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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 25, 1995
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Commission Registrant, State of Incorporation, IRS Employer
File Number Address, and Telephone Number Identification No.
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0-7862 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Ste. 100
Reno, Nevada 89502-3239
Telephone (702) 688-6300
2-38498 U-Haul International, Inc. 86-0663060
(A Nevada Corporation)
2727 N. Central Avenue
Phoenix, Arizona 85004
Telephone (602) 263-6645
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
Shoen Litigation
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Certain current members of the Board of Directors of
AMERCO (the "Company") and one former director are defendants in an
action in the Superior Court of the State of Arizona, Maricopa
County entitled Samuel W. Shoen, M.D., et al. v. Edward J. Shoen,
et al., No. CV88-20139, instituted August 2, 1988 (the "Shoen
Litigation"). The Company was also a defendant in the action as
originally filed, but the Company was dismissed from the action on
August 15, 1994. The plaintiffs, who are all members of a
stockholder group that is currently opposed to existing Company
management, alleged, among other things, that certain of the
individual plaintiffs were wrongfully excluded from sitting on the
Company's Board of Directors in 1988 through the sale of Company
Common Stock to certain key employees. That sale allegedly
prevented such stockholder group from gaining a majority position
in the Company's voting stock and control of the Company's Board of
Directors. The plaintiffs alleged various breaches of fiduciary
duty and other unlawful conduct by the individual defendants and
sought equitable relief, compensatory damages, punitive damages,
and statutory post-judgment interest at the rate of 10% per year.
Based on the plaintiffs' theory of damages (that their
stock has little or no current value) the Court ruled that the
plaintiffs elected as their remedy in this lawsuit to transfer
their shares of stock to the defendants for a price determined
based on the value of the plaintiffs' stock in 1988. On October 7,
1994, the jury determined that (i) the defendants breached their
fiduciary duties, and (ii) such breach diminished the value of the
plaintiffs' stock. The jury also determined the value of the
plaintiffs' stock in 1988 to be $81.12 per share or approximately
$1.48 billion. On February 2, 1995, the judge in this case granted
the defendants' motion for remittitur or a new trial on the issue
of damages. The judge determined that the value of the plaintiffs'
stock in 1988 was $25.30 per share or approximately $461.8 million.
On February 13, 1995, the plaintiffs filed a statement accepting
the remittitur. The jury also awarded the plaintiffs $70 million
in punitive damages against Edward J. Shoen. The judge ruled that
this punitive damage award is excessive and granted Edward J.
Shoen's motion for remittitur or a new trial on the issue of
punitive damages. The judge reduced the award of punitive damages
against Edward J. Shoen to $7 million. On February 13, 1995, the
plaintiffs filed a statement accepting the remittitur reducing the
punitive damage to $7 million. On February 21, 1995, judgment was
entered against the defendants and on March 23, 1995 Edward J.
Shoen filed a notice of appeal from the award of punitive damages.
The plaintiffs have subsequently filed a notice of cross-appeal
from the judge's remittitur of the punitive damages.
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Pursuant to separate indemnification agreements, the
Company had contracted to indemnify the defendants to the fullest
extent permitted by law or the Company's Articles of Incorporation
or By-Laws, for all expenses and damages, if any, incurred by the
defendants in this proceeding, subject to certain exceptions. With
respect to the defendants who have filed for protection under the
federal bankruptcy laws, the extent of the Company's
indemnification obligations may be an issue in the bankruptcy
proceedings. The defendants have not attempted to make demands
upon or prosecute their indemnification claims against the Company.
The Company reserves the right to contest the validity of any
indemnification claims made by the defendants.
Any attempted transfer of Common Stock from the
plaintiffs to the defendants will implicate rights held by the
Company. For example, pursuant to the Company's By-Laws, the
Company has certain rights of first refusal with respect to the
transfer of the plaintiffs' stock. In addition, the defendants'
rights to purchase the plaintiffs' stock may present a corporate
opportunity which the Company is entitled to exercise.
