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 149K
2: EX-99.(E)(3) Confidentiality Agrmt Between Bodycote and 7 31K
Company
3: EX-99.(E)(5) Amendment to Rights Agreement Dated Dec 13, 2000 5 17K
SC 14D9 — Tender-Offer Solicitation/Recommendation Statement
Document Table of Contents
[LOGO]
December 18, 2000
Dear Stockholder:
I am pleased to inform you that Lindberg Corporation has entered into a
merger agreement with Bodycote International plc ("Bodycote"), pursuant to which
an indirect wholly owned subsidiary of Bodycote has commenced a tender offer to
purchase all of the outstanding shares of Lindberg's common stock for $18.125
per share in cash. The tender offer is conditioned upon, among other things, a
majority of Lindberg's shares outstanding on a fully diluted basis being
tendered and not withdrawn and the receipt of regulatory approvals. The tender
offer will be followed by a merger, in which each share of Lindberg common stock
not purchased in the tender offer will be converted into the right to receive in
cash the price paid in the tender offer.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND A
VOTING AGREEMENT BETWEEN BODYCOTE AND CERTAIN STOCKHOLDERS, DETERMINED THAT THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE BODYCOTE OFFER
AND THE MERGER, ARE ADVISABLE AND IN THE BEST INTERESTS OF LINDBERG'S
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT LINDBERG'S STOCKHOLDERS ACCEPT THE
BODYCOTE OFFER AND TENDER THEIR SHARES OF LINDBERG COMMON STOCK PURSUANT TO THE
OFFER.
In arriving at its recommendation, the Board of Directors considered a
number of factors, as described in the attached Schedule 14D-9, including the
opinion of the Company's financial advisor, Credit Suisse First Boston
Corporation ("CSFB"), that, as of the date of the opinion, and based upon and
subject to the matters set forth therein, the consideration to be received by
the holders of Lindberg common stock in the offer and the merger is fair to
Lindberg's stockholders, other than Bodycote and its affiliates, from a
financial point of view. A copy of CSFB's written opinion, which sets forth the
assumptions made, procedures followed and matters considered by CSFB in
rendering its opinion, can be found in Exhibit (a)(4) to the Schedule 14D-9. You
should read the opinion carefully and in its entirety.
Enclosed are the Bodycote Offer to Purchase, dated December 18, 2000, the
Letter of Transmittal and related documents. These documents set forth the terms
and conditions of the tender offer. The Schedule 14D-9 describes in more detail
the reasons for your Board's conclusions and contains other information relating
to the tender offer. We urge you to consider this information carefully.
[SIG]
Leo G. Thompson
President and
Chief Executive Officer
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
LINDBERG CORPORATION
(Name of Subject Company)
LINDBERG CORPORATION
(Name of Person Filing Statement)
COMMON STOCK, $0.01 PAR VALUE
(Title of Class of Securities)
5351 71 102
(CUSIP Number of Class of Securities)
------------------------
LEO G. THOMPSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LINDBERG CORPORATION
6133 NORTH RIVER ROAD, SUITE 700
ROSEMONT, ILLINOIS 60018
(847) 823-2021
(Name, Address and Telephone Number of Person Authorized to Receive Notice and
Communications on Behalf of the Person Filing Statement)
------------------------
COPY TO:
JOHN H. BITNER, ESQ.
BELL, BOYD & LLOYD LLC
THREE FIRST NATIONAL PLAZA, SUITE 3300
CHICAGO, ILLINOIS 60602-4207
(312) 807-4306
------------------------
/ / Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer
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ITEM 1. SUBJECT COMPANY INFORMATION.
The name of the subject company is Lindberg Corporation, a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 6133 North River Road, Suite 700, Rosemont, Illinois 60018. The
telephone number of the Company at its principal executive offices is
(847) 823-2021.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
Exhibits or Annexes hereto, this "Statement") relates is the Common Stock, par
value $0.01 per share, of the Company (the "Common Stock") together with the
associated common share purchase rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of November 21, 1996, and amended on December 13,
2000 (the "Rights Agreement"), by and between the Company and Harris Trust and
Savings Bank, as Rights Agent (the "Rights Agent"). As of December 12, 2000,
there were 5,661,661 shares of Common Stock outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
The filing person is the subject company. The Company's name, business
address and business telephone number are set forth in Item 1 above.
This Statement relates to the tender offer by Bodycote Investments VI, Inc.
(the "Purchaser"), a Delaware corporation and an indirect wholly owned
subsidiary of Bodycote International plc, a public limited company organized
under the laws of England ("Bodycote"), to purchase all of the outstanding
shares of Common Stock and the associated Rights (shares of Common Stock
together with any associated Rights are referred to in this Statement as the
"Shares"), at a purchase price of $18.125 per Share (the "Offer Price"), net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Purchaser's Offer to Purchase, dated December 18, 2000 (the "Offer to
Purchase"), and in the related Letter of Transmittal (the "Letter of
Transmittal" which, together with the Offer to Purchase and any amendments or
supplements thereto, collectively constitute the "Offer"). The Offer is
described in a Tender Offer Statement on Schedule TO (as amended or supplemented
from time to time, the "Schedule TO"), filed by the Purchaser with the
Securities and Exchange Commission on December 18, 2000.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
December 13, 2000, by and among Bodycote, the Purchaser and the Company (the
"Merger Agreement"). The Merger Agreement provides that, subject to the
satisfaction or waiver of certain conditions, following completion of the Offer,
and in accordance with the Delaware General Corporation Law (the "DGCL"), the
Purchaser will be merged with and into the Company (the "Merger"). Following the
consummation of the Merger, the Company will continue as the surviving
corporation and will be an indirect wholly owned subsidiary of Bodycote. At the
effective time of the Merger (the "Effective Time"), each issued and outstanding
Share (other than Shares owned by Bodycote or any of its subsidiaries, Shares
held by the Company as treasury stock, and Shares held by stockholders who
properly demand appraisal and comply with the provisions of Section 262 of the
DGCL relating to dissenters' rights of appraisal) will be converted into the
right to receive the same amount in cash per Share that is paid pursuant to the
Offer (the "Merger Consideration"). The Merger Agreement is summarized in
Section 12 of the Offer to Purchase.
The Schedule TO states that the principal executive offices of Bodycote and
the Purchaser are located at Hulley Road, Macclesfield, Cheshire, SK10 2SG
England.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the
1
Information Statement (the "Information Statement") pursuant to Rule 14f-1 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that is
attached as Annex B to this Statement and is incorporated herein by reference.
Except as described in this Statement (including in the Exhibits hereto and in
Annex B hereto) or incorporated herein by reference, to the knowledge of the
Company, as of the date of this Statement there exists no material agreement,
arrangement or understanding or any actual or potential conflict of interest
between the Company or its affiliates and (1) the Company's executive officers,
directors or affiliates or (2) the Purchaser, Bodycote or their respective
executive officers, directors or affiliates.
THE MERGER AGREEMENT
The summary of the Merger Agreement and the description of the conditions of
the Offer contained in Sections 12 and 14, respectively, of the Offer to
Purchase, which is being mailed to stockholders together with this Statement,
and filed as an exhibit to the Schedule TO are incorporated herein by reference.
Such summary and description are qualified in their entirety by reference to the
Merger Agreement, which has been filed as Exhibit (e)(1) hereto and is
incorporated herein by reference.
THE TENDER AGREEMENT
In connection with the execution of the Merger Agreement, Bodycote, the
Purchaser and certain stockholders of the Company (including Mr. George H.
Bodeen, Chairman of the Board of the Company, Mr. Leo G. Thompson, President and
Chief Executive Officer of the Company, and Mr. Stephen S. Penley, Chief
Financial Officer of the Company) who own in the aggregate approximately 18% of
the outstanding Shares, entered into a Tender and Voting Agreement, dated as of
December 13, 2000 (the "Tender Agreement"). The summary of the Tender Agreement
contained in Section 12 of the Offer to Purchase, which is being mailed to
stockholders together with this Statement, and filed as an exhibit to the
Schedule TO is incorporated herein by reference. Such summary and description
are qualified in their entirety by reference to the Tender Agreement, which has
been filed as Exhibit (e)(2) hereto and is incorporated herein by reference.
THE CONFIDENTIALITY AGREEMENT
Bodycote executed a confidentiality agreement, dated October 5, 2000 (the
"Confidentiality Agreement"), which provides that Bodycote will use certain
information concerning the Company solely for the purpose of considering a
possible negotiated transaction between Bodycote and the Company and that
Bodycote will keep such material confidential. The foregoing summary of the
Confidentiality Agreement is qualified in its entirety by reference to the
Confidentiality Agreement, which has been filed as Exhibit (e)(3) hereto and is
incorporated herein by reference.
EFFECTS OF THE OFFER AND THE MERGER UNDER COMPANY STOCK PLANS AND AGREEMENTS
BETWEEN THE COMPANY AND ITS EXECUTIVE OFFICERS
BOARD REPRESENTATION. The Merger Agreement provides that:
- Subject to compliance with Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, promptly upon the purchase of any
Shares by the Purchaser or any of its affiliates pursuant to the Offer,
Bodycote will be entitled to designate such number of directors, rounded
up to the next whole number, on the Board of Directors of the Company (the
"Board" or "Board of Directors") as will give the Purchaser 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) multiplied
by the
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percentage that the aggregate number of Shares beneficially owned by
Bodycote or its affiliates, including pursuant to the Tender Agreement,
bears to the number of Shares outstanding.
- At the request of Bodycote, the Company will promptly increase the size of
the Board or secure the resignations of such number of directors, or both,
as is necessary to enable the Bodycote designees to be elected to the
Board and will cause the Bodycote designees to be so elected.
- At the request of Bodycote, the Company will also cause each committee of
the Board to include persons designated by Bodycote constituting at least
the same percentage (rounded up to the next whole number) of each such
committee as Bodycote's designees are of the Board.
