Filed On 2/26/99 · SEC File 5-43265 · Accession Number 898430-99-671
As Of Filer Filing On/For/As Docs:Pgs Issuer Agent
2/26/99 Pinkertons Inc SC 14D9 9:64 Pinkertons Inc Donnelley R R & S..05/FA
Tender-Offer Solicitation/Recommendation Statement · Schedule 14D-9
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 14D9 Tender-Offer Solicitation/Recommendation Statement 33 183K
2: EX-99.(A)(3) Press Release Dated 02/22/99 4 21K
3: EX-99.(A)(4) Opinion of Donaldson, Lufkin & Jenrette 2 15K
Securities
4: EX-99.(A)(5) Letter to Stockholders 2± 10K
5: EX-99.(C)(7) 1999 Severance Plan 7 26K
6: EX-99.(C)(11) 1999 Amendment to Employment Agreement With 4 21K
Denis R. Brown
7: EX-99.(C)(12) 1999 Amendment to Employment Agreement With C. 4 22K
Michael Carter
8: EX-99.(C)(13) 1999 Amendment to Employment Agreement With 4 22K
James P. McCloskey
9: EX-99.(C)(14) 1999 Agreement With Don W. Walker 4 20K
SC 14D9 · Tender-Offer Solicitation/Recommendation Statement
Document Table of Contents
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
PINKERTON'S, INC.
(Name of Subject Company)
PINKERTON'S, INC.
(Name of Person Filing Statement)
----------------
Common Stock, $0.001 par value per share,
with attached Preferred Stock Purchase Rights
(Title of Class of Securities)
----------------
723429 10 6
(CUSIP Number of Class of Securities)
----------------
Denis R. Brown
President and Chief Executive Officer
PINKERTON'S, INC.
4330 Park Terrace Drive
Westlake Village, California 91361
Telephone: (818) 706-6800
Telecopier: (818) 706-4919
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person Filing this Statement)
----------------
With copies to:
Andrew E. Bogen, Esq.
Gibson Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071-3197
Telephone: (213) 229-7159
Telecopier: (213) 229-6159
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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") relates to an offer by Securitas Acquisition Corp., a Delaware
corporation ("Purchaser") and an indirect wholly-owned subsidiary of Securitas
AB, a Swedish corporation ("Parent"), to purchase all of the issued and
outstanding Shares (as hereinafter defined) of Pinkerton's, Inc., a Delaware
corporation (the "Company").
Item 1. Security and Subject Company
The name of the subject company is Pinkerton's, Inc. The address of the
principal executive office of the Company is 4330 Park Terrace Drive, Westlake
Village, California 91361. The title of the class of equity securities to
which this Schedule 14D-9 relates is the Company's common stock, $0.001 par
value per share, including the associated rights (the "Rights") to purchase
Series A Junior Participating Preferred Stock (the "Shares"). On and as of the
Effective Time (as defined below), the Rights shall automatically be void and
of no further force or effect.
Item 2. Tender Offer of the Bidder
This Schedule 14D-9 relates to the tender offer disclosed in the Schedule
14D-1, dated February 26, 1999 (the "Schedule 14D-1"), filed with the
Securities and Exchange Commission (the "Commission") by Parent and Purchaser,
relating to an offer by Purchaser to purchase all of the issued and
outstanding Shares of the Company for an amount equal to $29.00 per Share or
such higher price as may be paid in the Offer, net to the seller in cash,
without interest (the "Per Share Amount"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated February 26, 1999 (the
"Offer to Purchase"), and the related Letter of Transmittal (which, together
with the Offer to Purchase, as amended or supplemented from time to time,
constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and
(a)(2) hereto, respectively, and incorporated herein by reference.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 19, 1999, by and among the Company, Purchaser and Parent (the
"Merger Agreement"), which provides for the making of the Offer by Purchaser,
subject to the conditions and upon the terms set forth in the Merger
Agreement, and for the subsequent merger of the Purchaser with and into the
Company (the "Merger"). In the Merger, each Share issued and outstanding at
the Effective Time (as defined in the Merger Agreement) (other than shares
held in the treasury of the Company or held by Parent, or any other wholly
owned subsidiary of Parent, or the Company, or Shares held by stockholders
validly exercising appraisal rights pursuant to the General Corporation Law of
the State of Delaware), will, by virtue of the Merger and without any action
on the part of Purchaser, the Company or the holder thereof, be canceled and
be converted into the right to receive, without interest, an amount in cash
equal to the Per Share Amount. The Merger Agreement, a copy of which is filed
as Exhibit (c)(1), is summarized in "Section 11--Background of the Offer;
Purpose of the Offer and the Merger; the Merger Agreement and Certain Other
Agreements" of the Offer to Purchase and incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and Purchaser are located at Lindhagensplan 70, P.O. Box 12307, SE-102
28 Stockholm, Sweden.
Item 3. Identity and Background
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 of this Schedule 14D-9,
which information is incorporated herein by reference.
(b) Except as set forth below, to the Company's knowledge, as of the date
hereof, there are no material contracts, agreements, arrangements or
understandings and actual or potential conflicts of interest between the
Company or its affiliates and (i) its executive officers, directors or
affiliates, or (ii) Parent, Purchaser or their respective executive officers,
directors or affiliates.
2
Agreements with Executive Officers, Directors and Affiliates of the Company
The Company has entered into agreements with certain of its executive
officers, as described in the Information Statement pursuant to Section 14(f)
of the Securities Exchange Act of 1934, and Rule 14f-1 thereunder (the
"Information Statement"), which is attached to this Schedule 14D-9 as Annex A
and is incorporated herein by reference. Such agreements provide change-in-
control benefits in the event of a change-in-control transaction during 1999
with a party other than Parent or its affiliates.
Stockholders should be aware that certain members of the Company's
management and Board of Directors have interests in the Merger in addition to
the interests of the stockholders of the Company in general, as described
further below and in the Information Statement.
The New Employment Agreements
The Company has maintained existing employment agreements, as amended, with
Denis R. Brown, C. Michael Carter and James P. McCloskey and a severance plan,
as amended, with Don W. Walker (together with Messrs. Brown, Carter and
McCloskey, the "Executive Officers"), the material terms of which are
summarized in the Information Statement under the caption "EXECUTIVE
COMPENSATION AND OTHER INFORMATION--Employment Agreements with Certain
Officers," and incorporated herein by reference. In connection with the Offer,
the Merger and the Merger Agreement, each Executive Officer has entered into a
new employment agreement (collectively, the "New Employment Agreements") with
the Company and Parent that will supersede the existing employment agreements,
as amended, and severance plan, as amended, upon the time Purchaser or Parent
purchases any of the Shares pursuant to the Offer (the "Effective Date"). The
Executive Officers' New Employment Agreements, copies of which are filed as
Exhibits (c)(2)-(c)(5) hereto, are summarized in "Section 11--Background of
the Offer; Purpose of the Offer and the Merger; the Merger Agreement and
Certain Other Agreements" of the Offer to Purchase and are incorporated herein
by reference.
Termination Agreement
In connection with the Merger Agreement, the Company, Parent and Thomas W.
Wathen, Chairman of the Board of the Company, have entered into the
Termination Agreement, dated as of February 19, 1999, pursuant to which the
Company and Mr. Wathen have agreed, among other things, to terminate that
certain Personal Services Agreement, dated as of February 10, 1994 (the
"Services Agreement"), between the Company and Mr. Wathen, effective on the
date the Offer is consummated. The Termination Agreement, a copy of which is
filed as Exhibit (c)(6) hereto, is summarized in "Section 11--Background of
the Offer; Purpose of the Offer and the Merger; the Merger Agreement and
Certain Other Agreements" of the Offer to Purchase and is incorporated herein
by reference.
Stock Option Awards
Upon consummation of the Merger, each outstanding option to purchase the
Shares (the "Options") granted under the Company's 1990 Stock Option Plan, as
amended, and the Company's 1995 Performance and Equity Incentive Plan, as
amended, and any and all other outstanding options, stock warrants and stock
rights granted pursuant to such stock option plans or otherwise, and in each
case, whether or not then exercisable or vested, shall be canceled. In
consideration of such cancellation, the Company shall pay to each such holder
of an option, which includes executive officers and directors of the Company,
an amount equal to the product of (i) the excess, if any, of the Per Share
Amount over the per share exercise price of such option and (ii) the number of
Shares subject thereto (such payment to be net of applicable withholding
taxes). The Company may elect at any time prior to the consummation of the
Offer to have the foregoing actions take effect, with respect to some or all
of the Options, upon consummation of the Offer, in which case the Company
shall provide written notice of such action to Parent. If the Company so
elects and if, upon consummation of the Offer, Purchaser shall have acquired
at least 90% of the outstanding Shares, Parent shall as promptly as
practicable following such consummation provide the Company with the funds
necessary to satisfy its obligations as described above.
3
Deferred Compensation Plan
Certain terms under the Company's existing Supplemental Retirement Income
Plan, as amended (the "SRIP"), will be automatically amended pursuant to the
New Employment Agreements on the Effective Date with respect to the benefits
the Executive Officers are entitled to receive under the SRIP. For a
description of the amended terms, see the summary of the New Employment
Agreements set forth in "Section 11--Background of the Offer; Purpose of the
Offer and the Merger; the Merger Agreement and Certain Other Agreements" of
the Offer to Purchase and incorporated herein by reference.
Severance Plan
In addition to the Executive Officers, certain other key employees of the
Company are entitled to severance benefits pursuant to the 1999 Severance Plan
for Selected Participants (the "Severance Plan"). The Severance Plan provides
that if a selected participant's employment is terminated other than by a
Nonqualifying Termination (as defined in the Severance Plan), the Company
shall pay to the participant severance compensation equivalent to the
continuation of the participant's monthly base salary in effect on the date
such employment is terminated for six months thereafter, and the Company shall
also continue the participant's health benefits until the earlier of six
months after the employment is terminated or the participant becomes employed.
However, the Severance Plan shall automatically terminate, and have no force
or effect, if a Change in Control (as defined in the Severance Plan) of the
Company does not occur during 1999. The transactions contemplated in the
Merger Agreement, if completed, will trigger each participants' rights to the
severance benefits described above. The forgoing summary of the Severance Plan
is qualified in its entirety to the full text thereof, a copy of which has
been filed as Exhibit (c)(7) hereto and is incorporated herein by reference.
Agreements with Parent, Purchaser or Their Respective Executive Officers,
Directors or Affiliates
The Merger Agreement
The Merger Agreement, a copy of which is filed as Exhibit (c)(1), is
summarized in "Section 11--Background of the Offer; Purpose of the Offer and
the Merger; the Merger Agreement and Certain Other Agreements" of the Offer to
Purchase and incorporated herein by reference.
Stockholders Agreement
In connection with the Merger Agreement, Parent, Purchaser and certain
trusts (collectively, the "Wathen Stockholders"), of which Mr. Wathen is sole
trustee, have entered into a Stockholders Agreement, dated as of February 19,
1999 (the "Stockholders Agreement"), pursuant to which each of the Wathen
Stockholders has, among other things, (i) agreed to tender its Shares in the
Offer, (ii) granted to Parent a proxy with respect to the voting of such
Shares and (iii) granted to Parent an option to purchase such Shares. The
Stockholders Agreement, a copy of which has been filed as Exhibit (c)(8)
hereto, is more fully summarized in "Section 11--Background of the Offer;
Purpose of the Offer and the Merger; the Merger Agreement and Certain Other
Agreements" of the Offer to Purchase and is incorporated herein by reference.
