OFFER TO PURCHASE FOR CASH
23,501,260 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
AMERICAN BANKERS INSURANCE GROUP, INC.
at
$58.00 Net Per Share
by
SEASON ACQUISITION CORP.
a wholly owned subsidiary of
CENDANT CORPORATION
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THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, FEBRUARY 25, 1998,
UNLESS THE OFFER IS EXTENDED.
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THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A
NUMBER OF COMMON SHARES WHICH, TOGETHER WITH SHARES OWNED BY CENDANT
CORPORATION ("PARENT") AND SEASON ACQUISITION CORP., A WHOLLY OWNED
SUBSIDIARY OF PARENT ("PURCHASER"), CONSTITUTE AT LEAST 51% OF THE COMMON
SHARES OUTSTANDING ON A FULLY DILUTED BASIS, (2) PURCHASER BEING SATISFIED,
IN ITS SOLE DISCRETION, THAT THE PROVISIONS OF SECTION 607.0901(2) OF THE
FLORIDA BUSINESS CORPORATION ACT ARE INAPPLICABLE TO THE PROPOSED MERGER
DESCRIBED HEREIN, (3) PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT
THE PROVISIONS OF SECTION 607.0902 OF THE FLORIDA BUSINESS CORPORATION ACT
CONTINUE TO BE INAPPLICABLE TO THE ACQUISITION OF COMMON SHARES PURSUANT TO
THE OFFER, (4) THE PURCHASE OF COMMON SHARES PURSUANT TO THE OFFER HAVING
BEEN APPROVED FOR PURPOSES OF RENDERING THE SUPERMAJORITY VOTE REQUIREMENT OF
ARTICLE VIII OF AMERICAN BANKERS INSURANCE GROUP, INC.'S (THE "COMPANY")
THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION INAPPLICABLE TO PARENT
AND PURCHASER, (5) THE PREFERRED STOCK PURCHASE RIGHTS HAVING BEEN REDEEMED
BY THE BOARD OF DIRECTORS OF THE COMPANY OR PURCHASER BEING SATISFIED, IN ITS
SOLE DISCRETION, THAT THE RIGHTS ARE INVALID OR OTHERWISE INAPPLICABLE TO THE
OFFER AND THE PROPOSED MERGER, (6) THE LOCKUP OPTION HELD BY AMERICAN
INTERNATIONAL GROUP, INC. TO PURCHASE UP TO 19.9% OF THE OUTSTANDING COMMON
SHARES HAVING BEEN TERMINATED OR INVALIDATED WITHOUT ANY COMMON SHARES HAVING
BEEN ISSUED THEREUNDER, AND (7) PARENT AND PURCHASER HAVING OBTAINED ALL
INSURANCE REGULATORY APPROVALS NECESSARY FOR THEIR ACQUISITION OF CONTROL
OVER THE COMPANY'S INSURANCE SUBSIDIARIES ON TERMS AND CONDITIONS
SATISFACTORY TO PURCHASER, IN ITS SOLE DISCRETION. SEE SECTION 14.
THE OFFER IS NOT CONDITIONED UPON PURCHASER OBTAINING FINANCING.
IMPORTANT
PARENT INTENDS TO CONTINUE TO SEEK TO NEGOTIATE WITH THE COMPANY WITH
RESPECT TO THE ACQUISITION OF THE COMPANY BY PARENT OR PURCHASER. PURCHASER
RESERVES THE RIGHT TO AMEND THE OFFER (INCLUDING AMENDING THE NUMBER OF
SHARES TO BE PURCHASED, THE PURCHASE PRICE AND THE PROPOSED MERGER
CONSIDERATION) UPON ENTERING INTO A MERGER AGREEMENT WITH THE COMPANY OR TO
NEGOTIATE A MERGER AGREEMENT WITH THE COMPANY NOT INVOLVING A TENDER OFFER
PURSUANT TO WHICH PURCHASER WOULD TERMINATE THE OFFER AND THE COMMON SHARES
(AS DEFINED HEREIN) WOULD, UPON CONSUMMATION OF SUCH MERGER, BE CONVERTED
INTO CASH, COMMON STOCK OF PARENT AND/OR OTHER SECURITIES IN SUCH AMOUNTS AS
ARE NEGOTIATED BY PARENT AND THE COMPANY.
Any shareholder desiring to tender all or any portion of such
shareholder's Common Shares should either (i) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in
the Letter of Transmittal, have such shareholder's signature thereon
guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or
deliver the Letter of Transmittal (or such facsimile thereof) and any other
required documents to the Depositary (as defined herein) and either deliver
the certificates for such Common Shares and, if separate, the certificates
representing the associated Rights (as defined herein) to the Depositary
along with the Letter of Transmittal (or a facsimile thereof) or deliver such
Common Shares (and Rights, if applicable) pursuant to the procedure for
book-entry transfer set forth in Section 3 prior to the expiration of the
Offer or (ii) request such shareholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such
shareholder. A shareholder having Common Shares (and, if applicable, Rights)
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust
company or other nominee if such shareholder desires to tender such Common
Shares (and, if applicable, Rights). Unless and until Purchaser declares that
the Rights Condition (as defined herein) is satisfied, shareholders will be
required to tender one-half of one Right for each Common Share tendered in
order to effect a valid tender of such Common Share.
Any shareholder who desires to tender Common Shares (and, if applicable,
Rights) and whose certificates for such shares (and, if applicable, Rights)
are not immediately available, or who cannot comply with the procedures for
book-entry transfer described in this Offer to Purchase on a timely basis,
may tender such Common Shares (and, if applicable, Rights) by following the
procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Managers at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional
copies of this Offer to Purchase, the Letter of Transmittal or other tender
offer materials may be obtained from the Information Agent.
The Dealer Managers for the Offer are:
XXXXXX XXXXXXXX XXXXXXX XXXXX & CO.
January 27, 1998
TABLE OF CONTENTS
PAGE
--------
INTRODUCTION.............................................................................. 1
1.Terms of the Offer; Expiration Date..................................................... 9
2.Acceptance for Payment and Payment for Shares; Proration................................ 11
3.Procedures for Tendering Common Shares.................................................. 12
4.Withdrawal Rights....................................................................... 15
5.Certain Federal Income Tax Consequences................................................. 16
6.Price Range of Shares; Dividends........................................................ 19
7.Effect of the Offer on the Market for the Common Shares; Exchange Listing and Exchange
Act Registration; Margin Regulations................................................... 20
8.Certain Information Concerning the Company.............................................. 21
9.Certain Information Concerning Purchaser and Parent..................................... 22
10.Source and Amount of Funds............................................................. 24
11.Background of the Offer; Contacts with the Company..................................... 25
12.Purpose of the Offer and the Merger; Plans for the Company; Certain Considerations .... 30
13.Dividends and Distributions............................................................ 35
14.Conditions of the Offer................................................................ 36
15.Certain Legal Matters; Regulatory Approvals; Certain Litigation........................ 39
16.Fees and Expenses...................................................................... 45
17.Miscellaneous.......................................................................... 46
SCHEDULE I................................................................................ S-1
SCHEDULE II............................................................................... S-6
TO THE HOLDERS OF COMMON STOCK OF AMERICAN BANKERS INSURANCE GROUP, INC.:
INTRODUCTION
Season Acquisition Corp. ("Purchaser"), a New Jersey corporation and a
wholly owned subsidiary of Cendant Corporation, a Delaware corporation
("Parent"), hereby offers to purchase 23,501,260 outstanding shares of common
stock, par value $1.00 per share (the "Common Shares"), of American Bankers
Insurance Group, Inc., a Florida corporation (the "Company"), including the
associated Series A Participating Preferred Stock Purchase Rights (including
any successors thereto, the "Rights") issued pursuant to the Rights
Agreement, dated as of February 24, 1988, as amended and restated as of
November 14, 1990, between the Company and ChaseMellon Shareholder Services,
L.L.C., as successor Rights Agent (as such agreement may be further amended
and including any successor agreement, the "Rights Agreement"), at a price of
$58.00 per Common Share, net to the seller in cash, without interest thereon
(the "Offer Price"), upon the terms and subject to the conditions set forth
in this Offer to Purchase and in the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer"). Unless the
context otherwise requires, all references to Common Shares shall include the
associated Rights, and all references to the Rights shall include the
benefits that may inure to holders of the Rights pursuant to the Rights
Agreement, including the right to receive any payment due upon redemption of
the Rights.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Common Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses
of Xxxxxx Brothers Inc. and Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated, as Dealer Managers (the "Dealer Managers"), Continental Stock
Transfer & Trust Company, as Depositary (the "Depositary"), and Innisfree M&A
Incorporated, as Information Agent (the "Information Agent"), incurred in
connection with the Offer. See Section 16.
According to publicly available information, a certain number of
outstanding Common Shares are owned of record by Xxxxxxx Xxxxx Trust Co., as
trustee (the "ESOP Trustee") under the Company's Leveraged Employee Stock
Ownership Plan (the "ESOP") and, accordingly, only the ESOP Trustee can
effect a valid tender of such Common Shares.
The purpose of the Offer and the proposed second-step merger is to enable
Parent to acquire control of, and ultimately the entire equity interest in,
the Company. The Offer, as the first step in the acquisition of the Company,
is intended to facilitate the acquisition of a majority of the outstanding
Common Shares. Parent intends to continue to seek to negotiate with the
Company with respect to the acquisition of the Company by Parent or
Purchaser. To date, Xxxxxx has been unable to so negotiate with the Company
(see the discussion regarding the "Fiduciary Sabbatical Provision" below).
Parent currently intends, as soon as practicable following consummation of
the Offer, to seek to have the Company consummate a merger with and into a
direct wholly owned subsidiary of Parent with such subsidiary continuing as
the surviving corporation (the "Proposed Merger"), pursuant to which each
then remaining Common Share outstanding (other than Common Shares owned by
Parent or any of its wholly owned subsidiaries, Common Shares held in the
treasury of the Company, and if shareholder appraisal rights are available
with respect to Common Shares, Common Shares held by shareholders who perfect
appraisal rights under the Florida Business Corporation Act (the "Florida
Corporation Act")) would be converted into that number of shares of common
stock, par value $.01 per share, of Parent ("Parent Common Stock") having a
value equal to the Offer Price (as determined as of the time of the Proposed
Merger). In addition, pursuant to the Proposed Merger, each of the then
outstanding shares of the $3.125 Series B Cumulative Convertible Preferred
Stock, no par value, of the Company (the "Preferred Shares" and, together
with the Common Shares, the "Shares") would be converted into one share of a
new series of convertible preferred stock of Parent having substantially
similar terms, except that such shares would be convertible into shares of
Parent Common Stock in accordance with the terms of the Preferred Shares. In
general, in the event that the Proposed Merger is consummated as described
above, (i) gain or loss will be recognized by a shareholder of the Company
who receives solely cash in exchange for Common Shares pursuant to the Offer
and who does not exchange any Common Shares pursuant to the Proposed Merger,
(ii) no gain or
loss will be recognized by a shareholder of the Company who does not exchange
any Common Shares pursuant to the Offer and who receives solely shares of
Parent Common Stock in exchange for Common Shares pursuant to the Proposed
Merger, and (iii) a shareholder of the Company who receives a combination of
cash and Parent Common Stock in exchange for such shareholder's Common Shares
pursuant to the Offer and the Proposed Merger will not recognize loss but
will recognize (i.e., pay tax on) gain realized, if any, to the extent of the
cash received. See Section 5.
Preferred Shares may not be tendered pursuant to the Offer. In the event
that a holder of Preferred Shares wants to tender such shares pursuant to the
Offer, such holder must first convert the Preferred Shares into Common Shares
pursuant to the terms of the Preferred Shares and then tender such Common
Shares pursuant to the Offer.
Over the past several years, representatives of Parent (formerly known as
CUC International Inc. ("CUC")), including Xxxx X. Xxxxxxx, Xxxxxx's
Executive Vice President and Chief Marketing Officer, and representatives of
the Company, including Xxxxxx X. Xxxxxx, the Company's Vice Chairman,
President and Chief Executive Officer, met on various occasions to discuss
possible strategic marketing alliances. At a meeting in May 1997, Xx. Xxxxxxx
and Xx. Xxxxxx met and discussed CUC's interest in acquiring the Company and
the existence of certain financial issues relating to a possible combination.
In the Summer of 1997, representatives of HFS Incorporated ("HFS")
separately identified the Company as a possible acquisition candidate. HFS's
interest in the Company increased as a result of its decision to acquire
Providian Auto & Home Insurance Company and its property and casualty
subsidiaries, which predominately market personal automobile insurance
through direct marketing channels.
During the course of planning for the then-pending merger of CUC and HFS,
their mutual interest in the Company was identified and scheduled to be
pursued following completion of the merger.
On December 3, 1997, a significant shareholder of the Company indicated to
the Senior Vice President -- Acquisitions of HFS that it believed the Company
was considering a sale transaction. This information was conveyed to Xx.
Xxxxxxx, who attempted on several occasions to contact Xx. Xxxxxx to inquire
as to its validity.
Xx. Xxxxxxx ultimately spoke with Xx. Xxxxxx in mid-December 1997 and
described the merger of CUC and HFS which created Parent and emphasized that
the resulting size and scale of Parent had eliminated the financial issues
relating to an acquisition of the Company which they had previously
discussed. Xx. Xxxxxxx inquired whether the Company was actively engaged in
discussions relating to an acquisition, and indicated that, if the Company
was so engaged, representatives of Parent would like to meet immediately with
the Company's representatives to discuss Xxxxxx's strong interest in
exploring such a transaction. In response to Xx. Xxxxxx'x assurances that the
Company was not actively engaged in acquisition discussions, Xx. Xxxxxxx
agreed to forward to Xx. Xxxxxx information regarding Parent and to contact
Xx. Xxxxxx to schedule a meeting in early January to discuss a possible
acquisition transaction.
On December 22, 1997, the Company and American International Group, Inc.,
a Delaware corporation ("AIG"), announced that they had entered into a
definitive merger agreement (including all amendments thereto, the "AIG
Merger Agreement") pursuant to which the Company would be sold to AIG through
the Proposed AIG Merger (as defined below), which would be consummated
following the receipt of required regulatory and shareholder approvals and
satisfaction of various other conditions.
Following a series of meetings among representatives of Parent and
Xxxxxx's outside financial advisors and legal counsel and a meeting of
Parent's Executive Committee, on January 26, 1998, Parent's Board of
Directors (the "Parent Board") met to review its strategic options in light
of the announcement of the Proposed AIG Merger. Because the Parent Board
believes that a combination of Parent and the Company would offer compelling
benefits to both companies, their shareholders and their other
constituencies, it determined that Parent should make a competing offer for
the Company.
On January 27, 1998, Parent submitted to the Company Board a written
proposal for the acquisition of the Company by Purchaser pursuant to the
Offer and the Proposed Merger and announced its intention to commence the
Offer. In its proposal, Parent indicated that its strong preference would be
to enter into
2
a merger agreement with the Company containing substantially the same terms
and conditions as the AIG Merger Agreement but at the significantly higher
value reflected in the Offer Price. However, the Fiduciary Sabbatical
Provision (as defined below) purports to prohibit the Company from discussing
Parent's proposal for 120 days from the date of the AIG Merger Agreement.
Also on January 27, 1998, Parent and Purchaser commenced litigation against
the Company, substantially all of the members of the Company's Board of
Directors (the "Company Board") and AIG in the United States District Court
for the Southern District of Florida (the "Florida Litigation") seeking relief
relating to various matters, including the Company Board's approval of the
AIG Merger Agreement, actions taken by the Company Board in furtherance of
the Proposed AIG Merger and AIG's failure to make certain disclosures
required by Federal securities laws. See Section 15.
According to the Current Report on Form 8-K filed by the Company with the
Securities and Exchange Commission (the "SEC") on January 13, 1998 (the
"Company January 13 Form 8-K"), the Company entered into the AIG Merger
Agreement which provides that, following the satisfaction or waiver of
certain conditions, the Company would be merged with and into a subsidiary of
AIG, with the separate corporate existence of the Company ceasing and the AIG
subsidiary continuing as the surviving corporation (the "Proposed AIG
Merger"). Pursuant to the Proposed AIG Merger, each outstanding Common Share
would be converted, based upon elections made by the respective holders and
subject to certain limitations, into the right to receive (i) $47.00 in cash,
without interest, (ii) a portion of a share of common stock, par value $2.50
per share, of AIG (the "AIG Common Stock") with a value equal to $47.00 (as
determined based on the average closing prices of the AIG Common Stock on the
New York Stock Exchange for the ten trading days ending on the third trading
day prior to the date that the Proposed AIG Merger is consummated) or (iii)
in certain circumstances, a combination of cash and shares of AIG Common
Stock with an aggregate value equal to $47.00. In addition, pursuant to the
Proposed AIG Merger, each of the then outstanding Preferred Shares would be
converted into one share of AIG preferred stock having substantially similar
terms, except that such shares would be convertible into shares of AIG Common
Stock.
The obligations of AIG and the Company to effect the Proposed AIG Merger
are subject to various conditions, including the approval of the Proposed AIG
Merger by the holders of at least a majority of the outstanding Common Shares
voting separately as a class (the "Common Shareholder Approval") and by the
holders of at least a majority of the outstanding Preferred Shares voting
separately as a class (the "Preferred Shareholder Approval") and the receipt
of all required regulatory consents, registrations, approvals, permits and
authorizations. In the event that the Preferred Shareholder Approval is not
obtained or AIG reasonably determines that such approval is not likely to be
obtained, the AIG Merger Agreement provides that the AIG Merger Agreement
would be amended to change the structure of the Proposed AIG Merger such that
a subsidiary of AIG would merge with and into the Company with the Company
continuing as the surviving corporation. Upon consummation of such revised
Proposed AIG Merger, the Preferred Shares would remain outstanding pursuant
to their existing terms (except that they would be convertible into shares of
AIG Common Stock). Unlike the Proposed AIG Merger initially contemplated in
the AIG Merger Agreement, the revised Proposed AIG Merger would not require
any approval of holders of Preferred Shares and would be a fully taxable
transaction, with the result that holders of Common Shares would pay Federal
income tax on all consideration, whether cash or shares of AIG Common Stock,
that they received in the revised Proposed AIG Merger to the extent of any
gain they may have on their Common Shares.
In connection with the execution of the AIG Merger Agreement, the Company
and AIG entered into an option agreement (the "AIG Lockup Option Agreement")
pursuant to which the Company granted to AIG an option (the "AIG Lockup
Option"), exercisable in certain events, to purchase up to approximately
8,265,626 Common Shares (which represented 19.9% of the outstanding number of
Common Shares at the time the AIG Lockup Option Agreement was entered into)
at an exercise price of $47.00 per Common Share, subject to adjustment as set
forth therein. The AIG Lockup Option may not be exercised prior to AIG's
receipt of applicable regulatory approvals, including insurance regulatory
approvals.
In the AIG Merger Agreement, the Company has agreed to a provision (the
"Fiduciary Sabbatical Provision") which provides that the Company and its
subsidiaries, officers, directors, employees, agents
3
and representatives will not, directly or indirectly, (i) initiate, solicit,
encourage, or otherwise facilitate any inquiries or the making of any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation or similar transaction involving, or any purchase of 15% or
more of the assets or any equity securities of, the Company or any of its
subsidiaries (an "Acquisition Proposal"), or (ii) engage in any negotiations
concerning, provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal, except that, after 120 days have elapsed since the date
of the AIG Merger Agreement and if the Proposed AIG Merger shall not have
been approved by the requisite vote of the Company's shareholders by such
date, the Company may, in certain limited circumstances, engage in
negotiations or discussions with any person who has made an unsolicited bona
fide superior Acquisition Proposal.
The AIG Merger Agreement provides that under certain circumstances in
which the AIG Merger Agreement is terminated, the Company will have an
obligation to pay a cash fee of $66 million to AIG (the "AIG Termination
Fee"). However, pursuant to the terms of the AIG Lockup Option Agreement,
AIG's total profit under the AIG Lockup Option Agreement (including the
amount of the AIG Termination Fee) is limited to $66 million.
In connection with the execution of the AIG Merger Agreement, AIG entered
into a Voting Agreement (the "AIG Voting Agreement") with X. Xxxx Xxxxxx,
Chairman of the Board of the Company, and Xxxxxx X. Xxxxxx, Vice Chairman,
President and Chief Executive Officer of the Company, pursuant to which
Messrs. Xxxxxx and Xxxxxx have agreed (i) to vote the approximately 8.2% of
the outstanding Company Shares beneficially owned by them (A) in favor of
adopting the AIG Merger Agreement and approving the Proposed AIG Merger and
(B) against any action or proposal that would compete with or could serve to
materially interfere with, delay, discourage, adversely affect or inhibit the
timely consummation of the Proposed AIG Merger, and (ii) upon request, to
grant to AIG an irrevocable proxy with respect to such Common Shares.
The foregoing description of the AIG Merger Agreement, the AIG Lockup
Option Agreement and the AIG Voting Agreement is qualified in its entirety by
reference to the full text of the AIG Merger Agreement, the AIG Lockup Option
Agreement and the AIG Voting Agreement, copies of which have been included by
the Company as exhibits to the Company January 13 Form 8-K and may be
obtained in the manner described in Section 8 (except that copies may not be
available at regional offices of the SEC).
As indicated in Xxxxxx's proposal, Xxxxxx intends to continue to seek to
negotiate with the Company with respect to the acquisition of the Company by
Parent or Purchaser, whether pursuant to the Offer and the Proposed Merger,
or otherwise. If such negotiations result in a definitive merger agreement
between the Company and Parent or Purchaser, the consideration to be received
by holders of Common Shares could include or consist of consideration other
than cash. Accordingly, such negotiations could result in, among other
things, amendment or termination of the Offer and submission of a different
acquisition proposal to the Company's shareholders for their approval. See
Section 12 and Section 14.
In connection with the Offer and during its pendency, or in the event the
Offer is terminated or not consummated, or after the expiration of the Offer
and pending the consummation of the Proposed Merger, in accordance with
applicable law and subject to the terms of any merger agreement that it may
enter into with the Company, Parent (alone or through affiliates) may explore
any and all options which may be available to it. In this regard, Xxxxxx
intends to solicit proxies against the adoption of the Proposed AIG Merger at
any meeting of the holders of Common Shares and/or Preferred Shares called
for such purpose and intends to promptly file preliminary proxy materials
with the SEC concerning such solicitation. Parent may also determine, whether
or not the Offer is then pending, to conduct a proxy contest in connection
with the Company's 1998 annual meeting of shareholders seeking to remove the
current members of the Company Board and elect a new slate of directors
designated by Parent. See Section 15. In addition, Parent may seek to acquire
Preferred Shares through a tender offer or exchange offer, upon such terms
and at such prices as it may determine, and after expiration or termination
of the Offer, Parent may seek to acquire Preferred Shares and additional
Common Shares, through open market
4
purchases, privately negotiated transactions, a tender offer or exchange
offer or otherwise, upon such terms and at such prices as it may determine,
which, in the case of Common Shares, may be more or less than the price to be
paid per Common Share pursuant to the Offer and could be for cash or other
consideration.
The Offer does not constitute a solicitation of proxies for any meeting of
the Company's shareholders. Any such solicitation which Parent or Purchaser
might make would be made only pursuant to separate proxy materials complying
with the requirements of Section 14(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). In addition, the Offer does not
constitute an offer to sell or solicitation of an offer to buy any securities
of Parent. Such an offer may be made only pursuant to a prospectus pursuant
to the Securities Act of 1933, as amended.
