executive or an authorized officer of Turner, as the case may be.
23. Severability.
In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law.
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24. Survivorship.
The respective rights and obligations of the Parties hereunder shall
survive any termination of Executive's employment to the extent necessary to the
intended preservation of such rights and obligations.
25. Beneficiaries/References.
Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following Executive's death by
giving Turner written notice thereof. In the event of Executive's death or a
judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
26. Notices.
Any notice given to a Party shall be in writing and shall be deemed
to have been given when delivered personally or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to Turner: The Turner Corporation
Attention: Corporate Secretary
375 Hudson Street
New York, New York 10014
Attention: Secretary
If to Executive: Mr. Thomas C. Leppert
4025 Blackpoint Road
Honolulu, Hawaii 96816
27. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Delaware without reference to principles of conflict
of laws. Subject to Section 15, Turner and Executive hereby consent to the
jurisdiction of any or all of the following courts for purposes of resolving any
dispute under this Agreement: (i) the United States District Court for Delaware
or (ii) any of the courts of the State of Delaware. Turner and Executive further
agree that any service of process or notice requirements in any such proceeding
shall be satisfied if the rules of such court relating thereto have been
substantially satisfied. Turner and Executive hereby waive, to the fullest
extent permitted by applicable law, any objection which it or he may now or
hereafter have to such jurisdiction and any defense of inconvenient forum.
28. Headings.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
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29. Counterparts.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
THE TURNER CORPORATION
By: /s/ E.T. Gravette, Jr.
-------------------------------------------
Name: E. T. Gravette, Jr.
Title: Chairman & Chief Executive Officer
/s/ Thomas C. Leppert
------------------------------------------------
Thomas C. Leppert
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EXHIBIT A
Defined Terms
(a) "Approved Early Retirement" shall have the meaning set forth in Section
10(g).
(b) "Base Salary" shall have the meaning set forth in Section 3.
(c) "Board" shall have the meaning set forth in Section 2(a).
(d) "Cause" shall have the meaning set forth in Section 10(b).
(e) "Change of Control" shall have the meaning set forth in Section 10(c).
(f) "Code" shall have the meaning set forth in Section 17.
(g) "Commencement Date" shall have the meaning set forth in Section 8(a).
(h) "Committee" shall have the meaning set forth in Section 3.
(i) "Competitor" or "Competition" shall have the meaning set forth in Section
12(a).
(j) "Confidential Information" shall have the meaning set forth in Section
11(c).
(k) "Disability" shall have the meaning set forth in Section 8(a).
(l) "Effective Date" shall have the meaning set forth in Section 1.
(m) "Excise Taxes" shall have the meaning set forth in Section 17.
(n) "Good Reason" shall have the meaning set forth in Section 10(c).
(o) "Gross-Up Payment" shall have the meaning set forth in Section 17.
(p) "Independent Advisors" shall have the meaning set forth in Section 17(i).
(q) "Normal Retirement" shall have the meaning set forth in Section 10(f).
(r) "Original Term of Employment" shall have the meaning set forth in Section
1.
(s) "Proceeding" shall have the meaning set forth in Section 16(a).
(t) "Renewal Term" shall have the meaning set forth in Section 1.
(u) "Restriction Period" shall have the meaning set forth in Section 12(b).
(v) "Safe Harbor Amount" shall have the meaning set forth in Section 17.
(w) "Severance Payments shall have the meaning set forth in Section 17.
(x) "Severance Period" shall have the meaning set forth in Section 10(c)(ii),
except as provided otherwise in Section 10(e).
<PAGE> 25
(y) "Stock Options" shall have the meaning set forth in Section 5(a).
(z) "Subsidiary" shall have the meaning set forth in Section 11(d).
(aa) "Term of Employment" shall have the meaning set forth in Section 1.
(bb) "Termination Date" shall have the meaning set forth in Section 10(a).
(cc) "Termination Without Cause" shall have the meaning set forth in Section
10(c).
<PAGE> 1
EXHIBIT 6
[TURNER LETTERHEAD]
[TURNER LOGO]
June 9, 1999
Thomas C. Leppert
4025 Blackpoint Road
Honolulu, Hawaii 96816
Dear Tom:
We are pleased you will be joining The Turner Corporation ("Turner") as
its Vice Chairman prior to commencing your full-time duties as Chairman and
Chief Executive Officer of Turner on October 1, 1999. This letter agreement
("Agreement") outlines the terms and conditions of your employment as Vice
Chairman of Turner until the termination of this Agreement on September 30,
1999. Any capitalized terms used which are not defined in this Agreement shall
have the meanings assigned to them in the employment agreement executed between
you and Turner on the same date as this Agreement is executed ("Employment
Agreement").
1. Term of Employment. The term of your employment under this Agreement
shall commence on your execution and acceptance of this Agreement (the
"Effective Date") and end on September 30, 1999 (the "Term"), unless earlier
terminated by Turner.
2. Position, Duties and Responsibilities.
(a) You shall serve as the Vice Chairman of Turner's board of
directors (the "Board") and shall have and perform such duties,
responsibilities, and authorities as are customary for the Vice Chairman of the
Board of corporations of similar size and businesses as Turner, as they each
may exist from time to time and as are consistent with such positions and
status.
(b) Anything herein to the contrary notwithstanding, nothing in this
Agreement shall preclude you from (i) continuing your service as a trustee for
the Campbell estate during the Term, (ii) serving on the boards of directors of
a reasonable number of other corporations or the boards of a reasonable number
of trade associations and/or charitable organizations, provided that you notify
the Board prior to accepting any such position, (iii) engaging in charitable
activities and community affairs, and (iv) managing your personal investments
and affairs, provided that such activities do not materially interfere with the
proper performance of your duties and responsibilities under this Agreement.
3. Base Salary. During the Term, Turner shall pay you a salary, payable in
accordance with the regular payroll practices of Turner, of $5,000 per month,
such salary to be paid pro rata for any partial months.