- Until the Effective Time, the Board will have at least two directors who
were directors on the date of the Merger Agreement and who are neither
officers of the Company nor designees, stockholders, affiliates or
associates of Bodycote (one or more of such directors, the "Independent
Directors"); provided, further, that if no Independent Director remains,
the other directors will designate two persons to fill the vacancies
neither of whom shall be an officer of the Company or a designee,
stockholder, affiliate or associate of Bodycote, and such persons will be
deemed to be an Independent Directors.
- Prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors will be required to (i) amend or terminate the
Merger Agreement on behalf of the Company, (ii) extend or waive the time
for performance of Bodycote's or the Purchaser's obligations under the
Merger Agreement, or (iii) waive any of the Company's rights or remedies
under the Merger Agreement.
OPTIONS. The Merger Agreement provides that at the Effective Time, each
holder of outstanding and unexercised options to purchase shares of Common Stock
(each, a "Company Option"), whether or not exercisable or vested, will have the
right to receive, in full satisfaction of each Company Option, cash in an amount
equal to the product of (A) the excess, if any, of the Offer Price over the
exercise price per Share and (B) the number of shares of Common Stock subject to
such Company Option.
The following table sets forth, with respect to each of the executive
officers and directors of the Company, (i) the number of shares of Common Stock
subject to Company Options held by such person and the vesting status as of
December 12, 2000, (ii) the weighted average exercise price of the Company
Options held by such person, and (iii) the aggregate value of such Company
Options based upon the $18.125 per Share Offer Price.
[Enlarge/Download Table]
WEIGHTED
VESTED UNVESTED AVERAGE AGGREGATE
OPTION OPTION EXERCISE VALUE OF
NAME SHARES(#) SHARES(#) PRICE/SHARE OPTIONS
---- --------- --------- ----------- ----------
G. H. Bodeen..................................... 16,500 0 $ 7.909 $ 168,563
Dr. R. F. Decker................................. 13,500 0 8.111 135,188
R. A. Jean....................................... 5,000 2,500 12.625 41,250
P. J. McCarren................................... 12,400 10,000 9.565 191,738
M. W. Nelson..................................... 47,250 16,250 8.321 622,563
S. S. Penley..................................... 38,000 26,000 9.801 532,750
W. R. Reum....................................... 3,000 6,000 11.250 61,875
J. T. Schanck.................................... 16,500 0 7.909 168,563
L. G. Thompson................................... 106,250 56,250 9.582 1,388,188
INTERESTS OF CERTAIN PERSONS. Certain members of the Company's management
and the Board of Directors may be deemed to have interests in the transactions
contemplated by the Merger Agreement that are in addition to their interests as
Company stockholders and option holders generally. The Board
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was aware of these interests and considered them, among other matters, in
approving the Merger Agreement, the Tender Agreement and the transactions
contemplated thereby.
CHANGE OF CONTROL AGREEMENTS. Messrs. Thompson and Penley are each a party
to an Employment Agreement (the "Employment Agreements") with the Company. Under
the Employment Agreements, benefits will become payable if, within 36 calendar
months in the case of Mr. Thompson, and 30 calendar months in the case of
Mr. Penley, following a "Change of Control," the executive's employment
terminates and the termination was by the Company without cause or Disability
(as defined in the Employment Agreements), or by the executive for "good reason"
(which includes assignment to the executive of any duties inconsistent with such
executive's position, authority or responsibilities or actions that result in a
diminution in such position, authority, duties or responsibilities, relocation,
failure of the Company to provide compensation and benefits in accordance with
the Employment Agreements or other changes and any termination by the executive
for any reason during the 30-day period immediately following the first
anniversary of the Acceptance Date (as defined in the Merger Agreement)). A
"Change of Control" for purposes of the Employment Agreements will occur on the
Acceptance Date.
The principal benefits to be provided to the executives under the Employment
Agreements are a lump sum payment equal to three times in the case of
Mr. Thompson, and two and a half times in the case of Mr. Penley, annual base
salary and annual bonus, a pro rata annual bonus for the year of termination,
and certain other benefits, including 36 months in the case of Mr. Thompson and
30 months in the case of Mr. Penley of welfare benefit continuation. In
addition, the Employment Agreements provide that if the executive would be
subject to any excise tax under the Internal Revenue Code of 1986, as amended,
on excess parachute payments, the Company shall provide the executive with a tax
reimbursement payment to make the executive whole on an after-tax basis for such
excise tax. Assuming that the Acceptance Date occurs on January 17, 2001, the
severance benefits (including any lump sum payment payable and any pro rata
bonus, but excluding the value attributable to welfare benefit continuation and
other benefits and without taking into account the amount, if any, of any tax
reimbursement payment) that would be payable to Mr. Thompson and Mr. Penley if
their employment were terminated in accordance with the terms of their
respective Employment Agreements would be approximately $1,665,000 and $624,375,
respectively. Messrs. Thompson and Penley have agreed to amendments to their
Employment Agreements providing that they will not compete with the Company for
three years in the event that they receive termination payments under their
Employment Agreements.
In September 2000, the Board of Directors approved amendments to the
Supplemental Pension Plan described under "Pension and Retirement Plans" in
Annex B relating to a Change of Control. Under the amendments, each of
Messrs. Thompson, Penley and Michael W. Nelson will receive a lump sum pay out
30 days following a Change of Control (which will occur on the Acceptance Date)
which is approximately $110,000, $191,000 and $122,000, respectively, greater
than he would have received absent a Change of Control and a lump sum pay out on
the Acceptance Date. The Board also then approved severance agreements for
several executives, pursuant to which Mr. Nelson would receive one year's salary
($172,000) and medical benefits if his employment is terminated by the Company
within one year after a Change of Control.
EMPLOYEE BENEFITS. Bodycote agrees to cause the Company to honor, and from
and after the Effective Time, agrees to cause the Surviving Corporation to
honor, all employee benefit plans of the Company in accordance with their terms
as in effect immediately before the date of the Merger Agreement,
- subject to any amendment or termination thereof that may be permitted by
their terms, and
- provided that the Surviving Corporation may amend or replace the Company's
existing employee benefit plans so that, through December 31, 2001,
current and former employees of the Company and its subsidiaries will
receive compensation and benefits that are substantially
4
comparable in the aggregate to those provided to Company employees
immediately prior to the Expiration Date.
This provision is not intended to prevent the termination of employment of any
Company employee or the amendment or termination of any particular employee
benefit plan of the Company.
For purposes of eligibility and vesting and levels of benefits under the
employee benefits plans of Bodycote and its affiliates providing benefits to any
Company employees after the date of the Merger Agreement, each Company employee
shall be credited with his or her years of service with the Company prior to the
Effective Time for purposes of eligibility and vesting. In addition, for
purposes of each such new plan providing medical, dental, pharmaceutical and/or
vision benefits to any Company employee, all pre-existing condition exclusions
and actively-at-work requirements of such new plans will be waived and any
eligible expenses will be counted for purposes of the employee's participation
in such new plans for purposes of satisfying all deductible, coinsurance and
maximum out-of-pocket requirements.
DIRECTORS' AND OFFICERS' INDEMNIFICATION; INSURANCE. The Merger Agreement
provides that the indemnification provisions of the Company's Certificate of
Incorporation and By-Laws as in effect at the Expiration Date will not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights under such
documents of individuals who at the Effective Time were directors, officers,
employees or agents of the Company. From and after the Expiration Date, the
Company (and, after the Effective Date, the Surviving Corporation) will honor
all of the covenants contained in this provision of the Merger Agreement,
without limit as to time.
For a period of six years after the Expiration Date, the Company (regardless
of whether the Merger becomes effective) and, for a period of six years after
the Effective Time, the Surviving Corporation, will, to the fullest extent
permitted under applicable law, indemnify and hold harmless, each present and
former director, officer, employee and agent of the Company or any of its
subsidiaries (each, together with such person's heirs, executors or
administrators, an "Indemnified Party") against any costs or expenses (including
advancing reasonable attorneys' fees and other fees and expenses provided that
the Indemnified Party undertakes to repay such expenses in certain
circumstances), judgments, fines, penalties, certain excise taxes, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any actual or threatened claim, action, suit, proceeding or investigation,
arising out of, relating to or in connection with:
- any action or omission occurring or alleged to have occurred prior to the
Effective Time, or
- the Merger or the other transactions contemplated by the Merger Agreement,
in each case to the fullest extent that the Company would have been permitted
under the DGCL, as the same exists on the date of the Merger Agreement or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment provides broader indemnification and liability limitation
rights than permitted prior to the amendment) and under the Company's
Certificate of Incorporation and By-Laws in effect on the date of the Merger
Agreement.
The Company and the Surviving Corporation agree to cooperate in the defense of
any such matter but neither party will be liable for any settlement effected
without its written consent (which will not be unreasonably withheld).
For a period of six years after the Effective Time, the Surviving
Corporation will cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company and its
subsidiaries (provided that the Surviving Corporation may substitute policies of
at least the same coverage and amounts containing terms and conditions that are
no less advantageous to the Indemnified Parties, and which coverages and amounts
shall be no less than the coverages and amounts provided at that time for
Bodycote's and/or the Surviving Corporation's directors and officers); provided
that
5
- the Surviving Corporation will not be required to expend in any year an
amount in excess of 250% of the annual aggregate premiums currently paid
by the Company for such insurance with respect to matters arising on or
before the Effective Time; and
- if the annual premiums of such insurance coverage exceed the amount
referred to in the immediately preceding bullet point, the Surviving
Corporation will be obligated to obtain a policy with the best coverage
available, in the reasonable judgment of its board of directors, for a
cost not exceeding such amount.
The Surviving Corporation will pay all reasonable expenses, including
reasonable attorneys' fees, that may be incurred by any Indemnified Party in
enforcing the indemnity and other obligations provided in this provision of the
Merger Agreement but none of the parties will be obliged to pay the fees and
disbursements of more than one counsel for all Indemnified Parties in any single
action, except to the extent that, in the opinion of counsel for the Indemnified
Parties, two or more of such Indemnified Parties have conflicting interests in
the outcome of such action.
The rights of each Indemnified Party under this provision of the Merger
Agreement are in addition to, and not in limitation of, any other rights such
Indemnified Party may have under the Certificate of Incorporation or By-Laws of
the Company, any other indemnification or liability limitation arrangement, the
DGCL or otherwise.
