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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 25, 1999
MARCUM NATURAL GAS SERVICES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-19793 84-11698358
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1675 BROADWAY, SUITE 2150, DENVER, COLORADO 80202
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 592-5555
NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On March 16, 1999, Marcum Natural Gas Services, Inc. (the "Registrant")
received a letter from Kenneth B. Funsten, President & Portfolio Manager of
Funsten Asset Management Company, the general partner of Famco Value Income
Partners, L.P., submitting to the Company a stockholder proposal requesting the
Board of Directors to refrain from adopting any future stockholder rights plan
or similar provision without prior stockholder approval, and to redeem or
terminate the Company's existing Rights Plan. On March 25, 1999, the Registrant
sent correspondence to Mr. Funsten responding to the issues raised in his
letter, informing him that the stockholder proposal was received after the
deadline for inclusion of stockholder proposals in the Registrant's 1999 proxy
materials established by Rule 14a-8 promulgated under the Securities Exchange
Act of 1934, as amended, and informing Mr. Funsten that if he properly brings
the proposal before this year's Annual Meeting of Stockholders, then the persons
named as proxy holders will vote against the proposal. A copy of the
correspondence sent by the Registrant to Mr. Funsten is filed herewith as
Exhibit 99.1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS
99.1 Correspondence, dated March 25, 1999, by W. Phillip
Marcum, President, Marcum Natural Gas Services, Inc.
to Kenneth B. Funsten, President & Portfolio Manager,
Funsten Asset Management Company, general partner of
Famco Value Income Partners, L.P.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MARCUM NATURAL GAS SERVICES, INC.
By: /s/ W. Phillip Marcum
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W. Phillip Marcum
President and Chief Executive Officer
Dated: April 14, 1999
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MARCUM NATURAL GAS SERVICES, INC.
FORM 8-K
DATED MARCH 25, 1999
EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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99.1 Correspondence, dated March 25, 1999, by W.
Phillip Marcum, President, Marcum Natural
Gas Services, Inc. to Kenneth B. Funsten,
President & Portfolio Manager, Funsten Asset
Management Company, general partner of FamCo
Value Income Partners, L.P.
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Exhibit 99.1
MARCUM NATURAL GAS SERVICES, INC.
1675 BROADWAY, SUITE 2150
DENVER, COLORADO 80202
(303) 593-5555
(FAX): (303) 592-5556
March 25, 1999
Kenneth B. Funsten, CFA
President & Portfolio Manager
Funsten Asset Management Company, General Partner
Famco Value Income Partners, L.P.
121 Outrigger Mall
Marina Del Rey, California 90292
Dear Ken:
I received your letter dated March 15, 1999 requesting that Marcum
Natural Gas Services, Inc. include a Proposal regarding the termination of
Marcum's Stockholder Rights Plan in Marcum's 1999 proxy materials. However, the
deadline for inclusion of stockholder proposals in Marcum's 1999 proxy
materials, which is established by Rule 14a-8 promulgated under the Securities
Exchange Act of 1934, as amended, was January 8, 1999, as disclosed in Marcum's
1998 Proxy Statement. Accordingly, your Proposal is not eligible for inclusion
and will not be included in Marcum's 1999 Proxy Statement. In addition, if you
properly bring your Proposal before this year's Annual Meeting of Stockholders,
then the persons named as proxy holders will vote against your Proposal.
Contrary to your assertion, neither I nor any other officer of Marcum gave you
any assurances that your proposal would be included in this year's Proxy
Statement. In fact, you did not discuss your Proposal with the Board of
Directors or me or, to my knowledge, any other officer before sending your
letter.
As to the substance of your Proposal, the Board of Directors believes
that terminating our Rights Plan (or redeeming the rights issued thereunder)
would not serve the best interests of Marcum and its stockholders. To the
contrary, the Board of Directors strongly believes that the Rights Plan protects
the interests of Marcum and all its stockholders by providing a valuable and
necessary means for protecting all stockholders against acquisition offers, the
Board believes to be inadequate, coercive or otherwise unfair. The Rights Plan
is not intended to, and does not, preclude unsolicited, non-abusive offers to
acquire Marcum at a fair price. Rather, the primary purpose of the Rights Plan
is to help the Board of Directors maximize stockholder value in the event of a
takeover attempt by encouraging negotiations with the Board and by giving the
Board the opportunity to explore better alternatives.
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The Rights Plan is a fundamental negotiating tool that inhibits abusive
conduct and is designed to protect against practices that do not treat all
stockholders equally and positions the Board to negotiate the best price for
stockholders when the sale of Marcum is in the best interests of the
stockholders. The Rights Plan protects shareholders against coercive and unfair
takeover tactics, such as partial or two-tier offers that may pressure
stockholders to sell their shares for less than full value, and prevents
creeping tender offers that would allow an acquirer to obtain control without
paying a premium or making an offer to all stockholders. Of course, the Board
can redeem the rights when appropriate and, in deciding whether to do so in
connection with any unsolicited offer, the Board will be bound by its fiduciary
obligations to act in the best interests of Marcum and its stockholders.
Accordingly, the Rights Plan will not interfere with any merger or business
combination that is approved by the Board of Directors.
In adopting the Rights Plan, the Board in its fiduciary role carefully
considered the adoption of the Rights Plan and determined it to be the best
available means of protecting the full value of the investment of Marcum's
stockholders, while not preventing a fair acquisition offer for Marcum. The
Board did not adopt the Rights Plan in response to any specific takeover threat.
