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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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.
80 SOUTH MAIN STREET
HANOVER, NEW HAMPSHIRE 03755-2053
(603) 643-1567
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)
NOVEMBER 3, 1997
(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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$125,000,000 $25,000
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*Calculated solely for purposes of determining the filing fee, based on the
purchase of 1,000,000 shares at the maximum tender offer price
per share of $125.00.
/ / 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.
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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 80 South Main Street, Hanover, New Hampshire 03755-2053.
(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 November 3, 1997,
there were 6,377,757 Shares outstanding. The Company is inviting shareholders
to tender Shares to the Company at prices not greater than $125.00 nor less than
$105.00 per Share, net to the seller in cash, specified by the tendering
shareholders, pursuant to the Offer to Purchase dated November 3, 1997 (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 at or above the Purchase Price (as determined by the Company
in accordance with the Offer to Purchase) 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 but subject to any applicable
legal requirements, to purchase more than 1,000,000 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.
(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
1
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.
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 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.
2
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated November 3, 1997.
(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 non-executive Chairman to shareholders dated
November 3, 1997.
(a)(5) Form of Letter from Lehman Brothers Inc. 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 November 3, 1997.
(a)(8) Text of press release dated October 30, 1997.
(a)(9) Text of press release dated November 3, 1997.
(b) Not applicable.
(c) None.
(d) None.
(e) Not applicable.
(f) None.
(g)(1) Text of Third Quarter Earnings Release dated October 27, 1997.
3
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.
November 3, 1997 By: /s/ Michael S. Paquette
----------------------------------
Michael S. Paquette
Vice President and Controller
4
EXHIBIT INDEX
EXHIBITS PAGE
(a)(1) Offer to Purchase dated November 3, 1997.........................
(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 non-executive Chairman to
Shareholders dated November 3, 1997.........................
(a)(5) Form of Letter from Lehman Brothers Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Other 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 November 3, 1997.............
(a)(8) Text of press release dated October 30, 1997.....................
(a)(9) Text of press release dated November 3, 1997.....................
(g)(1) Text of Third Quarter Earnings Release dated
October 27, 1997............................................
5
Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH
BY
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
UP TO
1,000,000 SHARES OF ITS COMMON STOCK
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THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, DECEMBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
Fund American Enterprises Holdings, Inc., a Delaware corporation (the
"Company"), is offering to purchase up to 1,000,000 shares of its Common Stock,
par value $1.00 per share ("Shares"), at prices not greater than $125.00 nor
less than $105.00 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 will, upon the terms and
subject to the conditions of the Offer, determine a single price per Share that
it will pay for the Shares (the "Purchase Price") properly tendered and not
withdrawn pursuant to the Offer, taking into account the number of Shares so
tendered and the prices specified by tendering shareholders of the Shares that
will allow it to buy 1,000,000 Shares (or such lesser number of Shares as are
properly tendered and not withdrawn) at prices not greater than $125.00 nor less
than $105.00 pursuant to the Offer. All Shares properly tendered at prices at
or below the Purchase Price 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 terms hereof. The Company reserves the
right, in its sole discretion but subject to any applicable legal requirements,
to purchase more than 1,000,000 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.
-----------------------------------
The Shares are listed and traded on the New York Stock Exchange (the "NYSE").
On October 30, 1997, 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 $108 1/8 per Share, and on October 31, 1997, the last full
trading day before the commencement of the Offer, the reported closing sales
price was $119 1/2 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.
-----------------------------------
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 AND THE
PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED.
-----------------------------------
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
November 3, 1997
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.
SHAREHOLDERS MUST PROPERLY COMPLETE THE LETTER OF TRANSMITTAL INCLUDING THE
SECTION OF THE LETTER OF TRANSMITTAL RELATING TO THE PRICE AT WHICH THEY ARE
TENDERING SHARES IN ORDER TO EFFECT A VALID TENDER OF THEIR 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.
-----------------------------------
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 or the Dealer Manager at their respective
addresses and telephone numbers 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.
-----------------------------------
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.
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
Introduction........................................................... 1
The Offer............................................................. 2
1. Number of Shares; Proration; Extension of the Offer.......... 2
2. Tenders by Holders of Fewer than 100 Shares.................. 5
3. Procedure for Tendering Shares............................... 5
Proper Tender of Shares................................. 5
Signature Guarantees and Methods of Delivery............ 6
Federal Backup Withholding.............................. 7
Book-Entry Delivery..................................... 7
Guaranteed Delivery..................................... 7
Determination of Validity; Rejection of Shares;
Waiver of Defects; No Obligation to Give Notice
of Defects......................................... 8
Allianz Asset Accumulation Plan......................... 8
Source One Mortgage Services Corporation Employee Stock
Ownership and 401(k) Savings Plan.................. 8
Valley Group Employees' 401(k) Savings Plan............. 8
4. Withdrawal Rights............................................ 9
5. Acceptance for Payment of Shares and Payment of Purchase
Price................................................... 9
6. Certain Conditions of the Offer.............................. 11
7. Price Range of Shares; Dividends............................. 13
8. Purpose of the Offer; Certain Effects of the Offer........... 14
9. Certain Information Concerning the Company................... 15
Insurance Operations.................................... 15
Consolidated Insurance Operations.................. 15
Investments in Unconsolidated Insurance
Affiliates.................................... 16
Mortgage Operations..................................... 17
Recent Developments..................................... 18
Summary Historical Consolidated Financial Information... 19
Pro Forma Consolidated Financial Information
(Unaudited)........................................ 22
Shareholder Rights Plan................................. 24
Additional Information.................................. 25
10. Source and Amount of Funds................................... 26
11. Certain Federal Income Tax Considerations.................... 26
Gain or Loss Recognition................................ 26
Backup Withholding...................................... 27
Foreign Shareholder Withholding......................... 27
State, Local and Foreign Taxes.......................... 27
12. Transactions and Arrangements Concerning the Shares.......... 27
13. Certain Legal Matters; Regulatory and Foreign Approvals...... 28
14. Certain Plans................................................ 28
Allianz Asset Accumulation Plan......................... 28
Source One Mortgage Services Corporation Employee
Stock Ownership and 401(k) Savings Plan............ 29
Valley Group Employees' 401(k) Savings Plan............. 29
15. Extension of Tender Period; Termination; Amendments.......... 30
16. Fees and Expenses............................................ 31
17. Miscellaneous................................................ 32
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 1,000,000 shares of its Common Stock,
par value $1.00 per share ("Shares"), at a price not greater than $125.00 nor
less than $105.00 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"). The Company
will, upon the terms and subject to the conditions of the Offer, determine a
single price per Share that it will pay for the Shares (the "Purchase Price")
properly tendered and not withdrawn pursuant to the Offer, taking into account
the number of Shares so tendered and the prices specified by tendering
shareholders of the Shares that will allow it to buy 1,000,000 Shares (or such
lesser number of Shares as are properly tendered and not withdrawn) at prices
not greater than $125.00 nor less than $105.00 pursuant to the Offer. All
Shares properly tendered at prices at or below the Purchase Price 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 terms hereof.
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 AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED.
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 November 3, 1997, there were 6,377,757 Shares outstanding. Pursuant to
the Fund American Long-Term Incentive Plan (the "Incentive Plan"), as of
November 3, 1997, an additional 2,000 Shares were issuable upon the exercise of
outstanding employee stock options. In addition to the Shares potentially
issuable pursuant to the Incentive Plan, another 1,000,000 Shares were
potentially issuable as of November 3, 1997, upon the exercise of warrants held
by John J. Byrne, non executive Chairman of the Company.
Accordingly, the 1,000,000 Shares which the Company is offering to purchase in
the Offer represent approximately 15.7% of the Shares outstanding as of November
3, 1997, and approximately 13.6% 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 executive officers that they
do not intend to tender Shares owned by them pursuant to the Offer, except that
John J. Byrne, the Company's non-executive Chairman, has informed the Company
that he and/or his affiliates currently intend to tender 100,000 Shares pursuant
to the Offer with a specified price of $116 per Share.
If before the Expiration Date (as defined in Section 1), a greater number of
Shares is properly tendered at or below the Purchase Price 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 at or below the
Purchase Price 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, on a pro rata basis, from all
other Shares properly tendered at or below the Purchase Price and not withdrawn.
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
Lehman Brothers Inc., which has been appointed as the dealer manager (the
"Dealer Manager"), and 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.
The Shares are listed and traded on the New York Stock Exchange (the "NYSE").
On October 30, 1997, 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 $108 1/8 per Share, and on October 31, 1997, the last full trading day
before the commencement of the Offer, the reported closing sales price was $119
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 "Allianz Plan"), the
Source One Mortgage Services Corporation Employee Stock Ownership and 401(k)
Savings Plan (the "Source One Plan") or the Valley Group Employees' 401(k)
Savings Plan (the "Valley Group Plan") may direct the respective trustee of such
plan to tender any or all Shares allocated to their respective accounts in the
Allianz Plan, the Source One Plan or the Valley Group Plan, as the case may be,
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 1,000,000 Shares or such
lesser number of Shares as are properly tendered (and not withdrawn in
accordance with Section 4) before the Expiration Date at a price (determined in
the manner set forth below) not greater than $125.00 nor less than $105.00 per
Share. The term "Expiration Date" means 12:00 midnight, New York City time, on
Monday, December 1, 1997, 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.
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single Purchase Price, taking into account the number of Shares so
tendered and the prices specified by tendering shareholders that will allow it
to buy 1,000,000 Shares (or such lesser number as are properly tendered and not
withdrawn) at a price not greater than $125.00 nor less than $105.00 per Share
pursuant to the Offer.
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 but subject to any applicable legal requirements, to purchase more
than 1,000,000 Shares pursuant to the Offer, in which case the Purchase Price
will be determined taking into account the number
2
of Shares tendered and the prices specified by tendering shareholders that will
allow it to purchase such greater number of Shares. 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 tendered at
prices greater than the Purchase Price and 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.
If the number of Shares properly tendered at prices not greater than $125.00 nor
less than $105.00 per Share and not withdrawn before the Expiration Date is less
than or equal to 1,000,000 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 at prices not greater than $125.00 nor
less than $105.00 per Share and not withdrawn before the Expiration Date is
greater than 1,000,000 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 at or below the Purchase Price and not
withdrawn before the Expiration Date by any shareholder who beneficially
owned as of the close of business on October 27, 1997, 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 at or below the Purchase Price 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. Proration for each shareholder tendering Shares other than
Odd Lot Holders shall be based on the ratio of the number of Shares tendered by
such shareholder to the total number of Shares tendered by all shareholders
other than Odd Lot Holders at or below the Purchase Price. Although the Company
does not expect that it will be able to announce the final proration factor
until approximately five 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
one one-thousandth 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
3
become exercisable or separately tradeable as a result of the Offer. Absent the
occurrence of circumstances causing the Rights to expire or 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, if any, associated with such
purchased Shares. See Section 9.
Since 1995 the Company has paid regular cash dividends to holders of Shares.
The Board may, in its sole discretion, reconsider its dividend policy from time
to time. There can be no assurance as to when or whether the Board will declare
additional dividends on Shares. On October 8, 1997, the Board declared a
quarterly dividend of $.20 per Share, payable December 17, 1997, to shareholders
of record as of December 8, 1997. Shareholders tendering their Shares pursuant
to the Offer will not be entitled to receive the dividend payable December 17,
1997 unless the Offer is extended and closes subsequent to the dividend record
date of December 8, 1997.
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 at or above
the Purchase Price 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 and must properly indicate in the section entitled "Price (In Dollars)
Per Share At Which Shares Are Being Tendered" in the Letter of Transmittal the
price at which such Shares are being tendered, except that an Odd Lot Holder may
check the box in the section entitled "Odd Lots" indicating that the shareholder
is tendering all of such shareholder's Shares at the Purchase Price. See
Section 3.
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.