CERTAIN CONDITIONS TO THE OFFER
THE MINIMUM CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED UPON THERE
BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF
THE OFFER A NUMBER OF COMMON SHARES WHICH, TOGETHER WITH SHARES OWNED BY
PARENT AND PURCHASER, CONSTITUTE AT LEAST 51% OF THE COMMON SHARES
OUTSTANDING ON A FULLY DILUTED BASIS (I.E., AS THOUGH ALL OPTIONS OR OTHER
SECURITIES CONVERTIBLE INTO OR EXERCISABLE OR EXCHANGEABLE FOR COMMON SHARES
HAD BEEN SO CONVERTED, EXERCISED OR EXCHANGED) (THE "MINIMUM CONDITION").
According to the AIG Merger Agreement, as of the close of business on
November 3, 1997, (i) 41,535,807 Common Shares were issued and outstanding
and (ii) approximately 5,630,610 (but no more than 5,664,193) Common Shares
were subject to issuance pursuant to various stock option and incentive plans
of the Company (the "Incentive Shares") and pursuant to the conversion of up
to 2,300,000 issued and outstanding Preferred Shares and the Company's
convertible debenture bonds due May 24, 1999 (collectively with the Preferred
Shares, the "Company Convertible Securities"). Although, according to the AIG
Lockup Option Agreement, 8,265,626 Common Shares have been reserved for
issuance in the event AIG exercises, in whole or in part, the AIG Lockup
Option, the Offer is conditioned upon the AIG Lockup Option having been
terminated or invalidated without any Common Shares having been issued
thereunder.
Based on the foregoing and disregarding for such purposes the 8,265,626
Common Shares purportedly issuable pursuant to the AIG Lockup Option
Agreement, Purchaser believes there are approximately 47,200,000 Common
Shares outstanding on a fully diluted basis. Parent currently owns an
aggregate of 371,200 Common Shares and an aggregate of 99,900 Preferred
Shares (which are convertible in 199,540 Common Shares), which were recently
acquired in open-market transactions. See Schedule II hereto. Accordingly,
Xxxxxxxxx believes that the Minimum Condition would be satisfied if an
aggregate of 23,501,260 Common Shares (equal to the number of Common Shares
that Purchaser is seeking in the Offer) are either validly tendered pursuant
to the Offer or owned by Parent, if the AIG Lockup Option is terminated or
invalidated without any Common Shares having been issued thereunder. For
purposes of the Offer, "fully diluted basis" assumes (i) no dilution due to
Rights, (ii) no Common Shares are issued or validly issuable under the AIG
Lockup Option, (iii) the issuance of all of the Incentive Shares, (iv) the
conversion of all Company Convertible Securities into Common Shares, (v) no
Common Shares were issued or acquired by the Company after November 3, 1997
(other than Common Shares issued pursuant to clauses (iii) and (iv) above)
and no options, warrants, rights or other securities convertible into or
exercisable or exchangeable for Common Shares were issued or granted after
December 21, 1997 other than the AIG Lockup Option Agreement, and (vi) as of
the date of purchase the Company has no other obligations to issue Common
Shares or other securities convertible into or exercisable for Common Shares.
In the Florida Litigation, Parent and Purchaser are requesting that the
court invalidate and/or enjoin the AIG Lockup Option in the event that it is
not revoked, waived or otherwise rendered unexerciseable by the Company
and AIG.
THE AFFILIATED TRANSACTION CONDITION. CONSUMMATION OF THE OFFER IS
CONDITIONED UPON PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE
PROVISIONS OF THE SECTION 607.0901(2) OF THE FLORIDA CORPORATION ACT (THE
"AFFILIATED TRANSACTION STATUTE") ARE INAPPLICABLE TO THE PROPOSED MERGER
(THE "AFFILIATED TRANSACTION CONDITION").
5
The Proposed Merger, including the timing and details thereof, is subject
to, among other things, the provisions of the Florida Corporation Act,
including the Affiliated Transaction Statute. In general, the Affiliated
Transaction Statute provides that the approval of the holders of two-thirds
of the voting shares of a corporation, other than the shares owned by an
"Interested Shareholder" (defined generally as a person beneficially owning
10% or more of a corporation's outstanding voting shares), would be required
in order to effectuate a "Business Combination" (defined to include a variety
of transactions including mergers) with an Interested Shareholder. However,
the foregoing special voting requirement does not apply in certain
circumstances, including if the Business Combination is approved by a
majority of the corporation's disinterested directors. See Section 15.
Accordingly, the Affiliated Transaction Condition would be satisfied if
(i) the Company Board approves the Proposed Merger, or (ii) Purchaser is
satisfied, in its sole discretion, that the Affiliated Transaction Condition
is otherwise inapplicable to the Proposed Merger for any reason, including,
without limitation, those specified in the Affiliated Transaction Statute.
In the Florida Litigation, Parent and Purchaser are requesting that the
court enjoin the Proposed AIG Merger unless and until a majority of the
Company's "disinterested directors" approve the Proposed Merger in accordance
with the Affiliated Transaction Statute.
THE CONTROL SHARE CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED UPON
PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE PROVISIONS OF
SECTION 607.0902 OF THE FLORIDA CORPORATION ACT (THE "CONTROL SHARE STATUTE")
CONTINUE TO BE INAPPLICABLE TO THE ACQUISITION OF COMMON SHARES PURSUANT TO
THE OFFER.
The Control Share Statute provides, in general, that shares of an "issuing
public corporation," such as the Company, acquired in a "control share
acquisition" will not have voting rights unless that issuing public
corporation's board of directors approves the acquisition of such shares or
voting rights for such shares are authorized at an annual or special meeting
of the shareholders of the issuing public corporation by each class or series
entitled to vote separately on the proposal by a majority of all the votes
entitled to be cast by the class or series, excluding all "interested shares"
(generally, those shares held by the acquiring person). See Section 15.
However, the Control Share Statute permits a corporation's by-laws to
provide that the Control Share Statute does not apply to control share
acquisitions of the shares of such corporation. Section 4 of Article V of the
Company's Amended and Restated By-Laws (the "Company By-Laws"), provides that
the Control Share Statute, and any amendments thereto, does not apply to
control share acquisitions of shares of stock of the Company occurring on or
after November 14, 1990. Accordingly, unless such Company By-Law is repealed
or amended, Purchaser believes that the Control Share Statute will continue
to be inapplicable to Purchaser's acquisition of Common Shares pursuant to
the Offer.
The foregoing description of the Company By-Laws is qualified in its
entirety by reference to the full text of the Company By-Laws, a copy of
which has been filed by the Company as an exhibit to documents filed with the
SEC and may be obtained in the manner described in Section 8 (except that
copies may not be available at regional offices of the SEC).
THE SUPERMAJORITY VOTE CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED
UPON THE PURCHASE OF COMMON SHARES PURSUANT TO THE OFFER HAVING BEEN APPROVED
FOR PURPOSES OF RENDERING THE SUPERMAJORITY VOTE REQUIREMENT OF PARAGRAPH A
OF ARTICLE VIII OF THE COMPANY'S THIRD AMENDED AND RESTATED ARTICLES OF
INCORPORATION (THE "COMPANY ARTICLES") INAPPLICABLE TO PARENT AND PURCHASER
(THE "SUPERMAJORITY VOTE CONDITION").
Paragraph A of Article VIII of the Company Articles provides, among other
things, that in addition to any affirmative vote required by law, the
affirmative vote of the holders of at least 85% of the outstanding shares of
capital stock of the Company entitled to vote generally in the election of
directors ("voting shares"), including the affirmative vote of at least 50%
of the voting shares held by shareholders other than any 30% Shareholder (as
defined below), shall be required to effectuate certain business combination
transactions, including, among others, a merger, sale of assets, sale of
shares and reclassification of securities involving the corporation with any
other person owning beneficially, directly
6
or indirectly, 30% or more of the voting shares (a "30% Shareholder").
However, this supermajority vote requirement does not apply in certain
circumstances, including if the Company Board has, by at least a 75% vote of
the directors then in office, (i) given prior approval to the 30%
Shareholder's acquisition of 30% or more of the outstanding Common Shares or
(ii) approved the business combination prior to the 30% Shareholder having
attained its 30% holding.
Accordingly, the Supermajority Vote Condition would be satisfied if the
Company Board, by at least a 75% vote of the directors then in office,
approves either Purchaser's acquisition of Common Shares pursuant to the
Offer or the Proposed Merger prior to the consummation of the Offer.
The foregoing description of the Company Articles is qualified in its
entirety by reference to the full text of the Company Articles, a copy of
which has been filed by the Company as an exhibit to documents filed with the
SEC and may be obtained in the manner described in Section 8 (except that
copies may not be available at regional offices of the SEC).
In the Florida Litigation, Parent and Purchaser are requesting that the
court enjoin the Proposed AIG Merger unless and until the Company Board, by at
least a 75% vote of the directors then in office, has given approval to the
Offer and/or the Proposed Merger.
THE RIGHTS CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED UPON THE
RIGHTS HAVING BEEN REDEEMED BY THE COMPANY BOARD OR PURCHASER BEING
SATISFIED, IN ITS SOLE DISCRETION, THAT THE RIGHTS ARE INVALID OR OTHERWISE
INAPPLICABLE TO THE OFFER AND THE PROPOSED MERGER (THE "RIGHTS CONDITION").
Pursuant to the terms of the Rights Agreement, the Rights will expire at
the close of business on March 10, 1998 unless earlier redeemed by the
Company as described below. Pursuant to the terms of the AIG Merger
Agreement, the Company has agreed that, upon the request of AIG, it will take
all actions necessary to extend the term of the Rights Agreement or to enter
into a new Rights Agreement. In the event either such action is taken by the
Company, the Rights Condition shall be deemed applicable to the Rights
Agreement as so extended or to such new Rights Agreement and the related new
Rights, as the case may be. In the event that the Company adopts a new Rights
Agreement prior to the expiration or consummation of the Offer, all
references to the Rights Agreement and the Rights in this Offer to Purchase,
the related Letter of Transmittal and in the other tender offer materials
shall be deemed to be references to such new Rights Agreement and the related
Rights issued thereunder.
The following is based upon the Form 8-K, dated November 14, 1990 (the
"Company November 14 Form 8-K") , and the Form 8-A, dated as of June 19, 1997
(the "Company Form 8-A"), filed by the Company with the SEC:
On February 24, 1988, the Company Board declared a dividend distribution
of one Right for each Common Share and executed the Rights Agreement. On
November 14, 1990, the Company adopted certain amendments to the Rights
Agreement. In addition, as a result of the two-for-one split in the Common
Shares paid on September 12, 1997 (the "Stock Split"), the aggregate number
of Rights associated with the Common Shares then outstanding, or issued or
delivered after such date but prior to the Distribution Date, was adjusted so
that one-half of one Right is associated with each Common Share. Under the
Rights Agreement, subject to the terms and conditions thereof, each Right
entitles the holder to purchase one share of Series A Participating Preferred
Stock, no par value, of the Company ("Series A Preferred Stock") at an
exercise price of $31.00, subject to adjustment.
Under the Rights Agreement, until the close of business on the
Distribution Date (which is defined as the earlier of (i) 10 days following a
public announcement that a person or group of affiliated or associated
persons (the "Acquiring Person") has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding Common Shares
and (ii) 10 business days following the commencement of a tender offer or
exchange offer which would result in a person or group beneficially owning
15% or more of the outstanding Common Shares), the Rights will be evidenced
by the certificates evidencing Common Shares (the "Common Share
Certificates") and will be transferred with and only with Common Share
Certificates. As soon as practicable after the Distribution Date,
certificates evidencing the Rights (the "Rights Certificates") will be mailed
to holders of record of the Common Shares as of the close of business on the
Distribution Date, and thereafter the separate Rights Certificates alone will
evidence the Rights. The Rights are not exercisable until the Distribution
Date.
7
At any time until 10 days following the Distribution Date, the Company may
redeem the Rights in whole, but not in part, at a price of $.01 per Right
(the "Redemption Price"). The redemption period may be extended by the
Company at any time prior to the expiration of such period. After the
redemption period has expired, the Company's right of redemption may be
reinstated if an Acquiring Person reduces its beneficial ownership to 10% or
less of the outstanding Common Shares in one or more transactions not
involving the Company and there are no other persons who are Acquiring
Persons. Immediately upon the action of the Company Board ordering redemption
of the Rights, the Rights will terminate, and the only right to which the
holders of Rights will be entitled will be the right to receive the
Redemption Price.
Pursuant to the AIG Merger Agreement, the Company has amended the Rights
Agreement to render the Rights Agreement inapplicable to the Proposed AIG
Merger and the other transactions contemplated by the AIG Merger Agreement,
the AIG Lockup Option Agreement and the AIG Voting Agreement and to ensure,
among other things, that AIG is not deemed to be an Acquiring Person and that
a Distribution Date does not occur by reason of such agreements or
transactions. However, pursuant to the AIG Merger Agreement the Company has
also agreed that it may not facilitate any effort or attempt to make or
implement an Acquisition Proposal, which would include the Offer, including
by means of an amendment to the Rights Agreement.
Based on publicly available information, Xxxxxxxxx believes that, as of
the date of this Offer to Purchase, the Rights were not exercisable, Rights
Certificates had not been issued and the Rights were evidenced by the Common
Share Certificates. Xxxxxxxxx believes that, as a result of Purchaser's
public announcement of the Offer, the Distribution Date will be no later than
February 10, 1998 unless prior to such date the Company Board redeems the
Rights or amends the Rights Agreement to delay the Distribution Date.
Purchaser believes that, under applicable law and under the circumstances
of the Offer, including the Company Board's approval of the AIG Merger
Agreement and the transactions contemplated thereby, the Company Board is
obligated by its fiduciary responsibilities not to redeem the Rights or
render the Rights Agreement inapplicable to any business combination
transaction with AIG without, at the same time, taking the same action as to
Purchaser, the Offer and the Proposed Merger, and that the Company Board's
failure to do so would be a violation of law. In the Florida Litigation,
Parent and Purchaser are seeking, among other things, to enjoin the Company
Board from treating AIG and Purchaser differently under the Rights Agreement.
See Section 15.
THE LOCKUP TERMINATION CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED
UPON THE AIG LOCKUP OPTION HAVING BEEN TERMINATED OR INVALIDATED WITHOUT ANY
COMMON SHARES HAVING BEEN ISSUED THEREUNDER (THE "LOCKUP TERMINATION
CONDITION").
In the Florida Litigation, Parent and Purchaser are seeking, among other
things, to invalidate the AIG Lockup Option.
THE INSURANCE REGULATORY APPROVAL CONDITION. CONSUMMATION OF THE OFFER IS
CONDITIONED UPON PARENT AND PURCHASER HAVING OBTAINED ALL INSURANCE
REGULATORY APPROVALS NECESSARY FOR THEIR ACQUISITION OF CONTROL OF THE
COMPANY'S INSURANCE SUBSIDIARIES ON TERMS AND CONDITIONS SATISFACTORY TO
PURCHASER, IN ITS SOLE DISCRETION (THE "INSURANCE REGULATORY APPROVAL
CONDITION").
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (the "Company 1996 Form 10-K") and other publicly
available documents, the Company, directly or through its subsidiaries, (i)
owns United States and foreign life insurance companies, (ii) owns United
States and foreign property and casualty insurance companies, and (iii) as
attorney-in-fact, manages and controls a reciprocal insurance exchange.
Accordingly, the acquisition of Common Shares satisfying the Minimum
Condition pursuant to the Offer will require filings with, and approvals of,
(i) state insurance regulatory authorities (the "Insurance Commissions")
under the respective insurance codes (the "Insurance Codes") of Arizona,
Florida, Georgia, New York, South Carolina, Texas and Puerto Rico, and (ii)
foreign insurance regulatory authorities under the laws of the United
Kingdom, Turks & Caicos, Mexico, Argentina, the Dominican Republic and the
Cayman Islands, which are the respective United States and foreign
jurisdictions in which the insurance companies owned or otherwise controlled
by the Company are domiciled.
8
United States Regulatory Approvals
The Insurance Codes of the United States domiciliary states (and Puerto
Rico) and the rules that have been promulgated thereunder each contain
provisions applicable to the acquisition of "control" of a domestic insurer,
including a presumption of control that arises from the ownership of 10% or
more of the voting securities of a domestic insurer or of a person that
controls a domestic insurer (under Florida law, 5% or more of the outstanding
voting securities unless the acquiror acquires less than 10% of the
outstanding voting securities and affirmatively disclaims control).
Generally, any person seeking to acquire voting securities, such as the
Common Shares, in an amount that would result in such person controlling,
directly or indirectly, a domestic insurer must, together with any person
ultimately controlling such person, file with the relevant Insurance
Commission an application for approval of acquisition of control (generally
known as a "Form A") containing certain information and send a copy of each
Form A to the domestic insurer. On the date of this Offer to Purchase, Parent
and Purchaser made Form A filings, including a copy of this Offer to Purchase
and other related information with respect to the Offer, with the relevant
Insurance Commissions and sent copies thereof to the relevant domestic
insurer.
In certain jurisdictions, the Form A filings trigger public hearing
requirements and/or commence statutory periods within which decisions must be
rendered approving or disapproving the acquisition of control of the Company
by Parent and Purchaser. In other jurisdictions, public hearings are
discretionary and/or there are not periods within which such decisions must
be rendered. The periods within which hearings must be commenced or decisions
rendered generally does not begin until the relevant Insurance Commission has
deemed the Form A filing complete. The Insurance Commission has discretion to
request that additional information be furnished before it deems the Form A
filing complete. The Insurance Codes provide certain statutory standards for
the approval or the disapproval of the acquisition of control of the Company.
The Insurance Codes, however, permit the Insurance Commissions discretion in
determining whether such standards have been met.
International Insurance Regulatory Approvals
The Company's non-U.S. insurance subsidiaries are organized under the laws
of the United Kingdom, Turks & Caicos, Mexico, Argentina, the Dominican
Republic and the Cayman Islands, which laws generally require notice to
and/or prior approval from the insurance regulatory authority prior to the
acquisition of control. Parent and the Purchaser intend to give promptly the
required notices to and/or seek the required approvals from such foreign
insurance regulatory authorities.
Certain other conditions to consummation of the Offer are described in
Section 14. Purchaser expressly reserves the right in its sole discretion to
waive any one or more of the conditions to the Offer. See Section 14.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension
or amendment), Purchaser will accept for payment and pay for all Common
Shares which are validly tendered prior to the Expiration Date (as
hereinafter defined) and not properly withdrawn in accordance with Section 4.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Wednesday, February 25, 1998, unless and until Purchaser, in its sole
discretion, shall have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall refer to the latest
time and date at which the Offer, as so extended by Purchaser, shall expire.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition, the Affiliated Transaction Condition, the Control Share
Condition, the Supermajority Vote Condition, the Rights Condition, the Lockup
Termination Condition and the Insurance Regulatory Approval Condition. If any
or all of such conditions are not satisfied or if any or all of the other
events set forth in Section 14
9
shall have occurred prior to the Expiration Date, Purchaser reserves the
right (but shall not be obligated) to (i) decline to purchase any of the
Common Shares tendered in the Offer and to terminate the Offer and return all
tendered Common Shares to the tendering shareholders, (ii) waive or reduce
the Minimum Condition or waive or amend any or all other conditions to the
Offer to the extent permitted by applicable law, and, subject to complying
with applicable rules and regulations of the SEC, purchase all Common Shares
validly tendered, or (iii) extend the Offer and, subject to the right of
shareholders to withdraw Common Shares until the Expiration Date, retain the
Common Shares which have been tendered during the period or periods for which
the Offer is extended.
Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend for any reason the period of time
during which the Offer is open, including the occurrence of any of the events
specified in Section 14, by giving oral or written notice of such extension
to the Depositary. During any such extension, all Common Shares previously
tendered and not properly withdrawn will remain subject to the Offer, subject
to the rights of a tendering shareholder to withdraw its Common Shares in
accordance with the procedures set forth in Section 4.
Subject to the applicable regulations of the SEC, Purchaser also expressly
reserves the right, in its sole discretion, at any time and from time to
time, (i) to delay acceptance for payment of, or, regardless of whether such
Common Shares were theretofore accepted for payment, payment for, any Common
Shares pending receipt of any regulatory approval specified in Section 15 or
in order to comply in whole or in part with any other applicable law, (ii) to
terminate the Offer and not accept for payment any Common Shares if any of
the conditions referred to in Section 14 has not been satisfied or upon the
occurrence of any of the events specified in Section 14 and (iii) to waive
any condition or otherwise amend the Offer in any respect by giving oral or
written notice of such delay, termination, waiver or amendment to the
Depositary and by making a public announcement thereof.
Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act
requires Purchaser to pay the consideration offered or return the Common
Shares tendered promptly after the termination or withdrawal of the Offer,
and (ii) Purchaser may not delay acceptance for payment of, or payment for
(except as provided in clause (i) of the first sentence of the preceding
paragraph), any Common Shares upon the occurrence of any of the conditions
specified in Section 14 without extending the period of time during which the
Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act, which require that material
changes be promptly disseminated to shareholders in a manner reasonably
designed to inform them of such changes) and without limiting the manner in
which Purchaser may choose to make any public announcement, Purchaser shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a press release to the Dow Xxxxx
News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will disseminate additional tender offer materials and
extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act. The minimum period during which the Offer must remain
open following material changes in the terms of the Offer or information
concerning the Offer, other than a change in price or a change in percentage
of securities sought, will depend upon the facts and circumstances, including
the relative materiality of the changed terms or information. In the SEC's
view, an offer generally should remain open for a minimum of five business
days from the date a material change is first published, sent or given to
shareholders. With respect to a change in price or a change in percentage of
securities sought, a minimum ten business day period is required to allow for
adequate dissemination to shareholders and investor response. As used in this
Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1
under the Exchange Act. Accordingly, if, prior to the Expiration Date,
Purchaser decreases the number of Common Shares being sought, or increases or
decreases the consideration offered pursuant to the Offer,
10
and if the Offer is scheduled to expire at any time earlier than the period
ending on the tenth business day from the date that notice of such increase
or decrease is first published, sent or given to holders of Common Shares,
the Offer will be extended at least until the expiration of such 10 business
day period.
As of the date of this Offer to Purchase, the Rights are evidenced by the
Common Share Certificates and do not trade separately. Accordingly, by
tendering a Common Share Certificate, a shareholder is automatically
tendering the associated Rights. If, however, pursuant to the Rights
Agreement or for any other reason, the Rights detach and separate Rights
Certificates are issued, shareholders will be required to tender one-half of
one Right for each Common Share tendered in order to effect a valid tender of
such Common Share.
A request is being made to the Company for the use of the Company's
shareholder list and security position listing for the purpose of
disseminating the Offer to shareholders. Upon compliance by the Company with
such request, this Offer to Purchase and the Letter of Transmittal will be
mailed to record holders of Common Shares and Rights and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the shareholder list and
list of holders of Rights, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Common Shares or Rights.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES; PRORATION.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Purchaser will purchase, by accepting for payment,
and will pay for, all Common Shares which are validly tendered prior to the
Expiration Date (and not properly withdrawn in accordance with Section 4)
promptly after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the regulatory conditions set forth in Section 14.
Purchaser expressly reserves the right, in its discretion, to delay
acceptance for payment of, or, subject to applicable rules of the SEC,
payment for, Common Shares in order to comply in whole or in part with any
applicable law. Purchaser understands that, in accordance with the applicable
rules of the SEC, any delay in accepting Common Shares, regardless of cause,
may not exceed an unreasonable length of time. Accordingly, if it appears at
the time that the Offer is scheduled to expire that any regulatory approvals
specified in Section 14 hereof are not likely to be obtained within a
reasonable length of time thereafter, Purchaser will either extend or
terminate the Offer.
