SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
/X/ Preliminary Information Statement
/_/ Confidential, for use of the Commission only
(as permitted by Rule 14c-5(d)(2))
/_/ Definitive Information Statement
THE PEREGRINE REAL ESTATE TRUST
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
/_/ No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Shares of Beneficial Interest
(2) Aggregate number of securities to which transaction applies:
2,319,915
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was determined):
$0.59
(4) Proposed maximum aggregate value of transaction: $1,368,750
(5) Total fee paid: $273.75
/_/ Fee paid previously with preliminary materials.
/_/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party: The Peregrine Real Estate Trust
(4) Date Filed: September 28, 2000
THE PEREGRINE REAL ESTATE TRUST
INFORMATION STATEMENT
INTRODUCTION
This Information Statement is furnished by The Peregrine
Real Estate Trust (d.b.a. WinShip Properties) (f.k.a. Commonwealth Equity
Trust), a California real estate investment trust ("Peregrine"), to holders
of the outstanding common shares of beneficial interest, par value $0.01 per
share, of Peregrine in connection with an Agreement and Plan of Merger, dated
as of September 26, 2000 (the "Merger Agreement"), by and between Peregrine
and WinShip Properties, a California real estate investment trust ("New
WinShip"). The Merger Agreement provides for the merger (the "Merger") of
Peregrine with and into New WinShip, with New WinShip as the trust surviving
the Merger (the "Surviving Trust"). New WinShip was formed by TCW Special
Credits Fund IV, TCW Special Credits Plus Fund, TCW Special Credits Trust IV,
TCW Special Credits Trust IVA and TCW Special Credits, as investment manager
of the Weyerhaeuser Company Master Retirement Trust Separate Account
(collectively, "TCW"); and OCM Real Estate Opportunities Fund A, L.P., OCM
Real Estate Opportunities Fund B, L.P., and Oaktree Capital Management, LLC
as investment manager of Gryphon Domestic VII, LLC's separate account
(collectively, "Oaktree") in connection with the Merger.
Oaktree, TCW, and The Prudential Insurance Company of
America and Gateway Recovery Trust (collectively, "Prudential" and together
with Oaktree and TCW, the "Majority Shareholders") currently beneficially own
approximately 89.7% of the Peregrine common shares, representing
approximately 89.7% of the voting power of the shareholders of Peregrine.
Oaktree and TCW have proposed, and Prudential has agreed to vote for, the
Merger in order to purchase all of the Peregrine common shares that are not
held by New WinShip or the Majority Shareholders (the "Nonaffiliated Shares").
As a result of the Merger, each Nonaffiliated Share will be
converted into the right to receive $0.59 in cash, without interest (the
"Merger Consideration"). The Merger Consideration represents a 136% premium
over the $0.25 average closing price per share during the 30 trading days
preceding September 1, 2000, which was the last full trading day before the
execution and public announcement of the Merger Agreement. On _________,2000,
the last full trading day prior to the date of the mailing of this
Information Statement, the closing price was $______ per share. A special
committee of the Board of Trustees of Peregrine consisting of Carson R.
McKissick, Matthew L. Witte and Michael C. Joseph (the "Special Committee")
negotiated the Merger Consideration with the Majority Shareholders and their
representatives. The total consideration payable to the holders of
Nonaffiliated Shares in the Merger is approximately $1,369,000. A copy of the
Merger Agreement is attached to this Information Statement as Exhibit A.
The Special Committee of Peregrine and the Board of
Trustees of Peregrine, based on the recommendation of the Special Committee
of Peregrine, believe that the terms and provisions of the Merger Agreement
and the Merger are fair to and in the best interests of Peregrine and holders
of Nonaffiliated Shares.
This transaction has not been approved or disapproved by
the Securities and Exchange Commission (the "SEC") or by any state securities
commission, nor has the SEC or any state securities commission passed upon
the fairness or merits of such transaction nor upon the accuracy or adequacy
of the information contained in this document. Any representation to the
contrary is unlawful.
On __________, 2000, the Majority Shareholders executed and
delivered to Peregrine a written consent in lieu of a meeting of shareholders
approving the Merger Agreement and the Merger and adopting the Merger
Agreement. The Merger will become effective no earlier than 20 business days
after this Information Statement is first sent or given to shareholders of
Peregrine. The effective date of the Merger will be on __________, 2000, or
such other time as Peregrine and the Majority Shareholders shall determine.
The Merger Agreement does not require the approval of the holders of
Nonaffiliated Shares.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY. PLEASE DO NOT SEND IN ANY OF YOUR SHARE CERTIFICATES AT
THIS TIME.
This Information Statement is first being mailed to
shareholders on or about ___________, 2000.
TABLE OF CONTENTS
Page
Questions and Answers About The Merger............................................1
Summary...........................................................................1
Market Data.......................................................................5
Selected Financial Data...........................................................6
General...........................................................................7
Special Factors Regarding the Merger..............................................7
Closing......................................................................7
Background of the Merger.....................................................7
The Majority Shareholders' Purpose and Reasons for the Merger................13
Opinion of the Financial Advisor.............................................14
Interests of Certain Persons in the Merger...................................18
Certain Effects of the Merger................................................19
Material Federal Income Tax Consequences of the Merger.......................19
Accounting Treatment.........................................................21
Financing of the Merger......................................................21
Regulatory Matters...........................................................21
Required Vote For Merger; Written Consent In Lieu Of Meeting.................21
The Merger Agreement..............................................................22
Consideration to be Paid in the Merger.......................................22
The Exchange Fund; Payment for Common Shares.................................22
Transfers of Peregrine Common Shares.........................................23
Treatment of Options.........................................................23
Amendment....................................................................24
Applicable Law...............................................................24
Estimated Fees and Expenses.......................................................24
No Dissenters Rights..............................................................24
Certain Information Regarding Peregrine...........................................25
Certain Information Regarding New Winship.........................................25
Certain Information Regarding the Majority Shareholders...........................25
Trustees and Executive Officers...................................................26
Security Ownership of Certain Beneficial Owners and Management....................29
Certain Relationships.............................................................31
Common Share Purchase Information.................................................32
Independent Accountants...........................................................33
Shareholder Proposals.............................................................33
Available Information.............................................................33
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Questions and Answers About The Merger
Q: WITH WHOM IS PEREGRINE MERGING?
A: The Peregrine Real Estate Trust (d.b.a. WinShip Properties), is merging
with and into a newly formed California real estate trust called
WinShip Properties. WinShip Properties will be the surviving trust.
WinShip Properties was formed by TCW and Oaktree and at the time of
consummation of the merger will be owned by Oaktree, TCW and
Prudential. Collectively, Oaktree, TCW and Prudential own 89.7% of the
common shares of Peregrine. The Peregrine common shares owned by
Oaktree, TCW and Prudential will be contributed to WinShip prior to
consummation of the merger.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Holders of Peregrine common shares (other than the Peregrine common
shares owned by WinShip Properties immediately prior to consummation of
the Merger) will receive $0.59 in cash for each share they own. A
special committee consisting of members of the Board of Trustees of
Peregrine who are neither affiliated nor associated with Oaktree, TCW
or Prudential or employed by Peregrine negotiated this price with the
Majority Shareholders and their representatives.
Q: WILL PEREGRINE BE A PUBLIC COMPANY AFTER THE MERGER?
A: No. As a result of the Merger, Peregrine will cease to exist and
WinShip Properties, as the trust surviving the merger, will be
privately held. Upon consummation of the Merger, there will be no
public market for Peregrine common shares. In addition, registration of
Peregrine common shares will be terminated and Peregrine will no longer
be required to file periodic reports with the Securities and Exchange
Commission.