Bodycote agreed to cause its United States holding company subsidiary to
agree to fulfill any unsatisfied obligations of the Company and the Surviving
Corporation under this provision.
Proper provision will be made so that the successors, assigns and
transferees of Bodycote's United States holding company subsidiary, the Company
or the Surviving Corporation assume the obligations set forth in this provision
of the Merger Agreement if any of them or any of their successors, assigns or
transferees:
- consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or
- transfers all or a substantial portion of its properties and assets to any
person.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD.
The Board, at a meeting held on December 13, 2000, unanimously adopted
resolutions (i) approving the Tender Agreement and the transactions contemplated
thereby and approving and declaring advisable the Offer, the Merger, the Merger
Agreement and the transactions contemplated thereby, (ii) declaring that it is
in the best interests of the Company's stockholders that the Company enter into
the Merger Agreement and consummate the Offer and the Merger on the terms and
subject to the conditions set forth in the Merger Agreement, (iii) recommending
that the Company's stockholders accept the Offer, tender their shares pursuant
to the Offer and adopt the Merger Agreement (if required by applicable law),
(iv) approving the acquisition of the Shares by the Purchaser pursuant to the
Offer and the Tender Agreement and the other transactions contemplated by the
Merger Agreement and the Tender Agreement, (v) exempting the Merger Agreement,
the Tender Agreement and the transactions contemplated thereby from the
restrictions of Section 203 of the DGCL and Article Eleventh of the Company's
Certificate of Incorporation, and (vi) amending the Rights Agreement to exempt
the transactions contemplated by the Merger Agreement and the Tender Agreement
from the Rights Agreement.
(b) (i) BACKGROUND.
During 1999 and 2000, the Board of Directors and others were concerned that
prevailing market prices for the Shares did not reflect intrinsic values. The
Board considered several alternatives to
6
correct the disparity. During this period, several companies, including
Bodycote, approached Lindberg's management about the possibility of a business
combination. In addition, Mr. Ira Sochet, who had accumulated close to 15% of
the Shares over several years, frequently had expressed his view to the
Company's management and Board of Directors that the Company should consider
various transactions, including repurchases of Shares and "going private"
transactions. In May 2000, Mr. Sochet proposed his making an offer for all
Shares not owned by him at $9.00 per Share, subject to several conditions. The
Company rejected this proposal, stating that the Company was not then for sale.
In November 2000, Mr. Sochet proposed a "going private" transaction in which he
and other principal stockholders of the Company would purchase the balance of
the Shares for $9.50 per Share.
(ii) COMPANY PROCESS.
In September 2000, the Company retained Donaldson, Lufkin & Jenrette
Securities Corporation (now Credit Suisse First Boston Corporation; "CSFB") as
its financial advisor to assist the Company in exploring alternatives for
enhancing stockholder value, including a possible sale. Shortly thereafter, at
the Company's direction, CSFB began conducting a process to explore a potential
sale of the Company as a part of its engagement. Upon completion of a
confidential information memorandum, CSFB began contacting potential strategic
and financial buyers. Eighteen potential buyers were contacted, including 13
strategic and five financial buyers. Seven of the parties contacted signed a
confidentiality/standstill agreement and received a confidential information
memorandum. These parties were asked to submit a written, non-binding indication
of interest by October 16, 2000. After reviewing the initial indications, the
Board of Directors authorized senior management and CSFB to continue discussions
and to conduct management presentations and additional due diligence with three
of these parties. Each of these three parties submitted final proposals,
including marked-up definitive agreements, on November 30, 2000. On December 1,
2000, the Board of Directors met to review the proposals and authorized CSFB to
have further discussions with the bidders. CSFB talked with the bidders and
requested best and final bids. All bidders resubmitted proposals and indicated
that such proposals were their best and final financial proposals. After
discussions between the Company and Bodycote representatives, Bodycote agreed to
increase its proposal to $18.125 per Share in cash, subject to negotiation of a
definitive agreement.
On December 5, 2000, the Board of Directors met to review final proposals,
including details of contractual terms. The Board of Directors concluded that
Bodycote's proposal was the strongest of the proposals received from a financial
point of view and authorized management and CSFB to continue discussions with
Bodycote and to negotiate the terms of a possible transaction. On December 13,
2000, the Board of Directors met to consider the proposed transactions and
unanimously determined to enter into the Merger Agreement with Bodycote.
(iii) CONTACTS WITH BODYCOTE.
From time to time for several years, Bodycote approached the Company about
the possibility of a strategic combination, alliance or joint venture. Nothing
had come of those discussions.
In September 1999, at a meeting requested by John Chesworth, Bodycote's
Chief Executive Officer, Mr. Chesworth and Martyn Wilton, Bodycote's Director of
its US Heat Treatment and HIP operations, indicated to Leo Thompson, the
Company's Chief Executive Officer, that Bodycote was very interested in
acquiring the Company. Mr. Thompson informed Messrs. Chesworth and Wilton that,
while the Company was not currently for sale, he would relay Bodycote's interest
to the Board.
In late January 2000, Mr. Chesworth, in a letter to Mr. Thompson, again
indicated Bodycote's interest in acquiring the Company. Also in late January
2000, Mr. Thompson reported to Mr. Chesworth that the Board had reviewed the
letter and determined not to pursue a sale of the Company at that time.
7
During April and June 2000, Mr. Wilton contacted Mr. Thompson to reiterate
Bodycote's interest in an acquisition of the Company. Mr. Thompson responded
that the Company was not interested in pursuing such a transaction at that time.
On August 17, 2000, Mr. Chesworth met with Mr. Thompson to discuss a
potential transaction. Mr. Chesworth indicated that Bodycote would be interested
in pursuing an acquisition of the Company at a price in the range of $12--$13
per Share. Mr. Thompson informed Mr. Chesworth that, while the Company was not
for sale at that time, he would discuss the possibility of a transaction with
the Company's Board.
On September 6, 2000, in a conversation between Mr. Thompson and
Mr. Chesworth, Mr. Thompson informed Mr. Chesworth that the Board had determined
to institute a process whereby alternatives would be considered, including
exploring proposals for the acquisition of the Company, and that Donaldson,
Lufkin & Jenrette (now CSFB) had been engaged as its financial advisor. On
September 11, 2000, a representative of Dresdner Kleinwort Benson ("DrKB")
contacted CSFB to discuss the procedure for the process. On October 5, 2000,
Bodycote and the Company entered into the Confidentiality Agreement and CSFB
delivered to Bodycote an invitation to submit such proposal to acquire the
Company and a confidential offering memorandum containing information about the
Company.
On October 16, 2000, Bodycote submitted to CSFB a preliminary proposal to
acquire the Company for between $15.00 and $18.00 per Share, subject to the
results of its due diligence and negotiation of a definitive agreement. On
October 20, 2000, representatives of CSFB informed representatives of DrKB that
the Board had invited Bodycote to continue in the process based on this
preliminary indication and that Bodycote would be invited to conduct due
diligence in order to prepare to submit a firm proposal.
During the period between November 6, 2000 and December 12, 2000, Bodycote
and its financial, legal, tax and accounting advisors conducted a due diligence
review of the Company and its operations and financial condition.
On November 30, 2000, Bodycote submitted a proposal to acquire the Company
at $17.25 per Share, together with a draft merger agreement containing the terms
and conditions on which it was willing to pursue a possible transaction. On
December 5, 2000, after various discussions among the advisors to Bodycote and
the Company, Bodycote agreed to increase its proposed price to $18.125 per
Share, subject to negotiation of a definitive agreement.
Between December 6, 2000 and December 13, 2000, the parties and their legal
advisers negotiated the terms of the transaction and the related agreements.
On December 13, 2000, Bodycote and the Company publicly announced that they
had entered into a Merger Agreement and that stockholders of the Company
controlling 18% of the outstanding Shares had entered into the Tender Agreement.
The Offer was formally commenced on the date of the Offer to Purchase.
(iv) REASONS FOR THE RECOMMENDATION OF THE BOARD OF DIRECTORS.
In reaching its recommendation described above in paragraph (a) of this Item
4, the Board of Directors considered a number of factors, including the
following:
1. COMPANY FINANCIAL AND OPERATING CONDITION; INDUSTRY AND MARKET CONDITIONS.
The Board considered the financial condition, results of operations and
business of the Company, on both an historical and prospective basis,
current industry, economic and market conditions, historical market prices,
price to earnings multiples and recent trading patterns of the Shares,
market prices and financial data relating to other companies engaged in the
same or similar businesses as the Company and the prices and premiums and
other terms in recent acquisition transactions in the industry, and the
Board's belief, on the basis of such information, that the price to be paid
in the Offer and the
8
Merger reflects a fair value for the Shares to the Company's stockholders,
given the Company's prospects and the risks and uncertainties as well as the
opportunities involved in the Company's current business environment.
2. TRANSACTION FINANCIAL TERMS/PREMIUM TO MARKET PRICE. The Board considered
the relationship of the Offer Price and the Merger Consideration to the
historical market prices of the Shares. The Offer Price represents a 103%
premium over the $8.9375 closing price of the Shares on Nasdaq on
December 13, 2000 (the day on which the Board approved the Merger Agreement)
and a 125% premium over the $8.0579 20-day average trading price of the
Shares prior to the execution of the Merger Agreement. The Board also
considered the form of consideration to be paid to holders of Shares in the
Offer and the Merger, and the certainty of value of such cash consideration
compared to stock consideration. The Board was aware that the consideration
received by the holders of Shares in the Offer and Merger would be taxable
to such holders for federal income tax purposes.
3. STRATEGIC ALTERNATIVES. The Board considered the presentation of the
Company's financial advisor and the Board's review with respect to trends in
the industry in which the Company's businesses operate and the strategic
alternatives available to the Company, including the alternative to remain
an independent public company, the possibility of acquisitions of or mergers
with other companies in such industry and other extraordinary corporate
transactions, as well as the risks and uncertainties associated with such
alternatives. The Board considered the results of the process that had been
conducted by CSFB to assist the Board in its evaluation of strategic
alternatives, including the fact that confidential information had been
provided to seven potentially interested parties and that the Company did
not receive any proposal that offered value superior to the Offer or that
the Board believed was more likely to be consummated. The Board also
considered the complementary nature of the two companies' operations, and
the experience, size and financial strength of Bodycote, including
Bodycote's ability to finance the Offer and the Merger.
