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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
SCHEDULE 13E-4
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
(Name of Issuer)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
(Name of Person(s) Filing Statement)
Common Stock, Par Value $1.00 Per Share
(Title of Class of Securities)
360768 10 5
(CUSIP Number of Class of Securities)
Michael S. Paquette
Vice President and Controller
Fund American Enterprises Holdings, Inc.
The 1820 House
Main Street
Norwich, Vermont 05055-0850
(802) 649-3633
Copy to:
Philip A. Gelston, Esq.
Cravath, Swaine & Moore
825 Eighth Avenue - Worldwide Plaza
New York, New York 10019
(212) 474-1000
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
February 21, 1995
(Date Tender Offer First Published, Sent, or Given to Security Holders)
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Transaction Value* Amount of Filing Fee*
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$56,250,000 $11,250
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*Based on $75.00 cash price per share for 750,000 shares.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Page 1 of 62 pages
Exhibit Index is on page 6
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ITEM 1. Security and Issuer.
(a) The name of the issuer is Fund American Enterprises Holdings, Inc., a
Delaware corporation (the "Company"). The Company's principal executive offices
are located at The 1820 House, Main Street, Norwich, Vermont 05055-0850.
(b) The class of securities to which this statement relates is the Company's
Common Stock, par value $1.00 per share ("Shares"). As of February 17, 1995,
there were 8,409,937 Shares outstanding. The Company is inviting shareholders
to tender Shares to the Company at a price of $75.00 per Share (the "Purchase
Price"), net to the seller in cash, pursuant to the Offer to Purchase dated
February 21, 1995 (the "Offer to Purchase") and the related Letter of
Transmittal (which together constitute the "Offer"), copies of which are
attached hereto as Exhibits (a)(1) and (a)(2), respectively, and are herein
incorporated by reference. All Shares properly tendered and not withdrawn will
be purchased at the Purchase Price, net to the seller in cash, upon the terms
and subject to conditions of the Offer, including the proration provisions
thereof. The Company reserves the right, in its sole discretion, to purchase
more than 750,000 Shares pursuant to the Offer. Reference is hereby made to the
"Introduction", Section 1, "Number of Shares; Proration; Extension of Offer",
and Section 12, "Transactions and Arrangements Concerning the Shares", of the
Offer to Purchase, each of which is herein incorporated by reference for
information regarding whether Shares are to be purchased from any officer,
director or affiliate of the Company, each of which is herein incorporated by
reference.
(c) Reference is hereby made to Section 7, "Price Range of Shares; Dividends",
of the Offer to Purchase, which Section is herein incorporated by reference.
(d) Not applicable.
ITEM 2. Source and Amount of Funds or Other Consideration.
(a) Reference is hereby made to Section 10, "Source and Amount of Funds", of the
Offer to Purchase, which Section is herein incorporated by reference.
(b) Not applicable.
ITEM 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or
Affiliates.
Reference is hereby made to the cover page, the "Introduction", Section 6,
"Certain Conditions of the Offer", Section 7, "Price Range of Shares;
Dividends", Section 8, "Purpose of the Offer; Certain Effects of the Offer" and
Section 9, "Certain Information Concerning the Company", each of which is herein
incorporated by reference. Other than as disclosed therein, the Company has no
present plans or proposals which would relate to or would result in any
transaction or other occurrence with respect to the Company or its Shares of the
type listed in paragraphs (a) through (j) of Item 3 of Schedule 13E-4.
ITEM 4. Interest in Securities of the Issuer.
Reference is hereby made to Section 12, "Transactions and Arrangements
Concerning the Shares", of the Offer to Purchase, which Section is herein
incorporated by reference.
ITEM 5. Contracts, Arrangements, Understandings or Relationships with Respect
to the Issuer's Securities.
Reference is hereby made to Section 12, "Transactions and Arrangements
Concerning the Shares", of the Offer to Purchase, which Section is herein
incorporated by reference.
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ITEM 6. Persons Retained, Employed or to be Compensated.
Reference is hereby made to the "Introduction" and Section 16, "Fees and
Expenses", of the Offer to Purchase, each of which is herein incorporated by
reference.
ITEM 7. Financial Information.
(a) Reference is hereby made to the Company's fourth quarter 1994 Earnings
Release dated February 1, 1995, a copy of which is attached hereto as Exhibit
(g)(1), and is herein incorporated by reference and Section 9, "Certain
Information Concerning the Company", of the Offer to Purchase, which Section is
herein incorporated by reference.
(b) Reference is hereby made to Section 9, "Certain Information Concerning the
Company", of the Offer to Purchase, which Section is herein incorporated by
reference.
ITEM 8. Additional Information.
(a) Reference is hereby made to Section 12, "Transactions and Arrangements
Concerning the Shares", of the Offer to Purchase, which Section is herein
incorporated by reference.
(b) Reference is hereby made to Section 13, "Certain Legal Matters; Regulatory
and Foreign Approvals", of the Offer to Purchase, which Section is herein
incorporated by reference.
(c) Reference is hereby made to Section 8, "Purpose of the Offer; Certain
Effects of the Offer", of the Offer to Purchase, which Section is herein
incorporated by reference.
(d) None.
(e) Reference is hereby made to the Offer to Purchase, which is herein
incorporated by reference in its entirety.
ITEM 9. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase dated February 21, 1995.
(a)(2) Letter of Transmittal (together with Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9).
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from the Company's Chairman to shareholders dated February 21,
1995.
(a)(5) Form of Letter from First Chicago Trust Company of New York to
Brokers, Dealers, Commercial Banks, Trust Companies and Nominees.
(a)(6) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees to their clients.
(a)(7) Form of summary advertisement dated February 21, 1995.
(a)(8) Text of press release dated February 16, 1995.
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(a)(9) Text of press release dated February 21, 1995.
(b) Not applicable.
(c) None.
(d) None.
(e) Not applicable.
(f) None.
(g)(1) The Company's fourth quarter 1994 Earnings Release dated February 1,
1995, herein incorporated by reference.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
February 21, 1995 By: /s/ Michael S. Paquette
-------------------------------
Michael S. Paquette
Vice President and Controller
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EXHIBIT INDEX
Exhibits Page
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(a)(1) Offer to Purchase dated February 21, 1995................ 7
(a)(2) Letter of Transmittal (together with Guidelines for
Certification of Taxpayer Identification Number on
Substitute Form W-9)..................................... 34
(a)(3) Notice of Guaranteed Delivery............................ 47
(a)(4) Letter from the Company's Chairman to
Shareholders dated February 21, 1995..................... 49
(a)(5) Form of Letter from First Chicago Trust Company of
New York to Brokers, Dealers, Commercial Banks,
Trust Companies and Other
Nominees................................................. 50
(a)(6) Form of Letter from Brokers, Dealers, Commercial Banks,
Trust Companies and Other
Nominees to their clients................................ 52
(a)(7) Form of summary advertisement dated February 21, 1995.... 55
(a)(8) Text of press release dated February 16, 1995............ 56
(a)(9) Text of press release dated February 21, 1995............ 57
(g)(1) The Company's fourth quarter 1994
Earnings Release dated February 1, 1995.................. 58
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EXHIBIT (a)(1)
Offer to Purchase for Cash
by
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Up to
750,000 Shares of Its Common Stock
At $75.00 Net Per Share
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MARCH, 20, 1995, UNLESS THE OFFER IS EXTENDED.
Fund American Enterprises Holdings, Inc., a Delaware corporation (the
"Company"), is offering to purchase up to 750,000 shares of its Common Stock,
par value $1.00 per share ("Shares"), for $75.00 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which together constitute the
"Offer"), including the proration provisions described herein. The Company
reserves the right, in its sole discretion, to purchase more than 750,000 Shares
pursuant to the Offer.
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THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
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The Shares are listed and traded on the New York Stock Exchange (the "NYSE").
On February 15, 1995, the last full trading day before the announcement of the
terms of the Offer, the reported closing sales price of the Shares on the NYSE
Composite Tape was $72 3/8 per Share, and on February 17, 1995, the last full
trading day before the commencement of the Offer, the reported closing sales
price was $74 1/2 per Share. Shareholders are urged to obtain a current market
quotation for the Shares.
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NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO
WHETHER ANY SHAREHOLDER SHOULD TENDER ANY OR ALL OF SUCH SHAREHOLDER'S SHARES
PURSUANT TO THE OFFER. EACH SHAREHOLDER MUST MAKE SUCH SHAREHOLDER'S OWN
DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
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The Information Agent for the Offer is:
First Chicago Trust Company of New York
February 21, 1995
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IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (1) complete and sign the Letter of Transmittal or a
facsimile copy thereof in accordance with the instructions in the Letter of
Transmittal, mail or deliver it and any other documents required by the Letter
of Transmittal to First Chicago Trust Company of New York, the depositary for
the Offer (the "Depositary"), and either mail or deliver the certificates for
such Shares to the Depositary along with the Letter of Transmittal or follow the
procedure for book-entry transfer set forth in Section 3, or (2) request such
shareholder's broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for such shareholder. A shareholder having Shares
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 Shares.
A shareholder who desires to tender Shares and whose certificates for such
Shares are not immediately available (or who cannot follow the procedure for
book-entry transfer on a timely basis) or who cannot transmit the Letter of
Transmittal and all other required documents to the Depositary before the
Expiration Date (as defined in Section 1) should tender such Shares by following
the procedure for guaranteed delivery set forth in Section 3.
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Any questions or requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent at its addresses and telephone number set
forth on the back cover of this Offer to Purchase. Shareholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer.
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NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING
SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL.
IF MADE OR GIVEN, SUCH RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
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TABLE OF CONTENTS
Section Page
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Introduction......................................................................... 1
The Offer............................................................................ 2
1. Number of Shares; Proration; Extension of the Offer.......................... 2
2. Tenders by Holders of Fewer than 100 Shares.................................. 3
3. Procedure for Tendering Shares............................................... 4
Proper Tender of Shares.................................................. 4
Signature Guarantees and Methods of Delivery............................. 4
Federal Backup Withholding............................................... 5
Book-Entry Delivery...................................................... 5
Guaranteed Delivery...................................................... 5
Determination of Validity; Rejection of Shares; Waiver of Defects;
No Obligation to Give Notice of Defects............................. 5
Allianz Asset Accumulation Plan.......................................... 6
4. Withdrawal Rights............................................................ 6
5. Acceptance for Payment of Shares and Payment of Purchase Price............... 6
6. Certain Conditions of the Offer.............................................. 7
7. Price Range of Shares; Dividends............................................. 9
8. Purpose of the Offer; Certain Effects of the Offer........................... 10
9. Certain Information Concerning the Company................................... 11
Source One Mortgage Services Corporation................................. 11
Financial Security Assurance Holdings Ltd. .............................. 12
Recent Developments...................................................... 12
Summary Historical Consolidated Financial Information.................... 13
Pro Forma Financial Information (Unaudited).............................. 14
Shareholder Rights Plan.................................................. 18
Additional Information................................................... 19
10. Source and Amount of Funds................................................... 19
11. Certain Federal Income Tax Considerations.................................... 19
Gain or Loss Recognition................................................. 19
Backup Withholding....................................................... 20
Foreign Shareholder Withholding.......................................... 20
State, Local and Foreign Taxes........................................... 20
12. Transactions and Arrangements Concerning the Shares.......................... 20
13. Certain Legal Matters; Regulatory and Foreign Approvals...................... 21
14. Allianz Asset Accumulation Plan.............................................. 21
15. Extension of Tender Period; Termination; Amendments.......................... 21
16. Fees and Expenses............................................................ 22
17. Miscellaneous................................................................ 23
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To the Holders of Common Stock of
Fund American Enterprises Holdings, Inc.:
INTRODUCTION
Fund American Enterprises Holdings, Inc., a Delaware corporation (the
"Company"), is offering to purchase up to 750,000 shares of its Common Stock,
par value $1.00 per share ("Shares"), at a price of $75.00 per Share (the
"Purchase Price"), net to the seller in cash, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer").
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS (THE "BOARD") MAKES ANY
RECOMMENDATION AS TO WHETHER ANY SHAREHOLDER SHOULD TENDER ANY OR ALL OF SUCH
SHAREHOLDER'S SHARES PURSUANT TO THE OFFER. EACH SHAREHOLDER MUST MAKE SUCH
SHAREHOLDER'S OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES
TO TENDER.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
As of February 17, 1995, there were 8,409,937 Shares outstanding. Pursuant to
the Company's 1985 Long-Term Incentive Plan (the "Incentive Plan"), as of
February 17, 1995, an additional 7,125 Shares were issuable upon the exercise of
outstanding employee stock options. In addition to the Shares potentially
issuable pursuant to the Incentive Plan, another 1,150,000 Shares were issuable
as of February 17, 1995, upon the exercise of warrants held by John J. Byrne,
Chairman, President and Chief Executive Officer of the Company.
Accordingly, the 750,000 Shares which the Company is offering to purchase in the
Offer represent approximately 8.9% of the Shares outstanding as of February 17,
1995, and approximately 7.8% of the sum of the Shares then outstanding and all
Shares which may be issued upon exercise of outstanding options and warrants as
of such date. Holders of options and warrants would have to exercise such
options or warrants and convert them irrevocably into Shares in order to tender
such Shares pursuant to the Offer.
Neither the Company nor the Board makes any recommendation to any holder of
options or warrants as to whether to exercise any or all such options or
warrants or to tender any or all Shares issuable upon such exercise.
The Company has been informed by its directors and officers that they do not
intend to tender Shares owned by them pursuant to the Offer, except that Allan
L. Waters, the Company's Senior Vice President and Chief Financial Officer, and
Arthur Zankel, a director of the Company, have informed the Company that they
currently intend to tender 4,125 and 6,000 Shares, respectively, pursuant to the
Offer.
If before the Expiration Date (as defined in Section 1), a greater number of
Shares is properly tendered and not withdrawn than will be accepted for purchase
by the Company, the Company will accept Shares for purchase, first, from all
Shares properly tendered by any Odd Lot Holder (as defined in Section 1) who
tenders all Shares beneficially owned by such Odd Lot Holder and complies with
the requirements set forth in Section 2 and, then, from all other Shares
properly tendered on a pro rata basis. See Sections 1 and 2. All Shares not
purchased pursuant to the Offer, including Shares not purchased because of
proration, will be returned to the tendering shareholders at the Company's
expense. Tendering shareholders will not be obligated to pay brokerage
commissions, solicitation fees or, subject to Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Company. The
Company will pay all reasonable charges and expenses incurred by First Chicago
Trust Company of New York, which has been appointed as the depositary (the
"Depositary") and the information agent (the "Information Agent") for the Offer.
See Section 16.
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The Shares are listed and traded on the New York Stock Exchange (the "NYSE").
On February 15, 1995, the last full trading day before the announcement of the
terms of the Offer, the reported closing sales price on the NYSE Composite Tape
was $72 3/8 per Share, and on February 17, 1995, the last full trading day
before the commencement of the Offer, the reported closing sales price was $74
1/2 per Share. See Section 7. Shareholders are urged to obtain a current
market quotation for the Shares.
Participants in the Allianz Asset Accumulation Plan (the "AAAP") may direct the
trustee of the AAAP to tender any or all Shares allocated to their respective
accounts in the AAAP pursuant to the Offer. See Sections 3 and 14.
THE OFFER
1. Number of Shares; Proration; Extension of the Offer
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and will thereby purchase) up to 750,000 Shares or such
lesser number of Shares as are properly tendered (and not withdrawn in
accordance with Section 4) before the Expiration Date at the Purchase Price.
The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday,
March 20, 1995, unless and until the Company shall have extended the period of
time for 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
the Company, shall expire. For a description of the Company's rights to extend
the period of time during which the Offer is open and to delay, terminate or
amend the Offer, see Section 15. See also Section 6. Subject to the purchase
of Shares properly tendered and not withdrawn by Odd Lot Holders as set forth in
Section 2, if the Offer is oversubscribed, Shares tendered before the Expiration
Date will be subject to proration. The proration period also expires on the
Expiration Date.
The Company reserves the right, in its sole discretion, at any time or from time
to time, to extend the period of time during which the Offer is open by giving
oral or written notice of such extension to the Depositary and making a public
announcement thereof. See Section 15. There can be no assurance, however, that
the Company will exercise its right to extend the Offer.