Q: WHY HAS THE BOARD OF TRUSTEES APPROVED THE MERGER AGREEMENT AND THE
MERGER?
A: Your Board of Trustees determined that, based upon the recommendation
of the Special Committee, the terms and provisions of the Merger
Agreement between Peregrine and WinShip Properties, and the Merger, are
fair to and in the best interests of Peregrine and its shareholders,
not including the Majority Shareholders. To review the background and
reasons for the Merger in greater detail, see pages 7 to 14 of this
Information Statement.
Q: SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A: No. We will send you written instructions for exchanging your share
certificates promptly after the closing of the Merger.
Q: WHAT ARE THE FEDERAL TAX CONSEQUENCES OF THE MERGER TO ME?
A: The Merger generally will be taxable to you for U.S. federal income
tax purposes. To review the federal income tax consequences to
shareholders in greater detail, see pages 19 to 21 of this
Information Statement.
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Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the Merger or would like additional
copies of this Information Statement, please contact D.F. King & Co.,
Inc., 77 Water Street, New York, New York 10005, telephone number (212)
269-5550.
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS
INFORMATION STATEMENT. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION
THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY, YOU SHOULD
CAREFULLY READ THE ENTIRE INFORMATION STATEMENT AND THE ATTACHED EXHIBITS.
SPECIAL FACTORS REGARDING THE MERGER
PURPOSE, BACKGROUND AND EFFECTS OF THE MERGER
The Majority Shareholders' purpose for the Merger is to
acquire all of the remaining Peregrine common shares not already owned by
them while affording holders of Nonaffiliated Shares the ability to dispose
of their shares at a premium above recent market prices without incurring the
transaction costs of selling their Peregrine common shares. The Merger will
cause Peregrine to be privately owned, which the Majority Shareholders
believe will advance Peregrine's long-term strategy, and will be beneficial
from a cost standpoint as well as from the standpoint of employee relations.
The Majority Shareholders sought to structure the transaction as a Merger
because it would most efficiently accomplish the objectives of the Majority
Shareholders to acquire the Nonaffiliated Shares. Upon the consummation of
the Merger, Peregrine common shares will cease to be publicly traded and
holders of Nonaffiliated Shares will receive $0.59 per share in cash.
Following the Merger, all of the equity interests of New WinShip as the
surviving trust will be owned by the Majority Shareholders. See "SPECIAL
FACTORS REGARDING THE MERGER--Background Of The Merger" and "--The Majority
Shareholders' Purpose And Reasons For The Merger."
APPROVAL BY THE TRUSTEES
In April 1998, Oaktree and TCW indicated to the Board of
Trustees of Peregrine that they were interested in acquiring all of the
Peregrine common shares not currently owned by them. To address actual and
potential conflicts of interest resulting from D. Richard Masson, a principal
of Oaktree Capital Management, LLC, the general partner and investment
advisor to the Oaktree funds and accounts and a general partner of TCW
Special Credits, the general partner and investment advisor to the TCW funds
and accounts, and Roger Snell, Chief Executive Officer of Peregrine, status
as members of the Board of Trustees, the Board of Trustees formed a Special
Committee of the Board of Trustees to review the Majority Shareholders'
proposal and make a recommendation to the Board of Trustees, and, if
necessary, to negotiate the terms of any such transaction with the Majority
Shareholders. The Special Committee consists of Carson R. McKissick, Matthew
L. Witte and Michael C. Joseph. No member of the Special Committee is an
employee or former employee of Peregrine or an associate or affiliate of any
of the Majority Shareholders.
In September 2000, New WinShip offered to acquire all of
the Nonaffiliated Shares at a purchase price of $0.59 per share pursuant to a
Merger of Peregrine with and into New WinShip. Through negotiations, the
Special Committee and the Majority Shareholders agreed on the final purchase
price of $0.59 per share.
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The Board of Trustees, acting on the recommendation of the
Special Committee, has approved the Merger and the Merger Agreement. The
Board of Trustees believes that the Merger and the terms and provisions of
the Merger Agreement (including the $0.59 per share Merger Consideration) are
fair to and in the best interests of Peregrine and the holders of
Nonaffiliated Shares. See "SPECIAL FACTORS REGARDING THE MERGER--Background
Of The Merger," "--The Majority Shareholders' Purpose And Reasons For The
Merger," and "--Opinion Of The Financial Advisor."
DUFF & PHELPS FAIRNESS OPINION
Prior to the August 3, 2000 meeting of the Special
Committee, Duff & Phelps, financial advisor to the Special Committee,
delivered its fairness analysis of July 2000 (which was subsequently updated
in its fairness analysis of August 2000 and confirmed by a final opinion of
September 1, 2000) that, as of September 1, 2000, based upon and subject to
the various considerations and assumptions stated in its opinion, the $0.59
per share consideration payable to the holders of Nonaffiliated Shares
pursuant to the Merger is fair to such shareholders from a financial point of
view. The Duff & Phelps opinion is attached to the Information Statement as
Exhibit B. Please read this opinion carefully. See "SPECIAL FACTORS REGARDING
THE MERGER - Opinion Of The Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
New WinShip was formed by Oaktree and TCW for the purpose
of acquiring 100% of Peregrine in the Merger. The Majority Shareholders
beneficially own approximately 89.7% of the Peregrine common shares.
Immediately prior to the consummation of the Merger each of the Majority
Shareholders will contribute all of its Peregrine common shares to New
WinShip. Following the Merger, the Majority Shareholders will own 100% of the
common shares of the Surviving Trust. Such ownership will result from the
conversion, upon the consummation of the Merger, of the outstanding shares of
Nonaffiliated Shares into cash.
Several of the trustees and officers of Peregrine hold
options to purchase Peregrine common shares. The options to purchase
Peregrine common shares held by officers of Peregrine will become options to
purchase common shares of New WinShip upon consummation of the Merger. The
options held by trustees will be cancelled upon consummation of the merger.
The rollover of options to purchase Peregrine common shares held by officers
of Peregrine in the Merger will result in a treatment of such officers that
is different from the interest of the holders of Nonaffiliated Shares and may
present actual or potential conflicts of interest. For a further description
of these interests, see page 18 of this Information Statement. The Special
Committee and the Board of Trustees were aware of and considered such
interests in recommending and approving the Merger. See "SPECIAL FACTORS
REGARDING THE MERGER--Interests Of Certain Persons In The Merger."
FINANCING OF THE MERGER
At the closing of the Merger, New WinShip expects to pay an
aggregate purchase price of approximately $1,369,000 to the holders of
Nonaffiliated Shares. The parties anticipate that New WinShip will require
approximately $470,000 to pay expenses and costs relating to the
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Merger. New WinShip will use Peregrine's cash on hand, cash from operations,
borrowings under its credit facility and cash proceeds from sales of
properties to finance the Merger Consideration and the expenses associated
with the Merger. See "Special Factors Regarding the Merger--Financing of the
Merger."
REGULATORY MATTERS
Peregrine does not believe that any material federal or
state regulatory approvals, filings or notices are required by Peregrine in
connection with the Merger other than (i) such approvals, filings or notices
required pursuant to federal and state securities laws and (ii) the filing of
the certificate of Merger with the Secretary of State of California. See
"SPECIAL FACTORS REGARDING THE MERGER--Regulatory Matters."
ACCOUNTING TREATMENT
The Merger between Peregrine and New WinShip will be
accounted for as an exchange of shares between entities under common control.
As a result, the historical cost basis of Peregrine's assets and liabilities
will be carried forward to the Surviving Trust.