Stock Option Agreement
In connection with the Merger Agreement, the Company and Parent have
entered into a Stock Option Agreement, dated as of February 19, 1999 (the
"Stock Option Agreement"), pursuant to which the Company has, among other
things, granted to Parent an irrevocable option (the "Parent Option") to
purchase up to 2,437,079 of the Company's Shares (subject to adjustments) at a
cash purchase price equal to $29.00 per Share, provided, however, that in no
event shall the number of Shares for which the Parent Option is exercisable
exceed 19.9% of the issued and outstanding Shares. The Stock Option Agreement,
a copy of which has been filed as Exhibit (c)(9) hereto, is more fully
summarized in "Section 11--Background of the Offer; Purpose of the Offer and
the Merger; the Merger Agreement and Certain Other Agreements" of the Offer to
Purchase and is incorporated herein by reference.
4
Confidentiality Agreement
As a condition to the furnishing by the Company or Parent (the "Provider")
of Information ("Information") to the other (the "Recipient"), the Company and
Parent entered into a Mutual Confidentiality Agreement on September 3, 1998
(the "Confidentiality Agreement"), pursuant to which each of the Company and
Parent agreed, among other things, that the Recipient of Information will keep
such Information confidential and will not use the Information in any way
detrimental to the Provider and will not use the Information other than in
connection with the evaluation of the potential transaction between the
Company and Parent. The Confidentiality Agreement, a copy of which has been
filed as Exhibit (c)(10) hereto, is more fully summarized in "Section 11--
Background of the Offer; Purpose of the Offer and the Merger; the Merger
Agreement and Certain Other Agreements" of the Offer to Purchase and is
incorporated herein by reference.
Item 4. The Solicitation or Recommendation
(a) Recommendation
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING WITHOUT LIMITATION THE OFFER
AND THE MERGER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
(b)(1) Background of the Offer
Management of the Company and Parent have been acquainted with one another
for a number of years and have had, from time to time, discussions concerning
the respective businesses and strategies of their companies.
Since 1995, Denis R. Brown, President and Chief Executive Officer of the
Company, has attended meetings of the Ligue Internationale Des Societes De
Surveillance, headquartered in Berne, Switzerland (the "Ligue"). While at
these meetings, Mr. Brown was introduced to and became acquainted with Thomas
Berglund, President and Chief Executive Officer of Parent.
Mr. Berglund, Melker Schorling, Chairman of Parent, and other members of
the board of directors of the Ligue visited the Company, which was hosting the
Ligue board meeting in the United States on March 9, 1998. During this time,
Mr. Brown and Company representatives gave the Ligue board a presentation on
the United States security market, and on the Company, and the parties talked
about possible future collaboration to meet the needs of the Company's
customers in Europe.
Following these initial meetings, Mr. Berglund invited Mr. Brown to come to
Sweden with a view to discussing the security services business and assessing
whether there might be any mutual interest for the Company and Parent to work
together in the future. On June 13, 1998, Mr. Brown, C. Michael Carter,
Executive Vice President, General Counsel and Corporate Secretary of the
Company, and James P. McCloskey, Executive Vice President and Chief Financial
Officer of the Company, met with Mr. Berglund, Hakan Winberg, Executive Vice
President and Chief Financial Officer, Amund Skarholt, Executive Vice
President, and Juan Vallejo, Country Manager Sweden of Parent, in Stockholm,
Sweden.
After the June meeting, there were occasional telephone conversations
between Mr. Brown and Mr. Berglund regarding a possible working relationship
and discussions among representatives of both companies regarding possible
support of the needs of the Company's customers in Europe.
On September 3, 1998, the Company and Parent entered into the
Confidentiality Agreement, which provided for the exchange of confidential and
non-public information between the two companies so as to enable both parties
to evaluate their interest in discussing a possible transaction involving the
two companies.
5
Following the entry into the Confidentiality Agreement, Mr. Brown invited
Mr. Berglund and Mr. Winberg to come to visit the Company's headquarters so as
to enable them to become better acquainted with the Company's operations and
personnel. On September 10 and 11, 1998, Messrs. Berglund and Winberg met with
Mr. Brown, Mr. Carter, Mr. McCloskey and Don W. Walker, Executive Vice
President, The Americas, of the Company.
On October 30, 1998, Mr. Berglund, Mr. Brown and Mr. Carter met in London
to talk further about a future working relationship. On the same date, Mr.
Berglund, Mr. Brown and Mr. Carter discussed with Larry G. Woelk, Vice
President, International Operations of the Company, regarding possible support
of the needs of the Company's customers in Europe.
After the October meeting, there were occasional telephone conversations
between Mr. Brown and Mr. Berglund regarding a possible working relationship
and discussions among representatives of both companies regarding possible
support of the needs of the Company's customers in Europe.
On December 14 and 15, 1998, Mr. Berglund met with Mr. Brown in California.
During these meetings, Mr. Berglund advised Mr. Brown that Parent would be
interested in exploring the possibility of acquiring the Company.
At a meeting of the Board on December 17, 1998, there was a discussion of
the developments concerning Parent; and the Board approved the engagement of
financial and legal advisors to assist in connection with a possible
transaction. Following the meeting, Mr. Brown had a telephone conference with
Mr. Berglund during which Mr. Brown advised Mr. Berglund that the Board had
approved Company management's continuing discussions with Parent regarding a
possible transaction.
After the December conversation, there were occasional other telephone
conversations between Mr. Brown and Mr. Berglund regarding a possible
transaction and discussions among representatives of both companies regarding
possible support of the needs of the Company's customers in Europe.
On January 8, 1999, the Board received a further report concerning the
progress of discussions with Parent and a proposed timetable for due diligence
procedures and negotiations to determine if an acceptable agreement could be
achieved. At the meeting, the Board received presentations from the Company's
financial and legal advisors (Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") and Gibson, Dunn & Crutcher LLP, respectively) and
considered Parent's request for exclusivity in negotiating with the Company.
The Board concluded that under the circumstances it would be in the best
interests of the Company to proceed with Parent on an exclusive basis, subject
to the ability of the Board to conduct discussions with others if required by
their fiduciary duties.
On January 15, 1999, the Company entered into an agreement pursuant to
which it agreed, subject to certain conditions (including a "fiduciary out"),
to enter into exclusive negotiations with Parent for a period of time so as to
enable both parties to determine whether to proceed with a transaction
involving the two companies.
On January 16, 1999, Mr. Brown and Mr. Berglund had a dinner meeting. On
January 17 through 19, 1999, Messrs. Berglund and Winberg, together with their
advisors and other representatives of Parent, met with Messrs. Brown, Carter,
McCloskey and Walker, together with the Company's advisors and other
representatives, in order to commence Parent's due diligence of the Company.
This due diligence process continued thereafter.
On January 29, 1999, Mr. Brown and other Company representatives met with
Mr. Berglund and other Parent representatives to discuss the results of the
due diligence process and to continue their discussions regarding a possible
transaction.
On February 5, 1999, Mr. Berglund and an advisor had a telephone conference
call with Mr. Brown relating to the terms and conditions of the proposed
management agreements for the senior executives of the Company.
On February 8, 1999, Mr. Berglund had a telephone conference with Mr. Brown
during which time Mr. Berglund advised Mr. Brown that Parent's board of
directors had approved proceeding with the negotiation of a transaction with
the Company.
6
From February 8 through February 18, 1999, representatives of Parent,
together with its legal counsel, Willkie Farr & Gallagher, and representatives
of the Company, together with its legal counsel, met in person and
communicated by telephone to discuss various aspects of the transaction.
During this time, drafts of the Merger Agreement, the Stock Option Agreement,
the Stockholders Agreement and the Termination Agreement were distributed,
reviewed and negotiated, and representatives of Parent continued the due
diligence investigation of the Company. In addition, during this time, Messrs.
Brown, Carter, McCloskey and Walker and their separate counsel negotiated the
terms of the New Employment Agreements with Parent and its counsel.
Following approval by the Board, on February 19, 1999, Parent, Purchaser
and the Company executed and delivered the Merger Agreement, and the parties
thereto executed the Stockholders Agreement, the Stock Option Agreement, the
Termination Agreement and the New Employment Agreements.
On February 26, 1999, Purchaser commenced the Offer.
(b)(2) Reasons for Recommendation
In making the determinations and recommendations set forth in subparagraph
(a) above, the Board considered a number of factors, including, without
limitation:
(i) the fact that the Merger and the Offer will provide stockholders of
the Company the opportunity to receive a premium of approximately 72% over
the closing price for the Shares on February 19, 1999, the last trading day
prior to public announcement of the transaction, and a premium of
approximately 21% over the highest closing price for the Shares in the past
year;
(ii) the Board's consideration of possible alternative transactions, and
its conclusion that the Merger and the Offer represent the highest price
reasonably attainable for the Company's stockholders;
(iii) the general familiarity of the Board with the financial condition,
results of operations and cash flows, competitive position, business and
prospects of the Company (as reflected in the Company's historical and
projected financial information), current economic and market conditions
and the nature of the industry in which it operates. In this regard, the
Board considered management's views with respect to the benefits associated
with increased size in the security and security-related business, the fact
that the Company and Parent together would be better able to compete with
its other competitors and the fact that operating synergies anticipated to
be achieved as a result of the Merger may allow Parent and the Company to
provide security and security-related services at lower overhead costs;
(iv) the historical market prices of, and recent trading activity in,
the Shares;
(v) (a) the presentation of DLJ at the January 8, 1999 meeting of the
Board regarding the financial valuation of the Company and (b) the written
opinion of DLJ, dated February 19, 1999, addressed to the Board to the
effect that, as of such date and based upon and subject to certain matters
in such opinion, the price per share to be received by the holders of the
Shares pursuant to the Merger Agreement was fair, from a financial point of
view, to the Company's stockholders. The full text of DLJ's written
opinion, which sets forth assumptions made, matters considered and
limitations on the review undertaken by DLJ in connection with such
opinion, is attached to this Schedule 14D-9 as Annex B and incorporated
herein by reference. Stockholders are urged to read such opinion carefully
in its entirety. The opinion of DLJ was presented to the Board in
connection with its consideration of the Merger Agreement and is directed
only to the fairness of the per share price to be received by the holders
of the Shares pursuant to the Merger Agreement. The opinion does not
constitute a recommendation to any stockholder as to whether to tender
Shares in the Offer or how to vote with respect to the Merger; and
(vi) the likelihood that the proposed acquisition will be consummated,
including the fact that the obligations of Parent and Purchaser to
consummate the proposed acquisition are not conditioned upon financing.
7
The Board of Directors of the Company did not assign relative weights to
the above factors or determine that any one factor was of special importance.
Rather, the Board viewed its position and recommendations as being based on
the totality of the information presented to and considered by it.
Item 5. Persons Retained, Employed or to Be Compensated
The Company retained DLJ, pursuant to a letter agreement dated December 30,
1998, in connection with the potential sale, merger, leveraged
recapitalization, consolidation or other business combination involving the
Company, including, without limitation, a transaction with Parent (each of the
foregoing, a "Transaction"). The Company agreed to pay DLJ (i) a fee of
$200,000 upon DLJ's presentation to the Company's Board of Directors regarding
the financial valuation of the Company, such presentation was made on January
8, 1999 and such fee has been paid; (ii) a fee of $500,000 upon DLJ's
notification to the Board that it was prepared to deliver a fairness opinion
(regardless of the conclusion reached in such opinion), such notification was
made on February 19, 1999; and (iii) a fee of $2,000,000 upon consummation of
a Transaction, less the fees described in clauses (i) and (ii) paid by the
Company. In addition, the Company has agreed to reimburse DLJ promptly for all
reasonable and properly documented out-of-pocket expenses (including the
reasonable fees and expenses of its counsel) incurred in connection with DLJ's
engagement by the Company, whether or not a Transaction is consummated. The
Company also agreed to indemnify or contribute to losses incurred by DLJ and
certain of its affiliated persons against certain liabilities and expenses,
including, without limitation, certain liabilities under the Federal
securities laws. The terms of the fee arrangement with DLJ, which DLJ and the
Company believe are customary in transactions of this nature, were negotiated
at arms length between the Company and DLJ and the Board was aware of such
arrangement, including that a significant portion of the aggregate fee payable
to DLJ is contingent upon consummation of a Transaction.