In all cases, payment for Common Shares purchased pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) the Common
Share Certificates and Rights Certificates, if the Rights are at such time
separately traded, or timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Common Shares (and Rights, if applicable),
if such procedure is available, into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company (each a
"Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer
Facilities") pursuant to the procedures set forth in Section 3, (ii) the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, or, in the case of a book-entry transfer, an Agent's Message (as
defined below) and (iii) any other documents required by the Letter of
Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Common Shares (and Rights, if
applicable) that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Purchaser may enforce such
agreement against the participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Common Shares (including the associated
Rights) validly tendered and not properly withdrawn if, as and when Purchaser
gives oral or written notice to the Depositary of Purchaser's acceptance of
such Common Shares for payment. Payment for Common Shares (including the
associated Rights) accepted pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payments from
11
Purchaser and transmitting payments to such tendering shareholders. Under no
circumstances will interest on the purchase price for Common Shares be paid
by Purchaser, regardless of any delay in making such payment. Upon the
deposit of funds with the Depositary for the purpose of making payments to
tendering shareholders, Purchaser's obligation to make such payment shall be
satisfied and tendering shareholders must thereafter look solely to the
Depositary for payment of amounts owed to them by reason of the acceptance
for payment of Common Shares pursuant to the Offer. Purchaser will pay any
stock transfer taxes incident to the transfer to it of validly tendered
Common Shares, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, as well as any charges and expenses of the Depositary and the
Information Agent.
If any tendered Common Shares are not accepted for payment for any reason
pursuant to the terms and conditions of the Offer or if Common Share
Certificates are submitted evidencing more Common Shares than are tendered,
Common Share Certificates evidencing unpurchased Common Shares will be
returned, without expense to the tendering shareholder (or, in the case of
Common Shares tendered by book-entry transfer into the Depositary's account
at a Book-Entry Transfer Facility pursuant to the procedure set forth in
Section 3, such Common Shares will be credited to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Common Share pursuant to the Offer, Purchaser will pay such
increased consideration for all such Common Shares purchased pursuant to the
Offer, whether or not such Common Shares were tendered prior to such increase
in consideration.
Purchaser reserves the right to transfer or assign, in whole at any time,
or in part from time to time, to Parent or one or more direct or indirect
wholly owned subsidiaries of Parent, the right to purchase all or any portion
of the Common Shares tendered pursuant to the Offer, provided that any such
transfer or assignment will not relieve Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering shareholders
to receive payment for Common Shares validly tendered and accepted for
payment pursuant to the Offer.
If more than 23,501,260 Common Shares (the "Maximum Shares") are validly
tendered prior to the Expiration Date and are not properly withdrawn,
Purchaser will, upon the terms and subject to the conditions of the Offer,
accept for payment and pay for only the Maximum Shares, on a pro rata basis,
with adjustments to avoid purchases of fractional Common Shares, based upon
the number of Common Shares validly tendered prior to the Expiration Date and
not properly withdrawn. Because of the difficulty of determining precisely
the number of Common Shares validly tendered and not withdrawn, if proration
is required, Purchaser would not expect to be able to announce the final
results of proration or pay for Common Shares until at least five New York
Stock Exchange, Inc. ("NYSE") trading days after the Expiration Date.
Preliminary results of proration will be announced by press release as
promptly as practicable after the Expiration Date. Holders of Common Shares
may obtain such preliminary information from the Information Agent and may
also be able to obtain such preliminary information from their brokers.
3. PROCEDURES FOR TENDERING COMMON SHARES.
Valid Tender of Common Shares. In order for Common Shares to be validly
tendered pursuant to the Offer, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message (in the case of any book-entry transfer)
and any other required documents, must be received by the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date and either (i) the Common Share Certificates
evidencing tendered Common Shares must be received by the Depositary at one
of such addresses or Common Shares must be tendered pursuant to the procedure
for book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date, or
(ii) the tendering shareholder must comply with the guaranteed delivery
procedures described below.
12
The method of delivery of Common Share Certificates and all other required
documents, including delivery through any Book-Entry Transfer Facility, is at
the sole option and risk of the tendering shareholder, and the delivery will
be deemed made only when actually received by the Depositary. If delivery is
by mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Common Shares at each Book-Entry Transfer Facility for purposes of the
Offer within two business days after the date of this Offer to Purchase, and
any financial institution that is a participant in either of the Book-Entry
Transfer Facilities' systems may make book-entry delivery of Common Shares by
causing a Book-Entry Transfer Facility to transfer such Common Shares into
the Depositary's account at a Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However,
although delivery of Common Shares may be effected through book-entry
transfer at a Book-Entry Transfer Facility, the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
delivery of Common Shares, and any other required documents must, in any
case, be transmitted to and received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date or the tendering shareholder must comply with the guaranteed
delivery procedures described below. Delivery of documents to a Book-Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures does not constitute delivery to the Depositary.
Signature Guarantee. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the
Securities Transfer Agents Medallion Program (each, an "Eligible
Institution"), unless the Common Shares are tendered (i) by a registered
holder of Common Shares who has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal.
If a Common Share Certificate is registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made, or
a Common Share Certificate not accepted for payment or not tendered is to be
returned, to a person other than the registered holder(s), then the Common
Share Certificate must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered
holder(s) appear on the Common Share Certificate, with the signature(s) on
such Common Share Certificate or stock powers guaranteed as described above.
See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Common Shares
pursuant to the Offer and such shareholder's Common Share Certificates are
not immediately available or time will not permit all required documents to
reach the Depositary prior to the Expiration Date or the procedure for
book-entry transfer cannot be completed on a timely basis, such Common Shares
may nevertheless be tendered if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) in the case of a guarantee of Common Shares, the Common Share
Certificates for all tendered Common Shares, in proper form for transfer,
or a Book-Entry Confirmation, together with a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof) with
any required signature guarantee (or, in the case of a book-entry
transfer, an Agent's Message) and any other documents required by such
Letter of Transmittal, are received by the Depositary within three NYSE
trading days after the date of execution of the Notice of Guaranteed
Delivery.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
13
Notwithstanding any other provision hereof, payment for Common Shares
purchased pursuant to the Offer will, in all cases, be made only after timely
receipt by the Depositary of (i) the Common Share Certificates evidencing
such Common Shares, or a Book-Entry Confirmation of the delivery of such
Common Shares, if available, (ii) a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) (or in the case
of a book-entry transfer, an Agent's Message) and (iii) any other documents
required by the Letter of Transmittal.
Distribution of Rights. Holders of Common Shares will be required to
tender one-half of one Right for each Common Share tendered to effect a valid
tender of such Common Share. Unless and until the Distribution Date occurs,
the Rights are represented by and transferred with the Common Shares.
Accordingly, if the Distribution Date does not occur prior to the Expiration
Date of the Offer, a tender of Common Shares will constitute a tender of the
associated Rights. If a Distribution Date has occurred, certificates
representing a number of Rights equal to one-half the number of Common Shares
being tendered must be delivered to the Depositary in order for such Common
Shares to be validly tendered. If a Distribution Date has occurred, a tender
of Common Shares without Rights constitutes an agreement by the tendering
shareholder to deliver certificates representing a number of Rights equal to
one-half the number of Common Shares tendered pursuant to the Offer to the
Depositary within three NYSE trading days after the date such certificates
are distributed. Purchaser reserves the right to require that it receive such
certificates prior to accepting Common Shares for payment. Payment for Common
Shares tendered and purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of, among other things, such certificates,
if such certificates have been distributed to holders of Common Shares.
Purchaser will not pay any additional consideration for the Rights tendered
pursuant to the Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Common Shares pursuant to any of the procedures described above will
be determined by Purchaser in its sole discretion, whose determination will
be final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of any Common Shares determined by it not to be in
proper form or if the acceptance for payment of, or payment for, such Shares
may, in the opinion of Purchaser's counsel, be unlawful. Purchaser also
reserves the absolute right, in its sole discretion, to waive any of the
conditions of the Offer or any defect or irregularity in any tender with
respect to Common Shares of any particular shareholder, whether or not
similar defects or irregularities are waived in the case of other
shareholders. No tender of Common Shares will be deemed to have been validly
made until all defects and irregularities have been cured or waived.
Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding. None of Parent, Purchaser, the Dealer Managers, the
Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or will
incur any liability for failure to give any such notification.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Common Shares
(including the associated Rights) tendered by such shareholder and accepted
for payment by Purchaser (and any and all noncash dividends, distributions,
rights, other Shares, or other securities issued or issuable in respect of
such Common Shares on or after the date of this Offer to Purchase). All such
proxies shall be considered coupled with an interest in the tendered Common
Shares or Rights. This appointment will be effective if, when, and only to
the extent that, Purchaser accepts such Common Shares for payment pursuant to
the Offer. Upon such acceptance for payment, all prior proxies given by such
shareholder with respect to such Common Shares and other securities will,
without further action, be revoked, and no subsequent proxies may be given.
The designees of Purchaser will, with respect to the Common Shares and other
securities for which the appointment is effective, be empowered to exercise
all voting and other rights of such shareholder as they in their sole
discretion may deem proper at any annual, special, adjourned or postponed
meeting of the Company's shareholders, by written consent or otherwise, and
Purchaser reserves the right to require that, in order for Common Shares or
other securities to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Common Shares, Purchaser must be able to
exercise full voting rights with respect to such Shares.
14
To prevent backup Federal income tax withholding with respect to payment
to certain shareholders of the purchase price for Shares purchased pursuant
to the Offer, each such shareholder must provide the Depositary with such
shareholder's correct Taxpayer Identification Number and certify that such
shareholder is not subject to backup Federal income tax withholding by
completing the substitute Form W-9 in the Letter of Transmittal. If backup
withholding applies with respect to a shareholder, the Depositary is required
to withhold 31% of any payments made to such shareholder. See Instruction 9
of the Letter of Transmittal.
Common Shares Owned by ESOP. According to documents filed by the Company
with the SEC, a certain number of outstanding Common Shares are owned of
record by the ESOP Trustee and, accordingly, only the ESOP Trustee can effect
a valid tender of such Common Shares. Pursuant to the organizational
documents of the ESOP, the ESOP Trustee may tender Common Shares owned of
record by the ESOP, regardless of whether or not such Common Shares have been
allocated to participants' accounts.
Purchaser's acceptance for payment of Common Shares tendered pursuant to
the Offer will constitute a binding agreement between the tendering
shareholder and Purchaser upon the terms and subject to the conditions of the
Offer.
4. WITHDRAWAL RIGHTS.
Tenders of Common Shares made pursuant to the Offer are irrevocable except
that such Common Shares may be withdrawn at any time prior to the Expiration
Date and, unless theretofore accepted for payment by Purchaser pursuant to
the Offer, may also be withdrawn at any time after March 30, 1998.
If Purchaser extends the Offer, is delayed in its acceptance for payment
of Common Shares or is unable to accept Common Shares for payment pursuant to
the Offer for any reason, then, without prejudice to Purchaser's rights under
the Offer, the Depositary may, nevertheless, on behalf of Purchaser, retain
tendered Common Shares, and such Common Shares may not be withdrawn except to
the extent that tendering shareholders are entitled to withdrawal rights as
described in this Section 4. Any such delay will be by an extension of the
Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary
at one of its addresses set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Common Shares to be withdrawn, the number of Common Shares
to be withdrawn and the name of the registered holder, if different from that
of the person who tendered such Common Shares. If Common Share Certificates
evidencing Common Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
Common Share Certificates, the serial numbers shown on such Common Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless
such Common Shares have been tendered for the account of an Eligible
Institution. If Common Shares have been tendered pursuant to the procedure
for book-entry transfer as set forth in Section 3, any notice of withdrawal
must also specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Common Shares and
otherwise comply with such Book-Entry Transfer Facility's procedures.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding. None of Parent,
Purchaser, the Dealer Managers, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
Any Common Shares properly withdrawn will thereafter be deemed not to have
been validly tendered for purposes of the Offer. However, withdrawn Common
Shares may be retendered at any time prior to the Expiration Date by
following the procedures described in Section 3.
15
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following discussion is a summary of the material Federal income tax
consequences of the Offer and the Proposed Merger to holders of Common Shares
who hold their Common Shares as capital assets. This summary is based upon
laws, regulations, rulings and decisions in effect on the date hereof, all of
which are subject to change, retroactively or prospectively, and to possibly
differing interpretations. The discussion set forth below is for general
information only and may not apply to certain categories of holders of Common
Shares subject to special treatment under the Internal Revenue Code of 1986,
as amended (the "Code"), including, but not limited to, banks, tax-exempt
organizations, insurance companies, holders who are not United States persons
(as defined in Section 7701(a)(30) of the Code) and holders who acquired such
Common Shares pursuant to the exercise of employee stock options or otherwise
as compensation. In addition, the discussion does not address the state,
local or foreign tax consequences of the Offer and the Proposed Merger.
Furthermore, this discussion does not address the Federal, state, local or
foreign tax consequences of the Offer and the Proposed Merger to holders of
Preferred Shares or to holders of Common Shares who also own Preferred
Shares.
EACH HOLDER OF COMMON SHARES IS URGED TO CONSULT ITS TAX ADVISOR WITH
RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
OFFER AND THE PROPOSED MERGER.
General Tax Consequences of the Offer and the Proposed Merger. In its
proposal to the Company, Parent has indicated that its strong preference
would be to enter into a merger agreement with the Company containing
substantially the same terms and conditions as the AIG Merger Agreement such
that the Company would merge with and into a direct subsidiary of Parent,
with the subsidiary of Parent continuing as the surviving corporation (the
"Proposed Merger Agreement"). Under this structure, the Offer and the
Proposed Merger should be treated as a single integrated transaction for
Federal income tax purposes. Consequently, the Offer and the Proposed Merger
should, in the aggregate, qualify as a reorganization pursuant to Section
368(a)(1)(A) and 368(a)(2)(D) of the Code. In such event, generally, (i) gain
or loss will be recognized by a shareholder of the Company who receives
solely cash in exchange for Common Shares pursuant to the Offer and who does
not exchange any Common Shares pursuant to the Proposed Merger, (ii) no gain
or loss will be recognized by a shareholder of the Company who does not
exchange any Common Shares pursuant to the Offer and who receives solely
shares of Parent Common Stock in exchange for Common Shares pursuant to the
Proposed Merger, and (iii) a shareholder of the Company who receives a
combination of cash and Parent Common Stock in exchange for such
shareholder's Common Shares pursuant to the Offer and the Proposed Merger
will not recognize loss but will recognize (i.e., pay tax on) gain realized,
if any, to the extent of the cash received. If so integrated, the Federal
income tax consequences to a shareholder may, depending on such shareholder's
particular circumstances, be less favorable than the Federal income tax
consequences to such shareholder if the Offer and the Proposed Merger are not
treated as integrated, as discussed below. See "Tax Consequences if the Offer
and the Proposed Merger are Treated as a Single Integrated Transaction."
If the Offer and the Proposed Merger were not treated as a single
integrated transaction for Federal income tax purposes, the receipt of cash
pursuant to the Offer would be a sale or exchange, while the Proposed Merger
should still qualify as a reorganization pursuant to Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Code. See "Tax Consequences if the Offer and the
Proposed Merger are Treated as Separate Transactions."
General Tax Consequences if the Proposed Merger is Restructured. As
described in this Offer to Purchase, if the approval of the Proposed Merger
by holders of Preferred Shares is not obtained or Parent reasonably
determines that such approval is not likely to be obtained, in such
circumstances Parent would expect that the Proposed Parent Merger Agreement
would provide for the change in structure provided for in the AIG Merger
Agreement such that a direct subsidiary of Parent would merge with and into
the Company with the Company continuing as the surviving corporation. If
structured in this manner, in contrast to the Proposed Merger, the Offer and
the revised Proposed Merger would be a fully taxable transaction with the
result that holders of Common Shares would pay Federal income tax on all
consideration (whether cash or stock) received in the Offer and the revised
Proposed Merger. Thus, a
16
shareholder of the Company who, pursuant to the Offer and the revised
Proposed Merger, exchanged all of the Common Shares owned by such shareholder
for cash and shares of Parent Common Stock would recognize capital gain or
loss equal to the difference between (a) the amount of cash received and the
fair market value (as of the date of the exchange) of the shares of Parent
Common Stock received and (b) such shareholder's adjusted tax basis in the
Common Shares surrendered therefor. Such gain or loss would be long-term gain
or loss if, as of the date of the exchange, the holder thereof has held such
Common Shares for more than one year.
TAX CONSEQUENCES IF THE OFFER AND THE PROPOSED MERGER ARE TREATED AS A SINGLE
INTEGRATED TRANSACTION
General. If the Offer and the Proposed Merger are treated as a single
integrated transaction, the Federal income tax consequences of such
transactions to a shareholder of the Company generally will depend on whether
the shareholder exchanges Common Shares for cash pursuant to Offer, Parent
Common Stock pursuant to the Proposed Merger or a combination of both, and
may further depend on whether (i) the shareholder is deemed to constructively
own Common Shares and (ii) the shareholder actually or constructively owns
any shares of Parent Common Stock. For this purpose, Common Shares are
constructively owned under the rules set forth in Section 318 of the Code
which generally treat a person as owning stock owned by certain family
members or related entities or that is the subject of an option or options
owned or deemed owned by such person.
Exchange of Common Shares Solely for Cash Pursuant to the Offer. In
general, a shareholder of the Company who, pursuant to the Offer, exchanges
all of the Common Shares owned by such shareholder solely for cash will
recognize capital gain or loss equal to the difference between the amount of
cash received and such shareholder's adjusted tax basis in the Common Shares
surrendered therefore. The gain or loss will be long-term capital gain or
loss if, as of the date of the exchange, the holder thereof has held such
Common Shares for more than one year. Gain or loss will be calculated
separately for each identifiable block of Common Shares surrendered pursuant
to the Offer. If, however, any such holder of Common Shares constructively
owns shares of the Company that are exchanged for shares of Parent Common
Stock in the Proposed Merger or owns shares of Parent Common Stock actually
or constructively after the Proposed Merger, the consequences to such holder
may be similar to the consequences described below under the heading
"Exchange of Common Shares for Cash and Parent Common Stock Pursuant to the
Offer and Proposed Merger," except that the amount of the consideration, if
any, treated as a dividend may not be limited to the amount of such holder's
gain.
Exchange of Common Shares Solely for Parent Common Stock Pursuant to the
Proposed Merger. A shareholder of the Company who, pursuant to the Proposed
Merger, exchanges all of the Common Shares actually owned by such shareholder
solely for shares of Parent Common Stock will not recognize any gain or loss
upon such exchange. Such shareholder may recognize gain or loss, however, to
the extent cash is received in lieu of a fractional share of Parent Common
Stock, as discussed below. The aggregate adjusted tax basis of the shares of
Parent Common Stock received (including fractional shares) in such exchange
will be equal to the aggregate adjusted tax basis of the Common Shares
surrendered therefor, and the holding period of the shares of Parent Common
Stock will include the period during which the Common Shares surrendered in
exchange therefor were held. If a holder has a differing basis or holding
period in respect of its Common Shares, the holder should consult its tax
advisor prior to the exchange with regard to identifying the bases or holding
periods of the particular shares of Parent Common Stock that it receives in
the exchange.
Exchange of Common Shares for Cash and Parent Common Stock Pursuant to the
Offer and Proposed Merger. A shareholder of the Company who, pursuant to the
Offer and the Proposed Merger, exchanges all of the Common Shares actually
owned by such shareholder for a combination of cash and shares of Parent
Common Stock will not recognize any loss on such exchange. Such shareholder
will realize gain equal to the excess, if any, of the cash and the aggregate
fair market value of the shares of Parent Common Stock received pursuant to
the Offer and the Proposed Merger over such shareholder's adjusted tax basis
in the Common Shares exchanged therefor, but will recognize (i.e., pay tax
on) any realized gain only to the extent of the cash received.
17
Any gain recognized by a shareholder of the Company who receives a
combination of cash and shares of Parent Common Stock pursuant to the Offer
and the Proposed Merger will be treated as capital gain unless the receipt of
the cash has the effect of the distribution of a dividend for Federal income
tax purposes, in which case, such recognized gain will be treated as ordinary
dividend income to the extent of such shareholder's ratable share of the
Company's accumulated earnings and profits. See "--Possible Treatment of Cash
as a Dividend."
The aggregate tax basis of the shares of Parent Common Stock received by a
Company shareholder who, pursuant to the Offer and the Proposed Merger,
exchanges such shareholder's Common Shares for a combination of cash and
shares of Parent Common Stock will be the same as the aggregate tax basis of
the Common Shares surrendered therefor, decreased by the cash received and
increased by the amount of any gain recognized (whether capital gain or
ordinary income). The holding period of shares of Parent Common Stock will
include the holding period of the Common Shares surrendered therefor.
Possible Treatment of Cash as a Dividend. In general, the determination of
whether the gain recognized in the Offer and the Proposed Merger will be
treated as received pursuant to a sale or exchange (generating capital gain)
or a dividend distribution (generating ordinary dividend income) will depend
upon whether and to what extent the exchange reduces the Company
shareholder's deemed percentage stock ownership interest in Parent. For
purposes of this determination, a shareholder of the Company will be treated
as if such shareholder first exchanged all of such shareholder's Common
Shares solely for shares of Parent Common Stock and then Parent immediately
redeemed a portion of such shares of Parent Common Stock in exchange for the
cash such shareholder actually received. The gain recognized in the exchange
followed by a deemed redemption will be treated as capital gain if the deemed
redemption is (i) "substantially disproportionate" with respect to the
Company shareholder or (ii) "not essentially equivalent to a dividend."
The deemed redemption, generally, will be "substantially disproportionate"
with respect to a Company shareholder if the percentage described in (ii)
below is less than 80% of the percentage described in (i) below. Whether the
deemed redemption is "not essentially equivalent to a dividend" with respect
to a shareholder will depend upon the shareholder's particular circumstances.
At a minimum, however, in order for the deemed redemption to be "not
essentially equivalent to a dividend," the deemed redemption must result in a
"meaningful reduction" in such Company shareholder's deemed percentage stock
ownership of Parent. In general, that determination requires a comparison of
(i) the percentage of the outstanding voting stock of Parent that such
Company shareholder is deemed actually and constructively to have owned
immediately before the deemed redemption by Xxxxxx and (ii) the percentage of
the outstanding voting stock of Parent actually and constructively owned by
such shareholder immediately after the deemed redemption by Parent as a
result of the Offer, the Proposed Merger or otherwise. In applying the
foregoing tests, a shareholder is deemed to own stock owned, and, in some
cases, constructively owned. As the constructive ownership rules are complex,
each shareholder that may be subject to these rules should consult its tax
advisor. The Internal Revenue Service has ruled that a minority shareholder
in a publicly held corporation whose relative stock interest is minimal and
who exercises no control with respect to corporate affairs is considered to
have a "meaningful reduction" if such shareholder has a reduction in such
shareholder's percentage stock ownership. Accordingly, in most circumstances,
gain recognized by a shareholder of the Company who exchanges such
shareholder's Common Shares for a combination of cash and shares of Parent
Common Stock generally will be capital gain, and will constitute long-term
capital gain if the holding period for such Common Shares was greater than
one year as of the date of the exchange.
Cash Received in Lieu of a Fractional Interest of Shares of Parent Common
Stock. Cash received in lieu of a fractional share of Parent Common Stock
will be treated as received in redemption of such fractional share interest
and gain or loss will be recognized, measured by the difference between the
amount of cash received and the portion of the basis of the Common Shares
allocable to such fractional interest. Such gain or loss generally will
constitute capital gain or loss, and will be long-term capital gain or loss
if the holding period for such Common Shares was greater than one year as of
the date of the exchange.
18
TAX CONSEQUENCES IF THE OFFER AND THE PROPOSED MERGER ARE TREATED AS SEPARATE
TRANSACTIONS
Although counsel to Parent believes that such result is unlikely, if the
Offer and the Proposed Merger were treated as separate transactions for
Federal income tax purposes, the receipt of cash pursuant to the Offer would
be a taxable transaction, while the Proposed Merger should still qualify as a
reorganization pursuant to Sections 368(a)(1)(A) and Section 368(a)(2)(D) of
the Code. Accordingly, a shareholder of the Company who received cash
pursuant to the Offer would recognize gain or loss equal to the difference
between the amount of cash received and the shareholder's adjusted tax basis
in the Common Shares surrendered therefor. The gain or loss would be
long-term capital gain or loss if, as of the date of the exchange, such
shareholder had held such stock for more than one year.
