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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
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ELJER INDUSTRIES, INC.
(Name of Subject Company)
ELJER INDUSTRIES, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
287 161 103
(CUSIP Number of Class of Securities)
GEORGE W. HANTHORN, ESQ.
VICE PRESIDENT--GENERAL COUNSEL AND SECRETARY
ELJER INDUSTRIES, INC.
17120 DALLAS PARKWAY
DALLAS, TEXAS 75248
(972) 407-2600
(Name, address and telephone number of persons authorized to receive notice and
communications on behalf of person(s) filing statement)
COPY TO:
THOMAS A. ROBERTS, ESQ.
WEIL, GOTSHAL & MANGES LLP
100 CRESCENT COURT, SUITE 1300
DALLAS, TEXAS 75201
(214) 746-7700
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Eljer Industries, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive
offices of the Company is 17120 Dallas Parkway, Dallas, Texas 75248. The title
of the class of equity securities to which this statement relates is the
Company's common stock, par value $1.00 per share (the "Common Stock").
ITEM 2. TENDER OFFER OF BIDDER.
This statement relates to the tender offer by Zurn Acquisition Co., Inc., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of Zurn
Industries, Inc., a Pennsylvania corporation ("Parent"), to purchase all
outstanding shares of Common Stock (each a "Share" and collectively the
"Shares") at a price of $24.00 per Share, net to the seller in cash (the
"Offer Consideration"), on the terms and subject to the conditions set forth
in the Offer to Purchase, dated December 20, 1996 (the "Offer to Purchase")
and in the related Letter of Transmittal (which, together with the Offer to
Purchase and any amendments or supplements thereto, collectively constitute
the "Offer"), copies of which are filed respectively as Exhibits 1 and 2
hereto and are incorporated herein by reference. The Offer is disclosed in a
Tender Offer Statement on Schedule 14D-1, dated December 20, 1996 (the
"Schedule 14D-1"), which was filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules promulgated by the Commission thereunder.
The Offer is being made by Purchaser pursuant to the Agreement and Plan of
Merger, dated December 14, 1996 (the "Merger Agreement"), among Parent,
Purchaser and the Company. The Merger Agreement is filed as Exhibit 3 hereto
and is incorporated herein by reference.
As set forth in the Schedule 14D-1, the address of the principal executive
offices of each of the Purchaser and Parent is One Zurn Place, Erie,
Pennsylvania 16505.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
(b)(1) Certain Material Contracts, Agreements, Arrangements or
Understandings and any Actual or Potential Conflicts of Interest Between (A)
the Company or its Affiliates and (B) the Company or its Executive Officers,
Directors or Affiliates.
Each of the material contracts, agreements, arrangements and understandings
between the Company or its affiliates and the Company and its executive
officers, directors or affiliates is described below or in the Company's
Information Statement (as defined below) in the Sections entitled "SECURITY
OWNERSHIP OF MANAGEMENT," "BOARD OF DIRECTORS AND EXECUTIVE OFFICERS--
Directors' Fees and Compensation," and "EXECUTIVE COMPENSATION AND OTHER
MATTERS." The Company's Information Statement, as mailed to the Company's
stockholders on December 20, 1996 (the "Information Statement"), is attached
hereto as Schedule I and is incorporated herein by reference. In addition,
certain contracts, agreements, arrangements and understandings relating to the
Company and/or the Company's directors, executive officers and affiliates are
contained in the Merger Agreement and are described below under "The Merger
Agreement."
Interests of Executive Officers and Directors under Certain Stock and Stock-
Based Incentive Plans of the Company
Option and Phantom Stock Unit Grants. On February 20, 1996, the Company
granted options to purchase a total of 115,800 Shares to its executive
officers under its Long-Term Executive Incentive Compensation Plan (the
"LTIP"). Of this total, options to purchase 30,000 Shares were granted to
Scott G. Arbuckle, options to
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purchase 15,800 Shares were granted to James A. Harris, options to purchase
9,900 Shares were granted to James F. Thomason, options to purchase 16,700
Shares were granted to George W. Hanthorn and options to purchase 4,000 Shares
were granted to G. Michael Morrell. The per Share exercise price of each of
these options is $9.4375.
In addition to the grants described above, each of Messrs. Arbuckle, Harris,
Thomason, Hanthorn and Morrell holds options and/or restricted Shares granted
previously under the LTIP in amounts described in the Information Statement
attached hereto as Schedule I.
During 1995 and 1996, the Company granted a total of 367,000 phantom stock
units to its executive officers under its 1995 Long Term Incentive Plan (the
"Incentive Plan"). Of this total, 115,000 units were granted to Scott G.
Arbuckle, 44,000 units were granted to James A. Harris, 29,000 units were
granted to James F. Thomason, 33,000 units were granted to George W. Hanthorn
and 35,000 units were granted to G. Michael Morrell. The initial value
assigned to each phantom stock unit by the Board of Directors on the date of
grant was $5.75.
Certain Change of Control Provisions. The LTIP and the Incentive Plan
provide that in the event that any person becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 25% or more
of the combined voting power of the Company's then outstanding securities (a
"Change of Control"), the options and phantom stock units then outstanding
under the LTIP or the Incentive Plan, as the case may be, shall become fully
vested and exercisable. In addition, upon the occurrence of a Change of
Control, all restrictions on restricted Shares granted pursuant to the LTIP
will lapse. Accordingly, upon consummation of the Offer, each outstanding
option and phantom stock unit will become fully vested and exercisable, and
each outstanding restricted Share will become free of all restrictions imposed
on such Shares. The Merger Agreement provides that at the effective time of
the Merger (the "Effective Time"), each option and phantom stock unit then
outstanding under the LTIP or the Incentive Plan, as the case may be, will be
cancelled and the holder will receive in settlement thereof an amount in cash
equal to (i) in the case of an option, $24.00 less the exercise price of such
option, and (ii) in the case of a phantom stock unit, $24.00 less the initial
value assigned to such unit by the Board of Directors on the date of grant. In
addition, each outstanding restricted Share will, pursuant to the Merger
Agreement, be entitled to receive at the Effective Time $24.00 in cash upon
conversion of such Shares pursuant to the Merger.
(b)(2) Certain Material Contracts, Agreements, Arrangements or
Understandings and any Actual or Potential Conflicts of Interest Between (A)
the Company or its Affiliates and (B) Parent or Purchaser or any of their
respective Executive Officers, Directors or Affiliates.
Except as described herein, to the knowledge of the Company, as of the date
hereof, there are no material contracts, agreements, arrangements or
understandings, or any potential or actual conflicts of interest between the
Company or its affiliates and Parent or Purchaser and their respective
executive officers, directors and affiliates.
The Merger Agreement
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the Merger Agreement, a copy
of which is filed as Exhibit 3 hereto and incorporated herein by reference.
The Offer. The Merger Agreement provides for the commencement of the Offer.
Without the prior written consent of the Company, Purchaser has agreed not to
(and Parent has agreed to cause Purchaser not to) (i) decrease or change the
form of the Offer Consideration or decrease the number of Shares sought
pursuant to the Offer, (ii) change the conditions to the Offer, (iii) impose
additional conditions to the Offer, (iv) extend the Expiration Date (as
defined in the Merger Agreement) (except (A) as required by applicable law,
(B) that Purchaser may extend the Expiration Date for up to 20 business days
after the initial Expiration Date, and (C) that if any condition to the Offer
is not satisfied or waived, Purchaser shall extend the Expiration Date for one
or more periods not exceeding 60 calendar days (or, if required by the Company
in its sole discretion, 120 calendar days) in the aggregate), (v) waive the
condition that there shall be validly tendered and not withdrawn prior to
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the expiration date of the Offer that number of Shares which constitutes at
least 50.1% of the Shares outstanding on a fully diluted basis (as defined in
the Merger Agreement), or (vi) amend any term of the Offer in any manner
adverse to the Stockholders; provided, however, that, except as set forth
above and subject to applicable legal requirements, Purchaser may waive any
other condition to the Offer in its sole discretion; and provided further that
the Offer may be extended in connection with an increase in the consideration
to be paid pursuant to the Offer to comply with applicable rules and
regulations of the Commission.
Board Representation. The Merger Agreement provides that promptly upon the
purchase by Purchaser pursuant to the Offer of such number of Shares which
represents at least 50.1% of the outstanding Shares (on a fully diluted
basis), and from time to time thereafter, (i) Parent shall be entitled to
designate such number of directors, rounded up to the next whole number as
will give Parent representation on the Board of Directors (the "Board" or the
"Board of Directors") equal to the product of (x) the number of directors on
the Board (giving effect to any increase in the number of directors pursuant
to the Merger Agreement) and (y) the percentage that such number of Shares so
purchased bears to the aggregate number of Shares outstanding (such number
being the "Board Percentage"), and (ii) the Company will, upon request by
Parent, promptly satisfy the Board Percentage by (x) increasing the size of
the Board or (y) using reasonable efforts to secure the resignations of such
number of directors as is necessary to enable Parent's designees to be elected
to the Board and shall use its best efforts to cause Parent's designees
promptly to be so elected, subject in all instances to compliance with Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Following the
election or appointment of Parent's designees pursuant to the Merger Agreement
and prior to the Effective Time, any amendment or termination of the Merger
Agreement, extension for the performance or waiver of the obligations or other
acts of Parent or Purchaser or waiver of the Company's rights thereunder shall
require the concurrence of a majority of the directors of the Company then in
office who are directors on the date of the Merger Agreement and who voted to
approve the Merger Agreement. The Company is today mailing to the Stockholders
a copy of an Information Statement prepared in accordance with Rule 14f-1
promulgated under the Exchange Act, relating to the possible designation by
Parent, pursuant to the Merger Agreement, of certain persons to be appointed
to the Board other than at a meeting of the Stockholders.
Consideration to be Paid in the Merger. The Merger Agreement provides that,
upon the terms and subject to the conditions set forth in the Merger Agreement
and in accordance with the Delaware General Corporation Law (the "DGCL"),
Purchaser will be merged with and into the Company at the Effective Time. In
the Merger, each Share issued and outstanding immediately prior to the
Effective Time (excluding Shares owned, directly or indirectly, by the Company
or any of its wholly owned subsidiaries or Shares owned by Parent, Purchaser
or any other wholly owned subsidiary of Parent and Dissenting Shares (as
defined in the Merger Agreement)) will be converted into the right to receive
$24.00 per share, payable to the holder thereof without any interest thereon,
less any required withholding taxes (the "Merger Consideration"), upon
surrender and exchange of a certificate representing such Shares. Each share
of the capital stock of Purchaser issued and outstanding immediately prior to
the Effective Time will be converted into and become one fully paid and
nonassessable share of common stock, par value $1.00 per share, of the
Surviving Corporation (as defined in the Merger Agreement), which will
thereupon become a wholly owned subsidiary of Parent. Each Share and all other
shares of capital stock of the Company that are owned by the Company or any
subsidiary of the Company and all Shares owned by Parent, Purchaser or any
other subsidiary of Parent shall be cancelled and retired and shall cease to
exist and no consideration shall be delivered or deliverable in exchange
therefor. The Merger will become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware or at such time
thereafter as is provided in the certificate of merger.
Company Stock Options. The Merger Agreement provides that, at the Effective
Time, each holder of (i) a then-outstanding option to purchase shares under
the LTIP, whether or not then exercisable (the "Options"), shall, in
settlement thereof, receive for each Share subject to such Option an amount
(subject to any applicable withholding tax) in cash equal to the difference
between the Merger Consideration and the per Share exercise price of such
Option to the extent such difference is a positive number (such amount being
hereinafter referred to as the "Option Consideration"), (ii) any then-
outstanding shares of restricted common stock awarded under
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the LTIP ("Restricted Shares") shall, in settlement thereof, receive for each
Restricted Share an amount (subject to any applicable withholding tax) in cash
equal to the Merger Consideration (the "Restricted Share Consideration") and
(iii) any then-outstanding phantom stock unit under the Incentive Plan whether
or not then exercisable (the "Phantom Rights"), shall, in settlement thereof,
receive for each Phantom Right an amount (subject to applicable withholding
tax) in cash equal to the difference between the Merger Consideration and the
Initial Value (as defined in the Incentive Plan) of such Phantom Right to the
extent such difference is a positive number (such amount being hereinafter
referred to as the "Phantom Right Consideration"); provided, however, that
with respect to any person subject to Section 16(a) of the Exchange Act, any
such amount shall be paid as soon as practicable after the first date payment
can be made without liability to such person under Section 16(b) of the
Exchange Act. Upon receipt of the Option Consideration, the Restricted Share
Consideration or the Phantom Right Consideration, the Option or the Phantom
Right, as the case may be, shall be cancelled and the Restricted Shares shall
be surrendered and cancelled. The surrender of an Option, a Restricted Share
or a Phantom Right to the Company in exchange for the Option Consideration,
the Restricted Share Consideration or the Phantom Right Consideration shall be
deemed a release of any and all rights the holder had or may have had in
respect of such Option, Restricted Share or Phantom Right. Prior to the
Effective Time, the Company has agreed to use its reasonable efforts to obtain
all necessary consents or releases from holders of Options, Restricted Shares
or Phantom Rights and to take all such other lawful action as may be necessary
to give effect to the transactions contemplated by the foregoing described
provisions of the Merger Agreement (except for any such action that may
require the approval of the Company's stockholders). Except as otherwise
agreed to by the parties, (i) the LTIP and the Incentive Plan shall terminate
as of the Effective Time and the provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any subsidiary thereof, shall
be canceled as of the Effective Time, and (ii) the Company shall use
reasonable best efforts to assure that following the Effective Time no
participant in the LTIP, the Incentive Plan or other plans, programs or
arrangements shall have any right thereunder to acquire equity securities of
the Company, the Surviving Corporation or any subsidiary thereof.
Stockholder Meeting. The Merger Agreement provides that the Company will, as
soon as practicable following the acceptance for payment of and payment for
Shares by Purchaser in the Offer, duly call, give notice of, convene and hold
a meeting of its Stockholders for the purpose of approving the Merger
Agreement and the transactions contemplated thereby. In connection with such
meeting, if required by applicable law to consummate the Merger, the Company,
in consultation with Parent, shall prepare and file with the Commission a
preliminary proxy statement, together with a form of proxy or information
statement (the "Preliminary Proxy Statement"). The Company has agreed to use
its reasonable best efforts to respond to all Commission comments with respect
to the Preliminary Proxy Statement and, subject to compliance with the
Commission's rules and regulations, to cause such proxy statement to be mailed
to the Stockholders at the earliest practicable date.
If Purchaser, or any other wholly owned subsidiary of Parent, acquires at
least 90% of the outstanding Shares in the Offer, at the request of Purchaser,
all parties to the Merger Agreement will take all necessary actions to cause
the Merger to become effective as soon as practicable after the expiration of
the Offer, without a meeting of the Stockholders, in accordance with the
provisions of the DGCL.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties. These include representations
and warranties by the Company with respect to, among other things, (i)
organization, standing and power, (ii) capital structure, (iii) authority, no
violations, consents and approvals, (iv) Commission documents, (v) information
supplied, (vi) compliance with applicable laws, (vii) litigation, (viii)
taxes, (ix) pension and benefit plans and ERISA, (x) absence of certain
changes and events, (xi) opinion of financial advisor, (xii) vote required,
(xiii) labor matters, (xiv) intangible property, (xv) environmental matters,
(xvi) certain defaults, (xvii) brokerage fees and commissions and (xviii) full
disclosure.
Parent and Purchaser also have made certain representations and warranties
with respect to, among other things, (i) organization, standing and power,
(ii) authority, no violations, consents and approvals, (iii) information
supplied, (iv) interim operations of Purchaser and (v) financing.
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Conduct of Business Pending the Merger. The Company has agreed that during
the period from the date of the Merger Agreement and continuing until the
earlier of (i) such time as Parent or Purchaser obtains majority
representation on the Board or (ii) the Effective Time (except as expressly
contemplated or permitted by the Merger Agreement or by the Bankruptcy Plan
(as defined in the Merger Agreement), or consented to by Parent in writing)
the Company and its subsidiaries will conduct their businesses in the usual,
regular and ordinary course in substantially the same manner as previously
conducted, and will use reasonable efforts to preserve intact its present
business organizations, keep available the services of its current officers
and employees and preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its goodwill and
ongoing business will not be impaired in any material respect at the Effective
Time. The Company has further agreed that during this period it will not, nor
will it permit any of its subsidiaries to: (i) declare or pay any dividends on
or make other distributions in respect of any of its capital stock, other than
cash dividends or distributions paid by a wholly owned subsidiary of the
Company to the Company or another wholly owned subsidiary of the Company; (ii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (iii) repurchase or otherwise
acquire, or permit any subsidiary to purchase or otherwise acquire, any shares
of its capital stock, except as provided in the Merger Agreement; (iv) except
pursuant to the exercise of Options, grant any options, warrants or rights to
purchase Shares or amend or reprice any Option or the LTIP or grant any
Phantom Rights or stock appreciation rights; (v) issue, deliver or sell, or
authorize or propose to issue, deliver or sell, any shares of its capital
stock of any class or series, any Company voting debt or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Company voting debt or convertible securities other than issuances of
Shares as permitted by the Merger Agreement; (vi) amend its or any
subsidiary's certificate of incorporation or bylaws (or comparable
organizational documents); (vii) acquire or agree to acquire by merger or
consolidation or purchase a substantial equity interest in or substantial
portion of assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof;
(viii) sell, lease, encumber or otherwise dispose of, or agree to sell, lease,
encumber or otherwise dispose of, any of its assets except for dispositions in
the ordinary course of business consistent with past practices which are not
material, individually or in the aggregate, to the Company and its
subsidiaries taken as a whole; (ix) authorize, recommend, propose or announce
an intention to adopt a plan of complete or partial liquidation or dissolution
of the Company or any of its subsidiaries; (x) voluntarily take or agree or
commit voluntarily to take any action that would make untrue in any material
respect any of the representations or warranties contained in the Merger
Agreement or cause any of the Company's covenants or conditions to the Merger
to not be satisfied in all material respects; (xi) (A) except for normal
increases to officers and key employees consistent with past practice, grant
any increases in the compensation of any of its directors, officers or key
employees, (B) pay or agree to pay any pension, retirement allowance or other
employee benefit not required or contemplated by any existing Company ERISA
Plans or Company Benefit Arrangements (both terms as defined in the Merger
Agreement) as in effect on the date of the Merger Agreement to any such
director, officer or key employee, whether past or present, (C) enter into or
materially amend any employment, severance or termination agreement with any
such director, officer or key employee, or (D) except as may be required to
comply with applicable law, become obligated under any Company ERISA Plan or
Company Benefit Arrangements which was not in existence on the date of the
Merger Agreement, or amend any such plan or arrangement in existence on the
date of the Merger Agreement if such amendment would have the effect of
enhancing any benefits thereunder; (xii) except for borrowings in the ordinary
course of business under its existing credit facilities or arrangements,
assume or incur indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its subsidiaries or
guarantee any debt securities of others or enter into any lease or create any
mortgages, liens, security interests or other encumbrances on the property of
the Company or any of its subsidiaries in connection with any indebtedness
thereof, or enter into any agreement or arrangement to maintain the financial
condition of another person; (xiii) take any action, other than in the
ordinary course of business consistent with past practice or as required by
the Commission or by law, to effect any material change in any of its
accounting policies, procedures and practices; or (xiv) make or authorize or
permit any of its subsidiaries to make or authorize any capital expenditures
in excess of $5,000,000 that is not included in the capital budget furnished
to Parent. In addition, the Company has agreed to confer on a regular and
frequent basis with Parent,
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report on operational matters, promptly advise Parent of any change or event
having, or which could reasonably be expected to have, a Material Adverse
Effect (as defined in the Merger Agreement) on the Company, and promptly
furnish Parent (or its counsel) with copies of all filings made by the Company
with the Commission or any other state or federal governmental entity in
connection with the Merger Agreement and the transactions contemplated
thereby.
Other Agreements. The Company, Purchaser and Parent have agreed to take all
reasonable actions necessary to comply promptly with all legal requirements
that may be imposed on such party with respect to the Offer, the Merger and
the transactions contemplated by the Merger Agreement (including furnishing
all information required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and in connection with approvals of
or filings with any governmental entity) and promptly to cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or their subsidiaries in connection with the Offer,
the Merger and the transactions contemplated by the Merger Agreement. Without
limiting the generality or effect of the foregoing, each of the Company,
Parent and Purchaser will, and will cause its subsidiaries to, take all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any governmental entity or other public or private third party required to
be obtained or made by the Company, Parent or any of their subsidiaries in
connection with the Offer, the Merger, the Merger Agreement or the taking of
any action contemplated thereby; provided, however, that Parent need not agree
with the Department of Justice or any other governmental entity to hold
separate, sell or otherwise dispose of any subsidiary of Parent or the Company
or assets or properties of any of the foregoing, in each case, which Parent
determines, in good faith, would materially affect the value of the
acquisition as a whole to Parent.
No Solicitation. The Merger Agreement provides that from and after the date
of the Merger Agreement until the termination of the Merger Agreement, the
Company may not, and may not permit any of its subsidiaries, or any of its or
their officers, directors, employees, representatives, agents or affiliates,
directly or indirectly, to initiate, solicit or facilitate the making of any
proposal that constitutes an Acquisition Proposal (as defined below), or to
enter into or maintain or continue discussions or negotiate with any person or
entity in respect of an Acquisition Proposal; provided, however, that nothing
contained in the Merger Agreement shall prohibit the Company from (i)
furnishing information to, or engaging in discussions or negotiations with, or
agreeing to or endorsing an Acquisition Proposal from, any person or entity
that makes an unsolicited Acquisition Proposal if, and only to the extent
that, (A) the Board, after consultation with legal counsel (who may be the
Company's regularly engaged legal counsel), determines in good faith that such
action is necessary for the Board to comply with its fiduciary duties under
applicable law and (B) the Company (x) provides prior notice to Parent to the
effect that it is taking such action and (y) receives from such person or
entity an executed confidentiality agreement in reasonably customary form or
(ii) failing to make, withdrawing, modifying or amending its recommendation if
there exists an Acquisition Proposal and the Board, after consultation with
legal counsel as aforesaid, determines that such action is necessary for the
Board to comply with its fiduciary duties under applicable law. The Company
must promptly notify Parent after receipt of any Acquisition Proposal or any
request for nonpublic information relating to the Company or any subsidiary or
for access to the properties, books or records of the Company or any
subsidiary by any person who has informed the Company that such person is
considering making, or has made, an Acquisition Proposal, and the Company will
keep Parent informed in reasonable detail of the status and details of any
such Acquisition Proposal. For purposes of the Merger Agreement, "Acquisition
Proposal" means any bona fide proposal with respect to a merger,
consolidation, share exchange or similar transaction involving the Company or
any subsidiary of the Company, or any purchase of all or any significant
portion of the assets of the Company or any subsidiary of the Company, or any
significant equity interest in the Company or any subsidiary of the Company,
other than the transactions contemplated by the Merger Agreement. The Company
is not prohibited from taking and disclosing to the Stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from
making any disclosure to the Stockholders which the Board, after consultation
with legal counsel (who may be the Company's regularly engaged legal counsel),
determines in good faith is required under applicable law.
Fees and Expenses. The Merger Agreement provides that, except as described
below, all costs and expenses incurred in connection with the Merger Agreement
and the transactions contemplated by the Merger Agreement
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will be paid by the party incurring the expenses. The Company has agreed to
pay Purchaser a fee in immediately available funds equal to $8,500,000 upon
termination of the Merger Agreement for any of the following reasons (each a
"Trigger Event"): (i) the Company shall have entered into a definitive
agreement with respect to any Acquisition Proposal other than the transactions
contemplated by the Merger Agreement; or (ii) the Board shall have withdrawn,
or modified or amended in a manner materially adverse to Parent or Purchaser,
its approval or recommendation of the Offer, the Merger or the Merger
Agreement. Also, the costs incurred in connection with printing and mailing
proxy materials to the Stockholders of the Company will be borne equally by
the Company and Parent.
Employee Benefits. From and after the Effective Time, Parent has agreed to
cause the Surviving Corporation to honor and perform all existing severance
agreements between the Company and certain of its officers. In addition, the
Company has agreed to make certain amendments to its existing Change-in-
Control Severance Plan for salaried, non-contract, non-union employees of the
Company. The Merger Agreement also provides that Parent will cause the
Surviving Corporation to pay Scott G. Arbuckle, Chairman of the Board and
Chief Executive Officer of the Company, on the Closing Date (as defined in the
Merger Agreement) all amounts that will be owing to him under his employment
agreement and executive severance agreement as a result of the transactions
contemplated by the Merger Agreement.
Indemnification; Directors' and Officers' Insurance. The Merger Agreement
provides that the Company shall, and from and after the Effective Time, the
Surviving Corporation shall, indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date of the Merger Agreement
or who becomes prior to the Effective Time, an officer or director of the
Company or any of its subsidiaries (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses (including reasonable attorneys' fees
and expenses), liabilities or judgments or amounts that are paid in settlement
with the approval of the indemnifying party (which approval shall not be
unreasonably withheld) of or in connection with any threatened or actual
claim, action, suit, proceeding or investigation based in whole or in part on
or arising in whole or in part out of the fact that such person is or was a
director or officer of the Company or any of its subsidiaries whether
pertaining to any matter existing or occurring at or prior to the Effective
Time and whether asserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities"), including all Indemnified Liabilities based
in whole or in part on, or arising in whole or in part out of, or pertaining
to the Merger Agreement or the transactions contemplated thereby, in each case
to the full extent a corporation is permitted under the DGCL to indemnify its
own directors or officers as the case may be (and Parent and the Surviving
Corporation, as the case may be, will pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
full extent permitted by law). Without limiting the foregoing, in the event
any such claim, action, suit, proceeding or investigation is brought against
any Indemnified Parties (whether arising before or after the Effective Time),
(i) the Indemnified Parties may retain counsel satisfactory to them and the
Company (or to them and the Surviving Corporation after the Effective Time)
and the Company (or after the Effective Time, the Surviving Corporation) shall
pay all fees and expenses of such counsel for the Indemnified Parties promptly
as statements therefor are received; and (ii) the Company (or after the
Effective Time, the Surviving Corporation) will use all reasonable efforts to
assist in the vigorous defense of any such matter, provided that neither the
Company nor the Surviving Corporation shall be liable for any settlement
effected without its prior written consent (which consent shall not
unreasonably be withheld). Any Indemnified Party wishing to claim
indemnification under the Merger Agreement, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Company (or after
the Effective Time, the Surviving Corporation) (but the failure so to notify
shall not relieve a party from any liability which it may have under the
Merger Agreement except to the extent such failure prejudices such party), and
shall deliver to the Company (or after the Effective Time, the Surviving
Corporation) the undertaking contemplated by Section 145(e) of the DGCL. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to each such matter unless there is, under applicable standards
of professional conduct, a conflict on any significant issue between the
positions of any two or more Indemnified Parties. All rights to
indemnification under the Merger Agreement, including provisions relating to
advances of expenses incurred in defense of any action or suit, existing in
favor of the Indemnified Parties with respect to matters occurring through the
Effective Time, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the
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Effective Time; provided, however, that all such rights to indemnification in
respect of any Indemnified Liabilities asserted or made within such period
shall continue until the disposition of such Indemnified Liabilities.
The Merger Agreement provides that for a period of six years following the
Effective Time, Parent shall cause the Surviving Corporation to keep in effect
the provisions in its Certificate of Incorporation and Bylaws as of the date
of the Merger Agreement providing for exculpation of director and officer
liability and indemnification to the fullest extent provided by the DGCL,
which provisions shall not be amended, repealed or otherwise modified except
as required by applicable law or except for amendments or modifications that
would not adversely affect the rights thereunder of any Indemnified Party.
For a period of six years after the Effective Time, the Surviving
Corporation will cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company and its
subsidiaries (provided that Parent may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are
no less advantageous in any material respect to the Indemnified Parties) with
respect to matters arising before the Effective Time, provided that Parent
shall not be required to pay an annual premium for such insurance in excess of
200% of the last annual premium paid by the Company prior to the date of the
Merger Agreement, but in such case shall purchase as much coverage as possible
for such amount.
The indemnification and directors' and officers' insurance provisions of the
Merger Agreement are intended to be for the benefit of, and are enforceable
by, each Indemnified Party, and each such Indemnified Party's heirs and his
personal representatives and are binding on all successors and assigns of
Purchaser, the Company and the Surviving Corporation.
Conditions to the Merger. Pursuant to the Merger Agreement, the obligation
of each party to effect the Merger is subject to the satisfaction, prior to
the Closing Date, of the following conditions: (i) the Merger Agreement and
the Merger shall have been adopted by the affirmative vote of the holders of a
majority of the Shares entitled to vote thereon if such vote is required by
applicable law; provided, that Parent and Purchaser must vote all Shares
purchased pursuant to the Offer in favor of the Merger, (ii) the waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
shall have terminated or shall have expired, (iii) no temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect,
provided, however, that prior to invoking this condition, the party so
invoking this condition shall have used its commercially reasonable efforts to
have any such Injunction vacated, and (iv) Purchaser shall have accepted for
payment and paid for all Shares validly tendered in the Offer and not
withdrawn, provided, however, that, neither Parent nor Purchaser may invoke
this condition if Purchaser has failed to purchase Shares so tendered and not
withdrawn in violation of the terms of the Merger Agreement or the Offer.
The obligations of Parent and Purchaser to effect the Merger are subject to
the satisfaction of the following conditions, any or all of which may be
waived in whole or in part by Parent and Purchaser: (i) the Company shall have
performed in all material respects all obligations required to be performed by
it under the Merger Agreement on or before the earlier of (i) such time as
Parent's designees shall constitute at least a majority of the Company's Board
pursuant to the Merger Agreement and (ii) the Closing Date; provided, however,
that no failure by the Company to have so performed in all material respects
any such obligation shall constitute a failure of satisfaction of the
foregoing condition where the Company's failure of performance occurred, and
was actually known to Parent, at or prior to the time Parent, Purchaser or any
of their affiliates accepted for payment any Shares pursuant to the Offer.
The obligation of the Company to effect the Merger is subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by the Company: (i) the representations and warranties of
Parent and Purchaser set forth in the Merger Agreement shall be true and
correct in all material respects as of the date of the Merger Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date; and (ii) Parent and Purchaser shall have performed in all material
respects all obligations required to be performed by them under the Merger
Agreement on or prior to the Closing Date.
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Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company or Parent, by: (i) mutual written consent of the
Company and Parent, or by mutual action of their respective boards of
directors; (ii) the Company, if Purchaser fails to commence the Offer within
five business days following the date of the initial public announcement of
the Offer; (iii) either the Company or Parent, so long as such party has not
materially breached its obligations under the Merger Agreement, if the Merger
is not consummated on or before May 15, 1997; provided, that such right to
terminate the Merger Agreement is not 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 Merger to occur on or before such date; (iv)
the Company or Parent in the event that a Trigger Event has occurred, provided
that the Company's right to terminate the Merger Agreement shall be available
only if it has paid Purchaser the fee payable upon the occurrence of a Trigger
Event under the Merger Agreement; (v) Parent, if the Offer expires or is
withdrawn or terminated in accordance with the terms and conditions thereof
without any Shares being purchased by Purchaser thereunder by reason of the
failure to satisfy any condition to the Offer; (vi) the Company, if the Offer
shall have expired or have been withdrawn or terminated without any Shares
being purchased by Purchaser on or prior to the 60th (or, if extended as
contemplated by the Merger Agreement, the 120th) day after the date of
commencement of the Offer; (vii) the Company, if Parent or Purchaser
materially breaches any of its respective representations and warranties or
covenants contained in the Merger Agreement; or (viii) either the Company or
Parent, if any permanent injunction or other order of a court of competent
authority preventing the consummation of the Merger shall have become final
and nonappealable. In the event of termination of the Merger Agreement by
either the Company or Parent as provided therein, the Merger Agreement shall
forthwith become void and there shall be no liability or obligation on the
part of Parent, Purchaser or the Company, or their respective affiliates,
officers, directors or shareholders, except: (i) with respect to (A) the
Confidentiality Agreement (as defined in the Merger Agreement), and (B) the
termination fee obligation of the Company described above, (ii) to the extent
that such termination results from the intentional or willful breach by a
party thereto of any of its representations or warranties, or any of its
covenants or agreements as set forth in the Merger Agreement, and (iii) with
respect to Parent and Purchaser, to the extent that such termination results
from Parent and Purchaser not having sufficient cash on hand or financing
resources in an aggregate amount sufficient to enable Parent and Purchaser to
pay all amounts specified in the Merger Agreement.
Amendment. Subject to applicable law and the Merger Agreement, the Merger
Agreement may be amended, modified or supplemented only by written agreement
of Parent, Purchaser and the Company at any time prior to the Effective Time
with respect to any of the terms contained therein; provided, however, that
after the Merger Agreement is approved by the Stockholders, no such amendment
or modification shall reduce the amount or change the form of consideration to
be delivered to the Stockholders or adversely affect the rights of the
Stockholders.
Assignment. Neither the Merger Agreement nor any of the rights, interests or
obligations thereunder may be assigned or delegated by any of the parties
thereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Purchaser may assign and delegate,
in its sole discretion, all (but not less than all) of its rights, interests
and obligations thereunder to any newly-formed direct or indirect wholly owned
subsidiary of Parent formed solely for the purpose of engaging in the
transactions contemplated by the Merger Agreement and not engaged in any
business activities or conducting any operations other than in connection with
the transactions contemplated thereby.
Timing. The exact timing and details for the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Purchaser pursuant to the Offer. Although Purchaser has agreed to
cause the Merger to be consummated on the terms set forth above, there can be
no assurance as to the timing of the Merger.
Delaware Law. The Board has approved the Merger Agreement and the
transactions contemplated by it, including the Offer and the Merger, for
purposes of Section 203 of the DGCL. Accordingly, the restrictions of Section
203 do not apply to the transactions contemplated by the Offer or the Merger
Agreement. See Section 15.
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The Rights Agreement
The Company and Harris Trust and Savings Bank (the "Rights Agent") are
parties to a Rights Agreement dated as of April 14, 1989 and amended on July
31, 1989, January 4, 1990, and November 5, 1991 (as amended, the "Rights
Agreement"). Pursuant to the Rights Agreement, on April 14, 1989 (the "Record
Date"), the Board of Directors of the Company declared and paid a dividend of
one common stock purchase right (a "Right") for each Share outstanding at the
close of business on such date. Except as set forth below, each Right, when it
becomes exercisable, entitles the registered holder to purchase from the
Company one Share at a purchase price of $111.00 (the "Purchase Price"),
subject to any adjustments which have been made prior to the date hereof and
to any adjustments which may be made subsequent to the date hereof.
The following is a summary of the material terms of the Rights Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the Rights Agreement. This
summary is further qualified by certain amendments (also described below) to
the Rights Agreement effected in connection with the execution of the Merger
Agreement and the transactions contemplated thereby (including the Offer and
the Merger). A copy of the Rights Agreement and the amendments thereto
described in the preceding sentence are filed as Exhibits 5 and 6 hereto,
respectively, and are incorporated herein by reference.
Until the earlier to occur of (i) the tenth day after the first date of
public announcement by the Company or an Acquiring Person (as hereinafter
defined) that an Acquiring Person has become such (a "Shares Acquisition
Date") or (ii) the tenth business day (or such later date as may be determined
by action of the Board of Directors prior to such time as any person becomes
an Acquiring Person) after the date of the commencement by any Person (other
than the Company, any subsidiary of the Company, any employee benefit plan of
the Company or any subsidiary of the Company, or any entity holding Shares for
or pursuant to the terms of any such plan) of, or the first public
announcement of the intention of any person (other than the Company, any
subsidiary of the Company, any employee benefit plan of the Company or any
subsidiary of the Company, or any entity holding Shares for or pursuant to the
terms of any such plan) to commence, a tender offer or exchange offer the
consummation of which would result in any person becoming the beneficial owner
of shares of Common Stock aggregating, in the case of any person who or which
is an Existing 15% Holder (as hereinafter defined), the Increased Percentage
(as hereinafter defined) or more, or, in the case of any other person, 15% or
more, of the then outstanding shares of Common Stock (the earlier of (i) or
(ii) being the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Stock certificate outstanding as of the Record
Date, by such Common Stock certificate.
"Acquiring Person" means any person who or which, together with all
affiliates and associates of such person, (x) was the beneficial owner as of
November 5, 1991 of 15% or more of the shares of Common Stock then outstanding
(an "Existing 15% Holder") and thereafter the beneficial owner of a percentage
of the shares of Common Stock then outstanding equal to or greater than the
percentage of shares of Common Stock beneficially owned by such Existing 15%
Holder, together with all affiliates and associates of such Existing 15%
Holder, as of November 5, 1991, plus 1% (the "Increased Percentage"), or (y)
is not an Existing 15% Holder but is the beneficial owner of 15% or more of
the shares of Common Stock then outstanding, but in any case shall not include
(i) the Company, (ii) any subsidiary of the Company and (iii) any employee
benefit plan of the Company or any subsidiary of the Company or any entity
holding shares of Common Stock for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, no person shall become an "Acquiring Person" as
the result of an acquisition of shares of Common Stock by the Company which,
by reducing the number of shares of Common Stock outstanding, increases the
proportionate number of shares of Common Stock beneficially owned to, in the
case of a person who or which is an Existing 15% Holder, a percentage equal to
or greater than the Increased Percentage or, in the case of any other Person,
15% or more of the shares of Common Stock then outstanding; provided, however,
that if a person, other than those persons referred to in clause (i), (ii) or
(iii) above, shall become the beneficial owner of, in the case of a person who
or which is an Existing 15% Holder, a percentage of the shares of Common Stock
then outstanding equal to or greater than the Increased Percentage or, in the
case of any other Person, 15% or more of the shares of Common Stock then
outstanding, by reason of
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Common Stock purchases by the Company and shall, after such purchases by the
Company, become the beneficial owner of any additional shares of Common Stock,
then such Person shall be deemed to be an "Acquiring Person."
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred only with the Common Stock. Until the Distribution Date
(or the earlier redemption or expiration of the Rights), new Common Stock
certificates issued after the Record Date, upon transfer or new issuance of
shares of Common Stock, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or the earlier redemption
or expiration of the Rights), the surrender for transfer of any certificates
for shares of Common Stock, outstanding as of the Record Date, even without
such notation, will also constitute the transfer of the Rights associated with
the shares of Common Stock represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Rights Certificates") will be mailed to holders of record of the
shares of Common Stock as of the close of business on the Distribution Date
and such separate Right Certificates alone will evidence the Rights. Each
share of Common Stock issued after the Distribution Date and prior to the
earlier of the redemption or expiration of the Rights pursuant to exercise of
any option, warrant, right or conversion privilege contained in any option,
warrant, right or convertible security issued by the Company prior to the
Distribution Date (other that the Rights) shall also include the right to
receive a Right (unless the Board of Directors provides to the contrary at the
time of issuance of any such option, warrant, right or convertible security)
and Rights Certificates evidencing such Rights shall be issued at the time of
issuance of such shares of Common Stock.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on May 1, 1999 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a
stock dividend on, or a subdivision, combination or reclassification of, the
Common Stock, (ii) upon the grant to holders of the shares of Common Stock of
certain rights or warrants to subscribe for or purchase shares of Common Stock
at a price, or securities convertible into shares of Common Stock with a
conversion price, less than the then current market price of the shares of
Common Stock or (iii) upon the distribution to holders of the shares of Common
Stock of evidences of indebtedness or assets (excluding a regular quarterly
cash dividend at a rate not in excess of 125% of the rate of the last regular
quarterly cash dividend theretofore paid or a dividend payable in shares of
Common Stock) or of subscription rights or warrants (other than those referred
to above).
No adjustment in the Purchase Price is required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price;
provided, however, that any adjustments not made on account of the foregoing
are carried forward and taken into consideration in any subsequent adjustment.
No fractional shares of Common Stock will be issued and in lieu thereof an
adjustment in cash will be made based on the market price of the shares of
Common Stock on the last trading day prior to the date of exercise.
The number of outstanding Rights and the number of shares of Common Stock
issuable upon exercise of each Right are also subject to adjustment in the
event of a stock split of the Common Stock or a stock dividend on the Common
Stock payable in shares of Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the
Distribution Date.
In the event that, on or after the Shares Acquisition Date, the Company is
acquired in a merger or other business combination transaction, or 50% or more
of its consolidated assets or earning power are sold (in one transaction or a
series of transactions other than in the ordinary course of business), proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
of the Right, that number of common shares of the acquiring company which at
the time of such transaction have a market value equal to two times the
Purchase Price. In the event that (i) any person becomes an Acquiring Person
(except where such person becomes an Acquiring Person through a purchase of
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shares of Common Stock pursuant to a cash tender offer for all of the
outstanding shares of Common Stock, which purchase causes such person to be
the beneficial owner of 80% or more of the shares of Common Stock then
outstanding), (ii) the Company is the surviving corporation in a merger with
such Acquiring Person or any associate or affiliate thereof and the Common
Stock of the Company remains outstanding and is not changed into or exchanged
for stock or other securities of any other person or the Company or cash or
any other property or (iii) an Acquiring Person engages in certain specified
self-dealing transactions, proper provision shall be made so that each holder
of a Right, other than Rights beneficially owned by the Acquiring Person
(which thereafter will be void), will thereafter have the right to receive
upon exercise thereof that number of shares of Common Stock of the Company
having a market value equal to two times the Purchase Price. The foregoing
exercise rights are subject to the Company's rights to redeem or exchange the
rights, as described below.
At any time after any person becomes an Acquiring Person, but prior to the
acquisition by such person, together with its affiliates and associates, of
beneficial ownership of 50% or more of the outstanding shares of Common Stock,
the Board of Directors of the Company may exchange the Rights (other than
Rights owned by such person which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock (or of a share of a class or
series of the Company's preferred stock having equivalent rights, preferences
and privileges) per Right (subject to adjustment).
At any time prior to the earlier to occur of (i) the close of business on
the tenth business day after the Shares Acquisition Date or (ii) the Final
Expiration Date, the Board of Directors of the Company may redeem all, but not
less than all, of the then outstanding Rights at a price of $.01 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the Record Date (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. After the redemption period has expired, the Company's right of
redemption may be reinstated in certain instances if an Acquiring Person
reduces its beneficial ownership to 10% or less of the outstanding shares of
Common Stock in a transaction or series of transactions not involving the
Company. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be
to receive the Redemption Price.
Prior to the Distribution Date, the Company may supplement or amend any
provision of the Rights Agreement without the approval of any stockholders.
From and after the Distribution Date, the Company may, subject to certain
limitations, supplement or amend the Rights Agreement without the approval of
any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained therein which may be defective
or inconsistent with any other provisions therein, (iii) to shorten or
lengthen any time period thereunder, including, without limitation, changing
the Final Expiration Date to a date after May 1, 1999 or (iv) to change or
supplement the provisions thereof in any manner which the Company may deem
necessary or desirable and which shall not adversely affect (as determined by
the Company) the interests of the holders of Rights Certificates (other than
an Acquiring Person or an affiliate or associate of an Acquiring Person).
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends.
IN CONNECTION WITH THE EXECUTION OF THE MERGER AGREEMENT AND IN
CONTEMPLATION OF THE TRANSACTIONS CONTEMPLATED THEREBY (INCLUDING, WITHOUT
LIMITATION, THE OFFER AND THE MERGER), THE BOARD OF DIRECTORS HAS ADOPTED,
APPROVED AND AUTHORIZED ALL ACTIONS NECESSARY SO THAT (I) THE EXECUTION AND
DELIVERY OF THE MERGER AGREEMENT, THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY (INCLUDING, WITHOUT LIMITATION, THE OFFER AND THE MERGER)
AND THE OTHER MATTERS PROVIDED FOR THEREIN WILL NOT RESULT IN (A) PARENT OR
PURCHASER OR ANY OF THEIR RESPECTIVE AFFILIATES OR ASSOCIATES BEING AN
ACQUIRING PERSON, (B) THE OCCURRENCE OF A DISTRIBUTION DATE OR (C) THE RIGHTS
BECOMING EXERCISABLE AND (II) THE FINAL EXPIRATION DATE WILL OCCUR IMMEDIATELY
PRIOR TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER (COLLECTIVELY, THE
"RIGHTS CONDITIONS"). PURSUANT TO THE BOARD OF DIRECTORS' ADOPTION, APPROVAL
AND AUTHORIZATION OF THE FOREGOING ACTIONS, AND IN SATISFACTION OF THE RIGHTS
CONDITIONS, THE COMPANY AND THE RIGHTS AGENT HAVE ENTERED INTO AMENDMENT NO. 4
TO RIGHTS AGREEMENT DATED AS OF DECEMBER 14, 1996, A COPY OF WHICH IS FILED AS
EXHIBIT 6 HERETO AND INCORPORATED HEREIN BY REFERENCE.
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For a description of certain other agreements and understandings between the
Company, on the one hand, and Parent or certain affiliates of Parent, on the
other, see the information set forth in Item 4 hereof under the heading
"Background of the Transactions; Past Contacts, Transactions and Negotiations
with Parent and Purchaser."
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation.
The Board of Directors has approved the Offer, the Merger and the other
transactions contemplated by the Merger Agreement, has determined that the
Offer, the Merger and the other transactions contemplated by the Merger
Agreement are fair to and in the best interests of the Company's stockholders
and recommends that the stockholders of the Company accept the Offer and
tender their Shares.
A copy of a letter to all stockholders of the Company communicating the
recommendation of the Board of Directors is filed as Exhibit 7 hereto and is
incorporated herein by reference.
(b)(1) Background of the Transaction; Past Contracts, Transactions and
Negotiations with Parent and Purchaser.
Over the course of the last twelve months, the Company has from time to time
received inquiries from interested parties as to the Company's interest in a
merger or other business combination transaction. During this time, the
Company began discussions with its historical financial advisor, Bear, Stearns
& Co. Inc. ("Bear Stearns"), as to the proper response to these inquiries.
During June and July 1996, a broker representing Parent discussed with
certain members of the Company's senior management the Company's interest in
pursuing a business combination transaction with Parent. The Company's
management indicated that the Company was not for sale, although management of
the Company indicated that it would be open to additional discussions with
Parent.
In early August 1996, Robert R. Womack, the Chairman and Chief Executive
Officer of Parent, requested a meeting with senior management of the Company.
On August 12, 1996, Mr. Womack met with Scott G. Arbuckle, the Chairman and
Chief Executive Officer of the Company. At this meeting, which was also
attended by other members of senior management of the Company, the Company and
Parent shared general information regarding their respective businesses and
operations.
Immediately following the August 12, 1996 meeting, the Company met with
representatives of Bear Stearns to discuss the formal retention of Bear
Stearns to analyze strategic alternatives, as well as to assist the Company
with responses to continuing inquiries from potential suitors. On August 19,
1996, the Company formally retained Bear Stearns to act as its exclusive
financial advisor in connection with a broad based financial and business
analysis of strategic alternatives in order to make recommendations to the
Board of Directors of the Company regarding ways to maximize shareholder
value.
On August 20, 1996, the Board of Directors of the Company held a regularly
scheduled meeting, at which representatives of Bear Stearns were present.
Senior management of the Company briefed the Board regarding the August 12,
1996 meeting with representatives of Parent, and indicated to the Board that
there could be a basis for a transaction with Parent. The Board reminded
management that the Company was not for sale, but that management could
continue discussions with Parent and other interested parties with respect to
a possible business combination transaction, provided the Company obtained a
confidentiality agreement from Parent and any such interested parties. On
August 21, 1996, Parent and the Company entered into a confidentiality and
standstill agreement.
In late August, Parent and its counsel began a due diligence examination of
United States Brass Corporation ("US Brass"). This examination continued
through early December. During this period, Parent retained Deutsche Morgan
Grenfell Inc. ("DMG") to assist in pursuing discussions with the Company.
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On September 8, 1996, in advance of a scheduled September 9, 1996 meeting,
Mr. Womack travelled to Dallas to meet with Mr. Arbuckle to discuss further
their respective companies and to define an approach to further discussions.