As specified in Instruction 5 of the Letter of Transmittal, each shareholder
desiring to tender Shares pursuant to the Offer must properly indicate in the
section captioned "Price (In Dollars) Per Share of Common Stock At Which Shares
of Common Stock Are Being Tendered" on the Letter of Transmittal the price (in
multiples of $1.00) at which such shareholder's Shares are being tendered;
provided, however, that an Old Lot Holder may check the box in the section
entitled "Odd Lots" indicating that he or she is tendering all of his or her
Shares at the Purchase Price. SHAREHOLDERS DESIRING TO TENDER SHARES AT MORE
THAN ONE PRICE MUST COMPLETE SEPARATE LETTERS OF TRANSMITTAL FOR EACH PRICE AT
WHICH SHARES ARE BEING TENDERED. THE SAME SHARES CANNOT BE TENDERED (UNLESS
PROPERLY WITHDRAWN PREVIOUSLY IN ACCORDANCE WITH THE TERMS OF THE OFFER) AT MORE
THAN ONE PRICE. IN ORDER TO PROPERLY TENDER SHARES, ONE AND ONLY ONE PRICE BOX
MUST BE CHECKED IN THE APPROPRIATE SECTION ON EACH LETTER OF TRANSMITTAL.
SHAREHOLDERS WISHING TO MAXIMIZE THE POSSIBILITY THAT THEIR SHARES WILL BE
PURCHASED AT THE PURCHASE PRICE MAY CHECK THE BOX ON THE LETTER OF TRANSMITTAL
MARKED "SHARES TENDERED AT PRICE
4
DETERMINED BY DUTCH AUCTION." CHECKING THIS BOX MAY RESULT IN A PURCHASE OF THE
SHARES SO TENDERED AT THE MINIMUM PRICE OF 105.00 PER SHARE.
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 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.
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
5
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
three 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 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 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 Dealer Manager, 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 Allianz Plan who wish to
have the trustee of the Allianz Plan 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 Allianz Plan may not use the Letter of Transmittal to direct the trustee
to tender Shares allocated to such shareholders but must
6
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. Directions as to the subsequent reinvestment of the proceeds from
the tendered Shares will be followed by the Trustee. PARTICIPANTS IN THE
ALLIANZ PLAN ARE URGED TO READ THE SEPARATE INSTRUCTION FORMS AND RELATED
MATERIALS SENT TO THEM CAREFULLY. SEE SECTION 14.
SOURCE ONE MORTGAGE SERVICES CORPORATION EMPLOYEE STOCK OWNERSHIP AND 401(K)
SAVINGS PLAN. Participants in the Source One Plan who wish to have the trustee
of the Source One Plan 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
Source One Plan 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 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. Directions as to the subsequent reinvestment of the proceeds from
the tendered Shares will be followed by the Trustee. PARTICIPANTS IN THE SOURCE
ONE PLAN ARE URGED TO READ THE SEPARATE INSTRUCTION FORMS AND RELATED MATERIALS
SENT TO THEM CAREFULLY. SEE SECTION 14.
VALLEY GROUP EMPLOYEES' 401(K) SAVINGS PLAN. Participants in the Valley Group
Plan who wish to have the trustee of the Valley Group Plan 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 Valley Group Plan 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
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. Directions as to the
subsequent reinvestment of the proceeds from the tendered Shares will be
followed by the Trustee. PARTICIPANTS IN THE VALLEY GROUP PLAN 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 Tuesday, December 30, 1997.
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.
7
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 Dealer Manager, 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 1,000,000 Shares (subject to increase or decrease as provided
in Sections 1 and 15) or such lesser number of Shares as are properly tendered
at prices not greater than $125.00 nor less than $105.00 per Share 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
proration, Shares which are tendered at or below the Purchase Price 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 five 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 tendered at prices greater than the Purchase Price and 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 7 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
8
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 as
set forth in Section 15, 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 indirectly,
relates in any manner to the Offer; or (ii) in the reasonable good
faith 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 reasonable good
faith 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 reasonable good faith
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
reasonable good faith 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 reasonable good faith judgment of the Company, a material
escalation, acceleration or worsening thereof; or (viii) any decline
in either the Dow Jones Industrial Average (7,442.08 at the close of
business on October 31, 1997) or the Standard and Poor's Index of 500
Industrial Companies
9
(914.62 at the close of business on October 31, 1997) by an amount in
excess of 10% measured from the close of business on October 31, 1997;
(d) after October 31, 1997, 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 October 31, 1997, 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 reasonable judgment of the Company, is or may be
material to the Company or affects the anticipated benefits to the
Company of acquiring Shares pursuant to the Offer;
(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 October 31, 1997), (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
(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 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. 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.
10
7. PRICE RANGE OF SHARES; DIVIDENDS
The Shares (symbol FFC) are listed and traded on the NYSE. The table that
follows 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
- ---------------------------------------------------------------------------
1995:
First Quarter 76 71 3/8
Second Quarter 72 3/4 68 1/8
Third Quarter 76 68 1/4
Fourth Quarter 75 1/2 66
1996:
First Quarter 79 7/8 72 1/8
Second Quarter 80 1/4 76
Third Quarter 93 1/2 80 1/4
Fourth Quarter 95 3/4 86 3/4
1997:
First Quarter 109 3/4 94
Second Quarter 110 1/2 98
Third Quarter 108 99 1/2
Fourth Quarter (through October 30) 112 105 1/4
- ---------------------------------------------------------------------------
On October 30, 1997, 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 $108 1/8 per Share, and on October 31, 1997, the last full trading day
before the commencement of the Offer, the reported closing sales price was $119
1/2 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR
THE SHARES.
Since 1995 the Company has paid regular cash dividends to holders of Shares.
The Board may, in its sole discretion, reconsider its dividend policy from time
to time. There can be no assurance as to when or whether the Board will declare
additional dividends on Shares. On October 8, 1997, the Board declared a
quarterly dividend of $.20 per Share, payable December 17, 1997, to shareholders
of record as of December 8, 1997. SHAREHOLDERS TENDERING THEIR SHARES PURSUANT
TO THE OFFER WILL NOT BE ENTITLED TO RECEIVE THE DIVIDEND PAYABLE DECEMBER 17,
1997 UNLESS THE OFFER IS EXTENDED AND CLOSES SUBSEQUENT TO THE DIVIDEND RECORD
DATE OF DECEMBER 8, 1997.
8. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
The tender is primarily being offered to provide shareholders with added
liquidity. The Company recognizes that its Common Stock is not widely held, not
regularly followed by analysts and is thinly traded. The Company believes that
in light of its current business plan, it should have adequate capital after
funding the maximum amount contemplated by the Offer. Accordingly, the Board
believes that it is in the interest of the Company's shareholders to provide an
opportunity for shareholders to sell up to 1,000,000 Shares at a premium to
recent market prices and without the usual transaction costs associated with a
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. 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.
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.
11
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 AND THE PRICE OR PRICES
AT WHICH SHARES SHOULD BE TENDERED.
The Company has been informed by its directors and executive officers that they
do not intend to tender Shares owned by them pursuant to the Offer, except that
John J. Byrne, the Company's non-executive Chairman, has informed the Company
that he and/or his affiliates currently intend to tender 100,000 Shares pursuant
to the Offer with a specified price of $116 per Share.
Since the sale of Fireman's Fund in 1991, the Company's primary strategic goal
has been to reinvest proceeds from the sale of its passive investment portfolio
into operating businesses in which management has knowledge or experience or, if
no better opportunities exist, to return those funds to Shareholders. Although
the Company has made several significant acquisitions during the past four
years, it has also returned a significant amount of capital to Shareholders.
Although the Company may in the future purchase additional Shares on the open
market, in private transactions, through tender offers or otherwise, giving
effect to the Offer, the Company's assets will consist almost entirely of
operating businesses and the Company does not expect to repurchase Shares in the
future.
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 1,000,000 Shares pursuant to the
Offer are described in Section 9.
The purchase of 1,000,000 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.
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. Fund American's principal businesses are
conducted through White Mountains Holdings, Inc. and its operating subsidiaries
("White Mountains"). White Mountains is a financial services holding company
that houses the Company's insurance and mortgage banking operations. White
Mountains' insurance operations are conducted through its subsidiaries and
affiliates in the businesses of property and casualty insurance, reinsurance and
financial guaranty insurance. White Mountains' mortgage banking operations are
conducted through Source One Mortgage Services Corporation and its subsidiaries
("Source One"). Source One is one of the nation's largest mortgage banking
companies. Fund American also owns a passive investment portfolio. A large
portion of the Company's passive investment portfolio consists of large blocks
of securities of a small number of issuers. 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 80 South Main Street, Hanover, New
Hampshire, 03755-2053, and its telephone number is (603) 643-1567.
INSURANCE OPERATIONS.
White Mountains was formed to be the holding company for all of Fund American's
consolidated and unconsolidated insurance operating interests and during 1997
became the holding company of Source One. White Mountains' principal insurance
holdings include investments in: Financial Security Assurance Holdings Ltd.
("FSA"), a leading Aaa/AAA
12
writer of financial guaranty insurance; Folksamerica Holding Company, Inc.
("Folksamerica"), a leading multi-line broker-market reinsurer, Main Street
America Holdings, Inc. ("MSA"), an affiliate of National Grange Mutual Insurance
Company ("NGM") which is a New Hampshire-based property and casualty insurer;
and the consolidated wholly-owned subsidiaries described below.
CONSOLIDATED INSURANCE OPERATIONS. On December 1, 1995, White Mountains
acquired Valley Group, Inc. of Albany, Oregon, and its subsidiaries
(collectively, "Valley") and Charter Group, Inc. of Dallas, Texas, and its
subsidiaries (collectively, "Charter") for $41.7 million in cash less $3.0
million of purchase price adjustments.
VALLEY: Valley's wholly-owned subsidiary, Valley Insurance Company, is an
"A" rated, Northwest-based property and casualty company which writes personal
and commercial lines. Valley Insurance Company focuses on establishing strong
long-term relationships with its agents and insured customers by focusing on
providing quality insurance products to the family unit and the independently
owned business. In 1996 Valley Insurance Company wrote $81.9 million of gross
premiums primarily in three Northwest states, through approximately 245
independent agents and for the nine month period ended September 30, 1997 Valley
wrote $66.0 million of gross premiums.
CHARTER: Charter, through its wholly-owned subsidiary Charter Indemnity
Company and its controlled affiliate, Northern County Mutual Insurance Company,
markets and underwrites nonstandard automobile insurance to individuals in the
State of Texas. For the year ended December 31, 1996, Charter's gross written
premiums totaled $70.0 million. Written premiums (and related expenses and
losses) for Charter's policies written prior to January 1, 1996, were entirely
ceded to Charter's former parent. Therefore, Charter's financial results for
years prior to 1996 are not meaningful for comparison purposes. Charter writes
all its business through independent agents located in Texas. At December 31,
1996, Charter had approximately 750 agents located throughout the State.
During the nine month period ended September 30, 1997 Charter wrote $47.4
million of direct premiums.
WHITE MOUNTAINS INSURANCE COMPANY ("WMIC"): WMIC is a New Hampshire-based
commercial property and casualty company which commenced its operations in
September 1995 and wrote $2.4 million in gross premiums during 1996. During the
nine month period ended September 30, 1997 WMIC wrote $3.7 million of gross
premiums. WMIC is currently licensed to write insurance in Maine, New
Hampshire, Vermont and Massachusetts and is expected to expand its operations to
other states as additional regulatory approvals are obtained. WMIC is a
wholly-owned subsidiary of Valley Insurance Company.
VALLEY NATIONAL INSURANCE COMPANY ("VALLEY NATIONAL"): On January 19,
1996, Valley purchased an inactive insurance company for $13.2 million, net of
cash balances acquired. The newly acquired insurance company, which was renamed
Valley National, is licensed to write property and casualty insurance in 48
states. Assets acquired pursuant to the Valley National acquisition included an
investment portfolio, consisting principally of fixed maturity investments,
totaling $6.7 million. Valley National wrote its first policies in December
1996 and has expanded its operations in 1997. Valley National is a wholly-owned
subsidiary of Valley Insurance Company.