The Offer is not conditioned upon any minimum number of Shares being tendered.
The Offer is, however, subject to certain other conditions. See Section 6.
All Shares purchased pursuant to the Offer will be purchased at the Purchase
Price, net to the seller in cash. The Company reserves the right, in its sole
discretion, to purchase more than 750,000 Shares pursuant to the Offer. If (a)
the Company (i) increases or decreases the price to be paid for Shares, (ii)
increases the number of Shares being sought and any such increase exceeds 2% of
the outstanding Shares or (iii) decreases the number of Shares being sought, and
(b) the Offer is scheduled to expire at any time earlier than the expiration of
a period ending on the tenth business day from and including the date that
notice of such increase or decrease is first published, sent or given in the
manner specified in Section 15, the Offer will be extended until the expiration
of such ten business day period. For the purposes of the Offer, a "business
day" means any day other than a Saturday, Sunday or Federal holiday and consists
of the time period from 12:01 A.M. through 12:00 Midnight, New York City time.
All Shares not purchased pursuant to the Offer, including Shares not purchased
because of proration, will be returned to the tendering shareholders at the
Company's expense as promptly as practicable (which, in the event of proration,
is expected to be approximately 12 NYSE trading days) following the Expiration
Date.
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If the number of Shares properly tendered and not withdrawn before the
Expiration Date is less than or equal to 750,000 Shares (or such greater number
of Shares as the Company may elect to purchase pursuant to the Offer), the
Company, upon the terms and subject to the conditions of the Offer, will
purchase at the Purchase Price all Shares so tendered and not withdrawn.
If the number of Shares properly tendered and not withdrawn before the
Expiration Date is greater than 750,000 Shares (or such greater number of Shares
as the Company may elect to purchase pursuant to the Offer), the Company, upon
the terms and subject to the conditions of the Offer, will accept Shares for
purchase in the following order of priority:
(a) first, all Shares properly tendered and not withdrawn before the Expiration
Date by any shareholder who beneficially owned as of the close of business
on February 13, 1995, and who continues to own beneficially until the
Expiration Date an aggregate of fewer than 100 Shares (each an "Odd Lot
Holder") who:
(1) tenders all Shares beneficially owned by such Odd Lot Holder (partial
tenders will not qualify for this preference); and
(2) completes the box captioned "Odd Lots" on the Letter of Transmittal
and, if applicable, on the Notice of Guaranteed Delivery; and
(b) then, after purchase of all the foregoing Shares, all other Shares properly
tendered and not withdrawn before the Expiration Date on a pro rata basis,
if necessary (with adjustments to avoid purchases of fractional Shares).
In the event that proration of tendered Shares is required, the Company will
determine the final proration factor as promptly as practicable after the
Expiration Date. Although the Company does not expect that it will be able to
announce the final proration factor until approximately seven NYSE trading days
after the Expiration Date, it will announce preliminary results of proration by
press release as promptly as practicable after the Expiration Date.
Shareholders may obtain such preliminary information from the Information Agent
and may be able to obtain such information from their brokers or financial
advisors.
On November 11, 1987, the Board declared a dividend distribution of one Right
(each, a "Right") for each Share outstanding on November 25, 1987. In addition,
each Share issued subsequent to November 25, 1987, automatically receives a
Right. The Rights expire on November 25, 1997, unless redeemed earlier by the
Company. Each Right entitles its registered holder to purchase from the Company
1/1000th of a share of Series A Participating Cumulative Preferred Stock, par
value $1.00 per share (the "Participating Stock"), at a price of $105, subject
to adjustment to prevent dilution. The Rights currently are not exercisable and
trade together with the Shares associated therewith, and will not become
exercisable or separately tradeable as a result of the Offer. Absent the
occurrence of circumstances causing the Rights to become exercisable or
separately tradeable before the Expiration Date, the tender of any Shares
pursuant to the Offer will include the tender of the Rights associated
therewith. No separate consideration will be paid for such Rights. Upon the
purchase of Shares by the Company pursuant to the Offer, shareholders selling
those Shares will no longer own the Rights associated with such purchased
Shares. See Section 9.
2. Tenders by Holders of Fewer than 100 Shares
The Company, upon the terms and subject to the conditions of the Offer, will
accept for purchase, without proration, all Shares properly tendered and not
withdrawn before the Expiration Date by or on behalf of Odd Lot Holders. See
Section 1. To avoid proration, however, an Odd Lot Holder must properly tender
all Shares that such Odd Lot Holder beneficially owns. Partial tenders will not
qualify for this preference. This preference is not available to owners of 100
or more Shares even if such owners have separate stock certificates for fewer
than 100 Shares. Any Odd Lot Holder wishing to tender all Shares beneficially
owned by such Odd Lot Holder pursuant to the Offer and qualify for this
preference must complete the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery. See
Section 3.
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3. Procedure for Tendering Shares
Proper Tender of Shares. For Shares to be properly tendered pursuant to the
Offer:
(a) the certificates for such Shares (or confirmation of receipt of such Shares
pursuant to the procedure for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal
(or a facsimile copy thereof) with any required signature guarantees, and
any other documents required by the Letter of Transmittal, must be received
before the Expiration Date by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase; or
(b) the tendering shareholder must comply with the guaranteed delivery
procedure set forth below.
It is a violation of Section 14(e) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (collectively, the "Exchange
Act"), and Rule 14e-4 promulgated thereunder, for a person to tender Shares for
such person's own account unless the person so tendering:
(a) owns such Shares; or
(b) owns an option, warrant or right to purchase such Shares and intends
to acquire Shares for tender by exercise of such option, warrant or
right.
Section 14(e) and Rule 14e-4 provide a similar restriction applicable to the
tender or guarantee of a tender on behalf of another person.
A tender of Shares made pursuant to any method of delivery set forth herein will
constitute a binding agreement between the tendering shareholder and the Company
upon the terms and subject to the conditions of the Offer, including the
tendering shareholder's representation that (i) such shareholder owns the Shares
being tendered within the meaning of Rule 14e-4 promulgated under the Exchange
Act and (ii) the tender of such Shares complies with Rule 14e-4.
Signature Guarantees and Methods of Delivery. No signature guarantee is
required on the Letter of Transmittal if the Letter of Transmittal is signed by
the registered owner of the Shares (which term, for purposes of this Section,
includes any participant in The Depository Trust Company, the Midwest Securities
Trust Company or the Philadelphia Depository Trust Company (collectively, the
"Book-Entry Transfer Facilities") whose name appears on a security position
listing as the owner of the Shares) tendered therewith, and payment and delivery
are to be made directly to such registered owner at such owner's address shown
on the records of the Company, or if Shares are tendered for the account of a
financial institution (including most banks, savings and loan associations, and
brokerage houses) that is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchanges Medallion Program (each such entity being hereinafter
referred to as an "Eligible Institution"). In all other cases, all signatures
on the Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 1 of the Letter of Transmittal. If a certificate representing
Shares is registered in the name of a person other than the person signing a
Letter of Transmittal, or if payment is to be made, or certificates for Shares
not purchased or tendered are to be issued, to a person other than the
registered owner, the certificate must be endorsed or accompanied by an
appropriate stock power, in either case signed exactly as the name of the
registered owner appears on the certificate, with the signature on the
certificate or stock power guaranteed by an Eligible Institution. In all cases,
payment for Shares tendered and accepted for payment pursuant to the Offer will
be made only after timely receipt by the Depositary of certificates for such
Shares (or a timely confirmation of a book-entry transfer of such Shares into
the Depositary's account at one of the Book-Entry Transfer Facilities), a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and any other documents required by the Letter of Transmittal.
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The method of delivery of all documents, including stock certificates, the
Letter of Transmittal and any other required documents, is at the election and
risk of the tendering shareholder. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended.
Federal Backup Withholding. Unless an exemption applies under the applicable
law concerning "backup withholding" of Federal income tax, the Depositary will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a shareholder (or other payee) pursuant to the Offer unless the
shareholder (or other payee) provides such person's tax identification number
(social security number or employer identification number) and certifies that
such number is correct. Each tendering shareholder, other than a noncorporate
foreign shareholder, should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal so as to
provide the information and certification necessary to avoid backup withholding,
unless an applicable exemption exists and is proved in a manner satisfactory to
the Company and the Depositary. Noncorporate foreign shareholders generally
should complete and sign a Form W-8, Certificate of Foreign Status, a copy of
which may be obtained from the Depositary, in order to avoid backup withholding.
For a discussion of certain other Federal income tax consequences of the Offer,
see Section 11.
Book-Entry Delivery. The Depositary will establish an account with respect to
the Shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in a Book-Entry Transfer Facility's
system may make book-entry delivery of the Shares by causing such facility to
transfer such Shares into the Depositary's account in accordance with such
facility's procedure for such transfer. Even though delivery of Shares may be
effected through book-entry transfer into the Depositary's account at one of the
Book-Entry Transfer Facilities, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), with any required signature guarantees and
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 before the Expiration Date, or the guaranteed delivery procedure set
forth below must be followed. Delivery of the Letter of Transmittal and any
other required documents to one of the Book-Entry Transfer Facilities does not
constitute delivery to the Depositary.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the
Offer and such shareholder's stock certificates are not immediately available
(or the procedure for book-entry transfer cannot be followed on a timely basis)
or time will not permit the Letter of Transmittal and all other required
documents to reach the Depositary before the Expiration Date, such Shares may
nevertheless be tendered provided that all the following conditions are
satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail or facsimile transmission) before
the Expiration Date, a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form the Company has provided
with this Offer to Purchase; and
(c) the certificates for all tendered Shares in proper form for transfer (or
confirmation of book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities), together with a
properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) and any other documents required by the Letter of
Transmittal, are received by the Depositary within five NYSE trading
days after the date of execution of such Notice of Guaranteed Delivery.
Determination of Validity; Rejection of Shares; Waiver of Defects; No Obligation
to Give Notice of Defects. All questions as to the number of Shares to be
accepted and the validity, form, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, which determination shall be final and binding
on all parties. The Company reserves the absolute right to reject any or all
tenders
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determined by it not to be in proper form or the acceptance for payment of which
may, in the opinion of the Company's counsel, be unlawful. The Company also
reserves the absolute right to waive any of the conditions of the Offer (except
as otherwise provided in Section 6) and any defect or irregularity in the tender
of any particular Shares. No tender of Shares will be deemed properly made
until all defects or irregularities have been cured or waived. None of the
Company, the Depositary, the Information Agent or any other person is or will be
obligated to give notice of any defects or irregularities in tenders, and none
of them will incur any liability for failure to give any such notice.
Allianz Asset Accumulation Plan. Participants in the AAAP who wish to have the
trustee of the AAAP tender Shares allocated to their accounts should so indicate
by completing, executing and returning to the trustee the instruction form
included in the notice sent to such participants. Participants in the AAAP may
not use the Letter of Transmittal to direct the trustee to tender Shares
allocated to such shareholders but must use the separate instruction form sent
to them. Under the Employee Retirement Income Security Act of 1974 ("ERISA"),
the trustee may be obligated to take action and make an independent decision
irrespective of directions given by participants. Accordingly, although
instructions from participants are being solicited for the trustee's information
and will be given due consideration by it, the trustee is not bound under ERISA
by such instructions and thus may tender Shares or may not tender Shares, as the
case may be, contrary to such designations. Of course, directions as to the
subsequent reinvestment of the proceeds from the tendered Shares will be
followed by the Trustee. Participants in the AAAP are urged to read the
separate instruction forms and related materials sent to them carefully. See
Section 14.
4. Withdrawal Rights
Except as otherwise provided in this Section 4, a tender of Shares pursuant to
the Offer is irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time before the Expiration Date and, unless theretofore
accepted for payment by the Company, after 12:00 Midnight, New York City time,
on Monday, April 17, 1995.
For a withdrawal to be effective, the Depositary must timely receive (at one of
its addresses set forth on the back cover of this Offer to Purchase) a written
or facsimile transmission notice of withdrawal. Any notice of withdrawal must
specify the name of the person having tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and, if different from the name of the person
who tendered the Shares, the name of the registered owner of such Shares. If
the certificates have been delivered or otherwise identified to the Depositary,
then, prior to the release of such certificates, the tendering shareholder must
also submit the serial numbers shown on the particular certificates evidencing
such Shares and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution (except in the case of Shares tendered by an Eligible
Institution). If Shares have been delivered pursuant to the procedure for book-
entry transfer set forth in Section 3, the notice of withdrawal must specify the
name and the number of the account at the applicable Book-Entry Transfer
Facility to be credited with the withdrawn Shares and otherwise comply with the
procedures of such facility.
All questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by the Company, in its sole discretion, which
determination shall be final and binding on all parties. None of the Company,
the Depositary, the Information Agent or any other person is or will be
obligated to give any notice of any defects or irregularities in any notice of
withdrawal, and none of them will incur any liability for failure to give any
such notice. A withdrawal of a tender may not be rescinded and Shares properly
withdrawn shall thereafter be deemed not to be validly tendered for purposes of
the Offer. Withdrawn Shares, however, may be retendered before the Expiration
Date by again following one of the procedures described in Section 3.
5. Acceptance for Payment of Shares and Payment of Purchase Price
Upon the terms and subject to the conditions of the Offer, as soon as
practicable after the Expiration Date, the Company will purchase and pay the
Purchase Price for 750,000 Shares (subject to increase or decrease as provided
in Sections 1 and 15) or such lesser number of Shares as are properly tendered
and not withdrawn as permitted in Section 4. For purposes of the Offer, the
Company will be deemed to have accepted for payment (and thereby purchased),
subject to
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proration, Shares which are tendered and not withdrawn when, as and if the
Company gives oral or written notice to the Depositary of the Company's
acceptance of such Shares for payment pursuant to the Offer.
In the event that proration of tendered Shares is required, the Company will
determine the final proration factor as promptly as practicable after the
Expiration Date. Although the Company does not expect that it will be able to
announce the final proration factor until approximately seven NYSE trading days
after the Expiration Date, it will announce the preliminary results of proration
by press release as promptly as practicable after the Expiration Date.
Shareholders may obtain such preliminary information from the Information Agent
and may be able to obtain such information from their brokers or financial
advisors. Certificates for all Shares not purchased pursuant to the Offer,
including Shares not purchased because of proration, will be returned to the
tendering shareholders (or, in the case of Shares delivered by book-entry
transfer, such Shares will be credited to the account maintained with one of the
Book-Entry Transfer Facilities by the participant therein who so delivered such
Shares) at the Company's expense as promptly as practicable (which, in the event
of proration, is expected to be approximately 12 NYSE trading days following the
Expiration Date).
Payment for Shares purchased pursuant to the Offer will be made by the Company
by depositing the aggregate Purchase Price therefor with the Depositary, which
will act as agent for tendering shareholders for the purpose of receiving
payment from the Company and transmitting payment to the tendering shareholders.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of certificates for such Shares (or a timely
confirmation by a Book-Entry Transfer Facility of book-entry transfer of such
Shares to the Depositary), a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) with any required signature guarantees and
any other required documents. Under no circumstances will interest be paid on
the Purchase Price of the Shares to be paid by the Company, regardless of any
delay in making such payment.
The Company will pay any stock transfer taxes with respect to the transfer and
sale of Shares to it or to its order pursuant to the Offer. If, however,
payment is to be made to, or certificates for Shares not purchased or tendered
are to be registered in the name of, any person other than the registered
holder, or if tendered certificates are registered in the name of any person
other than the person(s) signing the Letter of Transmittal, the amount of any
stock transfer taxes (whether imposed on the registered holder or such other
person) payable on account of the transfer to such person will be deducted from
the Purchase Price unless evidence satisfactory to the Company of the payment of
such taxes or an exemption therefrom is submitted. See Instruction 6 of the
Letter of Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND SIGN
THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL (OR, IN THE CASE
OF A NONCORPORATE FOREIGN SHAREHOLDER, A FORM W-8, WHICH IS OBTAINABLE FROM THE
DEPOSITARY) MAY BE SUBJECT TO A FEDERAL BACKUP WITHHOLDING TAX OF 31% OF THE
GROSS PROCEEDS TO BE PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE
OFFER. SEE SECTIONS 3 AND 11.