4. CSFB FAIRNESS OPINION. The Board considered presentations from CSFB and the
opinion of CSFB, dated December 13, 2000, that, based upon and subject to
certain considerations and assumptions, the consideration to be received by
holders of Shares pursuant to the Merger Agreement is fair from a financial
point of view to such holders (other than Bodycote and its affiliates). A
copy of the opinion rendered by CSFB to the Board of Directors, setting
forth the procedures followed, the matters considered and the assumptions
made by CSFB in arriving at its opinion, is attached as Annex A hereto and
incorporated herein by reference. Such opinion does not constitute a
recommendation to any holder of Shares as to whether such holder should
tender Shares pursuant to the Offer or how such holder should vote or act
with respect to any other matter related to the Offer or the Merger.
Stockholders are urged to read this opinion in its entirety. The Board was
aware that CSFB becomes entitled to certain fees described in Item 5 upon
the consummation of the Offer.
5. TIMING OF COMPLETION. The Board considered the anticipated timing of
consummation of the transactions contemplated by the Merger Agreement,
including the structure of the transactions as a tender offer for all of the
Shares, which should allow stockholders to receive the transaction
consideration earlier than in an alternative form of transaction, followed
by the Merger in which stockholders will receive the same consideration as
received by stockholders who tender their Shares in the Offer.
6. LIMITED CONDITIONS TO CONSUMMATION. Bodycote's obligation to consummate the
Offer and the Merger is subject to a limited number of conditions, with no
financing condition. The Board also considered the likelihood of obtaining
required regulatory approvals, and the terms of the Merger Agreement
regarding the respective obligations of Bodycote and the Company with
respect to the pursuit of such regulatory approvals.
9
7. ABILITY TO CONSIDER ALTERNATIVE TRANSACTIONS. The Board considered that
under the terms of the Merger Agreement, although the Company is prohibited
from soliciting acquisition proposals from third parties, the Company may
engage in discussions or negotiations with, and may furnish non-public
information to, a third party which makes a written acquisition proposal if,
among other things, the Board determines in good faith after consultation
with its outside legal counsel and financial advisor that such action is
necessary in order for its directors to comply with their fiduciary duties
under applicable law, and if the Board determines such proposal would, if
consummated, taking into account all the terms and conditions of the
acquisition proposals and any changes to the Offer proposed by Bodycote at
the time of such determination, be more favorable to the Company's
stockholders than the terms and conditions of the Offer, and for which
financing, if required, has been fully committed. The Board considered that
the terms of the Merger Agreement permit the Company to terminate the Merger
Agreement to enter into such a superior transaction involving the Company
if, among other things, (i) the Company is not in breach of the "no
solicitation" provisions of the Merger Agreement, (ii) the Company gives
Bodycote notice in writing that it intends to enter into an agreement for
such superior transaction, (iii) Bodycote does not make, within four
business days of receipt of such notification, an offer that the Board
determines, in good faith and after consultation with its financial
advisors, is at least as favorable to the stockholders of the Company, as
the superior proposal and (iv) the Company pays Bodycote a termination fee
of $4,500,000 plus reimbursement of expenses up to $1,000,000 prior to
terminating the Merger Agreement. The Board considered that these provisions
of the Merger Agreement could deter third parties who might be interested in
exploring an acquisition of the Company. The Board of Directors also
considered the contacts that the Company had had with various third parties
regarding a potential transaction involving the Company, and the fact that
the Company had engaged in a vigorous review of its strategic options. In
addition, after considering the views of management and CSFB, the Board
concluded that it was unlikely that a third party would be prepared to pay a
higher price for the Shares than the consideration offered in the Offer and
the Merger in a transaction that could be completed on a timely basis.
8. POTENTIAL CONFLICTS OF INTEREST. The Board was aware of the potential
conflicts of interest between the Company, on the one hand, and certain of
the Company's officers, directors or affiliates, on the other hand, in the
Offer and the Merger (as described under Item 3 "--Effects of the Offer and
the Merger under Company Stock Plans and Agreements between the Company and
its Executive Officers").
The foregoing includes the material factors considered by the Board. In view
of its many considerations, the Board of Directors did not find it practical to,
and did not, quantify or otherwise assign relative weights to the various
individual factors considered. In addition, individual members of the Board may
have given different weights to the various factors considered. After weighing
all of these considerations, the Board unanimously determined to approve the
Merger Agreement and recommend that holders of Shares tender their Shares in the
Offer.
(c) INTENT TO TENDER.
To the best of the Company's knowledge, each executive officer, director and
affiliate of the Company who owns Shares currently intends to tender all Shares
held of record or beneficially owned by such person or entity to the Purchaser
in the Offer.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
On September 6, 2000, the Company retained CSFB to assist the Company in
exploring alternatives to enhance stockholder value. Pursuant to a letter
agreement dated August 28, 2000 and executed by the Company on September 6, 2000
(the "CSFB Agreement"), the Company memorialized such retention of CSFB to act
as its exclusive financial advisor in connection with a review of strategic and
financial alternatives, including the possible sale of all or a portion of the
Company. The Board
10
retained CSFB based upon CSFB's qualifications, experience and expertise. CSFB
is an internationally recognized investment banking and advisory firm. CSFB, as
part of its investment banking and financial advisory business, is continuously
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In addition, CSFB is a full-service
securities firm engaged in securities trading, brokerage and financing
activities and as such may from time to time effect transactions, for its own
account or the account of customers, and hold positions in the securities and
options on securities of the Company and Bodycote.
Pursuant to the terms of the CSFB Agreement, the Company agreed to pay CSFB
(i) a fee of $50,000 per quarter (the "Retainer Fee"), with the first such fee
payable upon execution of the CSFB Agreement, subject to a minimum of two
quarters, (ii) a fee of $500,000 for delivery of the CSFB Fairness Opinion (the
"Opinion Fee") and (iii) a transaction fee of 1.175% of the aggregate
consideration paid in connection with the Offer and the Merger (the "Transaction
Fee"). The Retainer Fee and the Opinion Fee are to be applied against the
Transaction Fee. As defined in the CSFB Agreement, "aggregate consideration"
includes amounts paid to holders of the Shares, options, warrants and
convertible securities, plus the principal amount of any debt assumed, acquired,
remaining outstanding, retired or defeased or preferred stock redeemed or
remaining outstanding in connection with the Offer and the Merger. The Company
also has agreed to reimburse CSFB for its reasonable out-of-pocket expenses
including the fees and disbursements of its counsel and to indemnify CSFB and
related persons against certain liabilities related to or arising out of its
rendering of services under its engagement as financial advisor, including
liabilities under the federal securities laws.
Except as described above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to stockholders on its behalf concerning
the Offer.
CSFB has consented to the reproduction in full of its Fairness Opinion in
this Statement. A copy of CSFB's Fairness Opinion is attached as Annex A hereto.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
No transactions in Shares have been effected during the past 60 days by the
Company or, to the knowledge of the Company, by any executive officer, director,
affiliate or subsidiary of the Company, except for the Tender Agreement, which
is summarized under Item 2 under the subcaption "Tender Agreement," and except
that the family charitable foundation of which G. H. Bodeen is co-trustee and in
which Mr. Bodeen has no pecuniary interest sold 300 Shares in the open market on
December 8, 2000 at $8.50 per Share.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as set forth in this Statement, the Company is not currently
undertaking or engaged in any negotiations in response to the Offer that relate
to (1) a tender offer for or other acquisition of the Company's securities by
the Company, any subsidiary of the Company or any other person; (2) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company; (3) a purchase, sale or
transfer of a material amount of assets of the Company or any subsidiary of the
Company; or (4) any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company.
Except as set forth in this Statement, there are no transactions,
resolutions of the Board, agreements in principle, or signed contracts in
response to the Offer that relate to one or more of the events referred to in
the preceding paragraph.
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ITEM 8. ADDITIONAL INFORMATION.
(a) DELAWARE GENERAL CORPORATION LAW.
BUSINESS COMBINATION LAW. As a Delaware corporation, the Company is subject
to Section 203 of the DGCL ("Section 203"). In general, Section 203 would
prevent an "interested stockholder" (generally defined as a person beneficially
owning 15% or more of a corporation's voting stock) from engaging in a "business
combination" (as defined in Section 203) with a Delaware corporation for three
years following the date such person became an interested stockholder unless:
(1) before such person became an interested stockholder, the board of directors
of the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination, (2) upon
consummation of the transaction which resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding for purposes of determining the number of
shares of outstanding stock held by directors who are also officers and by
employee stock plans that do not allow plan participants to determine
confidentially whether to tender shares), or (3) following the transaction in
which such person became an interested stockholder, the business combination is
(x) approved by the board of directors of the corporation and (y) authorized at
a meeting of stockholders by the affirmative vote of the holders of at least
66 2/3% of the outstanding voting stock of the corporation not owned by the
interested stockholder. In accordance with the provisions of Section 203, the
Board of Directors has approved the Merger Agreement, as described in Item 4
above and, therefore, the restrictions of Section 203 are inapplicable to the
Merger, the Offer and the transactions contemplated under the Merger Agreement.
MERGER PROVISIONS. Under the DGCL, if the Purchaser acquires, pursuant to
the Offer or otherwise, at least 90% of the Shares, the Purchaser will be able
to effect the Merger after consummation of the Offer without a vote of the
Company's stockholders. However, if the Purchaser does not acquire at least 90%
of the Shares pursuant to the Offer or otherwise and a vote of the Company's
stockholders is required under Delaware law, a significantly longer period of
time will be required to effect the Merger.
(b) COMPANY'S CERTIFICATE OF INCORPORATION.