All of White Mountains' consolidated insurance subsidiaries (the "Insurance
Companies") market their products principally through independent agents.
INVESTMENTS IN UNCONSOLIDATED INSURANCE AFFILIATES.
FSA: In May 1994 the Company purchased 2,000,000 shares of the common
stock of FSA ("FSA Common Stock") from U S WEST Capital Corp., a wholly-owned
subsidiary of U S WEST, Inc. The purchase was part of an initial public
offering of 8,082,385 shares of FSA Common Stock at the initial offering price
of $20.00 per share. In 1995 and 1996, respectively, the Company purchased an
additional 460,200 shares of FSA Common Stock on the open market for $8.8
million and an additional 1,000,000 shares of FSA Common Stock in a private
transaction for $26.5 million.
FSA conducts operations principally through Financial Security Assurance Inc., a
wholly-owned monoline financial guarantee insurance subsidiary with Aaa/AAA
claims-paying
13
ratings. FSA is principally engaged in guaranteeing municipal bonds, and
residential mortgage and other asset-backed securities.
In September 1994 the Company acquired various fixed price options and shares of
convertible preferred stock ("FSA Options and Preferred Stock") which, in total,
give Fund American the right to acquire up to 4,560,607 additional shares of FSA
Common Stock for aggregate consideration of $125.7 million. All shares of and
rights to FSA Common Stock owned or acquired by the Company as described above
are 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. As of December 31,
1996, Fund American's economic interest in FSA was approximately 25.1% and Fund
American's voting interest in FSA was approximately 23.0%. In December 1995 and
January 1996 the Company transferred all of its interests in FSA existing at the
time to White Mountains and during 1997 White Mountains transferred all of its
interests in FSA to Source One.
MSA: In December 1994 the Company acquired 90,606 shares of the common
stock of MSA ("MSA Common Stock") for $25.0 million in cash. In 1995 the
Company paid NGM an additional $1.2 million in purchase price adjustments for
the MSA Common Stock. In December 1995 the Company transferred all of its
interest in MSA to White Mountains. White Mountains' investment in MSA
represented approximately 33.2% of the outstanding common stock of MSA as of
December 31, 1996.
MSA participates in 40% of NGM's business through a reinsurance pooling
agreement. NGM writes personal and commercial property and casualty insurance
in the Eastern United States.
FOLKSAMERICA: On June 19, 1996, White Mountains completed its purchase,
for $79.9 million including related expenses, of a 50.0% interest in
Folksamerica. Folksamerica owns a multi-line broker-market reinsurance company.
White Mountains' investment in Folksamerica includes (i) 6,920,000 shares of
ten-year 6.5% voting preferred stock having a liquidation preference of $79.4
million ("Folksamerica Preferred Stock") and (ii) ten-year warrants
("Folksamerica Warrants") to purchase up to 6,920,000 shares of the Common Stock
of Folksamerica ("Folksamerica Common Stock") for $11.47 per share, subject to
certain adjustments.
MORTGAGE OPERATIONS. Source One is one of the largest mortgage banking
companies in the United States based on the size of its mortgage loan servicing
portfolio. Source One services and subservices mortgage loans on behalf of
numerous institutional investors and other security holders. As of September
30,1997, Source One owned a mortgage loan servicing portfolio totalling $10.4
billion and subserviced $18.2 billion of loans for others. Source One currently
operates with approximately 130 retail branch offices in 26 states and
originated $2.7 billion in new mortgage loans for the nine month period ended
September 30, 1997.
Source One engages primarily in the business of producing, selling and servicing
residential mortgage loans and subservicing residential mortgage loans for third
parties. Its sources of revenue are net mortgage servicing revenue, net
interest revenue, net gain on sales of mortgages, net gain on sales of servicing
and other revenue (including underwriting and appraisal fees). Through
subsidiaries, Source One also markets credit-related insurance products (such as
life, disability, health, accidental death and property and casualty insurance).
Source One produces residential mortgage loans through a system of retail branch
offices, a specialized marketing program, mortgage brokers 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 a policy of Source One to primarily
produce 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,
14
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. Substantially all GNMA securities are sold without recourse to
Source One for loss of principal in the event of a subsequent default by the
mortgage borrower due to the underlying FHA and VA insurance.
Source One currently retains the rights to service the majority of all 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. Source One also sells servicing rights when management deems it
economically advantageous. During 1996 and 1995, Source One purchased the
rights to service $2.8 billion of mortgage loans from third parties. Source One
has not made any significant purchases of mortgage loan servicing rights during
1997 to-date.
Source One also sells servicing rights when management deems it economically
advantageous. On February 28, 1997 Source One sold its rights to service $17.0
billion of mortgage loans to a third party for gross proceeds of $271.5 million
and will continue to subservice such loans for a period of no less than 12
months. During 1996 Source One sold the rights to service $3.3 billion of
mortgage loans.
Mortgage loan servicing consists primarily of collecting monthly loan payments
and remitting amounts due to investors, collecting property tax and insurance
escrow deposits and making tax and insurance premium payments when due. Source
One collects 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.
RECENT DEVELOPMENTS.
On October 9, 1997 Fund American reported that John J. Byrne announced his
retirement as President and Chief Executive Officer of the Company and announced
that its Board of Directors had named K. Thomas Kemp as his successor. Mr. Kemp
was formerly Executive Vice President of the Company and is Chairman, President
and Chief Executive Officer of White Mountains.
On October 15, 1997, the Company filed a Current Report on Form 8-K announcing
that Allan L. Waters had resigned as the Company's Chief Financial Officer
citing a desire to spend more time with his family. Mr. Waters had been Chief
Financial Officer since 1993.
On October 24, 1997, Travelers Property Casualty Corp. ("TAP") filed a Form S-3
Registration Statement with the Securities and Exchange Commission that would
permit Fund American to sell up to 1,352,400 shares of TAP common stock within
the next several weeks. Fund American's investment in TAP is carried in "other
investments" on its balance sheet due to various restrictions on sales of its
investment in TAP common stock.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION. The summary financial
information for the years ended December 31, 1996 and 1995, 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, 1996
(the "Form 10-K"), the Company's Quarterly Report on Form 10-Q for the three and
six month periods ended June 30, 1997 (the "Form 10-Q") and the Company's third
quarter 1997 earnings release dated October 27, 1997 (the "3Q97 Earnings
Release") filed as an exhibit to the Company's Issuer Tender Offer
15
Statement on Schedule 13E-4 relating hereto. 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 and the Form 10-Q
are available for examination, and copies are obtainable, in the manner set
forth below under "Additional Information". The 3Q97 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., 80 South Main Street, Hanover, NH 03755, telephone
number (603) 643-1567.
16
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
Nine Months Ended Year Ended
September 30, December 31,
-------------------------- -------------------------
1997 1996 1996 1995
---------- ----------- ----------- ----------
(Dollars in millions, except per share amounts)
Ending Balance Sheet Data:
Total assets $ 2,023.2 $ 1,980.6 $ 1,871.9
Short-term debt 490.5 407.9 445.4
Long-term debt 304.1 424.2 407.3
Minority interest - preferred stock of subsidiary 44.0 44.0 44.0
Shareholders' equity 719.0 687.0 699.7
Book value per common and equivalent share 102.14 90.81 83.28
Income Statement Data:
Total revenues $ 231.4 $ 259.7 $ 332.5 $ 222.3
Total expenses (243.4) (227.1) (347.2) (225.9)
Net realized investment gains 47.6 28.1 38.5 38.8
Income tax provision (14.7) (24.7) (18.9) (16.7)
---------- ----------- ----------- ----------
After tax earnings 20.9 36.0 4.9 18.5
Tax benefit from sale of discontinued operations -- -- -- 66.0
Loss on early extinguishment of debt, after tax (6.0) -- -- (.4)
---------- ----------- ----------- ----------
Net income $ 14.9 $ 36.0 $ 4.9 $ 84.1
========== =========== =========== ==========
Primary earnings per share:
After tax earnings $ 2.84 $ 4.38 $ .60 $ 1.71
Tax benefit from sale of discontinued operations -- -- -- 7.69
Loss on early extinguishment of debt, after tax (.81) -- -- (.04)
---------- ----------- ----------- ----------
Net income $ 2.03 $ 4.38 $ .60 $ 9.36
========== =========== =========== ==========
Fully diluted earnings per share:
After tax earnings $ 2.84 $ 4.38 $ .60 $ 2.02
Tax benefit from sale of discontinued operations -- -- -- 7.18
Loss on early extinguishment of debt, after tax (.81) -- -- (.04)
---------- ----------- ----------- ----------
Net income $ 2.03 $ 4.38 $ .60 $ 9.16
========== =========== =========== ==========
Ratio of earnings to combined fixed charges and
preferred stock dividends 1.69 2.43 1.30 1.35
17
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:
Nine Months Year
Ended Ended
September 30, December 31,
----------------------- -----------------------
(Dollars in millions) 1997 1996 1996 1995
-------- -------- -------- --------
Pretax earnings $ 35.6 $ 60.7 $ 23.8 $ 35.2
Earnings from unconsolidated affiliates (14.8) (6.0) (12.0) (9.4)
Earnings received from unconsolidated affiliates 4.9 2.2 3.8 .8
Interest expense 35.7 38.5 50.0 45.8
Portion of rent representative of interest expense 1.3 1.3 1.8 2.4
-------- -------- -------- --------
Pretax earnings as adjusted $ 62.7 $ 96.7 $ 67.4 $ 74.8
======== ======== ======== ========
Preferred stock dividend requirements $ -- $ -- $ -- $ 7.3
Interest expense 35.7 38.5 50.0 45.8
Portion of rent representative of interest expense 1.3 1.3 1.8 2.4
-------- -------- -------- --------
Total fixed charges and preferred stock dividends $ 37.0 $ 39.8 $ 51.8 $ 55.5
======== ======== ======== ========
(B) Primary earnings per share amounts for the nine month periods ended
September 30, 1997 and 1996 are based on the weighted average number of common
and dilutive common equivalent shares outstanding of 7,344,466 and 8,220,149,
respectively. Fully diluted earnings per share amounts for the nine month
periods ended September 30, 1997 and 1996 are based on the weighted average
number of common shares outstanding, assuming full dilution, of 7,344,479 and
8,220,229, respectively. Primary earnings per share amounts for the years ended
December 31, 1996 and 1995 are based on the weighted average number of common
and dilutive common equivalent shares outstanding of 8,110,143 and 8,581,456,
respectively. Fully diluted earnings per share amounts for the years ended
December 31, 1996 and 1995 are based on the weighted average number of common
shares outstanding, assuming full dilution, of 8,110,229 and 9,189,054,
respectively.
18
PRO FORMA CONSOLIDATED 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 1,000,000
Shares are purchased in the Offer for $125.00 per Share (the maximum amount
contemplated in the Offer), net to the seller in cash, or an aggregate cost to
the Company of approximately $125.4 million including estimated related fees and
expenses of $.4 million.
The consolidated pro forma balance sheet information as of September 30, 1997
and December 31, 1996 assumes that the repurchase of Shares by the Company
pursuant to the Offer had occurred as of September 30, 1997 and December 31,
1996, respectively. The consolidated pro forma income statement information for
the periods ended September 30, 1997 and December 31, 1996 assumes that the
repurchase of Shares by the Company pursuant to the Offer had occurred as of
January 1, 1997 and January 1, 1996, respectively. 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 Form 10-K, the Form 10-Q and
the 3Q97 Earnings Release.