The cost of repurchasing the Peregrine common shares will
be accounted for as a treasury stock transaction within the context of
generally accepted accounting principles. Accordingly, the aggregate cost of
such repurchase will be accounted for as a deduction from shareholders'
equity. See "SPECIAL FACTORS REGARDING THE MERGER - Accounting Treatment."
FEDERAL INCOME TAX CONSEQUENCES
Shareholders will be taxed on their allocation of the
Merger Consideration to the extent that the amount they receive exceeds their
tax basis in their Peregrine common shares. Because determining the tax
consequences of the Merger can be complicated, shareholders should consult
their tax advisors in order to understand fully how the Merger will affect
them. See "SPECIAL FACTORS REGARDING THE MERGER--Material Federal Income Tax
Consequences Of The Merger."
THE PARTIES
- PEREGRINE. Peregrine is a California real estate investment
trust headquartered in Sacramento, California. As of June 30, 2000, Peregrine's
investments included:
- eight commercial properties located primarily in the
Sacramento area
- four hotel properties located in Northern
California
- partnership interests in two general partnerships
and
- one mortgage note secured by real property.
Peregrine was organized in California pursuant to a
Declaration of Trust dated July 31, 1973. Pursuant to a Plan of
Reorganization under Chapter 11 of the United States Bankruptcy Code
Peregrine was reorganized under a Restated Declaration of Trust in 1994. Its
principal offices are located at 1300 Ethan Way, Suite 200, Sacramento,
California, 95825. Its
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telephone number is (916) 929-8244. See "CERTAIN INFORMATION REGARDING
PEREGRINE" and "AVAILABLE INFORMATION."
- NEW WINSHIP. New WinShip was organized by Oaktree and TCW
to acquire all of the Peregrine common shares pursuant to the Merger
Agreement. New WinShip has not conducted any unrelated activities since its
organization. All of the outstanding capital stock of New WinShip is
currently owned by TCW and Oaktree, and immediately prior to consummation of
the Merger will be owned by the Majority Shareholders, who collectively own
89.7% of the issued and outstanding common shares of Peregrine. Immediately
prior to the consummation of the Merger, the Majority Shareholders will
contribute all of the Peregrine common shares owned by them to New WinShip in
exchange for shares of capital stock of New WinShip. See "CERTAIN INFORMATION
REGARDING NEW WINSHIP."
New WinShip's principal offices are located at 1300 Ethan
Way, Suite 200, Sacramento, California, 95825. Its telephone number is (916)
929-8244. See "CERTAIN INFORMATION REGARDING NEW WINSHIP."
REQUIRED VOTE FOR MERGER; WRITTEN CONSENT IN LIEU OF MEETING
Under Section 23006 of the California Corporations Code, as
amended, any two or more real estate investment trusts may be merged into one
real estate investment trust upon the approval of the holders of a majority
of the shares of beneficial interest of the real estate investment trust (or
as otherwise provided for in the declaration of trust), provided that the
merger is specifically permitted by the declaration of trust, and that
procedure is detailed in those declarations. Under Section 4.7 of Peregrine's
Restated Declaration of Trust, a merger or sale or transfer of all or
substantially all of the assets of Peregrine must be approved by the
affirmative vote or written consent of at least 75% of the outstanding common
shares of Peregrine entitled to vote. On ____________, 2000, the Majority
Shareholders, who then held, in the aggregate, 20,232,525 shares of Peregrine
common shares, representing more than 75% of the votes entitled to be cast at
a meeting to consider the Merger Agreement and the Merger, executed and
delivered to Peregrine a written consent in lieu of a meeting of shareholders
approving the Merger Agreement and the Merger and adopting the Merger
Agreement. On September 1, 2000, there were issued and outstanding 22,552,440
shares of Peregrine common shares. The Merger will become effective no
earlier than 20 business days after this Information Statement is first sent
or given to shareholders of Peregrine. The Merger Agreement does not require
the approval of the holders of Nonaffiliated Shares. See "REQUIRED VOTE FOR
MERGER; WRITTEN CONSENT IN LIEU OF MEETING."
NO DISSENTERS RIGHTS
California law and the provisions of Peregrine's Restated
Declaration of Trust do not provide dissenters' rights to shareholders of
Peregrine.
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MARKET DATA
MARKET
Peregrine's common shares have traded on the
Over-the-Counter Bulletin Board market system under the symbol PGRNS since
its emergence from bankruptcy in October 1994, and its issuance of new
Peregrine common shares was completed. Peregrine's common shares were not
actively traded during 1998, 1999 or 2000. The following table sets forth the
high and low closing quotations for the shares during each of the four
quarters of 1999 and 1998 and for the first, second and third quarter of 2000
as reported by Nasdaq. The Over-the-Counter market quotations reflect
inter-dealer prices, without retail mark-up, markdown, or commission and may
not necessarily represent actual transactions.
2000 1999 1998
---- ---- ----
HIGH LOW HIGH LOW HIGH LOW
First Quarter $0.41 $0.22 $0.25 $0.25 $0.63 $0.19
Second Quarter $0.41 $0.19 $0.25 $0.25 $0.56 $0.38
Third Quarter $0.25 $0.19 $0.28 $0.28 $0.56 $0.13
(to September 1 in the case
of 2000)
Fourth Quarter ----- ----- $0.28 $0.28 $0.56 $0.13
HOLDERS
As of December 31, 1999, there were 13,626
shareholders-of-record of Peregrine's common shares. In addition, there were
approximately 2,500 shareholders whose shares were held by depositories in
street and nominee names.
CASH DIVIDENDS
Peregrine did not pay any cash dividends on its common
shares in 2000, 1999 or 1998, and is substantially restricted under the terms
of its outstanding debt from making any cash distributions to shareholders in
the foreseeable future.
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SELECTED FINANCIAL DATA
The following represents selected financial data for
Peregrine for the years ended December 31, 1999, 1998, 1997, 1996, and 1995
and the six months ended June 30, 2000 and 1999. The data should be read in
conjunction with other financial statements and related notes incorporated
herein by reference. Numbers below are shown in thousands except for per
share data.
Six Six
Year Ended Year Ended Year Ended Year Ended Year Ended Months Months
December 31, December 31, December 31, December 31, December 31, June 30, June 30,
1999 1998 1997 1996 1995 2000 1999
------------ ------------ ------------ ----------- ------------ -------- --------
OPERATING RESULTS
Revenue (1).................. $28,523 $22,151 $24,828 $ 27,162 $ 26,893 $15,983 $16,367
Income/Loss before
extraordinary item...... $(3,482) $(4,671) $(2,008) $ (7,892) $(15,331) $ 290 $ 2,179
Extraordinary item........... $ 126 $ 255 $ 440 $ 187 $ 598 -- $ 55
Net Income/Loss (2) $(3,356) $(4,416) $(1,568) $ (7,705) $(14,733) $ 290 2,234
Net Income/Loss attributable to
Common Shares of Beneficial
Interest (2), (3), (5).... $(3,356) $(8,950) $(4,818) $(10,576) $(17,264) $ 290 $ 2,234
Loss per Common Share of
Beneficial Interest before
extraordinary item, basic
and diluted (5)........... $ (0.15) $ (1.18) $ (1.08) $ (2.21) $ (3.66) -- --
Extraordinary item per Common
Shares of Beneficial
Interest, basic and diluted $ -- $ 0.03 $ 0.09 $ 0.04 $ 0.12 -- --
Net Loss per share attributable
to Common Shares of
Beneficial Interest, basic
and diluted (2), (3),
(5)....................... $ (0.15) $ (1.15) $ (0.99) $ (2.17) $ (3.54) $ .01 $ .10
FINANCIAL POSITION:
Total Assets................. $74,139 $81,045 $69,883 $104,726 $121,793 $70,466
Long-term Obligations (4).... $70,388 $74,504 $88,757 $111,578 $115,064 $67,593
Book Value Per Common Share.. $ 0.02 $ 0.50 $ (4.34) $ (3.36) $ (1.19) $ 0.04 $ 0.27
Ratio of Earnings to Fixed
Charges (6)............... 0.54x -- 0.18x -- -- 1.08x 1.56x
- ----------------------------------
(1) Includes net gains (losses) from sales or transfer of investment
$4,474, $374, $1,358, $1,580, and ($184), for the years ended December
31, 1999, 1998, 1997, 1996, and 1995. Includes net gains of $2,519,000
and $4,821,000 for the six months ending June 30, 2000 and 1999,
respectively.