<PAGE> 2
6/09/99
To: MR. THOMAS C. LEPPERT PAGE 2
- --------------------------------------------------------------------------------
4. Incentive Grants. On the Effective Date, you shall receive the
following:
(a) 150,000 shares of non-qualified stock options ("Stock Options"),
at the market price of Turner stock on the Effective Date. The Stock Options
shall have a term of 10 years, and shall vest 25% on each of the first through
fourth anniversaries of June 9, 1999; and
(b) 150,000 shares of restricted stock, which shall vest 25% on each
of the first through fourth anniversaries of June 9, 1999.
5. Purchase of Primary Residence by Turner.
(a) Turner agrees to purchase your primary residence located at 4025
Blackpoint Road, Honolulu, Hawaii (the "Residence") for the greater of (i) the
actual cost of the Residence, as evidenced by you to Turner's reasonable
satisfaction, or (ii) the fair market value of the Residence, as determined by
a qualified appraiser selected by Turner and reasonably acceptable to you. The
closing of such purchase by Turner shall be completed no later than January 7,
2001.
(b) In the event that you are deemed to owe any income tax to any
taxing authority as a result of the sale of the Residence by you to Turner
("Excess Income Tax"), Turner will pay to you an additional amount ("Gross-Up
Payment") such that, after the payment by you of all taxes (including without
limitation all income and employment tax and the Excess Income Tax and treating
as a tax the lost tax benefit resulting from the disallowance of any deduction
by virtue of the inclusion of the Gross-Up Payment in your adjusted gross
income), and interest and penalties with respect to such taxes, imposed upon
the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the
Excess Income Tax.
6. Change of Control. In the event that a Change of Control of Turner
occurs during the Term (except with a "going-private" transaction), and
thereafter your employment is terminated by you or by Turner (or the acquirer)
for any reason, you shall be entitled to the benefits contained in Section
10(e) of the Employment Agreement ("Severance Payments"). Such Severance
Payments shall be instead of, and not in addition to, all other severance
payments to which you would otherwise be entitled pursuant to the Employment
Agreement.
7. Employee Benefit Programs. During the Term, except as otherwise noted
below, you shall be entitled to participate in such employee pension and
welfare benefit plans and programs of Turner as are made available to Turner's
employees generally.
8. Additional Relocation Reimbursement. In the event that your actual
moving expenses are not fully covered by Turner's relocation benefits, Turner
shall reimburse any and all uncovered amounts to you. In the event that you are
deemed to owe any income tax to any taxing authority as a result of the payment
to you by Turner of such relocation expenses ("Moving Expense Tax"), Turner
will pay to you an additional amount ("Gross-Up Payment") such that, after the
payment by you of all taxes (including without limitation all income and
employment tax and the Moving Expense Tax and treating as a tax the lost tax
benefit resulting from the disallowance of any deduction by virtue of the
inclusion of the Gross-Up Payment in your adjusted gross income), and interest
and penalties with respect to such taxes, imposed upon the Gross-Up Payment,
you retain an amount of the Gross-Up Payment equal to the Moving Expense Tax.
<PAGE> 3
6/09/99
To: MR. THOMAS C. LEPPERT PAGE 2
- --------------------------------------------------------------------------------
9. Failure to Commence Duties. In the event of Executive's (i) death, (ii)
disability, or (iii) termination of employment by Turner prior to October 1,
1999 for any reason other than Executive's refusal to assume and perform his
duties as Chairman and Chief Executive Officer. Executive shall be entitled to
the vesting of 37,500 stock options and shall have 90 days to exercise such
options. All other stock options and restricted stock shall be canceled.
10. Confidentiality; Litigation Cooperation; Non-disparagement. Throughout
the Term of this Agreement, you shall be bound by the covenants contained in
Sections 11, 12, and 13 of the Employment Agreement.
11. Assignability; Binding Nature. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors, heirs
(in your case) and permitted assigns.
12. Governing Law/Jurisdiction. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of Delaware without
reference to the principles of conflict of laws.
13. Counterparts. This Agreement may be executed in two or more
counterparts.
14. Survival. If a Change of Control occurs during the Term, the
provisions of Section 6 shall survive this Agreement, and be binding upon
Turner and its successors and assigns.
If the above terms are acceptable to you, please execute and return an
original copy of this agreement to Turner. We are looking forward to working
with you.
THE TURNER CORPORATION
By: /s/ E.T. Gravette, Jr.
____________________________________
Name: E.T. Gravette, Jr.
Title: Chairman and Chief Executive Officer
Accepted:
/s/ Thomas C. Leppert
_________________________________________
Thomas C. Leppert
Date: June 9, 1999
<PAGE> 4
THE TURNER CORPORATION
375 Hudson Street, New York, NY 10014-3667
Telephone: (212) 229-6000
[Turner LOGO]
August 12, 1999
Mr. Thomas C. Leppert
Vice Chairman
The Turner Corporation
375 Hudson Street
New York, NY 10014
Dear Tom:
You are a party to two employment agreements with Turner, each dated June 9,
1999. The term of the first agreement (the "Letter Agreement") commenced on June
9, 1999. The term of the second agreement (the "Agreement") will commence on
October 1, 1999. This letter confirms that Section 17 of the Agreement (entitled
"Excise Tax Gross-Up") will apply to any "payment" (as defined more fully in
Section 17 of the Agreement) to which you become entitled during the term of
either the Letter Agreement or the Agreement.
Very truly yours,
THE TURNER CORPORATION
/s/ E. T. Gravette, Jr.
-------------------------------
By: E. T. Gravette, Jr.
Its: Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT 7
RESTRICTED STOCK UNIT AGREEMENT
THIS AGREEMENT, made as of the 9th day of June, 1999 (the "Grant
Date"), between the Turner Corporation, a Delaware corporation (the "Company"),
and Thomas C. Leppert (the "Grantee").