A shareholder of the Company who received solely Parent Common Stock
pursuant to the Proposed Merger would be subject to the Federal income tax
rules concerning reorganizations discussed above under "Tax Consequences if
the Offer and the Proposed Merger are Treated as a Single Integrated
Transaction -- Exchange of Common Shares Solely for Parent Common Stock
Pursuant to the Proposed Merger." Additionally, if applicable, a shareholder
of the Company who received a combination of cash and shares of Parent Common
Stock pursuant to the Proposed Merger would be subject to the Federal income
tax rules concerning reorganizations discussed above under "Tax Consequences
if the Offer and the Proposed Merger are Treated as a Single Integrated
Transaction -- Exchange of Common Shares for Cash and Parent Common Stock
Pursuant to Offer and Proposed Merger."
Backup Withholding. Unless a shareholder of the Company complies with
certain reporting or certification procedures or is an "exempt recipient"
(i.e., in general, corporations and certain other entities) under applicable
provisions of the Code and Treasury Regulations promulgated thereunder, such
shareholder may be subject to withholding tax of 31% with respect to any cash
payments received pursuant to the Offer and/or the Proposed Merger. A foreign
shareholder of the Company should consult its tax advisor with respect to the
application of withholding rules to it with respect to any cash payments
received pursuant to the Offer and/or the Proposed Merger.
6. PRICE RANGE OF SHARES; DIVIDENDS.
According to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997, prior to July 9, 1997, the Common Shares were
listed and principally traded on the Nasdaq National Market ("Nasdaq NMS").
From and after such date, the Common Shares have been listed and principally
traded on the NYSE, and quoted under the symbol "ABI," according to published
financial sources. The following table sets forth, for the quarters
indicated, the high and low sales prices per Common Share on the Nasdaq NMS
or the NYSE, as the case may be, and the amount of cash dividends paid per
Common Share, as reported in the Company 1996 Form 10-K for periods in 1996,
and as reported by published financial sources with respect to periods in
1997 and 1998:
CASH
HIGH LOW DIVIDENDS
-------------------------- -----------
Year Ended December 31, 1996:
First Quarter............................. $ 19-15/16 $ 16-5/8 $0.095
Second Quarter ........................... 22-1/8 16-1/4 0.100
Third Quarter ............................ 25-3/16 19-3/4 0.100
Fourth Quarter ........................... 26-3/16 22-7/8 0.100
Year Ended December 31, 1997:
First Quarter ............................ 29-3/4 24-3/8 0.100
Second Quarter ........................... 34-9/16 24-3/8 0.105
Third Quarter ............................ 39 31-5/8 0.110
Fourth Quarter ........................... 46-3/16 35-7/8 0.110
Year Ending December 31, 1998:
First Quarter (through January 26, 1998) 46-1/4 45-9/16
The above prices have been adjusted to reflect the Stock Split.
On January 26, 1998, the most recent practicable trading day prior to the
announcement date of the Offer, the reported closing sales price of the
Common Shares on the NYSE Composite Tape was $46.25 per Common Share.
Shareholders are urged to obtain a current market quotation for the Common
Shares.
19
7. EFFECT OF THE OFFER ON THE MARKET FOR THE COMMON SHARES; EXCHANGE LISTING
AND EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
The purchase of Common Shares pursuant to the Offer will reduce the number
of Common Shares that might otherwise trade publicly and could reduce the
number of holders of Common Shares, which could adversely affect the
liquidity and market value of the remaining Common Shares held by the public.
Following consummation of the Offer, a large percentage of the outstanding
Common Shares will be owned by Purchaser.
According to the NYSE's published guidelines, the NYSE would consider
delisting the Common Shares if, among other things, the number of record
holders of at least 100 Common Shares should fall below 1,200, the number of
publicly held Common Shares (exclusive of holdings of officers, directors and
their families and other concentrated holdings of 10% or more (the "NYSE
Excluded Holdings")) should fall below 600,000 or the aggregate market value
of publicly held Common Shares (exclusive of NYSE Excluded Holdings) should
fall below $5,000,000. If, as a result of the purchase of Common Shares
pursuant to the Offer or otherwise, the Common Shares no longer meet the
requirements of the NYSE for continued listing and the listing of the Common
Shares is discontinued, the market for the Common Shares could be adversely
affected.
If the NYSE were to delist the Common Shares, it is possible that the
Common Shares would continue to trade on another securities exchange or in
the over-the-counter market and that price or other quotations would be
reported by such exchange or through the Nasdaq or other sources. The extent
of the public market therefor and the availability of such quotations would
depend, however, upon such factors as the number of shareholders and/or the
aggregate market value of such securities remaining at such time, the
interest in maintaining a market in the Common Shares on the part of
securities firms, the possible termination of registration under the Exchange
Act as described below and other factors. Purchaser cannot predict whether
the reduction in the number of Common Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for
or marketability of the Common Shares or whether it would cause future market
prices to be higher or lower than the Offer Price.
The Common Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the SEC if
the Common Shares are not listed on a national securities exchange and there
are fewer than 300 record holders of the Common Shares. The termination of
registration of the Common Shares under the Exchange Act would substantially
reduce the information required to be furnished by the Company to holders of
Common Shares and to the SEC and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
shareholders' meetings pursuant to Section 14(a), and the requirements of
Rule 13e-3 under the Exchange Act with respect to "going private"
transactions, no longer applicable to the Common Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of
the Company may be deprived of the ability to dispose of such securities
pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Securities Act").
If registration of the Common Shares under the Exchange Act were
terminated, the Common Shares would no longer be eligible for Nasdaq
reporting.
Based upon publicly available information, Xxxxxxxxx believes that, as of
the date of this Offer to Purchase, the Rights are registered under the
Exchange Act and are listed on the NYSE, but are attached to the Common
Shares and are not separately transferable. Xxxxxxxxx believes that, as a
result of Purchaser's public announcement of the Offer, the Distribution Date
will be no later than February 10, 1998 unless prior to such date the Company
Board redeems the Rights or amends the Rights Agreement to delay the
Distribution Date. According to the Company Form 8-A, as soon as practicable
after the Distribution Date, the Rights Certificates will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date, and thereafter the separate Rights Certificates alone will
evidence the Rights and the foregoing discussion with respect to the effect
of the Offer on the market for the Common Shares, stock exchange listing and
Exchange Act registration would apply to the Rights in a similar manner.
20
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The information concerning the Company contained in this Offer to
Purchase, including financial information, has been taken from or based upon
the Company 1996 Form 10-K and other publicly available documents and records
on file with the SEC and other public sources. None of Parent, Purchaser, the
Dealer Managers, the Depositary or the Information Agent assumes any
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Parent, Purchaser, the Dealer Managers, the Depositary or the Information
Agent.
According to information filed by the Company with the SEC, the Company is
a Florida corporation whose principal executive offices are located at 00000
Xxxxx Xxxxx Xxxxx, Xxxxx, Xxxxxxx 00000.
The Company, through its subsidiaries, provides primarily credit-related
insurance products in the United States and Canada, as well as in Latin
America, the Caribbean and the United Kingdom. The Company also provides to
its clients comprehensive administrative support in claims, accounting, tax,
data processing and actuarial matters, as well as a full range of marketing
materials, direct mail and telemarketing services and personnel training
programs.
Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the financial statements contained in the
Company 1996 Form 10-K, the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1997 (the "Company Form 10-Q") and other
documents filed by the Company with the SEC. More comprehensive financial
information is included in, and the financial information that follows is
qualified in its entirety by reference to, the Company 1996 Form 10-K, the
Company Form 10-Q and such other documents filed by the Company with the SEC.
The Company Form 10-K, the Company Form 10-Q and such other documents may be
examined at and copies may be obtained from the offices of the SEC or the
NYSE in the manner set forth below.
AMERICAN BANKERS INSURANCE GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS)
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1992 1993 1994 1995 1996
---------- ---------- ------------ ------------ ------------
INCOME STATEMENT
DATA:
Total revenues ...... $812,078 $973,324 $1,186,835 $1,360,848 $1,529,035
Net income .......... 42,275 52,295 56,544 72,260 94,503
Net income per share
(fully diluted)(1) 1.20 1.37 1.37 1.74 2.16
Dividends per Common
Share(1) ........... 0.30 0.34 0.36 0.38 0.40
(RESTUBBED TABLE CONTINUED FROM ABOVE)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1997
------------ ------------
(UNAUDITED)
INCOME STATEMENT
DATA:
Total revenues ...... $1,161,304 $1,219,083
Net income .......... 68,333 84,876
Net income per share
(fully diluted)(1) 1.59 1.81
Dividends per Common
Share(1) ........... 0.30 0.32
AT DECEMBER 31,
------------------------------------------------------------------
1992 1993 1994 1995 1996
----------- ------------ ------------ ------------ ------------
BALANCE SHEET
DATA:(2)
Investments ........ $ 982,135 $1,110,934 $1,264,870 $1,688,410 $1,968,403
Total assets ....... 1,404,291 2,160,475 2,432,499 2,987,734 3,469,503
Policy and claim
liabilities ....... 802,790 1,395,915 1,502,613 1,858,862 2,070,494
Total liabilities . 1,135,877 1,761,220 2,026,624 2,474,737 2,759,296
Total stockholders'
equity ............ 268,414 399,255 405,875 513,997 710,207
(RESTUBBED TABLE CONTINUED FROM ABOVE)
AT SEPTEMBER 30,
--------------------------
1996 1997
------------ ------------
(UNAUDITED)
BALANCE SHEET
DATA:(2)
Investments ........ $1,939,215 $2,127,147
Total assets ....... 3,355,983 3,678,961
Policy and claim
liabilities ....... 2,015,891 2,225,005
Total liabilities . 2,677,671 2,882,676
Total stockholders'
equity ............ 678,312 796,285
------------
(1) Adjusted to reflect the Stock Split.
(2) The amounts for 1993 and forward are reported in accordance with FASB
Statement 113.
21
The Company is subject to the information and reporting requirements of
the Exchange Act and is required to file reports and other information with
the SEC relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons
in transactions with the Company and other matters is required to be
disclosed in proxy statements distributed to the Company's shareholders and
filed with the SEC. These reports, proxy statements and other information
should be available for inspection at the public reference facilities of the
SEC located in Judiciary Plaza, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000, and also should be available for inspection and copying at prescribed
rates at the following regional offices of the SEC: Seven World Trade Center,
New York, New York 10048; and 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000. Copies of this material may also be obtained by mail, upon
payment of the SEC's customary fees, from the SEC's principal office at 000
Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000. The SEC also maintains an
Internet web site at xxxx://xxx.xxx.xxx that contains reports, proxy
statements and other information. Reports, proxy statements and other
information concerning the Company should also be available for inspection at
the offices of the NYSE, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT.
Purchaser. Purchaser is a newly incorporated New Jersey corporation
organized in connection with the Offer and the Proposed Merger and has not
carried on any activities other than in connection with the Offer and the
Proposed Merger. The principal offices of Purchaser are located at 0 Xxxxxx
Xxx, Xxxxxxxxxx, Xxx Xxxxxx 00000. The Purchaser is a wholly owned subsidiary
of Parent. Until immediately prior to the time that Purchaser will purchase
Common Shares pursuant to the Offer, it is not expected that Purchaser will
have any significant assets or liabilities or engage in activities other than
those incident to its formation and capitalization and the transactions
contemplated by the Offer and the Proposed Merger. Because Purchaser is newly
formed and has minimal assets and capitalization, no meaningful financial
information regarding Purchaser is available.
Parent. Parent is a Delaware corporation with its principal executive
offices located at 0 Xxxxxx Xxx, Xxxxxxxxxx, Xxx Xxxxxx 00000. Parent is one
of the foremost consumer and business services companies in the world. The
Company was created through the merger of CUC and HFS in December 1997 and
provides all of the services formerly provided by each of CUC and HFS,
including technology-driven, membership-based consumer services, travel
services, real estate services, residential mortgage services, tax
preparation services and multimedia software products. Parent also
administers insurance package programs in connection with certain discount
shopping and travel programs.
Parent is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
SEC relating to its business, financial condition and other matters.
Information, as of particular dates, concerning Xxxxxx's directors and
officers, their remuneration, stock options granted to them, the principal
holders of Parent's securities, any material interests of such persons in
transactions with Parent and other matters is required to be disclosed in
proxy statements distributed to Parent's shareholders and filed with the SEC.
These reports, proxy statements and other information should be available for
inspection and copies may be obtained in the same manner as set forth for the
Company in Section 8. Parent's common stock is listed on the NYSE, and
reports, proxy statements and other information concerning Parent should also
be available for inspection at the offices of the NYSE, 00 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
Set forth below are certain supplemental financial highlights relating to
Parent and its subsidiaries. Additional financial information is included in
other documents filed by Parent with the SEC. The financial information
summary set forth below is qualified in its entirety by reference to such
other documents which have been filed with the SEC, including the financial
information and related notes contained therein, which are incorporated
herein by reference. These documents may be inspected at and copies may be
obtained from the offices of the SEC or the NYSE in the manner set forth
below.
22
CENDANT CORPORATION
SUPPLEMENTAL CONSOLIDATED FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
HISTORICAL
-------------------------------------------------------------------
1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ ------------
INCOME STATEMENT HIGHLIGHTS:(1)(2)
Net revenues........... $1,835,471 $2,136,426 $2,446,731 $2,992,122 $3,908,780
Net income before
extraordinary loss ... 154,780 222,054(7) 284,590(6) 302,825(5) 423,611(4)
Net income before
extraordinary loss
per share (fully
diluted).............. 0.30(7) 0.37(7) 0.41(6) 0.41(5) 0.52(4)
(RESTUBBED TABLE CONTINUED FROM ABOVE)
NINE MONTHS
ENDED
SEPTEMBER 30,
---------------
PRO FORMA HISTORICAL
1996(3) 1997(9)
------------ ---------------
INCOME STATEMENT HIGHLIGHTS:(1)(2)
Net revenues........... $4,475,262 $3,890,015
Net income before
extraordinary loss ... 473,359 400,694(8)
Net income before
extraordinary loss
per share (fully
diluted).............. 0.56(4) 0.47(8)
AT
SEPTEMBER 30,
AT DECEMBER 31, 1997(9)
-------------------------------------------------------------------- -------------------
1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ -------------
BALANCE SHEET HIGHLIGHTS:(1)(2)
Total assets ........ $6,027,223 $6,698,832 $7,437,042 $8,994,384 $13,588,368 $14,997,006
Long-term debt ...... 303,474 394,123 419,968 353,977 1,004,584 2,422,524
Shareholders'
equity.............. 1,054,123 1,319,253 1,629,762 2,148,646 4,423,599 4,608,893
Assets under
management and
mortgage programs .. 3,805,748 4,058,764 4,115,360 4,955,609 5,729,234 5,602,175
Debt under
management and
mortgage programs .. 3,273,080 3,629,701 3,791,562 4,427,872 5,089,943 4,952,083
------------
(1) Includes the merger of HFS with and into CUC, which was renamed
Cendant Corporation, accounted for as a pooling of interests. Also
includes acquisitions by CUC and HFS accounted for as pooling of
interests and other acquisitions accounted for using the purchase
method of accounting.
(2) On January 31, 1992, HFS purchased substantially all of the assets
comprising the franchise system of Days Inn of America, Inc. and
certain of its subsidiaries. On April 29, 1993, HFS purchased the
outstanding stock of the company which owns the Super 8 Motel
franchise system. On May 11, 1995, HFS acquired by merger Central
Credit Inc., a gambling patron credit information business. On August
1, 1995, a majority owned subsidiary of HFS acquired the CENTURY 21
real estate brokerage franchise system. On January 23, 1996, HFS
purchased the assets comprising the Travelodge hotel franchise system
in North America. On February 12, 1996, HFS purchased substantially
all the assets comprising Electronic Realty Associates (ERA) real
estate brokerage franchise system. During the second quarter of 1996,
HFS purchased the six previously non-owned CENTURY 21 U.S. regions.
On May 31, 1996, HFS acquired by merger Coldwell Banker Corporation.
Consolidated results of Parent include the operating results of the
aforementioned acquisitions since the respective dates of
acquisition.
(3) Pro forma results of operations include the following acquisitions by
HFS, as if they occurred on January 1, 1996: (i) the acquisition and
related financing of Coldwell Banker Corporation on May 31, 1996;
(ii) the acquisition and related financing of Avis, Inc. on October
16, 1996; (iii) the acquisition and related financing of Resorts
Condominiums International, Inc. on November 12, 1996.
(4) Includes provisions for costs incurred principally in connection with
the acquisitions of Davidson & Associates, Inc. ("Davidson"), Sierra
On-Line, Inc. ("Sierra") and Ideon Group Inc. ("Ideon"). The charges
aggregated $179.9 million ($118.7 million or $0.15 per share
after-tax effect). Such costs in connection with CUC's acquisitions
of Davidson and Sierra are non-recurring and are comprised primarily
of transaction costs and other professional fees. Such costs
associated with CUC's acquisition of Ideon are non-recurring and
include transaction costs as well as a provision relating to certain
litigation matters. On June 13, 1997, CUC entered into an agreement
which provides for the settlement of certain Ideon litigation
matters. Such agreement calls for the payment of $70.5 million over a
six-year period which was provided for during the year ended December
31, 1996.
(5) Includes provision for costs related to the abandonment of certain
Ideon development efforts and the restructuring of CUC's SafeCard
division and CUC's corporate infrastructure. The charges aggregated
$97.0 million ($62.1 million or $0.08 per share after-tax effect).
23
(6) Includes net gain of $9.8 million ($6.2 million or $0.01 per share
after-tax effect) related to the sale of The ImagiNation Network,
Inc. offset by costs related to Ideon's products abandoned and
restructuring.
(7) Excludes extraordinary loss, net of tax of $12.8 million or $0.02 per
share for the year ended December 31, 1993, related to the early
extinguishment of debt.
(8) Includes a one-time pre-tax merger and restructuring charge of $303
million ($227 million, or $0.25 per share, after tax) during the
second quarter of 1997 in connection with the merger of HFS with PHH
Corporation for merger-related costs, including severance, facility
and system consolidations and terminations, costs associated with
exiting certain activities and merger-related professional fees.
(9) In the opinion of management, all adjustments necessary for a fair
presentation of the interim supplemental consolidated financial
highlights as of and for the nine months ended September 30, 1997 are
included. Such adjustments consist only of normal recurring items.
These interim results are not necessarily indicative of results of a
full year.
The name, citizenship, business address, principal occupation or
employment and five-year employment history for each of the directors and
executive officers of Purchaser and Parent are set forth in Schedule I
hereto.
During the past 60 days, Parent effected transactions in the equity
securities of the Company as set forth in Schedule II hereto. Except as set
forth in this Offer to Purchase, none of Parent or Purchaser or, to the best
knowledge of Parent or Purchaser, any of the persons listed in Schedule I
hereto, or any associate or majority-owned subsidiary of such persons,
beneficially owns any equity security of the Company, and none of Parent or
Purchaser or, to the best knowledge of Parent or Purchaser, any of the other
persons referred to above, or any of the respective directors, executive
officers or subsidiaries of any of the foregoing, has effected any
transaction in any equity security of the Company during the past 60 days.
Except as set forth in this Offer to Purchase, none of Parent or Purchaser
or, to the best knowledge of Parent or Purchaser, any of the persons listed
in Schedule I hereto has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, without limitation, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
securities of the Company, joint ventures, loan or option arrangements, puts
or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, none
of Parent or Purchaser or, to the best knowledge of Parent or Purchaser, any
of the persons listed in Schedule I hereto has had any transactions with the
Company, or any of its executive officers, directors or affiliates that would
require reporting under the rules of the SEC.
Except as set forth in this Offer to Purchase, there have been no
contacts, negotiations or transactions between Parent or Purchaser, or their
respective subsidiaries, or, to the best knowledge of Parent or Purchaser,
any of the persons listed in Schedule I hereto, on the one hand, and the
Company or its executive officers, directors or affiliates, on the other
hand, concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors, or a sale or other
transfer of a material amount of assets.
10. SOURCE AND AMOUNT OF FUNDS.
Purchaser estimates that the total amount of funds required to purchase
Common Shares pursuant to the Offer and to pay all related costs and
expenses, will be approximately $1.38 billion. See also Section 16. Purchaser
plans to obtain all funds needed for the Offer through a capital contribution
from Parent. Parent plans to obtain such funds from cash accounts, available
lines of credit (the "Existing Credit Facilities") and a new $1.5 billion
364-day Revolving Credit Facility (the "New Credit Facility" and, together
with the Existing Credit Facilities, the "Credit Facilities") pursuant to a
commitment letter (the "Financing Commitment"), dated January 23, 1998, among
Parent, The Chase Manhattan Bank ("Chase") and Chase Securities Inc. The
Existing Credit Facilities consist of (i) a $750 million Five Year
Competitive Advance and Revolving Credit Agreement dated as of October 2,
1996, as amended, among Parent, the lenders referred to therein (the
"Lenders") and Chase, as Administrative Agent (the "Five Year Credit
Facility") and (ii) a $1.25 billion 364-Day Competitive Advance and Revolving
Credit
24
Agreement, dated as of October 2, 1996, as amended, among Parent, the lenders
referred to therein and Chase, as Administrative Agent (the "Existing 364-Day
Credit Facility"). At January 26, 1998, Parent had approximately $858 million
of available borrowings under the Existing Credit Facilities.
Xxxxx'x obligations under the Financing Commitment are subject to the
following conditions, among others: (i) the execution and delivery of
satisfactory documentation with respect to the New Credit Facility and (ii)
the absence of a material adverse change with respect to Parent or financial,
bank syndication or capital market conditions.
The Existing 364-Day Credit Facility will mature on September 30, 1998,
provided that Parent is entitled to annually request a 364-day extension of
such maturity date. The Five Year Credit Facility will mature on October 1,
2001. The New Credit Facility will mature 364 days after the execution of the
definitive documentation relating thereto.
The Existing Credit Facilities provide, and the New Credit Facility will
provide, for revolving loans which bear interest, at the option of Parent, at
rates based on competitive bids of Lenders participating in such facilities,
at a prime rate or at LIBOR plus an applicable variable margin based on
Parent's senior unsecured long-term debt rating.
The Existing Credit Facilities contain, and the New Credit Facility will
contain, certain financial covenants as well as certain restrictions on,
among other things, (i) indebtedness of material subsidiaries, (ii) liens,
(iii) mergers, consolidations, liquidations, dissolutions and sales of
substantially all assets, (iv) sale and leasebacks, (v) changes in fiscal
year and accounting treatment and (vi) certain changes in the character of
business. The financial covenants require Parent to maintain specified (i)
maximum leverage ratios and (ii) minimum interest coverage ratios.
In connection with the Existing Credit Facilities and the Financing
Commitment, Parent has agreed to pay Chase, with respect to the Financing
Commitment, and the lenders and Chase, with respect to the Existing Credit
Facilities, certain fees, and to reimburse them for certain expenses and to
provide them certain indemnities, as is customary for commitments of the type
described herein.
It is anticipated that any indebtedness incurred by Parent under the
Credit Facilities will be repaid from funds generated internally by Parent
and its subsidiaries, through additional borrowings, or through a combination
of such sources. The New Credit Facility will, however, require that, subject
to certain exceptions, Parent use the proceeds of any offering of Parent's
debt or equity to repay outstanding indebtedness under such facility. No
final decisions have been made concerning the method Parent will employ to
repay such indebtedness. Such decisions when made will be based on Parent's
review from time to time of the advisability of particular actions, as well
as on prevailing interest rates and financial and other economic conditions.