On February 21, 1995, the director-defendants filed for
protection under Chapter 11 of the federal bankruptcy laws,
resulting in the issuance of an order automatically staying the
execution of the judgment against those defendants. On April 25,
1995, four of the director-defendants, in cooperation with the
Company, filed plans of reorganization in the United States
Bankruptcy Court for the District of Arizona (collectively, the
"Plan"). The plans of reorganization filed by the director-
defendants propose the same funding and treatment of the
plaintiffs' claims resulting from the judgment in the Shoen
Litigation.
Under the Plan, the director-defendants will transfer (or
cause to be transferred) to a stock transfer trust (the "Stock
Transfer Trust"), property having a stipulated or adjudicated value
in excess of $461.8 million. Each of the plaintiffs would receive
a trust certificate representing an undivided, fractional
beneficial interest in the Stock Transfer Trust. The property
transferred to the Stock Transfer Trust is expected to consist of
(i) approximately $300 million in Series B 7 1/2% non-voting
cumulative redeemable preferred stock issued by the Company or one
of its subsidiaries; (ii) a 1993 REMIC certificate held by the
Company with a face value of $11,518,452 evidencing a pool of 61
commercial mortgage loans which are secured by mortgages or deeds
of trust on 60 self-storage properties; (iii) mortgage loans with
an aggregate principal balance of approximately $109,913,871 on
property held by the Company, one or more of its subsidiaries, or
two corporations affiliated with the Company; and (iv) real
property held free and clear by the Company or its subsidiaries
having a total value of approximately $50 million. Upon the
funding of the Stock Transfer Trust, the plaintiffs participating
in the Stock Transfer Trust will be obligated to transfer their
shares of Common Stock.
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Alternatively, and in lieu of their respective
proportionate shares of the property to be transferred to the Stock
Transfer Trust, each of the plaintiffs may elect to participate in
a settlement and receive a discounted cash payment in full
satisfaction of their claim (the "Settlement"). The Settlement
provides for a cash fund of up to $350 million to be paid by the
Company to satisfy the claims of all plaintiffs electing to
participate in the Settlement. Any plaintiff electing to
participate in the Settlement will receive a pro rata distribution
of such fund based on the percentage of all of the plaintiffs'
stock held by such plaintiff. Any plaintiff so electing will not
participate in or be entitled to any interest in the Stock Transfer
Trust and the amount of property transferred to the Stock Transfer
Trust will be correspondingly reduced. The Company plans to
finance the Settlement through its existing lines of credit,
additional debt or equity issuances, asset sales or a combination
of the foregoing. The Company will determine which financing
source or sources to use to fund the Settlement based on, among
other things, market conditions as they exist from time to time and
the number of plaintiffs electing to participate in the Settlement.
The Company is unable to estimate the amount or cost of the
financing, if any, necessary to fund the Settlement. Upon receipt
of the cash distribution pursuant to the Settlement, the plaintiffs
electing to participate in the Settlement will be obligated to
transfer their Common Stock.
The Company expects the Plan to be confirmed in 1995 and
completed by early 1996. However, there is no assurance that the
Plan will be confirmed by the federal bankruptcy court or that the
Plan as confirmed will operate as described above. Because of the
Plan's complexity and the alternatives provided to the plaintiffs
under the Plan, the Company is unable to determine the Plan's
impact on the Company's financial condition, results of operations,
or capital expenditure plans. However, as a result of financing
the Plan, the Company is likely to incur additional costs in the
future in the form of dividends on preferred stock and/or interest
on borrowed funds.
No provision has been made in the Company's financial
statements for any payments to be made to the plaintiffs or the
Stock Transfer Trust pursuant to the Plan. In addition, in the
event any consideration paid by the Company for the plaintiffs'
stock is in excess of the fair value of the stock received by the
Company, the Company will be required to record an expense equal to
that difference.
On April 25, 1995, the director-defendants in the Shoen
Litigation filed an action in the United States Bankruptcy Court
for the District of Arizona entitled Edward J. Shoen, et al. v.