WHEREAS, the Grantee is currently the Vice Chairman of the Company,
and the Board of Directors of the Company (the "Board") has determined that it
is in the best interest of the Company and its stockholders to secure the
continued services of the Grantee; and
WHEREAS, in consideration of the grant of Restricted Stock Units as
provided herein, the Grantee has agreed to continue to serve the Company as its
Vice Chairman;
NOW THEREFORE, the parties hereto agree as follows:
1. GRANT OF RIGHTS.
The Company hereby grants to the Grantee 150,000 Restricted Stock
Units ("RSUs")(as adjusted pursuant to Section 7) subject to, and in
accordance with, the terms and conditions set forth in this Agreement.
2. TIME OF PAYMENT.
2.1 The RSUs will vest equally in 25% installments on each
anniversary of the Grant Date, beginning June 9, 2000 and
continuing to June 9, 2003.
2.2 Payment in respect of all vested RSUs shall be deferred until
Grantee ceases to be an employee of the Company for any reason
and shall be made within thirty (30) days following such date.
Except as otherwise provided in Section 2.3, all unvested RSUs
shall be canceled upon Grantee's cessation of employment with the
Company.
2.3 Upon a Change of Control, or if Grantee ceases to be an employee
of the Company due to retirement (with the Board's consent) death
or disability, all unvested RSUs shall immediately vest.
3. FORM OF PAYMENT.
3.1 Except as provided in Sections 3.2 and 3.3, payment in respect of
all RSUs shall be made by delivery of shares of the Company's
common stock, par value $1.00 per share (the "Common Stock"),
with each RSU representing the right to receive one (1) share of
Common Stock as existing on the date hereof (and adjusted
pursuant to Section 7).
3.2 In the event that the Grantee dies prior to the payment date in
respect of the RSUs, the Company in its sole discretion may make
a cash payment to the Grantee's designated beneficiary (or, in
the absence of a designated beneficiary, his estate) in lieu of
all or any portion of the RSUs, such payment to be in an amount
for each such RSU equal to the Fair Market Value of shares of
Common Stock on the date that delivery of the shares of Common
Stock in respect of such RSUs was scheduled to be made.
<PAGE> 2
3.3 In the event of a Change of Control, payment in respect of each RSU
shall be made (i) in the same form and amount of consideration (cash,
securities or other property) paid to shareholders in the transaction
or series of transactions constituting the Change in Control, or (ii)
if the Change in Control occurs other than upon the consummation of a
transaction or series of transactions, in cash in the amount of the
Fair Market Value of the Common Stock on the date of the Change in
Control.
4. RIGHT OF FIRST REFUSAL.
The Company shall have a right of first refusal (as described below) to
repurchase any and all shares of Common Stock issued pursuant to this Agreement
from a "Holder" (as defined below) of such shares of Common Stock. If in any
calendar month a Holder of the Common Stock issued pursuant to this Agreement
wishes to sell or transfer shares of such Common Stock, whether privately or
publicly, such Holder must, prior to any such sale or transfer, give notice of
such proposed sale or transfer to the Company at its principal executive
offices, unless such sale or transfer (when added to any other sales or
transfers of such shares in such calendar month) would result in the sale or
transfer of ten thousand (10,000) or fewer of such shares in such calendar
month. The Holder's written notice to the Company must state (i) the name and
address of the proposed transferee, (ii) the number of such shares to be sold
or transferred, (iii) the price per share and (iv) the terms and conditions for
payment of the price; provided, however, that no disclosure of the name and
address of the proposed purchaser or transferee shall be required with respect
to any proposed sale or transfer that is to be effected through a public sale
in which the name of the purchaser or transferee is unknown. Upon receipt of
the Holder's written notice, the Company, or such other party as the Company
may designate, shall, within five (5) business days following such receipt,
thereupon have the right and option to purchase from the Holder such shares
which are (when added to any other sales or transfers of such shares in such
calendar month) in excess of ten thousand (10,000) shares, on the following
terms: (x) if the proposed sale or transfer is to be effected pursuant to a
bona fide offer received by the Holder, on the terms contained in such offer;
or (y) if otherwise, at a price per share in cash equal to the Fair Market
Value of the Common Stock on the day the Company receives the Holder's written
notice of the proposed sale or transfer. If the Company does not exercise its
right and option within five (5) business days following its receipt of the
Holder's written notice, the Holder may thereafter sell or transfer the shares
of Common Stock in accordance with the terms disclosed to the Company;
provided, however, that if such sale or transfer does not occur within five (5)
business days following the expiration of the Company's right and option, the
Holder's right to sell or transfer such shares shall expire and the Holder must
thereafter comply with this Section 4 as to any sale or transfer of any such
shares. For purposes of this Section 4, "Holder" shall mean that Grantee or his
designated beneficiary or estate.
<PAGE> 3
RE: RSU AGREEMENT JUNE 9, 1999
THOMAS C. LEPPERT PAGE 3 OF 5
- --------------------------------------------------------------------------------
5. TRANSFERABILITY.
The RSUs may not be transferred, assigned, pledged or alienated by
the Grantee except under the following circumstances: (i) with the
express written consent of the Board or (ii) by will or pursuant to
the laws or descent and distribution. Any attempted transfer,
assignment, pledge or alienation not in accordance with this paragraph
shall be null and void and of no force and effect.
6. ADJUSTMENT.
If a "Change in Capitalization" (as defined in Section 7.1) occurs,
the RSUs shall be adjusted by the Board in good faith and in a manner
that preserves the economic value of the RSUs immediately prior to the
Change in Capitalization.
7. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
following definitions:
7.1 "Change in Capitalization" shall mean any increase or reduction
in the number of shares of the Common Stock, or any change
(including, in the case of a spin-off or extraordinary dividend,
a change in value) in such shares or exchange of such shares
for a different number or kind of shares of other securities of
the company or another corporation or other entity or other
property, by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or debt securities, stock
dividend, stock split or reverse stock split, extraordinary
dividend, combination or exchange of shares, repurchase of
shares, change in corporate structure or similar transaction.
7.2 "Change in Control" shall have the same meaning as in The Turner
Corporation 1997 Non-Qualified Stock Option Plan, as in effect on
the date hereof.
7.3 "Fair Market Value" shall mean the average of the high and low
prices at which the Common Stock is reported to have traded in
the principal market (whether consolidated trading on a stock
exchange, an interdealer quotation systems or another market) in
which the Common Stock is traded, or if there is no trade on a
particular date, "Fair Market Value" shall mean the average of
the low asked and high bid prices in that market on that date;
provided, however, that if the Common Stock is not traded on any
such market at the relevant time, Fair Market Value shall be as
determined (i) by the Board in good faith or (ii) upon the
election of the Grantee, by an investment banking firm or other
appraiser mutually acceptable to the Company and the Grantee.
<PAGE> 4
8. WITHHOLDING.
The Company shall have the right to deduct from any amounts payable
hereunder any taxes or other amounts required by law to be withheld and
shall not be required to issue or deliver any shares of Common Stock to the
Grantee until the Grantee has made satisfactory arrangements for the
payment of all applicable withholding requirements.
9. SECURITIES LAWS.
The obligation of the Company to issue or deliver shares of Common Stock
under this Agreement shall be subject to all applicable laws, rules and
regulations, including all applicable federal and state securities laws,
and the obtaining of all such approvals by governmental agencies as may be
deemed necessary or appropriate by the Company.
10. NOTICES.
Every notice relating to this Agreement shall be in writing and shall be
given by personal delivery or by registered or certified mail, postage
prepaid, return receipt requested to:
If to the Company: The Turner Corporation
375 Hudson Street
New York, NY 10014
Attn: Corporate Secretary
If to the Grantee: Thomas C. Leppert
4025 Black Point Road
Honolulu, HI 96816
11. CONTINUED EMPLOYMENT.
Nothing in this Agreement shall be interpreted or construed to confer upon
the Grantee any right with respect to continuance of employment by the
Company, nor shall this Agreement interfere in any way with the right of
the Company to terminate the Grantee's employment at any time.
12. GENERAL CREDITOR STATUS.
The rights of Grantee under this Agreement shall be solely those of an
unsecured creditor of the Company. Any asset acquired or held by the
Company or funds allocated by the Company in connection with the
liabilities assumed by the Company pursuant to this Agreement shall not be
deemed to be security for the performance of the Company's obligations
pursuant hereto, but shall be and remain general assets of the Company.
<PAGE> 5
13. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and
shall continue in full force in accordance with their terms.
14. GOVERNING LAW.
Except as to matters of federal law, this Agreement and the rights of all
persons claiming hereunder shall be construed and determined in accordance
with the laws of the State of Delaware without giving effect to conflicts
of law principles.
15. SUCCESSORS IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Grantee's legal representatives. All obligations imposed upon the Grantee
and all rights granted to the Company under this Agreement shall be binding
upon the Grantee's heirs, executors, administrators and successors.
THE TURNER CORPORATION
Attest:
/s/ Sara J. Gozo By: /s/ E.T. Gravette, Jr.
- ---------------------------------- ------------------------------------
E.T. Gravette, Jr.
Chairman and Chief Executive Officer
Attest: AGREED AND ACCEPTED
/s/ Patricia A. Knowles /s/ Thomas C. Leppert
- ---------------------------------- ----------------------------------------
Thomas C. Leppert
<PAGE> 1
EXHIBIT 8
THE TURNER CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
No. of Shares: 50,000 Grant Date: June 9, 1999
This is to confirm that The Turner Corporation (the "Company") has granted
Thomas C. Leppert ("you") the right and option (the "Option") under The Turner
Corporation 1992 Stock Option Plan (the "Plan") to purchase up to 50,000 shares
(the "Shares") of common stock, par value $1.00 per share, of the Company, on
the principal terms set forth herein. This Agreement shall be construed in
accordance with and subject to the provisions of the Plan and, except as
otherwise expressly set forth herein, the capitalized terms used in this
Agreement shall have the same definitions as set forth in the Plan.
1. When Option can be Exercised. The Option will vest and become
exercisable subject to the vesting schedule enclosed, and the Option will expire
at 5:00 P.M., New York City time on June 9, 2009, ("the Expiration Time"),
unless the Option terminates earlier as provided herein in Section 4 and in
Section 11 of the Plan attached. The Option is not intended to qualify as an
Incentive Stock Option within the meaning of Section 422 of the Code.
2. Exercise Price. The price at which you are entitled to purchase Shares
upon exercise of the Option will be $17.375 per share.
3. How to Exercise the Option. To exercise an option please refer to the
enclosed letter from Sara J. Gozo regarding specific instructions on the
procedure for exercising stock options and to the previously issued memo from D.
G. Sleeman on Outsourcing of Plan Administration for opening an account with
Merrill Lynch and exercising an option.
4. Termination of Option. The Option shall terminate on June 9, 2009
which is the tenth anniversary of the date the Option is granted or if earlier,
the first anniversary of the date of your death if such death occurs prior to
such tenth anniversary, but see also Section 11 of the Plan attached.
5. No Guarantee of Employment. The fact that you have been granted an
Option will not give you any right to continue in the employ of the Company or
will interfere with or restrict any right the Company may have to discharge you
as an employee.
6. Compliance with Securities Laws. The Company's obligation to issue
Shares to you upon exercise of the Option is subject to the condition that the
issuance of the Shares will be in compliance with the Securities Act of 1933, as
amended, and all other applicable laws and regulations, and that the stock you
will be purchasing by exercising the
<PAGE> 2
Option will have been authorized for listing on The New York Stock Exchange (or
any other securities exchange on which the Company's common stock is listed).