6. Certain Conditions of the Offer
Notwithstanding any other provision of the Offer, and in addition to (and not in
limitation of) the Company's right to extend, amend or terminate the Offer at
any time in its sole discretion, the Company shall not be required to accept for
payment or pay for any Shares tendered, and may terminate or amend the Offer if,
before acceptance for payment of or payment for any such Shares, any of the
following shall have occurred (or shall have been determined by the Company to
have occurred):
(a) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or administrative
agency or authority or tribunal or any other person, domestic or foreign,
before any court or governmental, regulatory or administrative authority,
agency or tribunal, domestic or foreign, which (i) challenges the making of
the Offer or the acquisition of Shares pursuant to the Offer, or otherwise,
directly or
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indirectly, relates in any manner to the Offer; or (ii) in the sole judgment
of the Company, could materially affect the business, condition (financial
or otherwise), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in any way
the contemplated future conduct of the business of the Company or any of its
subsidiaries or materially impair the Offer's contemplated benefits to the
Company;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any court or any government or governmental,
regulatory or administrative authority, agency or tribunal, domestic or
foreign, which, in the Company's sole judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for, some or
all the Shares illegal or otherwise restrict or prohibit consummation of the
Offer; (ii) delay or restrict the ability of the Company, or render the
Company unable, to accept for payment, or pay for, some or all the Shares;
(iii) materially impair the contemplated benefits of the Offer to the
Company; or (iv) materially affect the business, condition (financial or
otherwise), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in any way
the contemplated future conduct of the business of the Company or any of its
subsidiaries;
(c) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any United States national
securities exchange or in the over-the-counter market (excluding any
coordinated trading halt triggered solely as a result of a specified
decrease in a market index); (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States; (iii)
the commencement of a war, armed hostilities or other international or
national crisis directly or indirectly involving the United States; (iv) any
limitation (whether or not mandatory) by any governmental, regulatory or
administrative agency or authority on, or any event which, in the sole
judgment of the Company, might affect, the extension of credit by banks or
other lending institutions in the United States; (v) any significant
decrease in the market price of the Shares; (vi) any change in the general
political, market, economic or financial conditions in the United States or
abroad that could, in the sole judgment of the Company, have a material
adverse effect on the business, condition (financial or otherwise), income,
operations or prospects of the Company and its subsidiaries, taken as a
whole, or the trading in the Shares; (vii) in the case of any of the
foregoing existing at the time of the commencement of the Offer, in the sole
judgment of the Company, a material escalation, acceleration or worsening
thereof; or (viii) any decline in either the Dow Jones Industrial Average
(3,953.54 at the close of business on February 17, 1995) or the Standard and
Poor's Index of 500 Industrial Companies (481.97 at the close of business on
February 17, 1995) by an amount in excess of 10% measured from the close of
business on February 17, 1995;
(d) after February 17, 1995, any tender or exchange offer with respect to
the Shares (other than the Offer), or any merger, acquisition, business
combination or other similar transaction with or involving the Company or
any subsidiary, shall have been proposed, announced or made by any person or
entity;
(e) after February 17, 1995, any change shall occur or be threatened in the
business, condition (financial or otherwise), income, operations or
prospects of the Company and its subsidiaries, taken as a whole, which, in
the sole judgment of the Company, is or may be material to the Company;
(f) (i) any person, entity or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) shall have acquired, or proposed to acquire,
beneficial ownership of more than 5% of the outstanding Shares (other than a
person, entity or group which had publicly disclosed such ownership in a
Schedule 13D or 13G (or an amendment thereto) on file with the Securities
and Exchange Commission (the "SEC") prior to February 17, 1995), (ii) any
new group shall have been formed which beneficially owns more than 5% of the
outstanding Shares; or (iii) any person, entity or group shall have filed a
Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, or made a public announcement reflecting an intent
to acquire the Company or any of its subsidiaries or any of their respective
assets or securities; or
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(g) there shall be a reasonable likelihood that the purchase of Shares
pursuant to the Offer will cause either (i) the Shares to be held of record
by less than 300 persons; or (ii) the Shares neither to be listed on any
"national securities exchange" (as used in the Exchange Act) nor to be
"authorized to be quoted on an inter-dealer quotation system of any
registered national securities association" (as used in Rule 13e-
3(a)(3)(ii)(B) under the Exchange Act);
which, in the reasonable good faith judgment of the Company, in any such case
and regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition, makes it inadvisable to proceed with the
Offer or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such condition and, except as set
forth in the next sentence, any such condition may be waived by the Company, in
whole or in part, at any time and from time to time in its sole discretion. The
Company will not under any circumstances waive the condition set forth in
paragraph (g) above. The Exchange Act requires that all conditions to the Offer
must be satisfied or waived before the final Expiration Date. In certain cases,
waiver of a condition to the Offer would require an extension of the Offer. See
Section 15.
The Company's failure at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right; the waiver of any such right with
respect to particular facts and circumstances shall not be deemed a waiver with
respect to any other facts or circumstances; 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 Company concerning the events described above and any
related judgment by the Company regarding the inadvisability of proceeding with
the acceptance for payment or payment for any tendered Shares will be final and
binding on all parties.
7. Price Range of Shares; Dividends
The Shares (symbol FFC) are listed and traded on the NYSE. The table below sets
forth, for the calendar quarters indicated, the reported high and low closing
sales prices of the Shares on the NYSE Composite Tape:
- -----------------------------------------------------------------
High Low
- -----------------------------------------------------------------
1993:
First Quarter $ 80 1/2 $ 71 5/8
Second Quarter 86 1/2 79 3/4
Third Quarter 90 1/4 82
Fourth Quarter 92 3/8 73 1/2
1994:
First Quarter 77 64 3/4
Second Quarter 70 3/8 60 1/2
Third Quarter 78 3/8 69 3/4
Fourth Quarter 79 1/4 70 1/2
1995:
First Quarter (through February 17) 76 71 3/4
- -----------------------------------------------------------------
On February 15, 1995, the last full trading day before the announcement of the
Offer, the reported closing sales price of the Shares on the NYSE Composite Tape
was $72 3/8 per Share, and on February 17, 1995, the last full trading day
before the commencement of the Offer, the reported closing sales price was $74
1/2 per Share. Shareholders are urged to obtain a current market quotation for
the Shares.
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Since 1991 the Company has not paid regular cash dividends to holders of Shares,
and the Board currently does not intend to reinstate regular periodic dividends
on Shares. However, the Board currently intends to reconsider from time to time
the declaration of regular periodic dividends on Shares with due consideration
given to the financial characteristics of the Company's remaining invested
assets and operations and the amount and regularity of its cash flows at the
time. There can be no assurance, therefore, as to when or whether the Board
will declare additional dividends on Shares.
On December 22, 1993, the Company distributed to its shareholders approximately
74% of the outstanding shares of Common Stock of White River Corporation
(together with its subsidiaries, "White River"). White River was capitalized by
the Company on September 24, 1993, with $257.6 million in total assets and
$200.0 million of common shareholder's equity. The distribution of shares of
White River Common Stock had the effect of reducing the Company's book value per
common and equivalent share as of December 31, 1993, by approximately $15.
The Company may in the future purchase additional Shares on the open market, in
private transactions, through tender offers or otherwise. See Section 8.
8. Purpose of the Offer; Certain Effects of the Offer
The Company believes that it currently has capital in excess of its ongoing
needs in an amount equal to or greater than the maximum amount contemplated by
the Offer. Accordingly, the Board has determined that it is in the interest of
the Company's shareholders to offer to return such excess capital to
shareholders by creating a selling opportunity for shareholders through a
repurchase by the Company of up to 750,000 Shares. The Offer will also afford
to shareholders the opportunity to dispose of Shares without the usual
transaction costs associated with any market sale. The Offer will further allow
qualifying Odd Lot Holders whose Shares are purchased pursuant to the Offer to
avoid the payment of brokerage commissions and any applicable odd-lot discount
payable on a sale of Shares in a transaction effected on a securities exchange.
Shareholders whose Shares are not purchased in the Offer will obtain an increase
in their ownership interest in the Company and thus in the Company's future
earnings and assets. To the extent the purchase of Shares in the Offer results
in a reduction in the number of shareholders of record, the costs to the Company
for services to shareholders will be reduced.
NEITHER THE COMPANY NOR THE BOARD MAKES ANY RECOMMENDATION AS TO WHETHER ANY
SHAREHOLDER SHOULD TENDER ANY OF OR ALL SUCH SHAREHOLDER'S SHARES PURSUANT TO
THE OFFER. EACH SHAREHOLDER MUST MAKE SUCH SHAREHOLDER'S OWN DECISION WHETHER
TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
Aside from the Offer, the Board has not determined if or when any other
distribution to common shareholders will occur. See Section 7. The Company may
in the future purchase additional Shares on the open market, in private
transactions, through tender offers or otherwise. Any such purchases may be on
the same terms or on terms which are more or less favorable to shareholders than
the terms of the Offer. The Offer, if fully subscribed, will exhaust the
Company's remaining authorization to repurchase Shares.
Any possible future purchases of Shares by the Company would depend on many
factors, including among others, the market price of the Shares, the results of
the Offer, the Company's business and financial position and general economic
and market conditions. Rule 13e-4 under the Exchange Act generally prohibits
the Company and its affiliates from purchasing any Shares, other than pursuant
to the Offer, for at least ten business days after the Expiration Date.
Shares acquired by the Company pursuant to the Offer will be retired. Certain
pro forma financial effects of the purchase of 750,000 Shares pursuant to the
Offer are described in Section 9.
The purchase of 750,000 Shares pursuant to the Offer will not cause the Shares
to be delisted by the NYSE or deregistered under the Exchange Act. See clause
(g) of Section 6.
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The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Following the repurchase of
Shares pursuant to the Offer, the Shares not purchased will continue to be
"margin securities" for purposes of the Federal Reserve Board's margin
regulations.
9. Certain Information Concerning the Company
The Company was organized in 1980. The Company's principal business is
conducted through its wholly owned subsidiary, Source One Mortgage Services
Corporation, and its subsidiaries (collectively, "Source One"). The Company's
newest operating affiliate is Financial Security Assurance Holdings Ltd.
("FSA"), a leading Aaa/AA writer of financial guarantee insurance. The
Company's voting control of FSA is approximately 23%. The Company also owns a
portfolio of common equity securities and other investments totalling $489.7
million as of December 31, 1994. The portfolio investments consist in great
part of large blocks of securities of a small number of issuers, many of them in
the energy, natural resources and related industries. This concentration may
make the value of the Company's investment portfolio more volatile than the
value of a more diversified portfolio.
The Company's principal office is located at The 1820 House, Main Street,
Norwich, Vermont, 05055-0850, and its telephone number is (802) 649-3633.
Source One Mortgage Services Corporation. Source One is one of the largest
mortgage banking companies in the United States based on the size of its
mortgage loan servicing portfolio. As of December 31, 1994, Source One had a
mortgage loan servicing portfolio totalling $39.6 billion, which is serviced on
behalf of approximately 350 institutional investors and numerous other security
holders. See "Recent Developments" below. As of December 31,1994, Source One
had 144 retail branch offices in 28 states and originated $4.6 billion in new
mortgage loans for the year then ended.
Source One engages primarily in the business of producing, selling and servicing
residential mortgage loans. Its sources of revenue are net mortgage servicing
fees, net interest revenue, net gain on sales of mortgages and other revenue
(including underwriting and appraisal fees). Through subsidiaries, Source One
also sells credit-related insurance products (such as life, disability, health,
accidental death, and property/casualty insurance) and provides bi-weekly
mortgage payment services.
Source One produces residential mortgage loans through a system of retail branch
offices, mortgage brokers, a refinance division, and a correspondent network of
banks, thrift institutions and other mortgage lenders. Loans produced, whether
through origination or purchase, include conventional residential mortgage loans
as well as mortgage loans which are either insured by the Federal Housing
Administration ("FHA") or partially guaranteed by the Veterans Administration
("VA"). It is the policy of Source One to produce primarily fixed rate mortgage
loans. Mortgage loans originated by Source One are subject to a defined
underwriting process in order to assess each prospective borrower's ability to
repay the loan requested and the adequacy of each property as collateral. In
addition, Source One is subject to the underwriting guidelines of FHA, VA, the
Federal Home Loan Mortgage Corporation ("FHLMC") and the Federal National
Mortgage Association ("FNMA"), as well as specific contractual requirements of
institutional investors who have agreed to acquire mortgage loans originated by
Source One.
Source One sells loans either through mortgage-backed securities issued pursuant
to programs of the Government National Mortgage Association ("GNMA"), FNMA and
FHLMC, or to institutional investors. Most loans are aggregated in pools of
$1.0 million or more, which are purchased by institutional investors after
having been guaranteed by GNMA, FNMA or FHLMC. Source One, primarily through
investment bankers, also arranges to sell mortgage-backed securities to
investors.
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Source One currently retains the rights to service the majority all of the
mortgage loans it produces. In addition, Source One may acquire the rights to
service or subservice a mortgage loan portfolio without originating or acquiring
the underlying mortgage loans. Source One customarily makes such purchases of
servicing rights from banks, thrift institutions and other mortgage lenders.
The fees paid to acquire such servicing rights are negotiated on a case-by-case
basis. Mortgage loan servicing consists primarily of collecting monthly loan
payments, remitting amounts due to investors, collecting property tax and
insurance escrow deposits, and making tax and insurance premium payments when
due. Source One retains a servicing fee from each monthly loan payment equal to
a fixed percentage of the outstanding principal balance of each loan, plus any
late charges.
Financial Security Assurance Holdings Ltd. On May 13, 1994, the Company
purchased 2,000,000 shares of FSA common stock from U S WEST Capital Corp., a
wholly-owned subsidiary of U S WEST, Inc., as part of an initial public
offering of 8,082,385 shares of FSA's common stock at the initial offering price
of $20.00 per share. The Company's initial stake represents a 7.6% ownership of
FSA. The Company's Chairman, John J. Byrne, has also become Chairman of FSA.
FSA conducts operations principally through Financial Security Assurance, Inc.,
a wholly-owned monoline financial guarantee insurance subsidiary with Aa/AA
claims-paying ratings. FSA is principally engaged in guaranteeing residential
mortgage and other asset-backed securities and municipal bonds.
Following receipt of regulatory approvals, on September 2, 1994, the Company
acquired additional rights and securities whereby it substantially increased its
holdings in FSA. Such additional rights and securities included (i) various
fixed price options and shares of convertible preferred stock which, in total,
give the Company the right to acquire over the next five to ten years up to
4,560,607 additional shares of FSA common stock for aggregate consideration of
$125.7 million; and (ii) a "call right" which, in general, gives the Company the
right through November 13, 1995, to acquire up to 9,000,000 additional shares of
FSA common stock for per share consideration equal to the higher of (a) market
price or (b) a fixed price ranging from $29.00 to $30.50. The Company also has
a "right of first offer" through November 13, 1995, relating to the same
9,000,000 shares of FSA common stock. All shares of FSA common stock owned or
acquired by the Company as described above will be subject to certain
restrictions on transfer, voting provisions and other limitations and
requirements set forth in a Shareholders' Agreement, a Registration Rights
Agreement and a Voting Trust Agreement.
Recent Developments. Source One recently entered into a definitive agreement to
sell $9.8 billion of its servicing portfolio to a third party. The transaction
will result in Source One recognizing a pretax gain in the first quarter of 1995
of $28.2 million. The Company reported in its 1994 Earnings Release a $68.1
million pretax charge, recorded as a cumulative adjustment as of January 1,
1994, relating to a change in the manner by which Source One measures
"impairment" of its purchased mortgage servicing asset. Previously, Source One
measured the asset's impairment on an undiscounted, disaggregated basis. The new
accounting methodology measures the asset's impairment on a disaggregated basis
and discounts the asset's cash flow using a current market rate.
The Company purchased an additional 460,200 shares of FSA Common Stock on the
open market in the first quarter of 1995 for $5.6 million which raised its
voting control of FSA to approximately 23%.