In addition to its engagement as exclusive financial advisor to the Company
in connection with the transactions contemplated by the Merger Agreement, DLJ
has performed investment banking and other services for the Company in the
past and has been compensated for such services. In the ordinary course of its
business, DLJ or its affiliates may, at any time, hold long or short positions
and may trade or otherwise effect transactions for its own account or on the
account of its customers in debt or equity securities or bank or other senior
debt issued by the Company or Parent.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on
its behalf with respect to the Offer, except that such solicitations or
recommendations may be made by directors, officers or employees of the
Company, for which services no additional compensation will be paid.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) No transaction in the Shares have been effectuated during the past 60
days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company, except as
follows: on February 10, 1999, Mr. Wathen transferred 3,681,415 shares from
the Thomas W. Wathen Trust to the Thomas W. Wathen Charitable Remainder
Unitrust 1999 and the Wathen 1999 Annuity Trust, and effective February 23,
1999, 33 shares were issued to James R. Mellor, a director of the Company, in
lieu of director fees pursuant to a standing election under the Company's 1995
Performance and Equity Incentive Plan, as amended.
(b) To the best of the Company's knowledge, except as may be required to
avoid liability under Section 16(b) of the Securities Exchange Act of 1934, as
amended, each executive officer, director and affiliate of the Company
currently intends to tender all Shares to Purchaser over which he or she has
sole dispositive power as of the expiration date of the Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization
8
involving the Company or any subsidiary of the Company; (ii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (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.
(b) Except as described in Item 3(b) and Item 4 (the provisions of which
are hereby incorporated by reference), there are 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
Reference is hereby made to the Offer to Purchase and the related Letters
of Transmittal, which are attached as Exhibits (a)(1) and (a)(2) hereto,
respectively, and are incorporated by reference herein in their entirety.
Item 9. Materials to Be Filed as Exhibits
· Download Table
Exhibit
Number Description
------- -----------
(a)(1) Offer to Purchase, dated February 26, 1999.*+
(a)(2) Letter of Transmittal.*+
(a)(3) Press release issued by the Company, dated February 22, 1999.
(a)(4) Opinion of Donaldson, Lufkin & Jenrette Securities Corporation, dated
February 19, 1999.*
(a)(5) Letter to the Stockholders of Pinkerton's, Inc., dated February 26,
1999.*
(a)(6) Summary Advertisement.+
(c)(1) Agreement and Plan of Merger, dated as of February 19, 1999, by and
among the Company, Parent and Purchaser.+
(c)(2) Employment Agreement, dated February 19, 1999, between Denis R. Brown
and the Company.+
(c)(3) Employment Agreement, dated February 19, 1999, between C. Michael
Carter and the Company.+
(c)(4) Employment Agreement, dated February 19, 1999, between James P.
McCloskey and the Company.+
(c)(5) Employment Agreement, dated February 19, 1999, between Don W. Walker
and the Company.+
(c)(6) Termination Agreement, dated as of February 19, 1999, by and among the
Company, Parent and Thomas W. Wathen.+
(c)(7) 1999 Severance Plan for Selected Participants.
(c)(8) Stockholders Agreement, dated as of February 19, 1999, by and among
the Parent, Purchaser and certain stockholders of the Company.+
(c)(9) Stock Option Agreement, dated as of February 19, 1999, by and between
the Company and Parent.+
(c)(10) Mutual Confidentiality Agreement, dated September 3, 1998, by and
between the Company and Parent.+
(c)(11) 1999 Amendment to the Employment Agreement, dated as of February 3,
1999, between Denis R. Brown and the Company.
(c)(12) 1999 Amendment to the Employment Agreement, dated as of February 3,
1999, between C. Michael Carter and the Company.
(c)(13) 1999 Amendment to the Employment Agreement, dated as of February 3,
1999, between James P. McCloskey and the Company.
(c)(14) 1999 Agreement, dated as of February 3, 1999, between Don W. Walker
and the Company.
--------
* Included in materials delivered to the stockholders of the Company.
+ Filed as an exhibit to Parent's and Purchaser's Tender Offer Statement on
Schedule 14D-1, dated February 26, 1999, and incorporated herein by
reference.
9
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.
PINKERTON'S, INC.
/s/ Denis R. Brown
By:_________________________________
Name: Denis R. Brown
Title: President and Chief
Executive Officer
Dated: February 26, 1999
10
ANNEX A
PINKERTON'S, INC.
World Support Center
4330 Park Terrace Drive
Westlake Village, California 91361
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
GENERAL
This Information Statement (the "Statement") is being mailed on or about
February 26, 1999, as part of the Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") of Pinkerton's, Inc., a Delaware
corporation (the "Company"), with respect to the tender offer by Securitas
Acquisition Corp., a Delaware corporation ("Purchaser") and an indirect
wholly-owned subsidiary of Securitas AB, a Swedish corporation ("Parent"), for
shares of the Company's Common Stock, par value $0.001 per share, including
the associated rights to purchase Series A Junior Participating Preferred
Stock (the "Shares"). Capitalized terms used and not otherwise defined herein
shall have the meaning set forth in the Schedule 14D-9.
This Statement is furnished in connection with the possible election of
persons designated by Parent to a majority of the seats on the Company's Board
of Directors (the "Board"). The Agreement and Plan of Merger by and among the
Company, Parent and Purchaser, dated as of February 19, 1999 (the "Merger
Agreement"), provides that, subject to compliance with applicable laws and
promptly following the purchase by Purchaser of Shares pursuant to the Offer,
Parent shall be entitled to designate such number of directors (the "Parent
Designees"), rounded up to the next whole number, on the Board as will give
Parent representation on the Board equal to at least that number of directors
which equals the product of the total number of directors on the Board (giving
effect to the directors appointed or elected pursuant to this sentence and
including current directors serving as officers of the Company) multiplied by
the percentage that the aggregate number of Shares beneficially owned by
Parent or any affiliate of Parent (including such Shares as are accepted for
payment pursuant to the Offer, but excluding Shares held by the Company or any
of its subsidiaries) bears to the number of Shares outstanding. At such time,
the Company will also cause (i) each committee of the Board, (ii) if requested
by Parent, the board of directors of each of the Company's subsidiaries and
(iii) if requested by Parent, each committee of such board to include persons
designated by Parent constituting the same percentage of each such committee
or board as the Parent Designees constitute on the Board. The Company shall,
upon request by Parent, promptly increase the size of the Board or exercise
its best efforts to secure the resignations of such number of directors as is
necessary to enable the Parent Designees to be elected to the Board in
accordance with the terms of the Merger Agreement and shall cause the Parent
Designees to be so elected. In the event that the Parent Designees are
appointed or elected to the Board, until the Effective Time (as defined in the
Merger Agreement) (x) Denis R. Brown may continue to serve as a director of
the Company and (y) the Board shall have at least three directors who were
directors on February 19, 1999 and who are neither officers of the Company nor
designees, stockholders, affiliates or associates (within the meaning of the
Federal securities laws) of Parent (such directors, the "Independent
Directors"); provided, that if at any time or from time to time fewer than
three Independent Directors remain, the other directors shall elect to the
Board such number or persons who shall be neither officers of the Company nor
designees, shareholders, affiliates or associates of Parent so that the total
of such persons and remaining Independent Directors serving on the Board is at
least three. Any such person elected to the Board pursuant to the proviso of
the preceding sentence shall be deemed to be an Independent Director for
purposes of the Merger Agreement. Additionally, notwithstanding anything in
the Merger Agreement to the contrary, following the time directors designated
by Parent constitute a majority of the members of the Board and prior to the
Effective Time, the affirmative vote of a majority of the Independent
Directors shall be required for certain actions related to the Offer, Merger
and the Merger Agreement.
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This Statement is required by Section 14(f) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 14f-1 promulgated
thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
The Offer commenced on February 26, 1999 and is scheduled to expire at
12:00 Midnight, New York City time, on Thursday, March 25, 1999, unless
extended.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent, and the Company
assumes no responsibility for the accuracy, completeness or fairness of any
such information.
At the close of business on February 19, 1999, there were 12,246,631 Shares
issued and outstanding, which is the only class of securities outstanding
having the right to vote for the election of the Company's directors, each of
which entitles its record holder to one vote.
Designees to the Company's Board of Directors
Parent has informed the Company that it currently intends to choose the
Parent Designees it has the right to designate to the Board pursuant to the
Merger Agreement from the officers and employees of Parent and Purchaser
listed below:
· Download Table
Present Principal Occupation or
Employment and
Five-Year Employment History and
Name Age Citizenship
------------------------------------ --- -------------------------------------
Hans Olof Gluckman Bengtsson........ 37 Mr. Bengtsson, a Swedish citizen, has
been the Director of Finance and
Treasury of Parent since January
1998, and was the Finance Manager of
Parent from August 1993 to December
1997.
Thomas F. Berglund.................. 46 Mr. Berglund, a Swedish citizen, has
been President, Chief Executive
Officer and a member of the board of
directors of Parent since 1993.
Additionally, Mr. Berglund has been
President and a member of the board
of directors of Purchaser since
February 1999.
Amund Skarholt...................... 51 Mr. Skarholt, a Norwegian citizen,
has been Executive Vice President of
Parent since 1994. Prior to joining
Parent, he held the position of
Country Manager at Securitas A/S, an
indirect subsidiary of Parent, from
1991 to 1994.
Mats Uebel.......................... 37 Mr. Uebel, a Swedish citizen, has
been an in-house attorney (Group
General Counsel) with Parent since
1997. From 1993 to 1996, he was an
attorney with Hedberg & Co
Advokatbyra. From 1996 to 1997, he
was an attorney with Brandt & Bessman
Advokatbyra.
Hakan Winberg....................... 42 Mr. Winberg, a Swedish citizen, has
been Executive Vice President of
Parent since 1995 and Chief Financial
Officer of Parent since 1985.
Additionally, Mr. Winberg has been
Vice President and a member of the
board of directors of Purchaser since
February 1999.
Parent has advised the Company that each of the individuals listed above
has consented to act as a director. Parent has also advised the Company that,
to the best knowledge of Parent or Purchaser, none of such individuals (i)
currently is a director of, or holds, any position with, the Company, (ii)
beneficially owns any equity securities, or rights to acquire any equity
securities, of the Company or (iii) has been involved in any transactions with
the Company or any of its directors, executive officers, affiliates or
associates which are required to be disclosed pursuant to the rules and
regulations of the Commission.