Article Eleventh of the Company's Certificate of Incorporation ("Article
Eleventh") provides that the affirmative vote of the holders of at least
two-thirds of all securities of the Company then entitled to vote at a meeting
of stockholders will be necessary for the authorization of certain business
combinations with any person who, as of the record date for the determination of
holders entitled to vote, is the beneficial owner, directly or indirectly, of
more than 10% of the outstanding securities of the Company then entitled to
vote. However, that provision is not applicable to, among other things, any
business combination on terms substantially consistent with those set forth in a
memorandum of understanding with such person approved by the Board of Directors
prior to the time such person shall have become a holder of more than 10% of the
outstanding securities of the Company then entitled to vote. The Merger
Agreement constitutes a memorandum of understanding under Article Eleventh and,
therefore, the provisions of Articles Eleventh are inapplicable to the Offer,
the Merger and the Merger Agreement and the transactions contemplated thereby.
(c) REGULATORY APPROVALS.
UNITED STATES ANTITRUST COMPLIANCE. Under the provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), applicable to the Offer, the purchase of Shares under the Offer may be
consummated after the expiration of a 15-calendar-day waiting period following
the filing by the Purchaser of a Notification and Report Form with respect to
the Offer, unless the Purchaser receives a request for additional information or
documentary material from the Antitrust Division of the United States Department
of Justice (the "Antitrust Division") or the Federal Trade Commission (the
"FTC") or unless early termination of the waiting period is granted. The
12
Company made such filing on December 15, 2000. The Purchaser has advised the
Company that the Purchaser made such filing on December 14, 2000, and such
waiting period will expire at 11:59 p.m., New York City time, on December 29,
2000. If, however, within the initial 15-day waiting period, either the
Antitrust Division or the FTC requests additional information or documentary
material from Purchaser concerning the Offer, the waiting period will be
extended and would expire at 11:59 p.m., New York City time, on the tenth
calendar day after the date of substantial compliance by Purchaser with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, the waiting
period may be extended only by court order or with the consent of the Purchaser.
In practice, complying with a request for additional information or documentary
material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and may
agree to delay consummation of the transaction while the negotiations continue.
See Item 3.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after Purchaser's purchase of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Purchaser or the divestiture of substantial assets of Bodycote
or its subsidiaries, or the Company or its subsidiaries. Private parties may
also bring legal action under the antitrust laws in certain circumstances. While
Bodycote and the Purchaser believe that the Offer and the Merger do not involve
a violation of antitrust laws, there can be no assurance that a challenge to the
Offer on antitrust grounds will not be made or, if such a challenge is made, of
the result of that challenge. See Item 3.
OTHER FILINGS. The Company conducts operations in Mexico and Bodycote
conducts operations in a number of foreign countries and filings may have to be
made with foreign governments under their pre-merger notification statutes. The
filing requirements of various nations are being analyzed by the parties, and,
where necessary, the parties intend to make such filings.
(d) THE PURCHASER'S DESIGNATION OF PERSONS TO BE ELECTED TO THE BOARD OF
DIRECTORS.
The Information Statement attached as Annex B hereto is being furnished in
connection with the possible designation by Bodycote, pursuant to the terms of
the Merger Agreement, of certain persons to be elected to the Board of Directors
other than at a meeting of the Company's stockholders.
(e) AMENDMENT TO RIGHTS AGREEMENT.
Each Right issued pursuant to the Rights Agreement entitles the registered
holder thereof to purchase one one-thousandth of a share of Common Stock at an
exercise price of $40 per share, subject to adjustment. On the earlier of
(1) the tenth day following a public announcement, or such earlier date as a
majority of the Board becomes aware, that a person or group of affiliated or
associated persons has acquired beneficial ownership of 20% or more of the
outstanding Shares (an "Acquiring Person") or (2) the tenth business day (or
such later date as may be determined by action of the Board of Directors prior
to the time any person becomes an Acquiring Person) following the commencement
of, or announcement of an intention to make, a tender offer or exchange offer
the consummation of which would result in that person becoming an Acquiring
Person (the earlier of such dates being the "Distribution Date"), the Rights
become exercisable and trade separately from the Common Stock. After the
Distribution Date, each holder of a Right (other than the Acquiring Person) will
thereafter have the right to acquire shares of Common Stock at the exercise
price of $40 per share, subject to adjustment; or, in certain circumstances, the
right to acquire shares of the Acquiring Person's capital stock having a market
value of two times the exercise price of the Right. The Rights may be
13
redeemed at a price of $0.01 per Right at any time prior to the earlier of
(i) the tenth day following a person has becoming an Acquiring Person or
(ii) November 21, 2006.
The Company and the Rights Agent amended the Rights Agreement as of
December 13, 2000 to provide that (1) none of Bodycote, the Purchaser, or any
Affiliate or Associate of either of them will become an Acquiring Person and no
Stock Acquisition Date (as defined in the Rights Agreement) will occur by reason
of or as a result of the approval, announcement, execution, delivery or
performance of the Merger Agreement or the Tender Agreement, or the consummation
of the Offer, the Merger or the other transactions or agreements contemplated by
the Merger Agreement or the Tender Agreement, (2) no Distribution Date will
occur solely by reason of or as a result of the approval, announcement,
execution, delivery or performance of the Merger Agreement or the Tender
Agreement or the consummation of the Offer, the Merger or the other transactions
or agreements contemplated by the Merger Agreement or the Tender Agreement,
(3) no "Flip-In-Event" (as defined in the Rights Agreement) shall not occur
solely by reason of or as a result of the approval, announcement, execution,
delivery or performance of the Merger Agreement or the Tender Agreement or the
consummation of the Offer, the Merger or the other transactions or agreements
contemplated by the Merger Agreement or the Tender Agreement, and (4) the Rights
will expire immediately prior to the Acceptance Date if they have not expired
earlier.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
[Download Table]
EXHIBIT
NO. DESCRIPTION
--------- -----------
(a)(1) Letter to the stockholders of the Company, dated December
18, 2000.*
(a)(2) Sections 12 and 14 of the Offer to Purchase, dated
December 18, 2000 (incorporated by reference to Exhibit
(a)(1) to the Schedule TO of the Purchaser filed on
December 18, 2000).
(a)(3) Form of Letter of Transmittal (incorporated by reference to
Exhibit (a)(2) to the Schedule TO of the Purchaser filed on
December 18, 2000).
(a)(4) Opinion of CSFB, dated December 13, 2000 (included as Annex
A to this Statement).*
(a)(5) Joint Press Release issued by Bodycote and the Company on
December 13, 2000 (incorporated by reference to press
release under cover of Schedule 14D-9C filed by the Company
on December 14, 2000).
(e)(1) Agreement and Plan of Merger, dated as of December 13, 2000,
among Bodycote, the Purchaser and the Company (incorporated
by reference to Exhibit (d)(1) to the Schedule TO of the
Purchaser filed on December 18, 2000).
(e)(2) Tender and Voting Agreement, dated as of December 13, 2000,
among Bodycote, the Purchaser and certain stockholders of
the Company (incorporated by reference to Exhibit (d)(2) to
the Schedule TO of the Purchaser filed on December 18,
2000).
(e)(3) Confidentiality Agreement, dated October 5, 2000, between
Bodycote and the Company.*
(e)(4) Rights Agreement, dated November 21, 1996, between the
Company and Harris Trust and Savings Bank, as Rights Agent
(incorporated by reference to Exhibit 1 to the Registration
Statement of the Company on Form 8-A filed on December 6,
1996).
(e)(5) Amendment to Rights Agreement, dated December 13, 2000,
between the Company and Harris Trust and Savings Bank, as
Rights Agent.*
(e)(6) Information Statement of the Company, dated December 18,
2000 (included as Annex B hereto).*
------------------------
* Included with this Statement.
14
SIGNATURE
After due 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.
[Download Table]
LINDBERG CORPORATION
By: /s/ LEO G. THOMPSON
-----------------------------------------
Leo G. Thompson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: December 18, 2000
15
ANNEX A
[LETTERHEAD]
December 13, 2000
Board of Directors
Lindberg Corporation
6133 North River Road
Suite 700
Rosemont, IL 60018
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders of
Common Stock (as defined below) of Lindberg Corporation (the "Company"), other
than Bodycote International plc (the "Acquiror") and its affiliates, from a
financial point of view, of the Consideration (as defined below) to be received
by such holders pursuant to the Agreement and Plan of Merger, dated as of
December 13, 2000 (the "Agreement"), among the Company, Bodycote International
plc (the "Acquiror") and Bodycote Investments VI Inc., a wholly-owned subsidiary
of the Acquiror (the "Merger Sub"). The Agreement provides, among other things,
for (i) the commencement by Merger Sub of an offer to purchase (the "Offer") all
outstanding shares of common stock, par value $0.01 per share, ("Common Stock")
of the Company at a purchase price of $18.125 per share, net to the seller in
cash, (the "Consideration") and (ii) the subsequent merger (the "Merger" and,
together with the Offer, the "Transaction") of Merger Sub with and into the
Company. Pursuant to the Merger, the Company will become a wholly-owned
subsidiary of the Acquiror and each issued and outstanding share of Common Stock
will be converted into the right to receive the Consideration.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as the Agreement and
certain related documents. We have also reviewed certain other information,
including financial forecasts, provided to or discussed with us by the Company,
and have met with the Company's management to discuss the business and prospects
of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared those data with similar data for other publicly held
companies in businesses similar to the Company. In addition, we have reviewed
the financial terms of certain other business combinations and other
transactions that have recently been effected. We also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed appropriate.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing and have relied on its being
complete and accurate in all material respects. With respect to the financial
forecasts, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the Company's
management as to the future financial performance of the Company. In addition,
we have not been requested to make,
A-1
and have not made, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company nor have we been furnished
with any such evaluations or appraisals. Our opinion is necessarily based upon
financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. In connection with our engagement, we approached
third parties to solicit indications of interest in a possible acquisition of
the Company and held preliminary discussions with certain of these parties prior
to the date hereof.
We have acted as financial advisor to the Company in connection with the
Transaction and will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Offer. We will also receive a
fee for rendering this opinion.