On February 15, 1995, the Human Resources Committee of the Board (the "HRC")
approved, subject to the approval of shareholders at the Company's 1995 Annual
Meeting of Shareholders to be held in May, a new five-year employment contract
(the "Contract"), beginning as of January 1, 1995 and ending December 31, 1999,
between John J. Byrne and the Company. The Contract calls for: (i) Mr. Byrne
to continue to serve as Chairman, President and Chief Executive Officer of the
Company for the five-year term of the Contract at his current salary, (ii) an
extension of the expiration date with respect to 1,000,000 of the 1,150,000
warrants he currently holds to purchase Shares from January 2, 1996 to January
2, 2002, and (iii) providing Mr. Byrne the right to enter into a new loan from
the Company, or to receive a Company
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guarantee of a loan with a third party on Mr. Byrne's behalf, in an amount up to
$15.0 million, upon the maturity of his outstanding $30.0 million loan with the
Company which becomes due on October 23, 1995. If the Company makes the new
loan to Mr. Byrne, the loan would be a recourse loan having a term ending on or
before December 31, 1999, a market interest rate and standard commercial terms.
On February 15, 1995, the HRC also approved, subject to the approval of the
Company's shareholders in May 1995, a series of amendments to the Incentive Plan
to: (i) extend the Incentive Plan's current expiration date from September 1995
to May 2005, (ii) increase to 500,000 the number of Shares which may be granted
to participants pursuant to the Incentive Plan (from 353,762 available for grant
as of February 17, 1995), and (iii) to change the name of the Incentive Plan to
the Fund American Long-Term Incentive Plan. The Incentive Plan provides for
granting to officers and key employees of the Company and its participating
subsidiaries various types of stock-based incentive awards including stock
options and performance shares.
Summary Historical Consolidated Financial Information. The summary financial
information for the years ended December 31, 1994 and 1993, set forth below, has
been derived from and should be read in conjunction with the audited
consolidated financial statements (including the related notes thereto) included
in the Company's Annual Report on Form 10-K for the year ended December 31, 1993
(the "Form 10-K") and the Company's fourth quarter 1994 earnings release dated
February 1, 1995 (the "1994 Earnings Release") filed as an exhibit to the
Company's Issuer Tender Offer Statement on Schedule 13E-4 relating hereto (the
"Schedule 13E-4"). Such summary financial information is qualified in its
entirety by reference to such reports and all financial statements and related
notes contained therein. The Form 10-K should be available for examination, and
copies should be obtainable, in the manner set forth below under "Additional
Information". The 1994 Earnings Release is available through the Company upon
request and without charge. Written or telephone requests should be directed to
the Corporate Secretary, Fund American Enterprises Holdings, Inc., The 1820
House, Main Street, Norwich, Vermont 05055-0850, telephone number (802) 649-
3633.
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FUND AMERICAN ENTERPRISES HOLDINGS, INC.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
Year Ended
December 31,
------------------------
1994 1993
---------- ----------
(Dollars in millions, except per share amounts)
Ending Balance Sheet Data:
Total assets $ 1,807.3 $ 3,305.0
Short-term debt 224.1 1,536.8
Long-term debt 577.0 601.3
Minority interest - preferred stock of subsidiary 100.0 --
Shareholders' equity 661.1 905.0
Book value per common and equivalent share 68.95 77.27
Income Statement Data:
Total revenues $ 228.5 $ 251.0
Total expenses (225.7) (234.1)
Net investment gains 38.8 124.0
Income tax provision (20.5) (70.5)
--------- ---------
After tax earnings 21.1 70.4
Cumulative effect of accounting change -
capitalized mortgage servicing, after tax (44.3) --
--------- ---------
Net income (loss) $ (23.2) $ 70.4
========= =========
Earnings per share:
After tax earnings $ 1.20 $ 5.68
Net income (loss) (3.51) 5.68
Ratio of earnings to combined fixed charges and 1.22 1.90
preferred stock dividends
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Notes to Summary Historical Consolidated Financial Information
(A) The ratios of earnings to combined fixed charges and preferred stock
dividends were computed by dividing pretax earnings as adjusted by total fixed
charges and preferred stock dividends:
Year Ended
December 31,
----------------
(Dollars in millions) 1994 1993
------ ------
Pretax earnings $ 41.6 $140.9
Interest expense 78.8 103.1
Portion of rent representative of interest expense 2.3 1.9
------ ------
Pretax earnings as adjusted $122.7 $245.9
====== ======
Preferred stock dividend requirements $ 19.4 $ 24.4
Interest expense 78.8 103.1
Portion of rent representative of interest expense 2.3 1.9
------ ------
Total fixed charges and preferred
stock dividends $100.5 $129.4
====== ======
(B) Earnings per share amounts are based on the weighted average number of
common and dilutive common equivalent shares outstanding of 9,408,785 and
10,247,746 for the years ended December 31, 1994 and 1993, respectively.
Pro Forma Financial Information (Unaudited). The following unaudited pro forma
financial information sets forth the pro forma effects on the historical
financial results of the Company of the Offer assuming 750,000 Shares are
purchased in the Offer for $75.00 per Share, net to the seller in cash, or an
aggregate cost to the Company of approximately $56.4 million including estimated
related fees and expenses of $150,000.
The condensed consolidated pro forma balance sheet as of December 31, 1994,
assumes that the repurchase of Shares by the Company pursuant to the Offer had
occurred as of December 31, 1994. The condensed consolidated pro forma income
statement for the year ended December 31, 1994, assumes that the repurchase of
Shares by the Company pursuant to the Offer had occurred as of January 1, 1994.
See "Notes to Pro Forma Financial Information" in this Section 9 below.
The estimated financial effects of the repurchase of Shares by the Company
pursuant to the Offer presented in the pro forma financial information are not
necessarily indicative of either the Company's financial position or the results
of its operations which would have been obtained had the transactions described
above actually occurred on the dates described above, nor are they necessarily
indicative of the results of future operations. The pro forma financial
information should be read in conjunction with the Company's 1994 Earnings
Release.
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FUND AMERICAN ENTERPRISES HOLDINGS, INC.
CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
(Dollars in millions, except per share amounts)
December 31, 1994
------------------------------------
Adjust- Pro
Actual ments Forma
-------- ------- --------
Assets
Common equity securities, at market value $ 332.4 $ 332.4
Other investments 157.3 157.3
Short-term investments 119.2 $(56.4) 62.8
-------- ------ --------
Total Investments 608.9 (56.4) 552.5
Cash 1.5 1.5
Capitalized mortgage servicing, net 530.5 530.5
Mortgage loans held for sale 210.5 210.5
Other mortgage origination and
servicing assets 213.7
Investment in unconsolidated affiliates 69.7 69.7
Other assets 172.5 172.5
-------- ------ --------
Total assets $1,807.3 $(56.4) $1,750.9
======== ====== ========
Liabilities
Short-term debt $ 224.1 $ 224.1
Long-term debt 577.0 577.0
Accounts payable and other liabilities 245.1 245.1
-------- ------ --------
Total liabilities 1,046.2 1,046.2
-------- ------ --------
Minority Interest - preferred stock of subsidiary 100.0 100.0
-------- ------ --------
Shareholders' Equity
Preferred stock 75.0 75.0
Common stock and paid-in surplus 371.7 $ (8.3) 363.4
Retained earnings 1,098.2 (48.1) 1,050.1
Common stock in treasury (878.5) (878.5)
Net unrealized gains on
investment securities 19.7
Loan for common stock issued (25.0) (25.0)
-------- ------ --------
Total shareholders' equity 661.1 (56.4) 604.7
-------- ------ --------
Total liabilities, minority interest and
shareholders' equity $1,807.3 $(56.4) $1,750.9
======== ====== ========
Book value per common and
equivalent share $ 68.95 $ (.53) $ 66.42
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FUND AMERICAN ENTERPRISES HOLDINGS, INC.
CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
(Dollars in millions, except per share amounts)
Year Ended
December 31, 1994
--------------------------------------
Adjust- Pro
Actual ments Forma
------- ------- -------
Revenues:
Mortgage servicing revenue $ 169.3 $ $ 169.3
Amortization of capitalized servicing 86.9 86.9
------- ------- -------
Net servicing revenue 82.4 82.4
Net gain on sales of mortgages 29.5 29.5
Other mortgage operations revenue 23.9 23.9
Equity in earnings of unconsolidated affiliate 2.5 2.5
Net investment income and other revenue 90.2 (2.0) 88.2
------- ------- -------
Total Revenues 228.5 (2.0) 226.5
------- ------- -------
Expenses:
Interest expense 78.8 78.8
Compensation and benefits 69.2 69.2
General expenses 77.7 77.7
------- ------- -------
Total expenses 225.7 225.7
------- ------- -------
Pretax operating earnings 2.8 (2.0) .8
------- ------- -------
Net realized investment gains 38.8 38.8
------- ------- -------
Pretax earnings 41.6 (2.0) 39.6
Income tax provision 20.5 (.7) 19.8
------- ------- -------
After tax earnings $ 21.1 $ (1.3) $ 19.8
======= ======= =======
Earnings per share:
After tax earnings $ 1.20 $ (.05) $ 1.15
Net loss (3.51) (.46) (3.97)
Earnings per share denominator
(in thousands) 9,409 (750) 8,659
Ratio of earnings to combined fixed
charges and preferred stock dividends 1.22 (.02) 1.20
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Notes to Pro Forma Financial Information (Unaudited)
The condensed consolidated pro forma balance sheet as of December 31, 1994,
assumes that the repurchase of Shares by the Company pursuant to the Offer had
occurred as of December 31, 1994. The condensed consolidated pro forma income
statement for the year ended December 31, 1994, assumes that the repurchase of
Shares by the Company pursuant to the Offer had occurred as of January 1, 1994,
and includes only those adjustments that are expected to have a continuing
impact on the Company. The "adjustments" presented in the pro forma financial
information reflect the following assumptions:
a) The condensed consolidated pro forma balance sheet assumes that (i) the
$56.4 million of funds used by the Company to repurchase 750,000 Shares
pursuant to the Offer and pay related fees and expenses are derived from
sales and maturities of short-term investments and (ii) the Shares
repurchased by the Company pursuant to the Offer are retired.
b) The condensed consolidated pro forma income statement assumes that the
annualized yield on short-term investments used to fund the repurchase of
Shares by the Company pursuant to the Offer and pay related fees and
expenses was 3.57% for the year ended December 31, 1994. This assumed yield
is equal to the average yield actually experienced with respect to the
Company's short-term investments during the period indicated.
The condensed consolidated pro forma income statement also assumes that the
effective tax rate related to the reduction in investment income is 35%, the
maximum Federal statutory rate for corporations.
Shareholder Rights Plan. The Board adopted in 1987, and in 1988 and 1993
amended, a Shareholders' Rights Plan under which Rights to purchase preferred
stock were distributed to shareholders at the rate of one Right for each Share.
Each Right entitles the holder to purchase one one-thousandth of a share of
Participating Stock.
The Rights enable the holders to acquire additional equity in either the Company
or the acquiring company, and are exercisable if an unrelated person or group
(other than American Express Company or a wholly owned subsidiary thereof, any
subsidiary of the Company, any employee benefit plan of the Company or its
subsidiaries or certain affiliates of the Company and certain persons who
inadvertently and temporarily cross the 25% threshold) acquires beneficial
ownership of 25% or more of the outstanding Shares (such a 25% or more
beneficial owner is deemed an "Acquiring Person"). Thereafter, the Rights would
trade separately from the Shares and separate certificates representing the
Rights would be issued. The terms of the Participating Stock are such that each
one one-thousandth of a share would be entitled to participate in dividends and
to vote on an equivalent basis with one whole Share, along with other
preferential dividend rights and preferential distribution rights in
liquidation.
Upon the existence of an Acquiring Person, the Rights will entitle each holder
of a Right to purchase, at the exercise price, that number of one one-thousandth
of a share of Participating Stock equivalent to the number of Shares which, at
the time of the transaction, would have a market value of twice the exercise
price. If certain acquisitions of the Company occur, a similar right to
purchase securities of the Company or the entity acquiring the Company at a
discount would arise.
Any Rights that are beneficially owned by an Acquiring Person (or any affiliate
or associate of an Acquiring Person) are null and void and any holder of any
such Right (including any subsequent holder) will be unable to exercise or
transfer any such Right.
At any time after a person becomes an Acquiring Person, the Board may
mandatorily exchange all or some of the Rights for consideration per Right equal
to one-half of the securities issuable upon the exercise of one Right pursuant
to the terms of the Rights Agreement (or the common share equivalent) and
without payment of the exercise price.
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27
The Rights, which do not have the right to vote or receive dividends, expire
November 25, 1997, and may be redeemed by the Company at a price of $.01 per
Right at any time prior to the earlier of: (i) such time as a person becomes an
Acquiring Person; or (ii) the expiration date. Under certain circumstances, the
Board may redeem the Rights only if a majority of the disinterested directors
(as defined in the Shareholders' Rights Plan) agrees that the redemption is in
the best interests of the Company and its shareholders.
The foregoing description of the Rights is qualified in its entirety by
reference to the Shareholders Rights Plan.
The Rights currently are not exercisable and trade together with the Shares
associated therewith, and will not become exercisable or separately tradeable as
a result of the Offer. Absent the occurrence of circumstances causing the
Rights to become exercisable or separately tradeable before the Expiration Date,
the tender of any Shares pursuant to the Offer will include the tender of the
Rights associated therewith. No separate consideration will be paid for such
Rights. Upon the purchase of Shares by the Company pursuant to the Offer, the
shareholders selling those Shares will no longer own the Rights associated with
such purchased Shares.
Additional Information. The Company is subject to the informational reporting
requirements of the Exchange Act and in accordance therewith the Company files
reports, proxy statements and other information with the SEC. Additional
information concerning the Company is set forth in such proxy statements, the
Company's Annual Report on Form 10-K for the year ended December 31, 1993, and
the 1994 Earnings Release. The Company has filed the Schedule 13E-4 with the
SEC which includes certain additional information relating to the Offer. The
reports, proxy statements and other information filed by the Company with the
SEC can be inspected and copied at the public reference facilities maintained by
the SEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the SEC at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street
(Suite 1400), Chicago, Illinois 60661. Copies of such material also can be
obtained at prescribed rates from the Public Reference Section of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, material filed by the
Company can also be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005. The Company's Schedule 13E-4 will not be available at the
SEC's regional offices.
10. Source and Amount of Funds
If 750,000 Shares are purchased by the Company pursuant to the Offer at $75.00
per Share, net to the seller in cash, the aggregate cost to the Company,
including all related fees and expenses of the Offer, will be approximately
$56.4 million. The Company anticipates that it will fund the purchase of Shares
pursuant to the Offer and the payment of related fees and expenses through sales
and maturities of short-term investments.
11. Certain Federal Income Tax Considerations
Set forth below is a brief summary of the principal Federal income tax
consequences of a sale of Shares pursuant to the Offer under the Internal
Revenue Code of 1986, as amended to date (the "Code").
Gain or Loss Recognition. A tendering shareholder generally will recognize
taxable gain (or loss) upon the sale of Shares pursuant to the Offer equal to
the difference between the amount of cash received by such shareholder pursuant
to the Offer and such shareholder's tax basis in the Shares sold pursuant to the
Offer. Such gain (or loss) will be capital gain (or loss), assuming that such
Shares are held as a capital asset, and will be long-term capital gain (or loss)
if such Shares have been held for more than one year at the time of sale.
Notwithstanding the foregoing, the amount received by a tendering shareholder
will be treated as a dividend taxable as ordinary income if the Offer does not
result in (i) a complete termination of such shareholder's stock interest in the
Company, (ii) a more than 20% decrease in such shareholder's ownership of Shares
and other voting stock of the Company or (iii) a "meaningful reduction" in such
shareholder's proportionate interest in the Company. There are no
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28
precise rules on what constitutes a "meaningful reduction" in a shareholder's
proportionate interest, but the Internal Revenue Service has ruled that even a
small reduction is meaningful where the stock owned by the shareholder prior to
reduction represents a "minimal" interest in the corporation (only .0001118% in
the ruling) and the shareholder does not otherwise exercise any control over the
affairs of the corporation. The extent to which a shareholder's proportionate
interest is reduced will depend upon the extent to which other shareholders
tender Shares in the Offer. In determining the extent to which a shareholder's
proportionate interest is reduced, the shareholder must take into account any
Shares owned by related persons that such shareholder is deemed to own under the
constructive ownership rules of Sections 302(c) and 318 of the Code.