The next day, members of senior management of both the Company and Parent,
together with representatives from their respective financial advisors, met in
Dallas to discuss in more detail the respective businesses and to attempt to
identify and define potential areas of synergy that could be developed between
the two companies. In addition, management of the Company reviewed with Parent
the Company's projected financial results for the then current quarter ending
September 29, 1996.
In mid-September 1996, DMG provided to Bear Stearns a due diligence request,
which was forwarded to the Company. Thereafter and continuing through November
1996, the Company provided various materials to Parent and its advisors in
response to the due diligence request. In addition, during this period further
discussions were held among the inside and outside legal advisors to the
Company and Parent with respect to US Brass. Management of the Company and
Parent also had discussions during this period regarding various operational
and financial issues.
On October 6, 1996, Mr. Womack met with Mr. Arbuckle in Dallas to further
discuss strategies for a possible business combination. Representatives of DMG
and Bear Stearns also attended this meeting. On October 7, 1996, Mr. Womack
and representatives of Parent met with Mr. Arbuckle and representatives of the
Company. At this meeting the Company discussed a number of topics related to
its business, including its projected 1996 financial results and the status of
the US Brass bankruptcy proceedings. The Company provided Parent with copies
of the Company's internal projections for fiscal year 1996 and the next three
fiscal years. During the course of this meeting, the Company's representatives
indicated that a price per Share in excess of $20.00 would be required in
order for the Company to have any interest in continuing discussions.
At the Company's next regularly scheduled Board meeting, which was held on
October 15, 1996, members of management reported to the Board regarding their
further discussions with Parent. The Board considered and approved the three
year plan that was provided to Parent at the October 6, 1996 meeting, and the
Board discussed the advisability of selling the Company. The Board also
directed Bear Stearns to talk with parties that had previously made inquiries
with respect to a possible business combination transaction.
On October 28, 1996, a regular meeting of the Board of Directors of Parent
was convened. At this meeting, the Board authorized Parent's management to
pursue further discussions with the Company and to continue the due diligence
effort. On the next day, Mr. Womack met with Mr. Arbuckle to discuss the
general terms of a merger transaction between Parent and the Company.
On November 1, 1996 and November 5, 1996, respectively, members of senior
management of the Company met in Dallas with members of management from two
other parties potentially interested in exploring a business combination with
the Company. Confidentiality agreements had previously been entered into with
each of these parties. At these meetings, the Company and the other parties
shared information with respect to their respective businesses and operations
and discussed potential synergies.
In early November 1996, the confidentiality agreement between Parent and the
Company was amended to permit Parent and the Company to pursue discussions
with their respective lenders concerning the transaction. During this period,
Parent held meetings with its bank group and its counsel to discuss the
prospective merger and the necessary financing.
On November 13, 1996, a meeting of the Company's Executive Committee was
held, at which Mr. Arbuckle and Bear Stearns provided an update on the status
of the Company's discussions with Parent. In addition, Mr. Arbuckle advised
the Executive Committee of the Company's early November meetings with two
other interested parties, and updated them on the status of those discussions.
15
<PAGE>
On November 19, 1996, DMG delivered a term sheet to Bear Stearns outlining
certain terms of the proposed transaction. The term sheet did not indicate a
price, but did address, among other things, a joint marketing agreement, a
termination/expense reimbursement provision and various employee benefit
issues. Later that day, Bear Stearns advised DMG that one of the other
interested parties had expressed a willingness to pay approximately $22 per
Share. On November 25, 1996, Mr. Arbuckle telephoned Mr. Womack to discuss the
term sheet.
On November 27, 1996, Parent's legal counsel submitted a draft merger
agreement to the Company and its counsel outlining the proposed terms, other
than price, of the proposed transaction.
On December 3, 1996, after additional discussions with one of the other
interested parties, Bear Stearns advised Mr. Womack that it believed that a
price of $24 per Share would be required in order for the transaction to gain
the support of the Company's management.
On December 4, 1996, counsel to the Company provided comments to the
proposed merger agreement to Parent and the Board of Directors of the Company.
Shortly thereafter, Parent completed its environmental, tax and accounting due
diligence effort in respect of the Company.
On December 9, 1996, a meeting of the Board of Directors of Parent was
convened. During this meeting, Parent's Board approved a merger transaction
with the Company in which Stockholders would receive $24 per Share payable in
cash.
On December 10, 1996, a telephonic meeting of the Company's Executive
Committee was held, at which Bear Stearns and the Company's legal counsel were
present. At the meeting, Mr. Arbuckle reported that Parent's board had
approved a transaction at $24 per share, subject to negotiation of a
definitive agreement. Mr. Arbuckle reported that a meeting was scheduled for
the next day in Dallas to negotiate the terms of a merger agreement, and that
a Board meeting would be called for December 14, 1996 to discuss approval of a
transaction (to the extent the parties could agree on the terms over the next
couple of days).
On December 11, 1996, members of senior management of the Company and
Parent, together with their respective financial and legal advisors, met in
Dallas to discuss the terms of the proposed merger agreement. By the end of
the day, the parties had negotiated the principal terms of a proposed merger
agreement, whereby the Parent would acquire the Company in a tender offer.
Under the terms of the proposed merger agreement, Parent would cause a newly
formed subsidiary to merge with the Company following the tender offer, with
the Company surviving the merger. A substantially final draft of the proposed
merger agreement was distributed on December 11, 1996 to the Company's Board
of Directors, the Company and Parent (and to their respective
representatives).
On December 14, 1996, Parent delivered to the Company a firm offer of $24
per Share based on the proposed merger agreement and a meeting of the Board of
Directors of the Company was convened. During the meeting, the Company's Board
of Directors received the oral opinion of Bear Stearns that, based upon and
subject to certain matters identified by Bear Stearns, the consideration to be
received by the Stockholders in the Offer and the Merger was fair, from a
financial point of view, to the Stockholders. The Company's Board was also
advised that the other interested parties had declined to pursue further
discussions with the Company in view of the price offered by Parent. At the
conclusion of the meeting, the Board approved the merger agreement subject to
a reduction in the proposed termination fee included in the draft merger
agreement to $8.5 million. A representative from Bear Stearns thereafter
telephoned Mr. Womack to discuss the Board's action. Following discussions,
Mr. Womack agreed to the Board's request concerning the termination fee. Later
that day, the Merger Agreement was executed and delivered by Parent, Purchaser
and the Company.
On December 16, 1996, Parent and the Company publicly announced the
execution of the Merger Agreement.
16
<PAGE>
(b)(2) Reasons for Recommendation of the Board of Directors.
At its December 14, 1996, meeting, the Board of Directors considered the
Offer, the Merger and the other transactions contemplated by the Merger
Agreement. At such meeting the Board of Directors (i) determined that each of
the Offer and the Merger is fair to, and in the best interests of, the
Company's stockholders, (ii) approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, and
(iii) resolved to recommend (subject to the limitations set forth in the
Merger Agreement) that the Company's stockholders accept the Offer and tender
all of their Shares pursuant thereto.
The determination of the Board of Directors to accept the Offer and approve
the Merger Agreement and the transactions contemplated by the Merger Agreement
was based upon consideration of a number of factors. The following is a list
of material factors considered by the Board of Directors in making its
determination:
(i) that the Offer Consideration of $24.00 per Share represents a premium
of approximately 78% over the closing price of the Shares on the New York
Stock Exchange on December 13, 1996, the last full trading day prior to the
public announcement of the execution of the Merger Agreement;
(ii) the Board of Directors' review of recent market prices of the Common
Stock, including the fact that the Shares have not traded above the $24.00
Offer Consideration since October 1989;
(iii) the Board of Directors' consideration of, among other things,
information with respect to the financial condition, results of operations,
business and prospects of the Company, including the bankruptcy proceedings
involving US Brass;
(iv) the Board of Directors' review of presentations by, and discussion
of the terms of the Merger Agreement (including the Offer and the Merger)
with, senior executive officers of the Company, representatives of the
Company's legal counsel and representatives of Bear Stearns;
(v) the Board of Directors' receipt of the opinion of Bear Stearns to the
effect that, as of the date of its opinion and based upon and subject to
certain matters stated therein, the consideration to be received by the
holders of the Shares in the Offer and the Merger was fair, from a
financial point of view, to such holders. The full text of the Bear Stearns
fairness opinion, which sets forth, among other things, the assumptions
made, matters considered and limitations on the review undertaken by Bear
Stearns, is attached hereto as Schedule II (and filed as Exhibit 8 hereto)
and is incorporated herein by reference. Stockholders are urged to read the
Bear Stearns fairness opinion carefully and in its entirety for assumptions
made, matters considered and limits of the review by Bear Stearns;
(vi) the terms of the Offer, the Merger and the Merger Agreement,
including the structural features of the Offer, which provide for a prompt
cash tender offer for all outstanding Shares to be followed by a merger for
the same consideration (thereby enabling stockholders to obtain the
benefits of the transaction in exchange for their Shares at the earliest
possible time);
(vii) other provisions of the Offer and the Merger Agreement, including
the fact that the Offer (A) is not subject to any financing condition and
(B) that the Merger Agreement allows the Company to respond to unsolicited
inquiries concerning the Company and to terminate the Merger Agreement upon
payment to the Purchaser of the break-up fee identified in the description
of the Merger Agreement set forth in Item 3(b)(2) above to the extent that
the Board of Directors determines that such action is necessary to comply
with its fiduciary duties under applicable law; and
(viii) the extensive negotiations between the Company and Parent, leading
to the belief of the Board of Directors that $24.00 per Share represented
the highest price per Share that could be negotiated with Parent.
In view of the wide variety of factors considered by the Board of Directors,
the Board of Directors did not find it practical to, and did not, quantify or
otherwise assign relative weights to the foregoing factors or determine that
any factor was of particular importance. Rather, the Board of Directors viewed
its recommendation as being based on the totality of the information presented
to and considered by it.
17
<PAGE>
The Board of Directors recognizes that upon the consummation of the Offer
and the Merger, stockholders of the Company will no longer have their equity
interest in the Company or any interest in any future growth of the Company.
The Board of Directors has determined, based upon consideration of the
material factors specified above, however, that the Offer and the Merger are
in the best interest of stockholders and are consistent with maximizing
stockholder value.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to an engagement letter, dated August 19, 1996, between the Company
and Bear Stearns, the Company retained Bear Stearns to serve as the Company's
exclusive financial advisor in connection with a broad based financial and
business analysis of strategic alternatives with respect to the Company.
Pursuant to the engagement letter, the Company paid to Bear Stearns an initial
fee in the amount of $100,000, and a fee in the amount of $300,000 upon
delivery by Bear Stearns of its fairness opinion, which amounts will in each
case be credited against the transaction fee described below. The Company also
agreed to pay to Bear Stearns a fee of not less than 1% of the aggregate
consideration paid (including amounts of debt assumed) in connection with any
acquisition or divestiture involving the Company. Accordingly, upon
consummation of the Merger, the Company will pay to Bear Stearns a fee of
$2,850,000, after crediting the amount of the initial fee and the fee
attributable to the fairness opinion. The Company also has agreed to reimburse
Bear Stearns for its reasonable out-of-pocket expenses incurred (including
fees and expenses of counsel) in connection with the matters contemplated by
the engagement letter. In addition, the Company has agreed to indemnify Bear
Stearns against certain liabilities, including liabilities under the federal
securities laws or liabilities relating to or arising out of Bear Stearns'
engagement as financial advisor under the engagement letter.
Bear Stearns is an internationally recognized investment banking firm
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, corporate restructurings, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. Bear
Stearns was selected by the Company as a financial advisor on the basis of
Bear Stearns' qualifications, expertise and reputation in investment banking.
In the past, Bear Stearns has provided investing banking and financial
advisory services to the Company.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations
or recommendations to the stockholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in the Shares
have been effected during the past 60 days by the Company or by an executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, all of its executive officers,
directors, affiliates or subsidiaries presently intend to tender into the
Offer any Shares which are held of record or beneficially owned by such
persons (except for Shares subject to outstanding options, which will not be
tendered but will be cancelled in connection with the Merger as described in
Item 3(b) above).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company has not
undertaken any negotiations in response to the Offer, and no negotiations are
underway, which relate to or would result in (i) an extraordinary transaction
involving the Company or any of its subsidiaries, (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any of its
subsidiaries, (iii) a tender offer for or other acquisition of securities by
or of the Company or (iv) any material change in the present capitalization or
dividend policy of the Company.
18
<PAGE>
(b) Except as described in Item 3(b) and Item 4 above, there are presently
no transactions, board resolutions, agreements in principle or signed
contracts in response to the Offer which relate to or would result in one or
more of the matters referred to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached hereto as Schedule I is being furnished
in connection with the possible designation by the Parent, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
Exhibit 1 Offer to Purchase, dated December 20, 1996.
Exhibit 2 Letter of Transmittal, dated December 20, 1996.
Exhibit 3 Agreement and Plan of Merger, dated December 14, 1996, among
Parent, Purchaser and the Company.
Exhibit 4 Restated Certificate of Incorporation of the Company dated April
14, 1989.
Exhibit 5 Rights Agreement, dated as of April 14, 1989 and amended on July
31, 1989, January 4, 1990 and November 5, 1991, between the
Company and Harris Trust and Savings Bank, as Rights Agent.(1)
Exhibit 6 Amendment No. 4 to Rights Plan, dated as of December 14, 1996,
between the Company and Harris Trust and Savings Bank, as Rights
Agent.
Exhibit 7 Letter to Stockholders of Eljer Industries, Inc., dated December
20, 1996.*
Exhibit 8 Opinion of Bear, Stearns & Co. Inc., dated December 14, 1996.*
Exhibit 9 Text of Joint Press Release, dated December 16, 1996.
</TABLE>
- --------
* Enclosed with Schedule 14D-9 mailed to Stockholders.
(1) Incorporated herein by reference to the Company's Registration Statement
on Form 10 filed on February 14, 1989, as amended by Forms 8 filed on
March 14, 1989, March 23, 1989, March 27, 1989, August 3, 1989, January
10, 1990, May 2, 1990 and November 19, 1991 (File No. 0-10181), and to the
Company's Quarterly Report on Form 10-Q for the quarter ended September
29, 1991 filed on November 12, 1991.
19
<PAGE>
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.
December 20, 1996
Eljer Industries, Inc.
/s/ Scott G. Arbuckle
By: _________________________________
SCOTT G. ARBUCKLE
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
20
<PAGE>
SCHEDULE I
ELJER INDUSTRIES, INC.
17120 DALLAS PARKWAY
DALLAS, TEXAS 75248
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
This Information Statement is being mailed on or about December 20, 1996, as
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9"), to holders of record of the common stock, par value
$1.00 per share (the "Common Stock"), of Eljer Industries, Inc., a Delaware
corporation (the "Company"), at the close of business on December 18, 1996.
Capitalized terms used and not otherwise defined herein shall have the meaning
ascribed to them in the Schedule 14D-9. You are receiving this Information
Statement in connection with the possible election to the Company's Board of
Directors (the "Board" or the "Board of Directors") of persons to be
designated by Zurn Industries, Inc., a Pennsylvania corporation ("Parent").
Pursuant to the Merger Agreement, upon the acquisition by Zurn Acquisition
Co., Inc., a Delaware corporation and a wholly owned subsidiary of Parent
("Purchaser"), of at least 50.1% of the outstanding shares of Common Stock
(each, a "Share" and collectively, the "Shares") on a fully diluted basis
pursuant to the Offer (as defined below), and from time to time thereafter,
Parent will be entitled to designate such number of directors ("Parent's
Designees"), as will give Parent, subject to compliance with Section 14(f) of
the Exchange Act, that number of directors, rounded up to the next whole
number, equal to the product of (i) the total number of directors on the Board
at such time (giving effect to any increase in the number of directors
pursuant to the Merger Agreement) and (ii) the percentage that the number of
Shares purchased by Purchaser pursuant to the Offer bears to the aggregate
number of Shares outstanding (such number being the "Board Percentage"). The
Merger Agreement provides, however, that at all times prior to the effective
time of the Merger (the "Effective Time"), the Board shall include at least
two of the directors then in office who were directors on December 14, 1996
and who voted to approve the Merger Agreement ("Continuing Directors"). The
Merger Agreement requires the Company, at the request of Parent, to take all
action necessary, including increasing the size of the Board or using its
reasonable best efforts to secure the resignations of incumbent directors, to
cause Parent's Designees to be elected to the Board under the circumstances
described therein.
This Information Statement is required by Section 14(f) of the Exchange Act
and Rule 14f-1 thereunder. You are urged to read this Information Statement
carefully. You are not, however, required to take any action in connection
with this Information Statement.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 20, 1996. The Offer is scheduled to expire at 12:00 midnight, New
York City time, on January 21, 1997, unless extended in accordance with its
terms.
The information contained in this Information Statement concerning Purchaser
and Parent and Parent's Designees has been furnished to the Company by
Purchaser and Parent, and the Company assumes no responsibility for the
accuracy or completeness of such information.
VOTING SECURITIES
The only voting security of the Company outstanding is its Common Stock. As
of December 13, 1996, there were 7,153,657 shares of Common Stock outstanding.
Each share of Common Stock is entitled to one vote.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of December 13, 1996 (except
as otherwise noted in footnote (2) below) with respect to the persons known to
the Company to be the beneficial owners of more than five percent of the
outstanding Shares of Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
----------------------
NAME AND ADDRESS OF NUMBER PERCENT
BENEFICIAL OWNER OF SHARES OF CLASS(1)
- ------------------- ---------- -----------
<S> <C> <C>
Gabelli Funds, Inc....................................... 785,400(2) 11.0%
655 Third Avenue
New York, New York 10017
James P. Lennane......................................... 479,400(3) 6.7%
4820 Bayshore Drive, Suite D
Naples, Florida 33962
</TABLE>
- --------
(1) As of December 13, 1996, there were outstanding 7,153,657 shares of Common
Stock.
(2) The number of Shares is based on information contained in a Schedule 13D,
as amended through Amendment No. 18 thereto, filed with the Securities and
Exchange Commission (the "SEC") by Gabelli Funds, Inc. and certain of its
affiliates, which reflects their beneficial ownership of Shares as of
December 16, 1996. According to the filing, Gabelli Funds and such
affiliates reported that they may be deemed to have sole voting power with
respect to 745,400 Shares and sole dispositive power over 785,400 Shares.
(3) The number of Shares is based on information contained in a Schedule 13D,
as amended through Amendment No. 7 thereto, filed with the SEC by James P.
Lennane, Bette M. Byouk and Susan Kahl Lennane which reflects their
beneficial ownership of Shares as of October 31, 1996. According to the
filing, Mr. Lennane reported that he may be deemed to have sole voting and
dispositive power over 476,400 Shares and Ms. Byouk and Ms. Lennane each
reported that they may be deemed to have sole voting and dispositive power
over 1,000 and 2,000 Shares, respectively.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of December 13, 1996 the beneficial
ownership of Common Stock by each director of the Company, each named
executive officer listed in the Summary Compensation Table appearing in this
Information Statement and all directors and executive officers as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
-------------------
NUMBER PERCENT
OF SHARES OF CLASS
---------- --------
<S> <C> <C>
Directors
Scott G. Arbuckle........................................ 246,554(1) 3.3%
John H. Deininger........................................ 21,553(2) *
Walter C. Minnick........................................ 9,561(2) *
Frank J. Morgan.......................................... 36,159(2) *
Paul E. Price............................................ 4,008(2) *
C. A. Rundell, Jr........................................ 8,469(2) *
Named Executive Officers (excluding any director named
above) and Group
James A. Harris.......................................... 80,994(3) 1.1%
James F. Thomason........................................ 83,824(4) 1.2%
George W. Hanthorn....................................... 33,308(5) *
G. Michael Morrell....................................... 38,000(6) *
All directors and executive officers as a group (14
persons)................................................. 683,780(7) 8.9%
</TABLE>
- --------
*Beneficial ownership represents less than one percent of the outstanding
Common Stock.
(1) Includes 214,173 Shares Mr. Arbuckle has the right to acquire within 60
days pursuant to stock options (assuming acceleration of the vesting
periods with respect to such options upon consummation of the Offer);
10,131 Shares held for the account of Mr. Arbuckle under the Eljer Tax
Reduction Investment Plan ("TRIP"), with respect to which Mr. Arbuckle has
sole voting power and dispositive power, subject to the terms of the TRIP;
16,600 Shares held jointly by Mr. Arbuckle and his wife with respect to
which they share voting and dispositive power; and 5,650 Shares with
respect to which Mr. Arbuckle has sole voting and dispositive power.
(2) The beneficial owner has sole voting and investment power with respect to
all Shares listed.
(3) Includes 68,100 Shares Mr. Harris has the right to acquire within 60 days
pursuant to stock options (assuming acceleration of the vesting periods
with respect to such options upon consummation of the Offer); 2,744 Shares
held for the account of Mr. Harris under the TRIP with respect to which
Mr. Harris has sole voting power and dispositive power, subject to the
terms of the TRIP; 5,150 Shares with respect to which Mr. Harris has sole
voting and dispositive power; and 5,000 restricted Shares with respect to
which Mr. Harris has sole voting power, but no dispositive power. The
restricted period for the 5,000 restricted Shares, which were granted in
1994, terminates on February 15, 1997 (or, if earlier, upon consummation
of the Offer).
(4) Includes 68,700 Shares Mr. Thomason has the right to acquire within 60
days pursuant to stock options (assuming acceleration of the vesting
periods with respect to such options upon consummation of the Offer);
3,529 Shares held for the account of Mr. Thomason under the TRIP, with
respect to which Mr. Thomason has sole voting power and dispositive power,
subject to the terms of the TRIP; 3,695 Shares with respect to which Mr.
Thomason has sole voting and dispositive power; 1,300 Shares held by Mr.
Thomason' s wife with respect to which she has sole voting and dispositive
power; and 6,600 restricted Shares, with respect to which Mr. Thomason has
sole voting power, but no dispositive power. The restricted period for
those 6,600 restricted Shares, which were granted in 1996, terminates on
February 20, 1999 (or, if earlier, upon consummation of the Offer).
(5) Includes 31,700 Shares Mr. Hanthorn has the right to acquire within 60
days pursuant to stock options (assuming acceleration of the vesting
periods with respect to such options upon consummation of the Offer); and
1,608 Shares held for the account of Mr. Hanthorn under the TRIP with
respect to which Mr. Hanthorn has sole voting power and dispositive power,
subject to the terms of the TRIP.
3
<PAGE>
(6) Includes 14,000 Shares Mr. Morrell has the right to acquire within 60 days
pursuant to stock options (assuming acceleration of the vesting periods
with respect to such options upon consummation of the Offer); 10,000
Shares with respect to which Mr. Morrell has sole voting and dispositive
power; and 14,000 restricted Shares, with respect to which Mr. Morrell has
sole voting power, but no dispositive power. The restricted period for
10,000 restricted Shares, which were granted in 1994, terminates on April
19, 1997 (or, if earlier, upon consummation of the Offer) and the
restricted period for the remaining restricted Shares, which were granted
in 1996, terminates on February 20, 1999 (or, if earlier, upon
consummation of the Offer).
(7) Includes 495,673 Shares with respect to which executive officers and
directors have the right to acquire within 60 days pursuant to stock
options (assuming acceleration of the vesting periods with respect to such
options upon consummation of the Offer); 27,712 Shares held for the
account of such persons under the TRIP; and 35,600 restricted Shares.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Company's Restated Certificate of Incorporation provides that there
shall be three classes of directors. At each annual meeting of stockholders of
the Company, successors to directors of the class whose term of office expires
in that year are to be elected for a three-year term or until their successors
have been duly elected and qualified. The total number of directors is fixed
by the Board of Directors pursuant to authority granted it under the Company's
Restated Certificate of Incorporation. The Board of Directors is presently
comprised of six directors, one of whom is a salaried employee of the Company.
The current terms of the three classes of directors expire at the 1997, 1998
and 1999 annual meetings, respectively.
RIGHT TO DESIGNATE DIRECTORS; PARENT'S DESIGNEES
The Merger Agreement provides that promptly upon the purchase by Purchaser
of such number of Shares which represents at least 50.1% of the outstanding
Shares on a fully diluted basis pursuant to the Offer, and from time to time
thereafter, Parent shall be entitled to designate the Parent's Designees. The
Merger Agreement requires the Company, at the request of Parent, to take all
action necessary, including increasing the size of the Board or using
reasonable best efforts to secure the resignations of incumbent directors to
cause Parent's Designees to be elected under the circumstances described
herein. The Merger Agreement provides, however, that at all times prior to the
Effective Time of the Merger, the Board shall include at least two Continuing
Directors. None of the Parent Designees will begin serving as directors of the
Company until at least ten days after the date this Information Statement is
filed with the Commission and mailed to the Stockholders of record.
Following the election or appointment of Parent's Designees pursuant to the
Merger Agreement and prior to the Effective Time of the Merger, any amendment
or termination of the Merger Agreement, extension for the performance or
waiver of the obligations or other acts of Parent or Purchaser or waiver of
the Company's rights thereunder shall require the concurrence of a majority of
the directors of the Company then in office who are Continuing Directors.
It is expected that Parent's Designees may assume office at any time
following the purchase of Shares by Purchaser pursuant to the Offer, which
purchase may not be consummated prior to midnight on Tuesday, January 21, 1997
and that, upon assuming office, Parent's Designees will thereafter constitute
at least a majority of the Board of Directors. To the extent the Board of
Directors will consist of persons who are not Parent's Designees, the Company
expects such persons will be Continuing Directors.
Parent's Designees will be selected by Parent from among the individuals
listed below. The Company has been informed that each of the following
individuals has consented to serve as a director of the Company if
4
<PAGE>
appointed or elected. None of the following individuals owns any Shares. In
addition, none of the following individuals is a director of, or holds any
position with, the Company. The name, age, present principal occupation or
employment and five-year employment history of each of the following
individuals are set forth below. Each person is a citizen of the United
States, and, except as indicated otherwise, the business address of each
person is One Zurn Place, Erie, Pennsylvania 16505.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR PERIOD
NAME AGE AT 12/1/96 EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY SERVED
---- -------------- ------------------------------------------- ------
<S> <C> <C> <C>
Robert R. Womack 59 Chairman and Chief Executive Officer Since 1995
Director and Chief Executive Officer Since 1994
Independent Consultant 1993-1994
Vice Chairman and Chief Executive Officer 1990-1993
(1992-1993) and President and Chief Operating
Officer (1990-1992)--IMO Industries, Inc.,
Lawrenceville, NJ (controls, pumps, and
engineered power products)
Dennis Haines 43 General Counsel and Secretary Since 1993
Associate General Counsel 1989-1993
Robert D. Neary 63 Director Since 1995
Trustee Chairman and President, Armada Funds, Since 1996
Wilmington, DE (group of mutual funds)
Co-Chairman, Ernst & Young LLP, Cleveland, OH 1984-1993
(international accounting and consulting
firm)
Director, Cold Metal Products, Inc. (strip Since 1994
steel producer and service center processor)
Edward J. Campbell 68 Director Since 1986
President, JI Case Co., Racine, WI (farm 1992-1994
and construction machinery and equipment)
President, Newport News Shipbuilding, Newport 1979-1992
News, VA (shipbuilding and repairing)
Director of Global Marine, Inc. and Titan
Wheel International
</TABLE>
DIRECTORS OF THE COMPANY
Set forth below is certain information concerning the Company's directors,
including their classes and terms, ages, present principal occupations and
business experience during the past five years and the period during which
they have served as directors. The business address of each director is 17120
Dallas Parkway, Dallas, Texas 75248.
CLASS WHOSE TERM EXPIRES IN 1997
<TABLE>
<S> <C>
C. A. RUNDELL, JR.,
age 65, director since
October 1992........... Mr. Rundell serves as a consultant to and/or as a member of the
boards of
directors of a number of companies. His business is conducted
under the name
Rundell Enterprises, a sole proprietorship. Mr. Rundell is also
a director of
Inter-Regional Financial Group, Inc., NCI Building Systems,
Inc., Tandy Brands
Accessories, Inc. and Tyler Corporation.
</TABLE>
5
<PAGE>
CLASS WHOSE TERM EXPIRES IN 1998
<TABLE>
<S> <C>
SCOTT G. ARBUCKLE,
age 65, director since
February 1990.......... Mr. Arbuckle has served as Chairman of the Board since April
1996, and as
President and Chief Executive Officer of the Company since
February 1990. Mr. Arbuckle previously served as Executive Vice
President of the Company and President of the HVAC Group from
April 1989 to February 1990. He joined United States Brass
Corporation ("US Brass"), an indirect, wholly owned subsidiary
of the Company, in 1963.
WALTER C. MINNICK,
age 54, director since
April 1993............. Mr. Minnick served until February 1995 as President and Chief
Operating Officer, Chief Executive Officer and a director of TJ
International Inc., a manufacturer and distributor of specialty
building products. From 1974 to 1979, Mr. Minnick was employed
by TJ International in various other capacities, including
Corporate Secretary, National Manufacturing Manager and Vice
President, Division Operations. He is also a director of
MacMillan Bloedel, Ltd.
PAUL E. PRICE,
age 62, director since
February 1993.......... Mr. Price served in various capacities with The Quaker Oats
Company from 1972 until his retirement in June 1991 and, most
recently, served as its Senior Vice-President, Finance and Chief
Financial Officer from 1988 until his retirement. He also served
as President of the Fisher Price Toys division during 1990 and
as Executive Vice-President of the International Grocery
Products division of Quaker Oats in 1987 and 1988. Mr. Price is
also a director of DeSoto, Inc. and Xytronyx, Inc.
</TABLE>
CLASS WHOSE TERM EXPIRES IN 1999
<TABLE>
<S> <C>
FRANK J. MORGAN,
age 71, director since
April 1989............. Mr. Morgan served as Chairman of the Board of the Company from
December 1990 to April 1996. Mr. Morgan served as President and
Chief Operating Officer of The Quaker Oats Company, an
international marketer of foods, pet foods and toys, from 1983
to 1990. Prior thereto, he held various positions with Quaker
Oats since 1964. He is also a director of The Molson Companies
Limited.
JOHN H. DEININGER,
age 64 director since
April 1989............. Mr. Deininger serves as a consultant to and/or an investor in a
number of companies. His business is conducted under the name
J.D. Investments, Inc. He also has served as the Chairman of the
Board of Pawnee Rotation Molding Co., L.P. since May 1995. He
served as President, Chief Executive Officer and a director of
Union City Body Co., L.P., from October 1993 to October 1994. He
served as Executive Vice President of Illinois Tool Works, Inc.,
a manufacturer of industrial products and components from 1986
through 1990.
</TABLE>
BOARD MEETINGS AND COMMITTEES
During 1995 (the last full fiscal year of the Company), the Board of
Directors of the Company held 6 meetings. Each of the directors of the Company
attended at least 75 percent of the aggregate total number of
6
<PAGE>
meetings of the Board of Directors and meetings of any committee of the Board
on which that director served and which took place subsequent to his election
as a director. The Board of Directors has standing Audit, Compensation and
Executive Committees. It does not have a standing Nominating Committee.
The Audit Committee reviews the scope and results of the audit by the
Company's independent auditors, makes recommendations to the Board as to the
selection of independent auditors and has approval authority with respect to
services provided by the independent auditors. In addition, it reviews systems
of internal control, reviews accounting policies and procedures and directs
and supervises investigations into matters within the scope of its duties. The
members of this committee are Messrs. Deininger (chairperson), Morgan,
Rundell, Minnick and Price. The Audit Committee met 2 times in 1995.
The Compensation Committee reviews the cash compensation of management
personnel and takes action on all salary changes for certain management
personnel. In addition, it administers all aspects of the various management
stock incentive plans and awards stock-based compensation to executive
officers and employees of the Company. The members of this committee are
Messrs. Minnick (chairperson), Morgan, Deininger, Rundell and Price. The
Compensation Committee met 4 times in 1995.
The Executive Committee has, and may exercise, when the Board of Directors
is not in session, the powers of the Board of Directors in the management of
the business and affairs of the Company. The Executive Committee does not have
the power to change the membership or fill vacancies in the Board of Directors
or in the Executive Committee. The members of the Committee are Messrs. Morgan
(Chairperson), Rundell and Arbuckle. The Executive Committee met 5 times in
1995.
DIRECTORS' FEES AND COMPENSATION
Directors who are not employees of the Company or any of its subsidiaries
receive for their services a retainer fee of $16,000 per annum payable in cash
or in shares of the Company's Common Stock and a fee of $800 in cash for each
Board or committee meeting attended. In addition, each chairperson of a
committee of the Board who is not an employee of the Company or any subsidiary
receives for his services as chairperson a retainer fee of $2,000 per annum
payable in cash or in shares of the Company's Common Stock. If a director
elects to receive the retainer fee in shares of Common Stock, the Company
transfers shares of treasury stock to the directors in payment of such fees at
the time of, or shortly after, the first meeting of the Board of Directors
following the annual meeting of shareholders of the Company based on the
market value of the Company's Common Stock at that time. Cash payments, if
elected, are also made at that time. Non-employee directors who are elected to
the Board between annual shareholder meeting dates are entitled to receive a
pro rata portion of the retainer fees for their services based on the number
of days from the date of their election until the next annual meeting of
shareholders. Directors who are employees of the Company or any subsidiary do
not receive any fees for Board or committee service. The Company reimburses
all directors for travel, lodging and related expenses they may incur in
attending Board and committee meetings.
In 1992, the Company adopted a retirement plan for directors of the Company
who are not employees of the Company or any of its subsidiaries. Under the
plan, an eligible director who has three or more years of credited service as
a director is entitled to receive upon his or her retirement from the Board of
Directors an annual payment in cash equal to the amount of the per annum
director retainer fee in effect for the year in which he or she retired. The
annual retirement entitlement is payable for a period of years equal to the
number of years he or she served as a Board member but not to exceed 10 years.
7
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names, ages, titles with the Company, and principal
occupations and employment for the past five years of the executive officers
of the Company.
NAME AND AGE OFFICE AND EXPERIENCE
Scott G. Arbuckle, 65....Chairman of the Board, President and Chief Executive
Officer. Mr. Arbuckle has served as Chairman of the
Board since April 1996 and as President and Chief
Executive Officer since February 1990. Mr. Arbuckle
previously served as Executive Vice President of
Eljer Industries and President of HVAC Group. He
joined US Brass in 1963.
James A. Harris, 39......Executive Vice President. Mr. Harris has served in
his current position since January 1996 and also
serves as the President of Eljer Manufacturing, Inc.
Mr. Harris previously served as Vice President-Sales
and Marketing of Eljer Industries from January 1992
to December 1995. Prior to January 1992, Mr. Harris
served as Vice President-Marketing.
Brooks F. Sherman, 36....Vice President-Finance, Chief Financial Officer and
Treasurer. Mr. Sherman has served in his current
position since June 1995. Mr. Sherman previously
served as Controller, Treasurer and Assistant
Secretary from April 1991 to June 1995 and as
Controller and Assistant Secretary from 1989 to April
1991.
James F. Thomason, 62....Vice President-Manufacturing. Mr. Thomason has served
in his current position since April 1991, having
previously served as Group President-Selkirk/Dry N.A.
from April 1990 to April 1991. Prior to joining Eljer
Industries, Mr. Thomason served in various management
positions with Kohler Company, most recently as Vice
President-Operations for Plumbing and Specialty
Products, International.
George W. Hanthorn, 49...Vice President-General Counsel and Secretary. Mr.
Hanthorn has served in this position since October
1994. Mr. Hanthorn previously served as Senior Vice
President-General Counsel and Secretary of Greyhound
Lines, Inc., Dallas, Texas, a publicly-held
transportation services company, from 1990 to 1994,
and as Vice President, General Counsel and Secretary
of Greyhound Lines, Inc. from 1987 to 1990.
Nancy J. Duricic, 42.....Vice President-Human Resources. Ms. Duricic has
served in her current position since January 1996.
Ms. Duricic previously served as Director-Human
Resources from June 1995 to December 1995, as
Director-Compensation and Benefits from January 1992
to June 1995, and as Manager of Employee Benefits
from September 1990 to January 1992.
Steven M. Rodman, 42.....Vice President-Sales and Marketing. Mr. Rodman has
served in his current position since January 1996,
having previously served as Eljer Manufacturing,
Inc.'s Vice President-Consumer Sales since joining
the Company in August 1992. Mr. Rodman previously
served as Director of Sales for Artesian Plumbing
Products, Mansfield, Ohio, a privately-held plumbing
fixture manufacturer.
8
<PAGE>
Gerald J. Morris, 56.....Controller and Assistant Secretary. Mr. Morris has
served in his current position since June 1995 and
has held a variety of division controllership
positions since joining the Company in February 1981,
most recently as Controller-Manufacturing.
G. Michael Morrell, 60...Managing Director, European Operations. Mr. Morrell
has served in his current position since March 1994.
Mr. Morrell was a self-employed consultant prior to
March 1994 and held several senior management
positions with subsidiaries of Household
International, Inc., the Company's former parent,
prior to April 1989.
9
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
COMPENSATION SUMMARY
The following table sets forth certain summary information concerning the
compensation awarded to, earned by, or paid to the CEO and the other four most
highly compensated executive officers of the Company whose combined salary and
bonus for 1995 exceeded $100,000 (collectively, the "named executive
officers") for the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- ---------------------- ----------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(3) SATION($)(4) AWARD($)(5) SARS(#) PAYOUTS($) SATION($)(6)
- ------------------ ---- --------- ----------- ------------ ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott G. Arbuckle, 1995 400,000 200,000 25,954 -- 25,000 577,500 387,227(7)
President and CEO 1994 371,000 194,775 35,115 -- 35,000 -- 153,963(7)
1993 350,000 250,000 41,970 -- 50,000 -- 392,216(7)
James A. Harris, 1995 156,343 56,596 13,629 -- 10,000 137,830 6,506
Executive V.P. & 1994 144,095 60,520 13,629 44,688 15,000 -- 6,578
President of Eljer 1993 125,300 75,180 13,359 38,438 8,000 -- 5,049
Manufacturing, Inc.
James F. Thomason, 1995 198,278 79,708 15,267 -- 10,000 196,900 8,339
V.P. Manufacturing 1994 189,740 79,691 15,522 -- 15,000 -- 8,914
1993 179,000 107,400 15,149 -- 8,000 -- 7,512
George W. Hanthorn, 1995 200,000 66,400 12,790 -- -- 88,612 --
V.P., General Counsel 1994 41,667 10,416 3,135 -- 15,000 -- --
& Secretary(1) 1993 -- -- -- -- -- -- --
G. Michael Morrell, 1995 145,043 68,837 3,528 -- 10,000 95,286 --
Managing Director, 1994 103,965 72,236 2,521 70,000 -- -- --
European Operations(2) 1993 -- -- -- -- -- -- --
</TABLE>
- --------
(1) Mr. Hanthorn became an employee of the Company in October 1994.
(2) Mr. Morrell became an employee of the Company in April 1994. Amounts
indicated were paid in British pounds sterling and have been converted to
United States dollars on the basis of $1.578 per pound sterling.
(3) Annual bonus amounts are earned and accrued during the fiscal years
indicated and paid in the following year.
(4) Amounts consist of automobile lease payments made by the Company, tax
planning services and club dues for certain of the executives.
(5) As of December 31, 1995, the only restricted Shares outstanding that were
granted to the named executive officers were as follows: Mr. Harris, 5,000
in 1993 and 5,000 in 1994; and Mr. Morrell, 10,000 in 1994. The aggregate
value of these restricted Shares is based on the closing sales price of
the Company's Common Stock on the date of the grant. The restricted period
with respect to such Shares for Mr. Harris terminated on February 16, 1996
for those granted in 1993, and will terminate on February 15, 1997 for
those granted in 1994. The restricted period with respect to such Shares
for Mr. Morrell will terminate on April 19, 1997.
(6) Except as noted in footnote 7 below, these amounts represent matching
contributions by the Company to the TRIP and the defined contribution
portion of the Eljer Supplemental Benefit Plan (see "Defined Benefit and
Other Retirement Plans" below) on behalf of the named individuals.
(7) With respect to Mr. Arbuckle, these amounts include lump sum retirement
payments of $369,834 in 1995, $135,333 in 1994, $377,816 in 1993 earned
pursuant to the pension related benefit portion of the Eljer Supplemental
Benefit Plan. The payments reflect benefits as of December 31, 1995,
December 31, 1994 and December 31, 1993, respectively, a significant
amount of which Mr. Arbuckle earned prior to becoming President and Chief
Executive Officer of the Company.
10
<PAGE>
OPTION/SAR GRANTS
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the year ended December 31, 1995 to
each of the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS/ VALUE AT ASSUMED
UNDERLYING SARS ANNUAL RATES OF STOCK
OPTIONS/ GRANTED TO EXERCISE PRICE APPRECIATION FOR
SARS EMPLOYEES PRICE OPTION TERM(1)
-------------------------
GRANTED IN FISCAL PER EXPIRATION
NAME (#)(2) YEAR SHARE DATE 5%(3) 10%(4)
- ---- ---------- ---------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Scott G. Arbuckle....... 25,000 22.3% $5.88 2/22/05 $92,369 $234,080
James A. Harris......... 10,000 8.9% $5.88 2/22/05 $36,947 $ 93,632
James F. Thomason....... 10,000 8.9% $5.88 2/22/05 $36,947 $ 93,632
George W. Hanthorn(5)... -- -- -- -- -- --
G. Michael Morrell...... 10,000 8.9% $5.88 2/22/05 $23,917(6) $ 55,737(7)
</TABLE>
- --------
(1) The values shown are based on the indicated assumed annual rates of
appreciation compounded annually. Actual gains realized, if any, on stock
option exercises and Common Stock holdings are dependent on the future
performance of the Common Stock and overall stock market conditions. There
can be no assurance that the values shown in this table will be achieved.
(2) Options granted in 1995 did not include stock appreciation rights
("SARs").
(3) Represents an assumed market price per share of Common Stock of $9.57,
unless otherwise noted.
(4) Represents an assumed market price per share of Common Stock of $15.24,
unless otherwise noted.
(5) George W. Hanthorn was awarded no options in 1995. His most recent award
was October 17, 1994, which is Mr. Hanthorn's initial hire date.
(6) Represents an assumed market price per share of Common Stock of $8.27.
(7) Represents an assumed market price per share of Common Stock at $11.45.
OPTION/SAR EXERCISES
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock and SARs during the year ended
December 31, 1995, and the unexercised options held and the value thereof at
that date, by each of the named executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAREND OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED VALUE FISCAL YEAREND (#) FISCAL YEAREND ($)
ON EXERCISE REALIZED ------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Scott G. Arbuckle....... -0- -0- 106,046 85,000 78,670 249,764
James A. Harris......... -0- -0- 27,725 27,375 20,327 90,984
James F. Thomason....... -0- -0- 31,300 27,500 20,421 91,015
George W. Hanthorn...... -0- -0- 3,750 11,250 13,593 40,781
G. Michael Morrell...... -0- -0- -0- 10,000 -0- 48,750
</TABLE>
11
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS
The Long-Term Incentive Plan provides for awards based on performance units
to key executives. Units are earned based on the achievement of corporate
performance goals established by the Compensation Committee.
The Performance Target for the three-year period ended December 31, 1995
Performance Period was based on cumulative earnings per share excluding
certain unusual items. Results achieved were 110% of the target level.
<TABLE>
<CAPTION>
TARGET PAYOUT AMOUNT
AWARD @110% OF TARGET
-------- ---------------
<S> <C> <C>
Scott G. Arbuckle...................................... $525,000 $577,500
James A. Harris........................................ 125,300 137,830
James F. Thomason...................................... 179,000 196,900
George W. Hanthorn..................................... 80,555 88,611
G. Michael Morrell..................................... 86,624 95,286
</TABLE>
DEFINED BENEFIT AND OTHER RETIREMENT PLANS
The following table illustrates the amount of annual pension benefits on a
straight-life annuity basis for eligible employees retiring at age 65 in the
specified remuneration and years-of-service classifications under the
Retirement Plan, the Excess Plan and Supplemental Plan discussed below.
Offsets for Social Security payments and other offsets provided for in the
plans are reflected in this table.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE AT RETIREMENT
--------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 150,000......................... $ 30,662 $ 40,883 $ 51,103 $ 61,324 $ 71,545
200,000......................... 41,912 55,883 69,853 83,824 97,795
300,000......................... 64,412 85,883 107,353 128,824 150,295
400,000......................... 86,912 115,883 144,853 173,824 202,795
500,000......................... 109,412 145,883 182,353 218,824 255,295
750,000......................... 165,662 220,883 276,103 331,324 386,545
1,500,000......................... 334,412 445,883 557,353 668,824 780,295
</TABLE>
The Retirement Plan for Salaried Employees of Eljer Manufacturing, Inc. (the
"Retirement Plan") is a noncontributory, defined benefit plan for certain of
its salaried employees. The amount of a participant's pension benefits depends
primarily on years of employment, age at retirement and average annual
compensation (salary plus bonus, whether paid in cash or stock) for the five
successive highest-paid employment years out of the employee's last 10 years
of employment. Participants become fully vested in their accrued pension
benefits after five years of service.
The Retirement Plan was amended effective December 31, 1995, to freeze
compensation for benefit purposes at 1995 levels. In addition, benefit service
for participants under age 50 as of December 31, 1995, has been frozen;
participants age 50 or over continue to accrue service for benefit purposes.
All compensation received after 1995 is excluded in the determination of
benefits; all service after 1995 is excluded except for participants over the
age 50 on December 31, 1995.
The Company maintains two non-qualified, unfunded benefit plans (the "Excess
Plan" and the "Supplemental Plan") pursuant to which benefits of certain
participants under the Retirement Plan and TRIP, are supplemented to account
for limitations imposed on benefits under these plans by the Internal Revenue
Code of 1986, as amended (the "Code"). Benefits under the Excess Plan are
determined by reference to an employee's benefits under the Retirement Plan
and benefits under the Supplemental Plan are determined by reference to an
12
<PAGE>
employee's benefits under the Retirement Plan and TRIP calculated in each case
without regard to the contribution and benefit limitations contained in the
Code. In calculating an employee's benefits under the TRIP related portion of
the Supplemental Plan, amounts credited to an employee under such plan are
deemed to be invested in shares of Common Stock. Generally, benefits under the
Excess Plan and the Retirement Plan related portion of the Supplemental Plan
are payable at the time and in the form benefits are payable to an employee
under the Retirement Plan and benefits under the TRIP related portion of the
Supplemental Plan are payable in a single sum payment following an employee's
termination of employment with the Company or its participating subsidiaries,
death or disability. The Board has authorized the Eljer Pension Committee to
administer the Excess Plan and the Retirement Plan portion of the Supplemental
Plan and the Eljer TRIP Administrative and Investment Committee to administer
the TRIP related portion of the Supplemental Plan; provided that the Board
determines in each case the methods by which benefits are accumulated and
distributed (such as the timing and form of benefit payments) under the Excess
Plan and the Supplemental Plan. The amendment to the Retirement Plan discussed
above is also applicable to the Excess Plan in the same manner it affects
benefits and service earned under the Retirement Plan. The Company's
obligations under the Supplemental Plan and the Excess Plan are partially
secured by the assets of a grantor trust held by Wachovia Bank of North
Carolina, N.A., as trustee.
For purposes of determining the benefits under the Retirement Plan, the
Excess Plan and the Supplemental Plan for the named executive officers,
credited years of service and the amount of covered compensation (salary plus
bonuses paid in cash or stock) for 1995 are as follows: Mr. Arbuckle, 33 years
and $594,775; Mr. Harris, seven years and $216,863; Mr. Thomason, six years
and $277,969; and Mr. Hanthorn, two years and $210,416. In calculating
credited years of service, years of service with Household International, Inc.
prior to the spin-off of the Company have been taken into account.