In the ordinary course of our business, we and our affiliates may actively trade
the debt and equity securities of both the Company and the Acquiror for our and
such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Company in
connection with its consideration of the Offer and the Merger and does not
constitute a recommendation to any holder of Common Stock as to whether such
holder should tender shares pursuant to the Offer or how such holder should vote
or act with respect to any other matter relative to the Offer or the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration to be received by the stockholders of the Company in
the Transaction is fair to such stockholders, other than the Acquiror and its
affiliates, from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
A-2
ANNEX B
LINDBERG CORPORATION
6133 NORTH RIVER ROAD, SUITE 700
ROSEMONT, ILLINOIS 60018
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about December 18, 2000 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Statement") of Lindberg Corporation (the "Company"). You are receiving this
Information Statement in connection with the possible election of persons
designated by Bodycote International plc ("Bodycote") to a majority of seats on
the Board of Directors (the "Board of Directors" or the "Board") of the Company.
On December 13, 2000, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Bodycote and Bodycote Investments VI, Inc. (the
"Purchaser"), a Delaware corporation and an indirect wholly owned subsidiary of
Bodycote, pursuant to which the Purchaser is required to commence a tender offer
to purchase all outstanding shares of Common Stock, par value $0.01 per share,
of the Company (the "Common Stock"), and the associated common share purchase
rights (shares of Common Stock together with any associated rights are referred
to in this Information Statement as the "Shares") at a price per Share of
$18.125 (the "Offer Price"), net to the seller in cash, upon the terms and
conditions set forth in the Purchaser's Offer to Purchase, dated December 18,
2000 (the "Offer to Purchase"), and in the related Letter of Transmittal (which,
together with any amendments and supplements thereto, collectively constitute
the "Offer"). Copies of the Offer to Purchase and the Letter of Transmittal have
been mailed to stockholders of the Company and are filed as Exhibits (a)(1) and
(a)(2), respectively, to the Tender Offer Statement on Schedule TO (as amended
from time to time, the "Schedule TO") filed by the Purchaser with the Securities
and Exchange Commission (the "Commission") on December 18, 2000. The Merger
Agreement provides that, subject to the satisfaction or waiver of certain
conditions, following completion of the Offer, and in accordance with the
Delaware General Corporation Law (the "DGCL"), the Purchaser will be merged with
and into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation and will be an indirect
wholly owned subsidiary of Bodycote. At the effective time of the Merger (the
"Effective Time"), each issued and outstanding Share (other than Shares owned by
Bodycote, any of its subsidiaries (including the Purchaser), the Company, and
Shares held by stockholders who properly demand appraisal and comply with the
provisions of Section 262 of the DGCL relating to dissenters' rights of
appraisal) will be converted into the right to receive the same amount in cash
per Share that is paid pursuant to the Offer (the "Merger Consideration").
The Offer, the Merger, and the Merger Agreement are more fully described in
the Statement, to which this Information Statement forms Annex B, which was
filed by the Company with the Commission on December 18, 2000 and which is being
mailed to stockholders of the Company along with this Information Statement.
B-1
This Information Statement is being mailed to you in accordance with
Section 14(f) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), and Rule 14f-1 promulgated thereunder. The information set forth herein
supplements certain information set forth in the Statement. Information set
forth herein related to Bodycote, the Purchaser or the Bodycote Designees (as
defined below) has been provided by Bodycote. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action in connection with the matters set forth herein.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 18, 2000. The Offer is currently scheduled to expire at 12:00 midnight,
New York City time, on Wednesday, January 17, 2001, unless the Purchaser extends
it.
B-2
GENERAL
The Common Stock is the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of the stockholders of the
Company. As of the close of business on December 12, 2000, there were 5,661,661
outstanding Shares, of which a subsidiary of Bodycote owned 1,000 Shares and
Mr. John Hubbard, President of the Purchaser and Bodycote North America, Inc.,
owned 515 Shares (the "Affiliate Owned Shares").
RIGHTS TO DESIGNATE DIRECTORS AND BODYCOTE DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of and
payment for Shares by the Purchaser or any of its affiliates pursuant to the
Offer, Bodycote will be entitled to designate such number of directors (the
"Bodycote Designees") on the Board, rounded up to the next whole number, as is
equal to the product obtained by multiplying the total number of directors on
the Board by the percentage that the number of Shares so purchased and paid for
bears to the total number of Shares then outstanding.
The Merger Agreement provides that the Company will, upon request of the
Purchaser, promptly increase the size of the Board or obtain the resignations of
such number of directors, or both, as is necessary to enable the Bodycote
Designees to be elected to the Board and, subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, will cause the Bodycote
Designees to be so elected.
Notwithstanding the foregoing, if Shares are purchased pursuant to the
Offer, there will be until the Effective Time at least two members of the Board
who were directors on the date of the Merger Agreement and who are neither
employees of the Company nor designees, stockholders, affiliates or associates
of Bodycote.
The Bodycote Designees will be selected by Bodycote from among the
individuals listed below. Each of the following individuals has consented to
serve as a director of the Company if appointed or elected. None of the Bodycote
Designees currently is a director of, or holds any positions with, the Company.
Bodycote has advised the Company that, to the best of Bodycote's knowledge,
except for the Affiliate Owned Shares, none of the Bodycote Designees or any of
their affiliates beneficially owns any equity securities or rights to acquire
any such securities of the Company, nor has any such person been involved in any
transaction with the Company or any of its directors, executive officers or
affiliates that is required to be disclosed pursuant to the rules and
regulations of the Commission other than with respect to transactions between
Bodycote and the Company that have been described in the Schedule TO or the
Statement.
The name, age, citizenship, present principal occupation or employment and
five-year employment history of each of the individuals who may be selected as
Bodycote Designees are set forth below. Unless otherwise indicated, each such
person has held his or her present position as set forth below for the past five
years and each occupation refers to employment with Bodycote. Unless otherwise
B-3
indicated, each such person is a citizen of the United Kingdom, and the business
address of each person listed below is Hulley Road, Macclesfield, Cheshire, SK10
2SG England.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AGE MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- -------- ------------------------------------------------------------
John Chesworth................. 63 Mr. Chesworth has been the Chief Executive Officer and
Managing Director of Bodycote since 1993.
David F. Landless.............. 40 Mr. Landless was employed by Courtalds plc (located at 50
George Street, London, W1, England) as the Vice President,
Finance of a subsidiary from 1995 through 1997 and the
Finance Director of a division from 1997 through 1999. He
has been the Finance Director of Bodycote since 1999.
Mike Hallas.................... 52 Mr. Hallas was the Managing Director (UK) of Bodycote Heat
Treatments Ltd., a subsidiary of Bodycote, from 1995 through
1996. He has been the Director, European Heat Treatment of
Bodycote Heat Treatments Ltd. since 1996. His business
address is Westgate, Aldridge, Walsall, West Midlands, WS9
8BX England.
Martyn A. Wilton............... 51 Mr. Wilton has been the Director US Heat Treatment and HIP
of Bodycote IMT Inc. since 1992. His business address is 155
River Street, Andover, Massachusetts 01810.
Tim Bell....................... 39 Mr. Bell was a Director of Bodycote Heat Treatments Limited
from 1991 through 2000. He has been the Managing Director
Heat Treatments for Germany, Netherlands and Liechtenstein
of Bodycote since 1996. His business address is Buchweisen
6, D-73061, Ebersbach, Germany.
Derek Robson Sleight........... 51 Mr. Sleight was the Joint Managing Director of Bodycote
Materials Testing Group Limited, a subsidiary of Bodycote,
from 1994 through 1996. He has been the Director Materials
Testing Division of Bodycote since 1996. His business
address is Lochend Industrial Estate, Newbridge, Midlothian,
EH28 8PL United Kingdom.
John D. Hubbard................ 53 Mr. Hubbard has been the President of Bodycote North
America, Inc. since 1976. His business address is 10543
Doric Street, Dallas, Texas 75220. Mr. Hubbard is a citizen
of the United States.
OWNERSHIP OF COMMON STOCK BY THE PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth information as of December 12, 2000 (unless
otherwise indicated), with respect to the beneficial ownership of the Company's
Common Stock by (i) each director of the Company, (ii) each of the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company as of December 31, 1999 ("Named Executive Officers"), (iii) all
directors and executive officers of the Company as a group, and (iv) each person
who, to the best of the Company's knowledge, beneficially owns more than five
percent of any class of the Company's voting securities. Except as otherwise
indicated, persons listed below have sole voting and investment
B-4
power with respect to all Shares held by them, except to the extent such power
may be shared with a spouse.
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SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT OF
OWNED (1)(2) CLASS (3)
-------------- --------------
PRINCIPAL STOCKHOLDERS
Ira Sochet (4) ............................................. 803,200 14.2
9350 S. Dixie Highway, Suite 1260
Miami, Florida 33156
Nancy L. Bodeen (5) ........................................ 445,376 7.9
1180 Whitebridge Hill
Winnetka, Illinois 60093
The Killen Group, Inc. (6) ................................. 300,956 5.3
1199 Lancaster Avenue
Berwyn, Pennsylvania 19312
DFA Investment Dimensions Group, Inc. (6) .................. 430,500 7.6
1299 Ocean Ave., 11th Floor
Santa Monica, California 90401
DIRECTORS AND EXECUTIVE OFFICERS
G. H. Bodeen (7)............................................ 224,659 4.0
Dr. R. F. Decker............................................ 18,000 *
R. A. Jean.................................................. 19,500 *
P. J. McCarren.............................................. 23,600 *
M. W. Nelson................................................ 56,576 *
S. S. Penley (8)............................................ 68,865 1.2
W. R. Reum.................................................. 4,000 *
J. T. Schanck............................................... 17,500 *
L. G. Thompson (9).......................................... 232,500 4.0
All directors and executive officers as a group (9 persons) 665,200 11.2
(7)(8)(9).................................................
------------------------
* Less than one percent.
(1) Unless otherwise indicated, the persons named in the table above have sole
voting and investment power over all Shares beneficially owned by them,
subject to applicable community property laws. Beneficially owned Shares
include Shares subject to options exercisable within 60 days after
December 12, 2000.