In the case of a corporate shareholder, if the amount received is treated as a
dividend, the dividend income may be eligible for the 70% dividends-received
deduction. The dividends-received deduction is subject to certain limitations,
and may not be available if the corporate shareholder does not satisfy certain
holding period requirements with respect to the Shares or if the Shares are
treated as "debt financed portfolio stock". Generally, if a dividends-received
deduction is available, the dividend will probably be treated as an
"extraordinary dividend" under Section 1059(a) of the Code, in which case such
corporate shareholder's tax basis in Shares retained by such shareholder would
be reduced, but not below zero, by the amount of the nontaxed portion of the
dividend. Any amount of the nontaxed portion of the dividend in excess of the
shareholder's basis would generally be subject to tax upon sale or disposition
of those Shares.
Backup Withholding. Each tendering shareholder must provide certain information
through the Letter of Transmittal to avoid the 31% Federal "backup withholding"
tax on the gross proceeds payable pursuant to the Offer. See Section 3.
Foreign Shareholder Withholding. Foreign shareholders should note that the 30%
U.S. withholding tax generally applicable to corporate distributions should not
apply to the proceeds payable pursuant to the Offer, unless such proceeds are
treated as a dividend under the rules described in "Gain or Loss Recognition"
above. (However, as indicated in the preceding paragraph, Federal backup
withholding tax may be applicable.)
State, Local and Foreign Taxes. The foregoing discussion relates only to
Federal income tax consequences of the Offer. Shareholders should consult their
own tax advisors regarding the possible state, local and foreign tax
consequences of the Offer.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
TO DETERMINE THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SALES
MADE BY THEM PURSUANT TO THE OFFER IN VIEW OF THEIR OWN PARTICULAR
CIRCUMSTANCES.
12. Transactions and Arrangements Concerning the Shares
Based upon the Company's records and upon information provided to the Company by
its directors and executive officers, neither the Company nor any of its
subsidiaries nor, to the best of the Company's knowledge, any of the directors
or officers of the Company, nor any associates of any of the foregoing, has
effected any transactions in the Shares during the 40 business days prior to the
date hereof. For a discussion of certain modifications to warrants in respect
of the Shares held by John J. Byrne, Chairman, President and Chief Executive
Officer of the Company, see Section 9 "Recent Developments".
Except as set forth in this Offer to Purchase, neither the Company nor, to the
best of the Company's knowledge, any of its directors or officers, is a party to
any contract, arrangement, understanding or relationship with any other person
relating, directly or indirectly, to the Offer with respect to any securities of
the Company (including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies, consents or authorizations).
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The Company has been informed by its directors and officers that they currently
do not intend to tender Shares owned by them pursuant to the Offer, except that
Allan L. Waters, the Company's Senior Vice President and Chief Financial
Officer, and Arthur Zankel, a director of the Company, have informed the Company
that they currently intend to tender 4,125 and 6,000 Shares, respectively,
pursuant to the Offer.
13. Certain Legal Matters; Regulatory and Foreign Approvals
The Company is not aware of any license or regulatory permit that appears to be
material to its business that might be adversely affected by its acquisition of
Shares as contemplated in the Offer or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, that would be required for the Company's acquisition or
ownership of Shares pursuant to the Offer. Should any such approval or other
action be required, the Company currently contemplates that it will seek such
approval or other action. The Company cannot predict whether it may determine
that it is required to delay the acceptance for payment of Shares tendered
pursuant to the Offer pending the outcome of any such matter. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions or that the failure to
obtain any such approval or other action might not result in adverse
consequences to the Company's business. The Company intends to make all
required filings under the Exchange Act. The Company's obligation under the
Offer to accept Shares for payment is subject to certain conditions. See
Section 6.
14. Allianz Asset Accumulation Plan
AAAP participants should receive an AAAP Tender Offer Instruction Form in the
materials sent to them on behalf of the trustee. AAAP participants who wish to
have the trustee tender any of or all Shares allocated to their respective
accounts ("AAAP Shares") should so indicate by completing, executing and
returning an AAAP Tender Offer Instruction Form to the trustee. AAAP
participants may not use the Letter of Transmittal to direct the trustee to
tender their respective AAAP Shares but must use the AAAP Tender Offer
Instruction Form. Under ERISA, the trustee may be obligated to take action and
make an independent decision irrespective of directions given by participants.
Accordingly, although instructions from participants are being solicited for the
trustee's information and will be given due consideration by it, the trustee is
not bound under ERISA by such instructions and thus may tender Shares or may not
tender Shares, as the case may be, contrary to such designations. Of course,
directions as to the subsequent reinvestment of the proceeds from the tendered
Shares will be followed by the trustee. AAAP Participants are urged to read the
AAAP Tender Offer Instruction Form and related materials carefully.
Neither the Company nor the Board makes any recommendation as to whether any
participant in the AAAP should tender any of or all their respective AAAP Shares
pursuant to the Offer. Each participant in the AAAP must make such
participant's own decision whether to tender AAAP Shares, and, if so, how many
such Shares.
15. Extension of Tender Period; Termination; Amendments
The Company expressly reserves the right, in its sole discretion, at any time or
from time to time and regardless of whether or not any of the events set forth
in Section 6 shall have occurred or shall be deemed by the Company to have
occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of any Shares by giving oral or written
notice of such extension to the Depositary and making a public announcement
thereof. During any such extension, all Shares previously tendered and not
purchased or withdrawn will remain subject to the Offer, except to the extent
that such Shares may be withdrawn as set forth in Section 4. The Company also
expressly reserves the right, in its sole discretion, to terminate the Offer and
not accept for payment or pay for any Shares not theretofore accepted for
payment or paid for or, subject to applicable law, to postpone payment for
Shares upon the occurrence of any of the conditions specified in Section 6 or
otherwise by giving oral or written notice of such termination or postponement
to the Depositary and making a public announcement thereof. The Company's
reservation of the right to delay payment for Shares which it has accepted for
payment is limited by Rule 13e-4(f)(5) promulgated under the Exchange Act, which
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requires that the Company must pay the consideration offered or return the
Shares tendered promptly after termination or withdrawal of a tender offer.
Subject to compliance with applicable law, the Company further reserves the
right, in its sole discretion, and regardless of whether or not any of the
events set forth in Section 6 shall have occurred or shall be deemed by the
Company to have occurred, to amend the Offer in any respect (including, without
limitation, by decreasing or increasing the consideration offered in the Offer
to owners of Shares or by decreasing the number of Shares being sought in the
Offer) or to waive the limitation on the maximum number of shares to be
purchased pursuant to the Offer. Amendments to the Offer may be made at any time
or from time to time effected by public announcement thereof, such announcement,
in the case of an extension, to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Any disclosure of a material change in the information published, sent or given
to shareholders will be disseminated promptly to shareholders in a manner
reasonably designed to inform shareholders of such change. Without limiting the
manner in which the Company may choose to make a public announcement pursuant to
or concerning the Offer, except as required by applicable law, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
If the Company makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Company will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) promulgated
under the Exchange Act. The minimum period during which an offer must remain
open following material changes in the terms of the offer or information
concerning the offer (other than a change in price or a change in percentage of
securities sought) will depend on the facts and circumstances then existing,
including the relative materiality of the changed terms or information. If (a)
the Company (i) increases or decreases the price at which Shares may be properly
tendered, (ii) increases the number of Shares being sought and such increase
exceeds 2% of the outstanding Shares or (iii) decreases the number of Shares
being sought, and (b) the Offer is scheduled to expire at any time earlier than
the expiration of a period ending on the tenth business day from and including
the date that notice of such increase or decrease is first published, sent or
given, the Offer will be extended until the expiration of such ten business day
period.
16. Fees and Expenses
First Chicago Trust Company of New York ("First Chicago") has been retained by
the Company as Depositary and Information Agent in connection with the Offer.
The Information Agent will assist shareholders who request assistance in
connection with the Offer and may request brokers, dealers and other nominee
shareholders to forward material relating to the Offer to beneficial owners for
which they act as nominees. First Chicago will receive reasonable and customary
compensation for its services in connection with the Offer and will be
reimbursed for reasonable expenses, including the reasonable fees and expenses
of counsel. The Company has agreed to indemnify First Chicago against certain
liabilities which could occur in connection with the Offer, including certain
liabilities under the Federal securities laws. First Chicago has not been
retained and is not authorized to make solicitations or recommendations in
connection with the Offer in its role as Depositary or Information Agent.
The Company will not pay any fees or commissions to any broker, dealer,
commercial bank, trust company or other person for soliciting Shares pursuant to
the Offer. The Company will, however, on request, reimburse such persons for
customary handling and mailing expenses incurred in forwarding materials in
respect of the Offer to the beneficial owners for which they act as nominees.
No broker, dealer, commercial bank or trust company has been authorized to act
as an agent for the Company for the purpose of the Offer. The Company will not
pay (or cause to be paid) any stock transfer taxes on its purchase of Shares
pursuant to the Offer, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
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17. Miscellaneous
The Offer is not being made to, nor will the Company accept tenders from or on
behalf of, owners of Shares in any jurisdiction in which the making of the Offer
or its acceptance would not be in compliance with the laws of such jurisdiction.
The Company is not aware of any jurisdiction where the making of the Offer or
the tender of Shares would not be in compliance with applicable law. If the
Company becomes aware of any jurisdiction where the making of the Offer or the
tender of Shares is not in compliance with any applicable law, the Company will
make a good faith effort to comply with such law. If, after such good faith
effort, the Company cannot comply with such law, the Offer will not be made to
(nor will tenders be accepted from or on behalf of) the holders of Shares
residing in such jurisdiction.
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
February 21, 1995
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Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each shareholder
of the Company or such shareholder's broker, dealer, commercial bank, trust
company or other nominee to the Depositary at one of its addresses set forth
below.
The Depositary and the Information Agent for the Offer is:
First Chicago Trust Company of New York
Facsimile Transmission:
(For Eligible Institutions Only)
201-222-4720
201-222-4721
By Mail: By Hand:
Tenders & Exchanges Tenders & Exchanges
Suite 4660 - FA Suite 4680 - FA
P.O. Box 2562 14 Wall Street - 8th Floor
Jersey City, NJ 07303-2562 New York, NY 10005
For Information:
1-800-438-0057
Any questions or requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent. Shareholders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
24
33
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Pursuant to the Offer to Purchase
Dated February 21, 1995
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THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, MARCH 20, 1995, UNLESS THE OFFER IS EXTENDED.
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To: FIRST CHICAGO TRUST COMPANY OF NEW YORK, Depositary
By Mail: By Hand:
Tenders & Exchanges Tenders & Exchanges
Suite 4660 - FA Suite 4680 - FA
P.O. Box 2562 14 Wall Street - 8th Floor
Jersey City, NJ 07303-2562 New York, NY 10005
Delivery of this instrument to an address other than those shown above or
transmission of instructions to a facsimile number other than those listed above
does not constitute a valid delivery.
This Letter of Transmittal is to be used only if (a) certificates for
Shares (as defined below) are to be delivered with it or (b) Shares are being
delivered by book-entry transfer to the account maintained by the Depositary at
The Depository Trust Company ("DTC"), the Midwest Securities Trust Company
("MSTC") or the Philadelphia Depository Trust Company ("PDTC") (collectively,
the "Book-Entry Transfer Facilities") as set forth in Section 3 of the Offer to
Purchase (as defined below).
Shareholders whose stock certificates are not immediately available (or who
cannot follow the procedure for book-entry transfer on a timely basis) or who
cannot transmit this Letter of Transmittal and all other required documents to
the Depositary before the Expiration Date (as defined in Section 1 of the Offer
to Purchase) may nevertheless tender their Shares according to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2.
A shareholder owning beneficially as of the close of business on February
13, 1995 and who continues to own beneficially until the Expiration Date an
aggregate of fewer than 100 Shares, and who satisfies the other requirements set
forth in Instruction 7, may have all such Shares purchased before proration, if
any, of the purchase of other Shares pursuant to the Offer.
Delivery of the Letter of Transmittal and the other required documents to
one of the Book-Entry Transfer Facilities does not constitute delivery to the
Depositary.
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DESCRIPTION OF SHARES TENDERED
(See Instructions 3 and 4)
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Name(s) and Address(es) of Registered
Holder(s) (Please fill in exactly as Shares Tendered
name(s) appear(s) on certificate(s)) (Attach additional list if necessary)
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Number of
Shares Number of
Certificate Represented by Shares
Number(s)* Certificate(s)* Tendered**
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Total Shares
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* Need not be completed if Shares are delivered by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares
represented by any certificates delivered to the Depositary are being
tendered. See Instruction 4.
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34
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:_____________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
[_] DTC [_] MSTC [_] PDTC
Account Number:____________________________________________________________
Transaction Code Number:___________________________________________________
[_] CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND
COMPLETE THE FOLLOWING:
Name(s) of the Tendering Shareholder(s):___________________________________
Date of Execution of Notice of Guaranteed Delivery:________________________
Name of Institution Which Guaranteed Delivery:_____________________________
Check Box of Applicable Book-Entry Transfer Facility and Give Account
Number if Delivered By Book-Entry Transfer:________________________________
[_] DTC [_] MSTC [_] PDTC
Account Number:____________________________________________________________
Transaction Code Number:___________________________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Fund American Enterprises Holdings, Inc.,
a Delaware corporation (the "Company"), the above-described shares of Common
Stock, par value $1.00 per share, of the Company ("Shares"), at a price of
$75.00 per Share (the "Purchase Price"), net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
February 21, 1995 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together constitute the
"Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
herewith in accordance with the terms of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Company all right, title and interest in and to all the Shares
tendered hereby, or orders the registration of such Shares delivered by book-
entry transfer, that are purchased pursuant to the Offer and hereby irrevocably
constitutes and appoints the depositary for the Offer (the "Depositary") the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to:
(a) deliver certificates for such Shares, or transfer ownership of such
Shares on the account books maintained by any of the Book-Entry
Transfer Facilities, together, in any such case, with all accompanying
evidence of transfer and authenticity, to or upon the order of the
Company, upon receipt by the Depositary, as the undersigned's agent, of
the Purchase Price with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer of
such Shares on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares, all in accordance with the terms of the
Offer.
The undersigned hereby represents and warrants that:
(a) the undersigned "owns" the Shares tendered hereby within the meaning of
Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended, and has full power and authority to validly tender, sell,
assign and transfer the Shares tendered hereby;
(b) the tender of Shares by the undersigned complies with Rule 14e-4;
(c) when and to the extent the Company accepts the Shares for purchase, the
Company will acquire good, marketable and unencumbered title thereto,
free and clear of all security interests, liens, charges, encumbrances,
conditional sales agreements or other obligations relating to their
sale or transfer, and not subject to any adverse claim;
(d) on request, the undersigned will execute and deliver any additional
documents the Depositary or the Company deems necessary or desirable to
complete the assignment, transfer and purchase of the Shares tendered
hereby; and
(e) the undersigned has read and agrees to all the terms of the Offer.
35
The undersigned understands that all Shares properly tendered and not
withdrawn will be purchased at $75.00 per Share (or such other price that may be
set forth in an amendment to the Offer), net to the seller in cash, upon the
terms and subject to the conditions of the Offer, including the proration
provisions thereof and that the Company will return all other Shares, including
Shares not purchased because of proration.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may not
be required to accept for payment any of the Shares tendered herewith or may
accept for payment, pro rata with Shares tendered by other shareholders, fewer
than all the Shares tendered herewith.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Except as
stated on the Offer, this tender is irrevocable.
Unless otherwise indicated under "Special Payment Instructions", please
issue the check for the aggregate Purchase Price and/or return or issue the
certificate(s) evidencing any Shares not tendered or not accepted for payment in
the name(s) of the registered holder(s) appearing under "Description of Shares
Tendered". Similarly, unless otherwise indicated under "Special Delivery
Instructions", please mail the check for the aggregate Purchase Price and/or the
certificate(s) evidencing any Shares not tendered or not accepted for payment
(and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered". In the
event that both the "Special Delivery Instructions" and the "Special Payment
Instructions" are completed, please issue the check for the aggregate Purchase
Price and/or issue or return the certificate(s) evidencing any Shares not
tendered or accepted for payment in the name(s) of, and deliver said check
and/or certificate(s) to, the person or persons so indicated. In the case of
book-entry delivery of Shares, please credit the account maintained at the Book-
Entry Transfer Facility indicated above with any Shares not accepted for
payment. The undersigned recognizes that the Company has no obligation pursuant
to the "Special Payment Instructions" to transfer any Shares from the name(s) of
the registered holder(s) thereof if the Company does not accept for payment any
of the Shares so tendered.