The foregoing description of the Financing Commitment and the Existing
Credit Facilities is qualified in its entirety by reference to the full text
of such Financing Commitment and Existing Credit Facilities, copies of which
have been filed with the Commission as exhibits to Parent's and the
Purchaser's Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
and are incorporated by reference herein.
11. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
Over the past several years, representatives of Parent (formerly known as
CUC), including Xxxx X. Xxxxxxx, Xxxxxx's Executive Vice President and Chief
Marketing Officer, and representatives of the Company, including Xxxxxx X.
Xxxxxx, the Company's Vice Chairman, President and Chief Executive Officer,
met on various occasions to discuss possible strategic marketing alliances.
At a meeting in May 1997, Xx. Xxxxxxx and Xx. Xxxxxx met and discussed CUC's
interest in acquiring the Company and the existence of certain financial
issues relating to a possible combination.
In the Summer of 1997, representatives of HFS separately identified the
Company as a possible acquisition candidate. HFS's interest in the Company
increased as a result of its decision to acquire Providian Auto & Home
Insurance Company and its property and casualty subsidiaries, which
predominately market personal automobile insurance through direct marketing
channels.
25
During the course of planning for the then-pending merger of CUC and HFS,
their mutual interest in the Company was identified and scheduled to be
pursued following completion of the merger.
On December 3, 1997, a significant shareholder of the Company indicated to
the Senior Vice President -- Acquisitions of HFS that it believed the Company
was considering a sale transaction. This information was conveyed to Xx.
Xxxxxxx, who attempted on several occasions to contact Xx. Xxxxxx to inquire
as to its validity.
Xx. Xxxxxxx ultimately spoke with Xx. Xxxxxx in mid-December 1997 and
described the merger of CUC and HFS which created Parent and emphasized that
the resulting size and scale of Parent had eliminated the financial issues
relating to an acquisition of the Company which they had previously
discussed. Xx. Xxxxxxx inquired whether the Company was actively engaged in
discussions relating to an acquisition, and indicated that, if the Company
was so engaged, representatives of Parent would like to meet immediately with
the Company's representatives to discuss Xxxxxx's strong interest in
exploring such a transaction. In response to Xx. Xxxxxx'x assurances that the
Company was not actively engaged in acquisition discussions, Xx. Xxxxxxx
agreed to forward to Xx. Xxxxxx information regarding Parent and to contact
Xx. Xxxxxx to schedule a meeting in early January to discuss a possible
acquisition transaction.
On December 22, 1997, the Company and AIG announced that they had entered
into the AIG Merger Agreement contemplating the Proposed AIG Merger and the
AIG Lockup Option Agreement and that certain stockholders of the Company had
entered into the Voting Agreement with AIG.
Following a series of meetings among representatives of Parent and
Xxxxxx's outside financial advisors and legal counsel and a meeting of
Parent's Executive Committee, on January 26, 1998 the Parent Board met to
review its strategic options in light of the announcement of the Proposed AIG
Merger. Because the Parent Board believes that a combination of Parent and
the Company would offer compelling benefits to both companies, their
shareholders and their other constituencies, it determined that Parent should
make a competing offer for the Company. On January 27, 1998, Parent announced
its intention to commence the Offer, to be followed by the Proposed Merger.
On the same day, Xxxxxx sent the following letter to the Company Board:
January 27, 1998
Board of Directors
American Bankers Insurance Group, Inc.
00000 Xxxxx Xxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Attention: Mr. X. Xxxx Xxxxxx, Chairman
Dear Members of the Board:
On behalf of Cendant Corporation we are pleased to submit a proposal to
acquire American Bankers Insurance Group, Inc. for $58 per common share
payable in cash and stock. Our proposal, representing a premium of $11 (in
excess of 23%) over the value of American International Group's proposal, is
demonstrably superior to the AIG proposed transaction.
Several months ago one of our senior executives had discussed with Xx.
Xxxxxx our interest in pursuing a business combination with American Bankers.
As recently as December, in response to our inquiry as to whether American
Bankers was engaged in discussions relating to an acquisition and to our
expression of Cendant's strong interest in exploring such a transaction with
American Bankers, Xx. Xxxxxx said that American Bankers was not pursuing any
acquisition transaction, and suggested that he meet with our senior executive
in early January to discuss the matter further. In view of this, it is
particularly disappointing that we were not made aware that American Bankers
was interested in pursuing acquisition proposals and, accordingly, we did not
have the opportunity to submit an offer prior to the announcement of your
proposed transaction with AIG.
We would have liked to discuss our proposal directly with you. However,
the terms of Section 6.2 of your agreement with AIG purport to prohibit
discussions with us or any other party until 120 days
26
following the date of such agreement, at which time, as both you and AIG have
publicly stated, the acquisition of American Bankers by AIG likely will have
been completed, making any discussions between us irrelevant. We believe this
is an extraordinary measure and raises questions about whether it is in the
best interests of American Bankers' shareholders.
Accordingly, we will be commencing promptly a cash tender offer directly
to American Bankers' shareholders for 51% of American Bankers' shares at a
price of $58 per common share to be followed by a second step merger in which
shares of Cendant common stock with a fixed value of $58 per share will be
exchanged on a tax-free basis for the balance of American Bankers' common
stock and each share of American Bankers' preferred stock will be converted
into one share of Cendant preferred stock having substantially similar terms,
except that such shares will be convertible into shares of Cendant common
stock calculated in accordance with the terms of the American Bankers'
preferred stock.
The provisions in your agreement with AIG include highly unusual and
restrictive conditions which, in fact, represent a virtual forfeiture of the
Board's fundamental mandate of protecting the interests of shareholders.
Accordingly, we have today commenced litigation in federal court in Miami to
ensure that your shareholders will have the opportunity to consider our offer
and to assist your board in fulfilling its fiduciary obligations and to
resolve certain other issues.
Although we have determined that it is both necessary and appropriate,
under the circumstances, to commence our cash tender offer and litigation,
our strong preference would be to enter into a merger agreement with you
containing substantially the same terms and conditions (other than price and
inappropriate terms) as your proposed transaction with AIG.
In addition to its significant economic superiority, the merits and the
strategic value of the combination of Cendant and American Bankers are
compelling. Cendant (NYSE:CD) is the product of the recent combination of CUC
International Inc. and HFS Incorporated, creating the world's largest
consumer and business services company. Cendant interacts with approximately
170 million customers and members around the world, several times each year.
Cendant is investment grade rated and has a market value of approximately $30
billion. Cendant's 1997 revenues and net income are estimated by Wall Street
analysts at approximately $5.1 billion and $900 million, respectively.
Cendant has recently announced its acquisition of Providian Direct, a direct
marketer of automobile insurance. Under separate cover, we have sent a copy
of the proxy statement for the merger that created Cendant.
Cendant's vision for American Bankers is one of exceptional growth and
opportunity, which involves utilizing Cendant's distribution channels and
customer base as an outlet for American Bankers' products and capitalizing on
American Bankers' existing relationships with financial institutions and
retailers to increase penetration of Cendant's products. Consistent with this
vision, and Xxxxxxx's past strategic acquisition practices, Cendant would
expect American Bankers' management to continue with the company, would not
expect significant employment reductions and would expect American Bankers to
continue to maintain its headquarters in Miami.
The price we are offering in our proposal clearly provides significantly
greater value to your shareholders than the proposed transaction with AIG. It
would also benefit Cendant's shareholders and be accretive to earnings within
the first year. Our proposal is not subject to any due diligence or financing
condition and the funds for the cash portion of our offer are available from
existing cash resources and under our credit facilities. In addition,
Cendant, having acquired control of insurers in the past, is extremely
familiar with the insurance regulatory process, has obtained approvals of the
type required to implement this proposal and will be able to complete our
proposed transaction on a timely basis.
Accordingly, we strongly believe that you are obligated by principles of
fiduciary duty to consider and accept our proposal. Consistent with your
clear fiduciary duties, we expect you will provide us with at least the same
information you furnished to AIG in the course of your discussions and
negotiations with them and that you will discuss and negotiate with us the
details of our proposal. In addition, you should take whatever other actions
are reasonably necessary or appropriate so that we may operate on a level
playing field with AIG and any other companies which may be interested in
acquiring American Bankers.
27
Our Board of Directors is fully supportive of our proposal and has
unanimously authorized and approved it and no other Cendant approval is
required for this transaction. Consistent with our Board of Directors'
action, we and our advisors stand ready to meet with you and your advisors at
your earliest convenience. We want to stress that we are flexible as to all
aspects of our proposal and are anxious to proceed to discuss and negotiate
it with you as soon as possible.
Should you find it helpful to do so in connection with reviewing and
considering our proposal, you and your advisors should feel free to contact
our outside advisors: Xxxxxx X. Xxxxxxxx of Xxxxxx Brothers and Xxxx Xxxx of
Xxxxxxx Xxxxx & Co., our financial advisors, and Xxxxx Xxx of Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, our legal counsel.
Personally and on behalf of our colleagues at Cendant, we look forward to
hearing from you soon and working with you on our proposal.
Sincerely,
/s/ Xxxxx X. Xxxxxxxxx /s/Xxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxxx Xxxxxx X. Xxxxxx
President and Chairman
Chief Executive
Officer
cc: All Directors
In the AIG Merger Agreement, the Company has agreed to the Fiduciary
Sabbatical Provision which provides that the Company and its subsidiaries,
officers, directors, employees, agents and representatives will not, directly
or indirectly, initiate, solicit, encourage or otherwise facilitate any
inquiries or the making of any Acquisition Proposal. The Fiduciary Sabbatical
Provision also provides that the Company and its subsidiaries, officers,
directors, employees, agents or representatives will not engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person regarding any Acquisition Proposal,
or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal (including, without limitation, by means of an amendment
to the Rights Agreement). However, the Fiduciary Sabbatical Provision does
not prevent the Company or the Company Board from (i) complying with Rule
14e-2 of the Exchange Act (requiring the Company Board to disclose to the
Company's shareholders its position or lack thereof regarding the Offer) or
(ii) at any time after 120 days from the date of the AIG Merger Agreement if
the Proposed AIG Merger shall not have been approved by the requisite vote of
the Company's shareholders by such date, (A) providing information in
response to a request therefor by a person who has made an unsolicited bona
fide written Acquisition Proposal if the Company Board receives from the
requesting person an executed confidentiality agreement on substantially
equivalent terms to that entered into between the Company and AIG; (B)
engaging in any negotiations or discussions with any person who has made an
unsolicited bona fide written Acquisition Proposal; or (C) recommending such
Acquisition Proposal to the shareholders of the Company, if and only to the
extent that, (i) in each such case referred to in clause (A), (B) or (C)
above, the Company Board determines in good faith after consultation with
outside legal counsel that such action is necessary in order for the
Company's directors to comply with their respective fiduciary duties under
applicable law and (ii) in each case referred to in clause (B) or (C) above,
the Company Board determines in good faith (after consultation with its
financial advisor) that such Acquisition Proposal, if accepted, is reasonably
likely to be consummated, taking into account all legal, financial and
regulatory aspects of the proposal and the person making the proposal, and
would, if consummated, result in a more favorable transaction than the
Proposed AIG Merger, taking into account the long-term prospects and
interests of the Company (any such more favorable Acquisition Proposal, a
"Superior Proposal").
Pursuant to the AIG Merger Agreement, the Company has also agreed to take
all actions necessary to convene the respective meetings of the holders of
Common Shares and Preferred Shares (collectively, the "Shareholders
Meetings") as promptly as practicable (but in no case more than 45 days)
after AIG's Registration Statement on Form S-4 (registering shares of AIG
Common Stock and AIG preferred stock
28
to be issued in the Proposed AIG Merger) is declared effective by the SEC, in
order that such shareholders may consider and vote upon the approval of the
Proposed AIG Merger. In addition, the AIG Merger Agreement provides that,
subject to fiduciary obligations under applicable law, the Company Board will
recommend approval of the Proposed AIG Merger, will not withdraw or modify
such recommendation and will take all lawful action to solicit such approval.
However, in the event that the Company Board withdraws or modifies its
recommendation, the AIG Merger Agreement requires that the Company
nonetheless must still cause the Shareholders Meetings to be convened and a
vote taken with respect to the Proposed AIG Merger and the Company Board will
communicate to the Company's shareholders its basis for withdrawing or
modifying its recommendation in accordance with the Florida Corporation Act.
The AIG Merger Agreement may only be terminated in connection with an
Acquisition Proposal by the Company (i) at any time after 180 days from the
date of the AIG Merger Agreement, if the Common Shareholder Approval shall
not have been obtained at the meeting duly convened therefor or any
adjournment or postponement thereof, and prior to or at the time of such
meeting, any person shall have made or publicly announced an intention to
make an Acquisition Proposal, or (ii) (A) if the Company has not materially
breached the AIG Merger Agreement, (B) the Common Shareholder Approval and
the Preferred Shareholder Approval (collectively, the "Company Shareholder
Approval") shall not have been obtained, (C) the Company Board authorizes the
Company to enter into a binding agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies AIG that it intends
to enter into such an agreement, attaching the most current version of such
agreement to such notice, and (D) AIG does not make, prior to the later of
(x) five business days after receipt of the Company's notification of its
intention to enter into a binding agreement for a Superior Proposal or (y) at
least 180 days from the date of the AIG Merger Agreement, an offer that the
Company Board determines, in good faith after consultation with its financial
advisors, is at least as favorable as the Superior Proposal, taking into
account the long-term prospects and interests of the Company and its
shareholders. In addition, the Merger Agreement may be terminated by AIG,
among other circumstances, (i) if the Common Shareholder Approval shall not
have been obtained at a meeting duly convened therefor at any adjournment or
postponement thereof, or (ii) if the Company enters into a binding agreement
with respect to a Superior Proposal or the Company Board withdraws or
adversely modifies its approval or recommendation of the Proposed AIG Merger,
or after the mailing of the proxy statement/prospectus regarding the Proposed
AIG Merger, the Company Board fails to reconfirm its recommendation of the
AIG Merger Agreement within 10 business days after a reasonable written
request by AIG to do so. In the event the AIG Merger Agreement is terminated
pursuant to the provisions described in either of the two immediately
preceding sentences and (in the case of AIG's termination of the AIG Merger
Agreement pursuant to the provisions described in clause (i) above) prior to,
or at the time of the meeting referred to therein, any person shall have made
an Acquisition Proposal to the Company or any of its subsidiaries or any of
its stockholders or shall have publicly announced an intention to make an
Acquisition Proposal, then the Company is obligated to pay to AIG (within
certain time periods) the AIG Termination Fee.
In addition, the AIG Merger Agreement provides that, in the event that
either the Company or AIG terminates the AIG Merger Agreement as a result of
the failure to obtain the Common Shareholder Approval at a meeting duly
convened therefor or at any adjournment or postponement thereof and prior to
or at the time of such meeting no person shall have made or publicly
announced an intention to make an Acquisition Proposal, the Company will
promptly reimburse AIG for its aggregate expenses in connection with the
Proposed AIG Merger up to $5 million, and if within 18 months after such
termination, the Company enters into an agreement concerning a transaction
that constitutes an Acquisition Proposal, the Company will pay AIG the AIG
Termination Fee.
The foregoing description of the AIG Merger Agreement is qualified in its
entirety by reference to the full text of the AIG Merger Agreement, a copy of
which has been included by the Company as an exhibit to the Company January
13 Form 8-K and may be obtained in the manner described in Section 8 (except
that copies may not be available at regional offices of the SEC).
29
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; CERTAIN
CONSIDERATIONS.
General. The purpose of the Offer and the Proposed Merger is to enable
Parent to acquire control of, and ultimately the entire equity interest in,
the Company. The Offer, as the first step in the acquisition of the Company,
is intended to facilitate the acquisition of a majority of the outstanding
Common Shares. The purpose of the Proposed Merger is to acquire all Shares
not beneficially owned by the Purchaser following consummation of the Offer.
Pursuant to the Proposed Merger, each then outstanding Common Share (other
than Common Shares owned by Parent or any of its wholly owned subsidiaries,
Common Shares held in the treasury of the Company, and if shareholder
appraisal rights are available with respect to Common Shares, Common Shares
held by shareholders who perfect appraisal rights under the Florida
Corporation Act) would be converted into that number of shares of Parent
Common Stock having a value equal to the Offer Price (as determined as of the
time of the Proposed Merger). In addition, each then outstanding Preferred
Share would be converted into one share of a new series of convertible
preferred stock of Parent having substantially similar terms, except that
such shares would be convertible into shares of Parent Common Stock in
accordance with the terms of the Preferred Shares.
Except in the case of a "short-form" merger as described below, under the
Florida Corporation Act, the approval of the Company Board and the
affirmative vote of the holders of a majority of the outstanding Common
Shares (including any Common Shares owned by Purchaser) and the outstanding
Preferred Shares (including any Preferred Shares owned by Purchaser), each
voting separately as a class, would be required to approve the Proposed
Merger. If Purchaser acquires through the Offer at least a majority of the
outstanding Common Shares (which would be the case if the Minimum Tender
Condition and the Lockup Termination Condition were satisfied and Purchaser
were to accept for payment Common Shares tendered pursuant to the Offer) and
the Affiliated Transaction Condition, the Control Share Condition, the
Supermajority Vote Condition and the Insurance Regulatory Approval Condition
were each satisfied, Purchaser would have sufficient voting power to ensure
approval of the Proposed Merger by holders of the Common Shares. In its
proposal letter to the Company, Parent indicated that its strong preference
would be to enter into a merger agreement with the Company containing
substantially the same terms and conditions as the AIG Merger Agreement but
at the significantly higher value reflected in the Offer Price. Accordingly,
if the approval of the Proposed Merger by holders of Preferred Shares is not
obtained or Parent reasonably determines that such approval is not likely to
be obtained, in such circumstance Parent would expect that the Proposed
Parent Merger Agreement would provide for the change in structure provided
for in the AIG Merger Agreement such that a subsidiary of Parent would merge
with and into the Company with the Company continuing as the surviving
corporation. Upon consummation of such revised Proposed Merger, the Preferred
Shares would remain outstanding pursuant to their existing terms (except that
they would be convertible into Parent common stock). As would be the case
under the AIG Merger Agreement, the revised Proposed Merger would not require
any approval of holders of Preferred Shares and would cause holders of Common
Shares to pay Federal income tax on all consideration, whether cash or Parent
Common Stock, that they receive in the revised Proposed Merger to the extent
of any gain they may have on their Common Shares.
The Florida Corporation Act also provides that if a parent corporation
owns at least 80% of the outstanding shares of each class of stock of a
subsidiary, the parent company can effect a "short-form" merger with that
subsidiary without a shareholder vote. Accordingly, if, Purchaser were to
acquire at least 80% of the outstanding Common Shares and Preferred Shares,
respectively, and if the Affiliated Transaction Condition, the Control Share
Condition and the Supermajority Vote Condition were each satisfied, then
Purchaser could, and intends to, effect the Proposed Merger without any
action by any other shareholder of the Company.
Although Xxxxxx has sought to enter into negotiations with the Company
with respect to the Proposed Xxxxxx and continues to pursue such
negotiations, there can be no assurance, particularly in light of the
Fiduciary Sabbatical Provision, that such negotiations will occur, or, if
such negotiations occur, as to the outcome thereof. Purchaser reserves the
right to amend the Offer (including amending the number of Common Shares to
be purchased, the purchase price and the Proposed Merger consideration)
30
in connection with entering into the Proposed Merger Agreement or otherwise
or to negotiate a merger agreement with the Company not involving a tender
offer pursuant to which Purchaser would terminate the Offer and the Common
Shares would, upon consummation of such merger, be converted into cash,
Parent Common Stock and/or other securities in such amounts as are negotiated
by Parent and the Company.
In connection with the Offer and during its pendency, or in the event the
Offer is terminated or not consummated, or after the expiration of the Offer
and pending consummation of the Proposed Merger, in accordance with
applicable law and subject to the terms of any merger agreement that it may
enter into with the Company, Parent may explore any and all options which may
be available to it. In this regard, Xxxxxx intends to solicit proxies against
the adoption of the Proposed AIG Merger at any meeting of holders of Common
Shares and/or Preferred Shares called for such purpose and intends to
promptly file preliminary proxy materials with the SEC concerning such
solicitation. Parent may also determine, whether or not the Offer is then
pending, to conduct a proxy contest in connection with the Company's 1998
annual meeting of shareholders seeking to remove the current members of the
Company Board and elect a new slate of directors designated by Parent. In
addition, Parent may seek to acquire Preferred Shares through a tender offer
or exchange offer and upon such terms and at such prices as it may determine,
and after expiration or termination of the Offer, Parent may seek to acquire
Preferred Shares and additional Common Shares, through open market purchases,
privately negotiated transactions, a tender offer or exchange offer or
otherwise, upon such terms and at such prices as it may determine, which may
be higher or lower than the Offer Price and could be for cash or other
consideration.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY ANNUAL OR
OTHER MEETING OF THE COMPANY'S SHAREHOLDERS. ANY SUCH SOLICITATION WHICH
PARENT OR PURCHASER MIGHT MAKE WOULD BE MADE ONLY PURSUANT TO SEPARATE PROXY
MATERIALS IN COMPLIANCE WITH THE REQUIREMENTS OF SECTION 14(A) OF THE
EXCHANGE ACT. IN ADDITION, THE OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OF PARENT. SUCH AN OFFER MAY
BE MADE ONLY PURSUANT TO A PROSPECTUS PURSUANT TO THE SECURITIES ACT OF 1933,
AS AMENDED.
Whether or not the Offer is consummated, Purchaser reserves the right,
subject to applicable legal restrictions, to sell or otherwise dispose of any
or all Shares acquired pursuant to the Offer or otherwise. Such transactions
may be effected on terms and at prices as it shall determine, which may be
higher or lower than the Offer Price and could be for cash or other
consideration.
Plans for the Company. In connection with the Offer, Parent and Purchaser
have reviewed, and will continue to review, on the basis of publicly
available information, various possible business strategies that they might
consider in the event that the Parent acquires control of the Company,
whether pursuant to the Proposed Merger or otherwise. In addition, if and to
the extent that Parent acquires control of the Company or otherwise obtains
access to the books and records of the Company, Parent and Purchaser intend
to conduct a detailed review of the Company and its assets, corporate
structure, dividend policy, capitalization, operations, properties, policies,
management and personnel and, subject to applicable state insurance
regulatory rules and regulations, to consider and determine what, if any,
changes would be desirable in light of the circumstances which then exist.
However, except as indicated in this Offer to Purchase, neither Parent nor
Purchaser has any present plans or proposals which relate to or would result
in an extraordinary corporate transaction, such as a merger, reorganization
or liquidation, involving the Company or any of its subsidiaries, a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries or any material change in the Company's capitalization or
dividend policy or any other material changes in the Company's corporate
structure or business, or the composition of the Company Board or management.
Dissenters' Rights and Other Matters. Pursuant to Section 607.1302 of the
Florida Corporation Act, holders of Common Shares do not have dissenters'
rights as a result of the Offer. In addition, unless the Shares are no longer
registered on the NYSE at the time the Proposed Merger is consummated,
holders of Shares will not be entitled to dissenters' rights in connection
with the Proposed Merger. If, however, the Shares are no longer registered on
the NYSE at the time the Proposed Merger is consummated, holders of the
Common Shares and, to the extent that the Proposed Merger requires the
approval of the
31
holders of Preferred Shares, holders of Preferred Shares at the effective
time of the Proposed Merger will have certain rights pursuant to the
provisions of Section 607.1320 of the Florida Corporation Act to dissent and
demand appraisal of their Shares. Under Section 607.1320 of the Florida
Corporation Act, shareholders who have dissenters' rights, if any, and who
comply with the applicable statutory procedures (and who have not otherwise
agreed with the Company as to the value of their shares) will be entitled to
receive a judicial determination of the fair value of their Shares and to
receive payment of such fair value in cash, together, in the discretion of
the court, with a fair rate of interest, as determined by the court. Any such
judicial determination of the fair value of Common Shares could be based upon
factors other than, or in addition to, the value of the consideration to be
paid per share in the Proposed Merger or the market value of the Shares. The
value so determined could be more or less than the value of the consideration
to be paid per Common Share in the Proposed Merger.