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CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
· Download Table
Name Age Positions(1)
------------------------------------ --- -----------------------------------
Denis R. Brown...................... 59 Director, President and Chief
Executive Officer
Peter H. Dailey..................... 68 Director
John A. Gavin....................... 67 Director
James R. Mellor..................... 68 Director
Gerald D. Murphy.................... 71 Director
J. Kevin Murphy..................... 72 Director
Robert H. Smith..................... 63 Director
Thomas W. Wathen.................... 69 Director
William H. Webster.................. 75 Director
C. Michael Carter................... 55 Executive Vice President, General
Counsel and Corporate Secretary
James P. McCloskey.................. 58 Executive Vice President and Chief
Financial Officer
Don W. Walker....................... 57 Executive Vice President, The
Americas
Laura J. Cerar...................... 37 President, U.S. Security
Anthony R. Miller................... 58 Corporate Vice President, Total
Quality Management
Sally R. Phillips................... 39 Corporate Vice President, Human
Resources
Michael A. Stugrin.................. 49 Corporate Vice President, Strategic
Planning and Marketing
Richard E. Ferens................... 44 Vice President and Treasurer
Gregg S. Lamb....................... 36 Worldwide Controller
Frederick W. London................. 47 Vice President, Deputy General
Counsel and Assistant Secretary
--------
(1) The Board is divided into three classes as nearly equal in number as
possible, and the members of each class are elected for a term of three
years. Each of the executive officers above holds his or her office until
he or she resigns, is removed or otherwise disqualified to serve in such
capacity or until his or her successor is elected and qualified.
Denis R. Brown was elected the President and Chief Executive Officer and a
director of the Company in April 1994. Prior to joining the Company, Mr. Brown
served at Concurrent Computer Corporation as Chairman of the Board and Chief
Executive Officer from April 1992 until August 1993, as Chairman of the Board,
President and Chief Executive Officer from July 1991 until April 1992, and as
Vice Chairman of the Board, President and Chief Executive Officer from
September 1990 until July 1991. Mr. Brown served as President and Chief
Executive Officer of Penn Central Industries Group from May 1985 until January
1990. Prior to joining Penn Central, Mr. Brown spent 15 years with ITT
Corporation, serving as Corporate Vice President and Group Executive of the
Defense Space Group and as President of the Defense Communications Division.
Mr. Brown is also serving as a director of Farr Company, a producer and
distributor of filters and filtration systems. Mr. Brown is a member of the
Strategic Planning Committee of the Board.
Peter H. Dailey has been a director of the Company since February 1990. Mr.
Dailey is the Chairman of Enniskerry Financial Ltd., a private investment
company. Mr. Dailey was Vice Chairman, director and principal stockholder of
the Interpublic Group of Companies, a holding company for advertising agencies
from 1984 to 1985 and the Chairman and Chief Executive Officer of Memorex
Telex N.V., and served as the Chief Executive Officer of Memorex Telex
Corporation from 1995 to 1997 to assist with that company's reorganization
under Chapter 11 of the United States Bankruptcy Code filed in October 1996.
Mr. Dailey is currently a director of
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Chicago Title and Trust Company, Jacobs Engineering Group, Inc., Sizzler
International and The Wirthlin Group. Mr. Dailey has served as Ambassador to
Ireland and as Special Presidential Envoy to NATO countries for intermediate
nuclear weapons negotiations. Mr. Dailey also served as a member of the
eleven-member Presidential Advisory Committee on Arms Control and Disarmament.
He was appointed by President Reagan and reaffirmed by President Bush in the
same capacity. From 1985 to 1988, he served in the Central Intelligence Agency
as Counselor to William Casey, Director of Central Intelligence. He also
served as the principal media strategist in the election campaigns of
President Nixon in 1972, President Reagan in 1980, and the primary campaign of
President Ford in 1976. In 1984, he served as Senior Advisor to the re-
election campaign of President Reagan. Prior to government service, he was a
director of Walt Disney Productions and Cement Roadstone Corporation PLC of
Ireland. Mr. Dailey is a member of the Audit and Nominating & Governance
Committees of the Board.
John A. Gavin has been a director of the Company since April 1993. Mr.
Gavin is the founder and has been the Chairman of Gamma Holdings, an
international venture capital and consulting firm since 1989. Mr. Gavin has
served as a Managing Director and Partner of Hicks, Muse, Tate & Furst (Latin
America) since 1995, and as a director of Atlantic Richfield Corporation,
International Wire Group, Wirekraft Holdings Corp., Krause's Furniture Co.,
the Hotchkis & Wiley Funds, Apex Mortgage Company and FEDCO. From 1987 to
1990, Mr. Gavin served as President of Univisa Satellite Communications, a
Spanish-speaking broadcast communications network, and from 1986 to 1987 he
was a Vice President of Atlantic Richfield Corporation. In 1981, Mr. Gavin was
appointed Ambassador to Mexico by President Reagan and served in this capacity
through 1986. Mr. Gavin was also U.S. Advisor to the Secretary General of the
Organization of American States from 1961 through 1974. Mr. Gavin is Chairman
of the Compensation & Benefits Committee and a member of the Strategic
Planning Committee of the Board.
James R. Mellor has been a director of the Company since December 1996. Mr.
Mellor retired as the Chairman and Chief Executive Officer of General Dynamics
Corporation on May 31, 1997. He became President and Chief Operating Officer
in 1991 and President and Chief Executive Officer in 1993, and was elected
Chairman in 1994. Mr. Mellor has served at General Dynamics Corporation as a
director since 1981. He also served as Executive Vice President--Commercial
Systems and Corporate Planning from 1981 to 1982, then as Executive Vice
President--Corporate Planning and International until 1983, then as Executive
Vice President for Marine, Business Systems and Corporate Planning until 1986,
and then as Executive Vice President--Marine, Land Systems and International
until 1991. Before joining General Dynamics Corporation, Mr. Mellor was
President and Chief Operating Officer of AM International, Inc. and a director
there since 1977. Prior to that he spent 18 years with Litton Industries in a
variety of management and engineering positions. Mr. Mellor also serves as a
director of Bergen Brunswig Corporation, Computer Sciences Corporation and
USEC, Inc. Mr. Mellor is Chairman of the Strategic Planning Committee and a
member of the Compensation & Benefits Committee of the Board.
Gerald D. Murphy has been a director of the Company or of its predecessor
corporation since 1975. Mr. Murphy is currently a consultant to American Rice,
Inc. From 1964 to 1998, Mr. Murphy served as Chairman of the Board and Chief
Executive Officer of ERLY Industries, Inc. (formerly Early California
Industries), a publicly held international agribusiness that owns 81% voting
control of American Rice, Inc. and 100% of Chemonics Industries, Inc.
Mr. Murphy also served as Chairman of the Board of Directors of American Rice,
Inc. from 1991 to 1998 and serves as a director for Sizzler, Inc., Wynn's
International, Inc. and Leisure Technology, Inc. Mr. Murphy is contesting an
involuntary petition under the federal bankruptcy laws, which was filed
against him in 1999 in the Southern District of Texas. Mr. Murphy is a member
of the Audit Committee of the Board.
J. Kevin Murphy has been a director of the Company since October 1990. Mr.
Murphy is currently a business consultant to various companies. He served as a
director of Health Systems International, Inc., from February 1994 until April
1997, and served as Vice Chairman and a director of Qual-Med, Inc., from 1990
to February 1994. Mr. Murphy was President of 655 Associates, Inc., a crisis
management and management consulting firm from 1985 to 1991, and is a past
president of Purolator Courier Corporation and Trailways, Inc.
A-4
Mr. Murphy is Chairman of the Nominating & Governance Committee and a member
of the Compensation & Benefits Committee of the Board.
Robert H. Smith has been a director of the Company since April 1993. Mr.
Smith has served as Managing Director of Smith & Crowley, Inc., an investment
banking firm specializing in banks since 1993. He serves as a director of
Edison International, J. G. Boswell Co., Oasis Residential, Inc. and Marine
National Bank. From 1961 to 1992, Mr. Smith served in numerous managerial
positions with Security Pacific National Bank and Security Pacific
Corporation. From July 1991 until April 1992, he served as Chairman of the
Board and Chief Executive Officer of Security Pacific Corporation and Chairman
of the Board of Security Pacific National Bank. Mr. Smith also served during
1992 as a member of the Board and President and Chief Operating Officer of
BankAmerica Corporation and Bank of America NT & SA. Mr. Smith is Chairman of
the Audit Committee and a member of the Compensation & Benefits Committee of
the Board.
Thomas W. Wathen has been a director of the Company since 1988. Mr. Wathen
joined California Plant Protection, Inc. ("CPP") in 1963 and served on a full-
time basis as President, Chief Executive Officer and Chairman of the Board of
CPP from 1964 to January 1988. Since the acquisition of "old" Pinkerton's,
Inc. by CPP (through merger) in January 1988, Mr. Wathen has served as
President (until October 1990 and from July 1992 until April 1994), Chief
Executive Officer (until April 1994) and Chairman of the Board of the Company.
For the five years prior to joining CPP, Mr. Wathen served as a security
representative for North American Aviation and as a security director for RCA
and Mattel Toys. From 1951 to 1958, Mr. Wathen served as an industrial
security officer for the United States Air Force and special agent for the
Department of Defense. Mr. Wathen is a member of the Strategic Planning and
Nominating & Governance Committees of the Board.
William H. Webster has been a director of the Company since August 1992 and
a partner of the law firm of Milbank, Tweed, Hadley & McCloy since September
1991. Judge Webster is a director of Anheuser-Busch Companies, Inc., Maritz,
Inc., and Next WAVE Telecom, Inc. From May 1987 to September 1991, he served
as the Director of Central Intelligence and directed the Central Intelligence
Agency. From February 1978 to May 1987, Judge Webster served as the Director
of the Federal Bureau of Investigation. In 1970, Judge Webster was appointed a
Judge of the United States District Court for the Eastern District of
Missouri, and in 1973 was elevated to the United States Court of Appeals for
the Eighth Circuit. Judge Webster is a member of the Audit and Nominating &
Governance Committees of the Board.
C. Michael Carter has served as Executive Vice President, General Counsel
and Corporate Secretary of the Company since joining the Company in September
1994. He directs strategic planning and marketing, corporate development, risk
management, contracts and legal. Prior to joining the Company, Mr. Carter
served at Concurrent Computer Corporation as Senior Vice President, Operations
and Secretary from August 1993 to September 1994, and served as Vice
President, General Counsel and Secretary and directed corporate development
from May 1987 to August 1993. He also served as a director of Concurrent from
June 1994 to September 1994. Prior to his employment at Concurrent, Mr. Carter
was Senior Corporate Counsel and Assistant Secretary for RJR Nabisco, Inc. and
General Counsel and Secretary of RJ Reynolds Development Corporation. He also
held senior positions in legal affairs with The Singer Company, and was an
associate with Winthrop, Stimpson, Putnam & Roberts in New York.
James P. McCloskey has served as Executive Vice President and Chief
Financial Officer of the Company since joining the Company in October 1994.
Prior to joining the Company, Mr. McCloskey served as Vice President Finance,
Treasurer and Chief Financial Officer of Concurrent Computer Corporation from
1986 to 1994 and of Sybron Corporation from 1980 to 1986. Prior to that time,
Mr. McCloskey held a number of financial and operating positions with W. R.
Grace & Company. He began his career with Price Waterhouse.
Don W. Walker was named Executive Vice President, The Americas in March
1997, after serving as Executive Vice President, North American Operations
since November 1994. Prior to that he served as Executive Vice President,
Investigations since joining the Company in November 1991 and Executive Vice
President, Investigations and International Operations since June 1993. Mr.
Walker was the founder of Business Risks
A-5
International ("BRI"), a firm specializing in security consulting,
investigations and loss prevention, and served as its President and Chief
Executive Officer from September 1985 until joining the Company upon its
acquisition of BRI. Prior to founding BRI, Mr. Walker was Assistant General
Counsel and Corporate Security Director for Genesco Inc. Mr. Walker also is a
former Special Agent of the Federal Bureau of Investigation, and a former
President/Chairman of the American Society for Industrial Security.
Laura J. Cerar has served as President of the Company's U.S. Security
Services Division since October 1997 and as Vice President of Field
Operations, Regional Manager and District Manager since joining the Company in
1986. Prior to joining the Company, Ms. Cerar was the Security Director for a
contract security agency in the Pittsburgh, PA area.