7. Adjustments. In the event of a Change in Capitalization, the number and
class of Shares subject to the Option and the exercise price may be adjusted as
provided in the Plan.
8. Plan Controls. If there is any inconsistency between the terms of the
Plan and the terms of this Agreement, the terms of the Plan will control. The
Committee which administers the Plan will have authority to interpret the Plan
and this Agreement. You hereby acknowledge receipt of a copy of the Plan and
agree to be bound by all the terms and provisions thereof. Any determination
made hereunder shall be final, binding and conclusive on you and the Company
for all purposes.
9. Additional Terms and Conditions. Additional information regarding your
Option are available in the Plan.
THE TURNER CORPORATION
By /s/ Sara J. Gozo
-------------------
/s/ Thomas C. Leppert 7/26/99
- -------------------- -------
Receipt Acknowledged Date
-2-
<PAGE> 3
VESTING SCHEDULE
1992 STOCK OPTION PLAN
<TABLE>
<S> <C>
June 9, 2000 12,500
June 9, 2001 12,500
June 9, 2002 12,500
June 9, 2003 12,500
------
50,000
</TABLE>
<PAGE> 1
EXHIBIT 9
THE TURNER CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
No. of Shares: 100,000 Grant Date: June 9, 1999
This is to confirm that The Turner Corporation (the "Company") has
granted Thomas C. Leppert ("you") the right and option (the "Option") under The
Turner Corporation 1998 Stock Incentive Plan (the "Plan") to purchase up to
100,000 shares (the "Shares") of common stock, par value $1.00 per share, of
the Company, on the principal terms set forth herein. This Agreement shall be
construed in accordance with and subject to the provisions of the Plan and,
except as otherwise expressly set forth herein, the capitalized terms used in
this Agreement shall have the same definitions as set forth in the Plan.
1. When Option can be Exercised. The Option will vest and become
exercisable subject to the vesting schedule enclosed and the Option will expire
at 5:00 P.M., New York City time on June 9, 2009, (the "Expiration Time"),
unless the Option terminates earlier as provided in Section 4 of this Agreement.
The Option will terminate at the Expiration Time, if it has not terminated
before that; provided, however, that the Option may, upon your death, be later
exercised for up to one (1) year following the date of your death if such death
occurs prior to the tenth anniversary of the date of this Agreement. The Option
will become immediately exercisable in full upon a Change in Control of the
Company (as defined in the Plan) or upon your death, in either case if it
occurs while you are employed by the Company, even if such event occurs before
the exercise dates stated in the attached schedule. The Option is not intended
to qualify as an Incentive Stock Option within the meaning of Section 422 of
the Code.
2. Exercise Price. The price at which you are entitled to purchase
Shares upon exercise of the Option will be $17.375 per share.
3. How to Exercise the Option. To exercise an option please refer
to the enclosed letter from Sara J. Gozo regarding specific instructions on the
procedure for exercising stock options and to the attached memo from D. G.
Sleeman on Outsourcing of Plan Administration for opening an account with
Merrill Lynch and exercising an option.
4. Termination of Option. The Option shall terminate on June 9,
2009 which is the tenth anniversary of the date the Option is granted (or if
later, the first anniversary of the date of your death if such death occurs
prior to such tenth anniversary), unless terminated earlier as follows:
<PAGE> 2
(i) If your employment is terminated by the Company for any reason
other than Disability, death, Cause or Retirement, or if the Committee
determines, in its Discretion, that circumstances justify continued exercise of
Options, you may for a period of three (3) months after such termination
exercise your Option to the extent, and only to the extent, that such Option or
portion thereof was vested and exercisable as of the date of such termination,
after which time the Option shall automatically terminate in full.
(ii) If your employment is terminated by reason of Disability, you
may, for a period of twelve (12) months after such termination, exercise your
Option to the extent, and only to the extent, that such Option or portion
thereof was vested and exercisable, as of the date of such termination, after
which time the Option shall automatically terminate in full.
(iii) If your employment is terminated by reason of Retirement, (as
defined below), you may for a period of three (3) months after such termination
exercise your Option to the extent, and only to the extent, that such Option or
portion thereof was vested and exercisable as of the date of such termination,
after which the Option shall terminate in full. "Retirement" means your
termination from employment by reason of your fulfillment of the requirements
for a normal, early or disability retirement pension, as determined by the
Committee in its discretion.
(iv) If your employment is terminated by the Company for Cause the
Option granted to you hereunder shall immediately terminate in full.
(v) If your employment is terminated by reason of death, the Option
shall become immediately and fully exercisable and the Option may be exercised
at any time within twelve (12) months after your death by the person or persons
to whom such rights under the Option shall pass by will, or by the laws of
descent or distribution, after which time the Option shall terminate in full.
If you die within three (3) months of termination described in paragraph (i) or
(iii) above, or within twelve (12) months after a termination described in
paragraph (ii) above, the Option granted to you may be exercised at any time
within twelve (12) months after your death by the person or persons to whom
such rights under the Option shall pass by will, or by the laws of descent and
distribution, after which time the Option shall terminate in full, provided
that an Option may be exercised only to the extent it was exercisable on the
date of death or earlier termination of your employment.
(vi) The Option, to the extent it is not vested and exercisable on the
date of your termination of employment or does not become vested and exercisable
upon your termination of employment, shall terminate immediately upon your
termination of employment with the Company for any reason.
(vii) Notwithstanding the foregoing, in the event your employment with
the Company terminates following a Change in Control, the Option shall remain
exercisable until the earlier of the first anniversary of the termination of
your employment or the expiration of the stated term of the Option, but in no
such event earlier than provided in the preceding provisions of this Section 4.