Over 2,000 other public companies have adopted similar stockholder rights plans.
The Rights Plan does not weaken the financial strength of Marcum or
interfere with its business plans. The issuance of the rights themselves had no
dilutive effect, did not affect reported per share data, was not taxable to
Marcum or its stockholders, and does not affect the way in which Marcum's shares
are traded. The Board of Directors believes that the Rights Plan represents a
sound and reasonable means of addressing the complex issues of corporate policy
created by the current takeover environment.
The Board strongly believes that the Rights Plan is essential if the
Board is to fulfill its fiduciary duty to act in the best interest of all of
Marcum's stockholders. The Board believes that its ability to negotiate
effectively with a potential acquirer on behalf of all stockholders is
significantly greater than that of the stockholders individually. The Board
further believes it is in the best position to evaluate the adequacy of any
potential offer, to develop and implement superior alternatives in a takeover
bid and to protect stockholders against potential abuses during a takeover bid.
Without the Rights Plan, Marcum could find itself negotiating with a potential
acquirer from a weakened posture, unable to obtain a transaction which maximizes
value for stockholders and unable to protect the stockholders from unfair bids.
The Rights Plan is designed to ensure that, if there is a sale of Marcum, the
Board will have the opportunity to effect a transaction on the optimal terms. If
the Board determines that the unsolicited offer is fair, on terms that reflect
full value and are otherwise in the best interests of its stockholders, the
Board can redeem the rights issued to stockholders pursuant to the provisions of
the Rights Agreement and permit the offer to proceed.
Studies show that companies with stockholder rights plans similar to
Marcum's Rights Plan receive higher takeover premiums than those without such
plans. These studies also conclude that rights plans do not decrease the
likelihood that takeover bids will be made or completed for companies which
implemented such plans. For example, a study by J. P. Morgan Securities, Inc. of
438 acquisition transactions concluded that the median acquisition premium (the
price paid over the stock price five days before the offer closed) was 12.2%
higher when the acquired company had a stockholder rights plan in place.
According to J.P. Morgan, the difference in premiums was significant whether or
not the transactions were hostile or friendly, and whether the financing was all
stock, all cash or a combination of stock and cash. A November 1997 study by
Georgeson & Company, Inc., a leading proxy solicitation and investor relations
firm, after extensive analysis of
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takeover transactions, found that stockholders of companies with rights plans
received $13 billion in additional takeover premiums during the five year period
from 1992-1996 and that stockholders of companies without rights plans gave up
$14.5 billion in potential value. The Georgeson study also found that premiums
paid to acquire target companies with rights plans were an average 8% higher
than premiums paid for target companies that did not have rights plans; that the
presence of a rights plans at a target company did not increase the likelihood
of the defeat of a hostile takeover bid or the withdrawal of a friendly bid; and
that the rights plans did not reduce the likelihood that a company would become
a takeover target: the takeover rate was similar for companies with and without
rights plans. These and other empirical studies demonstrate that stockholder
rights plans actually increase value to stockholders rather than decrease value,
as you have asserted.
Under Delaware corporate law, the adoption and maintenance of the
Rights Plan is part of the responsibility of the Board in managing the business
and affairs of Marcum and thus a matter within the scope of the authority of the
Board of Directors. Terminating the Rights Plan would adversely affect the
ability of the Board to fulfill its fundamental duties under Delaware law. The
Board recognizes its obligations to fulfill its fiduciary duties and exercise
its business judgment in deciding whether to redeem the rights in the face of a
specific offer. Redeeming the rights would remove an important tool that the
Board should have for the protection of shareholders.
For all of the above reasons, the Board of Directors and management
strongly believe that your Proposal is neither in the best interests of Marcum
and its stockholders nor a reflection of current stockholder concerns (other
than your own).
I also want to call your attention to a few of the inaccuracies
contained in your letter and added in the Stockholder Statement of Support. At
the time Marcum announced its Stock Repurchase Plan, the 1998 Employee Stock
Purchase Plan had previously been discontinued. Also, the Board did not amend
the Rights Plan to "exclude" American Meter and its affiliates from the Rights
Plan, but rather to include a tight limitation on additional stock accumulations
by American Meter and its affiliates. In fact, the American Meter transaction
shows how well our Rights Plan works by allowing transactions that the Board
deems to be in the best interests of Marcum and its stockholders to be achieved
while maintaining the protections against transactions not in the best interests
of Marcum and its stockholders.
The 15% beneficial ownership level in the Rights Plan is consistent
with most, and more favorable than many (which have 10% thresholds), stockholder
rights plans of other public companies. The reason the Rights Plan has a lower
threshold than the "change in control" provisions of other agreements is because
the goal of the Rights Plan is to trigger the rights prior to, and thus if the
Board deems appropriate prevent the occurrence of, a change in control. If the
thresholds were the same, and only had effect after a change in control
occurred, then the Rights Plan would be completely ineffective. To be viable,
the Rights Plan must contain a trigger that precedes the change in control.
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The Board of Directors, which as you know is comprised of a majority of
outside, independent members, has always in the past and will always in the
future act in the best interests of Marcum and all its stockholders. We cannot
and will not support any proposal, such as your Proposal, that impairs the
ability of the Board so to act.
Sincerely,
W. Phillip Marcum