Anthony R. Miller has served as Corporate Vice President, Total Quality
Management since joining the Company in May 1995. Prior to joining the
Company, Mr. Miller served as Vice President--Chief Quality Officer of Banc
One Services Corporation from May 1990 to July 1994. He served at Citicorp
Global Payment Products as Vice President--Director Service Management from
1987 to 1990 and as Vice President--Director of Performance Engineering from
1986 to 1987. Prior to that, Mr. Miller spent four years with American Express
and three years with International Telephone & Telegraph in systems
development positions.
Sally R. Phillips has served as Corporate Vice President, Human Resources
since July 1998. During the period 1988 through July 1998, Ms. Phillips has
held various positions with the Company including Vice President, Legal and
Operations Support, and Vice President and Assistant General Counsel. Prior to
joining the Company, Ms. Phillips was an employment attorney with the
international law firm of Paul, Hastings, Janofsky and Walker.
Michael A. Stugrin has served as Corporate Vice President, Strategic
Planning and Marketing since December 1996, after serving as Corporate Vice
President, Marketing since joining the Company in May 1995. Prior to joining
the Company, Mr. Stugrin served at Concurrent Computer Corporation from 1992
to 1995 in various senior positions, including Director of Strategic Planning,
Director of Corporate and Marketing Communications and Director of National
Series 3200 Sales. He served at Unisys Corporation from 1984 to 1992 in
various senior marketing and communications positions and at Westinghouse
Electric Corporation on its Executive Support Staff from 1981 to 1984.
Richard E. Ferens has served as Vice President and Treasurer of the Company
since March 1998, Treasurer since March 1997, and as Director of Taxation
since joining the Company in November 1995. Prior to joining the Company, Mr.
Ferens served at AT&T Corporation as Director of Taxes-Transfer Pricing, from
January 1995 to October 1995, and at Concurrent Computer Corporation from
October 1988 to December 1994 as Director of Taxation. Prior to Concurrent
Computer Corporation. Mr. Ferens spent 10 years with Merck & Company, Inc. in
various financial positions.
Gregg S. Lamb has served as Worldwide Controller of the Company since
August 1998, and as Director of Corporate Development since joining the
Company in 1995. Prior to joining the Company, Mr. Lamb served at Concurrent
Computer Corporation from October 1987 to November 1995 in various financial
positions, including Director of Worldwide Financial, Planning and Reporting
with international controller responsibilities. He began his career with
Deloitte, Haskins & Sells (currently known as Deloitte & Touche).
Frederick W. London has served as Vice President, Deputy General Counsel
and Assistant Secretary since joining the Company in February 1998. Mr. London
also serves as a director of Questron Technology, Inc., a specialized, value-
added distributor of fasteners and related products. Prior to joining the
Company, Mr. London was a partner in the law firm of Gould & Wilkie, LLP, New
York, NY, during the period January 1995 through February 1998 and a partner
in the firm of Dunnington, Bartholow & Miller, LLP, New York, NY, during the
period January 1983 through December 1994. Prior to that time, Mr. London held
positions as an associate attorney with the Dunnington firm and as an attorney
with the Enforcement Division of the Securities and Exchange Commission.
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Section 16(a) Beneficial Ownership Reporting Compliance
Each director, officer and other designated employee of the Company who is
subject to Section 16 of the Exchange Act, and each other person who owns
beneficially more than 10% of the Common Stock, is required by Section 16(a)
of the Exchange Act to report to the Commission by a specified date his or her
ownership of and transactions in the Common Stock. Copies of such reports on
Forms 3, 4 and 5 must also be provided to the Company. Based on the Company's
review of the copies of such forms and amendments thereto it has received and
written representations from certain reporting persons, the Company believes
that all such forms were filed on a timely basis during fiscal 1998.
Corporate Governance
The Board, which held a total of six meetings in 1998, is currently
composed of nine members. Seven of the nine directors have their principal
occupation or employment outside the Company; one director is currently an
executive officer of the Company; and one director is a past President and
Chief Executive Officer of the Company.
In addition to membership on the Board, every director served on one or
more of four Committees of the Board in 1998. The directors spend a
considerable amount of time preparing for Board and Committee meetings and, in
addition, are called upon for their counsel between meeting dates. In 1998,
each director attended at least 75% of the total of the meetings of the Board
and the Committees of which he was a member.
As permitted under Delaware Law and the Restated Certificate of
Incorporation and By-Laws of the Company, the Board has established and
delegated certain authority and responsibility to four standing committees:
the Audit Committee; the Compensation & Benefits Committee; the Nominating &
Governance Committee; and the Strategic Planning Committee. The Board annually
reviews the authority and responsibility delegated to each Committee at the
organizational meeting of the full Board immediately following the annual
meeting of the Company's stockholders. The table below shows current Committee
membership. An asterisk denotes Chairman of the Committee.
· Download Table
Strategic
Compensation & Nominating & Planning
Audit Committee Benefits Committee Governance Committee Committee
--------------- ------------------ -------------------- ----------------
Peter H. Dailey John A. Gavin* Peter H. Dailey Denis R. Brown
Gerald D. Murphy James R. Mellor J. Kevin Murphy* John A. Gavin
Robert H. Smith* J. Kevin Murphy Thomas W. Wathen James R. Mellor*
William H. Webster Robert H. Smith William H. Webster Thomas W. Wathen
The principal responsibilities of the Audit Committee include the review of
all financial statements and notes thereto contained in public filings and
releases, matters pertaining to the selection, compensation, independence and
examination of the Company by its independent accountants, internal accounting
controls and procedures, including the performance of the Company's Internal
Audit Department, and the capital uses and needs of the Company. The Audit
Committee held four meetings during 1998.
The annual and long-term compensation of the Company's Named Officers (as
defined hereinafter) and Corporate Vice Presidents is determined by the
Compensation & Benefits Committee. The Committee also has oversight of the
incentive compensation plans and benefit programs for the Company's officers,
administers the Company's stock incentive plans, and with a member of
management administers the Company's Supplemental Retirement Income Plan (the
"SRIP"). The Committee is comprised entirely of outside, independent
directors. The Committee also has responsibility for management development
and succession programs. The Compensation & Benefits Committee met seven times
during 1998.
The Nominating & Governance Committee reviews the Company's corporate
governance principles and policies and makes recommendations to the Board
concerning these principles and policies. The Committee also identifies,
examines and recommends to the full Board those candidates it believes possess
the professional
A-7
expertise and demonstrated excellence and integrity to be nominated as
directors to fill vacancies on the Board, newly created directorships and
expired terms of directors. The Nominating & Governance Committee would also
review any nomination for the Board made by a stockholder. Under the Company's
By-Laws, a stockholder may nominate a person for election to the Board by
sending the Corporate Secretary written notice 50 to 75 days in advance of the
annual meeting, or within ten days following the public disclosure or notice
to stockholders of the annual meeting if such disclosure or notice is less
than 60 days in advance of the meeting. The stockholder's notice must include
certain information prescribed by the By-Laws to be valid. The Committee also
makes recommendations to the Board regarding its committees and their
membership (other than the Committee's own membership) and chairmanship. The
Nominating & Governance Committee met six times during 1998.
The Strategic Planning Committee oversees the development and
implementation of the Company's ongoing five-year strategic plans. The
Committee reviews Company achievement of strategic objectives and compares
actual performance to plan and examines potential strategic alliances for the
Company through joint ventures, business combinations and similar means. The
Strategic Planning Committee held three meetings in 1998.
Director's Compensation
Non-employee directors (other than Mr. Wathen) receive a quarterly fee of
$5,500, plus a quarterly fee of $750 for each Committee chairmanship they
hold. Non-employee directors also receive $1,000 per Board or Committee
meeting attended (in person or by telephone). In addition, the Company
reimburses directors for all reasonable travel and lodging expenses incurred
in connection with attending meetings and compensates directors not residing
in the area in which a Board or committee meeting is being held at the rate of
$1,000 per day for days traveling to and/or from the meeting if the length or
timing of any meeting of the Board or committee renders out-of-town travel
impractical on the day of the meeting. The Company also provides a
supplemental health care program and business travel accident insurance for
the benefit of its senior executives and its outside directors.
The 1995 Pinkerton Performance and Equity Incentive Plan (the "Performance
Plan") provides that on the day of each annual meeting of stockholders during
the term of the plan, each director who is not an employee of the Company (a
"Non-Employee Director") shall be granted a non-qualified stock option to
purchase 4,500 shares of Common Stock, vesting on the business day preceding
the following year's annual meeting of stockholders. Each such stock option
will have a term of ten years and will not be exercisable unless such Non-
Employee Director is at the time of such exercise a member of the Board and
has continuously been a member of the Board since the date the option was
granted. The price per share of Common Stock to be paid by the Non-Employee
Director will equal the fair market value of one share of Common Stock on the
date the stock option is granted and the purchase price of the shares of
Common Stock as to which such an option is exercised must be paid only in
cash. Each director other than Mr. Brown was granted such a stock option on
April 30, 1998.
The Performance Plan also provides that each Non-Employee Director may
elect to receive any or all of his or her annual retainer as a director in the
form of Common Stock. The election must be in writing and must be delivered to
the Corporate Secretary of the Company at least six months and one business
day before the services are rendered giving rise to such compensation. The
total number of shares of Common Stock granted to a Non-Employee Director who
elects to forego fees will be determined by dividing the amount of the
deferral by the fair market value on the last business day of the quarter in
which such fees would have been paid in the absence of an election. Mr. Mellor
is the only director who has made such an election.
In connection with Mr. Wathen's retirement as the Company's President and
Chief Executive Officer in April 1994, the Company and Mr. Wathen entered into
a personal services agreement. The agreement provides for the payment to Mr.
Wathen of $100,000 per year for service in his capacity as Chairman of the
Board (reduced by any director's fees otherwise payable to him by the Company)
and at least $200,000 per year for services as a consultant to the Company.
Mr. Wathen is also eligible to receive annual cash bonuses in the
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discretion of the Board and to participate, to the same extent as other non-
employee members of the Board, in any stock option awards to directors. The
personal services agreement also entitles Mr. Wathen to use a Company owned or
financed automobile, to use Company office space and support staff, to receive
certain specified term life and medical insurance coverage, to obtain
reimbursement for reasonable business expenses incurred while on Company
business and, in the discretion of the Board, to participate in other Company
benefit programs maintained from time to time. The personal services agreement
calls for the payment to Mr. Wathen of an annual retirement benefit payable in
monthly installments of $25,000 for life (provided that, if Mr. Wathen should
die before a total of 180 monthly payments shall have been made, the balance
of such 180 payments shall continue to be paid to Mr. Wathen's designated
beneficiary) and, to the extent practicable, must be made under and in
accordance with the terms of the SRIP. Unless the personal services agreement
is terminated by the Company for certain specified causes, Mr. Wathen will
continue to receive such retirement benefits. Under the personal services
agreement, Mr. Wathen has certain demand registration rights and "piggy-back"
registration rights with respect to his holdings of Common Stock. As stated in
Item 3(b) of the Company's Schedule 14D-9, pursuant to a Termination Agreement
between the Company, Parent and Mr. Wathen, this personal services agreement
will be terminated if the Offer is consummated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table and notes thereto set forth certain information
regarding the beneficial ownership of Common Stock by all those known by the
Company to be beneficial owners of more than five percent of its Common Stock,
unless otherwise indicated.