The Company maintains TRIP, which is a defined contribution plan intended to
constitute a qualified plan under Section 401(a) of the Code containing a
salary reduction feature, pursuant to which eligible employees of the Company
and its participating subsidiaries who are not covered by a collective
bargaining agreement may elect to contribute a portion of their compensation
on a before-tax and/or an after-tax basis and the Company and its
participating subsidiaries make matching contributions in an amount not
exceeding 50% of each employee's compensation contributed to TRIP up to 6% of
the employee's compensation. TRIP was amended effective January 1, 1996 to
include a profit sharing contribution referred to as "TRIP+" based, in part,
on each employee's years of credited service under TRIP. TRIP+ contributions
range from 2% of an employee's compensation to 9% of an employee's
compensation. Employees' contributions, matching contributions, and TRIP+
contributions are subject to certain restrictions and limitations imposed on
TRIP by the Code and the maximum amount of compensation that can be considered
under TRIP on behalf of an employee for 1996 is $150,000. Employees' may,
subject to certain limitations contained in TRIP, elect to invest their TRIP
accounts in certain investment funds, including a fund consisting primarily of
Common Stock.
Mr. Morrell is covered by a retirement plan of Selkirk Manufacturing
Limited, an indirect wholly-owned subsidiary of the Company. The plan provides
for an annual retirement benefit to Mr. Morrell, beginning at age 60, equal to
two-thirds of his final average compensation. Final average compensation means
the average annual compensation during the last three years of Mr. Morrell's
employment. The amount of covered compensation for 1995 to Mr. Morrell was
$217,279.
EXECUTIVE COMPENSATION (INCLUDING TERMINATION OF EMPLOYMENT) AGREEMENTS
Mr. Arbuckle entered into an agreement with the Company in 1991 that
provides for, among other things, certain continued compensation in the event
of (i) termination of Mr. Arbuckle's employment by the Company prior to age 65
for any reason other than willful and deliberate misconduct or disability for
a specified period that prevents him from reasonably performing his duties or
(ii) resignation of employment prior to age 65 by reason of reassignment to a
lesser rank or status, reduction of salary, benefits or target bonus, or
reassignment to a geographic area more than 50 miles from his residence as of
the date the agreement was executed.
13
<PAGE>
In the event Mr. Arbuckle's employment is terminated or he resigns for any
such reason described above, he will be entitled for 18 months thereafter to
(i) continued salary (prorated for the partial year), (ii) continued target
bonuses (prorated for the partial year) and (iii) continuation of pension
accrual, savings plan contributions, deferred compensation (if any) and
medical and life insurance benefits or, in each case under this clause (iii),
the economic equivalent thereof. Benefit plan accruals that would be payable
on a deferred basis were he to continue in employment, may, at the Company's
option, be deferred or payable in an actuarially equivalent lump sum at the
end of the 18-month period.
Messrs. Harris and Thomason entered into agreements with the Company in
1991. Mr. Hanthorn entered into an agreement with the Company in 1994. They
are identical to Mr. Arbuckle's agreement, except that (i) the continuation of
compensation provisions apply if the officer's employment is terminated or he
resigns (for the same reasons set forth in Mr. Arbuckle's agreement) prior to
the termination of the agreement (rather than at any time prior to age 65) and
(ii) the period of continued compensation post-employment is 12 months (rather
than 18 months). The agreements with Messrs. Harris and Thomason were
originally scheduled to terminate on May 1, 1995, and the agreement with Mr.
Hanthorn was originally scheduled to terminate on October 17, 1995. The term
of each of the agreements with Messrs. Harris, Thomason and Hanthorn is,
however, renewed automatically for successive one-year periods unless the
Company notifies the officer at least 90 days prior to the scheduled
termination date of the agreement (as originally fixed or as extended) of the
Company's election not to extend the agreement beyond such date. The term of
the agreements with Messrs. Harris, Thomason and Hanthorn were automatically
extended the additional one year period.
Mr. Morrell entered into an agreement with the Company in 1994 with terms
that are substantially the same as those contained in the agreements with
Messrs. Harris, Thomason and Hanthorn, with one exception. The term of the
agreement has no expiration date.
CHANGE-IN-CONTROL AGREEMENTS
The Company has entered into agreements with Messrs. Harris, Thomason,
Hanthorn and Morrell and four other officers of the Company, providing
severance benefits in the event their employment is terminated within two
years following a change-in-control of the Company. The provisions of these
agreements supersede the provisions of the compensation agreements described
above to the extent that those provisions would apply following a change-in-
control of the Company.
Under these agreements, a "change-in-control" is defined as the occurrence
of any one of the following: (i) the acquisition by a person or entity of
shares of stock of the Company representing 25 percent or more of the combined
voting power of the stock of the Company; (ii) a change in the majority of the
Board of Directors; or (iii) shareholder approval of a liquidation of the
Company, a sale or disposition of all or substantially all of the Company's
assets or a merger, consolidation or reorganization of the Company.
If the employment of an officer who is a party to a change-in-control
agreement is terminated by the Company other than for "cause" within two years
following a change-in-control, or if such an officer voluntarily terminates
his or her employment within such time period for "good reason", then the
officer will be entitled to the following severance benefits: (i) two times
the officer's highest annual base salary while employed by the Company; (ii)
two times the greater of (a) the officer's average annual bonus over the
preceding three years or (b) the officer's target bonus for the year in which
the change-in-control occurs; (iii) the officer's unpaid base salary and
accrued vacation pay through the date of employment termination; and (iv) two
years of continued coverage under welfare benefit plans, pension plans and
profit sharing plans (however, in the event an officer receives substantially
similar benefits from a subsequent employer, the coverage under the officer's
change-in- control agreement will be discontinued).
Mr. Arbuckle also has entered into a change-in-control agreement with terms
similar to those summarized above. However, in addition to the methods of
termination entitling officers to payment under the agreements described
above, Mr. Arbuckle's severance benefits also will be payable upon any
voluntary termination of his
14
<PAGE>
employment within the two-year period following a change-in-control. Mr.
Arbuckle's severance benefits will consist of the following: (i) three times
his highest annual base salary while employed by the Company; (ii) three times
the greater of (a) his average annual bonus over the preceding three years or
(b) his target bonus for the year in which the change-in-control occurs; (iii)
his unpaid base salary and accrued vacation pay through the date of employment
termination; and (iv) three years of continued coverage under welfare benefit
plans, pension plans, and profit sharing plans (except that if Mr. Arbuckle
receives substantially similar benefits from a subsequent employer, the
continued coverage under his change-in-control agreement will be
discontinued).
Upon a change-in-control of the Company, all outstanding awards granted
under the Company's Long- Term Executive Incentive Compensation Plan and the
1995 Long-Term Incentive Plan shall also become fully vested, exercisable
and/or payable.
The Company's obligations under the change-in-control agreements with all of
the officers of the Company are partially secured by a cash-collateralized
letter of credit in the amount of $2,500,000 held by Wachovia Bank of North
Carolina, N.A., as trustee.
Under the terms of the Merger Agreement, Parent has agreed to cause the
Surviving Corporation to honor and perform all existing change-in-control
agreements with the officers of the Company.
REPRICING OF OPTIONS
In 1995, the Company did not adjust or amend the exercise price of stock
options or SARs previously granted to any of the named executive officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Frank J. Morgan, who served on the Compensation Committee in 1995, served in
a salaried executive office as Chairman of the Board in 1992. In 1993, the
position of Chairman of the Board became a non-employee position.
COMPENSATION COMMITTEE
The Company's executive compensation program is administered by the
Compensation Committee. The Board designates the members and the Chairman of
the committee. At the present time, the Compensation Committee consists of all
of the directors who are not employees of the Company. The Compensation
Committee establishes the general compensation policies of the Company,
establishes the compensation plans and specific compensation levels for
executive officers and administers the Company's Executive Incentive
Compensation Program, 1991 Long-Term Performance Plan, 1995 Long-Term
Incentive Plan and the Long-Term Executive Incentive Compensation Plan and
awards stock-based compensation to executive officers and employees of the
Company.
The following is a report submitted by members of the Compensation Committee
addressing the Company's compensation policy as it related to the executive
officers for fiscal 1995. The report and the information herein under
"Executive Compensation--Performance Graph" shall not be deemed to be
"soliciting material" or to be "filed" with the SEC or subject to the SEC's
proxy rules, except for the required disclosure herein, or to the liabilities
established under Section 18 of the Securities Exchange Act of 1934 (the
"Exchange Act") and such information shall not be deemed to be incorporated by
reference into any filing made by the Company under the Securities Act of 1933
or the Exchange Act.
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
To the Shareholders of Eljer Industries, Inc.:
As members of the Compensation Committee of the Board of Directors (the
"Committee") it is our responsibility to review and set compensation levels of
the executive officers of the Company, evaluate the performance of management
and consider management succession and related matters.
The Committee retains the services of Hewitt Associates LLC, a compensation
and benefits consulting firm ("Hewitt Associates"), to provide information to
the Committee to assist it in connection with the performance of its duties.
Hewitt Associates provides advice to the Committee with respect to the
compensation of executive officers of the Company. The Committee takes into
account the performance of the Company and how compensation paid by the
Company compares to compensation paid by a comparator group of companies.
Members of the Committee also review various compensation surveys provided
during the year by Hewitt Associates and other firms specializing in executive
compensation. In 1995, these surveys included reports of middle market
manufacturing and service companies, and the market data of general industry
companies of similar size. Salaries for the executives are reviewed by the
Committee on an annual basis and may be increased at that time on the basis of
salary increase guidelines established each year by the Company, the
individual performance, and changes in pay levels at the comparator companies
and in industry in general. This group is referenced for establishing all
components of pay. The Committee believes that this group is the most
representative comparator group of companies for establishing competitive
levels of executive pay. Competitors chosen for comparison purposes in the
compensation area generally are not the same companies which comprise the peer
group index in the performance graph included in this Proxy Statement. The
Committee believes that the Company's most direct competitors for executive
talent are not necessarily those companies that would be included in the peer
group established for comparing shareholder returns.
In establishing executive compensation, the Committee neither bases its
decisions entirely on quantitative relative weights of various factors, nor
does it follow a mathematical formula. Rather, the Committee exercises
discretion and makes judgments after considering all factors that are deemed
relevant, including the achievement of certain objective targets set by the
Committee relating to the Company's financial performance. In establishing
each component of pay, the Committee considers the entire pay package.
Executive compensation policies are designed to use executive pay as
incentive to promote the Company's overall business strategies, values and
management initiatives. The policies are intended to (i) attract and retain
those kinds of executives who are considered essential to the long-term
success of the Company through the salaried administration program; (ii)
support a performance-based environment that rewards achievement of
established Company goals and corporate performance through the payment of
cash awards annually; and (iii) reward executives for long-term strategic
management and the enhancement of shareholder value through stock- based and
long-term incentive awards. The total compensation program emphasizes variable
compensation opportunities over time and encourages long-term stock ownership.
Section 162(m) of the Omnibus Budget Reconciliation Act of 1993 (the "1003
Act") limits the deductibility of compensation in excess of $1 million paid to
the Company's chief executive officer and the next four highest paid officers
during any fiscal year, beginning with 1994, unless such compensation meets
certain requirements.
The Compensation Committee believes that the current Executive Compensation
program is generally fully deductible. However, the Committee may occasionally
grant restricted shares or compensation regarding the long-term incentive
programs that are in excess of the $1 million limit and may not be deductible.
Therefore, the Committee's policy is to retain the discretion to pay non-
deductible compensation if that would be in the best interests of the Company
and shareholders under the circumstances. Nonetheless, all taxable income for
1995 of the Chief Executive Officer and other named executive officers
qualified as deductible by the Company.
16
<PAGE>
For 1995, as in years past, the Company's executive compensation program
consisted of three elements of a total compensation program: base salary,
annual incentive bonus and long-term, primarily stock-based, incentive
compensation. This approach emphasizes the management of total compensation
rather than the administration of separate components of pay. In its
compensation decisions with respect to 1995, the Committee took particular
note of the management skills, abilities and dedication needed in order for
the Company to continue to make progress in resolving financial, legal and
operating difficulties facing the Company. The Committee attempts to structure
executive compensation packages so that the compensation paid to the Company's
executive officers, both individually and collectively, will rank in the
median range of the compensation reported by the comparator companies, and
actual pay in 1995 fell within this range.
BASE SALARIES
In establishing the base salaries for executive officers, the Committee
considers the individual executive's level of responsibility. That
responsibility is compared to compensation surveys provided in large part by
Hewitt Associates. The Committee feels that a larger portion of executive
compensation opportunity should consist of performance-based incentives.
Consequently, the Company's salaries continue to average at the mid-point
range of base salaries reported by comparator companies for the year 1995.
On February 22, 1995, the salary of Scott G. Arbuckle, the Company's chief
executive officer ("CEO"), was raised, by the Committee, from $371,000 to
$400,000--an increase of approximately 8%. In fixing the CEO's salary, the
Committee took into account the Company's continued financial and operational
progress and determined that a merit base salary increase was in order. The
Committee based the amount of the increase partly on industry comparative
salaries for chief executive officers, which were higher than the CEO, and
partly on industry averages for pay increases (3 1/2% to 4 1/2%) for chief
executive officers.
ANNUAL INCENTIVES
Bonuses awarded under the Executive Compensation Program consist of a
discretionary portion and a non-discretionary portion that is based on the
achievement of objectives established each year by the Committee. Bonus
opportunities are established to approximate median practices among the
comparator companies. Under the annual incentive plans, financial targets are
set at levels approved by the Board of Directors and include specific
accounting measures of success. In February 1995, the Committee established
1995 performance goals for the Company's executive officers. The Committee
determined that 30% of each officer's bonus would be based on whether an
earnings per share target was met; 30% on whether a return on net assets
target was met; 20% on whether a net operating income (excluding unusual
items) target was met; and, 20% would be discretionary with consideration
given to the achievement of certain individual performance objectives
established for each officer. This discretionary portion of annual earned
awards was based on discretionary factors that reflected differences in
individual contributions to the Company's success for the year.
In February 1996, the Committee met, reviewed the continued improved
operating performance of the Company in fiscal 1995, but determined that the
net operating income target established by the Committee under the bonus
program had not been met. Partial awards were given for achievement toward
return on net assets and earnings per share objectives. The Committee also
reviewed the CEO's and the other executive officers' success in meeting
individual performance objectives. Based on its evaluation of all factors, the
Committee concluded that the CEO and other executive officers achieved
improvements in long-term financial performance and continued to position the
Company for stability and future growth, and awarded commensurate bonuses. In
total, the bonus payments either met or were slightly below target levels
because the operating performance of the Company, and the executives'
performance, averaged target performance levels. The Committee believes that
the bonuses paid to the CEO and other executives for services in 1995, as a
percentage of base salary, are in keeping with the improvements made to
operations.
LONG-TERM INCENTIVES
Long-term incentives provide a significant portion of total compensation for
executives and encourage long-term stock ownership. Stock-based awards under
the Long-Term Executive Incentive Compensation Plan
17
<PAGE>
strengthen the ability of the Company to attract, motivate and retain capable
executives and more closely align the interests of management with those of
shareholders. Long-term awards granted in 1995 under this plan consisted of
non-qualified stock options. Unlike cash, the value of stock options and to a
lesser extent restricted stock, will not be immediately realized by the
executive. Stock options are granted with exercise prices equal to the
prevailing market value of the underlying stock on the date of grant, and will
only have value if the Company's stock price increases, resulting in a
commensurate benefit for the Company's shareholders. Options granted in 1995
vest in equal amounts over four years and executives must be employed by the
Company or an affiliate at the time of vesting in order to exercise the
options. Restricted stock is subject to a restricted period during which the
stock will be forfeited if the executive's employment is terminated and during
which the stock cannot be transferred. The restricted period for awards
granted is three years. Restricted stock awards are made for the hiring and
retention of key executives. In establishing relative levels of stock options
and restricted stock grants the Committee references marketplace practices in
this regard.
The Committee considers the grant of stock-based compensation to executive
officers and key managers on an annual basis. The amount of stock-based
compensation awarded is based upon the position held by an executive, his
expected contribution to the Company's future growth and profitability and his
current equity holdings. In granting stock-based compensation, the Committee
considers awards reflected in compensation surveys and attempts to base awards
at the mid-level indicated by the practices among the comparator companies.
The Committee did not reprice any options in 1995, and has not considered it
necessary to establish target stock ownership levels for its executive
officers.
In accordance with the foregoing guidelines, the CEO was granted options to
purchase 25,000 shares of Common Stock in 1995. The Committee believes that
top executives are best motivated by the opportunity for equity ownership and
that fact, coupled with practices at the comparator companies, suggested these
shares as an appropriate size of the option grant to the CEO.
No awards previously granted under the Company's 1991 Long-Term Performance
Plan were earned during the three-year performance period ended December 31,
1993 because performance targets were not achieved. In 1993, the Committee
established new long-term incentive awards under the Company's 1991 Long-Term
Performance Plan for the performance period ending December 31, 1995, and
established the cumulative earnings per share targets (excluding certain
unusual items) relating to those awards. Payouts to the Named Executive
Officers for the 1993-1995 award period are shown in the Summary Compensation
Table. The Committee has established a new long-term incentive program, the
1995 Long-Term Incentive Plan, designed to further strengthen the relationship
between executive pay and shareholder value creation. The incentive awards
under the 1995 Long-Term Incentive Plan will replace the annual grants of
performance awards under the 1991 Long-Term Incentive Plan for the performance
period beginning in 1995. Award opportunities under the 1995 Long-Term
Incentive Plan will be directly tied to stock price growth. The Committee
believes that the flexibility provided under the 1995 Long-Term Incentive Plan
will best complement the existing stock option and restricted stock components
of the Company's long-term incentive program, and will provide an effective
means for further tieing the incentive opportunities of the Company's
executives to shareholder value creation.
SUMMARY
The Committee believes that executive compensation levels during fiscal 1995
adequately reflect the Company's compensation goals and policies.
Compensation Committee
Walter C. Minnick, Chairman
Frank J. Morgan
John H. Deininger
C.A. Rundell, Jr.
Paul E. Price
18
<PAGE>
COMPARISON OF STOCKHOLDER RETURNS
The following graph sets forth the cumulative total shareholder return for
the Common Stock, the New York Stock Exchange Market Index and a Competitor
Group Index for the years indicated as prescribed by SEC rules.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
AMONG ELJER INDUSTRIES, INC.,
NYSE MARKET INDEX AND COMPETITOR GROUP INDEX(2)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Company...................................... 91.23 126.32 92.98 80.70 150.88
NYSE Market.................................. 129.41 135.50 153.85 150.86 195.61
Competitor Group............................. 140.77 189.36 238.01 166.79 229.89
</TABLE>
- --------
(1) Total return assuming reinvestment of dividends. Assumes $100 invested on
January 1, 1991, in the Common Stock, the NYSE Market Index and a Company
constructed competitor group index.
(2) The Company constructed competitor group consists of the following
companies: Hughes Supply, Inc., Manville Corporation, Masco Corporation,
Morgan Products Ltd., Noland Company, Nortek, Inc., Owens- Corning
Fiberglass Corporation, Ply Gem Industries, Inc. and Waxman Industries,
Inc. Total return calculations were weighted according to the respective
company's market capitalization.
19
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires directors and officers of the
Company and persons who own more than 10 percent of the Common Stock to file
with the SEC initial reports of ownership and reports of changes in ownership
of the Common Stock. Directors, officers and more than 10 percent shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the year ended December 31, 1995 (the Company's
last full fiscal year), all filings applicable to its directors, officers and
more than 10 percent beneficial owners were in compliance with Section 16(a)
filing requirements.
20
<PAGE>
EXHIBIT 99.1
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ELJER INDUSTRIES, INC.
AT
$24.00 NET PER SHARE
BY
ZURN ACQUISITION CO., INC.
A WHOLLY OWNED SUBSIDIARY
OF
ZURN INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JANUARY 21, 1997, UNLESS THE OFFER IS EXTENDED
THE BOARD OF DIRECTORS OF ELJER INDUSTRIES, INC. (THE "COMPANY") HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER DESCRIBED HEREIN IS FAIR TO,
AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS (THE "STOCKHOLDERS"),
HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS (SUBJECT TO THE LIMITATIONS
SET FORTH IN THE MERGER AGREEMENT) THAT THE STOCKHOLDERS ACCEPT THE OFFER AND
TENDER ALL OF THEIR SHARES PURSUANT THERETO.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN)
THAT NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF THE
COMPANY WHICH CONSTITUTES AT LEAST 50.1% OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS ON THE DATE OF PURCHASE. THE OFFER IS ALSO SUBJECT TO CERTAIN
OTHER CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE "INTRODUCTION" AND
SECTIONS 1 AND 14 OF THIS OFFER TO PURCHASE.
----------------
IMPORTANT
Any Stockholder desiring to tender all or a portion of that Stockholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
manually signed facsimile thereof) in accordance with the instructions in the
Letter of Transmittal, mail or deliver it and any other required documents to
the Depositary and either deliver the certificates for those Shares to the
Depositary along with the Letter of Transmittal or tender those Shares
pursuant to the procedures for book-entry transfer set forth in Section 3
hereof, or (2) request his or her broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for the stockholder. Any
Stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact that broker,
dealer, commercial bank, trust company or other nominee if the stockholder
wishes to tender such Shares.
Any Stockholder who desires to tender Shares and whose certificates
representing those Shares are not immediately available or who cannot comply
with the procedure for book-entry transfer on a timely basis should tender
those Shares by following the procedures for guaranteed delivery set forth in
Section 3 hereof.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their addresses and telephone numbers set forth
on the back cover of this Offer to Purchase. Requests for additional copies of
this Offer to Purchase, the Letter of Transmittal and other related materials
may be directed to the Information Agent or to brokers, dealers, commercial
banks and trust companies.
----------------
The Dealer Manager for the Offer is:
DEUTSCHE MORGAN GRENFELL INC.
December 20, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION............................................................ 1
1. Terms of the Offer................................................. 3
2. Acceptance for Payment and Payment for Shares...................... 4
3. Procedure for Tendering Shares..................................... 5
4. Withdrawal Rights.................................................. 7
Certain Federal Income Tax Consequences of the Offer and the
5. Merger............................................................ 8
6. Price Range of the Shares; Dividends on the Shares................. 9
7. Effect of the Offer on the Market for the Shares, Stock Exchange
Listing
and Exchange Act Registration, and Margin Securities.............. 10
8. Certain Information Concerning the Company......................... 11
9. Certain Information Concerning Purchaser and Parent................ 13
10. Source and Amount of Funds......................................... 15
11. Background of the Offer............................................ 16
12. Purpose of the Offer and the Merger; Plans for the Company; the
Merger
Agreement; Other Matters.......................................... 19
13. Dividends and Distributions........................................ 32
14. Certain Conditions of the Offer.................................... 33
15. Certain Legal Matters.............................................. 34
16. Fees and Expenses.................................................. 36
17. Miscellaneous...................................................... 36
SCHEDULE I.............................................................. S-1
</TABLE>
<PAGE>
To the Holders of Common Stock of
Eljer Industries, Inc.:
INTRODUCTION
Zurn Acquisition Co., Inc., a Delaware corporation ("Purchaser"), hereby
offers to purchase all of the outstanding shares of common stock, par value
$1.00 per share (the "Shares" or the "Common Stock"), of Eljer Industries,
Inc., a Delaware corporation (the "Company"), at a purchase price of $24.00
per Share, net to the seller in cash (the "Offer Consideration"), upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). Purchaser
is a direct, wholly owned subsidiary of Zurn Industries, Inc., a Pennsylvania
corporation ("Parent").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
December 14, 1996 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser and further provides that after the
purchase of Shares pursuant to the Offer, subject to the satisfaction or
waiver of certain conditions, Purchaser will be merged with and into the
Company (the "Merger"), with the Company surviving the Merger as a wholly
owned subsidiary of Parent (the "Surviving Corporation"). In the Merger, each
Share (excluding Shares owned, directly or indirectly, by the Company or any
of its wholly owned subsidiaries or by Parent, Purchaser or any other wholly
owned subsidiary of Parent, and Shares owned by stockholders who have properly
exercised their appraisal rights under Delaware law) issued and outstanding
immediately prior to the effective time of the Merger (the "Effective Time")
will be converted at the Effective Time into the right to receive the Offer
Consideration (or any greater amount paid pursuant to the Offer), in cash,
without interest and less any required withholding taxes (the "Merger
Consideration").
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS DETERMINED THAT EACH
OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY'S STOCKHOLDERS (THE "STOCKHOLDERS"), HAS APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER,
AND RECOMMENDS (SUBJECT TO THE LIMITATIONS SET FORTH IN THE MERGER AGREEMENT)
THAT THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES PURSUANT
THERETO.
BEAR, STEARNS & CO. INC., THE COMPANY'S FINANCIAL ADVISOR ("BEAR STEARNS"),
HAS DELIVERED TO THE COMPANY ITS OPINION THAT THE CONSIDERATION TO BE RECEIVED
BY THE STOCKHOLDERS IN THE OFFER AND THE MERGER IS FAIR, FROM A FINANCIAL
POINT OF VIEW, TO THE STOCKHOLDERS. A COPY OF THE WRITTEN OPINION OF BEAR
STEARNS IS CONTAINED IN THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON
SCHEDULE 14D-9 (THE "SCHEDULE 14D-9") FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION") IN CONNECTION WITH THE OFFER, A COPY OF WHICH IS
BEING FURNISHED TO THE STOCKHOLDERS CONCURRENTLY WITH THIS OFFER TO PURCHASE.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES WHICH CONSTITUTES AT LEAST 50.1% OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM
SHARE CONDITION"). THE OFFER ALSO IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTIONS 1 AND 14.
The Company has informed Purchaser that, as of December 13, 1996, 7,153,657
Shares were issued and outstanding, and 761,404 Shares were reserved for
issuance to holders of outstanding stock options granted by the Company (the
"Options"). At least 3,965,446 Shares must be validly tendered pursuant to the
Offer and not withdrawn in order for the Minimum Share Condition to be met.
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including, if required, the approval of the Merger by
the requisite vote or consent of the Stockholders. Under the
<PAGE>
Delaware General Corporation Law (the "DGCL"), the Stockholder vote necessary
to approve the Merger must be the affirmative vote of at least a majority of
the outstanding Shares, including Shares held by Purchaser and its affiliates.
If the Minimum Share Condition is satisfied and Purchaser purchases at least
50.1% of the outstanding Shares in the Offer, Purchaser will be able to effect
the Merger without the affirmative vote of any other Stockholder. If, however,
Purchaser acquires at least 90% of the outstanding Shares pursuant to the
Offer or otherwise, Purchaser will be able to effect the Merger pursuant to
the "short-form" merger provisions of Section 253 of the DGCL, without prior
notice to, or any action by, any other Stockholder. In that event, Purchaser
intends to effect the Merger as promptly as practicable following the purchase
of Shares in the Offer. See Section 12.
The Merger Agreement is more fully described in Section 12. Certain federal
income tax consequences of the sale of Shares pursuant to the Offer and the
exchange of Shares for the Merger Consideration pursuant to the Merger are
described in Section 5.
Tendering Stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 to the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer or
the Merger. Purchaser will pay all charges and expenses of Deutsche Morgan
Grenfell Inc., as the Dealer Manager (the "Dealer Manager"), Harris Trust
Company of New York, as the depositary (the "Depositary"), and Morrow & Co.,
Inc., as the information agent (the "Information Agent"), in connection with
the Offer. See Section 16.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS
MADE WITH RESPECT TO THE OFFER.
2
<PAGE>
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment (and thereby purchase) all
Shares that are validly tendered and not withdrawn in accordance with Section
4 prior to the Expiration Date. As used in the Offer, the term "Expiration
Date" means 12:00 midnight, New York City time, on Tuesday, January 21, 1997,
unless and until Purchaser, in accordance with the terms of the Offer and the
Merger Agreement, shall have extended the period of time during which the
Offer is open, in which event the term "Expiration Date" means the latest time
and date at which the Offer, as so extended, expires. As used in this Offer to
Purchase, "business day" has the meaning set forth in Rule 14d-1(c)(6) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
In the event that the Offer is not consummated, Purchaser may seek to
acquire Shares through open-market purchases, privately negotiated
transactions or otherwise, upon such terms and conditions and at such prices
as it shall determine, which may be more or less than the Offer Consideration
and could be for cash or other consideration.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Share Condition and the expiration or termination of all waiting
periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the regulations thereunder (the "HSR Act"). The Offer is also
subject to certain other conditions set forth in Section 14. Subject to the
terms of the Merger Agreement, Purchaser expressly reserves the right (but
will not be obligated) to waive any or all of the conditions of the Offer.
Pursuant to the Merger Agreement, if by the Expiration Date any or all of the
conditions to the Offer are not satisfied or waived, Purchaser will extend the
Expiration Date for one or more periods not exceeding 60 calendar days (or, if
required by the Company in its sole discretion, 120 calendar days) in the
aggregate. In addition, the Merger Agreement permits Purchaser to extend the
Expiration Date for up to 20 business days after the initial Expiration Date.
Subject to the terms of the Merger Agreement and the rights of tendering
Stockholders to withdraw their Shares, Purchaser will retain all tendered
Shares until the Expiration Date.
Subject to the terms of the Merger Agreement described above, Purchaser
expressly reserves the right, subject to applicable law, to extend the period
of time during which the Offer is open by giving oral or written notice of
such extension to the Depositary and by making a public announcement of such
extension. There can be no assurance that Purchaser will exercise its right to
extend the Offer. Purchaser also expressly reserves the right, subject to
applicable law (including applicable rules of the Commission) and to the terms
of the Merger Agreement, at any time or from time to time, (i) to delay
acceptance for payment of, or payment for, any Shares, regardless of whether
the Shares were theretofore accepted for payment, or to terminate the Offer
and not accept for payment or pay for any Shares not theretofore accepted for
payment or paid for, upon the occurrence of any of the conditions specified in
Section 14, by giving oral or written notice of such delay in payment or
termination to the Depositary, and (ii) to waive any conditions or otherwise
amend the Offer in any respect, by giving oral or written notice to the
Depositary. Any extension, delay in payment, termination or amendment will be
followed as promptly as practicable by public announcement, the announcement
in the case of an extension to be issued no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Without limiting the manner in which Purchaser may choose to make any
public announcement, Purchaser will have no obligation to publish, advertise
or otherwise communicate any such announcement, otherwise than by issuing a
release to the Dow Jones News Service or as otherwise may be required by law.
The reservation by Purchaser of the right to delay acceptance for payment of,
or payment for, Shares is subject to the provisions of Rule 14e-1(c) under the
Exchange Act, which requires that Purchaser pay the consideration offered or
return the Shares deposited by or on behalf of Stockholders promptly after the
termination or withdrawal of the Offer. Any delay in acceptance for payment or
payment beyond the time permitted by applicable law will be effectuated by an
extension of the period of time during which the Offer is open.
Pursuant to the terms of the Merger Agreement, without the prior written
consent of the Company, Purchaser will not (and Parent will cause Purchaser
not to) (i) decrease or change the form of consideration
3
<PAGE>
payable in the Offer or decrease the number of Shares sought pursuant to the
Offer, (ii) change the conditions to the Offer, (iii) impose additional
conditions to the Offer, (iv) extend the Expiration Date (except as required
by law and except as described in the second preceding paragraph), (v) waive
the Minimum Share Condition or (vi) amend any term of the Offer in any manner
adverse to holders of Shares; provided, however, that, except as set forth
above and subject to applicable legal requirements, Purchaser may waive any
other condition to the Offer in its sole discretion; and provided, further,
that the Offer may be extended in connection with the increase in the
consideration to be paid pursuant to the Offer so as to comply with applicable
rules and regulations of the Commission. Assuming the prior satisfaction or
waiver of the conditions to the Offer, Purchaser will accept for payment, and
pay for, in accordance with the terms of the Offer, all Shares validly
tendered and not withdrawn pursuant to the Offer as soon as practicable after
the Expiration Date.
The Commission has announced that, under its interpretation of Rules 14d-
4(c) and 14d-6(d) under the Exchange Act, material changes in the terms of a
tender offer or information concerning a tender offer may require that the
tender offer be extended so that it remains open a sufficient period of time
to allow security holders to consider such material changes or information in
deciding whether or not to tender or withdraw their securities. The minimum
period during which an offer must remain open following material changes in
the terms of the Offer or information concerning the Offer, other than a
change in price or a change in percentage of securities sought, will depend
upon the facts and circumstances, including the relative materiality of the
terms or information. If Purchaser decides to increase or, subject to the
consent of the Company, to decrease the consideration in the Offer, to make a
change in the percentage of Shares sought or to change or waive the Minimum
Share Condition and if, at the time that notice of any such change is first
published, sent or given to Stockholders, the Offer is scheduled to expire at
any time earlier than the tenth business day after (and including) the date of
that notice, the Offer will be extended at least until the expiration of that
period of ten business days.
The Company has provided Purchaser with its stockholder list and security
position listings for the purpose of disseminating the Offer to the
Stockholders. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares and will
be furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
Company stockholder list or, if applicable, who are listed as participants in
a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment (and thereby purchase) and
pay for Shares that are validly tendered and not properly withdrawn on or
prior to the Expiration Date, as soon as practicable after the later of the
following dates: (i) the Expiration Date and (ii) the date of satisfaction or
waiver of all the conditions to the Offer set forth in this Offer to Purchase.
Subject to the applicable rules of the Commission, Purchaser expressly
reserves the right to delay acceptance for payment of, or payment for, Shares
in order to comply, in whole or in part, with any other applicable law,
government regulation or condition contained therein. See Sections 1 and 14.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates for the
Shares (or a timely Book-Entry Confirmation (as defined in Section 3) with
respect to the Shares), (ii) the Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed with all required
signature guarantees or an Agent's Message (as defined below) in connection
with a book-entry transfer and (iii) all other documents required by the
Letter of Transmittal. See Section 3.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility (as defined in Section 3) to and received by the Depositary
and forming part of a Book-Entry Confirmation, which states that (i) such
Book-Entry Transfer Facility has received an express acknowledgement from the
participant in such Book-Entry Transfer Facility tendering the Shares that are
the subject of such Book-Entry Confirmation, (ii) such
4
<PAGE>
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and (iii) Purchaser may enforce such agreement against such
participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) tendered Shares as, if and when Purchaser
gives oral or written notice to the Depositary of Purchaser's acceptance of
such Shares for payment. In all cases, payment for Shares purchased pursuant
to the Offer will be made by deposit of the purchase price with the
Depositary, which will act as agent for the tendering Stockholders for the
purpose of receiving payment from Purchaser and transmitting payment to the
tendering Stockholders whose Shares shall have been accepted for payment. If,
for any reason, acceptance for payment of any Shares tendered pursuant to the
Offer is delayed, or Purchaser is unable to accept for payment Shares tendered
pursuant to the Offer, then, without prejudice to Purchaser's rights under
Section 14, the Depositary may, nevertheless, on behalf of Purchaser, retain
the tendered Shares, and such Shares may not be withdrawn, except to the
extent that the tendering Stockholders are entitled to withdrawal rights as
described in Section 4 and as otherwise required by Rule 14e-1(c) under the
Exchange Act. Under no circumstances will interest accrue on the consideration
to be paid for the Shares by Purchaser, regardless of any delay in making such
payment.
If any tendered Shares are not purchased for any reason or if certificates
are submitted for more Shares than are tendered, certificates for the Shares
not purchased or tendered will be returned pursuant to the instructions of the
tendering Stockholder without expense to the tendering Stockholder (or, in the
case of Shares delivered by book-entry transfer into the Depositary's account
at a Book-Entry Transfer Facility pursuant to the procedures set forth in
Section 3, the Shares will be credited to an account maintained at the
appropriate Book-Entry Transfer Facility) as promptly as practicable following
the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay the increased
consideration for all of the Shares purchased pursuant to the Offer, whether
or not the Shares were tendered prior to the increase in consideration.
3. PROCEDURE FOR TENDERING SHARES
Valid Tenders. For Shares to be validly tendered pursuant to the Offer,
either (i) a Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees
and any other documents required by the Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase on or prior to the Expiration Date and either (a)
certificates representing tendered Shares must be received by the Depositary
at any one of those addresses prior to the Expiration Date or (b) the Shares
must be delivered pursuant to the procedures for book-entry transfer set forth
below and a Book-Entry Confirmation must be received by the Depositary on or
prior to the Expiration Date or (ii) the tendering Stockholder must comply
with the guaranteed delivery procedures set forth below. No alternative,
conditional or contingent tenders will be accepted.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company and the Philadelphia Depository
Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in either of the Book-Entry
Transfer Facility systems may make book-entry delivery of Shares by causing
the applicable Book-Entry Transfer Facility to transfer the Shares into the
Depositary's account at the Book-Entry Transfer Facility in accordance with
the Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of the Shares may be effected through book-entry transfer
into the Depositary's account at the Book-Entry Transfer Facility, the Letter
of Transmittal (or a manually signed facsimile thereof), properly completed
and duly executed with any required signature guarantees and any other
required documents must, in any case, be transmitted to, and received by, the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date, or the tendering Stockholder must
comply with the guaranteed delivery procedures described below. The
confirmation of a book-entry transfer of Shares into the Depositary's account
at a Book-Entry Transfer Facility as described above is referred to as a
"Book-Entry Confirmation." DELIVERY OF THE LETTER OF TRANSMITTAL OR OTHER
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY OF
THE LETTER OF TRANSMITTAL OR SUCH OTHER DOCUMENTS TO THE DEPOSITARY.
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<PAGE>
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder (which term, for purposes of this Section, includes any participant in
either of the Book-Entry Transfer Facility systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loans associations and brokerage houses) that is a participant in
the Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(an "Eligible Institution"). In all other cases, all signatures on the Letter
of Transmittal must be guaranteed by an Eligible Institution. See Instruction
1 of the Letter of Transmittal. If the certificates representing Shares are
registered in the name of a person other than the signer of the Letter of
Transmittal or if payment is to be made or certificates for Shares not
tendered or not accepted for payment are to be returned to a person other than
the registered holder of the certificates surrendered, then the tendered
certificates representing Shares must be endorsed or accompanied by
appropriate stock powers, in each case signed exactly as the name or names of
the registered holder or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed by an Eligible
Institution as described above and as provided in the Letter of Transmittal.
See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a Stockholder wishes to tender Shares pursuant to
the Offer and the Stockholder's certificates are not immediately available or
the procedures for book-entry transfer cannot be completed on a timely basis
or time will not permit all required documents to be received by the
Depositary prior to the Expiration Date, the Shares may nevertheless be
tendered if all the following guaranteed delivery procedures are complied
with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser with this Offer
to Purchase, is received by the Depositary as provided below prior to the
Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer or a Book-Entry Confirmation with respect to all tendered Shares,
together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof) and all required signature
guarantees or an Agent's Message and any other documents required by the
Letter of Transmittal, are received by the Depositary within three New York
Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery.
THE NOTICE OF GUARANTEED DELIVERY MAY BE DELIVERED BY HAND OR TRANSMITTED BY
TELEGRAM, FACSIMILE TRANSMISSION OR MAILED TO THE DEPOSITARY AND MUST INCLUDE
AN ENDORSEMENT BY AN ELIGIBLE INSTITUTION IN THE FORM SET FORTH IN THE NOTICE
OF GUARANTEED DELIVERY.
IN ALL CASES, SHARES SHALL NOT BE DEEMED VALIDLY TENDERED UNLESS A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED
FACSIMILE THEREOF) IS RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES SET
FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE PRIOR TO THE EXPIRATION
DATE.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE
TENDERING STOCKHOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE DEPOSITARY. IF DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Notwithstanding any other provision of this Offer to Purchase, payment for
Shares accepted for payment pursuant to the Offer in all cases will be made
only after timely receipt by the Depositary of certificates for (or Book-Entry
Confirmation with respect to) the Shares, a Letter of Transmittal (or a
manually signed facsimile
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<PAGE>
thereof), properly completed and duly executed with all required signature
guarantees and all other documents required by the Letter of Transmittal (or,
in the case of a book-entry transfer, an Agent's Message).
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING OF 31% OF THE PAYMENTS MADE TO STOCKHOLDERS WITH RESPECT TO THE
PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER OR THE MERGER, A
STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH HIS OR HER CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTIFY THAT HE OR SHE IS NOT SUBJECT TO BACKUP
FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED
IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 10 OF THE LETTER OF TRANSMITTAL.
SEE SECTION 5 BELOW.
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares pursuant to any of the procedures described above will
be determined by Purchaser in its sole discretion, which determination shall
be final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of Shares determined not to be in proper form or the
acceptance of or payment for which may, in the opinion of counsel, be unlawful
and reserves the absolute right to waive any defect or irregularity in any
tender of Shares. Subject to the terms of the Merger Agreement, Purchaser also
reserves the absolute right to waive or amend any or all of the conditions of
the Offer. Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and its instructions) will be final and
binding on all parties. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
None of Purchaser, Parent, the Dealer Manager, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to
give any such notification.
Appointment as Proxy. By executing a Letter of Transmittal, a tendering
Stockholder irrevocably appoints designees of Purchaser as his attorneys-in-
fact and proxies, with full power of substitution, in the manner set forth in
the Letter of Transmittal, to the full extent of the Stockholder's rights with
respect to the Shares tendered by the Stockholder and purchased by Purchaser
and with respect to any and all other Shares or other securities issued or
issuable in respect of those Shares, on or after the date of the Offer. All
such powers of attorney and proxies will be considered coupled with an
interest in the tendered Shares. Such appointment will be effective when, and
only to the extent that, Purchaser accepts the Shares for payment. Upon
acceptance for payment, all prior powers of attorney and proxies given by the
Stockholder with respect to the Shares (and any other Shares or other
securities so issued in respect of such purchased Shares) will be revoked,
without further action, and no subsequent powers of attorney and proxies may
be given (and, if given, will not be deemed effective) by the Stockholder. The
designees of Purchaser will be empowered to exercise all voting and other
rights of the Stockholder with respect to such Shares (and any other Shares or
securities so issued in respect of such purchased Shares) as they in their
sole discretion may deem proper, including, without limitation, in respect of
any annual or special meeting of the Stockholders, or any adjournment or
postponement of any such meeting.
Purchaser reserves the absolute right to require that, in order for Shares
to be validly tendered, immediately upon Purchaser's acceptance for payment of
the Shares, Purchaser must be able to exercise full voting and other rights
with respect to the Shares, including voting at any meeting of Stockholders
then scheduled.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except as
otherwise provided in this Section 4. Shares tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment by Purchaser as provided in this Offer to
Purchase, may also be withdrawn at any time after February 17, 1997. If
Purchaser extends the Offer, is delayed in its purchase of or payment for
Shares, or is unable to purchase or pay for Shares for any reason then,
without prejudice to the rights of Purchaser, tendered Shares may be retained
by the Depositary on behalf of Purchaser and may not be withdrawn, except to
the extent that tendering Stockholders are entitled to withdrawal rights as
set forth in this Section 4.
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<PAGE>
The reservation by Purchaser of the right to delay the acceptance or
purchase of or payment for Shares is subject to the provisions of Rule 14e-
1(c) under the Exchange Act, which requires Purchaser to pay the consideration
offered or to return Shares deposited by or on behalf of Stockholders promptly
after the termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the persons who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered the Shares. If certificates evidencing Shares have been delivered or
otherwise identified to the Depositary then, prior to the release of the
certificates, the tendering Stockholder must also submit the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn,
and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution (except in the case of Shares tendered for the account of
an Eligible Institution). If Shares have been tendered pursuant to the
procedure for book-entry transfer set forth in Section 3, the notice of
withdrawal must specify the name and number of the account at the applicable
Book-Entry Transfer Facility to be credited with the withdrawn Shares. All
questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by Purchaser, in its sole discretion, which
determination shall be final and binding on all parties. No withdrawal of
Shares will be deemed to have been made properly until all defects and
irregularities have been cured or waived. None of Parent, Purchaser, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failing to give such
notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be tendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3
above.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted into the right to receive the Merger
Consideration in the Merger (including any cash amounts received by dissenting
Stockholders pursuant to the exercise of appraisal rights). This discussion is
based upon the provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), the applicable Treasury Regulations promulgated and proposed
thereunder, judicial authority and administrative rulings and practice.
Legislative, judicial or administrative changes or interpretations are subject
to change, possibly on a retroactive basis, at any time and could alter or
modify the statements and conclusions set forth below. It is assumed for
purposes of this discussion that the Shares are held as "capital assets"
within the meaning of Section 1221 of the Code (i.e., property held for
investment). This discussion does not address all aspects of federal income
taxation that may be relevant to a particular Stockholder in light of such
Stockholder's personal investment circumstances, or those Stockholders subject
to special treatment under the federal income tax laws (for example, life
insurance companies, tax-exempt organizations, foreign corporations and
nonresident alien individuals) or to Stockholders who acquired their Shares
through the exercise of employee stock options or other compensation
arrangements. In addition, the discussion does not address any aspect of
foreign, state, local or estate and gift taxation that may be applicable to a
Stockholder.
Consequences of the Offer and the Merger to Stockholders
The receipt of the Offer Consideration and the Merger Consideration (and any
cash amounts received by dissenting Stockholders pursuant to the exercise of
appraisal rights) will be a taxable transaction for federal income tax
purposes (and also may be a taxable transaction under applicable state, local
and other income tax laws). In general, for federal income tax purposes, a
Stockholder will recognize gain or loss equal to the difference between his or
her adjusted tax basis in the Shares sold pursuant to the Offer or converted
to cash in
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the Merger or pursuant to the exercise of appraisal rights and the amount of
cash received therefor. Such gain or loss will be capital gain or loss and
will be long-term gain or loss, if, on the date of sale (or, if applicable,
the date of the Merger) the Shares were held for more than one year.
Backup Tax Withholding
Under the Code, a Stockholder may be subject, under certain circumstances,
to "backup withholding" at a 31% rate with respect to payments made in
connection with the Offer or the Merger. Backup withholding generally applies
if the Stockholder (i) fails to furnish his social security number or other
taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii)
fails properly to report interest or dividends, or (iv) under certain
circumstances, fails to provide a certified statement, signed under penalties
of perjury, that the TIN provided is his correct number and that he or she is
not subject to backup withholding. Backup withholding is not an additional tax
but merely an advance payment, which may be refunded to the extent it results
in an overpayment of tax. Certain persons generally are exempt from backup
withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Each Stockholder should consult
with his or her own tax advisor as to his or her qualifications for exemption
from withholding and the procedure for obtaining such exemption.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
TO DETERMINE THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM IN VIEW OF THEIR OWN PARTICULAR CIRCUMSTANCES.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Company 10-K") and Quarterly Report on Form 10-Q
for the quarterly period ended September 29, 1996 (the "Company 10-Q") and
information supplied to Purchaser by the Company, the principal trading market
for the Shares is the NYSE, and the Shares trade on the NYSE under the symbol
"ELJ." The Company has not paid regular cash dividends on the Shares. The
following table sets forth, for the periods indicated, the high and low sale
prices per Share reported by the NYSE Composite Reporting System.
<TABLE>
<CAPTION>
HIGH LOW
-------- -------
<S> <C> <C>
1994:
First Quarter.......................................... $ 9 1/4 $ 6 5/8
Second Quarter......................................... 8 1/2 5 7/8
Third Quarter.......................................... 8 1/2 6 1/2
Fourth Quarter......................................... 7 3/4 5 1/8
1995:
First Quarter.......................................... $ 6 3/4 $ 4 1/8
Second Quarter......................................... 6 1/2 5
Third Quarter.......................................... 6 1/4 4 5/8
Fourth Quarter......................................... 12 3 3/4
1996:
First Quarter.......................................... $ 11 1/4 $ 8 1/2
Second Quarter......................................... 12 7/8 9 5/8
Third Quarter.......................................... 11 8 5/8
Fourth Quarter (through December 13)................... 14 1/8 9 3/4
</TABLE>
On December 13, 1996, the last full trading day before the public
announcement of Purchaser's intention to acquire the Shares, the last reported
sale price on the NYSE was $13.50 per Share. On December 19, 1996, the last
full trading day before the commencement of the Offer, the last reported sale
price on the NYSE was $23.50 per Share. STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THE SHARES.