-2-
<PAGE> 3
5. Prohibition against Assignments. During your lifetime, the Option may
be exercised only by you, or by your guardian or legal representative if you
become unable to act. After your death, the Option may be exercised by the
executor of your estate or personal representative, or by the persons to whom
the right to exercise the Option has passed by will or through the laws of
descent and distribution. The Option may not be assigned, pledged or
hypothecated in any way, may not be subject to execution by a creditor or any
other person and may not be transferred other than by will or the laws of
descent and distribution. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option which is not specifically
permitted by the Plan will be void. Notwithstanding the foregoing, the Option
may be transferred to members of your immediate family, to trusts solely for the
benefit of your immediate family members and to partnerships in which such
family members and/or trusts are the only partners. For this purpose, immediate
family means your spouse, parents, children, stepchildren and grandchildren and
the spouses of such parents, children, stepchildren and grandchildren.
6. Not a Stockholder. You shall not be deemed to be the holder of, or
have any of the rights of a holder with respect to any Shares subject to the
Option until (i) the Option has been exercised pursuant to the terms of this
Agreement and you have paid the full purchase price for the number of Shares in
respect of which the Option was exercised, (ii) the Company has issued and
delivered the Shares to you, and (iii) your name has been entered as a
stockholder of record on the books of the Company, whereupon you shall have full
voting and other ownership rights with respect to such Shares.
7. No Guarantee of Employment. The fact that you have been granted an
Option will not give you any right to continue in the employ of the Company, or
will interfere with or restrict any right the Company may have to discharge you
as an employee.
8. Compliance with Securities Laws. The Company's obligation to issue
Shares to you upon exercise of the Option is subject to the condition that the
issuance of the Shares will be in compliance with the Securities Act of 1933, as
amended, and all other applicable laws and regulations, and that the stock you
will be purchasing by exercising the Option will have been authorized for
listing on The New York Stock Exchange (or any other securities exchange on
which the Company's common stock is listed).
9. Adjustments. In the event of a Change in Capitalization, the number
and class of Shares subject to the Option and the exercise price may be adjusted
as provided in the Plan.
10. Withholding of Taxes. If the Company is required to pay withholding
tax because of the exercise of the Option, the Company may (i) withhold Shares
of common stock purchased by exercising the Option, such Shares having an
aggregate Fair Market Value equal to the withholding taxes, or (ii) require
payment to the Company of a sum equal to the sum the Company must withhold
before the Company will issue stock as a result of exercising the Option. If you
make an election under Section 83(b) of the Internal Revenue Code in connection
with your exercise of the Option, you must notify the Company of that fact.
-3-
<PAGE> 4
11. Plan Controls. If there is any inconsistency between the terms
of the Plan and the terms of this Agreement, the terms of the Plan will
control. The Committee which administers the Plan will have authority to
interpret the Plan and this Agreement. You hereby acknowledge receipt of a copy
of the Plan and agree to be bound by all the terms and provisions thereof. Any
determination made hereunder shall be final, binding and conclusive on you and
the Company for all purposes.
12. Amendments. The Board of Directors of the Company may at any
time modify the Plan. However, no modification or amendment of the Plan will
affect your rights as the holder of this Option without your consent.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York without giving effect to the conflicts of laws principles thereof.
THE TURNER CORPORATION
By /s/ Sara J. Gozo
____________________
/s/ Thomas C. Leppert 7/26/99
_____________________ ________
Receipt Acknowledged Date
<PAGE> 5
VESTING SCHEDULE
1998 STOCK OPTION PLAN
<TABLE>
<S> <C>
June 9, 2000 25,000 shares
June 9, 2001 25,000 shares
June 9, 2002 25,000 shares
June 9, 2003 25,000 shares
------
100,000 shares
</TABLE>
<PAGE> 1
EXHIBIT 12
The Turner Corporation
375 Hudson Street
New York, New York 10014
August 13, 1999
Karl Steiner Holding AG
Hagenholzstrasse 60
CH-8050 Zurich
Switzerland
Dear Sirs:
With reference to our letter agreement, dated April 8, 1999 (the "Letter
Agreement"), relating to the proposed sale of a majority of the stock of Karl
Steiner Holding AG ("Steiner") to Skanska AB ("Skanska"), this letter will
clarify, with regard to the waivers of Section 12.1 and 12.2 of the Limited
Liability Company Agreement of Turner Steiner International, LLC dated as of
December 22, 1997 between The Turner Corporation ("Turner") and Steiner (the
"LLC Agreement"), that:
(a) the references to Skanska continuing its activities in the TSI
Territory (as defined in the Letter Agreement) were intended, and
shall be read, to apply to Skanska and its subsidiaries and
Affiliates (as defined in the LLC Agreement); and
(b) the references to Turner conducting activities in the TSI
Territory were intended, and shall be read, to apply to Turner
and its subsidiaries and Affiliates.
The letter will further confirm that Steiner has been advised that Turner is
considering entering into an Agreement and Plan of Merger (the "Merger
Agreement") with Hochtief AG (the "Bidder") and a subsidiary thereof, pursuant
to which Turner would be acquired by Bidder. In connection therewith, Steiner
hereby waives its rights under Section 12.1 of the LLC Agreement and consents
to the Bidder and its subsidiaries and Affiliates conducting activities in TSI
Territory from and after the time that the Bidder or any subsidiary thereof
first purchases shares of Turner stock under the tender offer contemplated by
the Merger Agreement.
<PAGE> 2
TO: KARL STEINER HOLDING AG 8/11/99
PAGE 2
- --------------------------------------------------------------------------------
If you are in agreement with the foregoing, please so indicate by signing and
returning the enclosed copy.
Very truly yours,
THE TURNER CORPORATION
By: /s/ E.T. Gravette, Jr.
------------------------------------
E.T. Gravette, Jr.