(2) Includes valuation losses of ($1,830), ($0), ($459), ($4,278), and
($9,526), for the years ended December 31, 1999, 1998, 1997, 1996,
and 1995.
(3) Includes net loss plus the effects of preferred stock dividends,
discounts on preferred stock dividends, and the accretion of discounts
on preferred stock dividends.
(4) Includes long-term notes payable collateralized by deeds of trust on
rental properties, Senior Notes, and the outstanding balance on the
Peregrine's line of credit. Includes the outstanding redeemable
convertible preferred stock for years ending December 31, 1997,
1996, and 1995.
(5) For 1998 the weighted average number of common shares of beneficial
interest reflects the conversion of all preferred stock into common
stock as of November 1998.
(6) Earnings were inadequate to cover fixed charges by $3,356,000,
$8,950,000, $4,818,000, $10,576,000 and $17,264,000 for the years
ended December 31, 1999, 1998, 1997, 1996 and 1995, respectively.
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GENERAL
This Information Statement is being delivered in connection
with the Merger of Peregrine with and into New WinShip pursuant to the Merger
Agreement. As a result of the Merger, New WinShip will be the Surviving Trust
and each Nonaffiliated Share will be converted into the right to receive the
Merger Consideration, and the equity interest and rights and obligations of
all Peregrine shareholders with respect to such shares will be terminated.
No person has been authorized to give any information or to
make any representations with respect to the Merger and related transactions
described herein, other than those contained in this Information Statement,
and, if given or made, such information or representations must not be relied
upon as having been authorized by Peregrine, New WinShip or the Majority
Shareholders.
SPECIAL FACTORS REGARDING THE MERGER
CLOSING
The consummation of the Merger and the transactions
contemplated thereby shall constitute the "Closing." Unless otherwise
mutually agreed to by Peregrine and New WinShip, the Closing shall take place
at the offices of Milbank, Tweed, Hadley & McCloy LLP, 601 South Figueroa
Street, 30th Floor, Los Angeles, California 90017 on _____________, 2000,
which shall constitute the "Closing Date." The effective time of the Merger
shall be the close of business on the Closing Date (the "Effective Time").
BACKGROUND OF THE MERGER
For several years the Board of Trustees and Peregrine's
management have had concerns that the stock price of Peregrine common shares
did not adequately reflect the value of Peregrine's assets, that the market
for Peregrine common shares was not as active or liquid as they desired,
especially for the minority shareholders. Management and the Board of
Trustees have also questioned whether Peregrine derived any material benefit
from being a public company. From 1997 to 2000 management held discussions
with financial advisors and other professionals to consider steps that could
be taken to address these concerns. During these discussions various
alternatives were discussed, including the possibility of a "going private"
transaction and various alternatives to a going private transaction.
The Board of Trustees initially decided not to explore a
going private transaction. The Board of Trustees and management believed that
they should fully explore certain other available alternatives to enhance
shareholder value before seriously considering a going private transaction.
Those transactions included an exchange of Peregrine's preferred shares for
common shares, a reverse stock split that would not result in a going private
transaction, a rights offering and the incorporation of Peregrine in
Delaware. Of these possible transactions, only the exchange of preferred
shares for common shares was carried out (following issuance of a fairness
opinion by Duff & Phelps and approval by an independent committee of the
Board of Trustees). The exchange of preferred shares for common shares was
completed in October 1998. Notwithstanding these efforts to enhance
shareholder value, management and the Board of
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Trustees of Peregrine continued to believe that Peregrine was not being
adequately valued by the public markets and began to explore various
possibilities for going private transactions, including tender offers,
reverse stock splits, open market purchases and mergers. The cash merger
structure was considered most desirable to management because it would
facilitate the acquisition of Peregrine common shares in a single step, with
minimum transaction costs and without material disruption to Peregrine's
operations. A merger with or sale to a third party was not considered because
Oaktree and TCW did not have any interest in such a transaction.
Since Roger D. Snell, the individual who is expected to be
Chief Executive Officer of New WinShip, and D. Richard Masson, an affiliate
of a Major Shareholder, are members of the Board of Trustees, the Board of
Trustees elected a Special Committee of the Board of Trustees in April 1998
and authorized and empowered the Special Committee to receive and to review
any proposals made by the Majority Shareholders and make a recommendation to
the full Board of Trustees, and, if necessary, negotiate the terms of any
transaction with the Majority Shareholders. The Special Committee consists of
trustees Carson R. McKissick, Matthew L. Witte and Michael C. Joseph, none of
whom is employed by Peregrine or associated or affiliated with the Majority
Shareholders. In addition to the fact that they are not affiliated with the
Majority Shareholders, Messrs. McKissick, Witte and Joseph were selected as
members of the Special Committee because of their extensive experience and
understanding of business and financial matters. In considering their
appointment to the Special Committee, the Board of Trustees was aware that
Messrs. McKissick, Witte and Joseph were originally designated to the Board
of Trustees by the Majority Shareholders, but did not view that fact as
creating a conflict of interest, particularly given their qualifications.
The Board of Trustees further authorized the Special
Committee to retain the services of legal counsel and a financial advisor to
assist the Special Committee in its deliberations. The Special Committee was
not authorized to seek alternative transactions with third parties because
Oaktree and TCW had no interest in such a transaction. In light of the stock
ownership and voting power of the Majority Shareholders to control a
disposition of Peregrine, there was no likelihood that such an alternative
transaction could be consummated.
In July 2000, the Special Committee retained Duff & Phelps,
LLC ("Duff & Phelps") as its financial advisor to act on behalf of the
holders of Nonaffiliated Shares for the purposes of negotiating the terms of
the Merger and Merger Agreement and preparing a report as to the fairness of
the Merger, from a financial point of view, to the holders of Nonaffiliated
Shares. In selecting Duff & Phelps, the Special Committee based its choice on
the basis of (i) the quality of Duff & Phelps's written material, (ii) Duff &
Phelps's reputation and prominence, (iii) Duff & Phelps's experience in
advising the Independent Committee on the exchange of preferred for common
shares in 1998 and in advising other board committees similar to the Special
Committee, (iv) the Special Committee's high level of comfort with the
representatives of Duff & Phelps who would be assigned to work with them, (v)
the sensitivity of such representatives to the need to obtain both a fair
price and impartial and lawful procedure, and (vi) Duff & Phelps's fee
structure. Upon the Special Committee's engagement of Duff & Phelps as its
financial advisor, Duff & Phelps began its due diligence review of Peregrine.
In early 2000, individual members of Oaktree and TCW,
certain senior managers of Peregrine and Peregrine's legal counsel discussed
the feasibility of taking Peregrine private.