· Download Table
Amount and Nature Percent of
Name and Address of Shares Common Stock
of Beneficial Owner Beneficially Owned Outstanding
------------------- ------------------ ------------
Thomas W. Wathen(1).......................... 3,759,010 30.6%
4330 Park Terrace Drive
Westlake Village, California 91361
SMALLCAP World Fund, Inc.(2)................. 810,000 6.4%
333 South Hope Street
Los Angeles, CA 90071
Southeastern Asset Management, Inc./
Longleaf Partners Small-Cap Fund (3)........ 1,875,000 15.2%
6410 Poplar Avenue Suite 900
Memphis, TN 38119
Tweedy, Browne Company....................... 1,363,181 10.82%
LLC/ TBK Partners, L.P./
Vanderbilt Partners, L.P.(4)
52 Vanderbilt Avenue
New York, NY 10017
--------
(1) The table above reflects the beneficial ownership of the Common Stock by
Mr. Wathen as of February 19, 1999. Mr. Wathen is Chairman of the Board of
Directors of the Company. The Thomas W. Wathen Charitable Remainder
Unitrust 1999 (the "1999 Unitrust"), The Thomas W. Wathen Charitable
Remainder Unitrust (the "Prior Unitrust"), The Wathen 1999 Annuity Trust
(the "Annuity Trust") and the Thomas W. Wathen Foundation (the
"Foundation") held of record 3,546,415 shares, 21,723, shares, 135,000
shares and 19,122 shares of Mr. Wathen's Common Stock, respectively. The
1999 Unitrust is an irrevocable trust for which Mr. Wathen is settlor and
trustee; the Prior Unitrust is an irrevocable trust for which Mr. Wathen
is the settlor, trustee and 6% income beneficiary; the Annuity Trust is an
irrevocable trust for which Mr. Wathen is settlor and trustee and the
Foundation is an irrevocable trust for which Mr. Wathen is the settlor and
trustee. Mr. Wathen has sole voting and investment power with respect to
all shares shown as beneficially owned. Also included are 36,750 shares of
Common Stock issuable under options exercisable currently or within sixty
days.
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(2) As of the latest available public filings. According to public filings,
SMALLCAP World Fund, Inc., an investment company registered under the
Investment Company Act of 1940 which is advised by Capital Research and
Management Company, an investment adviser registered under Section 203 of
the Investment Advisers Act of 1940, has sole voting power over 810,000 of
such shares. According to public filings, Capital Research and Management
Company and its parent company, The Capital Group Companies, Inc., have
disclaimed any beneficial ownership in such shares.
(3) As of the latest available public filings. According to public filings,
Southeastern Asset Management, Inc., an investment advisor registered
under Section 203 of the Investment Advisers Act of 1940 ("SAMI"), has
sole voting power over 654,600 of such shares, shared voting power over
1,104,400 of such shares, no voting power over 116,000 of such shares,
sole dispositive power over 770,600 of such shares, and shared dispositive
powers over 1,104,400 of such shares. Pursuant to a joint filing with
SAMI, Longleaf Partners Small-Cap Fund ("Longleaf"), a series of Longleaf
Partners Funds Trust, a Massachusetts business trust, may be deemed to be
the beneficial owner of 1,104,400 shares of Common Stock, representing
9.0% of the Common Stock outstanding. According to the joint filing,
Longleaf has only shared power to vote or to dispose of such shares. Based
on information available to the Company, SAMI is not an "Acquiring Person"
pursuant to the Rights Agreement, dated as of July 21, 1991 (the "Rights
Agreement"), by and between the Company and the Bank of New York, as
successor rights agent, as amended, due to the timing of its purchases of
shares. In addition, the Board as of February 17, 1999, pursuant to the
Rights Agreement, designated the "Distribution Date," if any, with respect
to SAMI's ownership of shares, as set forth in SAMI's most recent public
filing, to be December 31, 1999, which date may be further extended by
resolution of the Board at any time prior to December 31, 1999; provided,
that if SAMI shall acquire additional Shares amounting to 1% or more of
such shares outstanding, a new Stock Acquisition Date shall be deemed to
have occurred upon the first public announcement thereof or upon the
Company's earlier awareness thereof as described in the definition of
"Stock Acquisition Date" in the Rights Agreement.
(4) As of the latest available public filings. According to public filings,
Tweedy, Browne Company LLC, TBK Partners, L.P. and Vanderbilt Partners
L.P. disclaim membership in a "group" within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended. According to
public filings, Tweedy, Browne Company LLC, a broker-dealer and investment
advisor registered with the Securities and Exchange Commission, has sole
voting power over 1,177,317 of such shares and shared dispositive power
over 1,363,181 of such shares, TBK Partners, L.P. has sole voting and
dispositive power over 23,250 of such shares, and Vanderbilt Partners,
L.P. has sole voting power over 18,150 of such shares and sole dispositive
power over 23,250 of such shares.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table and notes thereto set forth certain information
regarding the beneficial ownership of the Company's Common Stock as of
February 19, 1999 by each of the current directors of the Company, the current
executive officers named in the Summary Compensation Table, and by all
directors and current executive officers of the Company as a group. Unless
otherwise indicated, the persons named in the table below have sole voting and
investment power with respect to all securities shown as beneficially owned by
them, subject to community property laws where applicable. A single asterisk
denotes beneficial ownership of less than one percent.
· Download Table
Percent of
Amount and Nature Common
Name or Number of Shares Stock
of Persons in Group Beneficially Owned Outstanding
------------------- ------------------ -----------
Thomas W. Wathen............................ 3,759,010 (1) 30.6%
Denis R. Brown.............................. 525,124 (2) 4.1%
C. Michael Carter........................... 98,125 (3) *
James P. McCloskey.......................... 105,500 (4) *
Don W. Walker............................... 135,491 (5) *
Laura J. Cerar.............................. 7,499 (6) *
Peter H. Dailey............................. 32,250 (7) *
John A. Gavin............................... 25,500 (6) *
James R. Mellor............................. 10,372 (8) *
Gerald D. Murphy............................ 80,109 (9) *
J. Kevin Murphy............................. 29,900(10) *
Robert H. Smith............................. 30,000(11) *
William H. Webster.......................... 25,500 (6) *
All directors and executive officers as a
group (19 persons)......................... 4,896,992(12) 36.6%
--------
(1)See footnote (1) under the heading "Security Ownership of Certain
Beneficial Owners."
(2)Includes 511,874 shares subject to options exercisable currently or within
sixty days.
(3)Includes 96,000 shares subject to options exercisable currently or within
sixty days.
(4)Includes 96,000 shares subject to options exercisable currently or within
sixty days.
(5)Includes 114,000 shares subject to options exercisable currently or within
sixty days.
(6)Consists of shares subject to options exercisable currently or within
sixty days.
(7)Includes 30,750 shares subject to options exercisable currently or within
sixty days.
(8)Includes 9,000 shares subject to options exercisable currently or within
sixty days.
(9) Includes 79,055 shares subject to options exercisable currently or within
sixty days.
(10)Includes 29,250 shares subject to options exercisable currently or within
sixty days.
(11) Includes 25,500 shares subject to options exercisable currently or within
sixty days. Mr. Smith has shared voting and investment power with respect
to 4,500 of such shares.
(12)Includes 1,116,979 shares subject to options exercisable currently or
within sixty days.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth the annual and long-term compensation for
services in all capacities to the Company for the three fiscal years ended
December 25, 1998, December 26, 1997 and December 27, 1996 of the Chief
Executive Officer, and each of the other four most highly compensated
executive officers (the "Named Officers").
· Enlarge/Download Table
Long-Term
Compensation
Annual Compensation Awards
---------------------------------- ------------
Other Annual Securities All Other
Name and Principal Bonus Compensation Underlying Compensation
Position Year Salary ($) ($ ) ($)(1) Options (#) ($)(2)
------------------ ---- ---------- ------- ------------ ------------ ------------
Denis R. Brown.......... 1998 699,030 352,748(3) 761 0 39,757
President and CEO...... 1997 662,865 453,532 733 267,500 40,786
1996 613,750 625,000 717 67,500 36,511
C. Michael Carter....... 1998 332,132 140,131(4) 954 0 6,756
Executive Vice
President, 1997 305,056 146,600 140 100,000 2,760
General Counsel and
Corporate 1996 266,964 189,700 189 30,000 4,322
Secretary
James P. McCloskey...... 1998 306,400 129,277(5) 182 0 6,756
Executive Vice
President and 1997 285,276 146,623 203 80,000 5,450
Chief Financial Officer 1996 266,158 189,000 183 30,000 11,826
Don W. Walker........... 1998 355,790 148,532(6) 143 0 6,756
Executive Vice
President, 1997 331,526 157,038 140 100,000 138
The Americas 1996 307,303 214,988 133 30,000 1,590
Laura J. Cerar.......... 1998 204,125 52,090 90 6,000 6,756
President, U.S.
Security 1997 111,033 54,891 16 16,125 228
1996 83,043 30,269 12 750 1,298
--------
(1) The amounts shown represent reimbursement of personal income taxes payable
by such executive officer as a result of certain expenses paid and certain
benefits provided by the Company to such executive officer.
(2) The amounts shown for 1998 represent payments made under the Company's
executive medical expense reimbursement plan and, for Mr. Brown, $23,891
of premiums for disability insurance and $9,110 of premiums for
supplemental life insurance.
(3) This bonus is payable upon consummation of the Offer.
(4) $113,620 of this bonus is payable upon consummation of the Offer.
(5) $104,820 of this bonus is payable upon consummation of the Offer.
(6) $121,710 of this bonus is payable upon consummation of the Offer.
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Stock Options
The following tables contain information relating to grants of stock
options under the Performance Plan during fiscal 1998 to the Named Officers
and the value at year end of options held by the Named Officers.
Option Grants in Last Fiscal Year
· Download Table
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Price
Appreciation
For Option
Individual Grants Term(3)
--------------------------------------------- --------------
Number of % of Total
Shares Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted(2) Fiscal Year ($/Share) Date 5% ($) 10% ($)
---- ---------- ------------ --------- ---------- ------ -------
Laura J. Cerar(1).. 6,000(2) 2.2% 22.50 2/25/08 84,900 215,160
--------
(1) No options were granted during 1998 to any other Named Officer.
(2) Options vest over four years in equal installments.
(3) Calculated as a projected stock price, less the exercise price. The
projected stock price is calculated assuming that the stock price at the
date of grant appreciates at the indicated rate, compounded annually, over
the term of the option.
Option Values at December 25, 1998
· Download Table
Number of Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Dec. 25, 1998 (#) Dec. 25, 1998 ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable(1)
---- ---------------- -----------------
Denis R. Brown......................... 465,000/297,500 3,963,582/457,501
C. Michael Carter...................... 75,375/122,125 659,324/295,024
James P. McCloskey..................... 75,374/102,126 584,376/284,529
Don W. Walker.......................... 90,375/122,125 649,695/279,523
Laura J. Cerar......................... 5,248/19,502 17,056/6,615
--------
(1) Computed based upon the difference between aggregate fair market value and
aggregate exercise price. The closing market price of the Common Stock on
December 24, 1998 (the last trading day in fiscal 1998) was $20.1875.
Retirement Plan
The Company maintains a Supplemental Retirement Income Plan (the "SRIP").
The SRIP establishes two retirement benefit levels: (i) a benefit at age 62 of
3.5% of final five-year average compensation for each full year of
participation, up to a maximum of 52.5% (the "Level 1 Benefit"); and (ii) a
benefit at age 62 of 2% of final five-year average compensation for each full
year of participation, up to a maximum of 40% (the "Level 2 Benefit"). The
Level 1 Benefit applies to certain participants, generally executive officers,
including the Named Officers, and the Level 2 Benefit applies to all other
participants. An employee must be recommended by the SRIP's administrative
committee and approved by the Board of Directors in order to participate in
the SRIP. The plan is not a qualified retirement plan under Section 401 of the
Internal Revenue Code.