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7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, STOCK EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION, AND MARGIN SECURITIES.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and may reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by Stockholders other than Purchaser. Purchaser
cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Shares or whether such reduction
would cause future market prices to be greater or less than the Offer
Consideration.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE for continued listing
and may, therefore, be delisted from such exchange. According to the NYSE's
published guidelines, the NYSE would consider delisting the Shares if, among
other things, the number of publicly-held Shares (excluding Shares held by
officers, directors, their immediate families and other concentrated holdings
of 10% or more) were less than 600,000, there were fewer than 1,200 holders of
at least 100 shares or the aggregate market value of the publicly-held Shares
were less than $5 million.
The Company has advised that, as of December 13, 1996, there were 7,153,657
Shares issued and outstanding. If, as a result of the purchase of Shares
pursuant to the Offer, the Shares no longer meet the requirements of the NYSE
for continued listing and the listing of Shares is discontinued, the market
for the Shares could be adversely affected. If the NYSE were to delist the
Shares (which Purchaser intends to cause the Company to seek if it acquires
control of the Company and the Shares no longer meet the NYSE listing
requirements), it is possible that the Shares would trade on another
securities exchange or in the over-the-counter market and that price
quotations for the Shares would be reported by such exchange or through the
Nasdaq Stock Market, Inc.'s National Market ("NASDAQ") or other sources. The
extent of the public market for the Shares and availability of such quotations
would, however, depend upon such factors as the number of holders and/or the
aggregate market value of the publicly-held Shares at such time, the interest
in maintaining a market in the Shares on the part of securities firms, the
possible termination of registration of the Shares under the Exchange Act and
other factors.
The Shares are currently registered under Section 12(b) of the Exchange Act.
Such registration may be terminated upon application of the Company to the
Commission if the Shares are neither listed on a national securities exchange
nor held by 300 or more holders of record. Termination of the registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain of the provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b), the
requirement of furnishing a proxy statement pursuant to Section 14(a) in
connection with a stockholders' meeting and the related requirement of an
annual report to stockholders and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions, no longer
applicable to the Shares. Furthermore, "affiliates" of the Company and persons
holding "restricted securities" of the Company may be deprived of the ability
to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933 (the "Securities Act"). If registration of the Shares
under the Exchange Act were terminated, the Shares would no longer be "margin
securities," or eligible for listing or NASDAQ reporting. Purchaser intends to
seek to cause the Company to terminate registration of the Shares under the
Exchange Act as soon after consummation of the Offer as the requirements for
termination of registration of the Shares are met.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of such Shares. Depending upon factors similar
to those described above regarding listing and market quotations, the Shares
might no longer constitute "margin securities" for the purposes of the Federal
Reserve Board's margin regulations and, therefore, could no longer be used as
collateral for loans made by brokers.
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<PAGE>
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive offices
located at 17120 Dallas Parkway, Dallas, Texas 75248. According to the Company
10-K, the Company, through its subsidiaries, is a leading manufacturer of high
quality building products for residential construction, commercial
construction and repair and remodeling markets. The Company manufactures and
markets plumbing and heating, ventilating and air conditioning ("HVAC")
products in North America and HVAC products in Europe. The Company markets its
products through wholesale distribution channels and, in North America,
directly to building products retailers.
United States Brass Corporation, an indirect wholly owned subsidiary of the
Company ("US Brass"), filed a voluntary petition for reorganization under
Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy
Court for the Eastern District of Texas on May 23, 1994.
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted from the Company 10-K
and the Company 10-Q. More comprehensive financial information is included in
such reports and other documents filed by the Company with the Commission, and
the following summary is qualified in its entirety by reference to such
reports and other documents and all of the financial information (including
any related notes) contained therein. Such reports and other documents should
be available for inspection and copies should be obtainable in the manner set
forth below under "Available Information."
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR*
---------------------- ---------------------------
SEPTEMBER 29, OCTOBER
1996 1, 1995 1995 1994 1993
------------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................... $290,370 $294,223 $397,386 $406,063 $387,562
Cost of sales............... 213,124 219,279 295,180 293,365 278,374
Selling and administrative
expenses.................... 56,373 56,098 73,670 81,767 80,902
Income from operations...... 21,509 14,378 21,262 269 21,071
Interest expense............ 9,231 11,467 14,982 12,662 14,647
Income (loss) before income
taxes....................... 12,907 3,020 6,755 (12,397) 6,437
Net income (loss)........... 10,328 2,434 4,889 (12,224) 3,898
Net income (loss) per share. 1.43 0.34 0.69 (1.72) 0.55
</TABLE>
- --------
* Fiscal years 1995, 1994 and 1993 ended on December 31, 1995, January 1, 1995
and January 2, 1994, respectively.
CONSOLIDATED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT
JANUARY
AT SEPTEMBER 29, AT OCTOBER 1, AT DECEMBER 31, 1,
1996 1995 1995 1995
---------------- ------------- --------------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Total assets............ $244,117 $251,543 $252,287 $257,057
Total liabilities....... 268,816 287,747 286,745 296,636
Shareholders' equity
(deficit)............... (24,699) (36,204) (34,458) (39,579)
</TABLE>
Certain Company Projections. During the course of discussions among Parent,
Purchaser and the Company that led to the execution of the Merger Agreement
(see Section 11 below), the Company provided Purchaser and Parent with certain
non-public business and financial information about the Company. The
information included a profit and loss statement which projected for the
Company and its subsidiaries, on a consolidated basis, (i) for
11
<PAGE>
the fiscal year ending December 29, 1996, (A) net sales of approximately
$399.5 million, (B) gross profit of approximately $107.2 million, (C) net
operating income of approximately $29.3 million, (D) net income of
approximately $12.4 million, (E) earnings before interest, taxes, depreciation
and amortization ("EBITDA") of approximately $37.1 million and (F) earnings
per share of approximately $1.72; (ii) for the fiscal year ending December 28,
1997, (A) net sales of approximately $430.2 million, (B) gross profit of
approximately $123.5 million, (C) net operating income of approximately $43.1
million, (D) net income of approximately $26.1 million, (E) EBITDA of
approximately $52.0 million and (F) earnings per share of approximately $3.62
($3.33 assuming the issuance of Shares as contemplated by the Third Amended
Plan of Reorganization proposed by US Brass and the Company (the "Bankruptcy
Plan")); (iii) for the fiscal year ending January 3, 1999, (A) net sales of
approximately $453.0 million, (B) gross profit of approximately $133.5
million, (C) net operating income of approximately $51.2 million, (D) net
income of approximately $34.3 million, (E) EBITDA of approximately $61.2
million and (F) earnings per share of approximately $4.77 ($4.06 assuming the
issuance of Shares as contemplated by the Bankruptcy Plan); and (iv) for the
fiscal year ending January 2, 2000, (A) net sales of approximately $473.6
million, (B) gross profit of approximately $138.4 million, (C) net operating
income of approximately $53.5 million, (D) net income of approximately $37.6
million, (E) EBITDA of approximately $64.0 million, and (F) earnings per share
of approximately $5.23 ($4.45 assuming the issuance of Shares as contemplated
by the Bankruptcy Plan). The profit and loss statements for fiscal year 1996,
1997, 1998 and 1999 assume an effective tax rate of 24.9%, 10.6%, 10.6% and
11.6%, respectively.
The Company does not as a matter of course make public any projections as to
future performance or earnings, and the projections set forth above are
included in this Offer to Purchase only because the information was provided
by the Company to Purchaser and Parent. The projections were not prepared with
a view to public disclosure or compliance with the published guidelines of the
Commission or the guidelines established by the American Institute of
Certified Public Accountants regarding projections or forecasts. None of the
Company, Purchaser or Parent or their respective financial advisors or any of
their respective directors or officers assumes any responsibility for the
accuracy of any of the projections. The Company has advised Purchaser and
Parent that the Company's internal financial forecasts (upon which the
projections provided to Parent were based in part) are, in general, prepared
solely for internal use and capital budgeting and other management purposes,
are subjective in many respects and are based on certain assumptions relating
to the implementation of certain programs and initiatives which may or may not
be implemented or, if implemented, may not produce the results assumed by
management in the preparation of its internal financial forecasts. As a result
of the foregoing, the projections provided to Parent and included herein are
susceptible to interpretation and periodic revision based on actual experience
and business developments. In addition, the estimates and assumptions
underlying the projections are inherently subject to significant economic and
competitive uncertainties and contingencies which are difficult or impossible
to predict accurately and are beyond the Company's, Purchaser's and Parent's
control, and there can be no assurance that the projected results will be
realized. Accordingly, it is expected that there will be differences between
actual and projected results, and actual results may be materially higher or
lower than those projected.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act. In accordance with the Exchange Act, the
Company files periodic reports, proxy statements and other information with
the Commission relating to its business, financial condition and other
matters. The Company is required to disclose in such proxy statements certain
information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of those persons
in transactions with the Company. Such reports, proxy statements and other
information may be inspected at the Commission's office at 450 Fifth Street,
N.W., Washington, D.C. 20549, and also should be available for inspection and
copying at the regional offices of the Commission located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies may be obtained
upon payment of the Commission's prescribed fees by writing to its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549, or through the
Commission's Website (http://www.sec.gov). Such material can also be obtained
at the office of The National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
12
<PAGE>
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained in this Offer to Purchase has been taken from
or is based upon publicly available documents on file with the Commission and
other publicly available information. Although Purchaser and Parent do not
have any knowledge that any such information is untrue, neither Purchaser nor
Parent takes any responsibility for the accuracy or completeness of such
information or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
Purchaser, a Delaware corporation, was organized to acquire all of the
Shares pursuant to the Offer and the Merger and has not conducted any
unrelated activities since its organization. All of the outstanding capital
stock of Purchaser is owned directly by Parent. The principal executive
offices of Purchaser are located at One Zurn Place, Erie, Pennsylvania 16505.
Parent is a Pennsylvania corporation, with its principal executive offices
located at One Zurn Place, Erie, Pennsylvania 16505. According to Parent's
Annual Report on Form 10-K for the fiscal year ended March 31, 1996 (the
"Parent 10-K"), Parent, together with its subsidiaries, designs, constructs,
manufactures, markets and operates in two industry segments: Water Control and
Power Systems. In October 1996, Parent announced its intent to sell its Power
Systems businesses and, as a result, Parent's dominant continuing operations
are those of the Water Control segment.
The Water Control segment includes products such as plumbing products
(including roof, floor, and trench drains, backwater valves recovery systems,
flush valves, shower heads, faucets and hand dryers for commercial, industrial
and institutional applications), tubular brass and plumbing supplies,
residential, commercial, and industrial pressure reducing and regulating
valves, construction of water resource and treatment systems, and automatic
interior fire protection sprinkler systems.
Set forth below is certain selected consolidated financial information with
respect to Parent and its subsidiaries, partially excerpted from the Parent
10-K and Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996 (the "Parent 10-Q"). More comprehensive financial
information is included in such reports and other documents filed by Parent
with the Commission, and the following summary is qualified in its entirety by
reference to such reports and other documents and all the financial
information (including any related notes) contained therein. The Parent 10-K
and the Parent 10-Q are incorporated herein by reference. Such reports and
other documents should be available for inspection and copies should be
obtainable from the offices of the Commission in the same manner as set forth
under "Available Information" in Section 8 above.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
------------------ ----------------------------
1996 1995 1996 1995 1994
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................... $164,073 $130,343 $421,539 $395,233 $709,225
Cost of sales................ 118,487 91,775 331,942 312,537 611,014
Marketing and administration. 28,959 25,708 70,194 64,517 62,019
Interest income.............. (1,541) (1,682) (3,368) (5,035) (5,035)
Interest expense............. 651 1,999 3,496 3,859 3,128
Other income................. (1,628) (1,590) (2,559) (1,303) (1,351)
Continuing operations income
(loss) before
income taxes................ 19,145 14,133 26,428 21,849 (11,389)
Net income (loss)............ 3,491 8,724 16,670 9,324 (13,876)
Earnings (loss) per share:
Continuing operations....... 0.97 0.70 1.41 1.24 (0.49)
Net income (loss)........... 0.28 0.71 1.35 0.76 (1.12)
</TABLE>
CONSOLIDATED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
----------------- -----------------
1996 1995 1996 1995
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Working capital............................ $180,197 $158,256 $173,836 $155,535
Total assets............................... 341,195 417,051 394,647 414,696
Total current liabilities.................. 58,781 138,227 113,158 142,844
Long-term obligations...................... 6,403 9,002 6,711 9,525
Retirement obligations..................... 43,869 43,679 43,823 43,397
Shareholders' equity....................... 232,142 226,143 230,955 218,930
Dividends paid............................. 2,470 3,950 6,415 10,888
Dividends paid per share................... 0.20 0.32 0.52 0.88
Dividends declared per share............... 0.20 0.20 0.40 0.88
</TABLE>
Except as set forth in this Offer to Purchase, none of Parent, Purchaser or
any of their respective subsidiaries (collectively, the "Purchaser Entities"),
or, to the knowledge of any of the Purchaser Entities, any of the persons
listed in Schedule I, has any contract, arrangement, understanding or
relationship (whether or not legally enforceable) with any other person with
respect to any securities of the Company, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer
or the voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies. Except as set forth in this Offer to
Purchase, none of the Purchaser Entities, or, to the knowledge of any of the
Purchaser Entities, any of the persons listed in Schedule I, has had, since
January 4, 1993, any transactions with the Company or any of its affiliates
that would be required to be disclosed in the Schedule 14D-1. Except as set
forth in this Offer to Purchase, since January 4, 1993, there have been no
contacts, negotiations or transactions between the Purchaser Entities or, to
the knowledge of any of the Purchaser Entities, any of the persons listed in
Schedule I, and the Company or its affiliates concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets. Except as set forth in this Offer to Purchase, none of the
Purchaser Entities or, to the knowledge of any of the Purchaser Entities, any
of the persons listed in Schedule I, beneficially owns any Shares or has
effected any transactions in the Shares in the past 60 days.
14
<PAGE>
10. SOURCE AND AMOUNT OF FUNDS
Source and Amount of Funds. The aggregate amount of funds required by the
Purchaser to pay the aggregate purchase price to be paid pursuant to the Offer
and the Merger is estimated to be approximately $200 million. These funds are
expected to be provided to the Purchaser in the form of capital contributions
or advances made by Parent. Parent plans to obtain the funds for such capital
contributions or advances from its available cash and working capital and
through loans from a group of banks (the "Banks") from which Parent has
obtained written financing commitments (the "Commitments").
Pursuant to the Commitments, Parent expects to obtain senior financing of up
to $250 million (the "Senior Financing") to finance a portion of the aggregate
purchase price to be paid pursuant to the Offer and the Merger, to refinance
certain existing indebtedness of Parent and the Company and the Company's
subsidiaries, to pay related costs and expenses and to provide for ongoing
working capital and funds for general corporate purposes.
The Commitments contemplate that the Banks will provide three separate
facilities to Parent consisting of : (i) a term facility (the "AT Facility")
of up to $90 million; (ii) a term facility (the "RT Facility") of up to $110
million (the AT Facility, together with the RT Facility, being the "Term
Facilities"); and (iii) a revolving facility (the "Revolving Facility") of up
to $50 million (the Revolving Facility, together with the Term Facilities,
being the "Facilities"). Loans under the AT Facility will be used to finance a
portion of the cash payments required to consummate the Offer and the Merger
and to pay related costs and expenses. Loans under the RT Facility will be
used to refinance certain existing indebtedness of the Company and its
subsidiaries. Loans under the Revolving Facility will be used for working
capital and general corporate purposes.
The Term Facilities will mature on the sixth anniversary of the "Closing
Date," which is the initial borrowing date of the term portion of the Senior
Financing, subject to quarterly amortization to be determined. The Revolving
Facility will terminate on the sixth anniversary of the Closing Date.
At the option of Parent, the loans will bear interest at (i) the Base Rate
plus the Applicable Margin; or (ii) the Eurodollar Rate plus the Applicable
Margin for 1, 2, 3 or 6 month interest periods; provided that Eurodollar loans
will not be available until the Syndication Date has been reached. The
Syndication Date is the earlier of 60 days after the Closing Date and the date
on which the agent determines that the primary syndication has been completed.
The Base Rate is defined as the higher of an announced prime rate and the
federal funds rate + 1/2 of 1%. The Applicable Margin initially will be 1% for
Base Rate loans and 2% for Eurodollar loans, and will be reduced in certain
circumstances.
Interest in respect of Base Rate loans will be payable quarterly in arrears
on the last business day of each fiscal quarter. Interest on Eurodollar loans
will be payable at the end of the applicable interest period, but not less
frequently than quarterly. All interest and fees will be calculated on the
basis of the number of actual days elapsed in a 360-day year. Upon any default
in payment, overdue loans and other overdue amounts will bear interest at 2%
above the otherwise applicable rate.
The Commitments contemplate the payment of fees on account of any unused
portion of the Revolving Facility and the Term Facilities. Such fees will
initially equal .375% of such unused portions payable quarterly in arrears.
The amount of such fees are subject to reduction in certain circumstances.
Loans under the Term Facilities must be mandatorily repaid and thereafter
the Revolving Facility will be mandatorily reduced as a result of (i) asset
sales (with certain exceptions and certain reinvestments in the business to be
permitted), (ii) certain debt incurrences, (iii) certain equity issuances, and
(iv) annual excess cash flow to be specified in the credit documentation.
Loans may be voluntarily repaid at any time upon appropriate notice, subject
in all cases to breakage costs if Eurodollar loans are prepaid other than on
the last day of the applicable interest period.
Obligations (a) under the AT Facility and the Revolving Facility will be
guaranteed (i) prior to the consummation of the Merger, by each direct and
indirect domestic subsidiary of Parent (including the Purchaser
15
<PAGE>
but excluding the Company and its subsidiaries) and (ii) after the
consummation of the Merger, by each direct and indirect subsidiary of Parent
and (b) under the RT Facility will be guaranteed by Parent and each domestic
subsidiary of Parent that is not a borrower under the RT Facility.
Obligations under the Facilities will be secured by (i) a pledge of 100%
(65% in the case of the capital stock of a foreign subsidiary) of the stock of
all subsidiaries held by a borrower or any guarantor (including prior to the
consummation of the Merger, the capital stock of the Company owned by Parent
or Purchaser, which pledge will be structured to satisfy the requirements of
Regulation U promulgated under the Exchange Act) and (ii) all other
unencumbered tangible and intangible assets of such borrowers and guarantors.
The Commitments are subject to, among other things, (a) the negotiation,
execution and delivery of definitive documentation, (b) there not having
occurred any material adverse change in the business, assets, liabilities,
operations, condition (financial or otherwise) or prospects of Parent and its
subsidiaries taken as a whole or the Company and its subsidiaries taken as a
whole since March 31, 1996 and December 31, 1995, respectively, (c) the
absence of a material adverse change occurring in the financial markets which
has a material adverse effect on the syndication of Senior Financing, (d) the
full amount of the Senior Financing having been committed to by the
participants therein, (e) there being no inaccuracy in any representation or
warranty contained in the definitive documentation providing for the
Facilities, (f) Purchaser acquiring, pursuant to the Offer, such number of
Shares as is sufficient to permit Purchaser to cause the Merger to be
consummated without the requirement of any other affirmative votes, (g) all
governmental and third-party approvals necessary to consummate the Offer and
the Merger being obtained, (h) the Banks' receipt of satisfactory opinions of
counsel relating to the transactions contemplated by the Commitments, (i)
there being no pending or threatened litigation by any entity with respect to
the Senior Financing or which could have a material adverse effect on the
business, assets, liabilities, operations, condition (financial or otherwise)
or prospects of Parent and its subsidiaries taken as a whole or of the Company
and its subsidiaries (other than US Brass) taken as a whole, (j) the Banks'
receipt of a satisfactory solvency opinion, (k) the Banks' receipt of a
satisfactory environmental and hazardous substances analysis and (l) there
being, after giving effect to the initial borrowings and to the full use of
the RT Facility, no indebtedness for borrowed money of, or guaranteed by, the
Company and its subsidiaries outstanding other than indebtedness to the Banks
under the RT Facility and such other indebtedness, if any, as is satisfactory
to the Banks. The definitive documentation providing for the Facilities is
expected to contain customary and other appropriate representations,
warranties, conditions, covenants and events of defaults.
The foregoing summary is qualified in its entirety by reference to the text
of the letters evidencing the Commitments, copies of which are filed as
exhibits to the Schedule 14D-1 and incorporated in this Offer to Purchase by
reference and may be inspected in the same manner as set forth under
"Available Information" in Section 8 above. If and when the definitive
documentation providing for the Facilities is executed, copies will be filed
with the Commission. Because the procurement of the Facilities is subject to,
among other things, the negotiation, execution and delivery of definitive
documentation on terms satisfactory to the Banks, there can be no assurance
that the terms described above will be the actual or only terms of the
Facilities.
Although no definitive plan or arrangement for repayment of borrowings under
the Facilities has been made, Parent expects that it will repay any amounts
borrowed with cash flow from operations and internally generated funds
(including, if the Merger is consummated, those of the Company) and from other
sources which may include the proceeds from future public or private sales of
debt or equity securities. The sources for repayment of such borrowings will
also depend upon Parent's review from time to time of the advisability of
certain actions, as well as prevailing interest rates, financial and other
economic conditions and such other factors as Parent may deem appropriate.
11. BACKGROUND OF THE OFFER
Over the course of the last twelve months, the Company has from time to time
received inquiries from interested parties as to the Company's interest in a
merger or other business combination transaction. During this time, the
Company began discussions with its historical financial advisor, Bear Stearns,
as to the proper response to these inquiries.
16
<PAGE>
During June and July 1996, a broker representing Parent discussed with
certain members of the Company's senior management the Company's interest in
pursuing a business combination transaction with Parent. The Company's
management indicated that the Company was not for sale, although management of
the Company indicated that it would be open to additional discussions with
Parent.
In early August 1996, Robert R. Womack, the Chairman and Chief Executive
Officer of Parent, requested a meeting with senior management of the Company.
On August 12, 1996, Mr. Womack met with Scott G. Arbuckle, the Chairman and
Chief Executive Officer of the Company. At this meeting, which was also
attended by other members of senior management of the Company, the Company and
Parent shared general information regarding their respective businesses and
operations.
Immediately following the August 12, 1996 meeting, the Company met with
representatives of Bear Stearns to discuss the formal retention of Bear
Stearns to analyze strategic alternatives, as well as to assist the Company
with responses to continuing inquiries from potential suitors. On August 19,
1996, the Company formally retained Bear Stearns to act as its exclusive
financial advisor in connection with a broad based financial and business
analysis of strategic alternatives in order to make recommendations to the
Board of Directors of the Company regarding ways to maximize shareholder
value.
On August 20, 1996, the Board of Directors of the Company held a regularly
scheduled meeting, at which representatives of Bear Stearns were present.
Senior management of the Company briefed the Board regarding the August 12,
1996 meeting with representatives of Parent, and indicated to the Board that
there could be a basis for a transaction with Parent. The Board reminded
management that the Company was not for sale, but that management could
continue discussions with Parent and other interested parties with respect to
a possible business combination transaction, provided the Company obtained a
confidentiality agreement from Parent and any such interested parties. On
August 21, 1996, Parent and the Company entered into a confidentiality and
standstill agreement.
In late August, Parent and its counsel began a due diligence examination of
US Brass. This examination continued through early December. During this
period, Parent retained Deutsche Morgan Grenfell Inc. ("DMG") to assist in
pursuing discussions with the Company.
On September 8, 1996, in advance of a scheduled September 9, 1996 meeting,
Mr. Womack travelled to Dallas to meet with Mr. Arbuckle to discuss further
their respective companies and to define an approach to further discussions.
The next day, members of senior management of both the Company and Parent,
together with representatives from their respective financial advisors, met in
Dallas to discuss in more detail the respective businesses and to attempt to
identify and define potential areas of synergy that could be developed between
the two companies. In addition, management of the Company reviewed with Parent
the Company's projected financial results for the then current quarter ending
September 29, 1996.
In mid-September 1996, DMG provided to Bear Stearns a due diligence request,
which was forwarded to the Company. Thereafter and continuing through November
1996, the Company provided various materials to Parent and its advisors in
response to the due diligence request. In addition, during this period further
discussions were held among the inside and outside legal advisors to the
Company and Parent with respect to US Brass. Management of the Company and
Parent also had discussions during this period regarding various operational
and financial issues.
On October 6, 1996, Mr. Womack met with Mr. Arbuckle in Dallas to further
discuss strategies for a possible business combination. Representatives of DMG
and Bear Stearns also attended this meeting. On October 7, 1996, Mr. Womack
and representatives of Parent met with Mr. Arbuckle and representatives of the
Company. At this meeting the Company discussed a number of topics related to
its business, including its projected 1996 financial results and the status of
the US Brass bankruptcy proceedings. The Company provided Parent with copies
of the Company's internal projections for fiscal year 1996 and the next three
fiscal years. During the
17
<PAGE>
course of this meeting, the Company's representatives indicated that a price
per Share in excess of $20.00 would be required in order for the Company to
have any interest in continuing discussions.
At the Company's next regularly scheduled Board meeting, which was held on
October 15, 1996, members of management reported to the Board regarding their
further discussions with Parent. The Board considered and approved the three
year plan that was provided to Parent at the October 6, 1996 meeting, and the
Board discussed the advisability of selling the Company. The Board also
directed Bear Stearns to talk with parties that had previously made inquiries
with respect to a possible business combination transaction.
On October 28, 1996, a regular meeting of the Board of Directors of Parent
was convened. At this meeting, the Board authorized Parent's management to
pursue further discussions with the Company and to continue the due diligence
effort. On the next day, Mr. Womack met with Mr. Arbuckle to discuss the
general terms of a merger transaction between Parent and the Company.
On November 1, 1996 and November 5, 1996, respectively, members of senior
management of the Company met in Dallas with members of management from two
other parties potentially interested in exploring a business combination with
the Company. Confidentiality agreements had previously been entered into with
each of these parties. At these meetings, the Company and the other parties
shared information with respect to their respective businesses and operations
and discussed potential synergies.
In early November 1996, the confidentiality agreement between Parent and the
Company was amended to permit Parent and the Company to pursue discussions
with their respective lenders concerning the transaction. During this period,
Parent held meetings with its bank group and its counsel to discuss the
prospective merger and the necessary financing.
On November 13, 1996, a meeting of the Company's Executive Committee was
held, at which Mr. Arbuckle and Bear Stearns provided an update on the status
of the Company's discussions with Parent. In addition, Mr. Arbuckle advised
the Executive Committee of the Company's early November meetings with two
other interested parties, and updated them on the status of those discussions.
On November 19, 1996, DMG delivered a term sheet to Bear Stearns outlining
certain terms of the proposed transaction. The term sheet did not indicate a
price, but did address, among other things, a joint marketing agreement, a
termination/expense reimbursement provision and various employee benefit
issues. Later that day, Bear Stearns advised DMG that one of the other
interested parties had expressed a willingness to pay approximately $22 per
Share. On November 25, 1996, Mr. Arbuckle telephoned Mr. Womack to discuss the
term sheet.
On November 27, 1996, Parent's legal counsel submitted a draft merger
agreement to the Company and its counsel outlining the proposed terms, other
than price, of the proposed transaction.
On December 3, 1996, after additional discussions with one of the other
interested parties, Bear Stearns advised Mr. Womack that it believed that a
price of $24 per Share would be required in order for the transaction to gain
the support of the Company's management.
On December 4, 1996, counsel to the Company provided comments to the
proposed merger agreement to Parent and the Board of Directors of the Company.
Shortly thereafter, Parent completed its environmental, tax and accounting due
diligence effort in respect of the Company.
On December 9, 1996, a meeting of the Board of Directors of Parent was
convened. During this meeting, Parent's Board approved a merger transaction
with the Company in which Stockholders would receive $24 per Share payable in
cash.
On December 10, 1996, a telephonic meeting of the Company's Executive
Committee was held, at which Bear Stearns and the Company's legal counsel were
present. At the meeting, Mr. Arbuckle reported that Parent's
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board had approved a transaction at $24 per share, subject to negotiation of a
definitive agreement. Mr. Arbuckle reported that a meeting was scheduled for
the next day in Dallas to negotiate the terms of a merger agreement, and that
a Board meeting would be called for December 14, 1996 to discuss approval of a
transaction (to the extent the parties could agree on the terms over the next
couple of days).
On December 11, 1996, members of senior management of the Company and
Parent, together with their respective financial and legal advisors, met in
Dallas to discuss the terms of the proposed merger agreement. By the end of
the day, the parties had negotiated the principal terms of a proposed merger
agreement, whereby the Parent would acquire the Company in a tender offer.
Under the terms of the proposed merger agreement, Parent would cause a newly
formed subsidiary to merge with the Company following the tender offer, with
the Company surviving the merger. A substantially final draft of the proposed
merger agreement was distributed on December 11, 1996 to the Company's Board
of Directors, the Company and Parent (and to their respective
representatives).
On December 14, 1996, Parent delivered to the Company a firm offer of $24
per Share based on the proposed merger agreement and a meeting of the Board of
Directors of the Company was convened. During the meeting, the Company's Board
of Directors received the oral opinion of Bear Stearns that, based upon and
subject to certain matters identified by Bear Stearns, the consideration to be
received by the Stockholders in the Offer and the Merger was fair, from a
financial point of view, to the Stockholders. The Company's Board was also
advised that the other interested parties had declined to pursue further
discussions with the Company in view of the price offered by Parent. At the
conclusion of the meeting, the Board approved the merger agreement subject to
a reduction in the proposed termination fee included in the draft merger
agreement to $8.5 million. A representative from Bear Stearns thereafter
telephoned Mr. Womack to discuss the Board's action. Following discussions,
Mr. Womack agreed to the Board's request concerning the termination fee. Later
that day, the Merger Agreement was executed and delivered by Parent, Purchaser
and the Company.
On December 16, 1996, Parent and the Company publicly announced the
execution of the Merger Agreement.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER
AGREEMENT; OTHER MATTERS
Purpose of the Offer and the Merger
The purpose of the Offer and the Merger is to enable Purchaser to acquire,
in one or more transactions, control of the Company and the entire equity
interest in the Company. The Offer is intended to increase the likelihood that
the Merger will be completed promptly. The acquisition of the entire equity
interest in the Company has been structured as a cash tender offer followed by
a cash merger in order to provide a prompt and orderly transfer of ownership
of the Company from the Stockholders to Parent and to provide the Stockholders
with cash for all of their Shares.
Plans for the Company
Following the Merger, the Company will be operated as a subsidiary of
Parent. Except as otherwise provided in this Offer to Purchase, Purchaser and
Parent have no current plans or proposals that would result in an
extraordinary corporate transaction, such as a merger, reorganization,
liquidation or sale or transfer of a material amount of assets involving the
Company or any subsidiary, or any other material changes in the Company's
capitalization, dividend policy, corporate structure, business or composition
of its management.
Parent intends, from time to time after completion of the Offer, to evaluate
and review the Company's operations and the potential opportunities for
rationalization and the achievement of synergies with Parent's operations, and
to consider what, if any, changes would be desirable in light of the results
of such evaluations and reviews. After such review, it is possible that Parent
might modify its current plans not to dispose of any businesses or assets of
the Company and not effect any changes in the Company's operations.
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The Merger Agreement
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full
text of the Merger Agreement, which is incorporated by reference and a copy of
which has been filed with the Commission as an exhibit to the Schedule 14D-1.
The Merger Agreement may be examined, and copies obtained from the offices of
the Commission in the same manner as set forth in Section 8 above.
The Offer. The Merger Agreement provides for the commencement of the Offer.
Without the prior written consent of the Company, Purchaser has agreed not to
(and Parent has agreed to cause Purchaser not to) (i) decrease or change the
form of the Offer Consideration or decrease the number of Shares sought
pursuant to the Offer, (ii) change the conditions to the Offer, (iii) impose
additional conditions to the Offer, (iv) extend the Expiration Date (except
(A) as required by applicable law, (B) that Purchaser may extend the
Expiration Date for up to 20 business days after the initial Expiration Date,
and (C) that if any condition to the Offer is not satisfied or waived,
Purchaser shall extend the Expiration Date for one or more periods not
exceeding 60 calendar days (or, if required by the Company in its sole
discretion, 120 calendar days) in the aggregate), (v) waive the Minimum Share
Condition, or (vi) amend any term of the Offer in any manner adverse to the
Stockholders; provided, however, that, except as set forth above and subject
to applicable legal requirements, Purchaser may waive any other condition to
the Offer in its sole discretion; and provided further that the Offer may be
extended in connection with an increase in the consideration to be paid
pursuant to the Offer to comply with applicable rules and regulations of the
Commission.
Board Representation. The Merger Agreement provides that promptly upon the
purchase by Purchaser pursuant to the Offer of such number of Shares which
represents at least 50.1% of the outstanding Shares (on a fully diluted
basis), and from time to time thereafter, (i) Parent shall be entitled to
designate such number of directors, rounded up to the next whole number as
will give Parent representation on the Board equal to the product of (x) the
number of directors on the Board (giving effect to any increase in the number
of directors pursuant to the Merger Agreement) and (y) the percentage that
such number of Shares so purchased bears to the aggregate number of Shares
outstanding (such number being the "Board Percentage"), and (ii) the Company
will, upon request by Parent, promptly satisfy the Board Percentage by (x)
increasing the size of the Board or (y) using reasonable efforts to secure the
resignations of such number of directors as is necessary to enable Parent's
designees to be elected to the Board and shall use its best efforts to cause
Parent's designees promptly to be so elected, subject in all instances to
compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Following the election or appointment of Parent's designees
pursuant to the Merger Agreement and prior to the Effective Time, any
amendment or termination of the Merger Agreement, extension for the
performance or waiver of the obligations or other acts of Parent or Purchaser
or waiver of the Company's rights thereunder shall require the concurrence of
a majority of the directors of the Company then in office who are directors on
the date of the Merger Agreement and who voted to approve the Merger
Agreement. The Company is today mailing to the Stockholders a copy of an
Information Statement prepared in accordance with Rule 14f-1 promulgated under
the Exchange Act, relating to the possible designation by Parent, pursuant to
the Merger Agreement, of certain persons to be appointed to the Board other
than at a meeting of the Stockholders.
Consideration to be Paid in the Merger. The Merger Agreement provides that,
upon the terms and subject to the conditions set forth in the Merger Agreement
and in accordance with the DGCL, Purchaser will be merged with and into the
Company at the Effective Time. In the Merger, each Share issued and
outstanding immediately prior to the Effective Time (excluding Shares owned,
directly or indirectly, by the Company or any of its wholly owned subsidiaries
or Shares owned by Parent, Purchaser or any other wholly owned subsidiary of
Parent and Dissenting Shares (as defined in the Merger Agreement)) will be
converted into the right to receive $24.00 per share, payable to the holder
thereof without any interest thereon, less any required withholding taxes,
upon surrender and exchange of a certificate representing such Shares. Each
share of the capital stock of Purchaser issued and outstanding immediately
prior to the Effective Time will be converted into and become one fully paid
and nonassessable share of common stock, par value $1.00 per share, of the
Surviving Corporation (as defined in the Merger Agreement), which will
thereupon become a wholly owned subsidiary of Parent. Each Share and all
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other shares of capital stock of the Company that are owned by the Company or
any subsidiary of the Company and all Shares owned by Parent, Purchaser or any
other subsidiary of Parent shall be cancelled and retired and shall cease to
exist and no consideration shall be delivered or deliverable in exchange
therefor. The Merger will become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware or at such time
thereafter as is provided in the certificate of merger.
Company Stock Options. The Merger Agreement provides that, at the Effective
Time, each holder of (i) a then-outstanding option to purchase shares under
the Company's Long-Term Executive Incentive Compensation Plan (the "LTIP"),
whether or not then exercisable (the "Options"), shall, in settlement thereof,
receive for each Share subject to such Option an amount (subject to any
applicable withholding tax) in cash equal to the difference between the Merger
Consideration and the per Share exercise price of such Option to the extent
such difference is a positive number (such amount being hereinafter referred
to as the "Option Consideration"), (ii) any then-outstanding shares of
restricted common stock awarded under the LTIP ("Restricted Shares") shall, in
settlement thereof, receive for each Restricted Share an amount (subject to
any applicable withholding tax) in cash equal to the Merger Consideration (the
"Restricted Share Consideration") and (iii) any then-outstanding phantom stock
unit under the Eljer Industries, Inc. 1995 Long-Term Incentive Plan (the
"Incentive Plan"), whether or not then exercisable (the "Phantom Rights"),
shall, in settlement thereof, receive for each Phantom Right an amount
(subject to applicable withholding tax) in cash equal to the difference
between the Merger Consideration and the Initial Value (as defined in the
Incentive Plan) of such Phantom Right to the extent such difference is a
positive number (such amount being hereinafter referred to as the "Phantom
Right Consideration"); provided, however, that with respect to any person
subject to Section 16(a) of the Exchange Act, any such amount shall be paid as
soon as practicable after the first date payment can be made without liability
to such person under Section 16(b) of the Exchange Act. Upon receipt of the
Option Consideration, the Restricted Share Consideration or the Phantom Right
Consideration, the Option or the Phantom Right, as the case may be, shall be
cancelled and the Restricted Shares shall be surrendered and cancelled. The
surrender of an Option, a Restricted Share or a Phantom Right to the Company
in exchange for the Option Consideration, the Restricted Share Consideration
or the Phantom Right Consideration shall be deemed a release of any and all
rights the holder had or may have had in respect of such Option, Restricted
Share or Phantom Right. Prior to the Effective Time, the Company has agreed to
use its reasonable efforts to obtain all necessary consents or releases from
holders of Options, Restricted Shares or Phantom Rights and to take all such
other lawful action as may be necessary to give effect to the transactions
contemplated by the foregoing described provisions of the Merger Agreement
(except for any such action that may require the approval of the Company's
stockholders). Except as otherwise agreed to by the parties, (i) the LTIP and
the Incentive Plan shall terminate as of the Effective Time and the provisions
in any other plan, program or arrangement providing for the issuance or grant
of any other interest in respect of the capital stock of the Company or any
subsidiary thereof, shall be canceled as of the Effective Time, and (ii) the
Company shall use reasonable best efforts to assure that following the
Effective Time no participant in the LTIP, the Incentive Plan or other plans,
programs or arrangements shall have any right thereunder to acquire equity
securities of the Company, the Surviving Corporation or any subsidiary
thereof.
Stockholder Meeting. The Merger Agreement provides that the Company will, as
soon as practicable following the acceptance for payment of and payment for
Shares by Purchaser in the Offer, duly call, give notice of, convene and hold
a meeting of its Stockholders for the purpose of approving the Merger
Agreement and the transactions contemplated thereby. In connection with such
meeting, if required by applicable law to consummate the Merger, the Company,
in consultation with Parent, shall prepare and file with the Commission a
preliminary proxy statement, together with a form of proxy or information
statement (the "Preliminary Proxy Statement"). The Company has agreed to use
its reasonable best efforts to respond to all Commission comments with respect
to the Preliminary Proxy Statement and, subject to compliance with the
Commission's rules and regulations, to cause such proxy statement to be mailed
to the Stockholders at the earliest practicable date.
If Purchaser, or any other wholly owned subsidiary of Parent, acquires at
least 90% of the outstanding Shares in the Offer, at the request of Purchaser,
all parties to the Merger Agreement will take all necessary actions to cause
the Merger to become effective as soon as practicable after the expiration of
the Offer, without a meeting of the Stockholders, in accordance with the
provisions of the DGCL.
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Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties. These include representations
and warranties by the Company with respect to, among other things, (i)
organization, standing and power, (ii) capital structure, (iii) authority, no
violations, consents and approvals, (iv) Commission documents, (v) information
supplied, (vi) compliance with applicable laws, (vii) litigation, (viii)
taxes, (ix) pension and benefit plans and ERISA, (x) absence of certain
changes and events, (xi) opinion of financial advisor, (xii) vote required,
(xiii) labor matters, (xiv) intangible property, (xv) environmental matters,
(xvi) certain defaults, (xvii) brokerage fees and commissions and (xviii) full
disclosure.
Parent and Purchaser also have made certain representations and warranties
with respect to, among other things, (i) organization, standing and power,
(ii) authority, no violations, consents and approvals, (iii) information
supplied, (iv) interim operations of Purchaser and (v) financing.
Conduct of Business Pending the Merger. The Company has agreed that during
the period from the date of the Merger Agreement and continuing until the
earlier of (i) such time as Parent or Purchaser obtains majority
representation on the Board or (ii) the Effective Time (except as expressly
contemplated or permitted by the Merger Agreement or by the Bankruptcy Plan,
or consented to by Parent in writing) the Company and its subsidiaries will
conduct their businesses in the usual, regular and ordinary course in
substantially the same manner as previously conducted, and will use reasonable
efforts to preserve intact its present business organizations, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that its goodwill and ongoing business will not be impaired
in any material respect at the Effective Time. The Company has further agreed
that during this period it will not, nor will it permit any of its
subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, other than cash
dividends or distributions paid by a wholly owned subsidiary of the Company to
the Company or another wholly owned subsidiary of the Company; (ii) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (iii) repurchase or otherwise
acquire, or permit any subsidiary to purchase or otherwise acquire, any shares
of its capital stock, except as provided in the Merger Agreement; (iv) except
pursuant to the exercise of Options, grant any options, warrants or rights to
purchase Shares or amend or reprice any Option or the LTIP or grant any
Phantom Rights or stock appreciation rights; (v) issue, deliver or sell, or
authorize or propose to issue, deliver or sell, any shares of its capital
stock of any class or series, any Company voting debt or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Company voting debt or convertible securities other than issuances of
Shares as permitted by the Merger Agreement; (vi) amend its or any
subsidiary's certificate of incorporation or bylaws (or comparable
organizational documents); (vii) acquire or agree to acquire by merger or
consolidation or purchase a substantial equity interest in or substantial
portion of assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof;
(viii) sell, lease, encumber or otherwise dispose of, or agree to sell, lease,
encumber or otherwise dispose of, any of its assets except for dispositions in
the ordinary course of business consistent with past practices which are not
material, individually or in the aggregate, to the Company and its
subsidiaries taken as a whole; (ix) authorize, recommend, propose or announce
an intention to adopt a plan of complete or partial liquidation or dissolution
of the Company or any of its subsidiaries; (x) voluntarily take or agree or
commit voluntarily to take any action that would make untrue in any material
respect any of the representations or warranties contained in the Merger
Agreement or cause any of the Company's covenants or conditions to the Merger
to not be satisfied in all material respects; (xi) (A) except for normal
increases to officers and key employees consistent with past practice, grant
any increases in the compensation of any of its directors, officers or key
employees, (B) pay or agree to pay any pension, retirement allowance or other
employee benefit not required or contemplated by any existing Company ERISA
Plans or Company Benefit Arrangements (both terms as defined in the Merger
Agreement) as in effect on the date of the Merger Agreement to any such
director, officer or key employee, whether past or present, (C) enter into or
materially amend any employment, severance or termination agreement with any
such director, officer or key employee, or (D) except as may be required to
comply with applicable law, become obligated under any Company ERISA Plan or
Company Benefit Arrangements which was not in existence on the date of the
Merger Agreement, or amend any such plan or arrangement in existence on the
date
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of the Merger Agreement if such amendment would have the effect of enhancing
any benefits thereunder; (xii) except for borrowings in the ordinary course of
business under its existing credit facilities or arrangements, assume or incur
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities
of the Company or any of its subsidiaries or guarantee any debt securities of
others or enter into any lease or create any mortgages, liens, security
interests or other encumbrances on the property of the Company or any of its
subsidiaries in connection with any indebtedness thereof, or enter into any
agreement or arrangement to maintain the financial condition of another
person; (xiii) take any action, other than in the ordinary course of business
consistent with past practice or as required by the Commission or by law, to
effect any material change in any of its accounting policies, procedures and
practices; or (xiv) make or authorize or permit any of its subsidiaries to
make or authorize any capital expenditures in excess of $5,000,000 that is not
included in the capital budget furnished to Parent. In addition, the Company
has agreed to confer on a regular and frequent basis with Parent, report on
operational matters, promptly advise Parent of any change or event having, or
which could reasonably be expected to have, a Material Adverse Effect (as
defined in the Merger Agreement) on the Company, and promptly furnish Parent
(or its counsel) with copies of all filings made by the Company with the
Commission or any other state or federal governmental entity in connection
with the Merger Agreement and the transactions contemplated thereby.
Other Agreements. The Company, Purchaser and Parent have agreed to take all
reasonable actions necessary to comply promptly with all legal requirements
that may be imposed on such party with respect to the Offer, the Merger and
the transactions contemplated by the Merger Agreement (including furnishing
all information required under the HSR Act and in connection with approvals of
or filings with any governmental entity) and promptly to cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or their subsidiaries in connection with the Offer,
the Merger and the transactions contemplated by the Merger Agreement. Without
limiting the generality or effect of the foregoing, each of the Company,
Parent and Purchaser will, and will cause its subsidiaries to, take all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any governmental entity or other public or private third party required to
be obtained or made by the Company, Parent or any of their subsidiaries in
connection with the Offer, the Merger, the Merger Agreement or the taking of
any action contemplated thereby; provided, however, that Parent need not agree
with the Department of Justice or any other governmental entity to hold
separate, sell or otherwise dispose of any subsidiary of Parent or the Company
or assets or properties of any of the foregoing, in each case, which Parent
determines, in good faith, would materially affect the value of the
acquisition as a whole to Parent.
No Solicitation. The Merger Agreement provides that from and after the date
of the Merger Agreement until the termination of the Merger Agreement, the
Company may not, and may not permit any of its subsidiaries, or any of its or
their officers, directors, employees, representatives, agents or affiliates,
directly or indirectly, to initiate, solicit or facilitate the making of any
proposal that constitutes an Acquisition Proposal (as defined below), or to
enter into or maintain or continue discussions or negotiate with any person or
entity in respect of an Acquisition Proposal; provided, however, that nothing
contained in the Merger Agreement shall prohibit the Company from (i)
furnishing information to, or engaging in discussions or negotiations with, or
agreeing to or endorsing an Acquisition Proposal from, any person or entity
that makes an unsolicited Acquisition Proposal if, and only to the extent
that, (A) the Board, after consultation with legal counsel (who may be the
Company's regularly engaged legal counsel), determines in good faith that such
action is necessary for the Board to comply with its fiduciary duties under
applicable law and (B) the Company (x) provides prior notice to Parent to the
effect that it is taking such action and (y) receives from such person or
entity an executed confidentiality agreement in reasonably customary form or
(ii) failing to make, withdrawing, modifying or amending its recommendation if
there exists an Acquisition Proposal and the Board, after consultation with
legal counsel as aforesaid, determines that such action is necessary for the
Board to comply with its fiduciary duties under applicable law. The Company
must promptly notify Parent after receipt of any Acquisition Proposal or any
request for nonpublic information relating to the Company or any subsidiary or
for access to the properties, books or records of the Company or any
subsidiary by any person who has informed the Company that such person is
considering making, or has made, an Acquisition Proposal, and the Company will
keep Parent informed in
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reasonable detail of the status and details of any such Acquisition Proposal.
For purposes of the Merger Agreement, "Acquisition Proposal" means any bona
fide proposal with respect to a merger, consolidation, share exchange or
similar transaction involving the Company or any subsidiary of the Company, or
any purchase of all or any significant portion of the assets of the Company or
any subsidiary of the Company, or any significant equity interest in the
Company or any subsidiary of the Company, other than the transactions
contemplated by the Merger Agreement. The Company is not prohibited from
taking and disclosing to the Stockholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any disclosure to the
Stockholders which the Board, after consultation with legal counsel (who may
be the Company's regularly engaged legal counsel), determines in good faith is
required under applicable law.