- 8 -
No specific proposal was put forth by Oaktree and TCW, however, until the
meeting of the Special Committee on August 3, 2000.
On August 3, 2000, after the Special Committee had retained
the law firm of Troy & Gould, P.C., as its legal counsel, Oaktree and TCW
delivered a letter to the Special Committee. In it, Oaktree and TCW proposed
the Merger between Peregrine and New WinShip, a new company they planned to
form to facilitate a merger. Under their proposal, the Majority Shareholders
would capitalize New WinShip with Peregrine common shares owned by them.
Peregrine would then merge with and into New WinShip, and New WinShip would
remain after the Merger as the Surviving Trust. The proposal also provided
that the holders of Nonaffiliated Shares would receive $0.59 per share in
cash for each Peregrine common share they owned. The proposal further
provided that, in connection with the Merger, the Peregrine common shares
held by New WinShip would be cancelled. As a result, the Majority
Shareholders would own 100% of Peregrine after the consummation of the Merger
and the cancellation of the shares of Nonaffiliated Shares.
On August 3, 2000, the Special Committee and its legal
counsel met with Roger Snell, the Chief Executive Officer of Peregrine, and
Larry Knorr, the Chief Accounting Officer of Peregrine, as well as
representatives of Oaktree and counsel for Peregrine to discuss the July 2000
Duff & Phelps fairness analysis and question management as to the status of
the Peregrine properties. After concluding its discussions with the officers
and counsel of Peregrine and with the representatives of Oaktree, the Special
Committee excused them from the meeting and the Special Committee, with its
counsel, continued the meeting to further discuss the July 2000 Duff & Phelps
fairness analysis. During such meeting counsel to the Special Committee
advised the Special Committee of its fiduciary duties and on the terms of the
Merger Agreement.
On September 1, 2000, the Special Committee and its counsel
met with representatives of Duff & Phelps to review the August 2000 Duff &
Phelps fairness analysis and their draft opinion. A presentation was made by
Duff & Phelps concerning the fairness of $0.59 offer. Duff & Phelps described
their due diligence review of Peregrine, which included visits to selected
properties and to Peregrine's headquarters in Sacramento, and extensive
meetings with Peregrine's executive officers, particularly with the President
and Chief Executive Officer of Peregrine, Roger D. Snell, and with Larry
Knorr, the Chief Accounting Officer of Peregrine. Duff & Phelps explained
that they had reviewed appraisals and management estimates of the values of
the properties, the historical trading price and volume of the Peregrine
common shares, and publicly available information regarding Peregrine as well
as internally prepared financial information, and had also considered both
current operating performance and management's projections of future
performance. Duff & Phelps also reviewed their revised August 2000 fairness
analysis and explained the types of analyses that they had performed, which
included five different methodologies: liquidation value analysis; discounted
cash flow analysis; public stock price analysis; comparable public company
analysis; and analysis of control transactions. Duff & Phelps advised the
Special Committee orally that, based upon their due diligence review and
these analyses, the $0.59 offer was fair to the holders of the Nonaffiliated
Shares from a financial point of view.
Based upon the oral indications and written fairness
analyses provided by Duff & Phelps, the Special Committee determined that the
$0.59 per share offer was acceptable to the
- 9 -
Special Committee, subject to the issuance by Duff & Phelps of their final
opinion and to the conversion of the senior notes of Peregrine into equity of
New WinShip.
At the same meeting of September 1, 2000, the Special
Committee, based upon the Duff & Phelps August 2000 fairness analysis and
upon oral representations of Peregrine management and Oaktree and TCW and
subject to the issuance by Duff & Phelps of its final written opinion in
substantially the form of the draft presented to the Special Committee that
the Merger and related transactions are fair to the holders of the
Nonaffiliated Shares from a financial point of view and the conversion of the
senior notes of Peregrine into equity of the Surviving Trust, unanimously
took the following actions: (i) approved the terms of the Merger Agreement
and the transactions contemplated thereby as they relate to the holders of
Nonaffiliated Shares; (ii) determined that the Merger is fair to and in the
best interest of the holders of Nonaffiliated Shares; and (iii) recommended
that the Board of Trustees approve and authorize the Merger Agreement and the
transactions contemplated thereby.
On September 1, 2000, Peregrine issued a press release
disclosing that the Special Committee had approved the Merger and authorized
Peregrine to sign a definitive Merger Agreement pursuant to which holders of
Nonaffiliated Shares would receive a per share price of $0.59 in cash upon
consummation of the Merger of Peregrine with New WinShip.
On September 26, 2000, the Special Committee advised the
Board of Trustees in writing that the Special Committee recommended that the
Board of Trustees approve and authorize the Merger Agreement and the
transactions contemplated thereby. The Board of Trustees also received the
final, written opinion of Duff & Phelps dated September 1, 2000, a copy of
which is attached hereto as Exhibit B. See "SPECIAL FACTORS REGARDING THE
MERGER."
On September 26, 2000 all of the members of the Board of
Trustees unanimously approved the Merger Agreement pursuant to a written
consent and directed that the Merger Agreement be submitted to a vote of the
shareholders of Peregrine entitled to vote thereon. The Board of Trustees
decided to obtain shareholder approval by written consent in lieu of a
shareholders meeting because the Majority Shareholders own in excess of the
75% of issued and outstanding Peregrine common shares required to approve the
Merger.
SPECIAL COMMITTEE
In reaching its determination that the terms and conditions
of the Merger Agreement are fair from a financial point of view to and in the
best interest of the holders of Nonaffiliated Shares and to approve and
recommend that the Board of Trustees approve the Merger Agreement, the
Special Committee did not perform any independent financial analysis, but
reviewed and adopted the analyses performed by Duff & Phelps, as described
above. The Special Committee also considered the factors listed below:
(1) COMPARISON OF MARKET PRICES. A comparison of the
historical market prices of Peregrine common shares with the per share
price offered by the Majority Shareholders. The $0.59 per share price
represents a 136% premium over the $0.25
- 10 -
average closing price per share for the 30 trading days before
Peregrine first publicly announced the Merger. The fact that the
Merger Consideration represents a meaningful premium over recent
trading prices of the Peregrine common shares in the view of the
Special Committee supported its determination to approve the Merger.
(2) FAIRNESS OPINION. The opinion of Duff & Phelps addressed
to the Special Committee and dated September 1, 2000, that the $0.59
per share to be received by the holders of Nonaffiliated Shares in
connection with the Merger is fair to such shareholders from a
financial point of view, as of that date. The rendering of that opinion
was, in the view of the Special Committee, a critical factor in support
of its determination to approve the Merger.
(3) SMALL PUBLIC FLOAT. The Special Committee also considered
the fact that the public float for the Peregrine common shares consists
of only approximately 10% of the outstanding shares of Peregrine common
shares. Because of the limited float, relatively low trading volume in
the Peregrine common shares and typical transaction costs, the Special
Committee believed that attempts to sell significant portions of the
Peregrine common shares could cause substantial downward pressure on
market prices and that sales by shareholders with smaller holdings were
not practical because of the related transaction costs. The Special
Committee therefore believes that an offer by the Majority Shareholders
of the Merger Consideration represents an opportunity for holders of
Nonaffiliated Shares to realize a higher price for such stock than
might be realized in market transactions. This factor was viewed as
supporting the fairness determination to approve the Merger.