36
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
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ODD LOTS
(See Instruction 7)
To be completed ONLY if Shares are being tendered by or on behalf of
a person who beneficially owned as of the close of business on
February 13, 1995, and who will continue to own beneficially until the
Expiration Date an aggregate of fewer than 100 Shares.
The undersigned either (check one box):
[_] was the beneficial owner as of the close of business on February
13, 1995, and will continue to be the beneficial owner until the
Expiration Date of an aggregate of fewer than 100 Shares, and is
tendering all such Shares, or
[_] is an "Eligible Institution" (as defined in Instruction 1) that
(i) is tendering, for the beneficial owners thereof, Shares with
respect to which it is the record owner and (ii) believes, based
upon representations made to it by each such beneficial owner,
that each such beneficial owner beneficially owned as of the
close of business on February 13, 1995, and will continue to own
beneficially until the Expiration Date an aggregate of fewer
than 100 Shares, and is tendering all such Shares.
37
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 4, 5, 6 and 9)
To be completed ONLY if the check for the aggregate Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are to be
mailed to someone other than the undersigned or to the undersigned at an address
other than that shown below the undersigned's signature.
Mail [_] check and/or [_] certificates to:
Name
---------------------------------------------------------------------------
(Please Print)
Address
------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
(Zip Code)
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 1, 4, 5, 6, 8 and 9)
To be completed ONLY if the check for the aggregate Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are to be
issued in the name of someone other than the undersigned.
Issue any [_] check and/or [_] certificates to:
Name
---------------------------------------------------------------------------
(Please Print)
Address
------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
(Zip Code)
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(Taxpayer Identification Number)
SIGN HERE
(See Instructions 1 and 5)
(Please complete Substitute Form W-9 below)
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Signature(s) of Owner(s)
Name(s)
------------------------------------------------------------------------
(Please Print)
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Capacity (full title)
----------------------------------------------------------
Address
------------------------------------------------------------------------
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(Include Zip Code)
Area Code and Telephone Number
-------------------------------------------------
Taxpayer Identification Number
-------------------------------------------------
(See Instruction 11)
Dated: , 1995
---------------------------------------------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, agent, officer of a corporation or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 5.)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Authorized Signature
-----------------------------------------------------------
Name
---------------------------------------------------------------------------
(Please Print)
Title
--------------------------------------------------------------------------
Name of Firm
-------------------------------------------------------------------
Address
-------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
-------------------------------------------------
Dated: , 1995
-------------------------------------------------------------------
38
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary with such
shareholder's correct taxpayer identification number ("TIN") on the Substitute
Form W-9 below. If the Depositary is not provided with the correct TIN, the
Internal Revenue Service may subject the shareholder or other payee to a $50
penalty. In addition, payments that are made to such shareholder or other payee
with respect to Shares purchased pursuant to the Offer may be subject to 31%
backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements and should indicate their status by writing "exempt" across the
face of the Substitute Form W-9. In order for a foreign individual to qualify as
an exempt recipient, the shareholder must submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for more
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments to be made to the shareholder or other payee. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering shareholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 2 is checked,
the shareholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary.
What Number to Give the Depositary
The shareholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the certificates evidencing the Shares. If the Shares are
registered in more than one name or are not registered in the name of the actual
owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
39
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
Social security number(s)
Part 1 - PLEASE / /
PROVIDE YOUR TIN IN ----------------------------
THE BOX AT RIGHT AND OR
SUBSTITUTE CERTIFY BY Employer identification
FORM W-9 SIGNING AND DATING number(s)
BELOW
/
----------------------------
Payer's Request for
Tax-payer Identification
Number (TIN)
- --------------------------------------------------------------------------------
Part 2 -
Awaiting TIN [_]
CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM
IS TRUE, CORRECT AND COMPLETE.
Name
----------------------------------------------
(Please print)
Address
-------------------------------------------
---------------------------------------------------
(Including zip code)
---------------------------------------------------
---------------------------- ---------------------
SIGNATURE DATE
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YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
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CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand
that, notwithstanding that I have checked the box in Part 2 (and completed this
Certificate of Awaiting Taxpayer Identification Number), all reportable payments
made to me before the time I provide the Depositary with a properly-certified
taxpayer identification number will be subject to a 31% backup withholding tax.
- -------------------------------------------------- ------------------------
Signature Date
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NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
40
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loan associations, and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchanges Medallion Program (each such entity being hereinafter referred to as
an "Eligible Institution"). Signatures on this Letter of Transmittal need not
be guaranteed if (a) this Letter of Transmittal is signed by the registered
owner of the Shares (which term, for purposes of this document, shall include
any participant in one of the Book-Entry Transfer Facilities whose name appears
on a security position listing as the owner of Shares) tendered herewith and
such owner has not completed either of the boxes entitled "Special Payment
Instructions" or "Special Delivery Instructions" on this Letter of Transmittal
or (b) such Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. Delivery of Letter of Transmittal and Shares; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be used only if (a) certificates
are to be forwarded with it to the Depositary or (b) delivery of Shares is to be
made by book-entry transfer pursuant to the procedure set forth in Section 3 of
the Offer to Purchase. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer of all Shares delivered electronically
into the Depositary's account at one of the Book-Entry Transfer Facilities,
together in each case with a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be received
by the Depositary at one of its addresses set forth on the front page of this
Letter of Transmittal before the Expiration Date (as defined in the Offer to
Purchase). Delivery of documents to one of the Book-Entry Transfer Facilities
does not constitute delivery to the Depositary.
Shareholders whose certificates are not immediately available (or who
cannot follow the procedures for book-entry transfer on a timely basis) or who
cannot transmit this Letter of Transmittal and all other required documents to
reach the Depositary before the Expiration Date, may nevertheless tender their
Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. Pursuant to such procedure: (a) such tender must be made
by or through an Eligible Institution, (b) the Depositary must receive (by hand,
mail or facsimile transmission), before the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery substantially in the
form the Company has provided with the Offer to Purchase and (c) the
certificates for all tendered Shares in proper form for transfer (or
confirmation of a book-entry transfer of all such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities), together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and any
other documents required by this Letter of Transmittal, must be received by the
Depositary within five New York Stock Exchange trading days after the date of
execution of such Notice of Guaranteed Delivery, all as provided in Section 3 of
the Offer to Purchase.
The method of delivery of all documents, including stock certificates, the
Letter of Transmittal and any other required documents, is at the election and
risk of the tendering shareholder. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal (or
a facsimile thereof), each tendering shareholder waives any right to receive any
notice of the acceptance of such shareholder's tender.
3. Inadequate Space. If the space provided in the box entitled
"Description of Shares Tendered" is inadequate, the certificate numbers and/or
the number of Shares should be listed on a separate signed schedule and attached
to this Letter of Transmittal.
41
4. Partial Tenders and Unpurchased Shares. (Not applicable to
shareholders who deliver Shares by book-entry transfer). If fewer than all the
Shares evidenced by any certificate delivered to the Depositary are to be
tendered, fill in the number of Shares that are to be tendered in the box
entitled "Number of Shares Tendered". If such Shares are purchased, a new
certificate for the remainder of the Shares evidenced by the old certificate(s)
will be sent to and in the name of the registered holder(s) (unless otherwise
specified by such holder(s) having completed either of the boxes entitled
"Special Delivery Instructions" or "Special Payment Instructions" on this Letter
of Transmittal) as soon as practicable following the expiration or termination
of the Offer. All Shares represented by the certificate(s) listed and delivered
to the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. Signatures on Letter of Transmittal; Stock Powers; and Endorsements.
(a) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered herewith, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificates without any change
whatsoever.
(b) If any of the Shares tendered herewith are registered in the names of
two or more joint owners, each such owner must sign this Letter of Transmittal.
(c) If any of the Shares tendered herewith are registered in different
names on different certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of certificates.
(d) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered herewith, no endorsements of certificates or separate stock
powers are required unless payment is to be made and/or certificates for Shares
not tendered or not purchased are to be issued to a person other than the
registered holder(s). If this Letter of Transmittal is signed by a person other
than the registered holder(s) of the Shares tendered herewith, however, the
certificates 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 certificates for such Shares. Signatures on any such certificates or stock
powers must be guaranteed by an Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock powers are
signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and proper evidence
satisfactory to the Company of the authority of such person so to act must be
submitted.
6. Stock Transfer Taxes. The Company will pay any stock transfer taxes with
respect to the transfer and sale of Shares to it or its order pursuant to the
Offer. If, however, payment of the aggregate Purchase Price is to be made to, or
certificates for Shares not tendered or accepted for purchase are to be
registered in the name of, any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder or such person) payable on
account of the transfer to such person will be deducted from the aggregate
purchase price unless satisfactory evidence of payment of such taxes or
exemption therefrom is submitted.
7. Odd Lots. As described in Sections 1 and 2 of the Offer to Purchase, if
the number of Shares properly tendered and not withdrawn before the Expiration
Date is greater than 750,000 (or such greater number of Shares as the Company
may elect to purchase pursuant to the Offer), the Company, upon the terms and
subject to the conditions of the Offer, will accept Shares for purchase first
from all Shares properly tendered and not withdrawn before the Expiration Date
by any shareholder who beneficially owned as of the close of business on
February 13, 1995, and who continued to own beneficially until the Expiration
Date an aggregate of fewer than 100 Shares, who tendered all Shares beneficially
owned by such person (partial tenders of Shares will not qualify for this
preference) and who completes the box captioned "Odd Lots" in this Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery. This
preference will not be available unless the box above entitled "Odd Lots" is
completed.
42
8. Irregularities. All questions as to the number of Shares to be
accepted and the validity, form, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, which determination shall be final and binding
on all parties. The Company reserves the absolute right to reject any or all
tenders determined by it not to be in proper form or the acceptance for payment
of which may, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any of the conditions of the Offer
(except as provided in Section 6 of the Offer to Purchase) and any defect or
irregularity in the tender of any particular Shares. The Company's
interpretation of the terms and conditions of the Offer (including these
instructions) shall be final and binding on all parties. No tender of Shares
will be deemed properly made until all defects or irregularities have been cured
or waived. None of the Company, the Depositary, the Information Agent or any
other person is or will be obligated to give notice of any defects or
irregularities in tenders, and none of them will incur any liability for failure
to give any such notice.
9. Special Payment and Delivery Instructions. If the check for the
aggregate Purchase Price of any Shares purchased is to be issued to, or any
Shares not tendered or not purchased are to be returned in the name of, a person
other than the person(s) signing this Letter of Transmittal or if the check or
any certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that shown
in the box entitled "Descriptions of Shares Tendered", the boxes entitled
"Special Payment Instructions" and/or "Special Delivery Instructions" on this
Letter of Transmittal should be completed.
10. Request for Assistance or Additional Copies. Requests for assistance or
additional copies of the Offer to Purchase, this Letter of Transmittal or the
Notice of Guaranteed Delivery may be directed to the Information Agent at its
addresses or telephone number set forth below.
11. Substitute Form W-9. Except as provided above under "Important Tax
Information", each tendering shareholder is required to provide the Depositary
with a correct TIN on Substitute Form W-9 which is provided under "Important Tax
Information" above. Failure to provide the information on the form may subject
the tendering shareholder to a $50 penalty and a 31% Federal back-up withholding
tax may be imposed on the payments made to the shareholder or other payee with
respect to Shares purchased pursuant to the Offer.
12. Foreign Shareholder Withholding. Foreign shareholders should note that
the 30% U.S. withholding tax generally applicable to corporate distributions
should not apply to the proceeds payable pursuant to the Offer, unless such
proceeds are treated as a dividend under the rules described in "Gain or Loss
Recognition" in Section 11 of the Offer to Purchase. (However, as indicated
above under "Important Tax Information", Federal backup withholding tax may be
applicable).
13. Allianz Asset Accumulation Plan. Participants in the Allianz Asset
Accumulation Plan (the "AAAP") who wish to have the trustee of the AAAP tender
Shares allocated to their accounts should so indicate by completing, executing
and returning to the trustee the instruction form for AAAP participants included
in the notices sent on behalf of the trustee of the AAAP. Participants in the
AAAP may not use the Letter of Transmittal to direct the trustee of the AAAP to
tender Shares allocated to such shareholders under the AAAP, but must use the
separate instruction form sent to them. See Sections 3 and 14 of the Offer to
Purchase.
43
Facsimile copies of this Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each shareholder
of the Company or such shareholder's broker, dealer, commercial bank, trust
company or other nominee to the Depositary at one of its addresses set forth
below.
The Depositary and the Information Agent for the Offer is:
First Chicago Trust Company of New York
By Mail: By Hand:
Tenders & Exchanges Tenders & Exchanges
Suite 4660 - FA Suite 4680 - FA
P.O. Box 2562 14 Wall Street - 8th Floor
Jersey City, NJ 07303-2562 New York, NY 10005
For Information:
1-800-438-0057
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Any questions or requests for assistance or for additional copies of the Offer
to Purchase, this Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent. Shareholders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
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44
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer.--
Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen; i.e. 00-0000000. The table below will help determine the number to
give the payer.
- --------------------------------------------------------------- -------------------------------------------------------------
Give the Give the EMPLOYER
For this type of account: SOCIAL SECURITY For this type of account: IDENTIFICATION
number of -- number of --
- --------------------------------------------------------------- -------------------------------------------------------------
1. An individual's account The individual 9. A valid trust, estate, or pension The legal entity (Do
trust not furnish the
2. Two or more individuals (joint The actual owner of identifying number
account) the account or, if of the personal
combined funds, any representative or
one of the trustee unless the
individuals(1) legal entity itself is
not designated in
3. Husband and wife (joint account) The actual owner of the account title.)(5)
the account or, if
joint funds, either 10. Corporate account The corporation
person(1)
11. Religious, charitable, or The organization
4. Custodian account of a minor The minor(2) educational organization
(Uniform Gift to Minors Act) account
5. Adult and minor (joint account) The adult or, if the 12. Partnership account held in the The partnership
minor is the only name of the business
contributor, the
minor(1) 13. Association, club, or other tax- The organization
exempt organization
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent 14. A broker or registered nominee The broker or
ward, minor, or incompetent person(3) nominee
person
15. Account with the Department The public entity
7. a The usual revocable savings trust The grantor- of Agriculture in the name of a
account (grantor is also trustee) trustee(1) public entity (such as a state
b So-called trust account that is The actual owner(1) or local government, school
not a legal or valid trust under district, or prison) that receives
State law agricultural program payments
8. Sole proprietorship account The owner(4)
- -------------------------------------------------------------- --------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
45
GUIDELINES FOR CERTIFICATE OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 652).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6019 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
46
EXHIBIT (a)(3)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
NOTICE OF GUARANTEED DELIVERY
OF SHARES OF COMMON STOCK
This form or a facsimile hereof must be used to accept the Offer (as
defined below) if:
(a) certificates for shares of Common Stock, par value $1.00 per share
("Shares"), of Fund American Enterprises Holdings, Inc., a Delaware
corporation (the "Company"), are not immediately available; or
(b) the procedure for book-entry transfer (set forth in Section 3 of the
Company's Offer to Purchase dated February 21, 1995 (the "Offer to
Purchase")) cannot be followed on a timely basis; or
(c) time will not permit the Letter of Transmittal and all other required
documents to be delivered to the depositary for the Offer (the
"Depositary") before the Expiration Date (as defined in Section 1 of
the Offer to Purchase).
This form, properly completed and duly executed, may be delivered by hand,
mail or facsimile transmission to the Depositary. See Section 3 of the Offer to
Purchase.
To: FIRST CHICAGO TRUST COMPANY OF NEW YORK, Depositary
By Mail: Facsimile Transmission: By Hand:
(For Eligible Institutions only)
Tenders & Exchanges Tenders & Exchanges
Suite 4660 - FA (201) 222-4720 Suite 4680 - FA
P.O. Box 2562 (201) 222-4721 14 Wall Street - 8th Floor
Jersey City, NJ 07303-2562 New York, NY 10005
To Confirm Receipt of
Notice of Guaranteed Delivery:
(201) 222-4707
Delivery of this instrument to an address other than as set forth above or
transmission of instructions to a facsimile number other than the ones listed
above will not constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
(as defined in the Offer to Purchase) under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, at a price of $75.00 per
Share (or such other price set forth in an amendment to the Offer referred to
below), net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase and the related Letter of Transmittal (which
together constitute the "Offer"), receipt of which is hereby acknowledged,
_________________ Shares pursuant to the guaranteed delivery procedure set forth
in Section 3 of the Offer to Purchase.