19
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET INFORMATION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
September 30, 1997 December 31, 1996
------------------------------------- ------------------------------------
Adjust- Pro Adjust- Pro
Actual ments Forma Actual ments Forma
-------- -------- --------- -------- --------- --------
Short-term investments, at amortized cost $ 88.9 $ (65.4) $ 23.5 $ 67.5 $ (65.4) $ 2.1
Common equity securities and other investments 351.0 (60.0) 291.0 337.3 (60.0) 277.3
Total assets 2,023.2 (125.4) 1,897.8 1,980.6 (125.4) 1,855.2
Total liabilities 1,260.2 -- 1,260.2 1,249.6 -- 1,249.6
Minority interest - preferred stock of subsidiary 44.0 -- 44.0 44.0 -- 44.0
Common stock and paid-in surplus 391.9 (12.5) 379.4 398.4 (12.5) 385.9
Retained earnings 1,031.2 (112.9) 918.3 1,067.1 (112.9) 954.2
Total shareholders' equity 718.9 (125.4) 593.5 687.0 (125.4) 561.6
Total liabilities, minority interest and
shareholders' equity 2,023.2 (125.4) 1,897.8 1,980.6 (125.4) 1,855.2
Book value per common and
equivalent share $ 102.14 $ (3.65) $ 98.49 $ 90.81 $ (5.00) $ 85.81
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
PRO FORMA CONSOLIDATED INCOME STATEMENT INFORMATION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Nine Months Ended Year Ended
September 30, 1997 December 31, 1996
--------------------------------- ------------------------------------
Adjust- Pro Adjust- Pro
Actual ments Forma Actual ments Forma
-------- -------- --------- -------- --------- --------
Net investment income $ 46.3 $ (2.6) $ 43.7 $ 57.3 $ (3.5) $ 53.8
Total revenues 231.4 (2.6) 228.8 332.5 (3.5) 329.0
Total expenses 243.4 -- 243.4 347.2 -- 347.2
Pretax operating loss (12.0) (2.6) (14.6) (14.7) (3.5) (18.2)
Net realized investment gains 47.6 -- 47.6 38.5 -- 38.5
Pretax earnings 35.6 (2.6) 33.0 23.8 (3.5) 20.3
Income tax provision 14.7 (.9) 13.8 18.9 (1.2) 17.7
After tax earnings 20.9 (1.7) 19.2 4.9 (2.3) 2.6
Net Income 14.9 (1.7) 13.2 4.9 (2.3) 2.6
Per share data:
After tax earnings per share $ 2.84 $ .18 $ 3.02 $ .60 $ (.23) $ .37
Net income per share 2.03 .05 2.08 .60 (.23) .37
Earnings per share denominator
(in thousands)
Primary 7,344 (1,000) 6,344 8,110 (1,000) 7,110
Fully diluted 7,344 (1,000) 6,344 8,110 (1,000) 7,110
Ratio of earnings to combined
fixed charges and preferred
stock dividends 1.69 (.07) 1.62 1.30 (.07) 1.23
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The consolidated pro forma balance sheet information as of September 30, 1997
and December 31, 1996 assumes that the repurchase of Shares by the Company
pursuant to the Offer had occurred as of September 30, 1997 and December 31,
1996, respectively. The consolidated pro forma income statement information for
the periods ended September 30, 1997 and December 31, 1996, assumes that the
repurchase of Shares by the Company pursuant to the Offer had occurred as of
January 1, 1997 and January 1, 1996, respectively, and includes only those
adjustments that are expected to have a continuing impact on the
20
Company. The adjustments presented in the pro forma financial information
reflect the following assumptions:
a) The consolidated pro forma balance sheet information assumes that (i) the
$125.4 million of funds used by the Company to repurchase 1,000,000 Shares
pursuant to the Offer and pay related fees and expenses are derived from
sales and maturities of short-term investments and sales of a portion of
its passive investments (approximately $60.0 million), and (ii) Shares
repurchased by the Company pursuant to the Offer are retired.
b) The consolidated pro forma income information assumes that the annualized
yield on short-term investments used to fund the repurchase of Shares was
5.40% and 5.30% for the periods ended September 30, 1997 and December 31,
1996, respectively. This assumed yield approximates the average yield
actually experienced with respect to the Company's short-term investments
during the period indicated.
c) The consolidated pro forma income statement information excludes the
effects on the Company's net investment income and realized investments
gains in connection with the pro forma sale of $60.0 million of common
stocks and other long-term investments as such amounts are not
determinable.
The consolidated pro forma income statement information also assumes that
the effective tax rate related to the reduction in net 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.
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
21
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. It is expected that the Rights will expire
in accordance with their terms on November 25, 1997.
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, 1996, the
Company's Quarterly Report on Form 10-Q for the three and six-month periods
ended June 30, 1997 and the Company's third quarter 1997 earnings release dated
October 27, 1997. 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, the Commission maintains a Website
(http:/ / www.sec.gov) that also contains such reports, proxy statements and
other information filed by the Company. 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 1,000,000 Shares are purchased by the Company pursuant to the Offer at
$125.00 per Share (the maximum amount contemplated in the Offer), net to the
seller in cash, the aggregate cost to the Company, including all related fees
and expenses of the Offer, will be approximately $125.4 million. The Company
anticipates that it will fund the purchase of Shares pursuant to the Offer
through sales and maturities of short-term investments and the sale of a portion
of its passive investment portfolio.
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. Capital gains of individuals, estates and
trusts generally are subject to a maximum Federal income tax rate of (i) 39.6%
if, at the time the Company accepts the Shares for payment, the shareholder held
the Shares for not more than one year, (ii) 28% if the shareholder held such
Shares for more than one year but not more than 18 months at such time and (iii)
20% if the shareholder held such
22
Shares for more than 18 months at such time. Capital gains of corporations
generally are taxed at the Federal income tax rates applicable to corporate
ordinary income.
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 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
(3.3%) 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
ownership or proportionate interest is terminated or 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. Shareholders should be aware that their ability to satisfy any
of the foregoing tests also may be affected by proration pursuant to the Offer.
Therefore, a shareholder (other than an Odd Lot Holder who tenders all of his or
her Shares at or below the Purchase Price) can be given no assurance, even if he
or she tenders all the shareholder's Shares, that the Company will purchase a
sufficient number of such Shares to permit the shareholder to satisfy any of the
foregoing tests.
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 under Section 243 of the Code. The dividends-received deduction is
subject to certain limitations, and may not be available if the corporate
shareholder does not satisfy certain recently amended 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 (which would include the tax
basis of the Shares sold in the Offer) would be reduced, but not below zero, by
the amount of the portion of the dividend which is untaxed due to the
dividends-received deduction. In general, any amount of the nontaxed portion of
the dividend in excess of the shareholder's basis for the retained Shares would
be currently taxable as gain from the sale of 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.) For this purpose, a "foreign shareholder"
is a beneficial owner of Shares that is not a "U.S. Holder". A U.S. Holder is a
beneficial owner that is (i) a citizen or resident of the United States, (ii) a
corporation or other entity taxable as a corporation created or organized in or
under the laws of the United States or any political subdivision thereof, (iii)
an estate or trust the income of which is subject to United States Federal
income taxation regardless of the source of such income or (iv) a person or
entity whose worldwide income and gain are otherwise subject to United States
Federal income taxation on a net income basis.
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
23
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, except for the purchase by the Company of: (a) 790 Shares for $105
per Share on September 11, 1997, (b) 156 Shares for $106 7/16 per Share on
September 19, 1997, (c) 52 Shares for $105 5/8 per Share on September 26, 1997,
(d) 1,504 Shares for $108 per Share on October 1, 1997, (e) 543 Shares for $110
9/16 per Share on October 15, 1997 and (f) 1,356 Shares for $108 1/4 per Share
on October 20, 1997.
These purchases of Shares were made pursuant to a prearranged program with the
Allianz Plan. The Company has agreed to purchase Shares offered to it from time
to time by the Allianz Plan trustee at a purchase price equal to the closing
price of Shares, as reported on the NYSE Composite Tape, on the day the
transaction is executed.
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).
The Company has been informed by its directors and executive officers that they
do not intend to tender Shares owned by them pursuant to the Offer, except that
John J. Byrne, the Company's current Chairman and former President and Chief
Executive Officer, has informed the Company that he and/or his affiliates
currently intend to tender 100,000 Shares 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. CERTAIN PLANS
ALLIANZ ASSET ACCUMULATION PLAN. Allianz Plan participants should receive an
Allianz Plan Tender Offer Instruction Form in the materials sent to them on
behalf of the trustee. Allianz Plan participants who wish to have the trustee
tender any of or all Shares allocated to their respective accounts ("Allianz
Plan Shares") should so indicate by completing, executing and returning an
Allianz Plan Tender Offer Instruction Form to the trustee. Allianz Plan
participants may not use the Letter of Transmittal to direct the trustee to
tender their respective Allianz Plan Shares but must use the Allianz Plan Tender
Offer Instruction Form. Under ERISA, the trustee may be obligated to take
action and make an independent decision
24
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. Directions as to the subsequent
reinvestment of the proceeds from the tendered Shares will be followed by the
trustee. Allianz Plan participants should note that proceeds of Shares tendered
by Allianz Plan participants will be paid directly to the Allianz Plan trustee
for crediting to Allianz Plan participant accounts. ALLIANZ PLAN PARTICIPANTS
ARE URGED TO READ THE ALLIANZ PLAN TENDER OFFER INSTRUCTION FORM AND RELATED
MATERIALS CAREFULLY.
NEITHER THE COMPANY NOR THE BOARD MAKES ANY RECOMMENDATION AS TO WHETHER ANY
PARTICIPANT IN THE ALLIANZ PLAN SHOULD TENDER ANY OF OR ALL THEIR RESPECTIVE
ALLIANZ PLAN SHARES PURSUANT TO THE OFFER. EACH PARTICIPANT IN THE ALLIANZ PLAN
MUST MAKE SUCH PARTICIPANT'S OWN DECISION WHETHER TO TENDER ALLIANZ PLAN SHARES,
AND, IF SO, HOW MANY SUCH SHARES.
SOURCE ONE MORTGAGE SERVICES CORPORATION EMPLOYEE STOCK OWNERSHIP AND 401(K)
SAVINGS PLAN. Source One Plan participants should receive a Source One Plan
Tender Offer Instruction Form in the materials sent to them on behalf of the
trustee. Source One Plan participants who wish to have the trustee tender any
of or all Shares allocated to their respective accounts ("Source One Plan
Shares") should so indicate by completing, executing and returning a Source One
Plan Tender Offer Instruction Form to the trustee. Source One Plan participants
may not use the Letter of Transmittal to direct the trustee to tender their
respective Source One Plan Shares but must use the Source One Plan 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. Directions as
to the subsequent reinvestment of the proceeds from the tendered Shares will be
followed by the trustee. Source One Plan participants should note that proceeds
of Shares tendered by Source One Plan participants will be paid directly to the
Source One Plan trustee for crediting to Source One Plan participant accounts.
SOURCE ONE PLAN PARTICIPANTS ARE URGED TO READ THE SOURCE ONE PLAN TENDER OFFER
INSTRUCTION FORM AND RELATED MATERIALS CAREFULLY.
NEITHER THE COMPANY NOR THE BOARD MAKES ANY RECOMMENDATION AS TO WHETHER ANY
PARTICIPANT IN THE SOURCE ONE PLAN SHOULD TENDER ANY OF OR ALL THEIR RESPECTIVE
SOURCE ONE PLAN SHARES PURSUANT TO THE OFFER. EACH PARTICIPANT IN THE SOURCE
ONE PLAN MUST MAKE SUCH PARTICIPANT'S OWN DECISION WHETHER TO TENDER SOURCE ONE
PLAN SHARES, AND, IF SO, HOW MANY SUCH SHARES.