(4) MAJORITY SHAREHOLDERS' CONTROL OF PEREGRINE. The Special
Committee also considered the fact that the Majority Shareholders
beneficially own approximately 89.7% of the Peregrine common shares,
representing approximately 89.7% of the voting power of Peregrine. The
Special Committee therefore considered the fact that the Majority
Shareholders have sufficient stock ownership and voting power to
control a disposition of Peregrine. The Special Committee and Duff &
Phelps were not authorized to, and did not, solicit third party
indications of interest for the auction of Peregrine. The fact that
Oaktree and TCW control Peregrine was understood by the Special
Committee to give rise to a conflict of interest in connection with the
Merger, and accordingly required the appointment of the Special
Committee to make a fairness determination. The Special Committee also
considered the statement made by Oaktree and TCW that, at such time,
they had no present plan or intention to sell their Peregrine common
shares or to liquidate the assets of Peregrine in the immediate
future.
Apart from the conflict of interest inherent in the control
position of Oaktree and TCW, and apart from the fact that such control
precluded a third party transaction, the Special Committee did not view
such control as either supporting or detracting from its fairness
determination with respect to the Merger.
The foregoing factors constitute all material factors
considered by the Special Committee in reaching its determination that
the terms and conditions of the Merger Agreement are fair from a
financial point of view to and in the best interests of the
- 11 -
holders of Nonaffiliated Shares. The Special Committee did not
assign relative weights to the factors described above.
THE BOARD OF TRUSTEES
The Board of Trustees believes that the terms and conditions
of the Merger Agreement are fair to and in the best interest of the holders of
Nonaffiliated Shares from a financial point of view. In reaching the
determinations referred to above, the Board of Trustees considered and relied
upon the conclusions and recommendations of the Special Committee, the unanimous
approval of the Merger Agreement and the Merger by the three trustees of
Peregrine (Carson R. McKissick, Matthew L. Witte and Michael C. Joseph) who are
not (i) officers or employees of Peregrine, (ii) officers or employees of New
WinShip or (iii) associates or affiliates of the Majority Shareholders, and the
following additional factors, each of which, in the view of the Board of
Trustees, supported such determinations: (x) the considerations referred to
above as having been taken into account by the Special Committee, whose
conclusions and recommendation the Board of Trustees adopted as their own, (y)
the receipt by the Special Committee of the opinion of Duff & Phelps addressed
to the Special Committee that, as of the date of such opinion, based upon and
subject to various considerations and assumptions stated therein, the $0.59 per
share to be received by the holders of Nonaffiliated Shares in the Merger is
fair to such holders from a financial point of view, and the related analysis
orally presented to the Board of Trustees by Duff & Phelps, and (z) the fact
that the price per share to be paid in the Merger and the terms and conditions
of the Merger Agreement were the result of arm's-length negotiations between the
Special Committee and Oaktree and TCW and their respective advisors.
The members of the Board of Trustees, including the members of
the Special Committee, evaluated the Merger in the light of their knowledge of
the business, financial condition and prospects of Peregrine, and the advice of
their financial and legal advisors. In view of the number and variety of factors
that the Special Committee and the Board of Trustees considered in connection
with their evaluation of the Merger, neither the Special Committee nor the Board
of Trustees found it practicable to assign relative weights to the foregoing
factors, and, accordingly, neither the Special Committee nor the Board of
Trustees did so.
The Board of Trustees believes that the Merger is procedurally
fair because, among other things: (i) the Special Committee consists of
independent, non-employee trustees appointed to represent the interests of the
shareholders other than the Majority Shareholders; (ii) the Special Committee
retained and was advised by independent legal counsel; (iii) the Special
Committee retained an independent financial advisor to assist in the evaluation
of the proposed transaction and received such assistance from the financial
advisor; and (iv) the $0.59 per share price and the other terms and conditions
of the Merger Agreement resulted from arm's-length bargaining between the
Special Committee and its representatives and Oaktree and TCW and their
representatives. The foregoing factors constitute all material factors
considered by the Board of Trustees in reaching its determination that the terms
and conditions of the Merger Agreement are fair to and in the best interests of
the holders of Nonaffiliated Shares from both a financial and procedural point
of view.
- 12 -
The Board of Trustees believes that the Merger is fair to and
in the best interest of Peregrine and the holders of Nonaffiliated Shares and,
upon the recommendations of the Special Committee, unanimously approved the
Merger Agreement.
THE MAJORITY SHAREHOLDERS' PURPOSE AND REASONS FOR THE MERGER
Oaktree and TCW's purpose for engaging in the transactions
contemplated by the Merger Agreement is to acquire, together with Prudential,
100% ownership of Peregrine and to afford the holders of the Nonaffiliated
Shares an opportunity to dispose of their shares at a premium over recent market
prices.
Oaktree and TCW believe that Peregrine will be better able to
concentrate on fulfilling its mission and long-term goals free from the
constraint of public ownership, which significantly increases the administrative
costs to Peregrine without any significant resulting benefit to Peregrine.
Peregrine has not raised capital through the public markets in the last twelve
years and does not anticipate doing so in the foreseeable future. The costs of
complying with the reporting requirements of a public company constitute a
significant portion of Peregrine's administrative expense and do not result in
any benefit. In addition, Oaktree and TCW believe that the management resources
of Peregrine are diverted by Peregrine's compliance obligations as a public
company and that privately held status will enhance Peregrine's ability to
continue to dedicate itself to ownership and management of commercial real
estate.
Public ownership has also created difficulties for Peregrine
with regard to employee compensation. The price of the Peregrine common shares,
which has been an element of employee compensation, has remained relatively
constant for the past five years and does not reflect Peregrine's performance,
which has reduced the incentive value of stock compensation and has hurt
employee morale. Oaktree and TCW believe that the motivation and rewarding of
Peregrine's employees can be better accomplished by means not involving publicly
traded Peregrine common shares.
Finally, Oaktree and TCW believe Peregrine will be able to
achieve savings of approximately $500,000 per year in legal, printing,
accounting and public relations costs by being freed of public reporting
obligations. On a long-term basis, such savings will outweigh the estimated
costs of the transaction as described under "Estimated Fees and Expenses."
Oaktree and TCW have not pursued a liquidation of Peregrine or
a sale of Peregrine to a third party because the Majority Shareholders want
Peregrine to continue to operate on an on-going basis. Oaktree and TCW want to
acquire, together with Prudential, the entire equity interest in Peregrine and
do not currently desire to sell the Peregrine common shares that they own to a
third party.
The acquisition of all of the outstanding equity interests in
Peregrine was structured as a cash merger in order to accomplish the acquisition
of all the remaining Peregrine common shares in a single step, with a minimum
transaction costs and without the necessity of financing separate purchases of
Peregrine common shares in a tender offer or in open market purchases while, at
the same time, not materially disrupting Peregrine's operations.
- 13 -
The Majority Shareholders and New WinShip have concluded that
the Merger, the Merger Consideration and the terms and conditions of the Merger
Agreement are fair to Peregrine and the holders of the Nonaffiliated Shares.
Material factors considered by the Majority Shareholders and New WinShip in
reaching such conclusion are as follows: (i) the conclusions and recommendations
of the Special Committee and the Board of Trustees; (ii) the unanimous approval
and recommendation of the Merger Agreement and the Merger by the Special
Committee, which consists solely of independent, non-employee trustees of
Peregrine who are not associates or affiliates of any of the Majority
Shareholders; (iii) the Merger Consideration and the other terms and conditions
of the Merger Agreement, which were the result of arm's-length good faith
negotiations between the Special Committee and its representatives and Oaktree
and TCW and their representatives; (iv) a fairness opinion issued by the
financial advisor to the Special Committee to the effect that, as of the date of
such opinion, based upon and subject to various considerations and assumptions
stated therein, the $0.59 per share to be received in the Merger is fair to the
holders of Nonaffiliated Shares from a financial point of view; and (v) the
other factors referred to above as having been taken into account by the Special
Committee and the Board of Trustees. Although the Majority Shareholders and New
WinShip are not experts with respect to the matters addressed by the financial
advisor to the Special Committee, the Majority Shareholders and New WinShip
adopted the analysis presented by the financial advisor to the Special Committee
as appearing reasonable.