(2) Includes Shares subject to options that were exercisable within 60 days of
December 12, 2000 as follows: Mr. Bodeen--16,500; Dr. Decker--13,500;
Mr. Jean--5,000; Mr. McCarren--15,400; Mr. Nelson--53,000;
Mr. Penley--46,750; Mr. Reum--3,000; Mr. Schanck--16,500; and
Mr. Thompson--125,000.
(3) Based on 5,661,661 Shares outstanding as of December 12, 2000, unless
otherwise indicated. In computing the percentages shown in the table,
Shares subject to options held by a named person that are exercisable
within 60 days after December 12, 2000 are treated as outstanding in
determining the percentage ownership of that person.
B-5
(4) Based on Amendment No. 9 to Statement on Schedule 13D filed with the SEC on
November 29, 2000.
(5) Includes 393,201 Shares with respect to which N. L. Bodeen has sole voting
and sole dispositive power and 52,175 Shares held by a family charitable
foundation with respect to which Shares she has shared voting and shared
dispositive power in her capacity as co-trustee with her husband, G. H.
Bodeen. Excludes 47,634 Shares held by a trust created under the will of L.
A. Lindberg of which trust N. L. Bodeen is the beneficiary but with respect
to which Shares N. L. Bodeen has no voting or dispositive power and
disclaims beneficial ownership.
(6) Based on a report of ownership by NASDAQ, as of September 30, 2000.
(7) G. H. Bodeen has sole voting and sole dispositive power over 97,250 Shares,
which includes 75,750 Shares he owns directly, 16,500 Shares subject to
currently exercisable options, and 5,000 Shares held by his personal
retirement trust of which he is co-trustee and co-beneficiary. In addition,
Mr. Bodeen has shared voting and sole dispositive power as to 75,234 Shares
in his capacity as co-trustee of trusts created under the will of L. A.
Lindberg, and Mr. Bodeen also has shared voting and shared dispositive
power with respect to 52,175 Shares in his capacity as co-trustee with his
wife, N. L. Bodeen, of a family charitable foundation.
(8) S. S. Penley has shared voting and dispositive power over 22,115 Shares and
has sole voting and dispositive power over 46,750 Shares subject to
currently exercisable options.
(9) L. G. Thompson has sole voting and sole dispositive power over 196,250
Shares which includes 71,500 Shares he owns directly and 125,000 Shares
subject to currently exercisable options. In addition, Mr. Thompson has
shared voting power with respect to 36,000 Shares.
B-6
Certain of the persons listed in the table above are parties to the Tender
Agreement, which is summarized under Item 2 of the Statement of which this
Information Statement is Annex B, relating to Shares owned by each such person,
as set forth below:
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NUMBER OF SHARES
NUMBER OF SHARES AVAILABLE PURSUANT
OWNED TO OPTIONS*
---------------- ------------------
George H. Bodeen............................. 75,750 16,500
The Delaware Charter Guarantee
Trust Company f/b/o George H. Bodeen
IRA Rollover............................... 5,000 0
Nancy and George Bodeen
Family Foundation.......................... 52,175 0
Nancy L. Bodeen.............................. 336,496 0
Nancy L. Bodeen Trust........................ 56,705 0
Ronald Byrd and Susan L. Byrd................ 246,926 0
Susan L. Byrd................................ 19,590 0
Leroy A. Lindberg Trust for Nancy L.
Bodeen..................................... 47,634 0
Leroy A. Lindberg Trust for Susan L. Byrd.... 27,600 0
Stephen S. Penley............................ 0 64,000
Stephen S. Penley and Janet P. Penley........ 22,115 0
Leo G. Thompson.............................. 71,500 162,500
Leo G. Thompson and Annette M. Thompson...... 36,000 0
-------- --------
Total...................................... 997,491 243,000
======== ========
------------------------
* Includes all Shares for which options are held regardless of whether options
are currently exercisable or exercisable within 60 days.
B-7
BOARD OF DIRECTORS
The Board of Directors is divided into three classes with staggered terms.
At each annual meeting of stockholders, a class of directors will be elected for
a three-year term to succeed the directors of the same class whose terms are
then expiring. Biographical information on each director, including his or her
age, follows:
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NAME (AGE);
YEAR FIRST PRINCIPAL OCCUPATION FOR LAST
ELECTED DIRECTOR FIVE YEARS AND PUBLIC COMPANY DIRECTORSHIPS
------------------------------- ------------------------------------------------------------
TERM EXPIRING IN 2001
Dr. R. F. Decker (70) ......... Chairman since December 1988 of Thixomat, Inc. (a general
1987 partnership formed to promote and commercialize
Thixomolding-TM- technology and in which the Company has a
minority investment)(1). Chairman from December 1988 to
December 1998 of University Science Partners, Inc. (a now
dissolved general partnership that funded, developed and
commercialized university and national laboratory
technology). Also a director of Special Metals Corporation.
R. A. Jean (58) ............... Corporate Vice President since August 1999 of AMSTED
1995 Industries Incorporated (a manufacturer of railroad,
construction and building products). President from April
1997 to August 1999, Chief Executive Officer from February
1999 to August 1999, Chief Operating Officer from February
1993 to January 1999 and Executive Vice President from
February 1993 to May 1997 of Varlen Corporation.
TERM EXPIRING IN 2002
G. H. Bodeen (76) ............. Chairman of the Board of the Company since December 1980.
1960 Chief Executive Officer from April 1965 to December 1990.
J. T. Schanck (69) ............ Former Vice Chairman from September 1986 to December 1988 of
1960 Illinois Tool Works Inc. (producer of specialty engineered
products and systems).
TERM EXPIRING IN 2003
W. R. Reum (58) ............... Former Chairman from April 1991 to February 1999 and Chief
1999 Executive Officer from January 1991 to February 1999 of The
Interlake Corporation (designer, manufacturer and
distributor of automotive, aerospace and material handling
products). Also a director of AMSTED Industries
Incorporated.
L. G. Thompson (60) ........... President and Chief Executive Officer of the Company since
1987 January 1991.
------------------------
(1) Dr. Decker and the Company each owns a 17% interest in Thixomat, Inc.
FUNCTIONING OF THE BOARD AND COMMITTEES
The Company's Board of Directors has an executive compensation committee and
an audit committee.
Members of the executive compensation committee are J. T. Schanck
(chairman), G. H. Bodeen and R. F. Decker. The committee reviews the performance
of the Company's Chief Executive Officer, makes recommendations to the full
Board with respect to salary policy and compensation of officers and administers
the 1991 Stock Option Plan for Key Employees. The committee also performs the
B-8
function of a nominating committee, reviewing and making recommendations to the
full Board with respect to candidates for membership on the Board and the
qualifications and responsibilities of members of the Board. The committee will
consider persons brought to its attention by officers, directors and
stockholders. Proposals for nominees may be submitted to the committee at the
address shown on page B-1 above, attention of the Secretary. During 1999, the
committee met twice.
Members of the audit committee are R. A. Jean (chairman), R. F. Decker, and
W. R. Reum, each of whom is an independent director. Among its responsibilities,
the committee reviews (i) audit procedures and the scope of examination by the
Company's independent public accountants, (ii) results of the annual audit by
the Company's independent public accountants, and (iii) internal audit
procedures. It also recommends to the full Board annually the independent public
accountants. During 1999, the committee met once.
The Board met on seven occasions during 1999. In 1999, all incumbent
directors attended at least 75% of the meetings of the Board and of the Board
committees on which they served.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of the Company do not receive any
compensation for serving on the Board. All directors are reimbursed for
out-of-pocket expenses incurred by them in connection with their travel to and
attendance at meetings of the Board of Directors or its committees.
Compensation of non-employee directors consists of an annual retainer fee of
$20,000 and a fee of $1,000 for each Board or committee meeting attended. In
addition, each committee chairman receives $2,000 per year. Under the Company's
1991 Stock Option Plan for Directors, each non-employee director is granted,
upon becoming a director, options to purchase 9,000 shares of the Company's
common stock, exercisable in equal installments on each of the first, second and
third anniversaries of the grant. The Company has, in the past, granted
additional options to purchase 7,500 shares of the Company's common stock to
each non-employee director who had served three years on the Board. These
additional options are exercisable in three equal installments on each of the
first, second and third anniversaries of the grant. The exercise price for
Shares granted under the plan is their fair market value at the time of grant.
Upon his election to the Board in 1999, W. R. Reum received a grant of an option
to purchase 9,000 Shares of Common Stock at an exercise price of $11.25 per
share.
In addition to his consulting fee described in the next paragraph and the
non-employee director fee described in the preceding paragraph, Mr. Bodeen
received a fee of $37,500 as Chairman of the Board in 1999.
Mr. Bodeen retired as an employee of the Company effective January 1, 1991
and entered into an agreement to provide consulting services to the Company. In
consideration for the consulting services, Mr. Bodeen receives annual
compensation of $100,000 until December 31, 2000, and certain perquisites
consistent with the position. The agreement prohibits Mr. Bodeen from competing
with the Company during the term of the agreement.
In addition to his fees as a Director, Chairman of the Board and consultant
described above, Mr. Bodeen receives until December 31, 2000 annual retirement
benefits of $91,017 under the Company's Supplemental Retirement Benefits Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires the Company's executive officers
and directors, and persons who are holders of more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4, and 5 with the Commission and
the Nasdaq, and to furnish the Company with copies of these forms. Based on its
review of the copies of Forms 3, 4, and 5 submitted to the Company, the Company
believes that all the
B-9
executive officers, directors, and persons who hold more than ten percent of the
Common Stock of the Company complied with all filing requirements imposed by
Section 16(a) of the Exchange Act during 1999.
EXECUTIVE COMPENSATION
COMPENSATION OVERVIEW
The Company compensates its executive officers at competitive levels while
at the same time structuring that compensation in a manner that links executive
compensation to the performance of the Company. The following table sets forth
information regarding the compensation of the Company's Chief Executive Officer
and the Company's other executive officers.