47
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ODD LOTS
(See Instruction 7 of the Letter of Transmittal)
To be completed ONLY if Shares are being tendered by or on behalf of a
person who beneficially owned as of the close of business on February 13, 1995,
and who will continue to own beneficially until the Expiration Date an aggregate
of fewer than 100 Shares.
The undersigned either (check one box):
[_] was the beneficial owner as of the close of business on February 13,
1995, and will continue to be the beneficial owner until the
Expiration Date of an aggregate of fewer than 100 Shares, and is
tendering all such Shares, or
[_] is an "Eligible Institution" that (i) is tendering, for the beneficial
owners thereof, Shares with respect to which it is the record owner,
and (ii) believes, based upon representations made to it by each such
beneficial owner, that each such beneficial owner beneficially owned
as of the close of business on February 13, 1995, and will continue to
own beneficially until the Expiration Date an aggregate of fewer than
100 Shares, and is tendering all such Shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No. of Shares tendered
________________________________________________________________________________
Certificate Nos. (if available):
________________________________________________________________________________
If Shares will be delivered by book-entry transfer:
Name of Tendering Institution: _________________________________________________
________________________________________________________________________________
Account No.
at:
[_] The Depository Trust Company
[_] Midwest Securities Trust Company
[_] Philadelphia Depository Trust Company
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- --------------------------------------------------------------------------------
SIGN HERE
________________________________________________________________________________
(Signature(s))
________________________________________________________________________________
(Signature(s))
________________________________________________________________________________
(Name(s)) (Please Print)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(Zip Code)
________________________________________________________________________________
(Area Code and Telephone No.)
- --------------------------------------------------------------------------------
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an "Eligible Institution", guarantees that (a) the above
named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule
14e-4 under the Securities Exchange Act of 1934, as amended, (b) such tender of
Shares complies with Rule 14e-4 and (c) the Depositary will receive either the
stock certificates representing the Shares tendered hereby, in proper form for
transfer, or confirmation of the book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, the Midwest Securities
Trust Company or the Philadelphia Depository Trust Company, in any such case
together with a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) and any other required documents, all within five New York
Stock Exchange trading days after the date of execution of this notice.
- --------------------------------------------------------------------------------
Name of Firm: ___________________________ Address: ___________________________
_________________________________________ _____________________________________
Authorized Signature Zip Code
Area Code and
Name: ___________________________________ Telephone No: ______________________
Please Print
Title: Dated: , 1995
__________________________________ ________________________
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST BE
SENT WITH THE LETTER OF TRANSMITTAL
48
EXHIBIT (a)(4)
- --------
Fund
American
- --------
John J. Byrne
Chairman
February 21, 1995
Dear Fellow Shareholder:
Fund American is offering to purchase up to 750,000 shares of its Common Stock
from shareholders at a cash price of $75.00 per share. This tender is being
offered to provide shareholders with added liquidity. We recognize that our
Common Stock is not widely held, not regularly followed by analysts and is
thinly traded. Throughout 1994 and to-date 1995, the Company has sold a
substantial portion of its passive investment portfolio and has amassed a
sizable cash balance. This tender is a means by which to return this
underdeployed capital to shareholders. This tender, if fully subscribed, will
exhaust the Company's remaining authorization to repurchase its Common Stock.
The offer is explained in detail in the enclosed Offer to Purchase and Letter of
Transmittal. If you want to tender your shares, the instructions for tendering
shares are also explained in detail in the enclosed materials. I encourage you
to read these materials carefully before making any decision with respect to the
offer.
Neither the Company nor its Board of Directors makes any recommendation as to
whether any shareholder should tender any or all of such shareholder's shares
pursuant to the offer. Each shareholder must make such shareholder's own
decision whether to tender shares and, if so, how many shares to tender.
Any questions you have about the offer should be directed to First Chicago Trust
Company of New York, the Information Agent, at 1-800-438-0057.
Respectfully submitted,
John J. Byrne
Chairman
Fund American Enterprises Holdings, Inc.
The 1820 House / Main Street
Norwich VT 05055
(802)649-3633
(802)649-2240(FAX)
49
EXHIBIT (a)(5)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Offer to Purchase for Cash
Up to 750,000 Shares of its Common Stock
At $75.00 Net Per Share
February 21, 1995
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
Fund American Enterprises Holdings, Inc., a Delaware corporation (the
"Company"), has appointed us to act as Information Agent in connection with its
offer pursuant to which the Company is inviting its shareholders to tender
shares of its Common Stock, par value $1.00 per share ("Shares"), at a price of
$75.00 per Share (such price, or any other price set forth in an amendment to
the Offer to Purchase referred to below, being the "Purchase Price"), net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated February 21, 1995 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which together constitute the "Offer"). We
enclose herewith the materials listed below relating to the Offer.
All Shares properly tendered and not withdrawn will be purchased at the Purchase
Price, net to the seller in cash, upon the terms and subject to the conditions
of the Offer, including the proration provisions described therein. The Company
reserves the right, in its sole discretion, to purchase more than 750,000 Shares
pursuant to the Offer. The Offer is not conditioned upon any minimum number of
Shares being validly tendered. The Offer is, however, subject to certain other
conditions. See Section 6 of the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold Shares
registered in your name or in the name of your nominee, we are enclosing the
following documents:
(1) Offer to Purchase dated February 21, 1995;
(2) Letter of Transmittal for your use and for the information of your clients
(together with "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9");
(3) Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available (or the procedure for
book-entry transfer cannot be followed on a timely basis) or time will not
permit the Letter of Transmittal and all other required documents to reach
the depositary for the Offer (the "Depositary") before the Expiration Date
(as defined in the Offer to Purchase);
(4) Letter to Clients which may be sent to your clients for whose accounts you
hold Shares registered in your name (or in the name of your nominee), with
space provided for obtaining such clients' instructions with regard to the
Offer;
(5) Letter from John J. Byrne, Chairman, President and Chief Executive Officer
of the Company, dated February 21, 1995, to shareholders of the Company;
and
(6) Return envelope addressed to First Chicago Trust Company of New York, as
Depositary.
PLEASE BRING THE OFFER TO THE ATTENTION OF YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, MARCH 20, 1995, UNLESS THE OFFER IS EXTENDED.
No fees or commissions will be payable to brokers, dealers or other persons for
soliciting tenders of Shares pursuant to the Offer. The Company will, however,
upon request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding any of the enclosed materials to your clients. The Company
will pay any stock transfer taxes with respect to the transfer and sale of
Shares to it or its order pursuant to the Offer, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
50
In order to take advantage of the Offer, a duly executed and properly completed
Letter of Transmittal and any other required documents should be sent to the
Depositary with either certificate(s) representing the tendered Shares or
confirmation of their book-entry transfer, all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
As described in Section 3 of the Offer to Purchase, tenders may be made even
though stock certificates are not immediately available (or the procedure for
book-entry transfer cannot be followed on a timely basis) or time will not
permit the Letter of Transmittal and all other required documents to reach the
Depositary before the Expiration Date, if such tenders are made by or through an
"Eligible Institution" (as defined in the Offer to Purchase). Certificates for
Shares so tendered in proper form for transfer (or a confirmation of a book-
entry transfer of such Shares into the Depositary's account at one of the "Book-
Entry Transfer Facilities" described in the Offer to Purchase), together with a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and any other documents required by the Letter of Transmittal, must be
received by the Depositary within five New York Stock Exchange trading days
after the date of execution of a properly completed and duly executed Notice of
Guaranteed Delivery.
Any questions you have or requests for additional copies of the enclosed
material may be directed to the undersigned at 1-800-438-0057.
Very truly yours,
First Chicago Trust Company of New York
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE COMPANY, THE DEPOSITARY OR THE INFORMATION
AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY
MATERIAL ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER, OTHER THAN THE
MATERIAL ENCLOSED HEREWITH AND THE STATEMENTS SPECIFICALLY CONTAINED IN SUCH
MATERIAL.
51
EXHIBIT (a)(6)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Offer to Purchase for Cash
Up to 750,000 Shares of its Common Stock
At $75.00 Net Per Share
To Our Clients: February 21, 1995
Enclosed for your consideration are the Offer to Purchase dated February 21,
1995, and the related Letter of Transmittal (which together constitute the
"Offer") in connection with the Offer by Fund American Enterprises Holdings,
Inc., a Delaware corporation (the "Company"), pursuant to which the Company is
inviting its shareholders to tender shares of its Common Stock, par value $1.00
per share ("Shares"), at a price of $75.00 per Share (such price, or any other
price set forth in an amendment to the Offer to Purchase referred to below being
the "Purchase Price"), net to the seller in cash, upon the terms and subject to
the conditions of the Offer.
All Shares properly tendered and not withdrawn will be purchased at the Purchase
Price, net to the seller in cash, upon the terms and subject to the conditions
of the Offer, including the proration provisions thereof. All Shares not
purchased pursuant to the Offer, including Shares not purchased because of
proration, will be returned to the tendering shareholders at the Company's
expense as promptly as practicable following the Expiration Date (as defined in
Section 1 of the Offer to Purchase). The Company reserves the right, in its
sole discretion, to purchase more than 750,000 Shares pursuant to the Offer.
See Section 1 of the Offer to Purchase.
We are the holder of record of Shares held for your account. As such, we are
the only ones who can tender your Shares, and then only pursuant to your
instructions. The Letter of Transmittal is for your information only and cannot
be used by you to tender Shares we hold for your account.
Please instruct us as to whether you wish us to tender any of or all the Shares
we hold for your account upon the terms and subject to the conditions of the
Offer.
We call your attention to the following:
1. You may tender any portion of or all your Shares as indicated in the
attached instruction form.
2. The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions. See
Section 6 of the Offer to Purchase.
3. The Offer, proration period and withdrawal rights will expire at 12:00
Midnight, New York City time, on Monday, March 20, 1995, unless the Offer is
extended.
4. The Offer is for 750,000 Shares, representing approximately 8.9% of the
Shares outstanding as of February 17, 1995, and approximately 7.8% of the
sum of the Shares then outstanding and all Shares which may be issued upon
the exercise of outstanding employee stock options and warrants as of such
date.
5. Tendering shareholders will not be obligated to pay any brokerage
commissions, solicitation fees, or, subject to Instruction 6 of the Letter
of Transmittal, any stock transfer taxes with respect to the transfer and
sale of Shares to the Company pursuant to the Offer.
6. If you owned beneficially as of the close of business on February 13, 1995,
and will continue to own beneficially until the Expiration Date (as defined
in the Offer to Purchase), an aggregate of fewer than 100 Shares and you are
tendering all such Shares and do not withdraw such Shares before the
Expiration Date and complete the box captioned "Odd Lots" in the attached
instruction form, the Company, upon the terms and subject to the conditions
of the Offer, will accept all such Shares for purchase before proration, if
any, of the purchase of other Shares tendered.
52
If you wish to have us tender any of or all your Shares, please so instruct us
by completing, executing and returning to us the attached instruction form. An
envelope to return your instruction form to us is enclosed. If you authorize us
to tender your Shares, we will tender all such Shares unless you specify
otherwise on the instruction form.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT
A TENDER ON YOUR BEHALF BEFORE THE EXPIRATION DATE. THE OFFER, PRORATION PERIOD
AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
MONDAY, MARCH 20, 1995, UNLESS THE OFFER IS EXTENDED.
As described in Section 1 of the Offer to Purchase and subject to matters
described therein, if the number of Shares properly tendered and not withdrawn
before the Expiration Date is greater than 750,000 Shares (or such greater
number of Shares as the Company may elect to purchase pursuant to the Offer),
the Company, upon the terms and subject to the conditions of the Offer, will
accept Shares for purchase in the following order of priority:
(a) first, all Shares properly tendered and not withdrawn before the Expiration
Date by any shareholder who owned beneficially as of the close of business
on February 13, 1995, and who continues to own beneficially until the
Expiration Date an aggregate of fewer than 100 Shares and who tenders all
Shares beneficially owned by such shareholder (partial tenders will not
qualify for this preference); and
(b) then, after purchase of all the foregoing Shares, all other Shares properly
tendered and not withdrawn before the Expiration Date on a pro rata basis,
if necessary (with adjustments to avoid purchases of fractional Shares).
The Offer is not being made to, nor will the Company accept tenders from or on
behalf of, owners of Shares residing in any jurisdiction in which the making of
the Offer or its acceptance would not be in compliance with the laws of such
jurisdiction.
53
Instructions
With Respect to the
Offer to Purchase for Cash
Up to 750,000 Shares of Common Stock
of
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to
Purchase dated February 21, 1995, and the related Letter of Transmittal (which
together constitute the "Offer"), in connection with the Offer by Fund American
Enterprises Holdings, Inc., a Delaware corporation (the "Company"), to purchase
for cash up to 750,000 shares of its Common Stock, par value $1.00 per share
("Shares"), at a price of $75.00 per Share (or such other price that may be set
forth in an amendment to the Offer), net to the seller in cash, upon the terms
and subject to the conditions of the Offer.
The undersigned hereby instruct(s) you to tender to the Company the number of
Shares indicated below or, if no number is indicated, all Shares you hold for
the account of the undersigned, upon the terms and subject to the conditions of
the Offer.
Aggregate number of Shares to be tendered by you for the account of the
undersigned:*
__________ Shares
*Unless otherwise indicated, all the Shares held for the account of the
undersigned will be tendered.
ODD LOTS
[_] By checking this box, the undersigned represents that the
undersigned beneficially owned as of the close of business on
February 13, 1995, and will continue to own beneficially until the
Expiration Date an aggregate of fewer than 100 Shares, and is
tendering all such Shares.
SIGNATURE BOX
Signature(s) ___________________________________________________
________________________________________________________________
Dated ____________________________________________________, 1995
Name(s) and Address(es)_________________________________________
(Please Print)
________________________________________________________________
Area Code and Telephone Number
Taxpayer Identification or
Social Security Number__________________________________________
54
EXHIBIT (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated
February 21, 1995, and the related Letter of Transmittal, and is not being made
to (nor will tenders be accepted from or on behalf of) holders of Shares
residing in any jurisdiction in which the making of the Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
by
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Up to 750,000 Shares of Its Common Stock At
$75.00 Net Per Share
Fund American Enterprises Holdings, Inc., a Delaware corporation
(the"Company"), is inviting its shareholders to tender shares of its Common
Stock, par value $1.00 per share ("Shares"), to the Company, at $75.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated February 21, 1995 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together constitute
the "Offer"). For purposes of the Offer, the Company shall be deemed to have
accepted for payment (and thereby purchased), subject to proration, Shares which
are tendered and not withdrawn when, as and if the Company gives oral or written
notice to the Depositary of the Company's acceptance of such Shares for payment
pursuant to the Offer. The Company reserves the right, in its sole discretion,
to purchase more than 750,000 Shares pursuant to the Offer.
The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions. See
Section 6 of the Offer to Purchase.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY,
MARCH 20, 1995, UNLESS THE OFFER IS EXTENDED.
Neither the Company nor its Board of Directors makes any recommendation as
to whether any shareholder should tender any or all of such shareholder's Shares
pursuant to the Offer. Each shareholder must make such shareholder's own
decision whether to tender Shares and, if so, how many Shares to tender.
The Company reserves the right, in its sole discretion, at any time or
from time to time, to extend the period of time during which the Offer is open
by giving oral or written notice of such extension to the Depositary and making
a public announcement thereof. See Sections 1 and 15 of the Offer to Purchase.
If the number of Shares properly tendered and not withdrawn before
12:00 Midnight, New York City time, on Monday, March 20, 1995, or the latest
time and date at which the Offer, if extended by the Company, shall expire (the
"Expiration Date"), is greater than 750,000 Shares (or such greater number of
Shares as the Company may elect to purchase pursuant to the Offer), the Company,
upon the terms and subject to the conditions of the Offer, will accept Shares
for purchase in the following order of priority: (a) first, all Shares properly
tendered and not withdrawn before the Expiration Date by any shareholder who
beneficially owned as of the close of business on February 13, 1995, and who
continues to own beneficially until the Expiration Date an aggregate of fewer
than 100 Shares and who: (1) tenders all Shares beneficially owned by such
shareholder (partial tenders will not qualify for this preference), and (2)
completes the box captioned "Odd Lots" on the Letter of Transmittal and, if
applicable, on the Notice of Guaranteed Delivery; and (b) then, after purchase
of all the foregoing Shares, all other Shares properly tendered and not
withdrawn before the Expiration Date on a pro rata basis, if necessary (with
adjustments to avoid purchases of fractional Shares).