In reaching their conclusion that the Merger, the Merger
Consideration and the terms and conditions of the Merger Agreement are fair to
Peregrine and the holders of Nonaffiliated Shares from a procedural and
financial point of view, Oaktree, TCW and New WinShip did not consider it
necessary to require approval of the Merger Agreement by the holders of a
majority of the Nonaffiliated Shares. Oaktree, TCW and New WinShip reached this
conclusion because they believed that the appointment of the Special Committee,
the retention by the Special Committee of a financial advisor and legal counsel
sufficed to assure procedural fairness.
OPINION OF THE FINANCIAL ADVISOR
Duff & Phelps has acted as financial advisor to the Special
Committee of the Board of Trustees of Peregrine in connection with the Merger.
As part of its services, Duff & Phelps rendered an opinion dated September 1,
2000 (the "Duff & Phelps Opinion") as to whether the Merger is fair to
Peregrine's common shareholders from a financial point of view.
On September 1, 2000, Duff & Phelps presented its analysis and
opinion to the Special Committee that, as of such date, the Merger Consideration
was fair, from a financial point of view, to the holders of Nonaffiliated
Shares. Duff & Phelps has no obligation to update the Duff & Phelps Opinion to
any date subsequent to September 1, 2000.
The full text of the Duff & Phelps Opinion, which sets forth
the assumptions made, procedures followed, matters considered and limitations on
the review undertaken, is attached as Exhibit B to this Information Statement.
Shareholders are urged to read the Duff & Phelps Opinion carefully and in its
entirety.
- 14 -
The Duff & Phelps Opinion was prepared at the request of and
for the information of the Special Committee. No limitations were imposed by
Peregrine on the scope of the investigation or the procedures to be followed by
Duff & Phelps in rendering the Duff & Phelps Opinion. In connection with its
engagement, the Duff & Phelps Opinion is directed only to the fairness, from a
financial point of view, of the Merger Consideration to be paid to the holders
of Nonaffiliated Shares. The summary of the Duff & Phelps Opinion set forth in
this Information Statement is qualified in its entirety to the full text of the
Duff & Phelps Opinion. The Duff & Phelps Opinion does not address the relative
merits of the Merger or any other transactions or business strategies discussed
by the Board of Trustees as alternatives to the Merger or the decision of the
Board of Trustees to proceed with, or the effects of, the Merger. Duff & Phelps
was not authorized to, and did not solicit, third party indications of interest
in acquiring all or part of Peregrine, and Duff & Phelps was not asked to
consider, and the Duff & Phelps Opinion does not address, the consideration
Peregrine or its shareholders might receive from another third-party purchaser,
the relative merits of the Merger as compared to any alternative business
strategies that might exist for Peregrine or the effects of any other
transaction in which Peregrine might engage.
In conducting its analysis, Duff & Phelps reviewed and
considered such information as it deemed necessary or appropriate for the
purposes of stating its opinion including (i) drafts, in the forms furnished to
Duff & Phelps by representatives of Peregrine, of the Merger Agreement and
Declaration of Trust of New WinShip; (ii) certain business and financial
information relating to Peregrine, as provided by Peregrine, including the
financial condition and results of operations of Peregrine, its historical
financial performance and certain financial projections prepared by the
management of Peregrine; (iii) certain public filings made by Peregrine with the
Securities and Exchange Commission; and (iv) to the extent publicly available,
certain market trading data and historical trading performance for securities of
Peregrine. In addition, Duff & Phelps conducted such other analyses and
examinations and reviewed and considered such other financial, economic and
market data as it deemed appropriate in arriving at the Duff & Phelps Opinion.
Duff & Phelps also met with members of senior management of Peregrine to
discuss, among other things, the historical and prospective industry and Company
environment, financial conditions and operating results for Peregrine and
reasons for the Merger and visited selected Peregrine properties.
In connection with its opinion, with Peregrine's permission
and without any independent verification, Duff & Phelps relied on the accuracy
and completeness of all the financial and other information reviewed by Duff &
Phelps, furnished, or otherwise communicated to Duff & Phelps by Peregrine or
obtained by Duff & Phelps from publicly available sources. Duff & Phelps was not
requested to and did not analyze or give any effect to the impact of any
federal, state or local income taxes to Peregrine's shareholders arising out of
the Merger. Duff & Phelps did not make an independent valuation or appraisal of
the assets or liabilities of Peregrine. Any inaccuracies in the information on
which Duff & Phelps relied could materially affect its opinion.
In developing its opinion, Duff & Phelps calculated a range of
values for Peregrine using five separate valuation approaches: (i) a liquidation
value analysis based upon an assumed orderly liquidation of Peregrine; (ii) a
discounted cash flow analysis based upon projected cash flows of Peregrine;
(iii) a public market price analysis based upon historical
- 15 -
performance of Peregrine's stock; (iv) a public market multiples analysis
based upon comparable publicly traded companies; and (v) an acquisition
multiples analysis based upon acquisitions of comparable companies. Set forth
is a brief summary of the analyses performed by Duff & Phelps in reaching its
opinion as of September 1, 2000.
LIQUIDATION VALUE ANALYSIS. Duff & Phelps considered the
value of Peregrine's equity under an orderly liquidation analysis. An orderly
liquidation analysis provides an indication of the equity value of a company
by subtracting the fair market value of a company's liabilities from the fair
market value of a company's assets. Duff & Phelps used Peregrine's balance
sheet as of June 30, 2000, as a basis for the analysis. Duff & Phelps made
certain adjustment to Peregrine's assets and liabilities to arrive at the
fair market value of these assets and liabilities. In making these
adjustments, Duff & Phelps considered management's estimates of certain asset
values, third-party appraisals of certain properties and industry valuation
measures for individual hotel properties, among other factors. Duff & Phelps
also adjusted for the liquidation expenses associated with the sale of
Peregrine's properties and dissolution of Peregrine. The liquidation expenses
were conservatively estimated at 5% of the fair market value of Peregrine's
real property assets. The indication of equity value of Peregrine's common
shares resulting from this analysis was $0.58 per share, or $13.9 million for
the total equity.
DISCOUNTED CASH FLOW ANALYSIS. The discounted cash flow
analysis ("DCF Analysis") derives value indications based on the present
value of a company's debt-free net cash flows. A company's debt-free net cash
flow provides a measure of how much cash it produces, irrespective of how it
finances its operations (i.e., before debt service). Duff & Phelps performed
a DCF Analysis based on the forecasted financial information provided by
Peregrine's management. The terminal value of Peregrine was estimated by
capitalizing projected year 2004 operating cash flows. The projected
debt-free net cash flows and terminal value were discounted to present value
using discount rates ranging from 9% to 13%, which reflect different
assumptions regarding the required rates of return of holders and prospective
investors of Peregrine's common shares. The range of equity values of
Peregrine's common shares resulting from this analysis was $0.06 to $0.28 per
share, or $1.5 million to $6.7 million for the total equity.