VALLEY GROUP EMPLOYEES' 401(K) SAVINGS PLAN. Valley Group Plan participants
should receive a Valley Group Plan Tender Offer Instruction Form in the
materials sent to them on behalf of the trustee. Valley Group Plan participants
who wish to have the trustee tender any of or all Shares allocated to their
respective accounts ("Valley Group Plan Shares") should so indicate by
completing, executing and returning a Valley Group Plan Tender Offer Instruction
Form to the trustee. Valley Group Plan participants may not use the Letter of
Transmittal to direct the trustee to tender their respective Valley Group Plan
Shares but must use the Valley Group Plan 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. Directions as to the
subsequent reinvestment of the proceeds from the tendered Shares will be
followed by the trustee. Valley Group Plan participants should note that
proceeds of Shares tendered by Valley Group Plan participants will be paid
directly to the Valley Group Plan trustee for crediting to Valley Group Plan
participant accounts. VALLEY GROUP PLAN PARTICIPANTS ARE URGED TO READ THE
VALLEY GROUP PLAN TENDER OFFER INSTRUCTION FORM AND RELATED MATERIALS CAREFULLY.
NEITHER THE COMPANY NOR THE BOARD MAKES ANY RECOMMENDATION AS TO WHETHER ANY
PARTICIPANT IN THE VALLEY GROUP PLAN SHOULD TENDER ANY OF OR ALL THEIR
RESPECTIVE VALLEY
25
GROUP PLAN SHARES PURSUANT TO THE OFFER. EACH PARTICIPANT IN THE VALLEY GROUP
PLAN MUST MAKE SUCH PARTICIPANT'S OWN DECISION WHETHER TO TENDER VALLEY GROUP
PLAN 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 withdraw or 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 under circumstances including but not limited to the
occurrence of any of the conditions specified in Section 6 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 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 increasing or
decreasing the number of Shares being sought in 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 calculated to
inform shareholders of such change to the extent required by Rules 13e-4(d)(2)
and 13e-4(e)(2) promulgated under the Exchange Act. 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 extend the Offer to the extent required by applicable rules or
regulations 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
Lehman Brothers Inc. ("Lehman Brothers") has been retained by the Company to act
as Dealer Manager in connection with the Offer. Lehman Brothers will receive a
fee of up to $200,000 for its services as Dealer Manager. The Company has also
agreed to reimburse Lehman Brothers for certain reasonable out-of-pocket
expenses incurred in connection with the Offer, including fees and disbursements
of counsel, and to indemnify Lehman Brothers against certain liabilities,
including certain liabilities under the Federal securities laws.
26
Lehman Brothers has rendered various investment banking and other advisory
services to the Company in the past, for which it has received customary
compensation, and may continue to render similar services to the Company in the
future.
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 and the Dealer Manager will assist shareholders who
request assistance in connection with the Offer. The Information Agent and the
Dealer Manager may contact holders of Shares by mail, telephone, telex,
telegraph, fax and personal interviews 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 to, or 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 (other than Lehman Brothers) 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 7 of the Letter of Transmittal.
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.
November 3, 1997
27
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
or
201-222-4721
BY MAIL: BY HAND: BY OVERNIGHT COURIER:
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 - FAE c/o The Depository Trust Company Suite 4680 - FAE
P.O. Box 2569 55 Water Street 14 Wall Street - 8th Floor
Jersey City, NJ DTC TAD New York, NY 10005
07303-2569 Vietnam Veterans Memorial Plaza
New York, NY 10041
FOR INFORMATION:
1-800-409-7443
- --------------------------------------------------------------------------------
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 or the Dealer Manager. Shareholders may
also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Offer.
- --------------------------------------------------------------------------------
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
Three World Financial Center
200 Vesey Street
New York, NY 10285
(212) 526-7850
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 NOVEMBER 3, 1997
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, DECEMBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
TO: FIRST CHICAGO TRUST COMPANY OF NEW YORK, DEPOSITARY
BY HAND:
TENDERS & EXCHANGES
C/O THE DEPOSITORY TRUST COMPANY
55 WATER STREET
BY MAIL: VIETNAM VETERANS MEMORIAL PLAZA BY OVERNIGHT COURIER:
TENDERS & EXCHANGES DTC TAD TENDERS & EXCHANGES
SUITE 4660 - FAE NEW YORK, NY 10041 SUITE 4680 - FAE
P.O. BOX 2569 14 WALL STREET -
JERSEY CITY, NJ 8TH FLOOR
07303-2569 NEW YORK, NY 10005
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN 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") 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 October
27, 1997 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 8, 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.
- -------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
- -------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) Shares Tendered
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) (Attach additional list if necessary)
- --------------------------------------------- --------------------------------------------
Number of
Shares Number of
Certificate Represented by Shares
Number(s)* Certificate(s)* Tendered**
------------ ----------------- -----------
------------ ----------------- -----------
------------ ----------------- -----------
------------ ----------------- -----------
TOTAL SHARES
- -------------------------------------------------------------------------------------------
* 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.
- -------------------------------------------------------------------------------------------
2
/ / 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 / / 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 / / 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 the price per
Share indicated in this letter, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated November 3,
1997 (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 (as defined below ) with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer of
such Shares on the Company's books; and
3
(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.
The undersigned understands that the Company will determine a single per
Share price (not greater than $125.00 nor less than $105.00 per Share), net to
the Seller in cash (the "Purchase Price"), that it will pay for
Shares validly tendered and not withdrawn pursuant to the Offer, taking into
account the number of Shares so tendered and the prices specified by tendering
shareholders. The undersigned understands that the Company will select the
lowest Purchase Price that will allow it to purchase 1,000,000 Shares (or such
lesser number of Shares as are validly tendered at prices not greater than
$125.00 nor less than $105.00 per Share) validly tendered and not withdrawn
pursuant to the Offer. The undersigned understands that all Shares properly
tendered at prices at or below the Purchase Price 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 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 in 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
4
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.
- --------------------------------------------------------------------------------
PRICE (IN DOLLARS) PER SHARE AT WHICH
SHARES ARE BEING TENDERED
-------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE,
A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED
MUST BE USED. (SEE INSTRUCTION 5)
-------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED,
THERE IS NO VALID TENDER OF SHARES.
-------------------------
SHARES TENDERED AT PRICE DETERMINED
BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having the Company purchase
all the Shares the undersigned is tendering (subject to the possibility of
proration). Accordingly, by checking this one box INSTEAD OF ONE OF THE
PRICE BOXES BELOW, the undersigned hereby tenders Shares at, and is willing
to accept, the Purchase Price resulting from the Dutch auction tender
process. This action could result in receiving a price per share as low as
$105.00 or as high as $125.00.
**CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW**
SHARES TENDERED AT PRICE
DETERMINED BY SHAREHOLDER
/ / $105 / / $112 / / $119
/ / $106 / / $113 / / $120
/ / $107 / / $114 / / $121
/ / $108 / / $115 / / $122
/ / $109 / / $116 / / $123
/ / $110 / / $117 / / $124
/ / $111 / / $118 / / $125
- --------------------------------------------------------------------------------
5
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
- --------------------------------------------------------------------------------
ODD LOTS
(SEE INSTRUCTION 8)
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 October 27, 1997,
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 October 27,
1997, 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 October 27, 1997, and will continue to own beneficially until the
Expiration Date an aggregate of fewer than 100 Shares, and is
tendering all such Shares.
If you do not wish to specify a Purchase Price, check the following box, in
which case you will be deemed to have tendered at the Purchase Price determined
by the Company in accordance with the terms of the Offer (persons checking this
box need not indicate the price per Share in the box entitled "Price (In
Dollars) Per Share At Which Shares Are Being Tendered" in this Letter of
Transmittal. / /
- --------------------------------------------------------------------------------
6
- ---------------------------------------- -------------------------------------
SPECIAL DELIVERY INSTRUCTIONS SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 10) (SEE INSTRUCTIONS 1, 4, 6, 7,
To be completed ONLY if the check for 9 AND 10)
the aggregate Purchase Price of Shares
purchased and/or certificates for To be completed ONLY if the check for
Shares not tendered or not purchased the aggregate Purchase Price of
are to be mailed to someone other than Shares purchased and/or certificates
the undersigned or to the undersigned at for Shares not tendered or not
an address other than that shown below purchased are to be issued in the
the undersigned's signature. name of someone other than the
undersigned.
Mail check and/or certificates to:
Issue any check and/or
Name_______________________________ certificates to:
(Please Print) Name________________________________
(Please Print)
Address____________________________
___________________________________ Address_____________________________
___________________________________ ____________________________________
(Zip Code) (Taxpayer Identification Number)
- ---------------------------------------- -------------------------------------
- --------------------------------------------------------------------------------
SIGN HERE
(SEE INSTRUCTIONS 1 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Signature(s) of Owner(s)
Name(s)_________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title)___________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number__________________________________________________
Taxpayer Identification Number__________________________________________________
(See Instruction 12)
Dated:__________________________________________________________________________
(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 6.)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 6)
Authorized Signature____________________________________________________________
- --------------------------------------------------------------------------------
7
-----------------------------------------------------------------
Name __________________________________________________
(Please Print)
Title _________________________________________________
Name of Firm __________________________________________
Address _______________________________________________
_______________________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________
Dated:_________________________________________________
-----------------------------------------------------------------
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.
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
8
- -----------------------------------------------------------------------------------------------
Part 1 - PLEASE PROVIDE YOUR TIN IN Social security number(s)
THE BOX AT RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW ________/_____/__________
SUBSTITUTE
FORM W-9 OR
Employer identification
number(s)
PAYER'S REQUEST FOR _________/_______________
TAXPAYER 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_____________________________________________________________
- -----------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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.
9
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 6.
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 three 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.
10
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING STOCK CERTIFICATES, THIS
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.
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. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to
be validly tendered, the shareholder must check the box indicating the price per
Share at which such shareholder is tendering Shares under "Price (In Dollars)
Per Share At Which Shares Are Being Tendered" in this Letter of Transmittal.
ONLY ONE BOX MAY BE CHECKED. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS
CHECKED, THERE IS NO VALID TENDER OF SHARES. A shareholder wishing to tender
portions of such shareholder's Share holdings at different prices must complete
a separate Letter of Transmittal for each price at which such shareholder wishes
to tender each such portion of such shareholder's Shares. The same Shares
cannot be tendered (unless previously validly withdrawn as provided in Section 4
of the Offer to Purchase) at more than one price. Shareholders wishing to
maximize the possibility that their Shares will be purchased at the relevant
Purchase Price may check the box on the Letter of Transmittal marked "Shares
Tendered at Purchase Price Determined by Dutch Auction." Checking this box may
result in a Purchase Price of the Shares so tendered at the minimum price of
$105.00.
6. 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
11
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.
7. 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.
8. ODD LOTS. As described in Sections 1 and 2 of the Offer to Purchase,
if the number of Shares properly tendered at or above the Purchase Price and not
withdrawn before the Expiration Date is greater than 1,000,000 (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 at or below
the Purchase Price and not withdrawn before the Expiration Date by any
shareholder who beneficially owned as of the close of business on October 27,
1997, 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.
9. 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.
10. 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.
12
11. 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 Dealer Manager or the
Information Agent at their respective addresses or telephone numbers set forth
below.
12. 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.
13. FOREIGN SHAREHOLDER WITHHOLDING. Foreign shareholders (as defined in
Section 11 of the Offer to Purchase) 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).
14. CERTAIN PLANS. Participants in the Allianz Asset Accumulation Plan
(the "Allianz Plan"), the Source One Mortgage Services Corporation Employee
Stock Ownership and 401(k) Savings Plan (the "Source One Plan") or the Valley
Group Employees' 401(k) Savings Plan (the "Valley Group Plan") who wish to have
the trustee of the Allianz Plan, the Source One Plan or the Valley Group Plan,
as the case may be, tender Shares allocated to their accounts should so indicate
by completing, executing and returning to the applicable trustee the instruction
form for Allianz Plan, Source One Plan or Valley Group Plan, as the case may be,
participants included in the notices sent on behalf of the respective trustees
of such Plans. Participants in the Allianz Plan, the Source One Plan or the
Valley Group Plan may not use the Letter of Transmittal to direct the trustee of
the Allianz Plan, the Source One Plan or the Valley Group Plan, as the case may
be, to tender Shares allocated to such shareholders under the Allianz Plan, the
Source One Plan or the Valley Group Plan, as the case may be, but must use the
separate instruction form sent to them. See Sections 3 and 14 of the Offer to
Purchase.