Except as otherwise provided in Section 4 of the Offer to Purchase, a
tender of Shares pursuant to the Offer is irrevocable. Shares tendered pursuant
to the Offer may be withdrawn at any time before the Expiration Date and, unless
theretofore accepted for payment by the Company, after 12:00 Midnight, New York
City time, on Monday, April 17, 1995. See Section 4 of the Offer to Purchase.
For a withdrawal to be effective, the Depositary must timely receive
(at one of its addresses set forth on the back cover of the Offer to Purchase) a
written or facsimile transmission notice of withdrawal. Any notice of
withdrawal must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and, if different from the name
of the person who tendered the Shares, the name of the registered owner of such
Shares. If the certificates have been delivered or otherwise identified to the
Depositary, then, prior to the release of such certificates, the tendering
shareholder must also submit the serial numbers shown on the particular
certificates evidencing such Shares and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution (as defined in Section
3 of the Offer to Purchase) (except in the case of Shares tendered by an
Eligible Institution). If Shares have been delivered pursuant to the procedure
for book-entry transfer set forth in Section 3 of the Offer to Purchase, the
notice of withdrawal must specify the name and number of the account at the
applicable Book-Entry Transfer Facility (as defined in Section 3 of the Offer to
Purchase) to be credited with the withdrawn Shares and otherwise comply with the
procedures of such facility. A withdrawal of a tender of Shares may not be
rescinded and Shares properly withdrawn shall thereafter be deemed to be not
validly tendered for purposes of the Offer. Withdrawn Shares, however, may be
retendered before the Expiration Date by again following any of the procedures
described in Section 3 of the Offer to Purchase.
The Offer to Purchase and the Letter of Transmittal contain important
information that should be read before any decision is made with respect to the
Offer. These documents are being mailed to record holders of Shares and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
shareholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
The information required to be disclosed by Rule 13e-4(d)(1) of the General
Rules and Regulations under the Securities Exchange Act of 1934 is contained in
the Offer to Purchase and is incorporated herein by reference.
Any questions or request for assistance may be directed to the Information
Agent at its address and telephone number set forth below. Requests for copies
of the Offer to Purchase, Letter of Transmittal, Notice of Guaranteed Delivery
or other tender offer materials may be directed to the Information Agent and
such copies will be furnished promptly at the Company's expense. Shareholders
may also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Offer.
The Depositary and the Information Agent for the Offer is:
First Chicago Trust Company of New York
P.O. Box 2562, STE 4660 - FA
Jersey City, New Jersey 07303-2562
1-800-438-0057
Requests for materials may be telecopied
to 201-222-4720
201-222-4721
February 21, 1995
55
EXHIBIT (a)(8)
- --------
Fund PRESS
American RELEASE
- --------
CONTACT: Terry Baxter
802-649-2640
FUND AMERICAN ANNOUNCES CASH TENDER OFFER
FOR UP TO 750,000 SHARES AT $75.00 NET
NORWICH, Vermont, February 16, 1995 - The Board of Directors of Fund American
Enterprises Holdings, Inc. has approved a cash tender offer to purchase up to
750,000 shares of its common stock at a price of $75.00 net per share. The
tender offer is expected to commence on Tuesday, February 21, 1995.
The tender offer, if fully subscribed, will exhaust the Company's remaining
Board authorization to repurchase its common shares. The Company's common stock
closed yesterday on the New York Stock Exchange at $72.375 per share.
The Offer will not be conditioned upon any minimum number of shares being
tendered. The Offer will be, however, subject to certain customary conditions.
The Offer, proration period and withdrawal rights are expected to expire at
12:00 midnight, New York City time, on Monday, March 20, 1995 unless the Offer
is extended.
Neither the Company nor its Board of Directors makes any recommendation as to
whether any shareholder should participate in the Offer.
Fund American Enterprises Holdings, Inc.
The 1820 House / Main Street
Norwich VT 05055
(802)649-3633
(802)649-2240(FAX)
56
EXHIBIT (a)(9)
- --------
Fund PRESS
American RELEASE
- --------
CONTACT: Terry Baxter
802-649-2640
FUND AMERICAN COMMENCES CASH TENDER OFFER
FOR UP TO 750,000 SHARES AT $75.00 NET
NORWICH, Vermont, February 21, 1995 - Fund American Enterprises Holdings,
Inc. today commenced its previously announced cash tender offer to purchase up
to 750,000 shares of its common stock at a price of $75.00 per share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated February 21, 1995, and the related Letter of Transmittal
(which together constitute the "Offer").
The Offer is not conditioned upon any minimum number of shares being tendered.
The Offer is, however, subject to certain customary conditions. The Offer,
proration period and withdrawal rights are scheduled to expire at 12:00
midnight, New York City time, on Monday, March 20, 1995 unless the Offer is
extended. The Company has reserved the right to purchase more than 750,000
shares in the Offer.
First Chicago Trust Company of New York is the Information Agent for the Offer
and can be reached at 1-800-438-0057.
None of the Company, its Board of Directors or the Information Agent makes any
recommendation as to whether any shareholder should participate in the Offer.
Fund American Enterprises Holdings, Inc.
The 1820 House / Main Street
Norwich, VT 05055
(802)649-3633
(802)649-2240(FAX)
57
EXHIBIT (g)(1)
CONTACT: Terry Baxter
(802) 649-2640
FUND AMERICAN REPORTS FOURTH QUARTER RESULTS
NORWICH, Vermont, February 1, 1995 -- Fund American Enterprises Holdings, Inc.
ended 1994 with a book value per share of $68.95, down $8.32 from $77.27 at
year-end 1993. The decline in book value is principally due to a $44.3 million
after tax charge related to a change in accounting methodology adopted by Source
One Mortgage Services Corporation, the Company's largest subsidiary, and $29.6
million of after tax net investment losses. "The 1994 financial results were
terrible," said Chairman Jack Byrne. "Book value per share dropped 11%. Real
economics were better, but not much. On to 1995."
The Company reported a net loss of $23.2 million, or $3.51 per share, for the
year ended December 31, 1994. The 1994 reported loss includes the effects of a
$68.1 million pretax charge, recorded as a cumulative adjustment as of
January 1, 1994, relating to a change in the manner by which Source One measures
"impairment" of its purchased mortgage servicing asset. Previously Source One
measured the asset's impairment on an undiscounted, disaggregated basis. The new
accounting methodology measures the asset's impairment on a disaggregated basis
and discounts the asset's cash flow using a current market rate. Before the
effect of the accounting change, net income for 1994 was $21.1 million, or $1.20
per share, compared to $70.4 million, or $5.68 per share, for 1993.
For the 1994 fourth quarter the Company reported a net loss of $12.1 million, or
$1.64 per share, versus a loss of $70.9 million, or $7.78 per share, in 1993.
The current quarter loss was primarily due to unfavorable operating results at
Source One and pretax net realized investment losses of $4.2 million. The 1993
fourth quarter net loss was primarily the result of $67.9 million of pretax net
investment losses.
Net income for the 1993 full year and fourth quarter includes $73.4 million of
pretax net unrealized investment gains and $81.0 million of pretax unrealized
losses, respectively. Under a new accounting rule adopted in December 1993,
Fund American now records such changes in unrealized investment gains and losses
as a direct adjustment to shareholders' equity with no corresponding credit or
charge to net income.
Net mortgage servicing revenue increased $28.8 million or 53.8% for the year and
$25.7 million for the fourth quarter versus comparable prior year amounts. The
improvements are primarily due to slower amortization of the capitalized
mortgage servicing asset, reflecting the reduced pace of mortgage loan payoffs
from the servicing portfolio during 1994. However, the falloff in Source One's
loan production resulted in a substantial decline for the year and fourth
quarter 1994 revenues related to the loan origination process (net interest
revenue, net gain on sales of mortgages and other revenues).
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58
Pretax operating income (before net investment gains and losses) declined to
$2.8 million in 1994 from $16.9 million in 1993. The Company reported a pretax
operating loss of $10.6 million for the 1994 fourth quarter versus a pretax
operating loss of $10.7 million in the prior year quarter. The deterioration in
operating income is attributed to worsening net operating results at Source One.
Source One's reported results reflect the contraction during 1994 of the
mortgage origination market due to higher market interest rates for mortgage
loans.
Fund American's general expenses in 1994 increased $15.9 million or 12.1% for
the year and decreased $5.2 million or 12.1% for the fourth quarter versus
comparable 1993 amounts. The increases in expenses for the year are due to the
expansion of Source One's mortgage loan production network throughout 1993 and
the 1994 first quarter. The reduction in expenses for the fourth quarter of
1994 reflects Source One's downsizing efforts in response to the contraction in
mortgage originations which began in the second quarter of 1994.
Source One recently entered into an agreement in principle to sell approximately
$10 billion of its servicing portfolio to a third party. The agreement is
expected to close in the first quarter of 1995 and is subject to due diligence
and completion of definitive documentation. Source One expects that if the sale
of servicing is consummated, the transaction will result in a pretax gain in
excess of $30 million.
Fund American's newest operating affiliate is Financial Security Assurance
Holdings Ltd. (FSA). The Company's voting control of FSA is approximately 23%.
With regard to FSA's 1994 operating results, Robert P. Cochran, president and
chief executive officer of FSA, said: "Although operating income for 1994 is
right in line with our expectations, growth in adjusted book value (a good proxy
for the intrinsic value of the business) is disappointing due to the dramatic
decline in new issuance in the municipal bond market and loss of market value
(mostly unrealized) in the investment portfolio. Nonetheless, we feel that our
efforts and accomplishments in 1994 have positioned FSA well for solid long-term
growth in intrinsic value."
Fund American shares of common stock are traded on the New York Stock Exchange
under the symbol FFC.
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59
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Consolidated Financial Summary
For the years ended December 31, 1994 and 1993
(in thousands, except per share amounts)
Year ended December 31,
-----------------------
1994 1993
--------- ---------
Revenues:
Mortgage servicing revenue $ 169,293 $ 187,113
Amortization of capitalized servicing 86,943 133,573
--------- ---------
Net servicing revenue 82,350 53,540
Net gain on sales of mortgages 29,471 34,839
Other mortgage operations revenue 23,858 29,161
Equity in earnings of unconsolidated affiliate 2,549 --
Net investment income and other revenue 90,249 133,505
--------- ---------
Total revenues 228,477 251,045
Interest expense 78,785 103,156
General expenses 146,856 130,986
--------- ---------
Pretax operating income 2,836 16,903
--------- ---------
Net realized investment gains 38,831 50,606
Change in net unrealized investment gains and losses (a) -- 73,442
--------- ---------
Net investment gains 38,831 124,048
--------- ---------
Pretax income 41,667 140,951
Income tax provision 20,538 70,584
--------- ---------
Income before cumulative effect of accounting change 21,129 70,367
Cumulative effect of accounting change - capitalized
mortgage servicing, after tax (44,296) --
--------- ---------
Net income (loss) (23,167) 70,367
Less dividends on preferred stock 9,854 12,167
--------- ---------
Net income (loss) applicable to common stock $ (33,021) $ 58,200
========= =========
Primary earnings per share:
Income before cumulative effect of accounting change $ 1.20 $ 5.68
Net income (loss) $ (3.51) $ 5.68
Fully diluted earnings per share:
Income before cumulative effect of accounting change $ 1.20 $ 5.68
Net income (loss) $ (3.51) $ 5.68
Average common shares outstanding 8,874 9,593
(a) In accordance with the December 31, 1993, adoption of a new accounting
standard, all unrealized investment gains and losses are now excluded from
earnings and are instead recorded directly to shareholders' equity.
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FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Consolidated Financial Summary
For the three month periods ended December 31, 1994 and 1993
(in thousands, except per share amounts)
Three months ended December 31,
-----------------------------------
1994 1993
------------ ------------
Revenues:
Mortgage servicing revenue $ 43,303 $ 43,125
Amortization of capitalized servicing 18,422 43,894
------------ ------------
Net servicing revenue 24,881 (769)
Net gain (loss) on sales of mortgages (1,142) 11,435
Other mortgage operations revenue 4,003 9,900
Equity in earnings of unconsolidated affiliate 448 --
Net investment income and other revenue 13,170 43,720
------------ ------------
Total revenues 41,360 64,286
Interest expense 14,460 32,278
General expenses 37,548 42,727
------------ ------------
Pretax operating loss (10,648) (10,719)
------------ ------------
Net realized investment gains (losses) (4,183) 13,099
Change in net unrealized investment gains and losses (a) - (80,982)
------------ ------------
Net investment losses (4,183) (67,883)
------------ ------------
Pretax loss (14,831) (78,602)
Income tax benefit (2,750) (7,715)
------------ ------------
Net loss (12,081) (70,887)
Less dividends on preferred stock 1,640 3,042
------------ ------------
Net loss applicable to common stock $ (13,721) $ (73,929)
============ ============
Net loss per common share $ (1.64) $ (7.78)
Average common shares outstanding 8,368 9,499
December 31, December 31,
1994 1993
------------ ------------
Total investments $ 608,894 $ 951,412
Total shareholders' equity $ 661,090 $ 905,047
Common shareholders' equity $ 586,091 $ 748,047
Common shares outstanding 8,410 9,408
Common and common equivalent shares outstanding 9,567 10,695
Book value per common and equivalent share $ 68.95 $ 77.27
(a) In accordance with the December 31, 1993, adoption of a new accounting
standard, all unrealized investment gains and losses are now excluded from
earnings and are instead recorded directly to shareholders' equity.
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SOURCE ONE MORTGAGE SERVICES CORPORATION
Financial Highlights
(dollars in millions)
quarter ended December 31, year ended December 31,
-------------------------- -----------------------
1994 1993 1994 1993
------------ ------------ ---------- ----------
Loan Production
---------------
Originations by loan type:
$ 274 $ 1,401 FHA/VA Insured $ 2,065 $ 3,453
$ 222 $ 2,824 Conventional 2,521 7,999
------------ ------------ ---------- ----------
$ 496 $ 4,225 Total $ 4,586 $ 11,452
============ ============ ========== ==========
Originations by source:
$ 316 $ 2,530 Retail $ 2,809 $ 7,101
180 1,695 Wholesale 1,777 4,351
----------- ------------ ---------- ----------
$ 496 $ 4,225 Total $ 4,586 $ 11,452
=========== ============ ========== ==========
Servicing Portfolio
-------------------
40,039 36,198 Beginning Balance 38,403 37,312
496 4,225 Mortgage Loan Production 4,586 11,452
0 3,130 Servicing Acquisitions 3,707 6,368
(549) (4,151) Regular Payoffs (4,728) (13,563)
Servicing Released, Principal
Amortization, Foreclosures
(418) (999) & Other (2,400) (3,166)
----------- ------------ ---------- ----------
39,568 38,403 Ending Balance 39,568 38,403
=========== ============ ========== ==========
Dec. 31, Sept. 30, Dec. 31,
1994 1994 1993
------------ ---------- ----------
Servicing Portfolio (a)
-------------------
Principal Balance 39,568 40,039 38,403
Capitalized Servicing Asset 530 544 667
Number of Loans (b) 543,428 549,484 518,972
Weighted Average Interest Rate (b) 8.14% 8.14% 8.53%
Percent Delinquent (b)(c) 4.84% 4.68% 5.36%
(a) Includes loans subserviced for others having a principal balance of $4,294
million, $4,351 million and $0 million as of December 31, 1994, September
30, 1994, December 31, 1993, respectively. The majority of the subserviced
loans arose from the second quarter 1994 sale of rights to service $3,868
million of mortgage loans. Since Source One continues to subservice these
loans, the $20 million pretax gain from the sale was deferred and is being
recognized over the five-year life of the subservicing agreement.
(b) Excludes $1,651 million, $1,651 million and $4,190 million outstanding
principal balance of interim servicing as of December 31, 1994,
September 30, 1994, and December 31, 1993, respectively.
(c) Includes loans in process of foreclosure.
(end)
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