Fees and Expenses. The Merger Agreement provides that, except as described
below, all costs and expenses incurred in connection with the Merger Agreement
and the transactions contemplated by the Merger Agreement will be paid by the
party incurring the expenses. The Company has agreed to pay Purchaser a fee in
immediately available funds equal to $8,500,000 upon termination of the Merger
Agreement for any of the following reasons (each a "Trigger Event"): (i) the
Company shall have entered into a definitive agreement with respect to any
Acquisition Proposal other than the transactions contemplated by the Merger
Agreement; or (ii) the Board shall have withdrawn, or modified or amended in a
manner materially adverse to Parent or Purchaser, its approval or
recommendation of the Offer, the Merger or the Merger Agreement. Also, the
costs incurred in connection with printing and mailing proxy materials to the
Stockholders of the Company will be borne equally by the Company and Parent.
Employee Benefits. From and after the Effective Time, Parent has agreed to
cause the Surviving Corporation to honor and perform all existing severance
agreements between the Company and certain of its officers. In addition, the
Company has agreed to make certain amendments to its existing Change-in-
Control Severance Plan for salaried, non-contract, non-union employees of the
Company. The Merger Agreement also provides that Parent will cause the
Surviving Corporation to pay Scott G. Arbuckle, Chairman of the Board and
Chief Executive Officer of the Company, on the Closing Date (as defined in the
Merger Agreement) all amounts that will be owing to him under his employment
agreement and executive severance agreement as a result of the transactions
contemplated by the Merger Agreement.
Indemnification; Directors' and Officers' Insurance. The Merger Agreement
provides that the Company shall, and from and after the Effective Time, the
Surviving Corporation shall, indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date of the Merger Agreement
or who becomes prior to the Effective Time, an officer or director of the
Company or any of its subsidiaries (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses (including reasonable attorneys' fees
and expenses), liabilities or judgments or amounts that are paid in settlement
with the approval of the indemnifying party (which approval shall not be
unreasonably withheld) of or in connection with any threatened or actual
claim, action, suit, proceeding or investigation based in whole or in part on
or arising in whole or in part out of the fact that such person is or was a
director or officer of the Company or any of its subsidiaries whether
pertaining to any matter existing or occurring at or prior to the Effective
Time and whether asserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities"), including all Indemnified Liabilities based
in whole or in part on, or arising in whole or in part out of, or pertaining
to the Merger Agreement or the transactions contemplated thereby, in each case
to the full extent a corporation is permitted under the DGCL to indemnify its
own directors or officers as the case may be (and Parent and the Surviving
Corporation, as the case may be, will pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
full extent permitted by law). Without limiting the foregoing, in the event
any such claim, action, suit, proceeding or investigation is brought against
any Indemnified Parties (whether arising before or after the Effective Time),
(i) the Indemnified Parties may retain counsel satisfactory to them and the
Company (or to them and the Surviving Corporation after the Effective Time)
and the Company (or after the Effective Time, the Surviving Corporation) shall
pay all fees and expenses of such counsel for the Indemnified Parties promptly
as statements therefor are received; and (ii) the Company (or after the
Effective Time, the Surviving Corporation) will use all reasonable efforts to
assist in the vigorous defense of any such matter, provided that neither the
Company nor the Surviving Corporation shall be liable for any settlement
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effected without its prior written consent (which consent shall not
unreasonably be withheld). Any Indemnified Party wishing to claim
indemnification under the Merger Agreement, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Company (or after
the Effective Time, the Surviving Corporation) (but the failure so to notify
shall not relieve a party from any liability which it may have under the
Merger Agreement except to the extent such failure prejudices such party), and
shall deliver to the Company (or after the Effective Time, the Surviving
Corporation) the undertaking contemplated by Section 145(e) of the DGCL. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to each such matter unless there is, under applicable standards
of professional conduct, a conflict on any significant issue between the
positions of any two or more Indemnified Parties. All rights to
indemnification under the Merger Agreement, including provisions relating to
advances of expenses incurred in defense of any action or suit, existing in
favor of the Indemnified Parties with respect to matters occurring through the
Effective Time, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Time;
provided, however, that all such rights to indemnification in respect of any
Indemnified Liabilities asserted or made within such period shall continue
until the disposition of such Indemnified Liabilities.
The Merger Agreement provides that for a period of six years following the
Effective Time, Parent shall cause the Surviving Corporation to keep in effect
the provisions in its Certificate of Incorporation and Bylaws as of the date
of the Merger Agreement providing for exculpation of director and officer
liability and indemnification to the fullest extent provided by the DGCL,
which provisions shall not be amended, repealed or otherwise modified except
as required by applicable law or except for amendments or modifications that
would not adversely affect the rights thereunder of any Indemnified Party.
For a period of six years after the Effective Time, the Surviving
Corporation will cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company and its
subsidiaries (provided that Parent may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are
no less advantageous in any material respect to the Indemnified Parties) with
respect to matters arising before the Effective Time, provided that Parent
shall not be required to pay an annual premium for such insurance in excess of
200% of the last annual premium paid by the Company prior to the date of the
Merger Agreement, but in such case shall purchase as much coverage as possible
for such amount.
The indemnification and directors' and officers' insurance provisions of the
Merger Agreement are intended to be for the benefit of, and are enforceable
by, each Indemnified Party, and each such Indemnified Party's heirs and his
personal representatives and are binding on all successors and assigns of
Purchaser, the Company and the Surviving Corporation.
Conditions to the Merger. Pursuant to the Merger Agreement, the obligation
of each party to effect the Merger is subject to the satisfaction, prior to
the Closing Date, of the following conditions: (i) the Merger Agreement and
the Merger shall have been adopted by the affirmative vote of the holders of a
majority of the Shares entitled to vote thereon if such vote is required by
applicable law; provided, that Parent and Purchaser must vote all Shares
purchased pursuant to the Offer in favor of the Merger, (ii) the waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
shall have terminated or shall have expired, (iii) no temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect,
provided, however, that prior to invoking this condition, the party so
invoking this condition shall have used its commercially reasonable efforts to
have any such Injunction vacated, and (iv) Purchaser shall have accepted for
payment and paid for all Shares validly tendered in the Offer and not
withdrawn, provided, however, that, neither Parent nor Purchaser may invoke
this condition if Purchaser has failed to purchase Shares so tendered and not
withdrawn in violation of the terms of the Merger Agreement or the Offer.
The obligations of Parent and Purchaser to effect the Merger are subject to
the condition that the Company shall have performed in all material respects
all obligations required to be performed by it under the Merger
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Agreement on or before the earlier of (i) such time as Parent's designees
shall constitute at least a majority of the Company's Board pursuant to the
Merger Agreement and (ii) the Closing Date; provided, however, that no failure
by the Company to have so performed in all material respects any such
obligation shall constitute a failure of satisfaction of the foregoing
condition where the Company's failure of performance occurred, and was
actually known to Parent, at or prior to the time Parent, Purchaser or any of
their affiliates accepted for payment any Shares pursuant to the Offer.
The obligation of the Company to effect the Merger is subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by the Company: (i) the representations and warranties of
Parent and Purchaser set forth in the Merger Agreement shall be true and
correct in all material respects as of the date of the Merger Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date; and (ii) Parent and Purchaser shall have performed in all material
respects all obligations required to be performed by them under the Merger
Agreement on or prior to the Closing Date.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company or Parent, by: (i) mutual written consent of the
Company and Parent, or by mutual action of their respective boards of
directors; (ii) the Company, if Purchaser fails to commence the Offer within
five business days following the date of the initial public announcement of
the Offer; (iii) either the Company or Parent, so long as such party has not
materially breached its obligations under the Merger Agreement, if the Merger
is not consummated on or before May 15, 1997; provided, that such right to
terminate the Merger Agreement is not 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 Merger to occur on or before such date; (iv)
the Company or Parent in the event that a Trigger Event has occurred, provided
that the Company's right to terminate the Merger Agreement shall be available
only if it has paid Purchaser the fee payable upon the occurrence of a Trigger
Event under the Merger Agreement; (v) Parent, if the Offer expires or is
withdrawn or terminated in accordance with the terms and conditions thereof
without any Shares being purchased by Purchaser thereunder by reason of the
failure to satisfy any condition to the Offer; (vi) the Company, if the Offer
shall have expired or have been withdrawn or terminated without any Shares
being purchased by Purchaser on or prior to the 60th (or, if extended as
contemplated by the Merger Agreement, the 120th) day after the date of
commencement of the Offer; (vii) the Company, if Parent or Purchaser
materially breaches any of its respective representations and warranties or
covenants contained in the Merger Agreement; or (viii) either the Company or
Parent, if any permanent injunction or other order of a court of competent
authority preventing the consummation of the Merger shall have become final
and nonappealable. In the event of termination of the Merger Agreement by
either the Company or Parent as provided therein, the Merger Agreement shall
forthwith become void and there shall be no liability or obligation on the
part of Parent, Purchaser or the Company, or their respective affiliates,
officers, directors or shareholders, except: (i) with respect to (A) the
Confidentiality Agreement (as defined below), and (B) the termination fee
obligation of the Company described above, (ii) to the extent that such
termination results from the intentional or willful breach by a party thereto
of any of its representations or warranties, or any of its covenants or
agreements as set forth in the Merger Agreement, and (iii) with respect to
Parent and Purchaser, to the extent that such termination results from Parent
and Purchaser not having sufficient cash on hand or financing resources in an
aggregate amount sufficient to enable Parent and Purchaser to pay all amounts
specified in the Merger Agreement.
Amendment. Subject to applicable law and the Merger Agreement, the Merger
Agreement may be amended, modified or supplemented only by written agreement
of Parent, Purchaser and the Company at any time prior to the Effective Time
with respect to any of the terms contained therein; provided, however, that
after the Merger Agreement is approved by the Stockholders, no such amendment
or modification shall reduce the amount or change the form of consideration to
be delivered to the Stockholders or adversely affect the rights of the
Stockholders.
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Assignment. Neither the Merger Agreement nor any of the rights, interests or
obligations thereunder may be assigned or delegated by any of the parties
thereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Purchaser may assign and delegate,
in its sole discretion, all (but not less than all) of its rights, interests
and obligations thereunder to any newly-formed direct or indirect wholly owned
subsidiary of Parent formed solely for the purpose of engaging in the
transactions contemplated by the Merger Agreement and not engaged in any
business activities or conducting any operations other than in connection with
the transactions contemplated thereby.
Timing. The exact timing and details for the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Purchaser pursuant to the Offer. Although Purchaser has agreed to
cause the Merger to be consummated on the terms set forth above, there can be
no assurance as to the timing of the Merger.
Delaware Law. The Board has approved the Merger Agreement and the
transactions contemplated by it, including the Offer and the Merger, for
purposes of Section 203 of the DGCL. Accordingly, the restrictions of Section
203 do not apply to the transactions contemplated by the Offer or the Merger
Agreement. See Section 15.
Article Eighth of the Restated Certificate of Incorporation
Article Eighth of the Restated Certificate of Incorporation of the Company
provides that certain "business combinations" (including certain mergers)
involving the Company and certain "interested stockholders" require the
affirmative vote of the holders of at least 80% of the voting power of all of
the then outstanding shares of the voting stock of the Company, voting
together as a single class. The Company has represented in the Merger
Agreement that if properly approved, among other things, the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
and such approval is sufficient to render Article Eighth inapplicable to the
Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger.
The Rights Agreement
The Company and Harris Trust and Savings Bank (the "Rights Agent") are
parties to a Rights Agreement dated as of April 14, 1989 and amended on July
31, 1989, January 4, 1990, and November 5, 1991 (as amended, the "Rights
Agreement"). Pursuant to the Rights Agreement, on April 14, 1989 (the "Record
Date") the Board of Directors of the Company declared and paid a dividend of
one common stock purchase right (a "Right") for each Share outstanding at the
close of business on such date. Except as set forth below, each Right, when it
becomes exercisable, entitles the registered holder to purchase from the
Company one Share at a purchase price of $111.00 (the "Purchase Price"),
subject to any adjustments which have been made prior to the date hereof and
to any adjustments which may be made subsequent to the date hereof.
The following is a summary of the material terms of the Rights Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the Rights Agreement. This
summary is further qualified by certain amendments (also described below) to
the Rights Agreement effected in connection with the execution of the Merger
Agreement and the transactions contemplated thereby (including the Offer and
the Merger). A copy of the Rights Agreement and the amendments thereto
described in the preceding sentence are filed as Exhibits 5 and 8 to the
Schedule 14D-9, respectively, and are incorporated herein by reference.
Until the earlier to occur of (i) the tenth day after the first date of
public announcement by the Company or an Acquiring Person (as hereinafter
defined) that an Acquiring Person has become such (a "Shares Acquisition
Date") or (ii) the tenth business day (or such later date as may be determined
by action of the Board of Directors prior to such time as any person becomes
an Acquiring Person) after the date of the commencement by any Person (other
than the Company, any subsidiary of the Company, any employee benefit plan of
the Company or any subsidiary of the Company, or any entity holding Shares for
or pursuant to the terms of any such plan) of, or
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the first public announcement of the intention of any person (other than the
Company, any subsidiary of the Company, any employee benefit plan of the
Company or of any subsidiary of the Company, or any holding Shares for or
pursuant to the terms of any such plan) to commence, a tender offer or
exchange offer the consummation of which would result in any person becoming
the beneficial owner of shares of Common Stock aggregating, in the case of any
person who or which is an Existing 15% Holder (as hereinafter defined), the
Increased Percentage (as hereinafter defined) or more, or, in the case of any
other person, 15% or more, of the then outstanding shares of Common Stock (the
earlier of (i) or (ii) being the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Stock certificate outstanding as
of the Record Date, by such Common Stock certificate.
"Acquiring Person" means any person who or which, together with all
affiliates and associates of such person, (x) was the beneficial owner as of
November 5, 1991 of 15% or more of the shares of Common Stock then outstanding
(an "Existing 15% Holder") and thereafter the beneficial owner of a percentage
of the shares of Common Stock then outstanding equal to or greater than the
percentage of shares of Common Stock beneficially owned by such Existing 15%
Holder, together with all affiliates and associates of such Existing 15%
Holder, as of November 5, 1991, plus 1% (the "Increased Percentage"), or (y)
is not an Existing 15% Holder but is the beneficial owner of 15% or more of
the shares of Common Stock then outstanding, but in any case shall not include
(i) the Company, (ii) any subsidiary of the Company and (iii) any employee
benefit plan of the Company or any subsidiary of the Company or any entity
holding shares of Common Stock for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, no person shall become an "Acquiring Person" as
the result of an acquisition of shares of Common Stock by the Company which,
by reducing the number of shares of Common Stock outstanding, increases the
proportionate number of shares of Common Stock beneficially owned to, in the
case of a person who or which is an Existing 15% Holder, a percentage equal to
or greater than the Increased Percentage or, in the case of any other Person,
15% or more of the shares of Common Stock then outstanding; provided, however,
that if a person, other than those persons referred to in clause (i), (ii) or
(iii) above, shall become the beneficial owner of, in the case of a person who
or which is an Existing 15% Holder, a percentage of the shares of Common Stock
then outstanding equal to or greater than the Increased Percentage or, in the
case of any other Person, 15% or more of the shares of Common Stock then
outstanding, by reason of Common Stock purchases by the Company and shall,
after such purchases by the Company, become the beneficial owner of any
additional shares of Common Stock, then such Person shall be deemed to be an
"Acquiring Person."
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of shares of Common Stock, will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for shares of Common Stock, outstanding as of the Record Date,
even without such notation, will also constitute the transfer of the Rights
associated with the shares of Common Stock represented by such certificate. As
soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Rights Certificates") will be mailed to holders of
record of the shares of Common Stock as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights. Each share of Common Stock issued after the Distribution Date and
prior to the earlier of the redemption or expiration of the Rights pursuant to
exercise of any option, warrant, right or conversion privilege contained in
any option, warrant, right or convertible security issued by the Company prior
to the Distribution Date (other than the Rights) shall also include the right
to receive a Right (unless the Board of Directors provides to the contrary at
the time of issuance of any such option, warrant, right or convertible
security) and Rights Certificates evidencing such Rights shall be issued at
the time of issuance of such shares of Common Stock.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on May 1, 1999 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
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The Purchase Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a
stock dividend on, or a subdivision, combination or reclassification of, the
Common Stock, (ii) upon the grant to holders of the shares of Common Stock of
certain rights or warrants to subscribe for or purchase shares of Common Stock
at a price, or securities convertible into shares of Common Stock with a
conversion price, less than the then current market price of the shares of
Common Stock or (iii) upon the distribution to holders of the shares of Common
Stock of evidences of indebtedness or assets (excluding a regular quarterly
cash dividend at a rate not in excess of 125% of the rate of the last regular
quarterly cash dividend theretofore paid or a dividend payable in shares of
Common Stock) or of subscription rights or warrants (other than those referred
to above).
No adjustment in the Purchase Price is required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price;
provided, however, that any such adjustments not made on account of the
foregoing are carried forward and taken into consideration in any subsequent
adjustment. No fractional shares of Common Stock will be issued and in lieu
thereof an adjustment in cash will be made based on the market price of the
shares of Common Stock on the last trading day prior to the date of exercise.
The number of outstanding Rights and the number of shares of Common Stock
issuable upon exercise of each Right are also subject to adjustment in the
event of a stock split of the Common Stock or a stock dividend on the Common
Stock payable in shares of Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the
Distribution Date.
In the event that, on or after the Shares Acquisition Date, the Company is
acquired in a merger or other business combination transaction, or 50% or more
of its consolidated assets or earning power are sold (in one transaction or a
series of transactions other than in the ordinary course of business), proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
of the Right, that number of common shares of the acquiring company which at
the time of such transaction have a market value equal to two times the
Purchase Price. In the event that (i) any person becomes an Acquiring Person
(except where such person becomes an Acquiring Person through a purchase of
shares of Common Stock pursuant to a cash tender offer for all of the
outstanding shares of Common Stock, which purchase causes such person to be
the beneficial owner of 80% or more of the shares of Common Stock then
outstanding), (ii) the Company is the surviving corporation in a merger with
such Acquiring Person or any associate or affiliate thereof and the Common
Stock of the Company remains outstanding and not changed into or exchanged for
stock or other securities of any other person or the Company or cash or any
other property, or (iii) an Acquiring Person engages in certain specified
self-dealing transactions, proper provision shall be made so that each holder
of a Right, other than Rights beneficially owned by the Acquiring Person
(which thereafter will be void), will thereafter have the right to receive
upon exercise thereof that number of shares of Common Stock of the Company
having a market value equal to two times the Purchase Price. The foregoing
exercise rights are subject to the Company's rights to redeem or exchange the
rights, as described below.
At any time after any person becomes an Acquiring Person, but prior to the
acquisition by such person, together with its affiliates and associates, of
beneficial ownership of 50% or more of the outstanding shares of Common Stock,
the Board of Directors of the Company may exchange the Rights (other than
Rights owned by such person which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock (or of a share of a class or
series of the Company's preferred stock having equivalent rights, preferences
and privileges) per Right (subject to adjustment).
At any time prior to the earlier to occur of (i) the close of business on
the tenth business day after the Shares Acquisition Date or (ii) the Final
Expiration Date, the Board of Directors of the Company may redeem all, but not
less than all, of the then outstanding Rights at a price of $.01 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the Record Date (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. After the redemption period has expired, the Company's
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right of redemption may be reinstated in certain instances if an Acquiring
Person reduces its beneficial ownership to 10% or less of the outstanding
shares of Common Stock in a transaction or series of transactions not
involving the Company. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders
of Rights will be to receive the Redemption Price.
Prior to the Distribution Date, the Company may supplement or amend any
provision of the Rights Agreement without the approval of any stockholders.
From and after the Distribution Date, the Company may, subject to certain
limitations, supplement or amend the Rights Agreement without the approval of
any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained
therein which may be defective or inconsistent with any other provisions
therein, (iii) to shorten or lengthen any time period thereunder, including,
without limitation, changing the Final Expiration Date to a date after May 1,
1999 or (iv) to change or supplement the provisions thereof in any manner
which the Company may deem necessary or desirable and which shall not
adversely affect (as determined by the Company) the interests of the holders
of Rights Certificates (other than an Acquiring Person or an affiliate or
associate of an Acquiring Person).
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends.
IN CONNECTION WITH THE EXECUTION OF THE MERGER AGREEMENT AND IN
CONTEMPLATION OF THE TRANSACTIONS CONTEMPLATED THEREBY (INCLUDING, WITHOUT
LIMITATION, THE OFFER AND THE MERGER), THE BOARD OF DIRECTORS HAS ADOPTED,
APPROVED AND AUTHORIZED ALL ACTIONS NECESSARY SO THAT (I) THE EXECUTION AND
DELIVERY OF THE MERGER AGREEMENT, THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY (INCLUDING, WITHOUT LIMITATION, THE OFFER AND THE MERGER)
AND THE OTHER MATTERS PROVIDED FOR THEREIN WILL NOT RESULT IN (A) PARENT OR
PURCHASER OR ANY OF THEIR RESPECTIVE AFFILIATES OR ASSOCIATES BEING AN
ACQUIRING PERSON, (B) THE OCCURRENCE OF A DISTRIBUTION DATE OR (C) THE RIGHTS
BECOMING EXERCISABLE AND (II) THE FINAL EXPIRATION DATE WILL OCCUR IMMEDIATELY
PRIOR TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER (COLLECTIVELY, THE
"RIGHTS CONDITIONS"). PURSUANT TO THE BOARD OF DIRECTORS' ADOPTION, APPROVAL
AND AUTHORIZATION OF THE FOREGOING ACTIONS, AND IN SATISFACTION OF THE RIGHTS
CONDITIONS, THE COMPANY AND THE RIGHTS AGENT HAVE ENTERED INTO AMENDMENT NO. 4
TO RIGHTS AGREEMENT DATED AS OF DECEMBER 14, 1996 ("AMENDMENT NO. 4"), A COPY
OF WHICH IS FILED AS AN EXHIBIT TO THE SCHEDULE 14D-9 AND INCORPORATED HEREIN
BY REFERENCE.
OTHER MATTERS
Appraisal Rights. No appraisal rights are available to Stockholders in
connection with the Offer. However, if the Merger is consummated, a
Stockholder will have certain rights under Section 262 of the DGCL to dissent
and demand appraisal of, and payment in cash for the fair value of, that
Stockholder's Shares. Those rights, if the statutory procedures are complied
with, could lead to a judicial determination of the fair value (excluding any
value arising from the Merger) required to be paid in cash to dissenting
Stockholders for their Shares. Any judicial determination of the fair value of
Shares could be based upon considerations other than or in addition to the
Offer Consideration and the market value of the Shares, including asset values
and the investment value of the Shares. The value so determined could be more
or less than the Offer Consideration or the Merger Consideration.
If a Stockholder who demands appraisal under Section 262 of the DGCL fails
to perfect, or effectively withdraws or loses, his or her right to appraisal
as provided in the DGCL, the Shares of that Stockholder will be converted into
the Merger Consideration in accordance with the Merger Agreement. A
Stockholder may withdraw his demand for appraisal by delivering to Purchaser a
written withdrawal of such demand for appraisal and acceptance of the Merger.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of those rights.
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Going Private Transactions. Rule 13e-3 under the Exchange Act is applicable
to certain "going-private" transactions. Purchaser does not believe that Rule
13e-3 will be applicable to the Merger, unless, among other things, the Merger
is completed more than one year after termination of the Offer. If applicable,
Rule 13e-3 would require, among other things, that certain financial
information regarding the Company and certain information regarding the
fairness of the Merger and the consideration offered to minority Stockholders
be filed with the Commission and disclosed to minority Stockholders prior to
consummation of the Merger.
Confidentiality Agreement. The Company and Parent have entered into a
Confidentiality and Standstill Agreement dated August 21, 1996, as amended
November 5, 1996 and November 7, 1996 (the "Confidentiality Agreement"). The
following is a summary of the material terms of the Confidentiality Agreement.
This summary is not a complete description of the terms and conditions of the
Confidentiality Agreement and is qualified in its entirety by reference to the
full text of the Confidentiality Agreement, which is incorporated by reference
and a copy of which has been filed with the Commission as an exhibit to the
Schedule 14D-1.
Under the Confidentiality Agreement, each of the Company and Parent have
agreed (i) to use certain information concerning the business, prospects,
financial condition, operations, assets and liabilities of each party
furnished by each to the other and all analyses, compilations, data, notes,
interpretations and the like prepared by a party based in whole or in part on
such information (collectively, "Confidential Information") obtained from the
other solely for purposes of evaluating a possible negotiated business
combination involving Parent and the Company (a "Transaction"); (ii) not to
disclose the Confidential Information to any third party, except for its
directors, officers and representatives of certain of its advisors
(collectively, its "Representatives"); (iii) to inform its Representatives of
the confidential natures of the Confidential Information; (iv) to take all
reasonable precautions necessary to prevent the disclosure of the Confidential
Information by its Representatives to any third party; and (v) to be
responsible for any breach of the Confidentiality Agreement by its
Representatives. If either party is required by legal process to disclose any
Confidential Information, such party agrees to give the other party prompt
notice so that the other party may seek a protective order and/or waive the
notifying party's compliance with the Confidentiality Agreement. If a party is
compelled to disclose Confidential Information, such party may disclose, after
notice to the other party, only that portion of the Confidential Information
that such party is advised by counsel is legally required to be disclosed. The
term "Confidential Information" does not include certain information that (i)
is or becomes generally available to the public other than as a result of a
disclosure in violation of the Confidentiality Agreement; (ii) is or becomes
available to the receiving party from a source other than the delivered party
or its Representatives; or (iii) was within the receiving party's possession
prior to being furnished by or on behalf of the delivering party.
The Confidentiality Agreement provides that none of the Company, Parent or
their respective Representatives will disclose to any person the existence,
status or terms of any negotiations or agreements between them concerning a
possible Transaction or that such party has provided to or received from the
other Confidential Information without obtaining the prior written consent of
the other party. The Confidentiality Agreement also provides that, unless a
Transaction is consummated, each party will not, for a period of two years
from the date of the Confidentiality Agreement, solicit employment of (other
than by means of a general advertisement) any of the (i) employees of the
other party with whom it had contact during the process contemplated by the
Confidentiality Agreement or (ii) management level personnel or officers of
the other party.
Each of the Parent and the Company have also agreed in the Confidentiality
Agreement that, until the expiration of two years from the date of the
Confidentiality Agreement, without the prior written consent of the Board of
Directors of the other party, it and its affiliates will not (i) in any manner
acquire, agree to acquire or make any proposal or offer or otherwise seek to
acquire, directly or indirectly, any securities (or rights in respect
thereof), assets or property of the other party or any of its subsidiaries,
whether such agreements or proposals or offers are made with or to the other
party (or any controlling person or successor thereof) or any of its
subsidiaries; (ii) enter into or agree, offer, seek or propose to enter into
or otherwise be involved in or part of, directly or indirectly, any merger,
acquisition transaction or other business combination involving the other
party or any of its subsidiaries or any of their respective assets; (iii)
make, or in any way participate in, directly or indirectly, any "solicitation"
of "proxies" (as such terms are used in the proxy rules of the Exchange Act)
to
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vote, or seek to advise or influence any person with respect to the voting of,
any voting securities of the other party or any of its subsidaries, (iv) form,
join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any voting securities of the
other party or any of its subsidiaries; (v) otherwise act, alone or in concert
with others, to seek or propose to control or influence the management, Board
of Directors or policies of the other party; (vi) directly or indirectly enter
into any discussions, negotiations, arrangements or understandings with any
other person (except internal discussions and planning activities involving
its Representatives) with respect to any of the foregoing activities or
propose any of such activities to any other person (other than its
Representatives); (vii) publicly disclose any intention, plan or arrangement
inconsistent with the foregoing; and (viii) directly or indirectly advise,
encourage, provide assistance (including debt or equity financial assistance)
to or hold discussions with or invest in any other person in connection with
any of the foregoing. Each party has also agreed that, during such two-year
period, neither it nor any of its affiliates will take any initiative with
respect to the other party or any of its subsidiaries that could reasonably be
expected to require the other party to make a public announcement regarding
(i) such initiative, (ii) any of the activities referred to in this paragraph,
(iii) the possibility of a Transaction or any similar transaction or (iv) the
possibility of such party or any other person acquiring control of the other
party, whether by means of a business combination or otherwise. However, the
provisions of the Confidentiality Agreement described in this paragraph do not
apply to a party in the event of a bona fide publicly announced proposal,
offer or agreement by a third party not acting in concert with such party (i)
to acquire more than 51% of any class of stock (or rights in respect thereof)
of the other party or (ii) to acquire the other party, or all or substantially
all of its assets, by means of a merger, consolidation, asset purchase or
other similar transaction. Additionally, the chief executive officer of a
party may contact the chief executive officer of the other party for the
purpose of expressing continuing or renewed interest in a Transaction,
provided that, unless invited to do so by the chief executive officer of the
other party, no offer or proposal shall be made that would require public
disclosure or formal consideration by such other party or its Board of
Directors.
Notwithstanding anything to the contrary contained in the Merger Agreement
or in the Confidentiality Agreement, the taking by any party of any action
contemplated by the provisions in the Merger Agreement to be taken by such
party will not constitute a breach of any provision of the Confidentiality
Agreement.
13. DIVIDENDS AND DISTRIBUTIONS
If, on or after the date of the Merger Agreement, the Company should (i)
split, combine or otherwise change the Shares or its capitalization, (ii)
acquire currently outstanding Shares, or otherwise cause a reduction in the
number of outstanding Shares or (iii) issue or sell additional Shares, shares
of any other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, then, subject to the provisions of Section 14,
Purchaser, in its sole discretion, may make such adjustments as it deems
appropriate in the Offer Consideration and other terms of the Offer,
including, without limitation, the number or type of securities offered to be
purchased.
If, on or after the date of the Merger Agreement, the Company declares or
pays any cash dividend on the Shares, makes other distributions on the Shares
or issues with respect to the Shares any additional Shares, shares of any
other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, payable or distributable to Stockholders of
record prior to the transfer of the Shares purchased pursuant to the Offer or
their nominees or any transferee on the Company's stock transfer records,
then, subject to Section 14 below, (i) the Offer Consideration may, in the
sole discretion of Purchaser, be reduced by the amount of any cash dividend or
cash distribution and (ii) the whole of any non-cash dividend, distribution or
issuance to be received by the tendering Stockholders will (A) be received and
held by the tendering Stockholders for the account of Purchaser and will be
required to be promptly remitted and transferred by each tendering Stockholder
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer or (B) at the direction of Purchaser, be exercised
for the benefit of Purchaser, in which case the proceeds of exercise promptly
will be remitted to Purchaser. Pending the remittance and subject to
applicable law, Purchaser will be entitled to all rights and privileges as
owner of any
32
<PAGE>
non-cash dividend, distribution, issuance or proceeds and may withhold the
entire Offer Consideration or deduct from the Offer Consideration the amount
or value of the non-cash dividend, distribution, issuance or proceeds, as
determined by Purchaser in its sole discretion.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two preceding paragraphs and
nothing in this Offer to Purchase shall constitute a waiver by Purchaser or
Parent of any of its rights under the Merger Agreement or a limitation of
remedies available to Purchaser or Parent for any breach of the Merger
Agreement, including termination of the Merger Agreement.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
promptly after expiration or termination of the Offer), to pay for any Shares
tendered, and may postpone the acceptance for payment or, subject to the
restrictions referred to above, payment for any Shares tendered, and, subject
to the terms of the Merger Agreement, may amend or terminate the Offer
(whether or not any Shares have theretofore been purchased or paid for
pursuant to the Offer) (i) unless the following conditions have been
satisfied: (A) there have been validly tendered and not withdrawn prior to the
time the Offer shall otherwise expire a number of Shares which constitutes
50.1% of the Shares outstanding on a fully-diluted basis on the date of
purchase ("on a fully diluted basis" having the following meaning, as of any
date: the number of Shares outstanding, together with the number of Shares the
Company is then required to issue pursuant to obligations outstanding at that
date under employee stock option or other benefit plans or otherwise); and (B)
any applicable waiting periods under the HSR Act shall have expired or been
terminated prior to the expiration of the Offer; and/or (ii) if at any time on
or after the date of the Merger Agreement and before acceptance for payment
of, or payment for, such Shares, any of the following events shall occur and
are continuing:
(A) any United States or foreign governmental entity or authority or any
United States or foreign court of competent jurisdiction in the United
States or any foreign country shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order which is in effect and which (1) materially
restricts, prevents or prohibits consummation of the transactions
contemplated by the Merger Agreement, including the Offer or the Merger,
(2) prohibits or limits materially the ownership or operation by Parent or
any of its subsidiaries of all or any material portion of the business or
assets of the Company and its subsidiaries taken as a whole or compels the
Company, Parent, or any of their subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of the
Company and its subsidiaries taken as a whole, or (3) imposes material
limitations on the ability of Parent, Purchaser or any other subsidiary of
Parent to exercise effectively full rights of ownership of any Shares,
including, without limitation, the right to vote any Shares acquired by
Purchaser pursuant to the Offer or otherwise on all matters properly
presented to the Company's Stockholders, including, without limitation, the
approval and adoption of the Merger Agreement and the transactions
contemplated thereby; provided that Parent and Purchaser shall have used
their respective reasonable efforts to cause any such order, decree,
judgment or injunction to be vacated or lifted;
(B) there shall be instituted or pending any action or proceeding before
any United States or foreign court or governmental entity or authority by
any United States or foreign governmental entity or authority seeking any
order, decree or injunction having any effect set forth in (A) above;
(C) the representations and warranties of the Company contained in the
Merger Agreement (without giving effect to the materiality limitations
contained therein) shall not be true and correct as of the Expiration Date
as though made on and as of such date (except for representations and
warranties made as of a specified date, which shall not be true and correct
as of the specified date), except for any breach or breaches which, in the
aggregate, would not have a Material Adverse Effect (as defined in the
Merger Agreement) with respect to the Company; provided that any suits,
actions or proceedings initiated or threatened against the Company or any
of its officers or directors by any Stockholder of the Company (or
33
<PAGE>
any group thereof) on or after the date of the Merger Agreement or the
transactions contemplated by the Merger Agreement ("Stockholder Suits")
shall not be given effect in determining whether or not the condition set
forth in this subparagraph (C) has been satisfied;
(D) the Company shall not have performed or complied in all material
respects with its obligations under the Merger Agreement to be performed or
complied with by it and such failure continues until the later of (1)
fifteen days after actual receipt by it of written notice from Purchaser
setting forth in detail the nature of such failure or (2) the Expiration
Date;
(E) there shall have occurred any material adverse change, or any
development that is reasonably likely to result in a material adverse
change, in the business, properties, assets, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries
taken as a whole; provided that neither (i) the US Brass Bankruptcy Events
(as defined in the Merger Agreement) nor (ii) any Stockholder Suits shall
be given effect in determining whether or not the condition set forth in
this subparagraph (E) has been satisfied;
(F) the Merger Agreement shall have been terminated in accordance with
its terms;
(G) prior to the purchase of Shares pursuant to the Offer, the Board
shall have withdrawn or materially modified or changed (including by
amendment of the Schedule 14D-9) in a manner adverse to Purchaser its
recommendation of the Offer, the Merger Agreement or the Merger;
(H) there has occurred the declaration of a banking moratorium or any
limitation or suspension of payments in respect of the extension of credit
by banks or other lending institutions in the United States; or
(I) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that any person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Parent or its affiliates or any
group of which any of them is a member, shall have acquired beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under the Exchange
Act) of more than 50% of any class or series of capital stock of the
Company (including the Shares), through the acquisition of stock, the
formation of a group or otherwise, or shall have been granted an option,
right or warrant, conditional or otherwise, to acquire beneficial ownership
of more than 50% of any class or series of capital stock of the Company
(including the Shares).
The foregoing conditions (other than the Minimum Share Condition) are for
the sole benefit of Purchaser and its affiliates and may be asserted by
Purchaser regardless of the circumstances (including, without limitation, any
action or inaction by Purchaser or any of its affiliates other than a material
breach by Parent or Purchaser of the Merger Agreement) giving rise to any such
condition or may be waived by Purchaser, in whole or in part, from time to
time in its sole discretion, except as otherwise provided in the Merger
Agreement. The failure by Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right and may be asserted at any time and
from time to time.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company, but without any independent
investigation, neither Purchaser nor Parent is aware of any license or
regulatory permit that appears to be material to the business of the Company
and its subsidiaries, taken as a whole, that might be adversely affected by
Purchaser's acquisition of Shares as contemplated in this Offer to Purchase or
of any approval or other action by any governmental authority that would be
required for the acquisition or ownership of Shares by Purchaser as
contemplated in this Offer to Purchase. Should any such approval or other
action be required, Purchaser and Parent presently contemplate that such
approval or other action will be sought, except as described below, under
"State Takeover Laws." While, except as otherwise expressly described in this
Section 15, Purchaser does not presently intend to delay the acceptance for
payment of or payment for Shares tendered pursuant to the Offer pending the
outcome of any such matter, there can be no assurance that any such approval
or other action, if needed, would be obtained or would be obtained without
substantial conditions or that failure to obtain any such approval or other
action might not result in consequences adverse to the Company's business
34
<PAGE>
or that certain parts of the Company's business might not have to be disposed
of if such approvals were not obtained or other actions were not taken or in
order to obtain any such approval or other action. If certain types of adverse
action are taken with respect to the matters discussed below, Purchaser could
decline to accept for payment or pay for any Shares tendered. See Section 14
above for certain conditions to the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable
to attempts to acquire securities of corporations that are incorporated or
have assets, stockholders, executive offices or places of business in those
states. In Edgar v. MITE Corp., the Supreme Court of the United States held
that the Illinois Business Takeover Act, which involved state securities laws
that made the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and therefore was unconstitutional.
In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the
United States held that a state may, as a matter of corporate law and, in
particular, those laws concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without prior approval of the remaining stockholders, provided
that the laws were applicable only under certain conditions.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval of either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." The Company has represented in the Merger Agreement that it
properly approved, among other things, the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, and
such approval is sufficient to render Section 203 of the DGCL inapplicable to
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger.
Based on information supplied by the Company and the Company's
representations in the Merger Agreement, Purchaser does not believe that any
other state takeover statutes apply to the Offer or the Merger. Neither
Purchaser nor Parent has currently complied with any state takeover statute or
regulation. Purchaser reserves the right to challenge the applicability or
validity of any state law purportedly applicable to the Offer or the Merger
and nothing in this Offer to Purchase or any action taken in connection with
the Offer or the Merger is intended as a waiver of that right. If it is
asserted that any state takeover statute is applicable to the Offer or the
Merger and an appropriate court does not determine that it is inapplicable or
invalid as applied to the Offer or the Merger, Purchaser might be required to
file certain information with, or to receive approvals from, the relevant
state authorities, and Purchaser might be unable to accept for payment or pay
for Shares tendered pursuant to the Offer, or be delayed in consummating the
Offer or the Merger. In such case, Purchaser may not be obligated to accept
for payment or pay for any Shares tendered pursuant to the Offer.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares under the Offer may be consummated following the expiration
of a 15-calendar-day waiting period following the filing by Purchaser of a
Notification and Report Form with respect to the Offer, unless Purchaser
receives a request for additional information or documentary material from the
Antitrust Division or the Federal Trade Commission (the "FTC") or unless early
termination of the waiting period is granted. Such filing was made on December
18, 1996 and such waiting period will expire at 11:59 p.m. on January 2, 1997.
If, within the initial 15-day waiting period, either the Antitrust Division or
the FTC requests additional information or documentary material from Purchaser
concerning the Offer, the waiting period will be extended and would expire
11:59 p.m., New York City time, on the tenth calendar day after the date of
substantial compliance by Purchaser with such request. Only one extension of
the waiting period pursuant to a request for additional information is
authorized by the HSR Act. Thereafter, the waiting period may be extended only
by court order or with the consent of Purchaser. In practice, complying with a
request for additional information or documentary material can take a
significant amount of time. In addition, if the Antitrust Division or the FTC
raises substantive issues in connection with a proposed transaction, the
parties frequently engage in negotiations with the relevant governmental
agency concerning possible means of addressing those issues and may agree to
delay consummation of the transaction while the negotiations continue. For
information regarding the obligations of the Company, Parent and Purchaser in
this regard, see "The Merger Agreement--Other Agreements" in Section 12.
35
<PAGE>
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's proposed acquisition of
the Company. At any time before or after Purchaser's purchase of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer or the consummation of the Merger or seeking the divestiture of
Shares acquired by Purchaser or the divestiture of substantial assets of
Purchaser or its subsidiaries, or the Company or its subsidiaries. Private
parties may also bring legal action under the antitrust laws under certain
circumstances. There can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if such a challenge is made, of the
result of that challenge. See Section 14 for certain conditions to the Offer,
including conditions with respect to litigation.
16. FEES AND EXPENSES
DMG is acting as Dealer Manager in connection with the Offer and has
provided certain financial advisory services to Parent in connection with the
proposed acquisition of the Company. DMG will not receive separate
compensation for its service as Dealer Manager. However, Parent has agreed to
pay DMG a "retainer fee" of $250,000 in connection with the retention of DMG
as financial advisor to Parent. Further, Parent has agreed to pay DMG a
"success fee" of $2.5 million (less the retainer fee) payable upon
consummation of the Merger. Parent's fee arrangement with DMG also includes a
termination fee arrangement whereby DMG would receive $700,000 in the event
that the Merger Agreement is terminated in circumstances where Parent receives
the termination fee contemplated by the Merger Agreement.
In addition, Parent has agreed to reimburse DMG for all out-of-pocket
expenses incurred by DMG and to indemnify DMG and certain related persons
against certain liabilities and expenses, including certain liabilities under
the federal securities laws. In the ordinary course of its business, DMG and
its affiliates may actively trade in the Shares for its or their own accounts
and for the account of its or their customers, and, accordingly, may at any
time hold a long or short position in the Shares.
Purchaser has retained Morrow & Co., Inc. to act as the Information Agent,
and Harris Trust Company of New York to act as the Depositary, in connection
with the Offer. The Information Agent and the Depositary each will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the federal securities laws.
Except as set forth above, Purchaser will not pay any fees or commissions to
any broker or dealer or other person for soliciting tenders of Shares pursuant
to the Offer. Brokers, dealers, commercial banks and trust companies will be
reimbursed by Purchaser for customary mailing and handling expenses incurred
by them in forwarding the offering materials to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) Stockholders residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of the jurisdiction. However, Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to Stockholders in that
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of Purchaser by one or more registered brokers or
dealers that are licensed under the laws of the jurisdiction.
Purchaser has filed with the Commission the Schedule 14D-1 pursuant to Rule
14d-1 under the Exchange Act containing certain additional information with
respect to the Offer. The Schedule and any amendments to the Schedule,
including exhibits, may be examined and copies may be obtained from the
principal office of the Commission in the manner set forth in Section 8 above
(except that they will not be available at the regional offices of the
Commission).
36
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE
OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, THE INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
ZURN ACQUISITION CO., INC.
DECEMBER 20, 1996
37
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER AND PARENT
A. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The directors of Purchaser are Robert R. Womack and John R. Mellett. The
executive officers of Purchaser are Robert R. Womack, President, Dennis
Haines, Secretary, and John R. Mellett, Treasurer. Each of the directors and
executive officers of Purchaser is also a director and/or executive officer of
Parent. Information concerning the name, present principal occupation or
employment and material occupation, positions, offices or employment for the
past five years of each director and executive officer of Purchaser is set
forth in the table of the directors and executive officers of Parent. The
business address of each such person is c/o Zurn Industries, Inc., One Zurn
Place, Erie, Pennsylvania 16505. All directors and officers of Purchaser are
citizens of the United States.
B. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The following table sets forth the name, present principal occupation or
employment and material occupations, positions, offices or employment for the
past five years of each director and executive officer of Parent and
Purchaser. Unless otherwise indicated below, (i) each individual has held his
or her positions for more than the past five years and (ii) the business
address of each person is c/o Zurn Industries, Inc., One Zurn Place, Erie,
Pennsylvania 16505. Except as otherwise stated below, all directors and
officers listed below are citizens of the United States. Directors are
identified with a single asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR PERIOD
NAME AGE AT 12/1/96 EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY SERVED
---- -------------- ------------------------------------------- ------
<S> <C> <C> <C>
Robert R. Womack* 59 Chairman and Chief Executive Officer Since 1995
Director and Chief Executive Officer Since 1994
Independent Consultant 1993-1994
Vice Chairman and Chief Executive Officer 1990-1993
(1992-1993) and President and Chief Operating
Officer (1990-1992)--IMO Industries, Inc.,
Lawrenceville, NJ (controls, pumps, and
engineered power products)
Donald L. Butynski 52 Group Vice President Since 1995
President--National Energy Production 1986-1995
Corporation,
Redmond, WA (a subsidiary of Parent)
Frank E. Sheeder, Jr. 53 Group Vice President Since 1995
President and Chief Executive Officer-- 1994-1995
Furmanite, Inc.,
Richardson, TX (engineering and maintenance
services), a subsidiary of Kaneb Services,
Inc.
Independent Consultant 1992-1994
Senior Vice President--Rhone Poulenc Inc., 1990-1992
Cranbury, NJ (specialty chemicals business)
John R. Mellett 47 Senior Vice President and Chief Financial Since 1995
Officer
Senior Vice President and Chief Financial 1992-1995
Officer and Vice President-Finance (1992-
1994)--LeFebure Corporation, Cedar Rapids, IA
(supplier of capital equipment and services
to financial institutions), a subsidiary of
De La Rue, PLC
Independent Consultant 1991-1992
James A. Zurn 54 Senior Vice President Since 1981
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR PERIOD
NAME AGE AT 12/1/96 EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY SERVED
---- -------------- ------------------------------------------- ------
<S> <C> <C> <C>
William J. Durbin 51 Vice President--Human Resources Since 1996
Vice President--Human Resources, Amcast 1984-1996
Industrial Corporation, Dayton, OH
(manufacturer of automotive and flow-control
products)
John E. Rutzler III 55 Vice President-Controller Since 1989
Dennis Haines 43 General Counsel and Secretary Since 1993
Associate General Counsel 1989-1993
Zoe Baird* 44 Director Since 1993
Visiting Scholar, Yale Law School, New Haven, Commencing
CT Jan. 1, 1997
Senior Vice President and General Counsel, 1990-1996
Aetna Life and Casualty Company, Hartford, CT
(multiline insurance company)
Director of Southern New England
Telecommunications Corporation and The
Southern New England Telephone Company
Michael K. Brown* 59 Director Since 1995
(Citizen of United Director and Senior Advisor, Brown Brothers Since 1993
Kingdom) Harriman (HK) Ltd., Hong Kong (a merchant
banking organization)
General Manager, Emirates Bank International 1989-1993
Ltd., Hong Kong (financial institution)
Director of, among others, Export Credit
Insurance Corporation of Singapore, Hong Kong
Government Industry Development Board, and
Hong Kong Government Textiles Advisory Board
William E. Butler* 65 Director Since 1992
Director, Chairman and Chief Executive 1991-1996
Officer, Eaton Corporation, Cleveland, OH
(manufacturer of vehicle powertrain
components and controls)
Director of Bearings, Inc., Ferro
Corporation,
The Goodyear Tire & Rubber Company, and
Pitney-Bowes, Inc.
Edward J. Campbell* 68 Director Since 1986
President, JI Case Co., Racine, WI (farm 1992-1994
and construction machinery and equipment)
President, Newport News Shipbuilding, Newport 1979-1992
News, VA (shipbuilding and repairing)
Director of Global Marine, Inc. and Titan
Wheel International
Robert D. Neary* 63 Director Since 1995
Trustee Chairman and President, Armada Funds, Since 1996
Wilmington, DE (group of mutual funds)
Co-Chairman, Ernst & Young LLP, Cleveland, OH 1984-1993
(international accounting and consulting
firm)
Director, Cold Metal Products, Inc. (strip Since 1994
steel producer and service center processor)
</TABLE>
S-2
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
Stockholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary, at one of the addresses set forth
below:
THE DEPOSITARY IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
BY MAIL: BY HAND: BY OVERNIGHT COURIER
<S> <C> <C>
Wall Street Station Receive Window 77 Water Street, 4th Floor
P.O. Box 1010 77 Water Street, 4th Floor New York, NY 10005
New York, NY 10268-1010 New York, NY 10005
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers listed below. Additional copies of this Offer to Purchase, the Letter
of Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below and will be furnished promptly at
Purchaser's expense. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
MORROW & CO., INC.