Leonard S. Shoen, et al., Case No. 95-1430-PHX-JMM, Adversary
No. 95-284, seeking injunctive relief to prevent the Company from
conducting its annual meetings of stockholders until the Plan is
confirmed and/or to prevent the plaintiffs from voting the Common
Stock that they are required to transfer pursuant to the Shoen
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Litigation. The director-defendants allege that despite the
election by the plaintiffs to transfer their Common Stock and
thereby disengage themselves from Company ownership, the plaintiffs
have two members of their stockholder group nominated to fill two
director positions which are scheduled for election at the 1994
deferred annual meeting of stockholders. The 1994 deferred annual
meeting of stockholders is currently scheduled to be held on
July 21, 1995. The director-defendants argue that it is
inappropriate to base the plaintiffs' right to vote at stockholders
meetings on their record ownership of Common Stock which is the
subject of the judgment in the Shoen Litigation. The director-
defendants further allege that if the Company is not enjoined from
holding its 1994 deferred annual meeting and its 1995 annual
meeting until the Plan is confirmed and if the plaintiffs are not
enjoined from voting their Common Stock, the plaintiffs are likely
to elect up to half of the members of the Company's Board of
Directors before the end of 1995 because the plaintiffs currently
control more Common Stock than the stockholder group that supports
existing Company management. The election of Board of Director
nominees supported by the plaintiffs would be likely to disrupt the
Company's ability to support and finance the Plan. Such
disruption, the defendants allege, will affect the defendants'
ability to reorganize and will cause substantial and irreparable
injury to the defendants. As a result of the foregoing, unless the
director-defendants are successful in this action, there can be no
assurance that the Company and the director-defendants will
continue to cooperate in satisfying the judgment in the Shoen
Litigation. The preliminary injunction hearing is scheduled for
May 26, 1995.
Market Overhang
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Currently, 1,105,132 shares of the Company's common stock
are trading on Nasdaq-National Market ("Nasdaq"). The Company has
37,558,931 other shares of common stock outstanding. Of this
amount (i) 18,254,596 shares are held by the plaintiffs in the
Shoen Litigation and are expected to be transferred to the Company
or its designee pursuant to the Plan as described above; (ii)
17,150,395 shares are held pursuant to a stockholder agreement by
a stockholder group supportive of the Company's existing management
(the "Inside Stockholder Group"); (iii) 1,245,777 are allocated to
participants in the AMERCO Employee Savings, Profit Sharing and
Employee Stock Ownership Plan (the "ESOP"); and (iv) 908,163 shares
are held by others.
In addition to the 908,163 shares described in (iv)
above, shares held by members of the Inside Stockholder Group could
be sold to the public in the near future. For example, subject to
certain limitations and restrictions, Paul F. Shoen and Sophia M.
Shoen may elect to cause the Company to effect the registration
under the Securities Act of 1933, as amended (the "Securities Act")
of all or part of the common stock held by them pursuant to
separate Share Repurchase and Registration Rights Agreements.
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Sophia M. Shoen and Paul F. Shoen currently hold 1,638,472 and
2,869,058 shares, respectively, of the Company's common stock. In
addition, Sophia M. Shoen and Paul F. Shoen have informed the
Company that they plan to begin regular sales of common stock
pursuant to Rule 144 under the Securities Act. Furthermore, the
Company has registered 1,700,000 shares of common stock held by
Mark V. Shoen who is a member of the Inside Stockholder Group, for
public sale from time to time by him.
Finally, the Company may issue and sell common stock in
the future. For example, the Company plans to file in the near
future a registration statement covering 25,000,000 shares of
common stock to be issued and sold to the public from time to time
by the Company. This and other sales of common stock by the
Company, as well as sales of currently outstanding shares, could
adversely affect the market price for the Company's common stock
trading on Nasdaq.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
AMERCO
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(Registrant)
Date May 4, 1995 /s/Gary B. Horton
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Gary B. Horton, Treasurer