Vesting of benefits under the SRIP normally occurs when a participant has
five years of SRIP participation. A participant's vested benefit under the
previous version of the SRIP as of April 30, 1994 (his or her "grandfathered
benefit") will not be reduced because of changes to the SRIP. A SRIP
participant with a
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grandfathered benefit will get the greater of the SRIP benefit or his or her
grandfathered benefit. A participant will receive his or her full retirement
benefit upon termination of employment after attaining age 62 or a reduced
benefit upon termination of employment prior to age 62, but in no event less
than the grandfathered benefit. Subject to certain benefit suspension
provisions, a participant (or a participant's beneficiary) will receive his or
her retirement benefit for life or 180 months, whichever is longer. Upon death
prior to retirement, a participant's beneficiary will receive a monthly
payment for 180 months.
The following table shows the estimated annual Level 1 Benefit and Level 2
Benefit payable under the SRIP upon retirement at age 62 with representative
compensation and years of service credited to the participant.
Estimated Annual Retirement Benefits
· Enlarge/Download Table
Years of Service
--------------------------------------------------------------
Level 1 Benefits Level 2 Benefits
Final Five Year -------------------------- -----------------------------------
Average Compensation 5 10 15* 5 10 15 20*
-------------------- -------- -------- -------- -------- -------- -------- --------
$ 100,000.............. $ 17,500 $ 35,000 $ 52,500 $ 10,000 $ 20,000 $ 30,000 $ 40,000
200,000.............. 35,000 70,000 105,000 20,000 40,000 60,000 80,000
300,000.............. 52,500 105,000 157,500 30,000 60,000 90,000 120,000
400,000.............. 70,000 140,000 210,000 40,000 80,000 120,000 160,000
500,000.............. 87,500 175,000 262,500 50,000 100,000 150,000 200,000
600,000.............. 105,000 210,000 315,000 60,000 120,000 180,000 240,000
700,000.............. 122,500 245,000 367,500 70,000 140,000 210,000 280,000
800,000.............. 140,000 280,000 420,000 80,000 160,000 240,000 320,000
900,000.............. 157,500 315,000 472,500 90,000 180,000 270,000 360,000
1,000,000.............. 175,000 350,000 525,000 100,000 200,000 300,000 400,000
1,100,000.............. 192,500 385,000 577,500 110,000 220,000 330,000 440,000
1,200,000.............. 210,000 420,000 630,000 120,000 240,000 360,000 480,000
1,300,000.............. 227,500 455,000 682,500 130,000 260,000 390,000 520,000
--------
* Amounts represent maximum benefit possible for applicable level of benefit
and compensation.
The annual compensation used in the benefits calculation includes the
amounts earned as salary and bonus as shown above in the Summary Compensation
Table. Messrs. Brown, Carter, McCloskey and Walker and Ms. Cerar are
participants in the SRIP and have four, four, four, seven and six credited
years of service for purposes of the SRIP, respectively. However, the benefits
of Messrs. Brown, Carter, McCloskey and Walker are governed by amendments to
the SRIP described below. Retirement benefits are computed without regard to
the withholding of Social Security and related taxes.
During fiscal 1993, the SRIP was amended to provide that Mr. Wathen's
retirement benefit shall be $25,000 per month for life, as described above
under "Directors' Compensation."
During fiscal 1994, the SRIP was amended to provide that: (i) Mr. Brown's
retirement benefit under the SRIP will be 52.5% of his "final average monthly
compensation" as defined in his employment agreement described below under
"Agreements with Certain Officers," and that his benefit will vest, so long as
he remains an employee of the Company: 20%, 46.667%, 73.334% and 100% on April
19, 1999, August 7, 1999, August 7, 2000 and August 7, 2001, respectively, and
(ii) with respect to Mr. Carter and Mr. McCloskey, following September 27,
1999 and October 4, 1999, respectively, their annual benefit accrual rate
under the SRIP will be 6.3% and 10.35%, respectively. The amendment results in
Messrs. Brown, Carter and McCloskey attaining the 52.5% maximum Level 1
Benefit at age 62. In addition, the employment agreements with Messrs. Carter
and McCloskey described below were amended in December 1997 to provide that in
the event of a termination of their participation in the SRIP, an equivalent
program will be provided to them during their continued employment with the
Company.
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During fiscal 1996, the SRIP was amended to provide that Mr. Walker's
annual benefit accrual rate under the SRIP will be 5.25% in 1997 and 4.375%
thereafter. This amendment results in Mr. Walker attaining the 52.5% maximum
Level 1 Benefit at age 62.
The SRIP has no plan assets. The Company has purchased life insurance
policies on the lives of certain individual executives as an investment that
it may use to provide pre-retirement death benefits and retirement benefits.
Employment Agreements With Certain Officers
The Company has an existing employment agreement with Mr. Brown that
continues until August 7, 2001 and is automatically renewed annually
thereafter until terminated by Mr. Brown, in accordance with the procedures
set forth in his employment agreement, as amended, or by the Company or until
the annual meeting of stockholders to be held in the year 2005. Under the
employment agreement, the Company is obligated to pay Mr. Brown a base salary
of $550,000 per annum, subject to increase from time to time in the discretion
of the Board. The agreement, as amended, also provides that Mr. Brown will
have a target annual incentive bonus of 50% of base salary tied to the
achievement of one or more Company financial or operational performance
objectives established annually by the Board at the outset of each fiscal
year; and that Mr. Brown's actual annual incentive bonus will decrease or
increase, up to a maximum percentage of base salary, depending on the
Company's actual performance compared to such objectives, in accordance with
formulas provided in the agreement. The Company and Mr. Brown amended the
agreement to raise the maximum percentage of base salary achievable from 75%
to 100%, effective for 1996 and thereafter. A performance based annual
compensation plan, which provides for a maximum bonus of 100% of salary for
Mr. Brown, was approved by the stockholders at the 1997 Annual Meeting of
stockholders. In December 1998, the Board approved, subject to obtaining any
necessary approvals, increasing Mr. Brown's target bonus to 60% of base salary
with a maximum bonus of 120% of salary.
The Company also has employment agreements with Messrs. Carter and
McCloskey. Under their employment agreements with the Company, it is obligated
to pay a base salary of at least $250,000 per annum and a target annual
incentive bonus equal to 35% of base salary, all of which are subject to
annual review by the
Board of Directors. During 1997, the target annual incentive bonuses were set
at 45% of base salary for Messrs. Carter, McCloskey and Walker beginning
fiscal 1998.
The employment agreements, as amended, of Messrs. Brown, Carter and
McCloskey provide that if such executive officer is terminated other than for
death, disability, retirement, or cause, the executive officer will receive a
lump-sum cash payment equal to the executive's then current annual salary or,
in the case of Mr. Brown, his then current annual salary multiplied by the
greater of two or the number of years left from the term of his employment
agreement. If the employment of such executive officer is terminated following
a change in control, he will receive, subject to any applicable payroll taxes
required to be withheld, a lump-sum cash payment equal to the lesser of (i)
two times (or in the case of Mr. Brown, 2.99 times) the sum of the executive's
then current annual salary plus the amount of his bonus to which the executive
was entitled and/or which he received for the fiscal year preceding the
termination (or in the case of Mr. Brown, the most recently completed fiscal
year for which a bonus was earned) and (ii) the maximum amount the Company can
deduct as a compensation expense on its federal income tax return for the
fiscal year in which the payment is made. In 1995, the Board approved a
Severance Plan for Executive Vice Presidents (the "EVP Severance Plan") that
applies to Executive Vice Presidents that do not have other severance
arrangements with the Company and that are designated by the Compensation &
Benefits Committee as entitled to the benefits of the plan. The benefits
provided by the plan are substantially the same as those described above for
Messrs. Carter and McCloskey. Mr. Walker is the only executive officer
designated as entitled to the benefits of that plan.
On February 3, 1999, the employment agreements of Messrs. Brown, Carter and
McCloskey and the EVP Severance Plan for Mr. Walker were amended (the "1999
Amendments") to provide that, if a change in control occurs during fiscal year
1999, (i) notwithstanding any other provisions of the SRIP to the contrary,
each of their
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benefits under the SRIP shall be 52.5% of their respective final average
monthly compensation and such benefit shall be fully accrued and fully vested
effective upon the date of the change in control; (ii) the limitation
described in clause (ii) of the preceding paragraph shall be inapplicable and
Messrs. Brown, Carter, McCloskey and Walker will be entitled to receive all
payments and benefits which would otherwise be payable if there were no such
tax limitation; (iii) in the event any payments or benefits to which Messrs.
Brown, Carter, McCloskey and Walker are entitled to as a result of a change in
control in 1999 constitute "parachute payments" and, therefore, subject to
excise tax under tax regulations, each of Messrs. Brown, Carter, McCloskey and
Walker will receive a payment from the Company sufficient to pay such excise
tax and all other taxes arising from the payments made by the Company; and
(iv) if during the two year period after a change in control Messrs. Brown,
Carter, McCloskey or Walker voluntarily terminates his employment with the
Company, other than for a Good Reason (as defined in the 1999 Amendments),
then each of them agrees not to compete with the Company for a period of one
year following such termination. However, the forgoing provisions set forth in
clauses (i), (ii), (iii) and (iv) of this paragraph shall automatically be
canceled and of no further force or effect without further action if (A) a
change in control does not occur in 1999, or (B) the transactions contemplated
in the Merger Agreement entered into by the Company with Parent and Purchaser
are completed. The forgoing summary of the 1999 Amendments is qualified in its
entirety to the full text thereof, copies of each have been filed as Exhibits
(c)(11)-(c)(14) to the Schedule 14D-9 and is incorporated herein by reference.
In connection with the Offer, the Merger and the Merger Agreement, each of
Messrs. Brown, Carter, McCloskey and Walker have entered into new employment
agreements (collectively, the "New Employment Agreements") with the Company
and Parent. The New Employment Agreements will supersede the original
employment agreements, as amended, of Messrs. Brown, Carter and McCloskey and
the EVP Severance Plan, as amended, for Mr. Walker upon the time that the
Purchaser or Parent purchase any of the Shares pursuant to the Offer. The
relevant terms of the New Employment Agreements are summarized in "Section
11--Background of the Offer; Purpose of the Offer and the Merger; the Merger
Agreement and Certain Other Agreements" of the Offer to Purchase and
incorporated herein by reference.
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REPORT ON EXECUTIVE COMPENSATION
BY THE COMPENSATION & BENEFITS COMMITTEE
The Company's Compensation & Benefits Committee was established in 1988 and
is comprised of independent, non-employee members of the Board. The Committee
meets on a regular basis during the fiscal year. This report describes the
various components of the Company's executive compensation program and
explains the basis on which 1998 compensation determinations were made by the
Committee with respect to the Company's executive officers.
The role of the Compensation & Benefits Committee is to review and approve
each element of the executive compensation program and assess the overall
effectiveness and competitiveness of the program. In addition, the Committee
administers the key provisions of the executive compensation program according
to the objectives of the base salary program, annual incentive plan and long-
term incentive plan, and administers the Company's stock incentive plans.
Compensation Philosophy
The Committee strives to provide executive compensation policies and
programs that:
. Base executives' variable compensation opportunities on both Company and
individual performance;
. Attract, motivate and retain the executive talent needed to support,
implement and reinforce the Company's strategic and business plans;
. Provide total compensation opportunities to executives that are
competitive to those of similarly sized companies in service industries;
and
. Align management's interests with those of stockholders through equity-
based compensation and ownership guidelines.
Components of Executive Compensation for 1998.