909 Third Avenue, 20th Floor
New York, NY 10022
Call Toll Free: (800) 566-9061
BANKS AND BROKERAGE FIRMS, PLEASE CALL: (800) 662-5200
THE DEALER MANAGER FOR THE OFFER IS:
Deutsche Morgan Grenfell Inc.
31 West 52nd Street
New York, NY 10019
BROKERS AND BANKS, PLEASE CALL (800) 334-1898
<PAGE>
EXHIBIT 99.2
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
ELJER INDUSTRIES, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 20, 1996
OF
ZURN ACQUISITION CO., INC.
A WHOLLY OWNED SUBSIDIARY
OF
ZURN INDUSTRIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JANUARY 21, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
By Overnight Courier:
77 Water Street, 4th Floor
New York, NY 10005
By Mail: By Facsimile Transmission: By Hand:
Wall Street Station (for Eligible Institutions Only) Receive Window
P.O. Box 1010 (212) 701-7636 77 Water Street,
New York, NY 10268-1010 (212) 701-7637 5th Floor
New York, NY
Confirm by Telephone:
(800) 245-7630
DESCRIPTION OF SHARES TENDERED
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON THE CERTIFICATE(S) TENDERED
CERTIFICATES(S)) (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER
OF SHARES
REPRESENTED NUMBER OF
CERTIFICATE BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL NUMBER
OF SHARES
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares
represented by Certificates delivered to the Depositary are being
tendered. See Instruction 4.
<PAGE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST
SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED
BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) of Eljer Industries, Inc. (the "Stockholders") if certificates
evidencing Shares ("Certificates") are to be forwarded with this Letter of
Transmittal or if delivery of Shares is to be made by book-entry transfer to
an account maintained by Harris Trust Company of New York (the "Depositary")
at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust
Company ("PDTC") (each, a "Book-Entry Transfer Facility") pursuant to the
procedures set forth in Section 3 of the Offer to Purchase (as defined below).
Stockholders whose Certificates are not immediately available or who cannot
deliver either their Certificates for, or a Book-Entry Confirmation (as
defined in Section 3 of the Offer to Purchase) with respect to, their Shares
and all other required documents to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) may tender their
Shares according to the guaranteed delivery procedures set forth in Section 3
of the Offer to Purchase. See Instruction 2 hereof. Delivery of documents to a
Book-Entry Transfer Facility does not constitute delivery to the Depositary.
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER).
Name of Tendering Institution:
---------------------------------------------
Check Box of applicable Book-Entry Transfer Facility:
[_] DTC [_] PDTC
Account Number:
------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------
[_] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Stockholder(s)
---------------------------------------
Window Ticket Number (if any)
----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-------------------------
Name of Institution which Guaranteed Delivery
------------------------------
If delivered by book-entry transfer, check box of applicable Book-Entry
Transfer Facility:
[_] DTC [_] PDTC
Account No.
----------------------------------------------------------------
Transaction Code No.
-------------------------------------------------------
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Zurn Acquisition Co., Inc., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Zurn
Industries, Inc., a Pennsylvania corporation, the above-described shares of
common stock, par value $1.00 per share (the "Shares"), of Eljer Industries,
Inc., a Delaware corporation (the "Company"), at a purchase price of $24.00
per Share, net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated December
20, 1996 (the "Offer to Purchase"), receipt of which is hereby acknowledged,
and in this Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). The
undersigned understands that Purchaser reserves the right to transfer or
assign, in whole or from time to time in part, to one or more of its
affiliates, the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
Purchaser of its obligations under the Offer or prejudice the rights of the
tendering Stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of, or payment for,
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms or conditions of any such extension or amendment), the undersigned
hereby sells, assigns, and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all of the Shares that are being tendered
hereby and any and all other Shares or other securities issued or issuable in
respect thereof on or after December 14, 1996 (a "Distribution") and
irrevocably constitutes and appoints the Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
Certificates evidencing such Shares (and any Distributions), or transfer
ownership of such Shares (and all Distributions) on the account books
maintained by a Book-Entry Transfer Facility, together, in any such case, with
all accompanying evidences of transfer and authenticity to, or upon the order
of, Purchaser, upon receipt by the Depositary as the undersigned's agent, of
the purchase price with respect to such Shares, (ii) present such Shares (and
any Distributions) for transfer on the books of the Company, and (iii) receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any Distributions), all in accordance with the terms and subject
to the conditions of the Offer.
The undersigned hereby irrevocably appoints each designee of Purchaser as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights with respect to
all shares tendered hereby and accepted for payment and paid for by Purchaser
(and any Distributions), including without limitation, the right to vote such
Shares (and any Distributions) in such manner as each such attorney and proxy
or his substitute shall, in his sole discretion, deem proper. All such powers
of attorney and proxies, being deemed to be irrevocable, shall be considered
coupled with an interest in the Shares tendered with this Letter of
Transmittal. Such appointment will be effective when, and only to the extent
that, Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior powers of attorney and proxies given by the undersigned
with respect to such Shares (and any Distributions) will be revoked, without
further action, and no subsequent powers of attorneys and proxies may be given
with respect thereto (and, if given, will be deemed ineffective). The
designees of Purchaser will, with respect to the Shares (and any
Distributions) for which such appointment is effective, be empowered to
exercise all voting and other rights of the undersigned with respect to such
Shares (and any Distributions) as they in their sole discretion may deem
proper. Purchaser reserves the absolute right to require that, in order for
Shares to be deemed validly tendered, immediately upon the acceptance for
payment of such Shares, Purchaser or its designees be able to exercise full
voting rights with respect to such Shares (and any Distributions), including
voting at any meeting of Stockholders then scheduled.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
3
<PAGE>
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any Distributions) and that, when the same are accepted for
payment and paid for by Purchaser, Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, and that the Shares tendered hereby (and any Distributions)
will not be subject to any adverse claim. The undersigned, upon request, will
execute and deliver any additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of Shares tendered hereby (and any Distributions). In addition, the
undersigned shall promptly remit and transfer to the Depositary for the
account of Purchaser any and all Distributions issued to the undersigned on or
after December 14, 1996 in respect of the Shares tendered hereby, accompanied
by appropriate documentation of transfer, and pending such remittance and
transfer or appropriate assurance thereof, the Purchaser shall be entitled to
all rights and privileges as owner of any such Distributions and may withhold
the entire purchase price or deduct from the purchase price the amount of
value thereof, as determined by Purchaser in its sole discretion.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in
the instructions to this Letter of Transmittal will constitute a binding
agreement between the undersigned and the Purchaser with respect to such
Shares upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Purchaser may not be required to accept for payment
any of the Shares tendered hereby.
Unless otherwise indicated in this Letter of Transmittal under "Special
Payment Instructions," please issue the check for the purchase price and
return any Certificates evidencing Shares not tendered or not accepted for
payment in the name(s) of the registered holder(s) appearing under
"Description of Shares Tendered." Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail the check for the purchase price
and return any Certificates evidencing Shares not tendered or not accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered." In the
event that both the "Special Payment Instructions" and the "Special Delivery
Instructions" are completed, please issue the check for the purchase price and
return any such Certificates evidencing Shares not tendered or not accepted
for payment (and accompanying documents, as appropriate) in the name(s) of,
and deliver such check and return such Certificates (and accompanying
documents, as appropriate) to, the person(s) so indicated. Unless otherwise
indicated herein under "Special Payment Instructions," in the case of book-
entry delivery of Shares, please credit the account maintained at the Book-
Entry Transfer Facility indicated above with respect to any Shares not
accepted for payment. The undersigned recognizes that Purchaser has no
obligation pursuant to the "Special Payment Instructions" to transfer any
Shares from the name of the registered holder if the Purchaser does not accept
for payment any of the Shares tendered hereby.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if To be completed ONLY if
Certificates for Shares not Certificates for Shares not
tendered or not accepted for tendered or not accepted for
payment and the check for the payment and the check for the
purchase price of Shares accepted purchase price of Shares accepted
for payment are to be issued in for payment are to be sent to
the name of someone other than the someone other than the undersigned
undersigned, or if Shares or to the undersigned at an
delivered by book-entry transfer address other than that shown
that are not accepted for payment above.
are to be returned by credit to an
account maintained at a Book-Entry Mail check and/or certificate(s)
Transfer Facility, other than to to:
the account indicated above.
Issue check and/or certificate(s) Name
------------------------------
to: (PLEASE TYPE OR PRINT)
Address
---------------------------
Name
------------------------------
(PLEASE TYPE OR PRINT)
-----------------------------------
Address (INCLUDE ZIP CODE)
---------------------------
-----------------------------------
(INCLUDE ZIP CODE)
-----------------------------------
(TAX IDENTIFICATION OR SOCIAL
SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
5
<PAGE>
IMPORTANT
STOCKHOLDER: SIGN HERE AND COMPLETE SUBSTITUTE
FORM W-9 BELOW
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
SIGNATURE(S) OF STOCKHOLDER(S)
Dated: , 199
------------------------
(MUST BE SIGNED BY THE REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
THE CERTIFICATE OR ON A SECURITY POSITION LISTING OR BY PERSON(S) AUTHORIZED
TO BECOME REGISTERED HOLDER(S) BY CERTIFICATES AND DOCUMENTS TRANSMITTED
HEREWITH. IF SIGNATURE IS BY TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS,
ATTORNEYS-IN-FACT, AGENTS, OFFICERS OR CORPORATIONS OR OTHERS ACTING IN A
FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE PROVIDE THE FOLLOWING
INFORMATION. SEE INSTRUCTION 5.)
Name(s):
--------------------------------------------------------------------
-----------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity (full title):
------------------------------------------------------
Address:
--------------------------------------------------------------------
-----------------------------------------------------------------------------
(INCLUDE A ZIP CODE)
Area Code and Telephone No.:
------------------------------------------------
(HOME)
------------------------------------------------
(BUSINESS)
Taxpayer Identification or Social Security No.:
-----------------------------
(COMPLETE SUBSTITUTE FORM W-9 BELOW)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature(s):
----------------------------------------------------
Name:
-----------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Title:
----------------------------------------------------------------------
Name of Firm:
---------------------------------------------------------------
Address:
--------------------------------------------------------------------
-----------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
------------------------------------------------
Dated: , 199
------------------------
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, no signature
guarantee is required on this Letter of Transmittal (a) if this Letter of
Transmittal is signed by the registered holder(s) (which term, for the
purposes of this document, includes any participant in any of the Book-Entry
Transfer Facility systems whose name appears on a security position listing as
the owner of the Shares) of Shares tendered herewith and such registered
holder has not completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on this
Letter of Transmittal or (b) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
If the Certificates are registered in the name of a person other than the
signer of this Letter of Transmittal or if payment is to be made or
Certificates for Shares not tendered or not accepted for payment are to be
returned to a person other than the registered holder of the Certificates
tendered, then the tendered Certificates must be endorsed or accompanied by
duly executed stock powers, in either case signed exactly as the name or names
of the registered owner or owners appear on the Certificates, with the
signatures on the Certificates or stock powers guaranteed by an Eligible
Institution as provided in this Letter of Transmittal. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
Stockholders if Certificates evidencing Shares are to be forwarded with this
Letter of Transmittal or if delivery of Shares is to be made pursuant to the
procedures for book-entry transfer set forth in Section 3 of the Offer to
Purchase. For Shares to be validly tendered pursuant to the Offer, either (a)
a Letter of Transmittal (or a manually signed facsimile thereof), properly
completed and duly executed, with any required signature guarantees and any
other documents required by this Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth in this Letter of Transmittal
on or prior to the Expiration Date and either (i) Certificates representing
tendered Shares must be received by the Depositary at one of those addresses
on or prior to the Expiration Date or (ii) Shares must be delivered pursuant
to the procedures for book-entry transfer set forth in Section 3 of the Offer
to Purchase and a Book-Entry Confirmation must be received by the Depositary
on or prior to the Expiration Date, or (b) the tendering Stockholder must
comply with the guaranteed delivery procedures set forth below and in Section
3 of the Offer to Purchase.
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary
or complete the procedures for book-entry transfer on or prior to the
Expiration Date may nevertheless tender their Shares by following the
guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase. Pursuant to such procedure: (i) tender must be made by or through an
Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by Purchaser,
must be received by the Depositary on or prior to the Expiration Date, and
(iii) Certificates representing all tendered Shares in proper form for
transfer, or a Book-Entry Confirmation with respect to all the tendered
Shares, together with a Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, and any required signature
guarantees or an Agent's Message (as defined in Section 2 of the Offer to
Purchase) and any other documents required by this Letter of Transmittal, must
be received by the Depositary within three New York Stock Exchange trading
days after the date of such Notice of Guaranteed Delivery. If Certificates are
forwarded separately to the Depositary, a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) must accompany
each delivery.
The method of delivery of Certificates, this Letter of Transmittal and any
other required documents is at the option and sole risk of the tendering
Stockholder and delivery will be deemed made only when actually received by
the Depositary. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.
7
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering Stockholders, by execution
of this Letter of Transmittal (or a manually signed facsimile thereof), waive
any right to receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided in this Letter of Transmittal is
inadequate, the information required under "Description of Shares Tendered"
should be listed on a separate signed schedule attached to this Letter of
Transmittal.
4. PARTIAL TENDERS. If fewer than all of the Shares represented by any
Certificates delivered to the Depositary with this Letter of Transmittal are
to be tendered, fill in the number of Shares which are to be tendered in the
box entitled "Number of Shares Tendered." In such cases, a new Certificate for
the remainder of the Shares that were evidenced by your old Certificate(s)
will be sent, without expense, to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on this
Letter of Transmittal, as soon as practicable after the Expiration Date. All
Shares evidenced by Certificate(s) delivered to the Depositary will be deemed
to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all the owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
Certificates.
If this Letter of Transmittal or any Certificates or instruments of transfer
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, that person should so indicate when signing, and
proper evidence satisfactory to the Purchaser of that person's authority to so
act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Certificates or
separate instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s). Signatures on the Certificates or
instruments of transfer must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by the Certificate(s) listed and
transmitted hereby, the Certificate(s) must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear on the Certificates for such
Shares. Signatures on the Certificates or instruments of transfer must be
guaranteed by an Eligible Institution.
6. TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchaser
will pay or cause to be paid any transfer taxes with respect to the transfer
and sale of Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or (in the circumstances
permitted hereby) if Certificates for Shares not tendered or not purchased are
to be registered in the name of, any person other than the registered
holder(s), or if tendered Certificates are registered in the name of any
person other than the person(s) signing this Letter of Transmittal, the amount
of any transfer taxes (whether imposed on the registered holder(s) or such
person) payable on account of the transfer to such person will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
8
<PAGE>
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Certificate(s) listed in this Letter
of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and Certificates
for unpurchased Shares are to be issued in the name of a person other than the
signer of this Letter of Transmittal or if a check is to be sent and
Certificates are to be returned to someone other than the signer of this
Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed. If any
tendered Shares are not purchased for any reason and the Shares are delivered
by book-entry transfer, the Shares will be credited to an account maintained
at the appropriate Book-Entry Transfer Facility.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance may be directed to the Information Agent at its address or
telephone number set forth below. Requests for additional copies of the Offer
to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or to brokers, dealers, commercial
banks and trust companies. Such materials will be furnished at Purchaser's
expense.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Purchaser (subject to certain limitations in the Merger Agreement (as defined
in the Offer to Purchase)), in whole or in part, at any time or from time to
time, in the Purchaser's sole discretion.
10. BACKUP WITHHOLDING TAX. Each tendering Stockholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN")
on Substitute Form W-9, which is provided under "Important Tax Information"
below and to certify that the Stockholder is not subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering Stockholder to a penalty and 31% federal income tax
backup withholding on the payment of the purchase price for the Shares. If the
tendering Stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future, the tendering Stockholder
should follow the instructions set forth in Part III of the Substitute Form W-
9 and sign and date both the Substitute Form W-9 and the "Certificate of
Awaiting Taxpayer Identification." If the Stockholder has indicated in Part
III that a TIN has been applied for and the Depositary is not provided with a
TIN by the time of payment, the Depositary will withhold 31% of all payments
of the purchase price, if any, made thereafter pursuant to the Offer until a
TIN is provided to the Depositary.
11. LOST OR DESTROYED CERTIFICATES. If any Certificate(s) representing
Shares has been lost or destroyed, the holders should promptly notify the
Depositary at the telephone number printed on the first page of this Letter of
Transmittal. The holders will then be instructed as to the procedure to be
followed in order to replace the Certificate(s). This Letter of Transmittal
and related documents cannot be processed until the procedures for replacing
lost or destroyed Certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
(TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ANY
OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE
EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a Stockholder whose tendered Shares
are accepted for payment is required to provide the Depositary (as payer) with
such Stockholder's correct TIN on Substitute Form W-9 below. If such
Stockholder is an individual, the TIN is his social security number. If the
tendering Stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future, the Stockholder should so
indicate on the Substitute Form W-9. See Instruction 10. If the Depositary is
not provided with the correct TIN, the Stockholder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that
are made to the Stockholder with respect to Shares purchased pursuant to the
Offer may be subject to backup federal income tax withholding.
9
<PAGE>
Certain Stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements and should indicate their status by writing "exempt" across the
face of, and by signing and dating, the Substitute Form W-9. In order for a
foreign individual to qualify as an exempt recipient, that Stockholder must
submit a statement, signed under penalties of perjury, attesting to that
individual's exempt status. Forms for such statements can be obtained from the
Depositary. See the enclosed Guidelines for Certificates of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the Stockholder. Backup withholding is not an additional
tax. Rather, the federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding with respect to payment of
the purchase price for Shares purchased pursuant to the Offer, a Stockholder
must provide the Depositary with his correct TIN by completing the Substitute
Form W-9 below, certifying that the TIN provided on Substitute Form W-9 is
correct (or that the Stockholder is awaiting a TIN) and that (1) such
Stockholder is exempt from backup withholding, (2) the Stockholder has not
been notified by the Internal Revenue Service that he is subject to backup
withholding as a result of failure to report all interest or dividends or (3)
the Internal Revenue Service has notified the Stockholder that he is no longer
subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are registered in more than one name or are not
in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report.
10
<PAGE>
PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK
--------------------------------
PART I--Taxpayer Identification Number-- PART III
For All Accounts
SUBSTITUTE Enter your taxpayer identification number
FORM W-9 in the appropriate box. For most Social security
individuals and sole proprietors, this is number
your Social Security Number. For other
entities, it is your Employer --------------
Identification Number. If you do not have
DEPARTMENT a number, see "How to Obtain a TIN" in
OF THE the enclosed Guidelines. OR
TREASURY
INTERNAL Note: if the account is in more than one
REVENUE name, see the chart on page 2 of the Employer
SERVICE enclosed Guidelines to determine what Identification
number to enter. Number
-----------------------------------------
PART II--For Payees Exempt From Backup
Withholding (see enclosed Guidelines and --------------
complete as instructed therein).
If awaiting TIN,
write "Applied
For".
- --------------------------------------------------------------------------------
CERTIFICATION.--Under penalties of
perjury, I certify that:
(1) The number shown on this form is my correct taxpayer
identification number, or I am waiting for a number
to be issued to me and either (a) I have mailed or
delivered an application to receive a taxpayer
identification number to the appropriate Internal
Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or
deliver an application in the near future. I
PAYER'S understand that if I do not provide a taxpayer
REQUEST FOR identification number, 31% of all reportable payments
TAXPAYER made to me thereafter will be withheld until I
IDENTIFICATION provide a number;
NUMBER
(2) I am not subject to backup withholding because (a) I
am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service ("IRS")
that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer
subject to backup withholding; and
(3) Any other information provided on this form is true,
correct and complete.
CERTIFICATION INSTRUCTIONS--You must cross out item (2)
above if you have been notified by the IRS that you are
currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were
subject to backup withholding you received another
notification from the IRS that you are no longer subject
to backup withholding, do not cross out item (2).
--------------------------------------------------------------
SIGNATURE DATE , 199
------------------------- --
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR INSTRUCTIONS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN
THE BOX IN PART III OF THE SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office
or (2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by
the time of payment, 31% of all payments of the purchase price pursuant to
the Offer made to me thereafter will be withheld until I provide a number.
SIGNATURE DATE
------------------------------------------ --------
- --------------------------------------------------------------------------------
11
<PAGE>
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue, 20th Floor
New York, NY 10022
(212) 754-8000
Call Toll Free: (800) 566-9061
Banks and Brokerage Firms,
Please Call: (800) 662-5200
The Dealer Manager for the Offer is:
DEUTSCHE MORGAN GRENFELL INC.
31 West 52nd Street
New York, NY 10019
(212) 469-7302 Call Collect
Call Toll Free: (800) 334-1898
December 20, 1996
12
<PAGE>
EXHIBIT 99.3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
ZURN INDUSTRIES, INC.,
ZURN ACQUISITION CO., INC.
AND
ELJER INDUSTRIES, INC.
DATED DECEMBER 14, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated December 14, 1996 (this "Agreement"),
among Zurn Industries, Inc., a Pennsylvania corporation ("Parent"), Zurn
Acquisition Co., Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and Eljer Industries, Inc., a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the acquisition of the Company by Parent, by means of the merger
of Sub with and into the Company (the "Merger"), upon the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, to effectuate the acquisition, Parent and the Company each desire
that Parent cause Sub to commence a cash tender offer to purchase all of the
outstanding shares of common stock, par value $1.00 per share, of the Company
(the "Shares" or the "Company Common Stock") upon the terms and subject to the
conditions set forth in this Agreement and the Offer Documents (as defined in
Section 1.2) and the Board of Directors of the Company has approved such
tender offer and is recommending (subject to the limitations contained herein)
that the Company's stockholders accept the tender offer and tender their
shares of Company Common Stock pursuant thereto; and
WHEREAS, Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Offer (as defined
in Section 1.1) and the Merger and also to prescribe various conditions to the
consummation thereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
The Offer
1.1 The Offer. (a) Provided that none of the events set forth in Exhibit A
hereto shall have occurred and be continuing, as promptly as practicable (but
in any event not later than five business days after the public announcement
of the execution and delivery of this Agreement), Parent shall cause Sub to
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), an offer to purchase (the "Offer")
all outstanding shares of the Company Common Stock at a price of $24.00 per
share, net to the seller in cash (as paid pursuant to the Offer, the "Offer
Consideration"). The obligation of Parent and Sub to commence the Offer, to
consummate the Offer and to accept for payment and to pay for shares of
Company Common Stock validly tendered in the Offer and not withdrawn shall be
subject only to those conditions set forth in Exhibit A hereto.
(b) Without the prior written consent of the Company, Sub shall not (and
Parent shall cause Sub not to) (i) decrease or change the form of the Offer
Consideration or decrease the number of Shares sought pursuant to the Offer,
(ii) change the conditions to the Offer, (iii) impose additional conditions to
the Offer, (iv) extend the expiration date of the Offer beyond the initial
expiration date of the Offer (except (A) as required by applicable law, (B)
that Sub may extend the expiration date of the Offer for up to 20 business
days after the initial expiration date of the Offer (which shall be the 20th
business day after commencement of the Offer), and (C) that if any condition
to the Offer has not been satisfied or waived, Sub shall extend the expiration
date of the Offer for one or more periods not exceeding 60 calendar days (or,
if required by the Company in its sole discretion, 120 days calendar days) in
the aggregate), (v) waive the condition that there shall be validly tendered
and not withdrawn prior to the time the Offer expires a number of Shares which
constitutes 50.1% of the Shares outstanding on a fully-diluted basis on the
date of purchase ("on a fully-diluted basis" meaning, as of any date, the
number of
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Shares outstanding, together with the Shares which the Company may be required
to issue pursuant to obligations outstanding at that date under employee stock
or similar benefit plans or otherwise), or (vi) amend any term of the Offer in
any manner adverse to holders of shares of Company Common Stock; provided,
however, that, except as set forth above and subject to applicable legal
requirements, Sub may waive any other condition to the Offer in its sole
discretion; and provided further, that the Offer may be extended in connection
with an increase in the consideration to be paid pursuant to the Offer so as
to comply with applicable rules and regulations of the United States
Securities and Exchange Commission (the "SEC"). Assuming the prior
satisfaction or waiver of the conditions to the Offer, Sub shall accept for
payment, and pay for, in accordance with the terms of the Offer, all shares of
Company Common Stock validly tendered and not withdrawn pursuant to the Offer
as soon as practicable after the expiration date thereof.
1.2 Offer Documents. As soon as practicable on the date of commencement of
the Offer, Parent and Sub shall file or cause to be filed with the SEC a
Tender Offer Statement on Schedule 14D-1 ("Schedule 14D-1") with respect to
the Offer which shall contain the offer to purchase and related letter of
transmittal and other ancillary Offer documents and instruments pursuant to
which the Offer will be made (collectively with any supplements or amendments
thereto, the "Offer Documents") and which Parent and Sub jointly represent,
warrant and covenant will comply in all material respects with the Exchange
Act and any other applicable law and shall contain (or shall be amended in a
timely manner so as to contain) all information which is required to be
included therein in accordance with the Exchange Act and the rules and
regulations thereunder and any other applicable law; provided, however, that
no agreement or representation is hereby made or shall be made by Parent or
Sub with respect to information supplied by the Company in writing expressly
for inclusion in, or with respect to Company information derived from the
Company's public SEC filings which is incorporated by reference in, the Offer
Documents; and provided, further, however, that no representation, warranty or
covenant is made or shall be made herein by the Company with respect to
information contained in the Offer Documents other than information supplied
by the Company in writing expressly for inclusion in, or with respect to
Company information derived from the Company's public SEC filings which is
incorporated by reference in, the Offer Documents.
Parent, Sub and the Company each agree promptly to correct any information
provided by them for use in the Offer Documents if and to the extent that it
shall have become false or misleading in any material respect and Parent and
Sub further jointly and severally agree to take all lawful action necessary to
cause the Offer Documents as so corrected to be filed promptly with the SEC
and to be disseminated to holders of Company Common Stock, in each case as and
to the extent required by applicable law. In conducting the Offer, Parent and
Sub shall comply in all material respects with the provisions of the Exchange
Act and any other applicable law. The Company and its counsel shall be given a
reasonable opportunity to review and comment on the Offer Documents and any
amendments thereto prior to the filing thereof with the SEC.
1.3 Company Actions. The Company hereby consents to the Offer and represents
that (a) its Board of Directors (at a meeting duly called and held) has (i)
determined that each of this Agreement, the Offer and the Merger are fair to
and in the best interests of the Company and its stockholders, (ii) approved
this Agreement and the transactions contemplated hereby, including the Offer
and the Merger, and such approval is sufficient to render (x) Section 203 of
the Delaware General Corporation Law (the "DGCL") inapplicable to this
Agreement and the transactions contemplated hereby, including the Offer and
the Merger, and (y) Article Eighth of the Restated Certificate of
Incorporation of the Company inapplicable to this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, and
(iii) resolved (subject to the limitations herein contained) to recommend
acceptance of the Offer and adoption of this Agreement by the holders of
Company Common Stock, and (b) Bear, Stearns & Co. Inc. has delivered to the
Board of Directors of the Company its opinion that the Offer Consideration to
be received by the holders of Company Common Stock in the Offer is fair, from
a financial point of view, to such holders. The Company hereby consents to the
inclusion in the Offer Documents of the recommendation referred to in this
Section 1.3; provided, however, that the Company's Board of Directors may
withdraw, modify or change such recommendation to the extent that, after
consultation with legal counsel (who may be the Company's regularly engaged
legal counsel), it determines in good faith that such
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action is necessary for the Board of Directors to comply with its fiduciary
duties under applicable law. The Company hereby agrees to file with the SEC
simultaneously with the filing by Parent and Sub of Schedule 14D-1, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, "Schedule 14D-9") containing such
recommendations of the Board of Directors of the Company in favor of the Offer
and the Merger; provided, however, that the Company's Board of Directors may
withdraw, modify or change such recommendation to the extent that, after
consultation with legal counsel (who may be the Company's regularly engaged
legal counsel), it determines in good faith that such action is necessary for
the Board of Directors to comply with its fiduciary duties under applicable
law. The Company represents, warrants and covenants that Schedule 14D-9 shall
comply in all material respects with the Exchange Act and any other applicable
law and shall contain (or shall be amended in a timely manner so as to
contain) all information which is required to be included therein in
accordance with the Exchange Act and the rules and regulations thereunder and
any other applicable law. The Company agrees to include in the Schedule 14D-9
information furnished by Parent or Sub in writing concerning Parent's
Designees (as such term is defined in Section 1.4 hereof), as required by
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company,
Parent and Sub each agree promptly to correct any information provided by them
for use in Schedule 14D-9 if and to the extent that it shall have become false
or misleading in any material respect and the Company further agrees to take
all lawful action necessary to cause Schedule 14D-9 as so corrected to be
filed promptly with the SEC and disseminated to the holders of Company Common
Stock, in each case as and to the extent required by applicable law. Parent,
Sub and their counsel shall be given a reasonable opportunity to review
Schedule 14D-9 and any amendments thereto prior to the filing thereof with the
SEC. In connection with the Offer, the Company shall promptly furnish Parent
with mailing labels, security position listings and all available listings or
computer files containing the names and addresses of the record holders of the
Company Common Stock as of the latest practicable date and shall furnish
Parent with such information and assistance (including updated lists of
stockholders, mailing labels and lists of security positions) as Parent or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of Company Common Stock. Subject to the requirements of
applicable law, and except for such actions as are necessary to disseminate
the Offer Documents and any other documents necessary to consummate the Offer
and the Merger, Parent and Sub and each of their affiliates, associates,
partners, employees, agents and advisors shall hold in confidence the
information contained in such labels, lists and files, shall use such
information only in connection with the Offer and the Merger, and, if this
Agreement is terminated in accordance with its terms, shall deliver promptly
to the Company (or destroy and certify to the Company the destruction of) all
copies of such information (and any copies, compilations or extracts thereof
or based thereon) then in their possession or under their control.
1.4 Directors. (a) Promptly upon the purchase by Sub pursuant to the Offer
of such number of shares of Company Common Stock which represents at least
50.1% of the outstanding shares of Company Common Stock (on a fully diluted
basis), and from time to time thereafter, (i) Parent shall be entitled to
designate such number of directors ("Parent's Designees"), rounded up to the
next whole number as will give Parent, subject to compliance with Section
14(f) of the Exchange Act, representation on the Board of Directors of the
Company equal to the product of (x) the number of directors on the Board of
Directors of the Company (giving effect to any increase in the number of
directors pursuant to this Section 1.4) and (y) the percentage that such
number of Shares so purchased bears to the aggregate number of Shares
outstanding (such number being, the "Board Percentage"), and (ii) the Company
shall, upon request by Parent, promptly satisfy the Board Percentage by (x)
increasing the size of the Board of Directors of the Company or (y) using
reasonable efforts to secure the resignations of such number of directors as
is necessary to enable Parent's Designees to be elected to the Board of
Directors of the Company and shall use best efforts to cause Parent's
Designees promptly to be so elected, subject in all instances to compliance
with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
At the request of Parent, the Company shall take, at Parent's expense, all
lawful action necessary to effect any such election. Parent will supply to the
Company in writing and be solely responsible for any information with respect
to itself, the Parent's Designees and its officers, directors and affiliates
required by Section 14(f) of the Exchange and Rule 14f-1 promulgated
thereunder to be included in Schedule 14D-9. Notwithstanding the foregoing, at
all times prior to the Effective Time the Company's Board of Directors shall
include at least two Continuing Directors (as defined in Section 1.4(b)).
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(b) Following the election or appointment of Parent's Designees pursuant to
this Section 1.4 and prior to the Effective Time (as defined in Section 2.3)
of the Merger, any amendment or termination of this Agreement, extension for
the performance or waiver of the obligations or other acts of Parent or Sub or
waiver of the Company's rights hereunder shall require the concurrence of a
majority of directors of the Company then in office who are directors on the
date hereof and who voted to approve this Agreement (such directors, the
"Continuing Directors").
ARTICLE II
The Merger
2.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, Sub shall be merged with and
into the Company at the Effective Time. Each of the parties shall use its
respective reasonable best efforts to cause the Merger to occur as promptly as
possible (subject to the limitations herein contained). At the Effective Time,
the separate corporate existence of Sub shall cease, and the Company shall
continue as the surviving corporation and a wholly owned subsidiary of Parent
(Sub and the Company are sometimes hereinafter referred to as "Constituent
Corporations" and, as the context requires, the Company is sometimes
hereinafter referred to as the "Surviving Corporation"), and shall continue
under the name "Eljer Industries, Inc."
2.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.1, the closing of the Merger (the "Closing") shall take place at 10:00 a.m.,
New York time, on the first business day following satisfaction or waiver of
the conditions set forth in Article VII (the "Closing Date"), at the offices
of Jones, Day, Reavis & Pogue, 599 Lexington Avenue, New York, New York unless
another date, time or place is agreed to in writing by the parties hereto.
2.3 Effective Time of the Merger. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, as provided in the DGCL, as soon
as practicable on or after the Closing Date. The Merger shall become effective
upon such filing or at such time thereafter as is provided in the Certificate
of Merger (the "Effective Time").
2.4 Effects of the Merger. (a) The Merger shall have the effects as set
forth in the applicable provisions of the DGCL.
(b) The directors and the officers of Sub immediately prior to the Effective
Time shall, from and after the Effective Time, be the initial directors and
officers of the Surviving Corporation until their successors have been duly
elected or appointed and qualified, or until their earlier death, resignation
or removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws.
(c) The Certificate of Incorporation of Sub immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
DGCL.
(d) The Bylaws of Sub as in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation until thereafter amended as
provided by applicable law, the Certificate of Incorporation or the Bylaws.
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ARTICLE III
Effect of The Merger on The Capital Stock of The Constituent Corporations;
Exchange of Certificates
3.1 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of Company
Common Stock or the holder of any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into
and become one fully paid and nonassessable share of common stock, par value
$1.00 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Company Common Stock and all other shares of capital stock of the Company that
are owned by the Company and all shares of Company Common Stock and other
shares of capital stock of the Company owned by Parent, Sub or any other
wholly-owned Subsidiary (as defined below) of Parent or the Company shall be
canceled and retired and shall cease to exist and no consideration shall be
delivered or deliverable in exchange therefor. As used in this Agreement, the
word "Subsidiary", with respect to any party, means any corporation,
partnership, joint venture or other organization, whether incorporated or
unincorporated, of which: (i) such party or any other Subsidiary of such party
is a general partner; (ii) voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation, partnership, joint venture or other organization is held by such
party or by any one or more of its Subsidiaries, or by such party and any one
or more of its Subsidiaries; or (iii) at least 50% of all classes of equity
securities is, directly or indirectly, owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and any one or more of
its Subsidiaries.
3.2 Conversion of Securities. At the Effective Time, by virtue of the Merger
and without any action on the part of Sub, the Company or the holders of any
of the shares thereof:
(a) (i) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (excluding (i) shares owned, directly
or indirectly, by the Company or any wholly-owned Subsidiary of the Company or
by Parent, Sub or any other wholly-owned Subsidiary of Parent and (ii)
Dissenting Shares (as defined in Section 3.6)) shall be converted into the
right to receive the Offer Consideration, payable to the holder thereof,
without any interest thereon (the "Merger Consideration"), less any required
withholding taxes, upon surrender and exchange of a Certificate (as defined in
Section 3.3).
(ii) All such shares of Company Common Stock, when converted as provided in
Section 3.2(a)(i), no longer shall be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each Certificate
previously evidencing Shares shall thereafter represent only the right to
receive the Merger Consideration. The holders of Certificates previously
evidencing Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to the Company Common Stock except as
otherwise provided herein or by law and from and after the Effective Time such
Certificates shall represent only the right to receive for their Shares the
Merger Consideration, without any interest thereon, upon surrender of the
Certificates in accordance with the provisions of Section 3.3.
3.3 Payment for Shares. (a) Paying Agent. Prior to the Effective Time, Sub
shall appoint a United States bank or trust company reasonably acceptable to
the Company to act as paying agent (the "Paying Agent") for the payment of the
Merger Consideration, and Parent shall deposit or shall cause to be deposited
with the Paying Agent in a separate fund established for the benefit of the
holders of shares of Company Common Stock, for payment in accordance with this
Article III, through the Paying Agent (the "Payment Fund"), immediately
available funds in amounts necessary to make the payments pursuant to Section
3.2(a)(i) and this Section 3.3 to holders (other than (i) the Company or any
wholly-owned Subsidiary of the Company or Parent, Sub or any other wholly-
owned Subsidiary of Parent, or (ii) holders of Dissenting Shares). The Paying
Agent shall, pursuant to irrevocable instructions, pay the Merger
Consideration out of the Payment Fund. From time to time at or after the
Effective Time, Parent shall take all lawful action necessary to make or cause
to be made the appropriate
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cash payments, if any, to holders of Dissenting Shares. The Paying Agent shall
invest portions of the Payment Fund as Parent directs in obligations of or
guaranteed by the United States of America, in commercial paper obligations
receiving the highest investment grade rating from either Moody's Investors
Services, Inc. and/or Standard & Poor's Corporation, or in certificates of
deposit, bank repurchase agreements or banker's acceptances of commercial
banks with capital exceeding $1,000,000,000 (collectively, "Permitted
Investments"); provided, however, that the maturities of Permitted Investments
shall be such as to permit the Paying Agent to make prompt payment to former
holders of Company Common Stock entitled thereto as contemplated by this
Section 3.3. Parent shall cause the Payment Fund to be promptly replenished to
the extent of any losses incurred as a result of Permitted Investments. All
earnings on Permitted Investments shall be paid to Sub. If for any reason
(including losses) the Payment Fund is inadequate to pay the amounts to which
holders of shares of Company Common Stock shall be entitled under this Section
3.3, Parent shall in any event be liable for payment thereof. The Payment Fund
shall not be used for any purpose except as expressly provided in this
Agreement.
(b) Payment Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall instruct the Paying Agent to mail to each holder
of record (other than the Company or any wholly-owned Subsidiary of the
Company or Parent, Sub or any other wholly-owned Subsidiary of Parent) of a
Certificate or Certificates which, immediately prior to the Effective Time,
evidenced outstanding shares of Company Common Stock (the "Certificates"), (i)
a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and shall be in such
form and have such other customary provisions as Parent reasonably may
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment therefor. Upon surrender of a Certificate
for cancellation to the Paying Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in respect thereof cash in an amount equal to the product of (x) the
number of shares of Company Common Stock represented by such Certificate and
(y) the Merger Consideration, and the Certificate so surrendered shall
forthwith be canceled. Absolutely no interest shall be paid or accrued on the
Merger Consideration payable upon the surrender of any Certificate. If payment
is to be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the registered holder of the surrendered Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered in accordance with the provisions of this
Section 3.3(b), each Certificate (other than Certificates representing Shares
owned by the Company or any wholly-owned Subsidiary of the Company or Parent,
Sub or any other wholly-owned Subsidiary of Parent) shall represent for all
purposes only the right to receive the Merger Consideration with respect to
the shares of Company Common Stock formerly evidenced by such Certificate.
(c) Termination of Payment Fund; Interest. Any portion of the Payment Fund
which remains undistributed to the holders of Company Common Stock for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with
this Article III and the instructions set forth in the letter of transmittal
mailed to such holder after the Effective Time shall thereafter look only to
Parent for payment of the Merger Consideration to which they are entitled.
(d) No Liability. Neither Parent nor the Surviving Corporation shall be
liable to any holder of shares of Company Common Stock for any cash from the
Payment Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Withholding Rights. Parent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder
of shares of Company Common Stock such amounts as Parent may be required to
deduct and withhold with respect to such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the holder of the shares of Company Common Stock in respect of which
such deduction and withholding was made.
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3.4 Stock Transfer Books. At the Effective Time, the stock transfer books of
the Company shall be closed and there shall be no further registration of
transfers of shares of Company Common Stock thereafter on the records of the
Company.
3.5 Stock-Based Executive Compensation Arrangements. At the Effective Time,
each holder of (a) a then-outstanding option to purchase Shares under the
Company's Long-Term Executive Incentive Compensation Plan (the "LTIP") (a true
and correct copy of which has been delivered by the Company to Parent),
whether or not then exercisable (the "Options"), shall, in settlement thereof,
receive for each Share subject to such Option an amount (subject to any
applicable withholding tax) in cash equal to the difference between the Merger
Consideration and the per Share exercise price of such Option to the extent
such difference is a positive number (such amount being hereinafter referred
to as, the "Option Consideration"), (b) any then-outstanding shares of
restricted Company Common Stock awarded under the LTIP ("Restricted Shares")
shall, in settlement thereof, receive for each Restricted Share converted
pursuant to Section 3.2(a) an amount (subject to any applicable withholding
tax) in cash equal to the Merger Consideration (the "Restricted Share
Consideration"), and (c) any then-outstanding phantom stock unit under the
Eljer Industries, Inc. 1995 Long-Term Incentive Plan (the "Incentive Plan"),
whether or not then exercisable (the "Phantom Rights") shall, in settlement
thereof, receive for each Phantom Right an amount (subject to applicable
withholding tax) in cash equal to the difference between the Merger
Consideration and the Initial Value (as defined in the Incentive Plan) of such
Phantom Right to the extent such difference is a positive number (such amount
being hereinafter referred to as, the "Phantom Right Consideration");
provided, however, that with respect to any person subject to Section 16(a) of
the Exchange Act, any such amount shall be paid as soon as practicable after
the first date payment can be made without liability to such person under
Section 16(b) of the Exchange Act. Upon receipt of the Option Consideration,
the Restricted Share Consideration or the Phantom Right Consideration, the
Option or the Phantom Right shall be cancelled and the Restricted Shares shall
be surrendered and cancelled. The surrender of an Option, a Restricted Share
or a Phantom Right to the Company in exchange for the Option Consideration,
the Restricted Share Consideration or the Phantom Right Consideration shall be
deemed a release of any and all rights the holder had or may have had in
respect of such Option, Restricted Share or Phantom Right. Prior to the
Effective Time, the Company shall use its reasonable efforts to obtain all
necessary consents or releases from holders of Options, Restricted Shares or
Phantom Rights under the LTIP and the Incentive Plan and take all such other
lawful action as may be necessary to provide for and give effect to the
transactions contemplated by this Section 3.5 (except for any such action that
may require the approval of the Company's stockholders). Except as otherwise
agreed to by the parties, (i) the LTIP and the Incentive Plan shall terminate
as of the Effective Time and the provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any Subsidiary thereof, shall
be canceled as of the Effective Time, and (ii) the Company shall use
reasonable best efforts to assure that following the Effective Time no
participant in the LTIP, the Incentive Plan or other plans, programs or
arrangements shall have any right thereunder to acquire equity securities of
the Company, the Surviving Corporation or any Subsidiary thereof.
3.6 Dissenting Shares. Notwithstanding any other provisions of this
Agreement to the contrary, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have not voted in favor of the Merger or consented thereto in writing
and who shall have demanded properly in writing appraisal for such shares in
accordance with Section 262 of the DGCL (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration. Such stockholders instead shall be entitled to receive
payment of the appraised value of such shares of Company Common Stock held by
them in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares of Company Common Stock under such Section 262 shall thereupon be
deemed to have been converted into and to have become exchangeable, as of the
Effective Time, for the right to receive, without any interest thereon, the
Merger Consideration upon surrender in the manner provided in Section 3.3, of
the Certificate or Certificates that, immediately prior to the Effective Time,
evidenced such shares of Company Common Stock.
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ARTICLE IV
Representations and Warranties
4.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Sub as follows (it being expressly
understood that, to the extent that any representation or warranty shall be
untrue or incorrect as a result of (i) the status of United States Brass
Corporation ("US Brass") as a debtor and debtor-in-possession under the
jurisdiction of the United States Bankruptcy Court for the Eastern District of
Texas, (ii) the past or future assertion of claims against US Brass in
connection with its reorganization proceedings, or (iii) the occurrence of any
other events, developments or actions with respect to US Brass in such
reorganization proceedings (collectively, the "US Brass Bankruptcy Events"),
such representation or warranty shall nonetheless be deemed to be true and
correct for all purposes of this Agreement):
(a) Organization, Standing and Power. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation, has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted, and is duly qualified and in
good standing to conduct business in each jurisdiction in which the business
it is conducting, or the operation, ownership or leasing of its properties,
makes such qualification necessary, other than in such jurisdictions where the
failure so to qualify or be in good standing could not reasonably be expected
to have a Material Adverse Effect (as defined below) with respect to the
Company. The entities identified on Schedule 4.1(a) represent all of the
Subsidiaries of the Company, and the Company does not own any equity interest
in any other entity other than the Subsidiaries. The Company has heretofore
made available to Parent complete and correct copies of its Restated
Certificate of Incorporation and Bylaws and the Certificate of Incorporation
and Bylaws (or other comparable documents) of each of its Subsidiaries. As
used in this Agreement, a "Material Adverse Effect" shall mean, with respect
to any party, a material adverse effect, or any development that is reasonably
likely to result in a material adverse effect, on the business, financial
condition or results of operations of such party and its Subsidiaries, taken
as a whole.
(b) Capital Structure. The authorized capital stock of the Company consists
of 50,000,000 shares of Company Common Stock and 10,000,000 shares of
Preferred Stock, par value $1.00 per share ("Preferred Stock"). As of the date
hereof: (i) 7,153,657 Shares (including 40,600 Restricted Shares) are issued
and outstanding, (ii) no shares of Preferred Stock are issued and outstanding,
(iii) 33,593 Shares are held by the Company or its direct or indirect wholly
owned Subsidiaries, and (iv) no bonds, debentures, notes or other instruments
or evidence of indebtedness having the right to vote (or convertible into, or
exercisable or exchangeable for, securities having the right to vote) on any
matters on which the Company stockholders may vote ("Company Voting Debt") are
issued or outstanding. All outstanding Shares were duly authorized and are
validly issued, fully paid and nonassessable and are not subject to preemptive
or other similar rights. Except as set forth on Schedule 4.1(b), all
outstanding shares of capital stock of the Subsidiaries of the Company are
owned by the Company or a direct or indirect Subsidiary of the Company, free
and clear of all liens, charges, encumbrances, claims and options. As of the
date hereof, except as set forth in this Section 4.1(b) or Schedule 4.1(b),
except for the common stock purchase rights (the "Rights") issued pursuant to
the Rights Agreement dated as of April 14, 1996, as amended, between the
Company and Harris Trust and Savings Bank (the "Rights Agreement") and except
for the tentative settlement entered into in November 1995 pursuant to which
it was agreed that 17.5% of the issued and outstanding shares of the common
stock of the Company will be issued to a trust to be created pursuant to the
Bankruptcy Plan (as hereinafter defined) in the US Brass Bankruptcy there are
outstanding: (i) no shares of capital stock, Company Voting Debt or other
voting securities of the Company; (ii) no securities of the Company or any
Subsidiary of the Company convertible into, or exchangeable or exercisable
for, shares of capital stock, Company Voting Debt or other voting securities
of the Company or any Subsidiary of the Company; (iii) no stock appreciation
rights, phantom stock awards or similar rights or awards have been issued or
granted by the Company or any Subsidiary of the Company; and (iv) no options,
warrants, calls, rights (including preemptive rights), commitments or
agreements to which the Company or any Subsidiary of the Company is a party or
by which it is bound, in any case obligating the Company or any Subsidiary of
the Company to issue, deliver, sell, purchase, redeem or acquire, or cause to
be issued, delivered, sold, purchased,
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redeemed or acquired, additional shares of capital stock or any Company Voting
Debt or other voting securities of the Company or of any Subsidiary of the
Company, or obligating the Company or any Subsidiary of the Company to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. Set forth on Schedule 4.1(b) is a list of all options, warrants and
rights to purchase shares of Company Common Stock, and all Phantom Rights and
stock appreciation rights outstanding as of the date hereof and the exercise
prices or Initial Values, as applicable, relating thereto. There are not as of
the date hereof and there will not be at the Effective Time any stockholder
agreements, voting trusts or other agreements or understandings to which the
Company is a party or by which it is bound relating to the voting of any
shares of the capital stock of the Company which will limit in any way the
solicitation of proxies by or on behalf of the Company from, or the casting of
votes by, the stockholders of the Company with respect to the Merger. There
are no restrictions on the Company to vote the stock of any of its
Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Company has all requisite corporate power and authority to enter
into this Agreement and, subject, if required with respect to consummation
of the Merger, to the Company Stockholder Approval (as defined in Section
4.1(c)(iii)), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject, if required with
respect to consummation of the Merger, to the Company Stockholder Approval.