13
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 HAND:
TENDERS & EXCHANGES
C/O THE DEPOSITORY TRUST COMPANY
55 WATER STREET
BY MAIL: VIETNAM VETERANS MEMORIAL PLAZA BY OVERNIGHT COURIER:
TENDERS & EXCHANGES DTC TAD TENDERS & EXCHANGES
SUITE 4660 - FAE NEW YORK, NY 10041 SUITE 4680 - FAE
P.O. BOX 2569 14 WALL STREET -
JERSEY CITY, NJ 8TH FLOOR
07303-2569 NEW YORK, NY 10005
FOR INFORMATION:
1-800-409-7443
- --------------------------------------------------------------------------------
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 or the Dealer Manager. Shareholders may
also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Offer.
- --------------------------------------------------------------------------------
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
Three World Financial Center
200 Vesey Street
New York, NY 10285
(212) 526-7850
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.
- ---------------------------------------------------------- -----------------------------------------------
FOR THIS TYPE OF ACCOUNT GIVE THE SOCIAL SECURITY NUMBER OF--
- ---------------------------------------------------------- -----------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined
funds, any one of the individuals(1)
3. Husband and wife (joint account) The actual owner of the account or, if joint
funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the only
contributor, the minor(1)
6. Account in the name of guardian or The ward, minor, or incompetent person(3)
committee for a designated ward, minor,
or incompetent person
7. a. The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b. So-called trust account that is not The actual owner(1)
a legal or valid trust under State law
8. Sole proprietorship account The owner(4)
- ---------------------------------------------------------- -----------------------------------------------
FOR THIS TYPE OF ACCOUNT GIVE THE EMPLOYER INDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------- -----------------------------------------------
9. A valid trust, estate, or pension trust The legal entity (Do not furnish the
identifying number of the personal
representative or trustee unless the legal
entity itself is not desiganted in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name The partnership
of the business
13. Association, club or other tax- The organization
exempt organization
13. A broker or registered nominee The broker or nominee
14. Account will the Department of Agriculture in The public entity
the name of a public entity (such as a State or
local government, school district, or prison)
that receives agricultural program payments
- --------------------------
(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.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER Payments of interest not generally subject to backup
withhoding include the following:
If you don't have a taxpayer identification number or
you don't know your number, obtain Form SS-5, Application - Payments of interest on obligations issued by
for A Social Security Number Card, or Form SS-4, individuals. Note: You may be subject to backup
Application for Employer Identification Number, at the withholding if this interest is $600 or more and is
local office of the Social Security Administration or the paid in the course of the payers trade or business
Internal Revenue Service and apply for a number. and you have not provided your correct taxpayer
identification number to the payer.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
- Payments of tax-exempt interest (including
Payees specifically exempted from backup withholding on exempt-interest dividends under section 852).
ALL payments include the following.
- Payments described in Section 6049(b)(5) to
- - A corporation. non-resident aliens.
- - A financial institution. - Payements on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- - An organization exempt from tax under section 501(a),
an individual retirement plan or a custodial account - Payments made to a nominee.
under section 403(b)(7).
Exempt payees described above should file Form W-9 to
- - The United States or any agency or instrumentality avoid possible erroneous backup withholding. FILE THIS
thereof. FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION
NUMBER, WRITE EXEMPT ON THE FACE OF THE FORM AND RETURN
the United States, or any subdivision or instrumentality IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS,
thereof. OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
- - A foreign government, a political subdivision of a Certain payments, other than interest, dividends and
foreign government, or any agency or instrumentality patronage dividends, that are not subject to information
thereof. reporting are also not subject to backup withholding. For
details, see the regulations under sections 6041,
- - An international organization or any agency or 6041A(a), 6045, 6050A and 6050N, and the regulations
instrumentality thereof. under those sections.
- - A registered dealer in securities or commodities PRIVACY ACT NOTICE.--Section 6109 requires most
registered in the U.S. or a possession of the U.S. recipients of dividend, interest, or other payments to
give taxpayer identification numbers to payers who must
- - A real estate investment trust. report the payments to IRS. IRS uses the numbers for
identification purposes. Payers must be given the numbers
- - A common trust fund operated by a bank under whether or not recipients are required to file tax
section 584(a). returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee
- - An exempt charitable remainder trust, or a who does not furnish a taxpayer identification number to
non-exempt trust described in section 4947(a)(1). a payer. Certain penalties may also apply.
- - An entity registered at all times during the tax year PENALTIES
under the Investment Company Act of 1940.
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER
- - A foreign central bank of issue. IDENTIFICATION NUMBER.--If you fail to furnish your
taxpayer identification number to a payer, you are
Payments of dividends and patronage dividends not subject to a penalty of $50 for each such failure is due
generally subject to backup withholding include the to reasonable cause and not to willful neglect.
- - Payments to nonresident aliens subject to withholding (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO
under section 1441. WITHHOLDING.--If you make a false statement with no
reasonable basis which results in no imposition of backup
- - Payments to partnerships not engaged in a trade or withholding, you are subject to a penalty of $500.
business in the U.S. and which have at least one
nonresident alien partner. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--
Falsifying certifications or affirmations may subject you
- - Payments of patronage dividends where the amount to criminal penalties including fines and/or imprisonment.
renewed is not paid in money.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
- - Payments made by certain foreign organizations. CONSULTANT OR THE INTERNAL REVENUE SERVICE.
- - Payments made to a nominee. Unless otherwise noted herein, allreferences to section
numbers or regulations are references to the Internal
Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.
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 November 3, 1997 (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 HAND:
TENDERS & EXCHANGES
C/O THE DEPOSITORY TRUST COMPANY
55 WATER STREET
BY MAIL: VIETNAM VETERANS MEMORIAL PLAZA BY OVERNIGHT COURIER:
TENDERS & EXCHANGES DTC TAD TENDERS & EXCHANGES
SUITE 4660 - FAE NEW YORK, NY 10041 SUITE 4680 - FAE
P.O. BOX 2569 14 WALL STREET -
JERSEY CITY, NJ 8TH FLOOR
07303-2569 NEW YORK, NY 10005
FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
Tenders & Exchanges
(201) 222-4720
or
(201) 222-4721
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.
2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, 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.
- --------------------------------------------------------------------------------
PRICE (IN DOLLARS) PER SHARE AT WHICH
SHARES ARE BEING TENDERED
--------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE,
A SEPARATE NOTICE OF GUARANTEED DELIVERY FOR EACH
PRICE SPECIFIED MUST BE USED.
--------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED,
THERE IS NO VALID TENDER OF SHARES.
- --------------------------------------------------------------------------------
SHARES TENDERED AT PRICE DETERMINED
BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having the
Company purchase all the Shares the undersigned is tendering
(subject to the possibility of proration). Accordingly, by
checking this one box INSTEAD OF ONE OF THE PRICE BOXES BELOW,
the undersigned hereby tenders Shares at, and is willing to
accept, the Purchase Price resulting from the Dutch auction
tender process. This action could result in receiving a price
per share as low as $105.00 or as high as $125.00.
**CHECK EITHER THE BOX ABOVE OR CHECK ON BOX BELOW**
- --------------------------------------------------------------------------------
SHARES TENDERED AT PRICE
DETERMINED BY SHAREHOLDER
/ / $105 / / $112 / / $119
/ / $106 / / $113 / / $120
/ / $107 / / $114 / / $121
/ / $108 / / $115 / / $122
/ / $109 / / $116 / / $123
/ / $110 / / $117 / / $124
/ / $111 / / $118 / / $125
- --------------------------------------------------------------------------------
3
- --------------------------------------------------------------------------------
ODD LOTS
(SEE INSTRUCTION 8 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 OCTOBER 27 , 1997,
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 OCTOBER 27,
1997, 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 OCTOBER 27, 1997, AND WILL CONTINUE TO
OWN BENEFICIALLY UNTIL THE EXPIRATION DATE AN AGGREGATE OF FEWER THAN
100 SHARES, AND IS TENDERING ALL SUCH SHARES.
IF YOU DO NOT WISH TO SPECIFY A PURCHASE PRICE, CHECK THE FOLLOWING BOX, IN
WHICH CASE YOU WILL BE DEEMED TO HAVE TENDERED AT THE PURCHASE PRICE DETERMINED
BY THE COMPANY IN ACCORDANCE WITH THE TERMS OF THE OFFER (PERSONS CHECKING THIS
BOX NEED NOT INDICATE THE PRICE PER SHARE IN THE BOX ENTITLED "PRICE (IN
DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED" ABOVE). / /
- --------------------------------------------------------------------------------
No. of Shares tendered SIGN HERE
- ----------------------------------- -----------------------------------
(Signature(s))
Certificate Nos. (if available):
-----------------------------------
(Signature(s))
If Shares will be delivered by
book-entry transfer: -----------------------------------
(Name(s)) (Please Print)
Name of Tendering Institution:
- ----------------------------------- -----------------------------------
(Address)
- -----------------------------------
-----------------------------------
Account No. (Zip Code)
------------------------
at: -----------------------------------
/ / The Depository Trust Company (Area Code and Telephone No.)
/ / Philadelphia Depository Trust
Company
4
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 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 THREE 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:__________________________________
- --------------------------------------------------------------------------------
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST BE
SENT WITH THE LETTER OF TRANSMITTAL
Exhibit (a)(4)
- --------
FUND JOHN J. BYRNE
AMERICAN CHAIRMAN
- --------
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
80 SOUTH MAIN STREET
HANOVER, NEW HAMPSHIRE 03755
November 3, 1997
Dear Fellow Shareholder:
I am announcing my final tender offer as Chairman of your Company.
Fund American is offering to purchase up to 1,000,000 shares of its Common Stock
from shareholders at a cash price of no less than $105 per share and no more
than $125 per share.
The style of this tender is a modified Dutch auction where you pick the price
within a presented range. Further procedural details are contained in the
documents enclosed. The Byrne family and its associated trusts will tender
100,000 of its shares at $116 per share. I am participating in this tender
because I recognize that the stock is thinly traded and can be somewhat illiquid
at times. Through this tender offer, all shareholders are being provided with
an opportunity to freely sell their shares without affecting the market price of
the stock and without incurring customary transaction costs.
Many of you will note that I recently retired as Fund American's President and
CEO. Tom Kemp, my colleague for many years, has already moved me out of my
former corner office in Hanover. I now have to stand in the hallway - so I
expect I will only serve briefly as non-executive Chairman until a successor is
named for that role. My new role, as a fellow owner, will be to cheer wildly
from the bleachers (not the hallway) for Tom and his team.
We must deserve the capital that we manage. Since the sale of Fireman's Fund in
1991, our primary strategic goal has been to reinvest proceeds into operating
businesses in which management has knowledge and experience or, if no better
opportunities exist, return those funds to our owners. Although we have
acquired a fine collection of new insurance operations over the last four years,
we have also returned a significant amount of capital to shareholders. Giving
effect to the offer, our assets will consist almost entirely of operating
businesses and we do not expect to repurchase shares in the future.
Now for the legal stuff. 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 I NOR 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 AND THE
PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED.
Respectfully submitted,
JOHN J. BYRNE
Exhibit (a)(5)
LEHMAN BROTHERS
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE NOT GREATER THAN
$125.00 NOR LESS THAN $105.00 NET PER SHARE
November 3, 1997
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 Dealer Manager 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 prices not
greater than $125.00 nor less than $105.00, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
November 3, 1997 (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.