Chairman and Chief Executive Officer
Agreed to and accepted as of the above date:
KARL STEINER HOLDING AG
By: /s/ Heinrich Baumann-Steiner
--------------------------------
Heinrich Baumann-Steiner
Chairman
By: /s/ Peter K. Steiner
--------------------------------
Peter K. Steiner
Vice Chairman
-2-
<PAGE> 1
Exhibit 13
FOR IMMEDIATE RELEASE Contact: Terry M. Kuflik
212/229-6379 (phone)
THE TURNER CORPORATION ANNOUNCES MERGER
WITH HOCHTIEF AG
NEW YORK, Aug. 16 -- The Turner Corporation (NYSE: TUR) announced that it
has entered into a merger agreement with HOCHTIEF AG under which it will
acquire all of the outstanding common stock of Turner for $28.625 per share. As
a first step, HOCHTIEF will make a tender offer for all Turner shares. The
Board of Directors of Turner has unanimously approved the merger agreement.
Certain Officers and Directors of Turner, as well as Turner's largest
stockholder EBSPSW Holdings AG, have agreed to tender Turner shares owned by
them, representing in the aggregate approximately 22 percent of the outstanding
voting power of Turner, and to grant HOCHTIEF an option to buy such shares in
accordance with, and subject to, the terms of an agreement among HOCHTIEF and
such shareholders.
With its work completed valued at $6.7 billion last year, HOCHTIEF AG is
Germany's largest construction firm. Roughly 48 percent of the Group's business
is done outside Germany. HOCHTIEF is increasingly involved not only in planning
and building, but also in financing and operating complex infrastructure and
other projects.
Commenting on an offer from HOCHTIEF, Turner Chairman E.T. Gravette, Jr. said,
"HOCHTIEF has the full support of our Board. We are delighted to have such a
strong partner take this interest in Turner and we are confident that together
we will be a powerful combination in the marketplace.
"This bid from HOCHTIEF recognizes the full value of Turner shares and the
strategic importance and potential of Turner as one of America's leading
general contractors. With $6.7 billion of work completed in 1998, HOCHTIEF is
one of the leaders in the worldwide construction industry. Joined with Turner,
which completed more than $4.1 billion in 1998 construction, HOCHTIEF
substantially reinforces its position as a leader on the cutting edge of total
construction project leadership."
Mr. Gravette emphasized the merger with HOCHTIEF will result in a win/win
situation. "The Turner Corporation will continue to operate as an autonomous
subsidiary with no change in U.S.
<PAGE> 2
management. From Turner's perspective, this is a growth-driven transaction, not
a cost-reduction deal. There are no layoffs anticipated for Turner operations
by reason of the merger."
HOCHTIEF's obligation to purchase shares in the offer will be conditioned upon
the tender of shares representing at least two-thirds of the outstanding voting
power of Turner and will be further subject to the satisfaction or waiver of
certain customary conditions, including expiration or termination of the
waiting period under the Hart Scott Rodino Anti-Trust Improvements Act of 1976.
Headquartered in New York City, The Turner Corporation, through Turner
Construction Company and other construction subsidiaries, is one of the
nation's leading general contractors, providing a complete range of
construction and program management services to the building market. Special
emphasis is placed on the commercial, retail, education, pharmaceutical,
healthcare, sports and justice sectors.
With more than sixty percent of Turner Corporation's business coming from
repeat clients, Turner is recognized as an industry leader in providing quality
service in diverse markets. The Company has a strong knowledge of the local
markets in which it operates, providing excellent service to key areas that
offer the greatest potential and highest return.
Operating through 41 offices, Turner has construction projects underway
throughout the United States and abroad. During 1998, The Turner Corporation
completed in excess of $4.1 billion in construction.
HOCHTIEF AG, based in Essen, Germany, has 37,000 employees around the world.
HOCHTIEF's operations in North America have in the past been channeled via its
participating interest in Kitchell Corporation of Phoenix, Arizona. HOCHTIEF
will retain its current holding of 35.46 percent of Kitchell's equity
unchanged. Kitchell primarily operates in the traditional construction and
general contracting business in the South Western United States.
For more information, visit Turner's Website at
http://www.turnerconstruction.com.
The statements contained in this release which are not historical facts may be
forward-looking statements with respect to events, the occurrence of which
involve risks and uncertainties, including without limitation, demand and
competition for these and other risks or uncertainties detailed in the
Company's Securities and Exchange Commission filings.
<PAGE> 1
Exhibit 14
[PAINEWEBBER LETTERHEAD]
[PAINEWEBBER LOGO]
August 13, 1999
Board of Directors
The Turner Corporation
375 Hudson Street
New York, NY 10014
Gentlemen:
The Turner Corporation (the "Company"), Hochtief AG (the "Acquiring
Company") and Beta Acquisition Corp., a wholly-owned subsidiary of the
Acquiring Company (the "Purchaser"), propose to enter into an agreement (the
"Agreement") pursuant to which the Purchaser will make a tender offer (the
"Offer") for all shares of the Company's common stock, par value $1.00 per
share including all shares issuable upon conversion of the Company's Series B,
C, and D Convertible Preferred Stock into common stock (the "Shares"), at a
cash price of $28.625 per Share. The Offer is expected to commence on or about
August 20, 1999. The Agreement also provides that, following consummation of
the Offer, the Purchaser will be merged with and into the Company (the
"Merger"). In the Merger, each Share will be converted into the right to
receive $28.625 per Share in cash.