This Agreement has been duly executed and delivered by the Company and,
subject, if required with respect to consummation of the Merger, to the
Company Stockholder Approval, and, assuming that this Agreement constitutes
the valid and binding agreement of Parent and Sub, constitutes a valid and
binding obligation of the Company enforceable in accordance with its terms
except that the enforcement hereof may be limited by (a) bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) (the
foregoing exception, the "Bankruptcy Exception").
(ii) The execution and delivery of this Agreement by the Company do not,
and the consummation of the transactions contemplated hereby by the Company
will not, (x) conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or the
loss of a benefit under, or the creation of a lien, pledge, security
interest or other encumbrance on assets or property, or right of first
refusal with respect to any asset or property (any such conflict,
violation, default, right of termination, cancellation or acceleration,
loss, creation or right of first refusal, a "Violation"), pursuant to any
provision of the Certificate of Incorporation or Bylaws of the Company or
the equivalent constituent documents of any of its Subsidiaries or (y)
except as set forth on Schedule 4.1(c)(ii) hereto and assuming the
consents, approvals, authorizations, permits, filings and notifications
referred to in Section 4.1(c)(iii) are duly and timely obtained or made
and, if required, the Company Stockholder Approval has been obtained,
result in any Violation of any (i) loan or credit agreement, note,
mortgage, indenture, lease, Company ERISA Plan (as defined in Section
4.1(i)), Company Benefit Arrangements (as defined in Section 4.1(i)) or
other agreement, obligation, instrument, Company Permit (as defined in
Section 4.1(f)), concession, franchise or license applicable to the Company
or any of its Subsidiaries or their respective properties or assets or (ii)
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or their respective
properties or assets (collectively, "Laws"). The Board of Directors of the
Company has taken all actions necessary under the DGCL, including approving
the transactions contemplated by this Agreement, to ensure that Section 203
of the DGCL does not, and will not, apply to the transactions contemplated
in this Agreement. The Board of Directors of the Company has also taken all
actions necessary under Article EIGHTH of the Company's Restated
Certificate of Incorporation, including approving the transactions
contemplated by this Agreement, to ensure that such Article EIGHTH does
not, and will not, apply to the transactions contemplated in this
Agreement. The Company and its Board of Directors have taken all actions
necessary so that (i) the execution and delivery of this Agreement, the
consummation of the transactions
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<PAGE>
contemplated hereby and the other matters provided for herein will not
result in (A) Purchaser or Sub or any of their respective Affiliates or
Associates being an Acquiring Person, (B) the occurrence of a Distribution
Date, or (C) the Rights becoming exercisable and (ii) the Final Expiration
Date will occur immediately prior to the purchase of Shares pursuant to the
Offer (the terms "Acquiring Person," "Affiliate," "Associate,"
"Distribution Date" and "Final Expiration Date" having the respective
meanings ascribed thereto in the Rights Agreement).
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, notice to, or permit from any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required
by or with respect to the Company or any of its Subsidiaries in connection
with the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby which,
if not obtained or made, would reasonably be expected to have a Material
Adverse Effect with respect to the Company, except for: (A) the filing of a
premerger notification and report form by the Company under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended and the rules and
regulations thereunder (the "HSR Act") and the expiration or termination of
the applicable waiting period thereunder; (B) the filing with the SEC of
(x) if required by applicable law, a proxy or information statement in
definitive form relating to a meeting of the holders of Company Common
Stock (the "Company's Stockholders Meeting") to adopt this Agreement
("Company Stockholder Approval") (such proxy or information statement as
amended or supplemented from time to time being hereinafter referred to as
the "Proxy Statement"), (y) Schedule 14D-9 in connection with the Offer,
and (z) such reports under and such other compliance with the Exchange Act
and the rules and regulations thereunder as may be required in connection
with this Agreement and the transactions contemplated hereby; (C) the
filing of the Certificate of Merger with the Secretary of State of the
State of Delaware; (D) the consents, approvals, orders, authorizations,
registrations, declarations or filings set forth on Schedule 4.1(c)(iii);
and (E) such filings and approvals as may be required by any applicable
state securities, "blue sky" or takeover laws.
(d) SEC Documents. The Company has made available to Parent a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by the Company with the SEC since January 1, 1993 and
prior to the date of this Agreement (the "Company SEC Documents") which are
all the documents (other than preliminary material) that the Company was
required to file with the SEC since such date. As of their respective dates,
(i) the Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Company SEC Documents, and (ii)
none of the Company SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the Company SEC Documents complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC)
and present fairly, in all material respects, in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal, recurring adjustments, none of which are material) the consolidated
financial position of the Company and its consolidated Subsidiaries as of
their respective dates and the consolidated results of operations and the
consolidated cash flows of the Company and its consolidated Subsidiaries for
the periods presented therein.
(e) Information Supplied. None of the information supplied or to be supplied
in writing by the Company expressly for inclusion or incorporation by
reference in (i) any of the Offer Documents will, at the time the Offer
Documents are first published, sent or given to holders of Company Common
Stock, and at any time they are amended or supplemented, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and (ii) the Proxy
Statement will, on the date it is first mailed to the holders
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<PAGE>
of the Company Common Stock or at the time of the Company's Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Company makes no representations with respect to
information supplied in writing by Parent or Sub expressly for inclusion in
the Proxy Statement.
(f) Compliance with Applicable Laws. The Company and its Subsidiaries hold
all permits, licenses, variances, exemptions, orders, franchises and approvals
of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except where the failure to
hold any such Company Permits would not reasonably be expected to have a
Material Adverse Effect with respect to the Company. Except as disclosed in
the Company SEC Documents, the businesses of the Company and its Subsidiaries
are not being conducted in violation of any Laws, other than Laws the
violation of which would not reasonably be expected to have a Material Adverse
Effect with respect to the Company. No investigation or review by any
Governmental Entity with respect to the Company or any of its Subsidiaries is
pending or, to the knowledge of the Company, threatened, other than those the
outcome of which would not reasonably be expected to have a Material Adverse
Effect. As used in this Agreement, "to the knowledge of the Company" and all
phrases of like import shall mean facts or circumstances within the personal
knowledge of Scott Arbuckle, Brooks Sherman, or George Hanthorn, in each case
after reasonably inquiry.
(g) Litigation. Except as disclosed in the Company SEC Documents or on
Schedule 4.1(g) and except for any suits, actions or proceedings initiated or
threatened against the Company or any of its officers or directors by any
shareholder of the Company (or any group thereof) on or after the date hereof
with respect to this Agreement or the transactions contemplated hereby, there
is no suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary of the Company,
nor is there any written judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any
Subsidiary of the Company, which is reasonably likely to result in a Material
Adverse Effect on the Company or its ability to consummate the transactions
contemplated hereby.
(h) Taxes. Except as disclosed on Schedule 4.1(h):
(i) All Tax returns, statements, reports and forms (including estimated
tax or information returns and reports) required to be filed with any
Taxing Authority with respect to any Pre-Closing Tax Period (defined below)
by or on behalf of the Company or any Subsidiary of the Company
(collectively, the "Returns") have, to the extent required to be filed on
or before the date hereof, been filed when due in accordance with all
applicable laws.
(ii) As of the time of filing, the Returns correctly reflected in all
material respects the facts regarding the income, business, assets,
operations, and activities and status of the Company and its Subsidiaries.
(iii) All Taxes shown as due and payable on the Returns that have been
filed have been timely paid, or withheld and remitted to the appropriate
Taxing Authority.
(iv) The reserves established for Taxes with respect to the Company and
its Subsidiaries for any Pre-Closing Tax Period (including any Pre-Closing
Tax Period for which no Return has yet been filed) reflected on the books
of the Company and its Subsidiaries (excluding any provision for deferred
income taxes) are adequate in accordance with GAAP.
(v) Neither the Company nor any Subsidiary of the Company is delinquent
in the payment of any Tax or has requested any extension of time within
which to file any Return except for extensions granted as a matter of
right.
(vi) Neither the Company nor any Subsidiary of the Company (or any member
of any affiliated, consolidated, combined or unitary group of which the
Company or any Subsidiary of the Company is or has been a member) has
granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such
extension or waiver) has not yet expired.
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<PAGE>
(vii) There is no action, suit or proceeding now pending and no claim,
audit or investigation now pending of which the Company is aware or, to the
knowledge of the Company, any action, suit, claim, audit or investigation
threatened against or with respect to the Company or any Subsidiary of the
Company in respect of any Tax.
(viii) None of the Company, any Subsidiary of the Company or any other
person on behalf of the Company or any Subsidiary of the Company has
entered into any agreement or consent pursuant to Section 341(f) of the
Code.
(ix) There are no liens for Taxes upon the assets of the Company or any
Subsidiary of the Company except liens for current Taxes not yet due.
(x) Neither the Company nor any Subsidiary of the Company will be
required to include any adjustment in taxable income for any Post-Closing
Tax Period (defined below) under Section 481(c) of the Code (or any similar
provision of the Tax laws of any jurisdiction) as a result of a change in
method of accounting for a Pre-Closing Tax Period or pursuant to the
provisions of any agreement entered into with any Taxing Authority with
regard to the Tax liability of the Company or any Subsidiary of the Company
for any Pre-Closing Tax Period.
(xi) Neither the Company nor any Subsidiary of the Company has been a
member of an affiliated, consolidated, combined or unitary group with
respect to which any corporation (other than the Company or any Subsidiary
of the Company, or any predecessors thereof) was the common parent.
(xii) Schedule 4.1(h) contains a list of all jurisdictions (whether
foreign or domestic) to which any Tax imposed on overall net income is
properly payable by the Company or any Subsidiary of the Company.
(xiv) For purposes of this paragraph 4.1(h):
(A) "Tax" shall mean (1) any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem,
value added, transfer, franchise, profits, license, withholding on
amounts paid to or by the Company or any Subsidiary of the Company,
payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty, addition to tax or
additional amount imposed by any governmental authority (domestic or
foreign) responsible for the imposition of any such tax (a "Taxing
Authority"), (2) any liability of the Company or any Subsidiary for the
payment of any amounts of any of the foregoing types described as a
result of being a member of an affiliated, consolidated, combined or
unitary group, and (3) liability of the Company or any Subsidiary for
the payment of any amounts as a result of being party to any Tax
sharing agreement or arrangement (whether or not written) binding the
Company or any Subsidiary of the Company or with respect to the payment
of any amounts of any of the foregoing types as a result of any express
or implied obligation to indemnify any other person.
(B) "Pre-Closing Tax Period" shall mean any Tax period (or portion
thereof) ending on or before the close of business on the Closing Date.
(C) "Post-Closing Tax Period" shall mean any Tax period (or portion
thereof) ending after the close of business on the Closing Date.
(i) Pension And Benefit Plans; ERISA.
Schedule 4.1(i) hereto contains a true and complete list of each "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained, contributed to or
required to be contributed to by the Company or any of its Subsidiaries for
the benefit of current, former and retired employees or their beneficiaries
(the "Company ERISA Plans") and each other plan, contract, program or
arrangement maintained, contributed to or required to be contributed to by the
Company or any of its Subsidiaries for the benefit of current, former or
retired employees and directors or their beneficiaries (the "Company Benefit
Arrangements" and, together with the Company ERISA Plans, the "Plans"). Each
Company ERISA Plan and each Company Benefit Arrangement is, and has at all
times, operated in compliance
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<PAGE>
in all material respects with its terms (including any applicable collective
bargaining agreements) and all applicable laws, including but not limited to
the Code, federal and state securities laws and ERISA, and no "reportable
event," "prohibited transaction" or breach of fiduciary duty (within the
meaning of ERISA) or termination has occurred with respect to any Company
ERISA Plan under circumstances which present a risk of any material liability
to any governmental authority or other person. None of the Company ERISA Plans
or Company Benefit Arrangements is a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA or a "multiple employer plan" within the meaning
of Section 413(c) of the Code or Section 4063 of ERISA. No event has occurred
which would cause the Company to incur (i) any liability to the Pension
Benefit Guaranty Corporation under Title IV of ERISA or (ii) any withdrawal
liability to a "multiemployer plan" or "multiple employer plan," in each case
except for liabilities which could not reasonably be expected to have a
Material Adverse Effect with respect to the Company. Copies or descriptions of
each Company ERISA Plan and Company Benefit Arrangement (and, where
applicable, the most recent summary plan description, actuarial report,
determination letter, annual report (Form 5500) and trust agreement relating
to such Company ERISA Plan and Company Benefit Arrangement), and such other
information as has been reasonably requested by Parent, have been made
available to Parent for review prior to the date hereof. Each Company ERISA
Plan intended to qualify under Section 401(a) of the Code is identified on
Schedule 4.1(i) and, to the knowledge of the Company, is so qualified, and, to
the knowledge of the Company, each trust maintained in connection with each
such plan is tax exempt under Section 501(a) of the Code. The Internal Revenue
Service (the "IRS") has issued favorable determination letters with respect to
each Company ERISA Plan and each Company Benefit Arrangement and related trust
intended to qualify under Section 401(a) of the Code, and the IRS has not
taken any action to revoke any such letter. If and to the extent applicable,
no Company ERISA Plan and no Company Benefit Arrangement has or has incurred
an accumulated funding deficiency within the meaning of ERISA (S) 302 or Code
(S) 412, nor has any waiver of the minimum funding standards of ERISA (S) 302
and Code (S) 412 been requested of or granted by the IRS with respect to any
Company ERISA Plan or Company Benefit Arrangement, nor has any lien in favor
of any such plan arisen under Code (S) 412(n) or ERISA (S) 302(f). Except as
indicated on Schedule 4.1(i), no Plan is self funded by the Company. Except as
disclosed on Schedule 4.1(i), with respect to any insurance policy providing
funding for benefits under any Company ERISA Plan or Company Benefit
Arrangement, there is no liability of the Company in the nature of a
retroactive rate adjustment, loss sharing arrangement, or other actual or
contingent liability, there will be no such liability arising wholly or
partially out of events occurring prior to the execution of this Agreement,
nor would there be any such liability if the Company cancelled such policy as
of the date hereof. Except as disclosed on Schedule 4.1(i), no action, suit,
grievance, arbitration or other manner of litigation, or claim with respect to
the Plans or the assets thereof (other than routine claims for benefits made
in the ordinary course of plan administration) are pending or, to the
knowledge of the Company, threatened against or with respect to the Plans, the
Company or any fiduciaries (as defined in Section 3(21) of ERISA) of the Plans
(including any action, suit, grievance, arbitration or other manner of
litigation, or claim regarding conduct which allegedly interferes with the
attainment of rights under a Plan, in each case except for actions, suits,
grievances, arbitrations, claims, or other matters that could not reasonably
be expected to have a Material Adverse Effect with respect to the Company.
Except as set forth in Schedule 4.1(i), all expenses and liabilities relating
to all of the Plans have been, and will at the Closing Date be, fully and
properly accrued in all material respects on the appropriate Plan's books and
records and disclosed in each case to the extent required and in accordance
with generally accepted accounting principles and in the Plan financial
statements. Except as set forth on Schedule 4.1(i), no Plan is funded through
a "welfare benefit fund" as defined in Section 419(e) of the Code.
(j) Absence of Certain Changes or Events. Since September 30, 1996, the
business of the Company and its Subsidiaries has been carried on only in the
ordinary course and there has not been any adverse change in the business,
financial condition or results of operations which has resulted in or
reasonably could be expected to result in a Material Adverse Effect with
respect to the Company.
(k) Opinion of Financial Advisor. The Company has received the opinion of
Bear, Stearns & Co. Inc. to the effect that, as of the date hereof, the Offer
Consideration to be received by the holders of Company Common Stock in the
Offer and the Merger Consideration to be received by the holders of Company
Common Stock in the Merger is fair, from a financial point of view, to such
holders.
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(l) Vote Required. In the event that Section 253 of the DGCL is inapplicable
and unavailable to effectuate the Merger, the affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock is the only
vote of the holders of any class or series of the Company's capital stock
necessary (under applicable law, the Restated Certificate of Incorporation of
the Company or otherwise) to approve the Merger and this Agreement and the
transactions contemplated hereby.
(m) Labor Matters. Except as set forth on Schedule 4.1(m), neither the
Company nor any of its Subsidiaries is a party to any employment, severance
compensation, labor or collective bargaining agreement and there are no
employment, severance compensation, labor or collective bargaining agreements
which pertain to employees of the Company or any of its Subsidiaries. The only
employment agreements and severance compensation agreements with officers of
the Company or any of its Subsidiaries are set forth on Schedule 4.1(m). No
labor organization or group of employees of the Company or any of its
Subsidiaries has made a pending written demand for recognition or
certification.
(n) Intangible Property.
(i) Schedule 4.1(n) sets forth a list of each material trademark, trade
name, patent, service mark, brand mark, brand name, proprietary computer
program, proprietary database, industrial design or copyright owned by, or
used in connection with the businesses of, the Company or any of its
Subsidiaries as well as a list of all registrations thereof and pending
applications therefor, and each license or other contract relating thereto
(collectively, the "Company Intangible Property"). Items identified with an
asterisk on Schedule 4.1(n) are owned by the Company ("Company Owned
Intangible Property"). Except as set forth on Schedule 4.1(n), all of the
Company Owned Intangible Property is owned by the Company or its
Subsidiaries free and clear of any and all liens, claims or encumbrances,
other than liens, claims and encumbrances which would not materially impair
the value of such Company Owned Intangible Property or its use in the
conduct of the businesses conducted by the Company and its Subsidiaries.
Except as set forth on Schedule 4.1(n), the use of the Company Intangible
Property by the Company or its Subsidiaries does not conflict with,
infringe upon, violate or interfere with or constitute an appropriation of
any right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, patent, service mark,
brand mark, brand name, computer program, database, industrial design,
copyright or any pending application therefor of any other person, except
in each case as would not materially impair the value of such Company
Intangible Property or its use in the conduct of the businesses conducted
by the Company and its Subsidiaries. There have been no claims made (or, to
the knowledge of the Company, threatened) and neither the Company nor any
of its Subsidiaries has received any notice of any claim that any of the
Company Intangible Property is invalid or unenforceable or conflicts with
the asserted rights of any other person or has not been used or enforced or
has failed to be used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of the Company
Intangible Property.
(ii) Each of the Company and its Subsidiaries owns, or has a valid right
to use, all Company Intangible Property necessary for the operation of its
business and has not forfeited or otherwise relinquished any Company
Intangible Property.
(iii) Except as set forth on Schedule 4.1(n), each of the licenses or
other contracts relating to the Company Intangible Property (collectively,
the "Company Intangible Property Licenses") is in full force and effect and
is valid and enforceable in accordance with its terms (subject to the
Bankruptcy Exception), and there is no material default under any Company
Intangible Property License either by the Company or any of its
Subsidiaries or, to the knowledge of the Company, by any other party
thereto and there has been no failure to maintain or enforce any material
rights with respect to the Company Intangible Property Licenses. The
transactions contemplated by this Agreement will not invalidate any Company
Intangible Property License to which the Company or any of its Subsidiaries
is a party or by which any of them are bound or result in any requirement
to pay material additional amounts in order to continue to use any such
Company Intangible Property License.
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(o) Environmental Matters.
(i) For purposes of this Agreement:
(A) "Environmental Law" means any applicable law regulating or
prohibiting Releases into any part of the environment (indoor or
outdoor), or pertaining to the protection of natural resources or the
environment including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") (42
U.S.C. (S)(S) 9601, et seq.), the Hazardous Materials Transportation
Act (49 U.S.C. (S)(S) 1801, et seq.), the Resource Conservation and
Recovery Act (42 U.S.C.(S)(S) 6901, et seq.), the Clean Water Act (33
U.S.C. (S)(S) 1251, et seq.), the Clean Air Act (33 U.S.C. (S)(S) 7401,
et seq.), the Toxic Substances Control Act (15 U.S.C. (S)(S) 7401, et
seq.) and the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. (S)(S) 136, et seq.), and the regulations promulgated pursuant
thereto, and any such applicable foreign or domestic state or local
statutes, and the regulations promulgated pursuant thereto, as such
laws are in effect on the date hereof;
(B) "Hazardous Material" means any substance, material or waste which
is regulated by any public or governmental authority in the
jurisdictions in which the Company or its Subsidiaries conducts
business, or the United States, including, without limitation, any
material or substance which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste," "contaminant," "toxic waste" or
"toxic substance" under any provision of any Environmental Law;
(C) "Release" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, including, without
limitation, any property owned, operated or leased by the Company or
any of its Subsidiaries; and
(D) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a governmental entity
or required under any Environmental Law, or voluntarily undertaken to
(i) clean up, remove, treat, or in any other way ameliorate or address
any Hazardous Materials or other substance in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it does not endanger
or threaten to endanger the public health or welfare of the indoor or
outdoor environment; (iii) perform preremedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (iv) achieve or maintain compliance with any
Environmental Law.
(ii) Except as disclosed in the Company SEC Documents, as set forth in
Schedule 4.1(o), or where the failure to comply would not reasonably be
expected to have a Material Adverse Effect with respect to the Company, the
operations of the Company and its Subsidiaries have complied and currently
comply with all Environmental Laws. Except as set forth in Schedule 4.1(o),
neither the Company nor any of its Subsidiaries has received any notice
with respect to any of its facilities of any violation of any Environmental
Law or any possible liability or remediation obligation arising under any
Environmental Law other than those violations, liabilities or obligations
which would not reasonably be expected to have a Material Adverse Effect
with respect to the Company.
(iii) The Company and its Subsidiaries are not subject to any outstanding
material orders, judgments, agreements or contracts with or issued by any
Governmental Entity or other person respecting (A) Environmental Laws, (B)
any Remedial Action or (C) any Release or threatened Release of a Hazardous
Material except as described in Schedule 4.1(o).
(p) Certain Defaults. Except as set forth on Schedule 4.1(p), neither the
Company nor any of its Subsidiaries is, or has received written notice that
any other party is, in default under any material written contract or other
agreement to which the Company or any Subsidiary is a party or otherwise
bound.
(q) Brokerage Fees and Commissions; Legal Fees. Except for Bear, Stearns &
Co. Inc. (a copy of whose engagement letter with the Company has been
furnished to Parent), no person or entity is entitled to receive from the
Company or any of its Subsidiaries any investment banking, brokerage or
finder's fee or fees for financial
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consulting or other advisory services in connection with this Agreement or the
transactions contemplated hereby based upon arrangements made by or on behalf
of the Company. The fees and expenses of Bear, Stearns & Co. Inc. as a result
of its representation of the Company in connection with this Agreement and the
transactions contemplated hereby shall not exceed $3,250,000.
(r) Full Disclosure. None of the representations or warranties contained in
this Section 4.1 nor any of the disclosures contained in the Schedules
attached hereto contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements contained herein or therein, in light of the circumstances
under which they are made, not misleading.
4.2 Representations and Warranties of Parent and Sub. Parent and Sub,
jointly and severally, represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, and each has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified and in
good standing to conduct business in each jurisdiction in which the business
it is conducting, or the operation, ownership or leasing of its properties,
makes such qualification necessary, other than in such jurisdictions where the
failure so to qualify or be in good standing could not reasonably be expected
to have a Material Adverse Effect with respect to Parent. Parent has delivered
to the Company complete and correct copies of the respective Certificates of
Incorporation and Bylaws, or equivalent organizational documents, of Parent
and Sub.
(b) Authority; No Violations; Consents and Approvals.
(i) Each of Parent and Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Sub.
This Agreement has been duly executed and delivered by each of Parent and
Sub and assuming this Agreement constitutes the valid and binding agreement
of the Company, constitutes a valid and binding obligation of Parent and
Sub enforceable in accordance with its terms, subject to the Bankruptcy
Exception.
(ii) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by each of Parent and Sub will not
result in any Violation pursuant to any provision of the Certificate of
Incorporation or Bylaws (or comparable governing instruments) of Parent or
Sub or any of their respective Subsidiaries or, except as set forth on
Schedule 4.2(b)(iii) hereto and assuming the consents, approvals,
authorizations, permits, filings and notifications referred to in Section
4.2(b)(iii) are duly and timely obtained or made, result in any Violation
of any (i) loan or credit agreement, note, mortgage, indenture, lease,
employee benefit plan, or other agreement, obligation, instrument, permit,
concession, franchise or license applicable to Parent or any of its
Subsidiaries or their respective properties or assets or (ii) any Laws
applicable to Parent or any of its Subsidiaries or their respective
properties or assets.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, notice to, or permit from any Governmental
Entity is required by or with respect to Parent or Sub in connection with
the execution and delivery of this Agreement by each of Parent and Sub or
the consummation by each of Parent or Sub of the transactions contemplated
hereby which, if not obtained or made, would reasonably be expected to have
a Material Adverse Effect with respect to Parent, except for: (A) filings
under the HSR Act; (B) the filing with the SEC of (x) Schedule 14D-1,
respectively, in connection with the commencement and consummation of the
Offer and (y) such reports under and such other compliance with the
Exchange Act and the rules and regulations thereunder, as may be required
in connection with this Agreement and the transactions contemplated hereby;
(C) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware; and (D) the filings identified on Schedule
4.2(b)(iii).
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(c) Information Supplied. The Offer Documents, including Schedule 14D-1,
will contain (or will be amended in a timely manner so as to contain) all
information which is required to be included therein in accordance with the
Exchange Act and the rules and regulations thereunder and any other applicable
law, and will conform in all material respects with the requirements of the
Exchange Act and any other applicable law. The information contained in the
Offer Documents (other than information furnished in writing by the Company
expressly for inclusion in the Offer Documents, as to which Parent and Sub
make no representations or warranties) will not, at the respective times such
Offer Documents are filed with the SEC (or such filings are amended or
supplemented) or published, sent or given to the Company's stockholders,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by
Parent or Sub or any affiliate of Parent for inclusion or incorporation by
reference in (i) Schedule 14D-9 will, at the time Schedule 14D-9 is filed with
the SEC, and at any time it is amended or supplemented, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or (ii) the Proxy
Statement will, on the date it is first mailed to the holders of the Company
Common Stock or at the time of the Company's Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect
to Parent or Sub, or with respect to any information supplied by Parent or Sub
for inclusion in the Schedule 14D-9 or the Proxy Statement, shall occur which
is required to be described in an amendment of, or a supplement to, such
document, Parent or Sub shall so describe the event to the Company.
(d) Interim Operations of Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated hereby. Sub is a wholly-owned subsidiary of
Parent.
(e) Financing. Parent and Sub collectively have cash on hand or financing
commitments from financially responsible third parties, or a combination
thereof, in an aggregate amount sufficient to enable Parent and Sub to (i) pay
in full (A) the Offer Consideration, (B) the Merger Consideration (including
the Restricted Share Consideration), (C) the Option Consideration, (D) the
Phantom Right Consideration, and (E) all fees and expenses payable by Parent
and Sub in connection with this Agreement and the transactions contemplated
thereby and (ii) refinance such of the Company's existing indebtedness as,
pursuant to its terms, will become due and payable prior to its stated
maturity as a result of the consummation of the transactions contemplated
hereby.
ARTICLE V
Covenants Relating to Conduct of Business
5.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the earlier of (i) such time as Parent or Sub
obtains majority representation on the Board of Directors of the Company (the
"Board") or (ii) the Effective Time, the Company agrees as to the Company and
its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or by the Third Amended Joint Plan of Reorganization proposed by US
Brass and the Company dated November 27, 1996 (as amended in accordance with
Section 5.1(o) hereof from time to time, the "Bankruptcy Plan"), or to the
extent that Parent shall otherwise consent in writing):
(a) Ordinary Course. The Company and its Subsidiaries shall carry on their
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, and shall use reasonable efforts to preserve
intact its present business organizations, keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end that its
goodwill and ongoing business shall not be impaired in any material respect at
the Effective Time.
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(b) Dividends; Changes in Stock. The Company shall not, nor shall it permit
any of its Subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, other than cash
dividends or distributions paid by a wholly-owned Subsidiary of the Company to
the Company or another wholly-owned Subsidiary of the Company; (ii) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; or (iii) repurchase or otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, any shares
of its capital stock, except as required pursuant to the terms of any
securities outstanding on the date hereof or as contemplated by any employee
benefit or stock plans or any employment or severance agreement, as in effect
on the date hereof.
(c) Issuance of Securities. Except pursuant to the exercise of Options, the
Company shall not, nor shall it permit any of its Subsidiaries to, (i) grant
any options, warrants or rights to purchase shares of Company Common Stock or
grant any Phantom Rights or stock appreciation rights, (ii) amend or reprice
any Option or the LTIP, or (iii) issue, deliver or sell, or authorize or
propose to issue, deliver or sell, any shares of its capital stock of any
class or series (including, without limitation, any Shares), any Company
Voting Debt or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, Company Voting Debt or convertible
securities, other than (A) the issuance of Shares upon the exercise of Options
under the LTIP which are outstanding on the date hereof, or in satisfaction of
stock grants or stock based awards made prior to the date hereof and set forth
on Schedule 4.1(b) (in any case as in effect on the date hereof) or (B)
issuances by a wholly-owned Subsidiary of its capital stock to its parent.
(d) Governing Documents. The Company shall not amend or propose to amend
its, or permit any Subsidiary to amend its, Certificate of Incorporation or
Bylaws (or comparable organizational documents).
(e) No Solicitation. From and after the date hereof until the termination of
this Agreement, the Company shall not, and shall not permit any of its
Subsidiaries, or any of its or their officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by the Company or any of
its Subsidiaries), directly or indirectly, to initiate, solicit, or facilitate
(including by way of furnishing non-public information or assistance) the
making of any proposal that constitutes an Acquisition Proposal (as defined
below), or enter into or maintain or continue discussions or negotiate with
any person or entity in respect of an Acquisition Proposal, provided, however,
that nothing contained in this Agreement shall prohibit the Company from:
(i) furnishing information to, or engaging in discussions or negotiations
with, or agreeing to or endorsing an Acquisition Proposal from, any person
or entity that makes an unsolicited Acquisition Proposal if, and only to
the extent that, (A) the Board, after consultation with legal counsel (who
may be the Company's regularly engaged legal counsel), determines in good
faith that such action is necessary for the Board to comply with its
fiduciary duties under applicable law and (B) the Company (x) provides
prior notice to Parent to the effect that it is taking such action and (y)
receives from such person or entity an executed confidentiality agreement
in reasonably customary form; or
(ii) failing to make, withdrawing, modifying or amending its
recommendation referred to in Section 1.3 if there exists an Acquisition
Proposal and the Board, after consultation with legal counsel as aforesaid,
determines that such action is necessary for the Board to comply with its
fiduciary duties under applicable law.
Subject to the immediately preceding sentence, the Company shall immediately
cease any existing negotiations with any parties conducted heretofore with
respect to any of the foregoing. The Company will promptly notify Parent after
receipt of any Acquisition Proposal or any request for nonpublic information
relating to the Company or any Subsidiary or for access to the properties,
books or records of the Company or any Subsidiary by any person who has
informed the Company that such person is considering making, or has made, an
Acquisition Proposal, and the Company will keep Parent informed in reasonable
detail of the status and details of any such Acquisition Proposal. For
purposes of this Agreement, "Acquisition Proposal" shall mean any bona fide
proposal with respect to a merger, consolidation, share exchange or similar
transaction involving the
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Company or any Subsidiary of the Company, or any purchase of all or any
significant portion of the assets of the Company or any Subsidiary of the
Company, or any significant equity interest in the Company or any Subsidiary
of the Company, other than the transactions contemplated hereby. Nothing
contained in this Section 5.1(e) shall prohibit the Company from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders which the Board, after consultation with legal counsel
(who may be the Company's regularly engaged legal counsel), determines in good
faith is required under applicable law. Notwithstanding anything contained in
this Agreement to the contrary, (x) any action by the Board permitted by this
Section 5.1(e) shall not constitute a breach of this Agreement by the Company
and (y) a "stop-look-and-listen" communication with respect to the Offer, the
Merger or this Agreement of the nature contemplated in Rule 14d-9 under the
Exchange Act made by the Company as a result of an Acquisition Proposal shall
in no event be deemed a withdrawal or modification by the Board of its
approval or recommendation of the Offer, the Merger and this Agreement.
(f) No Acquisitions. The Company shall not, nor shall it permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof.
(g) No Dispositions. Other than dispositions in the ordinary course of
business which are not material, individually or in the aggregate, to the
Company and its Subsidiaries taken as a whole, the Company shall not, nor
shall it permit any of its Subsidiaries to, sell, lease, encumber or otherwise
dispose of, or agree to sell, lease (whether such lease is an operating or
capital lease), encumber or otherwise dispose of, any of its assets.
(h) Advice of Changes; SEC Filings. The Company shall confer on a reasonably
regular basis with Parent, report on operational matters and promptly advise
Parent orally and in writing of any change or event having, or which could
reasonably be expected to have, a Material Adverse Effect on the Company. The
Company shall promptly provide Parent (or its counsel) with copies of all
filings made by the Company with the SEC or any other state or federal
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
(i) No Dissolution, Etc. The Company shall not authorize, recommend, propose
or announce an intention to adopt a plan of complete or partial liquidation or
dissolution of the Company or any of its Subsidiaries.
(j) Other Actions. The Company will not voluntarily take, nor will it permit
any of its Subsidiaries voluntarily to take or agree or commit voluntarily to
take, any action that results in any of the Company's representations or
warranties hereunder being untrue in any material respect or in any of the
Company's covenants hereunder or any of the conditions to the Merger not being
satisfied in all material respects.
(k) Certain Employee Matters. The Company and its Subsidiaries shall not:
(i) except for normal increases to officers and key employees consistent with
past practice, grant any increases in the compensation of any of its
directors, officers or key employees; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required or contemplated by
any of the existing Company ERISA Plans or Company Benefit Arrangements as in
effect on the date hereof to any such director, officer or key employee,
whether past or present; (iii) enter into any new, or materially amend any
existing, employment or severance or termination agreement with any such
director, officer or key employee; or (iv) except as may be required to comply
with applicable law, become obligated under any new Company ERISA Plan or
Company Benefit Arrangements, which was not in existence on the date hereof,
or amend any such plan or arrangement in existence on the date hereof if such
amendment would have the effect of enhancing any benefits thereunder.
Notwithstanding the foregoing, Parent agrees that to the extent that a covered
employee of the Company is unable to meet the targets set forth in the 1997
Executive Incentive Compensation Program or those targets are changed, in
either case as a result of a Change of Control as defined in the 1995 Long
Term Incentive Plan, the employee's 1997 bonus will be paid at par.
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(l) Indebtedness. Except for borrowings in the ordinary course of business
under its existing credit facilities or arrangements, the Company shall not,
nor shall the Company permit any of its Subsidiaries to, assume or incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities
of the Company or any of its Subsidiaries or guarantee any debt securities of
others or enter into any lease (whether such lease is an operating or capital
lease) or create any mortgages, liens, security interests or other
encumbrances on the property of the Company or any of its Subsidiaries in
connection with any indebtedness thereof, or enter into any "keep well" or
other agreement or arrangement to maintain the financial condition of another
person.
(m) Accounting. The Company shall not take any action, other than in the
ordinary course of business, consistent with past practice or as required by
the SEC or by law, to effect any material change in any of its current
accounting policies, procedures and practices.
(n) Capital Expenditures. The Company shall not make or authorize nor shall
the Company permit any of its Subsidiaries to make or authorize any capital
expenditures in excess of $5,000,000 that is not included in the capital
budget previously furnished to Parent.
(o) U.S. Brass Chapter 11 Case. The Company shall not act in any material
respect in the Chapter 11 case of U.S. Brass, pending in the United States
Bankruptcy Court, Eastern District of Texas (case no. 94-40823S) without
reasonable advance notice to and the consent of Parent, which consent shall
not be withheld unreasonably. In particular, the Company shall not propose or
agree to any amendment to or modification of the Third Amended Joint Plan of
Reorganization proposed in said Chapter 11 case by the Company and U.S. Brass,
dated November 27, 1996. Nothing contained in this Section 5.1(o) is intended
in any way to affect the duties, obligations or responsibilities of U.S. Brass
as a debtor under Chapter 11 of the Bankruptcy Code.
5.2 Notices of Certain Events. The Company and Parent shall promptly notify
the other of:
(i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
transactions contemplated by this Agreement; and
(ii) any notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings commenced
or, to the actual knowledge of the executive officers of the notifying
party, threatened against, relating to or involving or otherwise affecting
such party or any of its Subsidiaries which, if pending on the date of this
Agreement, would have been required to have been disclosed, in the case of
the Company, pursuant to Section 4.1(g), or which, in the case of either
the Company or Parent, relate to the consummation of the transactions
contemplated by this Agreement.
ARTICLE VI
Additional Covenants and Agreements
6.1 Preparation of the Proxy Statement; Company Stockholders Meeting; Merger
without a Company Stockholders Meeting. (a) As soon as practicable following
the acceptance for payment of and payment for shares of Company Common Stock
by Sub in the Offer, if required by applicable law in order to consummate the
Merger, the Company, in consultation with Parent, shall prepare and file with
the SEC a preliminary proxy statement, together with a form of proxy, or
information statement (the "Preliminary Proxy Statement") relating to the
Merger in accordance with the Exchange Act and the rules and regulations
thereunder. Parent, Sub and the Company will cooperate with each other in the
preparation of the Preliminary Proxy Statement. Without limiting the
generality or effect of the foregoing, the Company shall use its reasonable
efforts to respond to all SEC comments with respect to the Preliminary Proxy
Statement and, subject to compliance with SEC rules and regulations, to cause
the Proxy Statement to be mailed to the Company's stockholders at the earliest
practicable date. Parent and Sub will furnish to the Company the information
relating to Parent and Sub required under the Exchange Act and the rules and
regulations thereunder to be set forth in the Proxy Statement.
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(b) The Company will, as soon as practicable following the acceptance for
payment of and payment for shares of Company Common Stock by Sub in the Offer,
if required by law to consummate the Merger, duly call, give notice of,
convene and hold the Company Stockholders Meeting for the purpose of approving
this Agreement and the transactions contemplated hereby. At the Company
Stockholders Meeting, Parent shall cause all of the Shares then owned by
Parent and Sub and any of their respective Subsidiaries or controlled
affiliates to be voted in favor of the Merger.
(c) Notwithstanding the foregoing clauses (a) and (b), in the event that Sub
or any other wholly-owned Subsidiary of Parent shall acquire at least 90% of
the outstanding shares of Company Common Stock in the Offer, the parties
hereto shall, at the request of Sub, take all necessary actions to cause the
Merger to become effective, as soon as practicable after the expiration of the
Offer, without a meeting of stockholders of the Company, in accordance with
Section 253 of the DGCL.
(d) Parent shall (i) cause Sub promptly to submit this Agreement and the
transactions contemplated hereby for approval and adoption by the written
consent of its sole stockholder; (ii) cause the shares of capital stock of Sub
to be voted for adoption and approval of this Agreement and the transactions
contemplated hereby; and (iii) cause to be taken all additional actions
necessary for Sub to adopt and approve this Agreement and the transactions
contemplated hereby.
6.2 Access to Information. (a) Upon reasonable notice, the Company shall
(and shall cause each of its Subsidiaries to) afford to the officers,
employees, accountants, counsel and other representatives of Parent access,
during normal business hours during the period prior to the Effective Time, to
all of its properties, books, contracts, commitments and records (including,
without limitation, tax returns) of the Company and its Subsidiaries and cause
the Company's and its Subsidiaries' independent accountants to provide access
to their work papers and such other information as Parent may reasonably
request and, during such period, the Company shall (and shall cause each of
its Subsidiaries to) furnish promptly to Parent (i) a copy of each report,
schedule, registration statement and other document filed or received by the
Company or any such Subsidiary during such period pursuant to SEC requirements
and (ii) all other information concerning the business, properties and
personnel of the Company or any such Subsidiary as Parent may reasonably
request. Parent agrees that it will not, and will cause its representatives
not to, use any information obtained pursuant to this Section 6.2 for any
purpose unrelated to the consummation of the transactions contemplated by this
Agreement.
(b) The Confidentiality and Standstill Agreement, dated as of August 21,
1996, between Parent and the Company (the "Confidentiality Agreement") shall
apply with respect to information furnished thereunder or hereunder and any
other activities contemplated thereby.
6.3 Legal Conditions to Merger. Each of the Company, Parent and Sub will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on such party with respect to the Offer, the
Merger and the transactions contemplated by this Agreement (including
furnishing all information required under the HSR Act and in connection with
approvals of or filings with any other Governmental Entity) and will promptly
cooperate with and furnish information to each other in connection with any
such requirements imposed upon any of them or any of their Subsidiaries in
connection with the Offer, the Merger and the transactions contemplated by
this Agreement. Without limiting the generality or effect of the foregoing,
each of the Company, Parent and Sub will, and will cause its Subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party,
required to be obtained or made by the Company, Parent or any of their
Subsidiaries in connection with the Offer, the Merger, this Agreement or the
taking of any action contemplated hereby or thereby; provided, however, that
Parent need not agree with the Department of Justice or any other Governmental
Entity to hold separate, sell or otherwise dispose of any Subsidiary of Parent
or the Company or assets or properties of any of the foregoing, in each case,
which the Parent determines, in good faith, would materially affect the value
of the acquisition as a whole to Parent.
6.4 Fees and Expenses. (a) Except as otherwise provided in this Section 6.4,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
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(b) The Company agrees to pay Sub a fee in immediately available funds equal
to $8,500,000 upon the termination of this Agreement pursuant to Section
8.1(d) for any of the following reasons (each, a "Trigger Event"):
(i) the Company shall have entered into a definitive agreement with
respect to any Acquisition Proposal other than the transactions
contemplated by this Agreement; or
(ii) the Board shall have withdrawn, or modified or amended in a manner
materially adverse to Parent or Sub, its approval or recommendation of the
Offer, the Merger or this Agreement.
(c) The costs incurred in connection with printing and mailing proxy
materials to shareholders of the Company shall be borne equally by the Company
and Parent.
6.5 Brokers or Finders. Except for Bear, Stearns & Co. Inc., the Company
represents, as to itself, its Subsidiaries and its affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or
will be entitled to any broker's or finders fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement. The fees and expenses of Bear, Stearns & Co. Inc. shall be paid by
the Company in accordance with the Company's agreements with such firm, and
the Company agrees to indemnify and hold Parent harmless from and against any
and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by the Company or any of its affiliates.
Except for the firms identified on Schedule 6.5, Parent and Sub jointly and
severally represent as to themselves and their Subsidiaries and Affiliates
that no agent, broker, investment banker, financial advisor or other firm or
person is or will be entitled to any broker's or finders fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement. The fees and expenses of the firms identified
on Schedule 6.5 shall be paid by Parent and Sub in accordance with the
Parent's agreements with such firms. Parent agrees to indemnify and hold
Company harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses asserted
by any person on the basis of any act or statement alleged to have been made
by Parent or its affiliates.
6.6 Best Efforts. Subject to the terms and conditions of this Agreement,
each of the parties hereto agrees to use its best efforts to take, or cause to
be taken, all 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 contemplated by this Agreement, subject, as
applicable, to the Company Stockholder Approval, including cooperating fully
with the other party, including by provision of information and making of all
necessary filings in connection with, among other things, approvals under the
HSR Act. In case at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of either of the Constituent
Corporations, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
6.7 Conduct of Business of Sub. During the period of time from the date of
this Agreement to the Effective Time, Sub shall not engage in any activities
of any nature except as provided in or contemplated by this Agreement.
6.8 Publicity. The parties will consult with each other and will mutually
agree upon any press release or public announcement pertaining to this
Agreement or the transactions contemplated hereby, including the Offer and the
Merger, and shall not issue any such press release or make any such public
announcement prior to such consultation and agreement, except as may be
required by applicable law or by the rules of the New York Stock Exchange,
Inc., in which case the party proposing to issue such press release or make
such public announcement shall use reasonable efforts to consult in good faith
with the other party before issuing any such press release or making any such
public announcement.
6.9 Employee Benefits. From and after the Effective Time, Parent shall cause
the Surviving Corporation to honor and perform each of the severance
agreements and plans identified on Schedule 6.9; and, to the extent
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necessary under these agreements and plans, the preceding clause shall be
deemed an assumption of the Company's obligations under these agreements and
plans by the Surviving Corporation. The Company has heretofore delivered to
Parent a true and complete copy of each such agreement and plan. Without
limiting the generality of the foregoing, Parent shall cause the Surviving
Corporation to pay to Scott Arbuckle, on the Closing Date, all amounts that
will be owing to him under his Employment Agreement and Executive Severance
Agreement, in each case as amended, as a result of the transactions
contemplated by this Agreement. In addition, prior to the consummation of the
Offer, the Company shall take such actions as may be necessary to amend its
existing Change-In-Control Severance Payment Plan dated June 1, 1991 for
Employees of the Company so that such plan, as amended, shall provide for the
benefits specified on Schedule 6.9 hereto.
6.10 Indemnification; Directors' and Officers' Insurance. (a) The Company
shall, and from and after the Effective Time, the Surviving Corporation shall,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof or who becomes prior to the Effective Time, an
officer or director of the Company or any of its Subsidiaries (the
"Indemnified Parties") against all losses, claims, damages, costs, expenses
(including reasonable attorneys' fees and expenses), liabilities or judgments
or amounts that are paid in settlement with the approval of the indemnifying
party (which approval shall not be unreasonably withheld) of or in connection
with any threatened or actual claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact
that such person is or was a director or officer of the Company or any of its
Subsidiaries whether pertaining to any matter existing or occurring at or
prior to the Effective Time and whether asserted or claimed prior to, or at or
after, the Effective Time ("Indemnified Liabilities"), including all
Indemnified Liabilities based in whole or in part on, or arising in whole or
in part out of, or pertaining to this Agreement or the transactions
contemplated hereby, in each case to the full extent a corporation is
permitted under the DGCL to indemnify its own directors or officers as the
case may be (and Parent and the Surviving Corporation, as the case may be,
will pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law).
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Parties
(whether arising before or after the Effective Time), (i) the Indemnified
Parties may retain counsel satisfactory to them and the Company (or them and
the Surviving Corporation after the Effective Time) and the Company (or after
the Effective Time, the Surviving Corporation) shall pay all fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor
are received; and (ii) the Company (or after the Effective Time, the Surviving
Corporation) will use all reasonable efforts to assist in the vigorous defense
of any such matter, provided that neither the Company nor the Surviving
Corporation shall be liable for any settlement effected without its prior
written consent (which consent shall not unreasonably be withheld). Any
Indemnified Party wishing to claim indemnification under this Section 6.10,
upon learning of any such claim, action, suit, proceeding or investigation,
shall notify the Company (or after the Effective Time, the Surviving
Corporation) (but the failure so to notify shall not relieve a party from any
liability which it may have under this Section 6.10 except to the extent such
failure prejudices such party), and shall deliver to the Company (or after the
Effective Time, the Surviving Corporation) the undertaking contemplated by
Section 145(e) of the DGCL. The Indemnified Parties as a group may retain only
one law firm to represent them with respect to each such matter unless there
is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified
Parties. All rights to indemnification under this Section 6.10(a), including
provisions relating to advances of expenses incurred in defense of any action
or suit, existing in favor of the Indemnified Parties with respect to matters
occurring through the Effective Time, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Time; provided, however, that all such rights to indemnification
in respect of any Indemnified Liabilities asserted or made within such period
shall continue until the disposition of such Indemnified Liabilities.