The total executive compensation package is comprised of base salary,
annual bonus, long-term incentives and benefits including participation under
the SRIP. The Committee's philosophy and administration of each major element
is described below.
Base Salaries. Base salaries are targeted at the 50th percentile for
comparable positions at similarly sized companies. To make this determination,
the Committee refers to general and specific service industry compensation
surveys. In determining salaries and future increases, the Committee also
considers factors such as individual performance, departmental performance,
current responsibilities and any changes, individual salary history and
inflation. The Company believes that its current base salary structure is
generally consistent with its base salary objectives.
Annual Incentive Plan. The objective of the annual incentive plan is to
deliver competitive levels of compensation for the attainment of financial and
other objectives that the Company believes are important. Target award levels
are set such that the target level of annual cash compensation (i.e., base
salary plus annual incentive award) is at the 50th percentile of the
competitive market. Achievement above target levels can result in awards up to
200% of the target bonus. Target awards are expressed as a percentage of the
executive's base salary. In 1997, the target bonuses of the Executive Vice
Presidents and the Corporate Vice Presidents were 35% and 25% of annual base
salary, respectively. In light of the Committee's objective to ensure that
total annual cash compensation remain competitive and to permit annual
incentive awards that could exceed the 50th percentile, the Committee has,
effective the beginning of the 1998 fiscal year, increased the target bonuses
for Executive Vice Presidents to 45% of annual base salary.
The annual incentive plan rewards Executive Vice Presidents and Corporate
Vice Presidents for both Company performance and individual performance.
Company performance is measured by pre-established net
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income goals of the Company. Other financial results may be considered in the
future. Individual performance is measured by pre-established specific,
measurable objectives. Of the target award, 75% is based on Company
performance and 25% is based on individual performance.
Depending on actual performance of the Company and the individual, the
actual bonus may range from 0% to 200% of the individual's target bonus. For
the Company performance portion of the bonus to be paid, the Company must earn
a certain minimum net income goal. Above such minimum goal, a range of 50% to
200% of the Company performance portion may be earned and a range of 0% to
200% of the individual performance portion may be earned, each depending on
actual performance against the pre-established goals.
In determining what bonuses to pay in respect of 1998, the Committee in its
discretion concluded that the individual portion of the annual incentive
awards should be paid to all employees covered by the annual incentive
program. In addition, in light of the extraordinary efforts being made by
certain executives in connection with the Offer and the Merger, the Committee
determined to award to a group of executives, which group includes the
Executive Vice Presidents, special incentive awards payable upon completion of
the Offer. The amounts of these incentive awards are included in the Summary
Compensation Table and the notes thereto.
Long-term Incentive Plan. In 1995, the stockholders approved the
Performance Plan pursuant to which executive and employee stock option grants
are made. In 1994, the Committee approved a range of annual option grants for
each employee grade eligible for options. Ranges were developed to deliver
long-term compensation that, when added to annual cash compensation, would
deliver a total compensation package at the 50th percentile of market. Actual
grants are determined on the basis of individual performance and the dilutive
effect of such grants.
On November 24, 1997, the Committee approved an additional front-loaded
performance stock option grant ("Performance Options") under the Performance
Plan to the CEO and Executive Vice Presidents. The purpose of the grant is to
focus the CEO and Executive Vice Presidents on achieving pre-determined stock
price goals within the next four years. Grants were made at the midpoint of
the established ranges and are designed to deliver long-term incentive
opportunity at the 50th percentile or higher of the market for the next four
years. Performance Options have an exercise price equal to the fair market
value of the underlying shares on the date of grant and will expire on
December 31, 2004. Performance Options will vest no later than December 31,
2003 and may vest earlier if the stock price goals described below are
achieved.
In the event that the Company's stock price trades for twenty consecutive
trading days (the "Trading Period") at an average price of $29.87 or greater
during a Trading Period ending or before December 31, 1999, 50% of the options
(reduced by any previously vested options) will vest on the final day of such
Trading Period. In the event that the Company's stock price trades at an
average of $34.39 or greater during a Trading Period ending or before December
31, 2000, 75% of the options (reduced by any previously vested options) will
vest on the final day of such Trading Period. In the event that the Company's
stock price trades at an average of $39.59 or greater during a Trading Period
ending or before December 31, 2001, 100% of the options (reduced by any
previously vested options) will vest on the final day of such Trading Period.
The Committee will consider granting future options to the CEO and
Executive Vice Presidents at the earlier date of: (1) achievement of the
$39.59 stock price goal, or (2) four years from the date of the Performance
Option grant. None of the price goals was reached during 1998 and, as a
result, no additional options were granted to the Chief Executive Officer or
any of the Executive Vice Presidents during 1998. Ms. Cerar was granted
options during 1998 under the Company's annual grant program described above.
A-18
Stock Ownership Guidelines
To further align the interests of executives with stockholders, the
Committee has established stock ownership guidelines that are designed to
encourage the accumulation and retention of a significant portion of its
equity by its executive officers. The guidelines require that each executive
officer hold a minimum multiple of his or her base salary in Company equity by
the end of the year 2002. The following guidelines are designed to be
reasonably achievable within the stated time frame and under the current long-
term incentive program:
· Download Table
Multiple of
Position Base Salary
-------- -----------
CEO.......................................................... 4x
Executive Vice Presidents.................................... 3x
Corporate Vice Presidents.................................... 1x
Ownership guidelines can be satisfied with either stock held as a
stockholder and/or effective shares held as a result of vested options under
the long-term incentive plan (i.e., the embedded value of vested options). As
of the end of fiscal year 1998, the executive officers held shares of Common
Stock (including effective shares) valued at the following multiples of the
base salary figures-reported in the summary compensation table: Mr. Brown
(6.4x), Mr. Carter (2.4x), Mr. McCloskey (2.9x) and Mr. Walker (2.9x).
CEO Compensation
The Committee accepted the recommendation of the President and Chief
Executive Officer that his base salary remain unchanged for 1999 but that he
be entitled to an extra week's vacation per year. In addition, in view of the
extraordinary efforts having been made by Mr. Brown in connection with the
Offer and the Merger, the Committee determined to pay to Mr. Brown a special
incentive award in the amount of $352,748 payable upon completion of the
Offer. The amount of this incentive award is included in the Summary
Compensation Table and the notes thereto. Finally, the Committee approved,
subject to obtaining any necessary approvals, an increase in Mr. Brown's
target bonus beginning with fiscal 1999 from 50% to 60% of base salary. All of
these determinations were approved by the Board.
Deductibility of Compensation
Internal Revenue Code Section 162(m) ("Section 162(m)") does not allow the
Company to take a tax deduction pertaining to certain types of compensation in
excess of $1,000,000 paid to a covered employee as defined in Section 162(m).
"Performance-based" compensation (as defined by Section 162(m)) is not subject
to Section 162(m) limitations. The Company's current compensation levels and
programs (excluding base salary) are "performance-based" and no compensation
which is not performance based exceeds the $1,000,000 limit.
The Company will consider the impact of Section 162(m) in making
compensation decisions for executive officers, but the Company makes no
assurances that it will not pay compensation for which it cannot take a tax
deduction. The Performance Plan and the annual incentive compensation plan for
the President and Chief Executive Officer have been designed to constitute
"performance-based" compensation. However, due to ambiguities in Section
162(m) and uncertainties regarding its interpretation, no assurances can be
given that compensation intended to be "performance-based" compensation will
in fact be deductible if it should, together with any other compensation paid
to any Covered Employee, exceed $1,000,000.
Compensation & Benefits Committee
John A. Gavin, Chairman
James R. Mellor
J. Kevin Murphy
Robert H. Smith
A-19
PERFORMANCE GRAPH
The following graph illustrates the performance of the cumulative total
return to the holders of the Common Stock in comparison to the cumulative
total return (assuming dividend reinvestment) of companies on the Standard and
Poor's 500 Stock Index and the Standard and Poor's Services
(Commercial/Consumer) Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG PINKERTON'S, INC., THE S&P 500 INDEX AND THE S&P SERVICES
(COMMERCIAL/CONSUMER) INDEX
[PERFORMANCE GRAPH]
· Enlarge/Download Table
Symbol Index Description 12/93 12/94 12/95 12/96 12/97 12/98
------ ----------------- ----- ----- ----- ----- ----- -----
PKT................. PINKERTON'S, INC.................... 100 100 100 129 181 164
S&P 500 Stocks...................... 100 101 139 171 229 294
S&P Services (Commercial/Consumer).. 100 92 124 128 175 177
--------
* ASSUMING $100 INVESTED IN STOCK OR INDEX ON DECEMBER 31, 1993, REINVESTMENT
OF DIVIDENDS, AND FISCAL YEAR ENDING DECEMBER 31.
Note: Last trading day of the month is used.
A-20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as otherwise disclosed in the Schedule 14D-9 and this Information
Statement, the Company does not have any other relationships or transactions
with the Board or the Company's management.
A-21
ANNEX B
[LETTERHEAD OF DONALDSON, LUFKIN & JENRETTE]
February 19, 1999
Board of Directors
Pinkerton's, Inc.
4330 Park Terrace Drive
Westlake Village, CA 91361
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of Pinkerton's, Inc. (the "Company") of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, dated as of February 19, 1999 (the "Agreement"),
by and among the Company, Securitas AB ("Securitas") and Securitas Acquisition
Corp., a wholly owned subsidiary of Securitas ("Acquisition Sub").
Pursuant to the Agreement, Acquisition Sub will commence a tender offer
(the "Tender Offer") for any and all outstanding shares of the Company's
common stock at a price of $29.00 per share (the "Price Per Share") in cash.
Following the Tender Offer, Acquisition Sub will be merged (the "Merger") with
and into the Company and as a result of the Merger, all shares of the
Company's common stock not tendered in the Tender Offer will be converted into
the right to receive the Price Per Share in cash.
In arriving at our opinion, we have reviewed the draft dated February 18,
1999 of the Agreement and the exhibits thereto. We also have reviewed
financial and other information that was publicly available or furnished to us
by the Company, including information provided during discussions with the
Company's management. Included in the information provided during discussions
with the Company's management were certain financial projections of the
Company for the period beginning December 26, 1998 and ending December 26,
2003 prepared by the management of the Company. In addition, we have compared
certain financial and securities data of the Company with various other
companies whose securities are traded in public markets, reviewed the
historical stock prices and trading volumes of the Company's common stock,
reviewed prices and premiums paid in certain other business combinations and
conducted such other financial studies, analyses and investigations as we
deemed appropriate for purposes of our opinion. We did not solicit the
interest of any other party in acquiring the Company or any of its assets or
securities.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
to us from public sources, that was provided to us by the Company or its
representatives or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. We have not assumed any
responsibility for making an independent evaluation of any assets or
liabilities or for making any independent verification of any of the
information reviewed by us.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as
of, the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Tender Offer, the Merger and the other business strategies being
considered by the Company's Board of Directors, nor does it address the
Board's business decision to proceed with the Tender Offer or the Merger or
any legal aspect of the transactions contemplated by the Agreement and related
agreements. Our opinion does not constitute a recommendation to
Board of Directors
Pinkerton's, Inc.
Page 2 February 19, 1999
any stockholder as to whether such stockholder should tender shares of the
Company's common stock in the Tender Offer or how such stockholder should vote
on the Merger.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In
addition to serving as your exclusive financial advisor in connection with the
transactions contemplated by the Agreement, DLJ has performed investment
banking and other services for the Company in the past and has been
compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Price Per Share to be received by the stockholders of
the Company pursuant to the Agreement is fair to such stockholders from a
financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Mark W. Lanigan
---------------------------------
Mark W. Lanigan
Managing Director
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