The Company will determine a single price (not greater than $125.00 nor less
than $105.00 per Share), net to the seller in cash, that it will pay for Shares
validly tendered and not withdrawn pursuant to the Offer (the "Purchase Price"),
taking into account the number of Shares so tendered and the prices specified by
tendering shareholders. The Company will select the lowest Purchase Price that
will allow it to purchase 1,000,000 Shares (or such lesser number of Shares as
is validly tendered at prices not greater than $125.00 nor less than $105.00 per
Share) and not withdrawn pursuant to the Offer.
All Shares properly tendered at or above the Purchase Price 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 but subject to applicable legal requirements, to purchase more than
1,000,000 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 November 3, 1997;
(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, non-executive Chairman of the Company, dated
November 3, 1997, to shareholders of the Company; and
(6) Return envelope addressed to First Chicago Trust Company of New York, the
Depositary.
2
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, DECEMBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
No fees or commissions will be payable to brokers, dealers or other persons
(other than the Dealer Manager) 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 7 of the Letter of
Transmittal.
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 three 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 Information Agent or the Dealer Manager at their
respective addresses and telephone numbers set forth on the back cover of the
enclosed Offer to Purchase.
Very truly yours,
LEHMAN BROTHERS
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE COMPANY, THE DEALER MANAGER, 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.
Exhibit (a)(6)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE NOT GREATER THAN $125.00
NOR LESS THAN $105.00 NET PER SHARE
To Our Clients: November 3, 1997
Enclosed for your consideration are the Offer to Purchase dated November 3,
1997, 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 prices not greater than $125.00 nor less than $105.00
per Share, net to the seller in cash, upon the terms and subject to the
conditions of the Offer.
The Company will determine a single per Share price (not greater than $125.00
nor less than $105.00 per Share) (the "Purchase Price") that it will pay for the
Shares validly tendered pursuant to the Offer and not withdrawn, taking into
account the number of Shares so tendered and the prices specified by tendering
shareholders. The Company will select the lowest Purchase Price that will allow
it to purchase 1,000,000 Shares (or such lesser number of Shares as are validly
tendered at prices not greater than $125.00 nor less than $105.00 per Share) and
not withdrawn pursuant to the Offer.
All Shares properly tendered at or above the Purchase Price 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 tendered at prices greater than the Purchase Price and 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 but subject to any applicable legal
requirements, to purchase more than 1,000,000 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 at prices (in multiples of
$1.00), which cannot be greater than $125.00 nor less than $105.00 per
Share as indicated in the attached instruction form, net to you in cash.
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, December 1, 1997, unless the Offer
is extended.
4. The Offer is for 1,000,000 Shares, representing approximately 15.7% of the
Shares outstanding as of November 3, 1997, and approximately 13.6% 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 7 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 October 27, 1997,
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
2
Shares for purchase before proration, if any, of the purchase of other
Shares tendered at or below the Purchase Price.
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, DECEMBER 1, 1997, 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 at prices not greater than $125.00 nor less than
$105.00 per Share is greater than 1,000,000 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 at or below the Purchase Price and not
withdrawn before the Expiration Date by any shareholder who owned
beneficially as of the close of business on October 27, 1997, 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 at or below the Purchase Price 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.
3
INSTRUCTIONS
WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 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 November 3, 1997, 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 1,000,000 shares of its Common Stock, par value $1.00 per share
("Shares"), at prices not greater than $125.00 nor less than $105.00 per Share,
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.
4
PRICE (IN DOLLARS) PER SHARE AT WHICH
SHARES ARE BEING TENDERED
------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE,
A SEPARATE FORM FOR EACH PRICE SPECIFIED
MUST BE USED.
------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED
THERE IS NO VALID TENDER OF SHARES
------------------------
SHARES TENDERED AT PRICE DETERMINED
BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having the Company purchase
all the Shares the undersigned is tendering (subject to the possibility of
proration). Accordingly, by checking this one box INSTEAD OF ONE OF THE
PRICE BOXES BELOW, the undersigned hereby tenders Shares at, and is willing
to accept, the Purchase Price resulting from the Dutch auction tender
process. This action could result in receiving a price per Share as low as
$105.00 or as high as $125.00.
***CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW***
SHARES TENDERED AT PRICE
DETERMINED BY SHAREHOLDER
/ / $105 / / $112 / / $119
/ / $106 / / $113 / / $120
/ / $107 / / $114 / / $121
/ / $108 / / $115 / / $122
/ / $109 / / $116 / / $123
/ / $110 / / $117 / / $124
/ / $111 / / $118 / / $125
5
- --------------------------------------------------------------------------------
ODD LOTS
/ / By checking this box, the undersigned represents that the undersigned
beneficially owned as of the close of business on October 27, 1997, 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__________________________________________________________________________
Name(s) and Address(es)________________________________________________________
(Please Print)
___________________________________________________________________________
___________________________________________________________________________
Area Code and Telephone Number_________________________________________________
Taxpayer Identification or
Social Security Number_________________________________________________________
- --------------------------------------------------------------------------------
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
NOVEMBER 3, 1997, 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 1,000,000 SHARES OF ITS COMMON STOCK AT
A PURCHASE PRICE NOT GREATER THAN $125.00
NOR LESS THAN $105.00 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 prices not greater than
$125.00 nor less than $105.00 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
November 3, 1997 (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 at or above the
Purchase Price (as defined below) 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 1,000,000 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, DECEMBER 1, 1997, 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.
As promptly as practicable following the Expiration Date, the Company will
purchase up to 1,000,000 Shares or such lesser number of Shares as are properly
tendered (and not withdrawn in accordance with Section 4 of the Offer to
Purchase) prior to the Expiration Date at prices not greater than $125.00 nor
less than $105.00 per Share in cash. The term "Expiration Date" means 12:00
midnight, New York City time, on Monday, December 1, 1997, unless and until the
Company, in its sole discretion, shall have extended the period of time during
which the Offer will remain open, and thereby delay acceptance for payment of,
and payment for, any Shares by giving oral or written notice of such extension
to the Depositary and making a public announcement thereof.
The Company will, upon the terms and subject to the conditions of the
Offer, determine a single per Share price (not greater than $125.00 nor less
than $105.00 per Share) net to the seller in cash (the "Purchase Price") that it
will pay for Shares validly tendered and not withdrawn pursuant to the Offer,
taking into account the number of Shares so tendered and the prices specified by
the tendering shareholders. The Company will select the lowest Purchase Price
that will allow it to buy 1,000,000 Shares (or such lesser number as are validly
tendered at prices not greater than $125.00 nor less than $105.00 per Share).
All Shares validly tendered at prices at or below the Purchase Price and not
withdrawn will be purchased at the Purchase Price, subject to the terms and the
conditions of the Offer, including the proration terms thereof.
If the number of Shares properly tendered and not withdrawn before the
Expiration Date is greater than 1,000,000 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 at or above the Purchase Price and not withdrawn before the Expiration
Date by any shareholder who beneficially owned as of the close of business on
October 27, 1997, 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 at or above the Purchase Price 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 Tuesday, December 30, 1997. 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 requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
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 or the Dealer Manager 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 DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
Three World Financial Center
200 Vesey Street
New York, New York 10285
(212) 526-7850
THE DEPOSITARY AND THE INFORMATION AGENT FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
P.O. Box 2569, STE 4660 - FAE
Jersey City, New Jersey 07303-2569
1-800-409-7443
Requests for materials may be telecopied to
201-222-4720
or
201-222-4721
November 3, 1997
================================================================================
Exhibit (a)(8)
- --------
FUND PRESS
AMERICAN RELEASE
- --------
CONTACT: Terry Baxter
603-640-2229
FUND AMERICAN ANNOUNCES DUTCH AUCTION CASH
TENDER OFFER FOR UP TO 1,000,000 SHARES
HANOVER, New Hampshire, October 30, 1997 - The Board of Directors of Fund
American Enterprises Holdings, Inc. today approved a "Dutch auction" cash tender
offer to purchase up to 1,000,000 shares of its common stock at prices not
greater than $125.00 nor less than $105.00 net per share. The tender offer is
expected to commence on Monday, November 3, 1997.
The Company's common stock closed today on the New York Stock Exchange at $108
1/8 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.
If the Offer commences on November 3, 1997, the proration period and withdrawal
rights are expected to expire at 12:00 midnight, New York City time, Monday,
December 1, 1997 unless the Offer is extended.
Neither the Company nor its Board of Directors makes any recommendations as to
whether any shareholder should participate in the Offer.
Fund American is traded on the New York Stock Exchange under the symbol FFC.
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
80 South Main Street
Hanover, New Hampshire 03755
603-643-1567
Exhibit (a)(9)
- --------
FUND PRESS
AMERICAN RELEASE
- ---------
CONTACT: Terry Baxter
603-640-2229
FUND AMERICAN COMMENCES DUTCH AUCTION CASH TENDER OFFER
FOR UP TO 1,000,000 SHARES
HANOVER, New Hampshire, November 3, 1997 - Fund American Enterprises Holdings,
Inc. today commenced its previously announced cash tender offer to purchase up
to 1,000,000 shares of its common stock at prices not greater than $125.00 nor
less than $105.00 per share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated November 3,
1997, 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, December 1, 1997 unless the Offer is
extended.
First Chicago Trust Company of New York is the Information Agent for the Offer
and can be reached at 1-800-438-0057. Lehman Brothers Inc. is the Dealer
Manager for the Offer.
None of the Company, its Board of Directors, the Dealer Manager or the
Information Agent makes any recommendation as to whether any shareholder should
participate in the Offer.
Exhibit 99(g)(1)
FUND AMERICAN REPORTS THIRD QUARTER RESULTS
HANOVER, New Hampshire, October 27, 1997-- Fund American Enterprises Holdings,
Inc. ended the 1997 third quarter with a book value per share of $102.14, an
increase of $11.33 from the December 31, 1996 book value per share of $90.81.
Fund American President and CEO Tom Kemp said, "1997 is developing just fine
thus far. I am pleased with operating results at all of our insurance
operations, however, these operating results have been muted by one-time charges
at our mortgage operations. Investment results have been quite satisfactory."
Fund American reported net income of $14.9 million, or $2.03 per share, for the
nine month period ended September 30,1997, compared to net income of $36.0
million, or $4.38 per share, for the nine month period ended September 30,1996.
For the 1997 third quarter Fund American reported net income of $15.4 million,
or $2.18 per share, versus net income of $3.7 million, or $.46 per share, in
1996. The 1997 nine month results include a $6.0 million after tax extraordinary
loss on early extinguishment of debt recorded in the second quarter by the
Company's mortgage banking subsidiary, Source One Mortgage Services Corporation.
The 1996 nine month results include a $27.5 million pretax, $17.9 million after
tax, recovery of Source One's valuation allowance associated with its
capitalized mortgage loan servicing asset due to an increase in market interest
rates.
INSURANCE OPERATIONS
Valley Insurance Companies (Valley), a Northwest region property-casualty
company which writes personal and commercial lines, posted a combined ratio of
100.4% for the 1997 year-to-date period versus a 101.0% for the comparable 1996
period. Valley had $59.0 million of earned premium in the 1997 year-to-date
period, an increase of $7.1 million from the comparable 1996 amount. The
operations of Charter Insurance Companies (Charter), which writes non-standard
automobile insurance in Texas, posted a combined ratio of 92.7% for the 1997
year-to-date period versus 97.9% for the comparable 1996 period. Charter had
$46.8 million of earned premium in the 1997 year-to-date period, an increase of
$23.7 million from the comparable 1996 amount. Premiums for Charter's automobile
policies written prior to 1996 were fully ceded to a former affiliate of
Charter. White Mountains Insurance Company, a newly formed New England region
property-casualty company which writes commercial lines, had $2.2 million of
earned premium in the 1997 year-to-date period.