(b) For a period of six years following the Effective Time, Parent shall
cause the Surviving Corporation to keep in effect the provisions in its
Certificate of Incorporation and Bylaws as of the date hereof providing for
exculpation of director and officer liability and indemnification to the
fullest extent provided by the DGCL, which provisions shall not be amended,
repealed, or otherwise modified except as required by applicable law or except
for amendments or modifications that would not adversely affect the rights
thereunder of any Indemnified Party.
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(c) For a period of six years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company and its
Subsidiaries (provided that Parent may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are
no less advantageous in any material respect to the Indemnified Parties) with
respect to matters arising before the Effective Time, provided that Parent
shall not be required to pay an annual premium for such insurance in excess of
200% of the last annual premium paid by the Company prior to the date hereof,
but in such case shall purchase as much coverage as possible for such amount.
(d) The provisions of this Section 6.10 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his heirs and his
personal representatives and shall be binding on all successors and assigns of
Sub, the Company and the Surviving Corporation.
ARTICLE VII
Conditions Precedent
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
adopted by the affirmative vote of the holders of a majority of the Shares
entitled to vote thereon if such vote is required by applicable law; provided
that the Parent and Sub shall vote all Shares purchased pursuant to the Offer
in favor of the Merger.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of Merger shall be in effect;
provided, however, that prior to invoking this condition, the party so
invoking this condition shall have used its commercially reasonable efforts to
have any such Injunction vacated.
(d) Completion of the Offer. Sub shall have accepted for payment and paid
for all shares of Company Common Stock validly tendered in the Offer and not
withdrawn; provided, however, that neither Parent nor Sub may invoke this
condition if Sub shall have failed to purchase shares of Company Common Stock
so tendered and not withdrawn in violation of the terms of this Agreement or
the Offer.
7.2 Conditions of Obligations of Parent and Sub. The obligations of Parent
and Sub to effect the Merger are subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by Parent
and Sub:
(a) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement on or before the earlier of (i) such time as Parent's
Designees shall constitute at least a majority of the Company's Board of
Directors pursuant to Section 1.4 of this Agreement and (ii) the Closing Date;
provided, however, that no failure by the Company to have so performed in all
material respects any such obligation shall constitute a failure of
satisfaction of the foregoing condition where the Company's failure of
performance occurred, and was actually known to Parent, at or prior to the
time Parent, Sub or any of their affiliates accepted for payment any shares of
Company Common Stock pursuant to the Offer.
Notwithstanding the foregoing, the obligations of Parent and Sub to effect
the Merger shall not be relieved by the failure of any of the foregoing
conditions if such failure is the result, directly or indirectly, of any
breach by Parent or Sub of any of their material obligations under this
Agreement.
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7.3 Conditions of Obligations of the Company. The obligation of the Company
to effect the Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by the
Company:
(a) Representations and Warranties. The representations and warranties of
Parent and Sub set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement on or prior to the Closing Date.
ARTICLE VIII
Termination and Amendment
8.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company or Parent:
(a) by mutual written consent of the Company and Parent, or by mutual action
of their respective Boards of Directors;
(b) by the Company, if Sub shall have failed to commence the Offer within
five business days following the date of the initial public announcement of
the Offer;
(c) by either the Company or Parent, so long as such party has not
materially breached its obligations hereunder, if the Merger shall not have
been consummated on or before May 15, 1997; provided, that the right to
terminate this Agreement under this Section 8.1(c) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has
been the cause of or resulted in the failure of the Merger to occur on or
before such date;
(d) by either the Company or Parent in the event that a Trigger Event shall
have occurred under Section 6.4(b); provided that the Company's right to
terminate this Agreement under this Section 8.1(d) shall be available only if
the Company shall have paid to Sub the fee provided for in Section 6.4(b);
(e) by Parent, if the Offer shall have expired or have been withdrawn or
terminated in accordance with the terms and conditions thereof without any
shares of Company Common Stock being purchased by Sub thereunder by reason of
the failure to satisfy any condition set forth in Exhibit A hereto;
(f) by the Company, if the Offer shall have expired or have been withdrawn
or terminated without any shares of Company Common Stock being purchased by
Sub thereunder on or prior to the 60th (or, if extended as contemplated by
Section 1.2, the 120th) day after the date of commencement of the Offer
pursuant to Section 1.2 hereof;
(g) by the Company, if Parent or Sub materially breaches any of their
respective representations and warranties or covenants contained in this
Agreement; or
(h) by either the Company or Parent, if any permanent injunction or other
order of a court or other competent authority preventing the consummation of
the Merger shall have become final and non-appealable.
8.2 Effect of Termination. In the event of termination of this Agreement by
either the Company or Parent as provided in Section 8.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the
part of Parent, Sub or the Company or their respective affiliates, officers,
directors or stockholders except (i) with respect to this Section 8.2, the
last sentence of Section 6.2(a), and Sections 6.2(b), 6.4 and 6.5, (ii) to the
extent that such termination results from the intentional or wilful breach by
a party hereto
25
<PAGE>
of any of its representations or warranties, or of any of its covenants or
agreements, in each case, as set forth in this Agreement (except as provided
in Section 9.7) and (iii) with respect to Parent and Sub, to the extent that
such termination results from the breach, for whatever reason, of the
representations and warranties of Parent and Sub contained in Section 4.2(e)
hereof or from the failure of Parent and Sub to consummate the transactions
contemplated hereby because Parent and Sub do not have sufficient cash on hand
or financing resources in an aggregate amount sufficient to enable Parent and
Sub to pay all of the amounts specified in Section 4.2(e) hereof.
8.3 Amendment. Subject to applicable law and to Section 1.4(b), this
Agreement may be amended, modified or supplemented only by written agreement
of Parent, Sub and the Company at any time prior to the Effective Time with
respect to any of the terms contained herein; provided, however, that, after
this Agreement is adopted by the Company's stockholders, no such amendment or
modification shall reduce the amount or change the form of consideration to be
delivered to the stockholders of the Company or adversely affect the rights of
the stockholders of the Company.
8.4 Extension; Waiver. At any time prior to the Effective Time, and subject
to Section 1.4(b) and applicable law, the parties hereto, by action taken or
authorized by their respective Boards of Directors, may, to the extent legally
allowed: (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto; (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto; and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
ARTICLE IX
General Provisions
9.1 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Article III
and Sections 6.9 and 6.10. The Confidentiality Agreement shall survive the
execution and delivery of this Agreement, and the provisions of the
Confidentiality Agreement shall apply to all information and material
delivered by any party hereunder.
9.2 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by a nationally recognized overnight courier or certified or
registered mail, postage prepaid, and shall be deemed to be given, dated and
received when so delivered by courier, personally, telegraphed or telecopied
or, if mailed, five business days after the date of mailing to the following
address, or to such other address or addresses as such person may subsequently
designate by notice given hereunder:
(a) if to Parent or Sub, to:
Zurn Industries, Inc.
One Zurn Place
Erie, Pennsylvania 16505
Attn: Dennis Haines, Esq.
Telecopy: (814) 459-3535
with a copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attn: David G. Heiman, Esq.
Telecopy: (216) 579-0212
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(b) if to the Company, to:
Eljer Industries, Inc.
17120 Dallas Parkway
Dallas, Texas 75248
Attn: George W. Hanthorn, Esq.
Telecopy: (972) 407-7238
with copies to:
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Attn: Thomas A. Roberts, Esq.
Telecopy: (214) 746-7777
9.3 Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents, and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the word "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
9.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same instrument and
shall become effective when executed and delivered by each of the parties, it
being understood that all parties need not sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (together with the Confidentiality Agreement and any
other documents and instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and,
except as provided in Sections 6.9 and 6.10, is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
Notwithstanding anything to the contrary contained herein or in the
Confidentiality Agreement, the taking by any party of any action contemplated
by the provisions hereof to be taken by such party shall in no event
constitute a breach of any provision of the Confidentiality Agreement.
9.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflict of laws thereof.
9.7 Severability. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure
to take an action constitutes a material breach of this Agreement or makes
this Agreement impossible to perform, in which case this Agreement shall
terminate pursuant to Article VIII hereof. Upon any such holding that any
provision of this Agreement is null, void or unenforceable, the parties will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the
end that the transactions contemplated by this Agreement are consummated to
the extent possible. Except as otherwise contemplated by this Agreement, to
the extent that a party hereto took an action inconsistent herewith or failed
to take action consistent herewith or required hereby pursuant to an order or
judgment of a court or other competent authority, such party shall incur no
liability or obligation unless such party did not in good faith seek to resist
or object to the imposition or entering of such order or judgment.
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<PAGE>
9.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned or delegated by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign and delegate, in its
sole discretion, all (but not less than all) of its rights, interests and
obligations hereunder to any newly-formed direct or indirect wholly-owned
Subsidiary of Parent formed solely for the purpose of engaging in the
transactions contemplated hereby and not engaged in any business activities or
conducting any operations other than in connection with the transactions
contemplated hereby. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
Zurn Industries, Inc.
/s/ Robert R. Womack
By: _________________________________
Title: Chairman and Chief Executive
Officer
Zurn Acquisition Co., Inc.
/s/ Robert R. Womack
By: _________________________________
Title: President
Eljer Industries, Inc.
/s/ Scott G. Arbuckle
By: _________________________________
Title: President and Chief Executive
Officer
28
<PAGE>
EXHIBIT A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Sub shall not be required
to accept for payment or, subject to any applicable rules and regulations of
the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Sub's
obligation to pay for or return tendered Shares promptly after expiration or
termination of the Offer), to pay for any Shares tendered, and may postpone
the acceptance for payment or, subject to the restrictions referred to above,
payment for any Shares tendered, and, subject to the terms of the Agreement,
may amend or terminate the Offer (whether or not any Shares have theretofore
been purchased or paid for pursuant to the Offer) (A) unless the following
conditions have been satisfied: (i) there have been validly tendered and not
withdrawn prior to the time the Offer shall otherwise expire a number of
Shares which constitutes 50.1% of the Shares outstanding on a fully-diluted
basis on the date of purchase (the "Minimum Share Condition") ("on a fully-
diluted basis" having the following meaning, as of any date: the number of
Shares outstanding, together with the number of Shares the Company is then
required to issue pursuant to obligations outstanding at that date under
employee stock option or other benefit plans or otherwise) and (ii) any
applicable waiting periods under the HSR Act shall have expired or been
terminated prior to the expiration of the Offer; and/or (B) if at any time on
or after the date of the Agreement and before acceptance for payment of, or
payment for, such Shares, any of the following events shall occur and are
continuing:
(a) any United States or foreign governmental entity or authority or any
United States or foreign court of competent jurisdiction in the United
States or any foreign country shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order which is in effect and which (1) materially
restricts, prevents or prohibits consummation of the transactions
contemplated by the Agreement, including the Offer or the Merger, (2)
prohibits or limits materially the ownership or operation by Parent or any
of its Subsidiaries of all or any material portion of the business or
assets of the Company and its Subsidiaries taken as a whole or compels the
Company, Parent, or any of their Subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of the
Company and its Subsidiaries taken as a whole, or (3) imposes material
limitations on the ability of Parent, Sub or any other Subsidiary of Parent
to exercise effectively full rights of ownership of any Shares, including,
without limitation, the right to vote any Shares acquired by Sub pursuant
to the Offer or otherwise on all matters properly presented to the
Company's stockholders, including, without limitation, the approval and
adoption of the Agreement and the transactions contemplated thereby;
provided that Parent and Sub shall have used their respective reasonable
efforts to cause any such order, decree, judgment, or injunction to be
vacated or lifted.
(b) there shall be instituted or pending any action or proceeding before
any United States or foreign court or governmental entity or authority by
any United States or foreign governmental entity or authority seeking any
order, decree or injunction having any effect set forth in (a) above;
(c) the representations and warranties of the Company contained in the
Agreement (without giving effect to the materiality limitations contained
therein) shall not be true and correct as of the expiration date of the
Offer (as the same may be extended from time to time) as though made on and
as of such date (except for representations and warranties made as of a
specified date, which shall not be true and correct as of the specified
date), except for any breach or breaches which, in the aggregate, would not
have a Material Adverse Effect with respect to the Company; it being
expressly understood, however, that any suits, actions or proceedings
initiated or threatened against the Company or any of its officers or
directors by any shareholder of the Company (or any group thereof) on or
after the date hereof with respect to this Agreement or the transactions
contemplated hereby shall not be given effect in determining whether or not
the condition set forth in this subparagraph (c) has been satisfied.
(d) the Company shall not have performed or complied in all material
respects with its obligations under the Agreement to be performed or
complied with by it and such failure continues until the later of (A)
fifteen days after actual receipt by it of written notice from Sub setting
forth in detail the nature of such failure or (B) the expiration date of
the Offer;
A-1
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(e) there shall have occurred any material adverse change, or any
development that is reasonably likely to result in a material adverse
change, in the business, properties, assets, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries
taken as a whole; it being expressly understood, however, that neither (i)
the U.S. Brass Bankruptcy Events nor (ii) any suits, actions or proceedings
initiated or threatened against the Company or any of its officers or
directors by any shareholder of the Company (or any group thereof) on or
after the date hereof with respect to this Agreement or the transactions
contemplated hereby shall be given effect in determining whether or not the
condition set forth in this subparagraph (e) has been satisfied.
(f) the Merger Agreement shall have been terminated in accordance with
its terms;
(g) prior to the purchase of Shares pursuant to the Offer, the Board
shall have withdrawn or materially modified or changed (including by
amendment of Schedule 14D-9) in a manner adverse to Sub its recommendation
of the Offer, the Agreement or the Merger;
(h) there has occurred the declaration of a banking moratorium or any
limitation or suspension of payments in respect of the extension of credit
by banks or other lending institutions in the United States; or
(i) it shall have been publicly disclosed or Sub shall have otherwise
learned that any person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent or its affiliates or any group of which
any of them is a member, shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of
more than 50% of any class or series of capital stock of the Company
(including the Shares), through the acquisition of stock, the formation of
a group or otherwise, or shall have been granted an option, right or
warrant, conditional or otherwise, to acquire beneficial ownership of more
than 50% of any class or series of capital stock of the Company (including
the Shares).
The foregoing conditions (other than the Minimum Share Condition) are for
the sole benefit of Sub and its affiliates and may be asserted by Sub
regardless of the circumstances (including, without limitation, any action or
inaction by Sub or any of its affiliates other than a material breach by
Parent or Sub of the Agreement) giving rise to any such condition or may be
waived by Sub, in whole or in part, from time to time in its sole discretion,
except as otherwise provided in the Agreement. The failure by Sub at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right and may be
asserted at any time and from time to time. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings ascribed to them in the
Agreement and Plan of Merger among the Parent, Sub and the Company to which
this Exhibit A is attached (the "Agreement").
A-2
<PAGE>
EXHIBIT 99.4
<PAGE>
RESTATED CERTIFICATE OF
INCORPORATION
OF
ELJER INDUSTRIES, INC.
(Originally Incorporated on January 26, 1989)
FIRST: The name of the Corporation is Eljer Industries, Inc.
SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation shall be to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Sixty Million (60,000,000), of
which Ten Million (10,000,000) shares shall be Preferred Stock of the par value
of $1.00 per share and Fifty Million (50,000,000) shares shall be Common Stock
of the par value of $1.00 per share.
A. Preferred Stock. The Board of Directors is expressly authorized to
provide for the issue of all or any shares of the Preferred Stock, in one or
more series, and to fix for each such series such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors providing for the
issue of such series (a "Preferred Stock Designation") and as may be permitted
by the General Corporation Law of the State of Delaware. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the voting power of all of the then outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock"), voting together as a single class,
without a separate vote of the holders of the Preferred Stock, or any series
thereof, unless a vote of any such holders is required pursuant to any Preferred
Stock Designation.
B. Common Stock. Except as otherwise required by law or as otherwise
provided in any Preferred Stock Designation, the holders of the Common Stock
shall exclusively possess all voting power and each share of Common Stock shall
have one vote.
FIFTH: A. Number, Election and Terms of Directors. Subject to the
rights of the holders of any series of Preferred Stock to elect additional
directors under specified circumstances, the number of directors shall be fixed
from time to time exclusively by the Board of Directors pursuant to a resolution
adopted by a majority of the Whole Board (as defined in Article EIGHTH). The
directors, other than those who may be elected by the holders of any series of
Preferred Stock under specified circumstances, shall be divided, with respect to
the time for which they severally hold office, into three classes, with the term
of office of the first class to expire at the 1990 annual meeting of
stockholders, the term of office of the second class to expire at the 1991
annual meeting of stockholders and the term of office of the third class to
expire at the 1992 annual meeting of stockholders, with each director to hold
office until his or her successor shall have been duly elected and qualified. At
each annual meeting of stockholders, commencing with the 1990 annual meeting,
(i) directors elected to succeed those directors whose terms then expire shall
be elected for a term of office to expire at the third succeeding annual meeting
of stockholders after their election, with each director to hold office until
his or her successor shall have been duly elected and qualified and (ii), if
authorized by a resolution of the Board of Directors, directors may be elected
to fill any vacancy on the Board of Directors, regardless of how such vacancy
was created.
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B. Stockholder Nomination of Director Candidates and Introduction of
Business. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
By-Laws of the Corporation.
C. Newly Created Directorships and Vacancies. Subject to the rights of
the holders of any series of Preferred Stock, and unless the Board of Directors
otherwise determines, newly created directorships resulting from any increase in
the authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been elected expires and until
such director's successor shall have been duly elected and qualified. No
decrease in the number of authorized directors constituting the entire Board of
Directors shall shorten the term of any incumbent director.
D. Removal. Subject to the rights of the holders of any series of
Preferred Stock, any director, or the entire Board of Directors, may be removed
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least a majority of the voting power of all of the
then-outstanding shares of Voting Stock, voting together as a single class.
E. Amendment, Repeal or Alteration. Notwithstanding any other
provisions of this Restated Certificate of Incorporation (the "Certificate of
Incorporation") or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required by
law, this Certificate of Incorporation or any Preferred Stock Designation, the
affirmative vote of the holders of at least eighty percent (80%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal this Article
FIFTH.
SIXTH: In furtherance and not in limitation of the powers conferred by
law, the Board of Directors is expressly authorized to make, alter, amend and
repeal the By-Laws of the Corporation, subject to the power of the holders of
the capital stock of the Corporation to alter, amend and repeal the By-Laws;
provided, however, that, with respect to the powers of holders of capital stock
to alter, amend and repeal By-Laws of the Corporation, notwithstanding any other
provision of this Certificate of Incorporation or any provision of law which
might otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of the capital
stock of the Corporation required by law, this Certificate of Incorporation or
any Preferred Stock Designation, the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of all the then-outstanding shares of
the Voting Stock, voting together as a single class, shall be required to (i)
alter, amend or repeal any provision of the By-Laws or (ii) alter, amend or
repeal any provision of this proviso to this Article SIXTH.
SEVENTH: Subject to the rights of the holders of any series of
Preferred Stock, (A) any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders and (B) special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the Whole Board. Notwithstanding any other
provisions of this Certificate of Incorporation or any provision of law which
might otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of the capital
stock of the Corporation required by law, this Certificate of Incorporation or
any Preferred Stock Designation, the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of all of the then-outstanding shares
of the Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal this Article SEVENTH.
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EIGHTH: A. (1) In addition to any affirmative vote required by law, by
this Certificate of Incorporation or by any Preferred Stock Designation, and
except as otherwise expressly provided in Section B of this Article EIGHTH:
(i) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (a) any Interested Stockholder (as
hereinafter defined) or (b) any other corporation (whether or not itself
an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of any
Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder or any Affiliate of any Interested Stockholder
of any assets of the Corporation or any Subsidiary having an aggregate
Fair Market Value (as hereinafter defined) of $10 million or more; or
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an aggregate Fair
Market Value of $10 million or more; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate of any Interested Stockholder; or
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving any
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any Subsidiary
which is Beneficially Owned (as hereinafter defined) by any Interested
Stockholder or any Affiliate of any Interested Stockholder ;
shall require the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of all of the then-outstanding shares of the Voting
Stock, voting together as a single class. Such affirmative vote shall be
required notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law or of any agreement with any national
securities exchange or otherwise which might otherwise permit a lesser vote or
no vote.
(2) The term "Business Combination" as used in this Article EIGHTH
shall mean any transaction which is referred to in any one or more of
subparagraphs (i) through (v) of paragraph (1) of this Section A.
(B) The provisions of Section A of this Article EIGHTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law, any other
provision of this Certificate of Incorporation and any Preferred Stock
Designation, if, in the case of a Business Combination that does not involve any
cash or other consideration being received by the stockholders of the
Corporation, solely in their respective capacities as stockholders of the
Corporation, the condition specified in the following paragraph (1) is met or,
in the case of any other Business Combination, the conditions specified in
either of the following paragraph (1) or paragraph (2) are met:
(1) The Business Combination shall have been approved by a majority of
the Continuing Directors (as hereinafter defined); provided however, that this
condition shall not be capable of satisfaction unless there are at least three
Continuing Directors.
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(2) All of the following conditions shall have been met:
(i) The consideration to be received by holders of shares of a
particular class (or series) of outstanding capital stock (including Common
Stock and other than Excluded Preferred Stock (as hereinafter defined)) shall
be in cash or in the same form as the Interested Stockholder or any of its
Affiliates has previously paid for shares of such class (or series) of capital
stock. If the Interested Stockholder or any of its Affiliates have paid for
shares of any class (or series) of capital stock with varying forms of
consideration, the form of consideration to be received per share by holders of
shares of such class (or series) of capital stock shall be either cash or the
form used to acquire the largest number of shares of such class (or series) of
capital stock previously acquired by the Interested Stockholder.
(ii) The aggregate amount of (x) the cash and (y) the Fair Market
Value, as of the date (the "Consummation Date") of the consummation of the
Business Combination, of the consideration other than cash to be received per
share by holders of Common Stock in such Business Combination shall be at least
equal to the higher of the following (in each case appropriately adjusted in the
event of any stock dividend, stock split, combination of shares or similar
event):
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Stockholder or any of its Affiliates for any shares of Common Stock
acquired by them within the two-year period immediately prior to the date of the
first public announcement of the proposal of the Business Combination (the
"Announcement Date") or in any transaction in which the Interested Stockholder
became an Interested Stockholder, whichever is higher, plus interest compounded
annually from the first date on which the Interested Stockholder became an
Interested Stockholder (the "Determination Date") through the Consummation Date
at the publicly announced base rate of interest of The First National Bank of
Chicago (or such other major bank headquartered in the City of Chicago as may be
selected by the Continuing Directors) from time to time in effect in the City of
Chicago, less the aggregate amount of any cash dividends paid, and the Fair
Market Value of any dividends paid in other than cash, on each share of Common
Stock from the Determination Date through the Consummation Date in any amount up
to but not exceeding the amount of interest so payable per share of Common
Stock; and
(b) the Fair Market Value per share of Common Stock on the
Announcement Date or the Determination Date, whichever is higher.
(iii) The aggregate amount of (x) the cash and (y) the Fair Market
Value, as of the Consummation Date, of the consideration other than cash to be
received per share by holders of shares of any class (or series), other than
Common Stock or Excluded Preferred Stock, of outstanding capital stock shall be
at least equal to the highest of the following (in each case appropriately
adjusted in the event of any stock dividend, stock split, combination of shares
or similar event), it being intended that the requirements of this paragraph (2)
(iii) shall be required to be met with respect to every such class (or series)
of outstanding capital stock whether or not the Interested Stockholder or any of
its Affiliates has previously acquired any shares of a particular class (or
series) of capital stock:
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Stockholder or any of its Affiliates for any shares of such class (or
series) of capital stock acquired by them within the two-year period immediately
prior to the Announcement Date or in any transaction in which it became an
Interested Stockholder, whichever is higher, plus interest compounded annually
from the Determination Date through the Consummation Date at the publicly
announced base rate of interest of The First National Bank of Chicago (or such
other major bank headquartered in the City of Chicago as may be selected by the
Continuing Directors) from time to time in effect in the City of Chicago, less
the aggregate amount of any cash dividends
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paid, and the Fair Market Value of any dividends paid in other than cash, on
each share of such class (or series) of capital stock from the Determination
Date through the Consummation Date in an amount up to but not exceeding the
amount of interest so payable per share of such class (or series) of capital
stock;
(b) the Fair Market Value per share of such class (or series) of
capital stock on the Announcement Date or on the Determination Date, whichever
is higher; and
(c) the highest preferential amount per share, if any, to which the
holders of shares of such class (or series) of capital stock would be entitled
in the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation.
(iv) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (a)
except as approved by a majority of the Continuing Directors, there shall have
been no failure to declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on any outstanding Preferred
Stock; (b) there shall have been (I) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of the
Continuing Directors, and (II) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has the effect
of reducing the number of outstanding shares of the Common Stock, unless the
failure so to increase such annual rate is approved by a majority of the
Continuing Directors; and (c) neither such Interested Stockholder nor any of its
Affiliates shall have become the beneficial owner of any additional shares of
Voting Stock except as part of the transaction which results in such Interested
Stockholder becoming an Interested Stockholder; provided, however, that no
approval by Continuing Directors shall satisfy the requirements of this
subparagraph (iv) unless at the time of such approval there are at least three
Continuing Directors.
(v) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder and any of its Affiliates shall not
have received the benefit, directly or indirectly (except proportionately,
solely in such Interested Stockholder's or Affiliate's capacity as a stockholder
of the Corporation), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages provided by the
Corporation, whether in anticipation of or in connection with such Business
Combination or otherwise.
(vi) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to all
stockholders of the Corporation at least 30 days prior to the consummation of
such Business Combination (whether or not such proxy or information statement is
required to be mailed pursuant to such Act or subsequent provisions).
(vii) Such Interested Stockholder shall have supplied the Corporation
with such information as shall have been requested pursuant to Section E of this
Article EIGHTH within the time period set forth therein.
C. For the purposes of this Article EIGHTH:
(1) A "person" means any individual, limited partnership, general
partnership, corporation or other firm or entity.
(2) "Interested Stockholder" means any person (other than the
Corporation or any Subsidiary) who or which:
(i) is the beneficial owner (as hereinafter defined), directly or
indirectly, of ten percent (10%) or more of the voting power of the outstanding
Voting Stock; or
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(ii) is an Affiliate or an Associate of the Corporation and at any
time within the two-year period immediately prior to the date in question was
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
the voting power of the then-outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two year period immediately prior
to the date in question beneficially owned by any Interested Stockholder, if
such assignment or succession shall have occurred in the course of a transaction
or series of transactions not involving a public offering within the meaning of
the Securities Act of 1933, as amended.
(3) A person shall be a "beneficial owner" of, or shall "Beneficially
Own," any Voting Stock:
(i) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on
January 1, 1989; or
(ii) which such person or any of its Affiliates or Associates has (a)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding (but neither such person nor any such
Affiliate or Associate shall be deemed to be the beneficial owner of any shares
of Voting Stock solely by reason of a revocable proxy granted for a particular
meeting of stockholders, pursuant to a public solicitation of proxies for such
meeting, and with respect to which shares neither such person nor any such
Affiliate or Associate is otherwise deemed the beneficial owner); or
(iii) which are beneficially owned, directly or indirectly, within the
meaning of the Rule 13d-3 under the Securities Exchange Act of 1934, as in
effect on January 1, 1989, by any other person with which such person or any of
its Affiliates or Associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting (other than solely by reason of a
revocable proxy as described in subparagraph (ii) of this paragraph (3) or
disposing of any shares of Voting Stock;
provided, however, that in the case of any employee stock ownership or
similar plan of the Corporation or of any Subsidiary in which the
beneficiaries thereof possess the right to vote any shares of Voting Stock
held by such plan, no such plan nor any trustee with respect thereto (or
any Affiliate of such trustee), solely by reason of such capacity of such
trustee, shall be deemed, for any purposes hereof, to beneficially own any
shares of Voting Stock held under any such plan.
(4) For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph (2) of this Section C, the number of shares of
Voting Stock deemed to be outstanding shall include shares deemed owned through
application of paragraph (3) of this Section C but shall not include any other
unissued shares of Voting Stock which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(5) "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on January 1, 1989.
(6) "Subsidiary" means any corporation, limited partnership, general
partnership or other firm or entity of which a majority of any class of equity
security or other equity interest is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in paragraph (2) of this Section C, the term
"Subsidiary" shall mean only a corporation, limited partnership, general
partnership or other firm or entity of which a majority of each class of equity
security or other equity interest is owned, directly or indirectly, by the
Corporation.
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(7) "Continuing Director" means any member of the Board of Directors
of the Corporation who is unaffiliated with the Interested Stockholder and was a
member of the Board of Directors of the Corporation prior to the time that the
Interested Stockholder became an Interested Stockholder, and any director who is
thereafter chosen to fill any vacancy on the Board of Directors or who is
elected and who, in either event, is unaffiliated with the Interested
Stockholder and in connection with his or her initial assumption of office is
recommended for appointment or election by a majority of Continuing Directors
then on the Board of Directors.
(8) "Fair Market Value" means: (i) in the case of stock, the highest
closing sale price of such stock during the 30-day period immediately preceding
the date in question on the Composite Tape for New York Stock Exchange Listed
Stocks, or, if such stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such exchange, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation with respect to a
share of such stock during the 30-day period immediately preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotation System or any system then in use, or if no such quotations are
available, the fair market value on the date in question of a share of such
stock as determined by the Board of Directors of the Corporation in accordance
with Section D of this Article EIGHTH; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined by the Board of Directors of the Corporation in
accordance with Section D of this Article EIGHTH.
(9) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
paragraphs (2) (ii) and (2) (iii) of Section B of this Article EIGHTH shall
include the shares of Common Stock and/or the shares of any other class (or
series) of outstanding capital stock retained by the holders of such shares.
(10) "Whole Board" means the total number of directors which the
Corporation would have if there were no vacancies.
(11) "Excluded Preferred Stock" means any series of Preferred Stock
with respect to which the Preferred Stock Designation creating such series
expressly provides that the provisions of this Article EIGHTH shall not apply.
D. A majority of the Whole Board, but only if a majority of the Whole
Board shall then consist of Continuing Directors or, if a majority of the Whole
Board shall not then consist of Continuing Directors, a majority of the then
Continuing Directors, shall have the power and duty to determine, on the basis
of information known to them after reasonable inquiry, all facts necessary to
determine compliance with this Article EIGHTH, including, without limitation,
(i) whether a person is an Interested Stockholder, (ii) the number of shares of
Voting Stock beneficially owned by any person, (iii) whether a person is an
Affiliate or Associate of another, (iv) whether the applicable conditions set
forth in paragraph (2) of Section B have been met with respect to any Business
Combination, (v) the Fair Market Value of stock or other property in accordance
with paragraph (8) of Section C of this Article EIGHTH and (vi) whether the
assets which are the subject of any Business Combination referred to in
paragraph (1) (ii) of Section A have, or the consideration to be received for
the issuance or transfer of securities by the Corporation or any Subsidiary in
any Business Combination referred to in paragraph (1) (iii) of Section A has, an
aggregate Fair Market Value of $10 million or more.
E. A majority of the Whole Board shall have the right to demand, but
only if a majority of the Whole Board shall then consist of Continuing
Directors, or, if a majority of the Whole Board shall not then consist of
Continuing Directors, a majority of the then Continuing Directors shall have the
right to demand that any person who it is reasonably believed is an Interested
Stockholder (or holds of record shares of Voting Stock Beneficially Owned by any
Interested Stockholder) supply the Corporation with complete information as to
(i) the record owner(s) of all shares Beneficially Owned by such person who it
is reasonably believed is an Interested Stockholder, (ii) the number of, and
class or series of, shares Beneficially Owned by such person who it is
reasonably believed is an Interested
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Stockholder and held of record by each such record owner and the number(s) of
the stock certificate(s) evidencing such shares and (iii) any other factual
matter relating to the applicability or effect of this Article EIGHTH, as may be
reasonably requested of such person, and such person shall furnish such
information within 10 days after receipt of such demand.
F. Nothing contained in this Article EIGHTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
G. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least eighty percent (80%) of the voting power of all of the then-
outstanding shares of the Voting Stock, voting together as a single class, shall
be required to alter, amend or repeal this Article EIGHTH.
NINTH. A. No person who is or was at any time a director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for any breach of fiduciary duty by such person as a
director; provided that the provisions of this Article NINTH shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derived an improper
personal benefit. If the General Corporation Law of the State of Delaware is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended. No
amendment to or repeal of this Section A shall apply to or have any adverse
effect on the liability or alleged liability of any director of the Corporation
for or with respect to any act or omission of such director occurring prior to
such amendment or repeal.
B. (1) Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director, officer or employee of the Corporation or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by the
General Corporation Law of the State of Delaware as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that except
as provided in paragraph (2) of this Section B with respect to proceedings
seeking to enforce rights to indemnification, the Corporation shall indemnify
any such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section B shall be a contract right and shall
include the right to be paid by the Corporation expenses incurred in defending
any such proceeding in advance of its final disposition; provided, however, that
if the General Corporation Law of the State of Delaware requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
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limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section B or otherwise.
(2) If a claim under paragraph (1) of this Section B is not paid in
full by the Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the General Corporation Law of the State of Delaware for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel or stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the General Corporation
Law of the State of Delaware, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel or stockholders)
that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
(3) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in this
Section B shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of stockholders or disinterested
directors or otherwise.
(4) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware.
(5) The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and rights to be paid
by the Corporation the expenses incurred in defending any proceeding in advance
of its final disposition, to any agent of the Corporation to the fullest extent
of the provisions of this Section B with respect to the indemnification and
advancement of expenses of directors, officers and employees of the Corporation.
TENTH: The Corporation reserves the right to amend, change or repeal
any provision contained in this Certificate of Incorporation, and any other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter provided herein or by
statute, and all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or any other persons whomsoever by and
pursuant to this Certificate of Incorporation in its present form or as amended
are granted subject to the rights reserved in this Article TENTH.
ELEVENTH: This Certificate of Incorporation shall become effective on
April 14, 1989 at 4:00 p.m. Eastern time.
9
<PAGE>
IN WITNESS WHEREOF, this Certificate of Incorporation, which restates
and integrates and further amends the provisions of the Certificate of
Incorporation of this Corporation, has been duly adopted in accordance with
Sections 242 and 245 of the General Corporation Law of the State of Delaware,
has been executed by its Chairman of the Board and attested by its Assistant
Secretary on this 12th day of April, 1989.
ELJER INDUSTRIES, INC.
By /s/ Donald C. Clark
--------------------
Donald C. Clark
Chairman of the Board
ATTEST:
/s/ Ronald C. Roselli
__________________________
Ronald C. Roselli
Assistant Secretary
10
<PAGE>
EXHIBIT 99.6
<PAGE>
AMENDMENT NO. 4 TO RIGHTS AGREEMENT
This AMENDMENT NO. 4 TO RIGHTS AGREEMENT (this "Amendment"), dated as of
December 14, 1996, is entered into by and between ELJER INDUSTRIES, INC., a
Delaware corporation (the "Company"), and HARRIS TRUST AND SAVINGS BANK, an
Illinois banking corporation (the "Rights Agent").
WHEREAS, the Company and the Rights Agent are parties to that certain Rights
Agreement, dated as of April 14, 1989 and amended on July 31, 1989, January 4,
1990 and November 5, 1991 (as so amended, the "Rights Agreement"; all
capitalized terms used but not otherwise defined herein having the meanings
given such terms in the Rights Agreement);
WHEREAS, the Company, Zurn Industries, Inc., a Pennsylvania corporation
("Zurn"), and Zurn Acquisition Co., Inc., a Delaware corporation ("Sub"),
intend to enter into an Agreement and Plan of Merger dated as of the date
hereof (the "Merger Agreement").
WHEREAS, neither Zurn nor Sub will enter into the Merger Agreement unless
the Company and its Board of Directors first shall have taken all actions
necessary so that (i) the execution and delivery of the Merger Agreement, the
consummation of the transactions contemplated thereby and the other matters
provided for therein will not result in (A) Zurn or Sub or any of their
respective Affiliates and Associates being an Acquiring Person, (B) the
occurrence of a Distribution Date, or (C) the Rights becoming exercisable and
(ii) the Final Expiration Date will occur immediately prior to the purchase of
Shares (as defined in the Merger Agreement) pursuant to the Offer (as defined
in the Merger Agreement) (such conditions being hereinafter referred to
collectively as the "Rights Conditions");
WHEREAS, the Company's Board of Directors has unanimously adopted and
approved all actions necessary to satisfy the Rights Conditions; and
WHEREAS, pursuant to and in compliance with the provisions of Section 27 of
the Rights Agreement, the Company and the Rights Agent desire to amend the
Rights Agreement as hereinafter set forth.
NOW THEREFORE, in consideration of the premises and agreements herein
contained, the Company and the Rights Agent agree as follows:
Section 1. Section 1(a) of the Rights Agreement is amended by adding at the
end thereof the following:
"Notwithstanding the foregoing, neither Zurn Industries, Inc., a
Pennsylvania corporation ("Zurn Industries"), nor Zurn Acquisition Co.,
Inc., a Delaware corporation and wholly-owned subsidiary of Zurn
Industries ("Zurn Acquisition Co."), nor any of their respective
Affiliates and Associates, shall be deemed an "Acquiring Person" as a
result of or in connection with the transactions contemplated by that
certain Agreement and Plan of Merger, dated as of December 14, 1996,
among the Company, Zurn Industries and Zurn Acquisition Co. (as amended
from time to time, the "Merger Agreement"), including, without
limitation, the Offer and the Merger (each as defined in the Merger
Agreement), and the other matters provided for therein.
Section 2. Section 3(a) of the Rights Agreement is hereby amended by adding
thereto at the end of the first sentence thereof the following:
"; provided, however, that neither the transactions contemplated by the
Merger Agreement (including, without limitation, the Offer and the
Merger) nor any of the other matters provided for therein shall be
deemed to have caused the occurrence of the Distribution Date"
<PAGE>
Section 3. Section 7 of the Rights Agreement is hereby amended by deleting
therefrom clause (i) thereof and substituting in its place the following:
"(i) the earlier of (A) the close of business on May 1, 1999, unless
extended pursuant to Section 27, and (B) the moment in time immediately
prior to purchase of Shares pursuant to the Offer (such earlier date
being the "Final Expiration Date"),
Section 4. The form of Right Certificate attached to the Rights Agreement as
Exhibit A is hereby amended by deleting the word "and" preceding the date
"November 5, 1991" in the first sentence of the first paragraph thereof,
substituting in its place a comma and adding immediately after such date the
phrase "and December 14, 1996."
Section 5. This Amendment may be executed in two or more counterparts, all
of which shall be considered one and the same instrument and shall become
effective when executed and delivered by both parties, it being understood
that all parties need not sign the same counterpart.
Section 6. Except as set forth herein, this Amendment shall not by
implication or otherwise alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants, or agreements contained in the
Rights Agreement, all of which are ratified and affirmed in all respects and
shall continue in full force and effect.
Section 7. This Amendment shall be governed and construed in accordance with
the laws of the State of Delaware, without giving effect to the principles of
conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first set forth above.
ELJER INDUSTRIES, INC.
/s/ Scott G. Arbuckle
By: _________________________________
Scott G. Arbuckle
Name: _______________________________
Chairman & C.E.O.
Title: ______________________________
HARRIS TRUST AND SAVINGS BANK
/s/ K.W. Penn
By: _________________________________
K.W. Penn
Name: _______________________________
Assistant Vice President
Title: ______________________________
2
<PAGE>
EXHIBIT 99.7
<PAGE>
December 20, 1996
Dear Eljer Stockholders:
I am pleased to inform you that on December 14, 1996 the Company entered
into an Agreement and Plan of Merger (the "Merger Agreement") with Zurn
Industries, Inc. ("Zurn") and Zurn Acquisition Co., Inc., a wholly owned
subsidiary of Zurn ("Zurn Acquisition"), pursuant to which Zurn Acquisition is
commencing a cash tender offer (the "Offer") to purchase all outstanding
shares of the Company's Common Stock at a price of $24.00 per share. Following
completion of the Offer, upon the terms and subject to the conditions of the
Merger Agreement, Zurn Acquisition will be merged (the "Merger") into the
Company, and each share of the Company's Common Stock not purchased in the
Offer (other than any shares owned by the Company or any subsidiary of the
Company, Zurn or Zurn Acquisition and any shares held by holders who have
timely demanded appraisal rights in accordance with Delaware law) will be
converted into the right to receive $24.00 per share in cash, without
interest. Upon consummation of these transactions, the Company will be a
wholly owned subsidiary of Zurn.
The Board of Directors of the Company has determined that each of the Offer
and the Merger is fair to, and in the best interests of, the Company's
stockholders, it has approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, and it recommends
that the stockholders accept the Offer and tender all of their shares pursuant
to the Offer.
In reaching its decision, the Board of Directors carefully considered a
number of factors. These factors are described in the Schedule 14D-9 relating
to the Offer that is being filed today with the Securities and Exchange
Commission, a copy of which accompanies this letter. Among other things, the
Board of Directors considered the opinion of Bear, Stearns & Co. Inc., the
Company's financial advisor, that the consideration to be received by the
Company's stockholders in the Offer and the Merger is fair, from a financial
point of view, to such stockholders.
Accompanying this letter, in addition to the Schedule 14D-9, are the Offer
to Purchase, dated December 20, 1996, of Zurn and Zurn Acquisition, together
with related materials, including a Letter of Transmittal to be used for
tendering your shares, and the Company's Information Statement pursuant to
Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1
thereunder. The Information Statement, a copy of which is attached as Schedule
I to the Schedule 14D-9, is required to be sent to all stockholders of the
Company in advance of a change in the majority of the Board of Directors of
the Company without a meeting of the Company's stockholders.
The enclosed documents set forth the terms and conditions of the Offer and
the Merger and provide other detailed information relating to these
transactions, including instructions for tendering your shares. I urge you to
read them carefully.
Your investment and support over the years are very much appreciated.
Very best wishes,
SCOTT G. ARBUCKLE
Chairman, President & Chief
Executive Officer
<PAGE>
EXHIBIT 99.8
<PAGE>
[LETTERHEAD OF BEAR STEARNS APPEARS HERE]
December 18, 1996
Eljer Industries, Inc.
17120 Dallas Parkway, Suite 205
Dallas, TX 75248
Attention: Scott G. Arbuckle
Chairman of the Board
Dear Sirs:
We understand that Zurn Industries, Inc. has agreed to acquire all of the
outstanding common stock of Eljer Industries, Inc. ("Eljer") for a price of
$24.00 per share in cash, under the terms of a merger agreement (the "Merger
Agreement") dated December 14, 1996 (the "Transaction"). You have provided us
with the Merger Agreement.
You have asked us to render our opinion as to whether the Transaction is fair,
from a financial point of view, to the shareholders of Eljer.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Merger Agreement;
2. reviewed Eljer's Annual Reports to Shareholders and Annual Reports
on Form 10-K for the fiscal years ended December 29, 1991, January
3, 1993, January 2, 1994, January 1, 1995 and December 31, 1995, and
its Quarterly Reports on Form 10-Q for the periods ended March 31,
June 30 and September 29, 1996;
3. reviewed certain operating and financial information, including
projections, provided to us by management relating to Eljer's
business and prospects;
4. met with certain members of Eljer's senior management to discuss its
operations, historical financial statements and future prospects;
5. reviewed the historical prices and trading volumes of the common
shares of Eljer;
6. reviewed publicly available financial data and stock market
performance data of companies which we deemed generally comparable
Eljer;
<PAGE>
Eljer Industries, Inc.
December 18, 1996
Page 2
7. reviewed the terms of recent acquisitions of companies which we
deemed generally comparable to Eljer; and
8. conducted such other studies, analyses, inquiries and investigations
as we deemed appropriate.
In the course of our review, we have relied upon and assumed the accuracy and
completeness of the financial and other information provided to us by Eljer.
With respect to Eljer's projected financial results, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of Eljer as to its expected future
performance. We have not assumed any responsibility for the information or
projections provided to us and we have further relied upon the assurances of the
management of Eljer that it is unaware of any facts that would make the
information or projections provided to us incomplete or misleading. In arriving
at our opinion, we have not performed or obtained any independent appraisal of
the assets of Eljer. Our opinion is necessarily based on economic, market and
other conditions, and the information made available to us, as of the date
hereof.
Based on the foregoing, it is our opinion that the Transaction is fair, from a
financial point of view, to the shareholders of Eljer.
We have acted as financial advisor to Eljer in connection with the Transaction
and will receive a fee for such services, payment of a significant portion of
which is contingent upon the consummation of the Transaction.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of Eljer and does not constitute a recommendation to the
stockholders of Eljer about whether to tender their shares. This letter may be
included in its entirety in the Schedule 14D-9 or other documents distributed to
the shareholders of Eljer in conjunction with the Transaction (but any reference
to or description of the opinion expressed herein in any such Schedule 14D-9 or
other document or any other public reference to this letter shall be subject to
our prior written consent). This letter is not to be used for any other
purpose, or reproduced, disseminated, quoted or referred to at any time, in
whole or in part, without our prior written consent.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ Sheldon I. Stein
-------------------------------
Senior Managing Director
<PAGE>
EXHIBIT 99.9
<PAGE>
FOR IMMEDIATE RELEASE
December 16, 1996
ZURN INDUSTRIES, INC. TO BUY ELJER INDUSTRIES, INC.
Dallas, TX...Eljer Industries, Inc. (NYSE:ELJ) and Zurn Industries, Inc.
(NYSE:ZRN) announced today the execution of a definitive merger agreement in
which an affiliate of Zurn has agreed to acquire all of the outstanding shares
of common stock of Eljer for $24.00 per share in cash. Zurn will commence a
tender offer for the Eljer shares by Friday, December 20, 1996. The expiration
date of the tender offer will be 20 business days following commencement,
unless the offer is extended.
Eljer, based in Dallas, TX is a leading manufacturer and marketer of high
quality building products, including plumbing, heating and ventilation
products, for residential and commercial construction, remodeling and repair,
and do-it-yourself markets. Eljer's 1995 revenues were $397.4 million. With FY
1996 reported revenues of $421.5 million, Zurn, based in Erie, PA, is an
industry leader in manufacturing and marketing of plumbing products
(principally to the specification markets) and in providing water resource
construction services and fire protection systems.
The merger of Zurn and Eljer will create a leader in plumbing products and
HVAC markets. Zurn and Eljer believe that the merger offers very attractive
product and market synergies for both Zurn and Eljer products.
The transaction has received the approval of the Boards of Directors of both
companies and is subject to only customary regulatory approvals. The Board of
Directors of Eljer recommends that the offer be accepted by the Eljer
shareholders.
"The acquisition of Eljer fits perfectly with Zurn's strategic focus on
plumbing products and the growth of those businesses," said Robert R. Womack,
Zurn Chairman and CEO. "Eljer's products and markets are very complementary
with those of Zurn and we believe the combined business has significant
advantages."
Commenting on the merger, Scott G. Arbuckle, Eljer Chairman and CEO, said, "We
are pleased to have reached an agreement with Zurn which we feel is in the
best interest of our shareholders and also provides the Company with a strong
partner and resources for future growth. The management teams of our two
organizations fit well and we believe the outlook for the combined
organization to be exciting."
Zurn has indicated that it will finance this transaction through a combination
of internal cash resulting from its recent sale of business units and loans
committed by its existing lenders.
Deutsche Morgan Grenfell Inc. acted as financial adviser to Zurn and Bear,
Stearns & Co., Inc. was financial advisor to Eljer. Deutsche Morgan Grenfell
will act as dealer-manager for the tender offer.
* * *
Contact:Zurn Industries, Inc.
John R. Mellett
Chief Financial Officer
Erie, PA
814/452-2111
Deutsche Morgan Grenfell
Jonathan P. Wendell
New York, NY
212/469-8016
Contact:Eljer Industries, Inc.
Brooks F. Sherman
Chief Financial Officer
Dallas, TX
972/407-2603
Bear, Stearns & Co. Inc.
Sheldon I. Stein
Dallas, TX
214/979-7935