The foregoing summary of Sections 607.1302 and 607.1320 of the Florida
Corporation Act does not purport to be complete and is qualified in its
entirety by reference to such statutory sections.
The Proposed Merger would have to comply with any applicable Federal law
operative at the time of its consummation. The SEC has adopted Rule 13e-3
under the Exchange Act which is applicable to certain "going private"
transactions and which may under certain circumstances be applicable to the
Proposed Merger. However, Rule 13e-3 would be inapplicable if (i) the Shares
are deregistered under the Exchange Act prior to the Proposed Merger or (ii)
the Proposed Merger is consummated within one year after the purchase of the
Common Shares pursuant to the Offer and the amount paid per Common Share in
the Proposed Merger is at least equal to the amount paid per Common Share in
the Offer. If applicable, Rule 13e-3 requires, among other things, that
certain financial information concerning the fairness of the proposed
transaction and the consideration offered to minority shareholders in such
transaction be filed with the SEC and disclosed to shareholders prior to
consummation of the transaction.
The Company Articles and the Company By-Laws. The Company Articles and the
Company By-Laws contain several provisions that may delay a change in control
of the Company following the purchase of Common Shares by Purchaser pursuant
to the Offer, including, among others, (i) a provision that the Company Board
shall be classified, with each class elected for a term of three years and
one class elected each year at the Company's annual meeting of shareholders,
(ii) a provision requiring advance notice to the Company of any shareholder
nominations for directors at an annual meeting of shareholders, (iii) a
provision that directors may only be removed for cause, and only by the
affirmative vote of holders of 75% or more of the voting shares, and (iv) a
provision that special meetings of shareholders may be called only by the
Chief Executive Officer of the Company, the Company Board, the Executive
Committee of the Company Board or holders of at least 75% of the Common
Shares.
Pursuant to Section 2 of Article V of the Company Articles, the Company
Board is divided into three classes, each of which consists of five members,
with each class elected for a term of three years and one class elected at
the Company's annual meeting of shareholders each year. The number of the
Company's directors is currently limited to between 12 and 18 pursuant to
Section 1 of Article V of the Company Articles, and there are currently 15
directors. Pursuant to Section 3 of Article V of the Company Articles,
members of the Company Board may be removed only for cause, and only by the
affirmative vote of the holders of 75% or more of the outstanding voting
shares.
Paragraph A of Article VIII of the Company Articles provides that in
addition to any affirmative vote required by law, the affirmative vote of the
holders of at least 85% of the outstanding voting shares, including the
affirmative vote of least 50% of the voting shares held by shareholders other
than any 30% Shareholder, shall be required to effectuate certain business
combination transactions, including, among others, a merger, sale of assets,
sale of shares and reclassification of securities involving the corporation
with any 30% Shareholder. However, this supermajority vote requirement does
not apply in certain circumstances, including if the Company Board has, by at
least a 75% vote of the directors then in office, (i) given prior approval to
the 30% Shareholder's acquisition of 30% or more of the outstanding Common
Shares or (ii) approved the business combination prior to the 30% Shareholder
having attained its 30% holding.
32
Amendment of the foregoing provisions of the Company Articles requires the
affirmative vote of the holders of at least 85% of the Company's outstanding
voting shares, including the affirmative vote of at least 50% of the voting
shares other than any 30% Shareholders, unless such amendment is recommended
to shareholders by at least a majority of the entire Company Board and by at
least two-thirds of the continuing directors (as defined in the Company
Articles). Amendment of the foregoing provisions of the Company By-Laws
requires a majority vote of the full Company Board or a majority vote of all
shareholders entitled to vote at any meeting of the shareholders of record.
If, following consummation of the Offer, the members of the Company Board
in office at such time were to refuse to approve the Proposed Merger (or any
other transaction or corporate action proposed by Purchaser that required
approval of the Company Board), Purchaser, in order to consummate the
Proposed Merger (or any such other transaction or corporate action), would
first have to replace at least a majority of the Company Board with its own
designees. As a result of the classified board provision contained in the
Company Articles, at least two annual meetings of the Company's shareholders
could be required to enable nominees of Purchaser to comprise a majority of
the Company Board. If the current Company Board opposes the Offer or the
Proposed Merger, Parent may determine, whether or not the Offer is then
pending, to take action necessary to place a majority of its designees on the
Company Board, including without limitation, seeking to amend the Company
Articles and Company By-Laws to remove the provisions described above or to
increase the number of seats available on the Company Board for its nominees
and to solicit proxies from the shareholders of the Company for use at the
Company's 1998 annual meeting shareholders for the purpose of electing new
directors designated by Purchaser.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF SUCH PROXIES AT ANY
MEETING OF THE COMPANY'S SHAREHOLDERS. ANY SUCH SOLICITATION WHICH PARENT OR
PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS IN
COMPLIANCE WITH THE REQUIREMENTS OF SECTION 14(A) OF THE EXCHANGE ACT.
The foregoing description of the Company Articles and the Company By-Laws
is qualified in its entirety by reference to the full text of the Company
Articles and the Company By-Laws, copies of which have been filed by the
Company as exhibits to documents filed with the SEC and may be obtained in
the manner described in Section 8 (except that copies may not be available at
regional offices of the SEC).
The Rights. The following is based upon the Company November 14 Form 8-K
and the Company Form 8-A, filed with the SEC:
On February 24, 1988, the Company Board declared a dividend distribution
of one Right for each Common Share and executed the Rights Agreement. On
November 14, 1990, the Company adopted certain amendments to the Rights
Agreement. In addition, as a result of the Stock Split, the aggregate number
of Rights associated with the Common Shares then outstanding, or issued or
delivered after the date of the Stock Split but prior to the Distribution
Date, was adjusted so that one-half of one Right is associated with each
Common Share. Under the Rights Agreement, each Right entitles the holder to
purchase one share of the Series A Preferred Stock at an exercise price of
$31.00, subject to adjustment.
Under the Rights Agreement, until the close of business on the
Distribution Date (which is defined as the earlier of (i) 10 days following a
public announcement that an Acquiring Person has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding
Common Shares and (ii) 10 business days following the commencement of a
tender offer or exchange offer which would result in a person or group
beneficially owning 15% or more of the outstanding Common Shares), the Rights
will be evidenced by the Common Share Certificates and will be transferred
with and only with Common Share Certificates. As soon as practicable after
the Distribution Date, the Rights Certificates will be mailed to holders of
record of the Common Shares as of the close of business on the Distribution
Date, and thereafter the separate Rights Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire at the close of business on March 10, 1998 unless earlier
redeemed by the Company as described below. Pursuant to the terms of the AIG
Merger Agreement, the Company has agreed that, upon the request of AIG, it
will take all actions necessary to extend the term of the Rights Agreement or
to enter into a new Rights Agreement.
33
In the event that the Company is acquired in a merger or consolidation in
which the Company is not the surviving corporation (or is the surviving
corporation but the Common Shares are changed or exchanged) or 50% or more of
the Company's consolidated assets or earning power is sold or transferred,
each holder of a Right will thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number
of shares of common stock of the acquiring company which at the time of such
transaction will have a value equal to two times the exercise price of the
Right.
In the event that an Acquiring Person becomes the beneficial owner of 15%
or more of the outstanding Shares, each holder of a Right will thereafter
have the right to receive, upon exercise, Common Shares (or, in certain
circumstances, cash, property or other securities of the Company), having a
value equal to two times the exercise price of the Right.
At any time until 10 days following the Distribution Date, the Company may
redeem the Rights in whole, but not in part, at the Redemption Price. The
redemption period may be extended by the Company at any time prior to the
expiration of such period. After the redemption period has expired, the
Company's right of redemption may be reinstated if an Acquiring Person
reduces its beneficial ownership to 10% or less of the outstanding Common
Shares in one or more transactions not involving the Company and there are no
other persons who are Acquiring Persons. Immediately upon the action of the
Company Board ordering redemption of the Rights, the Rights will terminate,
and the only right to which the holders of Rights will be entitled will be
the right to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including without limitation, the
right to vote or to receive dividends.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by
the Company Board prior to the Distribution Date. On and after the
Distribution Date, the provisions of the Rights Agreement may be amended by a
majority of the disinterested directors, with the concurrence of a majority
of the Continuing Directors (as defined below) voting separately, in order to
cure any ambiguity, to make changes in any manner which the disinterested
directors and Continuing Directors may deem necessary or desirable and which
does not adversely affect the interests of the holders of the Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen
any time period under the Rights Agreement. In addition, no amendment to
adjust the time period governing redemption of the Rights shall be made at
any time the Rights are not redeemable.
Pursuant to the AIG Merger Agreement, the Company has amended the Rights
Agreement to render the Rights Agreement inapplicable to the Proposed AIG
Merger and the other transactions contemplated by the AIG Merger Agreement,
the AIG Lockup Option Agreement and the AIG Voting Agreement and to ensure,
among other things, that AIG is not deemed to be an Acquiring Person and that
a Distribution Date does not occur by reason of such agreements or
transactions. However, pursuant to the AIG Merger Agreement the Company has
also agreed that it may not facilitate any effort or attempt to make or
implement an Acquisition Proposal, which would include the Offer, including
by means of an amendment to the Rights Agreement.
Based on publicly available information, Xxxxxxxxx believes that, as of
the date of this Offer to Purchase, the Rights were not exercisable, Rights
Certificates had not been issued and the Rights were evidenced by the Common
Share Certificates. Xxxxxxxxx believes that, as a result of Purchaser's
public announcement of the Offer, the Distribution Date will be no later than
February 10, 1998, unless prior to such date the Company Board redeems the
Rights or amends the Rights Agreement to delay the Distribution Date.
Purchaser believes that, under applicable law and under the circumstances
of the Offer, including the Company Board's approval of the AIG Merger
Agreement and the transactions contemplated thereby, the Company Board is
obligated by its fiduciary responsibilities not to redeem the Rights or
render the Rights Agreement inapplicable to any business combination
transaction by AIG without, at the same time, taking the same action as to
Purchaser, the Offer and the Proposed Merger, and that the Company Board's
failure to do so would be a violation of law. In the Florida Litigation,
Purchaser is seeking, among other things, to enjoin the Company Board from
treating AIG and Purchaser differently under the Rights Agreement. See
Section 15.
34
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the Company
November 14 Form 8-K, the Company Form 8-A and the full text of the Rights
Agreement as an exhibit thereto filed with the SEC, and subsequent amendments
to the Rights Agreement as filed with the SEC. Copies of these documents may
be obtained in the manner set forth above.
If the Rights Condition is not satisfied and Purchaser elects, in its sole
discretion, to waive such condition and consummate the Offer, and if there
are outstanding Rights which have not been acquired by Purchaser, Purchaser
will evaluate its alternatives. Such alternatives could include purchasing
additional Rights in the open market, in privately negotiated transactions,
in another tender or exchange offer or otherwise. Any such additional
purchase of Rights could be for cash or other consideration. Under such
circumstances, the Proposed Xxxxxx might be delayed or abandoned as
impracticable. The form and amount of consideration to be received by the
holders of Common Shares in the Proposed Merger, if consummated, might be
subject to adjustment to compensate Purchaser for, among other things, the
costs of acquiring Rights and a portion of the potential dilution cost of
Rights not owned by Purchaser and its affiliates at the time of Proposed
Merger. In such event, the value of the consideration to be exchanged for
Common Shares in Proposed Merger could be substantially less than the
consideration paid in the Offer. In addition, Purchaser may elect under such
circumstances not to consummate the Proposed Merger.
Unless the Rights are redeemed, shareholders will be required to tender
one-half of one Right for each Common Share tendered in order to effect a
valid tender of such Common Shares in accordance with the procedures set
forth in Section 3. If separate certificates for the Rights are not issued, a
tender of Common Shares will also constitute a tender of the associated
Rights. See Sections 1 and 3.
Consummation of the Offer is conditioned upon the Rights having been
redeemed by the Company Board or Purchaser being satisfied, in its sole
discretion, that the Rights are invalid or otherwise inapplicable to the
Offer and to the Proposed Merger.
13. DIVIDENDS AND DISTRIBUTIONS.
If, on or after the date of this Offer to Purchase, the Company should (i)
split, combine or otherwise change the Common Shares or its capitalization,
(ii) issue or sell any additional securities of the Company or otherwise
cause an increase in the number of outstanding securities of the Company or
(iii) acquire currently outstanding Common Shares or otherwise cause a
reduction in the number of outstanding Common Shares, then, without prejudice
to Purchaser's rights under Sections 1 and 14, Purchaser, in its sole
discretion, may make such adjustments as it deems appropriate in the purchase
price and other terms of the Offer, including, without limitation, the amount
and type of securities offered to be purchased.
If, on or after the date of this Offer to Purchase, the Company should
declare or pay any dividend on the Common Shares, other than regular
quarterly dividends, or make any distribution (including, without limitation,
the issuance of additional Common Shares pursuant to a stock dividend or
stock split, the issuance of other securities or the issuance of rights for
the purchase of any securities) with respect to the Common Shares that is
payable or distributable to shareholders of record on a date prior to the
transfer to the name of Purchaser or its nominee or transferee on the
Company's stock transfer records of the Common Shares purchased pursuant to
the Offer, then, without prejudice to Purchaser's rights under Sections 1 and
14, (i) the purchase price per Common Share payable by Purchaser pursuant to
the Offer will be reduced by the amount of any such cash dividend or cash
distribution and (ii) any such non-cash dividend, distribution or right to be
received by the tendering shareholders will be received and held by such
tendering shareholders for the account of Purchaser and will be required to
be promptly remitted and transferred by each such tendering shareholder to
the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount of value thereof,
as determined by Purchaser in its sole discretion.
35
14. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time in its sole discretion, Purchaser shall not be required to accept for
payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's
obligation to pay for or return tendered Common Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the
acceptance for payment of or, subject to the restriction referred to above,
the payment for, any tendered Common Shares, and may terminate the Offer as
to any Common Shares not then paid for, if, in the sole judgment of Purchaser
(1) at or prior to the expiration of the Offer any one or more of the Minimum
Condition, the Affiliated Transaction Condition, the Control Share Condition,
the Supermajority Vote Condition, the Rights Condition, the Lockup
Termination Condition or the Insurance Regulatory Approval Condition has not
been satisfied, (2) the waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), applicable to the
purchase of Common Shares pursuant to the Offer shall not have expired or
been terminated, or (3) at any time on or after January 27, 1998 and prior to
the acceptance for payment of Shares, any of the following events shall
occur:
(a) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim before any court, governmental
regulatory or administrative agency or commission, authority or tribunal,
domestic, foreign or supranational, by any government, governmental
authority or other regulatory or administrative agency or commission,
domestic, foreign or supranational, or by any other person, domestic or
foreign (whether brought by the Company, an affiliate of the Company or
any other person), which (i) challenges or seeks to challenge the
acquisition by Parent or Purchaser or any affiliate of either of them of
the Common Shares, restrains, delays or prohibits or seeks to restrain,
delay or prohibit the making of the Offer or the Proposed Merger,
consummation of the transactions contemplated by the Offer or any other
subsequent business combination, restrains or prohibits or seeks to
restrain or prohibit the performance of any of the contracts or other
arrangements entered into by Purchaser or any of its affiliates in
connection with the acquisition of the Company or obtains or seeks to
obtain any material damages or otherwise directly or indirectly relating
to the transactions contemplated by the Offer, the Proposed Merger or any
other subsequent business combination, (ii) prohibits or limits or seeks
to prohibit or limit Parent's or Purchaser's ownership or operation of all
or any portion of their or the Company's business or assets (including
without limitation the business or assets of their respective affiliates
and subsidiaries (which term as used in this Offer to Purchase shall
include, without limitation, the insurance exchange managed by the
Company)) or to compel or seeks to compel Parent or Purchaser to dispose
of or hold separate all or any portion of their own or the Company's
business or assets (including without limitation the business or assets of
their respective affiliates and subsidiaries) or imposes or seeks to
impose any limitation on the ability of Parent, Purchaser or any affiliate
of either of them to conduct its own business or own such assets as a
result of the transactions contemplated by the Offer, Proposed Merger or
any other subsequent business combination, (iii) makes or seeks to make
the acceptance for payment, purchase of, or payment for, some or all of
the Common Shares pursuant to the Offer or the Proposed Merger illegal or
results in a delay in, or restricts, the ability of Parent or Purchaser,
or renders Parent or Purchaser unable, to accept for payment, purchase or
pay for some or all of the Common Shares or to consummate the Proposed
Merger, (iv) imposes or seeks to impose limitations on the ability of
Parent or Purchaser or any affiliate of either of them effectively to
acquire or hold or to exercise full rights of ownership of the Common
Shares, including, without limitation, the right to vote the Common Shares
purchased by them on an equal basis with all other Common Shares on all
matters properly presented to the shareholders of the Company, (v) in the
sole judgment of Parent or Purchaser, might adversely affect the Company
or any of its subsidiaries or affiliates or Parent, Purchaser, or any of
their respective affiliates or subsidiaries, (vi) in the sole judgment of
Parent or Purchaser, might result in a diminution in the value of the
Common Shares or the benefits expected to be derived by Parent or
Purchaser as a result of the transactions contemplated by the Offer, (vii)
in the sole judgment of Parent or Purchaser, imposes or seeks to impose
any material condition to the Offer unacceptable to Parent or Purchaser or
(viii) otherwise directly or indirectly relates to the Offer, the Proposed
Merger or any other business combination with the Company;
36
(b) there shall be any action taken, or any statute, rule, regulation or
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed or become applicable to the Offer, the
Proposed Merger or other subsequent business combination between Purchaser
or any affiliate of Purchaser and the Company or any affiliate of the
Company or any other action shall have been taken, proposed or threatened,
by any government, governmental authority or other regulatory or
administrative agency or commission or court, domestic, foreign or
supranational, other than the routine application of the waiting period
provisions of the HSR Act to the Offer, that, in the sole judgment of
Parent or Purchaser, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (vii) of paragraph (a)
above;
(c) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the
business, properties, assets, liabilities, capitalization, shareholders'
equity, condition (financial or otherwise), operations, licenses,
franchises, permits, permit applications, results of operations or
prospects of the Company or any of its subsidiaries or affiliates which,
in the sole judgment of Parent or Purchaser, is or may be materially
adverse to the Company or any of its subsidiaries or affiliates, or Parent
or Purchaser shall have become aware of any fact which, in the sole
judgment of Parent or Purchaser, has or may have material adverse
significance with respect to either the value of the Company or any of its
subsidiaries or the value of the Common Shares to Parent or Purchaser;
(d) there shall have occurred (i) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States
(whether or not mandatory), (ii) any limitation (whether or not mandatory)
by any governmental authority or agency on, or other event which, in the
sole judgment of Parent or Purchaser, might affect the extension of credit
by banks or other lending institutions, (iii) a commencement of a war,
armed hostilities or other national or international crisis directly or
indirectly involving the United States, (iv) any significant change in
United States or any other currency exchange rates or any suspension of,
or limitation on, the markets therefor (whether or not mandatory), (v) any
significant adverse change in the market price of the Common Shares or in
the securities or financial markets of the United States, or (vi) in the
case of any of the foregoing existing at the time of the commencement of
the Offer, in the sole judgment of Parent or Purchaser, a material
acceleration or worsening thereof;
(e) other than the redemption of the Rights at the Redemption Price, the
Company or any subsidiary of the Company shall have, at any time after
January 27, 1998 (i) issued, distributed, pledged, sold or authorized,
proposed or announced the issuance of or sale, distribution or pledge to
any person of (A) any shares of its capital stock (other than sales or
issuances pursuant to options outstanding on January 27, 1998 in
accordance with their terms as disclosed on such date or conversions of
the Company Convertible Securities in accordance with their terms) of any
class (including without limitation the Common Shares) or securities
convertible into any such shares of capital stock, or any rights, warrants
or options to acquire any such shares or convertible securities or any
other securities of the Company, or (B) any other securities in respect
of, in lieu of, or in substitution for, Common Shares outstanding on
January 27, 1998, (ii) purchased, acquired or otherwise caused a reduction
in the number of, or proposed or offered to purchase, acquire or otherwise
reduce the number of, any outstanding Common Shares, or other securities,
(iii) declared, paid or proposed to declare or pay any dividend or
distribution on any Common Shares (other than the regular quarterly
dividend on the Common Shares not in excess of the amount per share, and
with record and payment dates, in accordance with recent practice) or on
any Preferred Shares (other than the regular quarterly dividend on the
Preferred Shares not in excess of the amount per share payable in
accordance with the terms of the Preferred Shares) or on any other
security or issued, authorized, recommended or proposed the issuance or
payment of any other distribution in respect of the Common Shares or the
Preferred Shares, whether payable in cash, securities or other property,
(iv) altered or proposed to alter any material term of any outstanding
security, (v) incurred any debt other than in the ordinary course of
business and consistent with past practice or any debt containing
burdensome covenants, (vi) issued, sold or authorized or announced or
proposed the issuance of or sale to any person of any debt securities or
any securities convertible into or exchangeable for debt
37
securities or any rights, warrants or options entitling the holder thereof
to purchase or otherwise acquire any debt securities or incurred or
announced its intention to incur any debt other than in the ordinary
course of business and consistent with past practice, (vii) split,
combined or otherwise changed, or authorized or proposed the split,
combination or other change of the Common Shares, the Preferred Shares or
its capitalization, (viii) authorized, recommended, proposed or entered
into or publicly announced its intent to enter into any merger,
consolidation, liquidation, dissolution, business combination, acquisition
or disposition of a material amount of assets or securities, any material
change in its capitalization, any waiver, release or relinquishment of any
material contract rights or comparable right of the Company or any of its
subsidiaries or any agreement contemplating any of the foregoing or any
comparable event not in the ordinary course of business, or taken any
action to implement any such transaction previously authorized,
recommended, proposed or publicly announced, (ix) transferred into escrow
any amounts required to fund any existing benefit, employment or severance
agreements with any of its employees or entered into any employment,
severance or similar agreement, arrangement or plan with any of its
employees other than in the ordinary course of business and consistent
with past practice or entered into or amended any agreements, arrangements
or plans so as to provide for increased benefits to the employees as a
result of or in connection with the transactions contemplated by the Offer
or any other change in control of the Company, (x) except as may be
required by law, taken any action to terminate or amend any employee
benefit plan (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended) of the Company or any of its
subsidiaries, or Parent or Purchaser shall have become aware of any such
action which was not previously disclosed in publicly available filings,
(xi) amended or proposed or authorized any amendment to the Company
Articles or the Company By-Laws or similar organizational documents, (xii)
authorized, recommended, proposed or entered into any other transaction
that in the sole judgment of Parent or Purchaser could, individually or in
the aggregate, adversely affect the value of the Common Shares to Parent
or Purchaser or (xiii) agreed in writing or otherwise to take any of the
foregoing actions or Parent or Purchaser shall have learned about any such
action which has not previously been publicly disclosed by the Company and
also set forth in filings with the SEC;
(f) the Company and Parent or Purchaser shall have reached an agreement
or understanding that the Offer be terminated or amended or Parent or
Purchaser (or one of their respective affiliates) shall have entered into
a definitive agreement or an agreement in principle to acquire the Company
by merger or similar business combination, or purchase of Shares or assets
of the Company;
(g) Parent or Purchaser shall become aware (i) that any material
contractual right of the Company or any of its subsidiaries or affiliates
shall be impaired or otherwise adversely affected or that any material
amount of indebtedness of the Company or any of its subsidiaries shall
become accelerated or otherwise become due prior to its stated due date,
in either case with or without notice or the lapse of time or both, as a
result of the transactions contemplated by the Offer or the Proposed
Merger, or (ii) of any covenant, term or condition in any of the Company's
or any of its subsidiaries' instruments or agreements that are or may be
materially adverse to the value of the Common Shares in the hands of
Purchaser or any other affiliate of Parent (including, but not limited to,
any event of default that may ensue as a result of the consummation of the
Offer, consummation of the Proposed Merger or any other business
combination or the acquisition of control of the Company); or
(h) Parent or Purchaser shall not have obtained any waiver, consent,
extension, approval, action or non-action from any governmental authority
or agency which in its judgment is necessary to consummate the Offer;
which, in the sole judgment of Parent or Purchaser in any such case, and
regardless of the circumstances (including any action or inaction by
Parent or Purchaser or any of their affiliates), giving rise to any such
condition, makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment or payment. Parent and Purchaser have the right to
rely on any condition set forth in the immediately preceding sentence
being satisfied in determining whether to consummate the Offer; however,
if Parent or Purchaser asserts the failure of any such condition without
relying
38
on the exercise of its reasonable judgment or some other objective
criteria, Parent and Purchaser shall promptly disclose such assertion and
the Expiration Date will be (and, if necessary, will be extended to be) at
least five business days after the date of such disclosure.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent or Purchaser in their sole discretion
regardless of the circumstances (including any action or omission by Parent
or Purchaser) giving rise to any such conditions or may be waived by Parent
or Purchaser in their sole discretion in whole or in part at any time and
from time to time. The failure by Parent or Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time. Any determination by the Parent or Purchaser
concerning any condition or event described in this Section 14 shall be final
and binding upon all parties.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS; CERTAIN LITIGATION.