You have asked us whether or not, in our opinion, the proposed cash
consideration to be received by the shareholders of the Company pursuant to the
Offer and the Merger is fair to such shareholders from a financial point of
view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three years ended December 31,
1998, the Company's Form S-3 registration statement filed on
March 4, 1999 with the Securities Exchange Commission and the
Company's Form 10-Q and the related unaudited financial
information for the six months ended June 30, 1999;
-1-
<PAGE> 2
PaineWebber
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company, furnished to us by the Company;
(3) Conducted discussions with members of senior management of the Company
concerning its businesses and prospects;
(4) Reviewed the historical market prices and trading activity for the
Shares and compared them with that of certain publicly traded
companies which we deemed to be relevant;
(5) Compared the financial position and results of operations of the
Company with that of certain companies which we deemed to be relevant;
(6) Compared the proposed financial terms of the transactions contemplated
by the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
(7) Reviewed a draft Agreement dated August 11, 1999;
(8) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic,
regulatory, market and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information publicly available, supplied or otherwise communicated to us
by or on behalf of the Company, and we have not assumed any responsibility to
independently verify such information. With respect to the financial forecasts
examined by us, we have assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and good faith judgements of
the management of the Company as to the future performance of the Company. We
have also relied upon the assurances of the management of the Company that they
are unaware of any facts that would make the information or financial forecasts
provided to us incomplete or misleading. We have not made any independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company nor have we been furnished with any such evaluations or
appraisals.
This opinion is directed to the Board of Directors of the Company and does
not constitute a recommendation to any shareholder of the Company as to whether
any such shareholder should or should not tender his or her shares in the Offer
or as to how any such shareholder should vote on the Merger. This opinion does
not address the relative merits of the Offer or the Merger and any other
transactions or business strategies discussed by the Board of Directors of the
Company as alternatives to the Offer and the Merger or the decision of the
Board of Directors of the Company with respect to the Offer and the Merger. We
were not requested to, and did not, solicit third party indications of interest
in
-2-
<PAGE> 3
PaineWebber
acquiring all or any portion of the Company. Our opinion is based on
regulatory, economic, monetary and market conditions existing on the date
hereof.
In the ordinary course of business, PaineWebber Incorporated may trade in
the securities of the Company and the Acquiring Company for our own account and
for the accounts of our customers and, accordingly, may at any time hold long
or short positions in such securities.
PaineWebber Incorporated is currently acting as financial advisor to the
Company in connection with the Offer and the Merger and will be receiving a fee
in connection with the rendering of this opinion and upon consummation of the
Offer. In the past, PaineWebber Incorporated and its affiliates have provided
investment banking and other financial services to the Company and have received
fees for rendering these services.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed cash consideration to be received by the shareholders of the
Company pursuant to the Offer and the Merger is fair to such shareholders from
a financial point of view.
This opinion has been prepared for the information of the Board of
Directors of the Company in connection with the Offer and the Merger and shall
not be reproduced, summarized, described or referred to, provided to any person
or otherwise made public or used for any other purpose without the prior
written consent of PaineWebber Incorporated, provided, however, that this
letter may be reproduced in full in a Schedule 14D-9 filed by the Company
related to the Offer.
Very truly yours,
PAINEWEBBER INCORPORATED
/s/ PaineWebber Incorporated
-3-
<PAGE> 1
EXHIBIT 15
[THE TURNER CORPORATION LETTERHEAD]
August 20, 1999
To Our Stockholders:
I am pleased to inform you that The Turner Corporation has entered into an
Agreement and Plan of Merger with HOCHTIEF AG and Beta Acquisition Corp. As
provided for in this agreement, Beta Acquisition Corp. has commenced a tender
offer to purchase all of your shares of Turner common stock for $28.625 per
share in cash. The terms and conditions of the tender offer are set forth in the
enclosed Offer to Purchase. Instructions as to how to tender your shares are set
forth in the Offer to Purchase and the accompanying Letter of Transmittal. The
tender offer is scheduled to expire at 12:00 midnight, New York City time, on
Friday, September 17, 1999.
The tender offer also covers the outstanding convertible preference stock
held by EBSPSW Holding AG for $28.625 per share multiplied by the number of
shares of Turner common stock issuable upon conversion.
If successful, the tender offer will be followed by the merger of Beta
Acquisition Corp. into Turner. In this merger, all non-tendered shares of common
stock will be converted into the right to receive $28.625 per share in cash,
without interest. If you do not tender your shares in the tender offer, you will
have the right to dissent from the merger and receive the "fair value" of your
shares. This amount may be higher or lower than $28.625.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE TENDER OFFER AND THE
MERGER, UNANIMOUSLY DETERMINED THAT THE TENDER OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, TURNER'S STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT THE STOCKHOLDERS ACCEPT THE TENDER OFFER AND TENDER THEIR SHARES PURSUANT
TO THE TENDER OFFER.
In arriving at its recommendations, Turner's board of directors gave
careful consideration to a number of factors described in the enclosed Schedule
14D-9 that has been filed with the Securities and Exchange Commission. These
factors include the opinion of PaineWebber Incorporated, the financial adviser
retained by the board of directors, to the effect that the proposed cash
consideration to be received by the shareholders in the tender offer and merger
is fair to such shareholders from a financial point of view. A copy of the
PaineWebber opinion is attached to the Schedule 14D-9.
In a separate arrangement, certain directors and executive officers of
Turner, as well as Turner's largest shareholder EBSPSW Holding AG, have agreed
to tender their shares and to vote their shares in favor of the merger. These
persons have also granted Beta Acquisition Corp. an option to purchase their
shares at the same cash consideration to be paid in the tender offer and the
merger. These stockholders beneficially own shares representing approximately
23.8% of the outstanding shares, assuming conversion of the preference shares.
The merger opens up tremendous opportunities for both HOCHTIEF and Turner.
HOCHTIEF is a much larger and more broadly-based company than Turner. In
addition to construction, HOCHTIEF is among the world leaders in providing
comprehensive infrastructure engineering design, general construction and
post-construction operating management services. It has an excellent worldwide
reputation as a total project leader.
Your board of directors and management thank you for your loyalty and
support over the years.
Very truly yours,
/s/ E.T. Gravette, Jr.
------------------------------------
E.T. Gravette, Jr.
Chairman and Chief Executive Officer