SUMMARY COMPENSATION TABLE
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ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING
SALARY BONUS OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) (#)(2)
--------------------------- -------- -------- --------- -----------
L. G. Thompson.................................. 1999 350,016 -- --
President and Chief 1998 300,000 300,000 60,000
Executive Officer 1997 283,344 181,500 25,000
S. S. Penley.................................... 1999 170,000 10,000 --
Executive Vice President and 1998 155,000 133,500 27,000
Chief Financial Officer 1997 149,667 48,625 10,000
M. W. Nelson.................................... 1999 163,000 29,750 --
Senior Group Vice President 1998 155,000 70,950 13,500
1997 149,667 55,825 10,000
P. J. McCarren.................................. 1999 145,000 8,000 --
Group Vice President 1998 135,000 67,500 9,000
1997 115,167 38,975 2,000
------------------------
(1) Cash bonuses.
(2) Options were granted for a term of ten years, subject to earlier termination
in certain events related to termination of employment. Options become
exercisable in four equal annual installments commencing on the first
anniversary of the grant. The exercise price for Shares granted under such
options is their fair market value at the time of grant.
The Company did not grant any options to its executive officers in 1999.
B-10
The following table sets forth the aggregate gross value realized of options
exercised (market price on date of exercise less exercise price) by executive
officers during the fiscal year ended December 31, 1999 and the year-end value
of unexercised options held by the executive officers on December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
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NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON OPTIONS AT 12/31/99 AT 12/31/99
EXERCISE VALUE ------------------------- -------------------------
NAME (#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
L. G. Thompson................. 16,000 $83,750 98,750/43,750 $29,000/$--
S. S. Penley................... -- -- 35,000/19,000 13,125/ --
M. W. Nelson................... -- -- 45,375/11,125 41,500/ --
P. J. McCarren................. 2,000 10,500 11,400/ 6,000 4,625/ --
EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS
In 1999, the Company entered into employment agreements with L. G. Thompson
and S. S. Penley which provide for the payment of compensation and benefits in
the event of termination following a change in control of the Company. Each
executive whose employment is terminated following a change in control will
receive compensation pursuant to the agreement only if the termination was by
the Company without cause or by the executive for good reason (which includes
the termination by the executive for any reason during the 30-day period
following the first anniversary of a change in control). Once effective, the
agreements provide, in addition to unpaid ordinary compensation and benefits, a
lump sum cash payment equal to the executive's annual compensation times 3.0
with respect to L. G. Thompson and 2.5 with respect to S. S. Penley.
In September 2000, the Board approved severance agreements for several
executives, pursuant to which M. W. Nelson would receive one year's salary and
medical benefits if his employment is terminated within one year after a change
in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the executive compensation committee are J. T. Schanck
(chairman), G. H. Bodeen and R. F. Decker. G. H. Bodeen currently holds the
office of Chairman of the Company, and was, until January 1, 1991, the Chief
Executive Officer of the Company.
EXECUTIVE COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's officers are made by the
three-member executive compensation committee of the Board. Each member of the
executive compensation committee is a non-employee director. The committee
establishes the compensation of L. G. Thompson, Chief Executive Officer, based
on its evaluation of Mr. Thompson's performance. It establishes the compensation
of the other officers of the Company in consultation with Mr. Thompson. All
decisions by the executive compensation committee relating to the compensation
of all the Company's officers are reviewed by the full Board. Set forth below is
the report submitted by Messrs. Schanck, Bodeen and Decker in their capacity as
the Board's executive compensation committee.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The executive compensation committee's executive compensation policies are
designed to provide competitive levels of compensation that integrate with the
Company's annual and long-term
B-11
performance goals, reward above-average corporate performance, recognize
individual initiative and achievements and assist the Company in attracting and
retaining qualified executives.
The executive compensation committee also endorses the position that stock
ownership by management and stock-based performance compensation arrangements
help align management's and stockholders' interests in enhancing stockholder
value. The committee has recommended that incentive pay tied to objective
performance of the Company and stock-based incentives should be significant
elements of the compensation for the executive officers.
Section 162(m) of the Internal Revenue Code of 1986, as amended, which
limits the deduction for federal income tax purposes of certain compensation
paid by any publicly held corporation to its chief executive officer and its
four other highest compensated officers to $1 million per each such executive,
is not relevant at the current levels of compensation of the Company's executive
officers.
RELATIONSHIP OF PERFORMANCE UNDER COMPENSATION PLANS
The primary measure of performance utilized under the Company's compensation
plans each year is targeted versus actual annual net earnings for the Company as
a whole. Business unit earnings performance criteria accounted for the rest in
the case of Messrs. Nelson and McCarren. Annual operating targets utilized for
purposes of evaluating annual bonuses are developed by the Company's senior
officers, including Mr. Thompson. They are subsequently approved by the Board of
Directors. In the event that the minimum threshold level of targeted net
earnings is not attained, no cash bonus is paid based on this criteria. In 1999,
the executive compensation committee awarded a cash bonus to Mr. Nelson based on
earnings performance objectives approved by the Board and, in the case of
Messrs. Thompson, Penley and McCarren, based on certain non-quantitative
factors. Mr. Thompson declined the bonus awarded to him.
OTHER COMPENSATION PLANS
At various times in the past, the Company has adopted certain broad-based
employee benefit plans in which executive officers have been permitted to
participate and has adopted certain retirement, life and health insurance plans.
In addition, the Board of Directors has approved a Supplemental Pension Plan
(the "Supplemental Plan"). Under the Supplemental Plan, benefits are payable to
participants to the extent such benefits exceed the maximum benefits payable
under the Lindberg Corporation Pension Plan (the "Pension Plan") (by federal
law, deductibility of benefits is limited to those based on maximum annual
covered compensation of $150,000 per individual). Benefits under these plans are
not directly or indirectly tied to Company performance. Messrs. Thompson, Penley
and Nelson are participants in the Supplemental Plan. (See also "Pension and
Retirement Plans.")
CEO COMPENSATION
The executive compensation committee establishes the annual base salary of
the Chief Executive Officer. In setting the base salary of the Chief Executive
Officer, the committee considers a number of factors, including competitive
compensation data, the individual's experience, responsibility and job
performance. The committee considers the same factors in establishing the Chief
Executive Officer's incentive pay.
Mr. Thompson has been Chief Executive Officer since January 1, 1991. His
compensation consists of annual base salary ($350,000 for 1999), incentive cash
awards and stock option grants.
EXECUTIVE COMPENSATION COMMITTEE
J. T. Schanck (Chairman)
G. H. Bodeen
R. F. Decker
B-12
PENSION AND RETIREMENT PLANS
The executive officers of the Company are covered by the Pension Plan. The
Pension Plan provides retirement benefits for participating employees which are
calculated with reference to years of service and final average monthly
compensation (salary and bonus). In addition, Messrs. Thompson, Penley and
Nelson are participants in the Supplemental Plan. The following table shows
estimated annual benefits payable upon retirement under the Pension Plan and the
Supplemental Plan to employees with the indicated years of service and final
average annual compensation. The estimated annual benefits are based on the
assumption that both plans will continue in effect and that the participant
retires at age 62. If the executive's retirement begins before his reaching age
62, benefits under the Supplemental Plan are reduced by .3% for each month that
the payment precedes his 62nd birthday. Benefits are not subject to reduction
for Social Security benefits. The vesting period for the Supplemental Plan is
ten years and, at December 31, 1999, the credited years of service under the
Supplemental Plan for Messrs. Thompson, Penley and Nelson were 12, 12 and 16,
respectively. Currently, they are the only participants in the Supplemental
Plan. See "Executive Compensation Committee Report on Executive
Compensation--Other Compensation Plans."
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YEARS OF SERVICE
FINAL AVERAGE ----------------------------------------------------------------
COMPENSATION 10 15 20 25 30
------------- -------- -------- -------- -------- --------
$150,000 $ 50,100 $ 75,150 $ 75,150 $ 75,150 $ 75,150
200,000 66,800 100,200 100,200 100,200 100,200
250,000 83,500 125,250 125,250 125,250 125,250
300,000 100,200 150,300 150,300 150,300 150,300
350,000 116,900 175,350 175,350 175,350 175,350
400,000 133,600 200,400 200,400 200,400 200,400
450,000 150,300 225,450 225,450 225,450 225,450
500,000 167,000 250,500 250,500 250,500 250,500
DEFINED CONTRIBUTION PLANS
All of the executive officers are eligible to participate in one of the
Company's 401(k) defined contribution plans. Under these plans, the Company
matches 50% of the participant's contributions up to 4% of compensation.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
The chart below sets forth a comparison of the Company's annual stockholder
return with the annual stockholder return of (i) the Wilshire Next 1750 Universe
index (an index of the stocks of 1,750 companies ranked 751 to 2,500 by market
capitalization in the Wilshire 5000 Total Market Index), and (ii) a peer group
of publicly-traded companies that are similar in size and produce products and
perform services similar to those of the Company. The companies in the peer
group are Ampco-Pittsburgh Corporation, Steel Technologies Inc. and
Fansteel Inc., and each company's contribution to the peer group's total value
is weighted based on that company's market capitalization. The chart is based on
an investment of $100 on December 30, 1994, and assumes that all dividends were
reinvested. The chart is not an indicator of the future performance of the
Company. Thus, it should not be used to predict the future performance of the
Company's stock. The chart and related data were furnished by Wilshire
Associates, a Santa Monica, California-based financial and investment firm.
B-13
FIVE-YEAR CUMULATIVE TOTAL RETURNS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
[Download Table]
LIND- PEER GROUP- WILSHIRE
BERG
Corporation Metal Processors Next 1750
12/30/94 $100 $100 $100
12/29/95 $112 $87 $130
12/31/96 $171 $108 $151
12/31/97 $265 $134 $187
12/31/98 $164 $80 $188
12/31/99 $144 $104 $236
Total returns assume dividends reinvested on ex-date.
[Enlarge/Download Table]
12/30/94 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
Lindberg Corporation............................... $100 $112 $171 $265 $164 $144
Peer Group--Metal Processors....................... $100 $ 87 $108 $134 $ 80 $104
Wilshire Next 1750................................. $100 $130 $151 $187 $188 $236
B-14
Dates Referenced Herein and Documents Incorporated by Reference
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