General. Except as otherwise disclosed herein, based on a review of
publicly available information by the Company with the SEC, neither Purchaser
nor Parent is aware of (i) any license or regulatory permit that appears to
be material to the business of the Company and its subsidiaries, taken as a
whole, that might be adversely affected by the acquisition of Common Shares
and the indirect acquisition of the capital stock of the Company's insurance
subsidiaries by Parent or Purchaser pursuant to the Offer or the Proposed
Merger, or (ii) any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic, foreign or
supranational, that would be required for the acquisition or ownership of
Common Shares, or the indirect acquisition of the capital stock of the
Company's insurance subsidiaries by Parent or Purchaser as contemplated
herein. Should any such approval or other action be required, Parent and
Purchaser currently contemplate that such approval or action would be sought.
While Purchaser does not currently intend to delay the acceptance for payment
of Common Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or action, if
needed, would be obtained or would be obtained without substantial conditions
or that adverse consequences might not result to the business of the Company,
Purchaser or Parent or that certain parts of the businesses of the Company,
Purchaser or Parent might not have to be disposed of in the event that such
approvals were not obtained or any other actions were not taken. Purchaser's
obligation under the Offer to accept for payment and pay for Common Shares is
subject to certain conditions. See Section 14.
State Insurance Approvals. The acquisition of Common Shares pursuant to
the Offer will require filings with, and approvals of, the Insurance
Commissions under the Insurance Codes of Arizona, Florida, Georgia, New York,
South Carolina, Texas and Puerto Rico, which are the United States
jurisdictions in which the insurance companies owned or otherwise controlled
by the Company are domiciled. The Insurance Codes each contain similar
provisions (subject to certain variations noted below) applicable to the
acquisition of control of a domestic insurer, including a presumption of
control that arises from the ownership of 10% or more of the voting
securities of a domestic insurer or of any person that controls a domestic
insurer (under Florida law, 5% or more of the outstanding voting securities
unless the acquiror acquires less than 10% of the outstanding voting
securities and affirmatively disclaims control).
Generally, a person seeking to acquire voting securities, such as the
Common Shares, in an amount that would result in such person controlling,
directly or indirectly, a domestic insurer must, together with any person
ultimately controlling such person, file a Form A with the relevant Insurance
Commission and send a copy of such Form A to the domestic insurer. Parent and
Purchaser made Form A filings with the relevant Insurance Commissions and
sent copies thereof to the relevant domestic insurers on the date of this
Offer to Purchase.
In certain jurisdictions, the Form A filings trigger public hearing
requirements and/or statutory periods within which decisions must be rendered
approving or disapproving the acquisition of control. In other states, public
hearings are discretionary and/or there are no periods within which such
decisions must be rendered. The periods within which hearings must be
commenced or decisions rendered may not begin until the relevant Insurance
Commission has deemed the Form A filing complete, and the Insurance
Commission has discretion to request that Parent and Purchaser furnish
additional information before it
39
deems the Form A filing complete. The Arizona Insurance Code provides that a
public hearing must be commenced within thirty days after the Form A is filed
and the Arizona Insurance Commission must make its determination within
thirty days after the conclusion of such hearing. The Georgia, New York,
South Carolina and Texas Insurance Codes require a public hearing if the
Insurance Commissioner intends to disapprove the acquisition because the Form
A does not demonstrate compliance with the statutory standards for approval.
The Georgia and South Carolina Insurance Commissions, however, have generally
been conducting public hearings on all Form A filings. The Florida Insurance
Code provides that the acquisition shall be deemed approved unless the
Insurance Commission disapproves the acquisition within ninety days after the
Form A has been filed. The Florida Insurance Commission may on its own
initiative, or if requested to do so by a substantially affected party shall,
conduct a hearing to consider whether the acquisition should be approved. The
ninety day time period shall be tolled during the pendency of the proceeding.
If a request for a proceeding is filed, the proceeding shall be conducted
within sixty days after the date the written request for a proceeding is
received by the Florida Insurance Commission. A recommended order shall be
issued within twenty days of the date of the close of the proceedings. A
final order shall be issued within twenty days of the date of the recommended
order or, if exceptions to the recommended order are filed, within twenty
days of the date the exceptions are filed. Although the New York Insurance
Code does not require a public hearing prior to the approval of an
acquisition of control of a domestic insurer, the Insurance Commission must
give the applicant notice and an opportunity to be heard in the event it
intends to disapprove the acquisition of control. The Puerto Rico Insurance
Code provides that the Insurance Commission must make its determination
within thirty days from the date on which the Form A is received, unless
during that period the Insurance Department requests additional information,
in which case the Commission shall make its determination thirty days after
receiving such information. Although the Puerto Rico Insurance Code does not
require a public hearing prior to the approval of an acquisition of control
of a domestic insurer, the Insurance Commission has generally been conducting
public hearings on all Form A filings.
The Insurance Codes generally require the relevant Insurance Commissions
to approve the application for the acquisition of control unless the
Insurance Commission determines (in certain states, after a public hearing)
that such application should be disapproved on one or more prescribed
regulatory grounds. The Insurance Codes contain provisions providing
generally for judicial review of an Insurance Commission order.
International Insurance Regulatory Approvals. The Company's non-United
States insurance subsidiaries are organized under the laws of the United
Kingdom, Turks & Caicos, Mexico, Argentina, the Dominican Republic and the
Cayman Islands, which laws generally require notice to and/or prior approval
from the insurance regulatory authority prior to the acquisition of control.
Parent and the Purchaser intend to give promptly the required notices to
and/or seek the required approvals from such foreign insurance regulatory
authorities.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and to the FTC and certain waiting period requirements
have been satisfied. Parent expects to file such information on the date
hereof. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Common Shares pursuant to the Offer may not be consummated until
the expiration of a 15-calendar day waiting period following the filing by
Parent, unless the Antitrust Division and the FTC terminate the waiting
period prior thereto. If, within such 15-day period, either the Antitrust
Division or the FTC requests additional information or material from Parent
concerning such 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 Parent with such request. Only one extension of
the waiting period pursuant to a request for additional information is
authorized by the HSR Act. Thereafter, such waiting period may be extended
only by court order or with the consent of Parent. Purchaser will not accept
for payment Common Shares tendered pursuant to the Offer unless and until the
waiting period requirements imposed by the HSR Act with respect to the Offer
have been satisfied. See Section 14.
40
The Proposed Merger would not require an additional filing under the HSR
Act if Purchaser owns 50% or more of the outstanding Common Shares at the
time of the Proposed Merger.
The FTC and the Antitrust Division frequently scrutinize the legality
under the antitrust laws of transactions such as Purchaser's acquisition of
Common Shares pursuant to the Offer. At any time before or after Purchaser's
acquisition of Common Shares, 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 acquisition of Common
Shares pursuant to the Offer or otherwise or seeking divestiture of Common
Shares acquired by Purchaser or divestiture of substantial assets of Parent
or its subsidiaries. Private parties and state attorneys general may also
bring legal action under the antitrust laws under certain circumstances.
Based upon an examination of publicly available information relating to the
businesses in which Parent and the Company are engaged, Parent and Purchaser
believe that the acquisition of Common Shares by Purchaser will not violate
the antitrust laws. Nevertheless, there can be no assurance that a challenge
to the Offer or other acquisition of Common Shares by Purchaser on antitrust
grounds will not be made or, if such a challenge is made, of the result. See
Section 14 for certain conditions to the Offer, including conditions with
respect to litigation and certain governmental actions.
State Takeover Statutes. Various states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable
to attempts to acquire securities of corporations that are incorporated or
have assets, shareholders, executive offices or places of business in such
states. In Xxxxx x. Mite Corp., the Supreme Court of the United States held
that the Illinois Business Takeover Act, which involved state securities laws
that made the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and therefore was unconstitutional.
In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the
United States held that a state may, as a matter of corporate law and, in
particular, those laws concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without prior approval of the remaining shareholders, provided
that such laws were applicable only under certain conditions.
Except as described in this Offer to Purchase, neither Purchaser nor
Parent has currently complied with any state takeover statute or regulation.
Purchaser reserves the right to challenge the applicability or validity of
any state law purportedly applicable to the Offer or the Proposed Merger and
nothing in this Offer to Purchase or any action taken in connection with the
Offer or the Proposed Merger is intended as a waiver of such right. If it is
asserted that any state takeover statute is applicable to the Offer or the
Proposed Merger and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the Proposed Merger,
Purchaser might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and Purchaser might be unable
to accept for payment or pay for Common Shares tendered pursuant to the
Offer, or be delayed in consummating the Offer or the Proposed Merger. In
such case, Purchaser may not be obliged to accept for payment or pay for any
Common Shares tendered pursuant to the Offer.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or
have substantial assets, shareholders, principal executive offices or
principal places of business, or whose business operations otherwise have
substantial economic effects, in such states. Purchaser does not know whether
any of these laws will, by their terms, apply to the Offer and has not
complied with any such laws. Should any person seek to apply any state
takeover law, Purchaser will take such action as then appears desirable,
which may include challenging the validity or applicability of any such
statute in appropriate court proceedings. In the event it is asserted that
one or more state takeover laws are applicable, and an appropriate court does
not determine that such law is, or such laws are inapplicable or invalid as
applied to the Offer, Purchaser might be required to file certain information
with, or receive approvals from, the relevant state authorities. In addition,
if enjoined, Purchaser might be unable to accept for payment any Common
Shares tendered pursuant to the Offer, or be delayed in continuing or
consummating the Offer. In such case, Purchaser may not be obligated to
accept for payment any Common Shares tendered. See Section 14.
The Affiliated Transaction Statute. Consummation of the Offer is
conditioned upon Purchaser being satisfied, in its sole discretion, that the
provisions of the Affiliated Transaction Statute are inapplicable to the
acquisition of Common Shares pursuant to the Offer.
41
The Affiliated Transaction Statute, in general, provides that any
"Affiliated Transaction" (defined to include a variety of transactions,
including a merger, as discussed below) between a Florida corporation (such
as the Company) and an "Interested Shareholder" (defined generally as a
beneficial owner of more than 10% of the outstanding voting shares of such
corporation) requires, in addition to any other vote required by law or the
corporation's articles of incorporation, approval by the holders of at least
two-thirds of the voting shares of the corporation, excluding the shares
beneficially owned by the Interested Shareholder, unless (a) the Affiliated
Transaction has been approved by a majority of the "Disinterested Directors"
(as defined below), (b) the Interested Shareholder is the beneficial owner of
at least 90% of the outstanding voting shares of the corporation (exclusive
of shares acquired directly from the corporation in a transaction not
approved by a majority of the Disinterested Directors) or (c) in the
Affiliated Transaction, the per share consideration to be received by the
holders of voting shares of the corporation is generally at least equal to
the highest of (i) the highest per share price paid by the Interested
Shareholder for the corporation's shares during the two-year period
immediately preceding the announcement date of the Affiliated Transaction or
in the transaction in which the Interested Shareholder become an Interested
Shareholder, (ii) the higher of the fair market value of the corporation's
shares on such announcement date or such determination date or (iii) a price
based upon a combination of the foregoing. Under the Affiliated Transaction
Statute, the requirements described above do not apply in certain
circumstances which Parent and Purchaser do not believe are applicable to the
Company.
As used in the Affiliate Transaction Statute, unless otherwise specified
in the corporation's original articles of incorporation, a "Disinterested
Director" means as to any particular Interested Shareholder (1) any member of
the board of directors of the corporation who was a member of the board of
directors before the later of January 1, 1987 or the date on which the
Interested Shareholder became such and (2) any member of the board of
directors of the corporation who was recommended for election by, or was
elected to fill a vacancy and received the affirmative vote of, a majority of
the Disinterested Directors then on the board of directors.
The Affiliated Transaction Statute provides, except as described above,
that the corporation may not merge or consolidate with an Interested
Shareholder or any affiliate or associate thereof, and also may not engage in
certain other transactions with an Interested Shareholder or any affiliate or
associate thereof, including, without limitation, (a) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition (in one transaction
or a series of transactions) of assets of the corporation or any subsidiary
of the corporation (i) having an aggregate fair market value equal to 5% or
more of the aggregate fair market value of (A) all the assets of the
corporation determined on a consolidated basis or (B) all the outstanding
shares of the corporation or (ii) representing 5% or more of the earning
power or net income, determined on a consolidated basis, of the corporation;
(b) the issuance or transfer by the corporation or by any subsidiary of the
corporation (in one transaction or a series of transactions) of any shares of
the corporation or any subsidiary of the corporation which have an aggregate
fair market value equal to 5% or more of the aggregate fair market value of
all the outstanding shares of the corporation to the Interested Shareholder
or any affiliate or associate of the Interested Shareholder, except pursuant
to a transaction which effects a pro rata distribution to all shareholders of
the corporation; (c) the adoption of any plan or proposal for the liquidation
or dissolution of the corporation proposed by, or pursuant to any agreement,
arrangement, or understanding (whether or not in writing) with, the
Interested Shareholder or any affiliate or associate of the Interested
Shareholder; (d) any reclassification of securities or recapitalization of
the corporation, or any merger or consolidation of the corporation with any
subsidiary of the corporation, or any other transaction (whether or not with
or into or otherwise involving the Interested Shareholder), with the
Interested Shareholder or any affiliate or associate of the Interested
Shareholder, which has the effect, directly or indirectly (in one transaction
or a series of which transactions during any 12-month period), of increasing
by more than 5% of the percentage of the outstanding voting shares of the
corporation or any subsidiary of the corporation beneficially owned by the
Interested Shareholder; or (e) any receipt by the Interested Shareholder or
any affiliate or associate of the Interested Shareholder of the benefit,
directly or indirectly (except proportionately as a shareholder of such
corporation), of any loans, advances, guaranties, pledges or other financial
assistance or any tax credits or other tax advantages provided by or through
the corporation.
42
The foregoing summary of the Affiliated Transaction Statute does not
purport to be complete and is qualified in its entirety by reference to the
provisions of the Affiliated Transaction Statute.
Parent and Purchaser are hereby requesting that the Company Board adopt a
resolution approving the Proposed Merger for purposes of the Affiliated
Transaction Statute. However, there can be no assurance that the Company
Board will do so.
In the Florida Litigation, Parent and Purchaser are requesting that the
court enjoin the Proposed AIG Merger unless and until a majority of the
Company's "disinterested directors" approve the Proposed Merger in accordance
with Affiliated Transaction Statute.
The Control Share Statue. Consummation of the Offer is conditioned on
Purchaser being satisfied, in its sole discretion, that the provisions of the
Control Share Statute continue to be inapplicable to the acquisition of
Common Shares pursuant to the Offer.
The Control Share Statute provides, in general, that shares of an "issuing
public corporation," such as the Company, acquired in a "control share
acquisition" will not have voting rights unless that issuing public
corporation's board of directors approves the acquisition of such shares or
voting rights for such shares are authorized at an annual or special meeting
of the shareholders of the issuing public corporation by each class or series
entitled to vote separately on the proposal by a majority of all the votes
entitled to be cast by the class or series, excluding all "interested shares"
(generally, those shares held by the acquiring person).
However, Section 5 of the Control Share Statute permits a corporation's
bylaws to provide that the Control Share Statute does not apply to control
share acquisitions of the shares of such corporation. Section 4 of Article V
of the Company By-Laws provides that the Control Share Statute, and any
amendments thereto, does not apply to control share acquisitions of shares of
stock of the Company occurring on or after November 14, 1990. Accordingly,
unless such By-Law is repealed or amended by either (i) the majority vote of
the full Company Board or (ii) by a majority vote of the outstanding Common
Shares at any meeting of the Company's shareholders, Purchaser believes that
the Control Share Statute shall continue to be inapplicable to Purchaser's
acquisition of Common Shares pursuant to the Offer.
As used in the Control Share Statute, a "control share acquisition" means,
in general, the acquisition (other than pursuant to a merger agreement to
which the issuing public corporation is a party or pursuant to an acquisition
approved by the board of directors of such issuing public corporation),
directly or indirectly, of beneficial ownership of shares of an issuing
public corporation, and all acquisitions of such shares within 90 days before
or after the date of the acquisition of beneficial ownership of shares that
results in a control share acquisition, which (but for the provisions of the
statute) would have voting rights and which, when added to all other shares
of such issuing public corporation beneficially owned by such person, would
entitle such person, upon acquisition of such shares, to vote or direct the
voting of shares of such issuing public corporation having voting power in
the election of directors within any of the following ranges of such voting
power: (i) one-fifth or more but less than one-third of all voting power;
(ii) one-third or more but less than a majority of all voting power; or (iii)
a majority or more of all voting power.
Any person who proposes to make or has made a control share acquisition
may at the person's election deliver a statement (an "Acquiring Person
Statement") to the issuing public corporation at the issuing public
corporation's principal office. The Acquiring Person Statement must set forth
(1) the identity of the acquiring person and each other member of any group
of which the person is a part for purposes of determining shares acquired in
a control share acquisition, (2) a statement that the Acquiring Person
Statement is given pursuant to Section 607.0902, (3) the number of shares of
the issuing public corporation owned, directly or indirectly, by the
acquiring person and each other member of the group and (4) the range of
voting power under which the control share acquisition falls or would, if
consummated, fall.
If the control share acquisition has not taken place, the acquiring person
must also set forth (1) a description in reasonable detail of the terms of
the proposed control-share acquisition and (2)
43
representations of the acquiring person, together with a statement, in
reasonable detail of the facts upon which they are based, that the proposed
control share acquisition, if consummated, will not be contrary to law and
that the acquiring person has the financial capacity to make the proposed
control share acquisition.
If the acquiring person so requests at the time of delivery of an
Acquiring Person Statement and gives an undertaking to pay the corporation's
expenses of a special meeting, within ten days thereafter, the board of
directors of the issuing public corporation, or others authorized to call
such a meeting under the issuing public corporation's articles of
incorporation or by-laws, shall call a special meeting of shareholders of the
issuing public corporation for the purpose of considering the voting rights
to be accorded to shares acquired or to be acquired in the control share
acquisition. Such special meeting must be called within 10 days after the
issuing public corporation receives the request and must be held within 50
days after the request was received. If the acquiring person so requests, the
special meeting may not be held sooner than 30 days after receipt of the
Acquiring Person Statement. If no request is made, the voting rights to be
accorded the shares acquired in the control share acquisition shall be
presented to the next special or annual meeting of the shareholders.
In addition, the Control Share Statute provides that, if authorized in a
corporation's certificate of incorporation or bylaws before a control share
acquisition has occurred, the issuing public corporation may, if no Acquiring
Person Statement has been filed with the issuing public corporation, at any
time during the 60-day period after the last acquisition of shares by the
acquiring person, redeem the shares acquired in a control share acquisition
at fair value thereof pursuant to procedures adopted by the corporation. The
shares acquired in a control share acquisition are not subject to redemption
after an Acquiring Person Statement has been filed unless such shares are not
accorded full voting rights by the required shareholder vote.
Unless otherwise provided in the certificate of incorporation or bylaws,
before a control share acquisition has occurred, in the event shares acquired
in a control share acquisition are accorded full voting rights and the
acquiring person has acquired shares with a majority or more of all the
voting power, all shareholders of the subject corporation have dissenters'
rights to receive the "fair value" (as defined below) of their shares. "Fair
Value" for this purpose means a value not less than the highest price paid
per share by the acquiring person in the control share acquisition.
The foregoing summary of the Control Share Statute does not purport to be
complete and is qualified in its entirety by reference to the provisions of
the Control Share Statute.
Florida Litigation. On January 27, 1998, in connection with the Florida
Litigation, Parent and Purchaser filed a complaint in the United States
District Court for the Southern District of Florida against the Company,
substantially all of the directors of the Company, AIG and AIGF, Inc., a wholly
owned subsidiary of AIG ("AIGF"), alleging that the directors and the Company,
in a civil conspiracy with AIG and AIGF, have breached the fiduciary
obligations owed to the shareholders of the Company by, among other things,
entering into the AIG Merger Agreement and deterring the Offer through a number
of unlawful takeover defenses, including the AIG Lockup Option Agreement, the
Fiduciary Sabbatical Provision in the AIG Merger Agreement, the AIG Termination
Fee and the Rights Agreement. The complaint also alleges that AIG filed
materially false and misleading public disclosures on Schedule 13D regarding
the AIG Voting Agreement in violation of Section 13(d) of the Exchange Act.
Specifically, it is alleged that AIG failed to disclose that AIG's Chairman
of the Board, Xxxxxxx X. Xxxxxxxxx, is a person controlling AIG.
In the complaint, Parent and Purchaser ask the Court to enter judgment
against the defendant: (a) declaring the AIG Lockup Option Agreement,
Fiduciary Sabbatical Provision and AIG Termination Fee to be unlawful and in
breach of the fiduciary duties of the Company and the Company Board;
(b) enjoining, temporarily, preliminarily and permanently, (i) any exercise or
payment of the AIG Lockup Option Agreement, (ii) enforcement of the Fiduciary
Sabbatical Provision, (iii) payment of the AIG Termination Fee, and (iv) any
steps to implement the Rights Agreement or to extend its terms; (c) declaring
the AIG Merger Agreement to be unlawful and in breach of the fiduciary duties of
the Company and the Company Board, and enjoining, temporarily, preliminarily
and permanently, any steps to effectuate it unless and until the takeover
defenses discussed above are invalidated, enjoined or otherwise rendered
inapplicable
44
to Parent and Purchaser and any actions contemplated by Parent and Purchaser,
including the Offer and the Proposed Merger; (d) enjoining, temporarily,
preliminarily and permanently, AIG from acquiring any shares of the Company,
voting any shares of the Company or soliciting any proxies with respect to
the shares of the Company stock unless and until AIG files a full and
complete Schedule 13D with respect to the Company and (e) requiring the
Company and its directors to provide Purchaser with a fair and equal
opportunity to acquire the Company, including furnishing to Purchaser the
same information and access to information that was provided to AIG. On
January 27, 1998, Parent and Purchaser also filed an application for expedited
discovery in the action in anticipation of making a motion for the preliminary
injunctive relief sought in the complaint.