The Company's unconsolidated insurance affiliates consist of a 25% economic
interest in Financial Security Assurance Holdings Ltd. (FSA), a 50% interest in
Folksamerica Holding Company, Inc. (Folksamerica) and a 33% interest in Main
Street America Holdings, Inc. (MSA). Fund American's earnings from these
affiliates increased to $14.8 million for the first nine months of 1997, from
$6.0 million for the comparable 1996 period. The increase is primarily due to
strong operating results at FSA and MSA and the inclusion in 1997 of earnings
from Folksamerica (which was acquired in June 1996). The strong operating
results at FSA in 1997 were the result of a steady domestic transaction flow as
well as several large, high premium European transactions. FSA's adjusted book
value at September 30,1997 was $37.88, up $3.35 from $34.53 at December 31,1996.
(more)
Folksamerica's operations performed well despite a continuing highly-competitive
reinsurance market. Folksamerica's September 30, 1997 book value per share
increased to $14.54, an increase of $2.42 from its 1996 year-end value of $12.12
per share. MSA's underwriting results for the first nine months of 1997 produced
a combined ratio of 102.9% vs. a 108.9% combined ratio for the 1996 comparable
period.
MORTGAGE BANKING OPERATIONS
For the 1997 year-to-date period, Source One had a net loss applicable to common
stock of $13.8 million versus net income of $24.7 million for the comparable
1996 period. Source One's 1997 results include the following one-time charges:
(i) a $6.0 million after tax extraordinary loss on early extinguishment of debt
and (ii) restructuring and compensation charges of $3.1 million pretax, $2.0
after tax, associated with Source One's plan to reduce its operating costs and
improve its financial performance. Source One's 1996 results include a $27.5
million pretax, $17.9 million after tax, recovery of Source One's valuation
allowance associated with its capitalized mortgage loan servicing asset due to
an increase in market interest rates. For the 1997 third quarter, Source One had
net income applicable to common stock of $.1 million versus net income of $7.3
million for the comparable 1997 period. Source One's 1997 year-to-date and third
quarter results include $6.2 million and $3.1 million of pretax earnings,
respectively, associated with the Company's investment in FSA which was
contributed to Source One during 1997 to provide additional credit support to
Source One's mortgage banking operations.
Source One's gross mortgage servicing revenue decreased to $20.7 million and
$69.4 million for the three and nine month periods ended September 30, 1997,
respectively, from $33.0 million and $101.1 million for the comparable 1996
periods. The decrease in gross mortgage servicing revenue during the 1997
periods is primarily the result of Source One's February 28, 1997 sale of
servicing rights with respect to $17.0 billion of mortgage loans. Source One's
net mortgage servicing revenue decreased to $7.5 million and $30.1 million for
the three and nine month periods ended September 30, 1997, respectively, from
$16.7 million and $69.9 million for the comparable 1996 periods. During 1997
Source One had pretax impairment to its capitalized mortgage loan servicing
asset of $8.2 million (due to decreases in market interest rates during 1997 as
compared to 1996) versus $27.5 million of pretax recoveries for the 1996
comparable period.
Net mortgage servicing revenue for the nine month period ended September 30,
1997 has been enhanced by $4.3 million of pretax net gains on financial
instruments which represents an increase in the market value of Source One's
investments in interest rate floor contracts and principal only swap agreements.
Net mortgage servicing revenue for the comparable 1996 period has been reduced
by $5.1 million of pretax net losses on financial instruments which represents a
decrease in these financial instruments during the 1996 period.
Net gain on sales of mortgages decreased to $15.7 million for the nine month
period ended September 30, 1997 from $32.2 million for the comparable 1996
period. The 1997 amount includes a $3.0 million pretax charge, recorded during
the 1997 second quarter, related to mortgage loans held for investment which
have been identified for sale and marked down from amortized cost to current
market value. The balance of the 1997 decline is primarily due to decreased
production and the related decrease in mortgage loan sales volume during 1997 as
compared to 1996.
(more)
In connection with the February 1997 servicing sale, Source One recorded a $4.3
million pretax loss ($2.8 million after tax) during the 1997 year-to-date
period. Source One will continue to subservice the mortgage loans pursuant to a
subservicing agreement at least until March 1998, June 1998 and August 1998 for
Federal Home Loan Mortgage (FHLMC) loans, Government National Mortgage
Association (GNMA) loans and Federal National Mortgage Association (FNMA) loans,
respectively. The subservicing period can be extended for two years beyond these
dates at the option of the purchaser.
OTHER OPERATIONS
Fund American's investment income is comprised primarily of interest income
earned on mortgage loans originated by Source One and the fixed maturity
investments of its consolidated insurance operations. Net investment income was
$46.3 million and $44.7 million, respectively, for the 1997 and 1996 nine month
periods.
Realized investment gains of $47.6 million for the first nine months of 1997
resulted principally from the sales of 834,895 shares of the common stock of
Veritas DGC Inc. for net proceeds of $20.9 million, 628,581 shares of the common
stock of Travelers Property Casualty Corp. for net proceeds of $22.9 million and
388,140 shares of the common stock of Mid Ocean Limited for net proceeds of
$22.6 million. Realized gains of $28.2 million for the comparable 1996 period
resulted principally from sales of 2,042,572 shares of the common stock of
Zurich Reinsurance Centre Holdings, Inc. for net proceeds of $61.8 million and
2,928,100 shares of the common stock of The Louisiana Land and Exploration
Company for net proceeds of $125.1 million.
Fund American shares of common stock are traded on the New York Stock Exchange
under the symbol FFC.
(more)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Consolidated Financial Summary
For the nine month periods ended September 30, 1997 and 1996
(in thousands, except per share amounts)
Nine months ended September 30,
-------------------------------
1997 1996
--------- ---------
Revenues:
Gross mortgage servicing revenue $ 69,380 $ 101,105
Amortization and impairment of capitalized mortgage servicing (43,524) (26,076)
Net gain (loss) on financial instruments 4,286 (5,127)
--------- ---------
Net mortgage servicing revenue 30,142 69,902
Net gain on sales of mortgages 15,740 32,217
Gain (loss) on sale of mortgage servicing rights (4,296) 10,080
Other mortgage operations revenue 13,771 13,578
Earned property and casualty insurance premiums 108,005 75,727
Earnings from unconsolidated insurance affiliates 14,834 6,043
Other insurance operations revenue 6,855 7,417
Net investment income 46,293 44,739
--------- ---------
Total revenues 231,344 259,703
--------- ---------
Interest expense 35,724 38,541
Compensation and benefits 72,603 73,214
General expenses 62,164 63,195
Insurance losses and loss adjustment expenses 72,865 52,184
--------- ---------
Total expenses 243,356 227,134
--------- ---------
Pretax operating earnings (loss) (12,012) 32,569
Net realized investment gains 47,634 28,154
--------- ---------
Pretax earnings 35,622 60,723
Income tax provision 14,735 24,757
--------- ---------
After tax earnings 20,887 35,966
Loss on early extinguishment of debt, after tax (5,975) --
--------- ---------
Net income $ 14,912 $ 35,966
========= =========
Earnings per share:
After tax earnings $ 2.84 $ 4.38
Net income 2.03 4.38
Average common shares outstanding 6,669 7,538
(more)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Consolidated Financial Summary
For the three month periods ended September 30, 1997 and 1996
(in thousands, except per share amounts)
Three months ended September 30,
--------------------------------
1997 1996
--------- ---------
Revenues:
Gross mortgage servicing revenue $ 20,741 $ 33,009
Amortization and impairment of capitalized mortgage servicing (19,301) (16,046)
Net gain (loss) on financial instruments 6,026 (225)
--------- ---------
Net mortgage servicing revenue 7,466 16,738
Net gain on sales of mortgages 6,480 7,748
Loss on sale of mortgage servicing rights -- 10,080
Other mortgage operations revenue 4,774 4,042
Earned property and casualty insurance premiums 36,751 30,392
Earnings from unconsolidated insurance affiliates 5,018 2,990
Other insurance operations revenue 2,271 2,127
Net investment income 16,620 15,731
--------- ---------
Total revenues 79,380 89,848
--------- ---------
Interest expense 12,394 11,517
Compensation and benefits 22,262 25,302
General expenses 19,558 22,700
Insurance losses and loss adjustment expenses 24,523 21,677
--------- ---------
Total expenses 78,737 81,196
--------- ---------
Pretax operating earnings 643 8,652
Net realized investment gains (losses) 21,824 (1,548)
--------- ---------
Pretax earnings 22,467 7,104
Income tax provision 7,099 3,438
--------- ---------
Net income $ 15,368 $ 3,666
========= =========
Net income per share $ 2.18 $ .46
Average common shares outstanding 6,387 7,298
September 30, December 31,
1997 1996
--------- ---------
Total investments $ 592,353 $ 560,158
Total shareholders' equity $ 718,944 $ 687,005
Common shares outstanding 6,381 6,905
Common and common equivalent shares outstanding 7,383 7,908
Book value per common and common equivalent share $ 102.14 $ 90.81
(more)
Financial Highlight
(dollars in millions)
CONSOLIDATED INSURANCE OPERATIONS
Three months ended Sept. 30, Nine months ended Sept. 30,
- --------------------------- ---------------------------
1997 1996 1997 1996
- ----------- --------- --------- ---------
$ 39.1 $ 34.8 Net written premium $ 112.9 $ 114.0
Ending statutory surplus $ 91.8 $ 80.3
Combined ratios:
Valley Insurance Companies (1)
66.7% 67.7% Loss and loss adjustment expense 64.8% 64.5%
34.7% 39.1% Underwriting expense 35.6% 36.5%
- ----------- --------- --------- ---------
101.4% 106.8% Combined 100.4% 101.0%
=========== ========= ========= =========
Charter Insurance Companies
62.8% 76.3% Loss and loss adjustment expense 68.9% 78.1%
24.2% 22.7% Underwriting expense 23.8% 19.8%
- ----------- --------- --------- ---------
87.0% 99.0% Combined 92.7% 97.9%
=========== ========= ========= =========
White Mountains Insurance Company
127.9% 91.0% Loss and loss adjustment expense 109.6% 91.7%
45.8% 62.0% Underwriting expense 53.6% 53.0%
- ----------- --------- --------- ---------
173.7% 153.0% Combined 163.2% 144.7%
=========== ========= ========= =========
(1) Valley Insurance Companies excluding its wholly-owned subsidiary White
Mountains Insurance Company
MORTGAGE BANKING OPERATIONS
Three months ended Sept. 30, Nine months ended Sept. 30,
- --------------------------- ---------------------------
1997 1996 1997 1996
- ----------- --------- --------- ---------
Loan Origination By Source
$ 420 $ 371 Retail $ 1,013 $ 1,471
829 420 Wholesale 1,704 1,632
- ----------- --------- --------- ---------
$ 1,249 $ 791 Total $ 2,717 $ 3,103
=========== ========= ========= =========
Servicing Portfolio (a)
$ 28,583 $ 31,329 Beginning balance $ 29,201 $ 31,831
1,249 791 Mortgage loan production 2,717 3,103
(831) (634) Regular payoffs (2,127) (2,417)
(357) (3,839) Sales of servicing and other (1,147) (4,870)
- ----------- --------- --------- ---------
$ 28,644 $ 27,647 Ending balance $ 28,644 $ 27,647
=========== ========= ========= =========
Owned Loans (b) Total Loans (a)
- -------------------------- ---------------------------
Sept. 30, Dec. 31, Sept. 30, Dec. 31,
1997 1996 1997 1996
- ----------- --------- ----------- ---------
Ending Servicing Portfolio
$ 10,428 $ 26,410 Principal balance $ 28,644 $ 29,201
173,187 451,802 Number of loans serviced 462,234 478,779
.424% .422% Weighted average net servicing fee n/a n/a
8.69% 8.59% Weighted average interest rate 8.41% 8.48%
8.20% 7.44% Percent delinquent (c) 6.78% 7.17%
(a) Includes loans subserviced for others. Loans subserviced for others had a
principal balance of $18,216 million, $2,791 million and $3,796 million as
of Sept. 30, 1997, Dec. 31, 1996 and Sept. 30, 1996, respectively.
(b) Excludes loans subserviced for others.
(c) Includes loans in the process of foreclosure.
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