16. FEES AND EXPENSES.
Except as set forth below, neither Parent nor Purchaser will pay any fees
or commissions to any broker, dealer or other person for soliciting tenders
of Common Shares pursuant to the Offer. The Dealer Managers are acting in
such capacity in connection with the Offer and are acting as financial
advisors to Parent in connection with its effort to acquire the Company.
Parent has agreed to pay each of the Dealer Managers (in their capacities as
Dealer Managers and financial advisors) upon the commencement of the Offer a
fee of $250,000 and (a) in the case of Xxxxxx Brothers Inc., an additional
fee of $1,750,000 contingent upon the execution of a definitive agreement
providing for the acquisition of the Company by Parent and a further fee of
$6,000,000 upon the consummation of an acquisition of the Company by Parent
within 2 years of the rentention of Xxxxxx Brothers Inc. and (b) in the case
of Xxxxxxx Lynch, Xxxxxx, Xxxxxx & Xxxxx Incorporated, an additional fee of
$1,750,000 contingent upon the execution of a definitive agreement providing
for the acquisition of a 35% or greater interest in or a substantial portion
of the business of the Company by Parent or an affiliate of Parent, and a
further additional fee of $6,000,000 if Parent or an affiliate of Parent
acquires a 35% or greater interest in or a substantial portion of the
business of the Company within 2 years of the retention of Xxxxxxx Lynch,
Pierce, Xxxxxx & Xxxxx Incorporated. Parent has also agreed to reimburse the
Dealer Managers (in their capacities as Dealer Managers and financial
advisors) for their reasonable out-of-pocket expenses, including the
reasonable fees and expenses of their legal counsel, incurred in connection
with their engagement, and to indemnify such firms and certain related
persons against certain liabilities and expenses in connection with their
engagement, including certain liabilities under the Federal securities laws.
The Dealer Managers have rendered various investment banking and other
advisory services to Parent and its affiliates in the past and are expected
to continue to render such services, for which they have received and will
continue to receive customary compensation from Parent and its affiliates. In
the ordinary course of business, the Dealer Managers and their respective
affiliates may actively trade or hold the securities of the Company and
Parent for their own account or for the account of customers and,
accordingly, may at any time hold a long or short position in such
securities. As of the date of this Offer to Purchase, Xxxxxx Brothers Inc.
and its affiliates own 302,000 Common Shares and 94,800 Preferred Shares for
their own account.
Purchaser has retained Innisfree M&A Incorporated to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Common Shares by mail, telephone, facsimile, telegraph and
personal interviews and may request brokers, dealers and other nominee
shareholders to forward materials relating to the Offer to beneficial owners
of Common Shares. The Information Agent will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities
and expenses in connection therewith, including certain liabilities under the
Federal securities laws.
In addition, Continental Stock Transfer & Trust Company has been retained as
the Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services, will be reimbursed
for certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the Federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by Purchaser for customary
mailing and handling expenses incurred by them in forwarding offering
material to their customers.
45
17. MISCELLANEOUS.
Purchaser is not aware of any jurisdiction where the making of the Offer
is prohibited by any administrative or judicial action pursuant to any valid
state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Common Shares
pursuant thereto, Purchaser will make a good faith effort to comply with such
state statute. If, after such good faith effort, Purchaser cannot comply with
any such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Common Shares in such state. In
any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to
be made on behalf of Purchaser by one or more registered brokers or dealers
which are licensed under the laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Parent or Purchaser not contained in this Offer
to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been
authorized.
Parent and Purchaser have filed with the SEC the Schedule 14D-1, together
with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations
under the Exchange Act, furnishing certain additional information with
respect to the Offer. The Schedule 14D-1, and any amendments thereto, may be
inspected at, and copies may be obtained from, the same places and in the
same manner as set forth in Section 8 (except that they may not be available
at the regional offices of the SEC).
SEASON ACQUISITION CORP.
January 27, 1998
46
SCHEDULE I
DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of
each director and executive officer of Parent. Except as noted, each such
person is a citizen of the United States of America. The business address of
each such person is c/o Cendant Corporation, 0 Xxxxxx Xxx, Xxxxxxxxxx, Xxx
Xxxxxx 00000.
DIRECTORS
The following individuals serve as directors of Parent as of January 27,
1998.
Xxxxxx X. Xxxxxx, Chairman
Xxxxx X. Xxxxxxxxx
Xxxxx X. Xxxxxxx
Xxxxxxxx Xxxxxx
Xxxxxxx X. Xxxxxxx
X. Xxxxxx Xxxxxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxx
Xx. Xxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxxxxxxx X. XxXxxx
Xxxxxxx X. Xxxxxx
The Rt. Hon. Xxxxx Xxxxxxxx, P.C., LL.D
Xxxxxx X. Xxxxxxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxx
X. Xxxx Xxxxxxxxx, Xx.
Xxxxxx X. Xxxxxxxxxxx
Xxxxxxx X. Xxxxxxxx, Xx.
Xxxxxxx Xxxxxxxxx
X. Xxxx Xxxxxxx
Xxxxxx X. Xxxxx
Xxxx X. Xxxxxxxxx
Xxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, age 55, Director, Chairman of the Board of Parent since
1983, having also served as Chief Executive Officer of Parent from 1976 until
December 1997. Xx. Xxxxxx was the President of Parent between 1982 and May
1991. Xx. Xxxxxx is also a director of NFO Research, Inc.
Xxxxx X. Xxxxxxxxx, age 57, President, Chief Executive Officer and
Director of Parent since December 1997. Xx. Xxxxxxxxx served as Director,
Chairman of the Board, Chairman of the Executive Committee and Chief
Executive Officer of HFS from May 1990 until December 1997. From November
1994 until February 1996, Xx. Xxxxxxxxx also served as Chairman of the Board
and Chief Executive Officer of Chartwell Leisure Inc. ("Chartwell"), formerly
known as National Gaming Corp. and National Lodging Corp., an independent
publicly traded company and former wholly owned subsidiary of HFS.
Xxxxx X. Xxxxxxx, age 53, Senior Executive Vice President, General Counsel
and Director of Parent since December 1997. Xx. Xxxxxxx served as Senior
Executive Vice President, General Counsel and Assistant Secretary of HFS from
May 1997 until December 1997, as Executive Vice President, General Counsel
and Assistant Secretary of HFS from February 1992 until May 1997, and as a
Director of HFS from June 1994 until December 1997. Xx. Xxxxxxx also serves
as a director and officer of several subsidiaries of Parent. From November
1994 to February 1996, Xx. Xxxxxxx served as Executive Vice President,
General Counsel and Secretary of Chartwell and until August 1996 he served as
a Director of Chartwell.
Xxxxxxxx Xxxxxx, age 65, Director of Parent since 1976. Xx. Xxxxxx is an
independent investor. Since 1978, Xx. Xxxxxx has been President of the Xxxxx
X. Xxxxxx Foundation, a charitable foundation. Since 1981, he has been
President of CIB Associates, a venture capital Firm. Xx. Xxxxxx was Chairman
of the Board of Directors of Parent between 1976 and 1983.
Xxxxxxx Xxxxxxx, age 48, Director of Parent since December 1997. Xx.
Xxxxxxx served as a Director of HFS from April 1997 until December 1997. Xx.
Xxxxxxx has served as President of The National League of Professional
Baseball Clubs since 1994, having previously served since 1992 as
S-1
Executive Director, Market Development of Major League Baseball. Xx. Xxxxxxx
is a director of Beneficial Corporation, Xxxxx Corning, the Omnicom Group,
New Jersey Resources and Avis Rent A Car, Inc.
X. Xxxxxx Xxxxxxxxx, age 64, Director of Parent since 1977. Xx. Xxxxxxxxx
is, and has been for at least the past five years, an independent investor.
Xxxxxx X. Xxxxxxx, age 56, Director of Parent since 1997. Xx. Xxxxxxx
served as a Director of HFS from November 1993 until December 1997. Xx.
Xxxxxxx also serves as President and a Director of Chartwell. He was a
partner at Battle Xxxxxx, a New York City law firm, from 1972 through 1993
and as of January 1, 1994 is Of Counsel to that firm. Battle Xxxxxx has
represented Parent in a number of transactions during the past fiscal year.
Xx. Xxxxxxx is also a partner of Chartwell Hotels Associates, Chartwell
Leisure Associates L.P., Chartwell Leisure Associates X.X. XX, and of certain
of their respective affiliates. Xx. Xxxxxxx also serves as a Director of
Capital Trust and Avis Rent A Car, Inc.
Xxxxxxxxx X. Xxxxx, age 58, Director of Parent since December 1997. Xx.
Xxxxx is President and Chairman of Golf Services, Inc. Since 1969, Golf
Services and its affiliates have been engaged in the ownership and
development of residential and commercial real estate projects as well as the
creation and management of golf clubs.
Xxxxxxx X. Xxxxxxx, age 62, Director of Parent since 1984. Xx. Xxxxxxx is
a professor of marketing/communications at the Harvard Business School, on
whose faculty he has served for over 30 years. He also serves as a director
of Edelman Worldwide (a public relations firm) and Opinion Research
Corporation, and is a past Vice Chairman of the Public Broadcasting Service.
Xx. Xxxxxx X. Xxxxxx, age 55, Director of Parent since December 1997. Xx.
Xxxxxx is Superintendent of Schools in Syosset, New York, a suburban K-12
school district; she has served in that district since 1990.
Xxxxxxx X. Xxxxxx, age 40, Vice Chairman and Director of Parent since
December 1997. Xx. Xxxxxx served as a Vice Chairman of HFS from September
1996 until December 1997 and also served as a Director of HFS from June 1994
until December 1997. From July 1990 through September 1996 Xx. Xxxxxx served
as Executive Vice President, Treasurer and Chief Financial Officer of Parent.
Xx. Xxxxxx also serves as a director and officer of several subsidiaries of
Parent. Xx. Xxxxxx also serves as a Director and, from November 1994 to
February 1996 was the Executive Vice President and Chief Financial Officer,
of Chartwell. Xx. Xxxxxx also serves as a Director of Avis Europe Ltd. and
Avis Rent A Car, Inc.
Xxxxxx X. Xxxxxxx, age 55, Vice Chairman and Director of Parent since
December 1997. Xx. Xxxxxxx served as Vice Chairman and Director of HFS from
April 1997 until December 1997, having previously been Chairman of the Board
(since 1989), Chief Executive Officer (since 1988) and President (since 1984)
of PHH Corporation. He is a member of the board of directors of CSX
Corporation, Mercantile Bankshares Corporation and GenCorp, Inc.
Xxxxxxxxxxx X. XxXxxx, age 42, Vice Chairman of Parent since December 1997
and a Director of Parent since 1995. Xx. XxXxxx served as Executive Vice
President of Parent from 1986 until December 1997 and as a member of the
Office of the President of Parent from 1988 until December 1997. Xx. XxXxxx
was Chief Executive Officer of CUC Software from January 1997 until December
1997 and was President of Parent's Comp-U-Card Division between 1988 and
August 1995.
Xxxxxxx X. Xxxxxx, age 50, Vice Chairman, Chief Financial Officer and
Director of Parent since December 1997. Xx. Xxxxxx served as Vice Chairman
and Chief Financial Officer of HFS from October 1996 to December 1997 and as
a Director of HFS from January 1997 to December 1997. Xx. Xxxxxx also serves
as a director and officer of several subsidiaries of Parent. Xx. Xxxxxx
served as Executive Vice President and Chief Financial Officer of the
American Express Company from September 1990 to June 1996. Xx. Xxxxxx also
serves as a director of Avis Rent-A-Car, Inc.
The Rt. Hon. Xxxxx Xxxxxxxx, P.C., LL.D., age 58, Director of Parent since
December 1997. Xx. Xxxxxxxx served as a Director of HFS from April 1997 until
December 1997. Xx. Xxxxxxxx served as Prime Minister of Canada from 1984 to
1993 and is currently Senior Partner in the Montreal-based law firm, Oglivy
Renault. He is a member of several corporate boards of directors, including
Xxxxxx Xxxxxxx Midland Company Inc., Xxxxxxx Gold Corporation and Petrofina,
S.A. Xx. Xxxxxxxx is a Canadian citizen.
S-2
Xxxxxx X. Xxxxxxxxxxx, age 64, Director of Parent since December 1997.
Xx. Xxxxxxxxxxx served as a Director of HFS from July 1995 until December
1997. Xx. Xxxxxxxxxxx has been President and Director since November 1981 of
the Nederlander Organization, Inc., owner and operator of one of the world's
largest chains of legitimate theaters. Xx. Xxxxxxxxxxx has been Chairman of
the Board of Ridell Sports Inc., ("Ridell") since April 1988 and was the
Chief Executive Officer of such corporation from 1988 through April 1, 1993.
From February until June 1992, Xx. Xxxxxxxxxxx was also Xxxxxx'x interim
President and Chief Operating Officer. He served as the Managing General
Partner of the New York Yankees from August 1990 until December 1991, and has
been a limited partner since 1973. Xx. Xxxxxxxxxxx has been President since
October 1985 of the Nederlander Television and Film Productions, Inc.;
Chairman of the Board since January 1988 of Mego Financial Corp. ("Xxxx");
Xx. Xxxxxxxxxxx also served as Vice Chairman of the Board since February 1988
to early 1993 of Vacation Spa Resorts, Inc., an affiliate of Mego; and
Chairman of the Board of Xxxxx-Xxxxxxxx Corp. from May 1989 to 1993 and as
Vice Chairman from 1993 through October 1996. In October 1996, Xx.
Xxxxxxxxxxx became a director of News Communications, Inc., a publisher of
community oriented free circulation newspapers.
Xxxxxx X. Xxxxxx, age 68, Director of Parent since 1982. In 1986, Xx.
Xxxxxx retired from Xxxx Xxxxxx Corporation after fifteen years of service.
Xx. Xxxxxx became Senior Vice President of Eckerd in 1980 and served as such
until 1986.
Xxxxxxx X. Xxxxxxxx, age 42, Director of Parent since December 1997. Xx.
Xxxxxxxx has been President and Chief Operating Officer of Xxxxxx Industries,
Inc. (an international drilling contractor) since 1992 and a member of the
Executive Committee of Nabors Industries Inc. since 1991. Xx. Xxxxxxxx has
also been a director of Xxxxxxxxx Holding Corporation, a financial services
holding company, since 1996. From 1979 to 1991, Xx. Xxxxxxxx was with Xxxxx &
XxXxxxxx, a law firm, where he was Managing Partner of its New York office
until 1991. Xx. Xxxxxxxx continues as Of Counsel to Xxxxx & XxXxxxxx.
Xxxxxx X. Xxxxxxx, age 43, Director of Parent since December 1997. Xx.
Xxxxxxx served as a Director of HFS from July 1994 until December 1997. Since
October 1996 Xx. Xxxxxxx has been President and Chief Executive Officer of
AOL Networks, a unit of America Online, Inc. From September 1995 through
October 1996, Xx. Xxxxxxx served as the Chief Executive Officer and Managing
Partner of Parent's wholly owned subsidiary, Century 21 Real Estate
Corporation. From 1990 until September 1995, Xx. Xxxxxxx served as President
and Chief Executive Officer of Time Warner Enterprises, a business
development unit of Time Warner Inc. and, from 1991 to September 1995,
additionally, as Chairman and Chief Executive Officer of Six Flags
Entertainment Corporation, the parent of Six Flags Theme Parks Inc. Xx.
Xxxxxxx serves as a director of America Online, Inc.
X. Xxxx Xxxxxxxxx, Xx., age 67, Director of Parent since December 1997.
Xx. Xxxxxxxxx served as a Director of HFS from September 1996 to December
1997. Xx. Xxxxxxxxx has been, since 1988, Vice Chairman of The Bear Xxxxxxx
Companies, Inc. Xx. Xxxxxxxxx also serves as a director of The Bear Xxxxxxx
Companies, Inc., Hasbro, Inc. and Frequency Electronics, Inc.
Xxxxxx X. Xxxxxxxxxxx, age 59, Director of Parent since 1982. Xx.
Xxxxxxxxxxx is Chairman and Chief Executive Officer of Gruntal Financial
Corp., an investment services firm based in New York City. He is Chairman of
Yorkville Associates Corp., a private investment and financial concern formed
in April 1989. He served as a trustee of the DBL Liquidating Trust from April
1992 until April 1996. He served as a director in 1990, as Chairman in
November 1992 and as President and Chief Executive Officer from March 1993
until February 1995 of Nationar, Inc., a banking services corporation. Xx.
Xxxxxxxxxxx is also a director of Ferrofluidics Corporation, Interchange
Financial Services Corp. and Xxxxxxx Computer Services, Inc.
Xxxxxxx X. Xxxxxxxx, Xx., age 77, Director of Parent since 1976. Xx.
Xxxxxxxx is, and has been, for at least the last five years, an independent
investor and is a director of International Flavors and Fragrances, Inc.
Xxxxxxx Xxxxxxxxx, age 50, Director of Parent since December 1997. Xx.
Xxxxxxxxx was a Director of HFS from August 1993 until December 1997. Xx.
Xxxxxxxxx is currently Chairman of the Board and Chief Executive Officer of
Triad Capital Corporation of New York, a small business investment company,
S-3
and is a professor at the Xxxxxxx X. Xxxxx Graduate School of Business at
the University of Rochester in Rochester, New York. Xx. Xxxxxxxxx was Senior
Vice President of PepsiCo Inc. from February 1987 to April 1995. Xx.
Xxxxxxxxx also serves as a director of RCSB Finance, Inc., the bank holding
company for Rochester Community Savings Bank.
X. Xxxx Xxxxxxx, age 42, Vice Chairman of Parent since December 1997 and
Director of Parent since 1995. Xx. Xxxxxxx served as President of Parent from
May 1991 until December 1997 and as Chief Operating Officer of Parent from
1988 until December 1997. Xx. Xxxxxxx also served as Executive Vice President
of Parent from 1984 to 1991.
Xxxxxx X. Xxxxx, age 64, Director of Parent since December 1997. Xx. Xxxxx
served as a Director of HFS from February 1993 until December 1997. From
November 1994 until August 1996, Xx. Xxxxx also served as a Director of
Chartwell. Xx. Xxxxx is the retired Chairman and Chief Executive Officer of
American Express Bank, Ltd. ("AEBL"). He joined AEBL's parent company, the
American Express Company in 1981 as Corporate Treasurer before moving to AEBL
and serving as Vice Chairman and Co-Chief Operating Officer and then
President prior to becoming CEO. Xx. Xxxxx is currently a Partner in Car
Component Technologies, Inc., an automobile parts remanufacturer, located in
Bedford, New Hampshire.
Xxxx X. Xxxxxxxxx, age 40, Director of Parent since December 1997. Xx.
Xxxxxxxxx served as Director, President and Chief Operating Officer of HFS
from February 1992 until December 1997 and as Vice Chairman of HFS from
September 1996 until December 1997. Xx. Xxxxxxxxx also served as a Director,
Chairman of the Board and Chief Executive Officer of several subsidiaries of
HFS. From November 1994 through January 1996, Xx. Xxxxxxxxx served as Vice
Chairman of the Board of Chartwell. Xx. Xxxxxxxxx is currently an independent
investor and Chairman of the Board of Xxxxxxx Xxxxxx Inc., a subsidiary of
Parent.
Xxxxx X. Xxxxxxxxx, age 52, Director of Parent since December 1997. Xx.
Xxxxxxxxx has been President of Xxxxx & XxXxxxxx Real Estate Advisors, Inc.
since 1983. Xx. Xxxxxxxxx is also a director of Allegheny Properties, Inc. (a
real estate investment concern), X.X. Xxxxx Inc. and Vacu Dry Co.
Xxxxxx X. Xxxxxx, age 55, Vice Chairman and Director of Parent since
December 1997 and Secretary of Parent since 1977. From 1972 through 1992, Xx.
Xxxxxx was a partner at Xxxxx & XxXxxxxx, a law firm. Since 1992, Xx. Xxxxxx
has been engaged in private legal practice.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of Parent:
NAME OFFICE OR POSITIONS HELD
-------------------------- -----------------------------------------------------
Xxxxxx X. Xxxxxx........... Chairman of the Board
Xxxxx X. Xxxxxxxxx......... President and Chief Executive Officer
Xxxxxxx X. Xxxxxx.......... Vice Chairman and Chief Financial Officer
Xxxxxxx X. Xxxxxx.......... Vice Chairman
Xxxxxx X. Xxxxxxx.......... Vice Chairman
Xxxxxxxxxxx X. XxXxxx. .... Vice Chairman
X. Xxxx Xxxxxxx............ Vice Chairman
Xxxxxx X. Xxxxxx........... Vice Chairman and Secretary
Xxxxx X. Xxxxxxx........... Senior Executive Vice President and General Counsel
For biographical information concerning Messrs. Xxxxxx, Xxxxxxxxx, Monaco,
Xxxxxx, Xxxxxxx, XxXxxx, Xxxxxxx, Xxxxxx and Xxxxxxx, see "Directors" above.
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of
each director and executive officer of Purchaser. Each such person is a
citizen of the United States of America and the business address of each such
person is c/o Cendant Corporation.
S-4
DIRECTORS
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxx
EXECUTIVE OFFICERS
Xxxxxxx X. Xxxxxx......President
Xxxxx X. Xxxxxxx ...... Executive Vice President
Xxxxxxx X. Xxxxxx .... Executive Vice President
For biographical information concerning Messrs. Monaco, Xxxxxxx and
Xxxxxx, see Section 1 above.
S-5
SCHEDULE II
The following table sets forth information concerning transactions in
Common Shares during the past 60 days by Xxxxxx. All transactions involved
open-market purchases of Common Shares.
TRANSACTION NUMBER OF PRICE PER
DATE COMMON SHARES COMMON SHARE
----------------- --------------- --------------
January 16, 1998 25,000 $45.9375
January 16, 1998 142,600 $45.8750
January 16, 1998 10,000 $45.8125
January 20, 1998 25,000 $46.0000
January 20, 1998 3,600 $45.9375
January 21, 1998 31,500 $46.0000
January 21, 1998 50,000 $46.1250
January 22, 1998 21,900 $46.0000
January 22, 1998 48,100 $46.0625
January 23, 1998 . 13,500 $46.0625
---------------
Total: ........... 371,200
The following table sets forth information concerning transactions in
Preferred Shares during the past 60 days by Xxxxxx. All transactions involved
open-market purchases of Preferred Shares.
TRANSACTION NUMBER OF PRICE PER
DATE PREFERRED SHARES PREFERRED SHARES
----------------- ---------------- ----------------
January 26, 1998 22,200 $95.2500
January 26, 1998 6,000 $95.5000
January 26, 1998 6,700 $95.6875
January 26, 1998 40,000 $95.7500
January 26, 1998 10,000 $96.0000
January 26, 1998 15,000 $96.1250
----------------
Total: ........... 99,900
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Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the
Common Shares and any other required documents should be sent by each
shareholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary as follows:
The Depositary for the Offer is:
Continental Stock Transfer & Trust Company
0 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
By Facsimile Transmission:
(for Eligible Institutions Only)
(000) 000-0000
For Information Telephone:
(212) 509-4000 ext. 226
(000) 000-0000
Any questions or requests for assistance may be directed to the
Information Agent or the Dealer Managers at their respective telephone
numbers and locations listed below. Additional copies of the Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be obtained from the Information Agent at its address and telephone numbers
set forth below. Holders of Shares may also contact their broker, dealer,
commercial bank or trust company or other nominee for assistance concerning
the Offer.
The Information Agent for the Offer is:
INNISFREE M&A INCORPORATED
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
CALL TOLL-FREE: (000) 000-0000
Banks and Brokers call collect:
000 000-0000
The Dealer Managers for the Offer are:
XXXXXX XXXXXXXX XXXXXXX XXXXX & CO.
3 WORLD FINANCIAL CENTER WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285 NORTH TOWER
(000) 000-0000 (CALL COLLECT) NEW YORK, NEW YORK 10281-1305
(000) 000-0000 (CALL COLLECT)