PUBLIC MARKET PRICE ANALYSIS. Duff & Phelps reviewed the
performance of Peregrine's common shares which is traded on the
Over-the-Counter Bulletin Board. Peregrine's common shares has not been
actively traded for many years, with the monthly volume for the period from
September 1999 to August 2000 representing approximately 0.02% of the total
shares outstanding. Over the same period, the price of Peregrine's common
shares ranged from $0.16 to $0.47 per share. As of August 18, 2000, the price
of Peregrine's common shares was $0.25 per share. The Merger Consideration to
be received by the holders of Peregrine's Nonaffiliated Shares as a result of
Merger represents a premium of approximately 136% to the price of Peregrine's
common shares as of August 18, 2000.
PUBLIC MARKET MULTIPLES ANALYSIS. The public market
multiples analysis derives value indications by evaluating the public
valuations of comparable companies competing in similar industries using
available public information. Duff & Phelps selected certain shopping center,
office, lodging, hotel and mixed office/industrial REITs and C-corporations
based on a variety of factors. These comparable companies were as follows:
Alexandria Real Estate
- 16 -
Equities, Arden Realty, Boston Properties, Boykin Lodging Co., Burnham
Pacific Properties, Center Trust, Equity Inns, Extended Stay America, Felcor
Lodging Trust, Great Lakes, Hospitality Properties Trust, Host Marriott,
Innkeepers USA Trust, John Q. Hammons Hotels, Kilroy Realty Corp., Lodgian,
Meristar Hospitality Corp., Prime Hospitality Corp., PS Business Parks, RFS
Hotel Investments, Starwood Hotels & Resorts, Sunburst Hospitality Corp. and
Winston Hotels. The valuation multiples for the comparable public companies
ranged as follows: enterprise value as a multiple of sales ranged from 1.6x
to 9.7x, enterprise value as a multiple of operating cash flow ranged from
5.1x to 13.9x, and enterprise value as a multiple of operating income ranged
from 6.8x to 20.6x. Enterprise value was defined as the market value of
common equity, plus the book value of interest-bearing debt, preferred stock
and minority interests, less cash and cash equivalents. Other commonly used
valuation multiples, such as equity value as a multiple of net income and
equity value as a multiple of funds from operations, were not applicable due
to Peregrine's negative earnings and funds from operations. Based on the
multiples observed for the comparable companies, this analysis supported only
a speculative value for Peregrine's equity.
ACQUISITION MULTIPLES ANALYSIS. The acquisition multiples
analysis applies a similar methodology as the Public Market Multiples
Analysis, but relies upon multiples derived from merger and acquisition
transactions involving target involved in the real estate industry with some
operational similarity to Peregrine. The valuation multiples for the selected
transactions ranged as follows: enterprise value as a multiple of latest
twelve months' revenue ranged from 0.5x to 12.7x, enterprise value as a
multiple of latest twelve months' operating cash flow ranged from 7.0x to
30.5x, and enterprise value as a multiple of latest twelve months' operating
income ranged from 9.6x to 45.2x. The range of equity values of Peregrine's
common shares resulting from this analysis was $0.00 to $0.25 per share, or
$0.0 million to $5.9 million for the total equity.
The material analyses performed by Duff & Phelps have been
summarized above. Nonetheless, the summary set forth does not purport to be a
complete description of the analyses performed by Duff & Phelps. The
preparation of a fairness opinion involves various determinations as to the
most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Furthermore, in arriving at its opinion, Duff & Phelps did not
attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgements as to the significance and relevancy
of each analysis and factor. Accordingly, Duff & Phelps believes that its
analyses must be considered as a whole and that considering any portion of
such analyses and of the factors considered, without considering all analyses
and factors, could create a misleading or incomplete view of the process
underlying the Duff & Phelps Opinion.
In performing its analyses, Duff & Phelps made numerous
assumptions with respect to Peregrine and industry performance, general
business, economic and market conditions and other matters, based on, among
other things, information provided to it by Peregrine, many of which matters
are beyond the control of Peregrine. Any estimates and/or projections
contained in its analyses are not necessarily indicative of actual values or
actual results, as applicable, which may be significantly more or less
favorable than as set forth therein. The actual future performance of
Peregrine may vary substantially from such projections.
- 17 -
The Duff & Phelps Opinion to the Special Committee was one
of many factors taken into consideration by the Special Committee of the
Board of Trustees in recommending and approving the Merger.
The Special Committee selected Duff & Phelps as its
financial advisor because Duff & Phelps is an established investment banking
firm with experience in transactions similar to the Merger. Duff & Phelps, as
part of its investment banking services, is regularly engaged in the
valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for estate, corporate or other
purposes. Duff & Phelps has been retained by the Special Committee and the
Board of Trustees to render financial advisory services to the Special
Committee and the Board of Trustees in connection with the Merger and
received a fee for such services upon delivery of the Duff & Phelps Opinion.
As compensation for Duff & Phelps's services in rendering the Duff & Phelps
Opinion, Peregrine paid Duff & Phelps a total of $60,000, plus reimbursement
of out-of-pocket expenses of approximately $2,500, prior to receipt of the
Duff & Phelps Opinion and $20,000, plus expenses, following receipt of the
Duff & Phelps Opinion. Duff & Phelps will also receive indemnification
against certain liabilities for the services rendered pursuant to the
engagement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Special Committee
and the approval of the Board of Trustees with respect to the Merger,
shareholders should be aware that certain members of the Board of Trustees
and Peregrine's management have interests in connection with the Merger
(including those described below) that differ from those of the holders of
Nonaffiliated Shares. The Special Committee and the Board of Trustees, based
on the recommendation of the Special Committee, were aware of these potential
or actual conflicts of interest and considered them along with other matters
described in this section under "--Background Of The Merger." The Special
Committee and the Board of Trustees recognized that the existence of these
actual or potential conflicts might result in increased scrutiny of the
Merger and therefore viewed such factors negatively. As discussed elsewhere
in this section, the Special Committee and the Board of Trustees, based on
the recommendation of Special Committee, believe that the terms of the Merger
Agreement and Merger are fair to and in the best interests of the holders of
Nonaffiliated Shares from both a financial and a procedural point of view.
See "--Background of the Merger--Special Committee" and "--Board of Trustees."
New WinShip was formed by Oaktree and TCW for the purpose
of acquiring Peregrine in the Merger. At the time of the consummation of the
Merger, the Majority Shareholders will own 100% of New WinShip. Following the
effectiveness of the Merger, on a fully diluted basis, the Majority
Shareholders will own 100% of the common shares of the Surviving Trust. Such
ownership will result from the conversion, upon the consummation of the
Merger, of all of the outstanding shares of Nonaffiliated Shares into the
right to receive the Merger Consideration.
Messrs. McKissick, Witte and Joseph, members of the Special
Committee, were initially proposed for election to the Board of Trustees by
the Majority Shareholders, although such persons are not affiliated or
associated with the Majority Shareholders.
- 18 -
Several of Peregrine's officers hold options to purchase
Peregrine common shares. All of the outstanding options to purchase Peregrine
common shares held by the employees which were issued under the 1998 Long
Term Incentive Plan will be converted into options to purchase New WinShip
common shares and all obligations of Peregrine under such option plans will
be assumed by New WinShip upon consummation of the Merger. As a result, the
following officers of Peregrine will have options to purchase New WinShip
common shares: Roger D. Snell, Larry Knorr and Paul Gradeff. See "THE MERGER
AGREEMENT--Treatment Of Options."
Options to purchase Peregrine common shares which are held
by trustees of Peregrine and were issued under Peregrine's Trustee Option
Plan will not be converted into options to purchase New WinShip common
shares and will be cancelled.
CERTAIN EFFECTS OF THE MERGER
Following the Merger, the Majority Shareholders will own
100% of the common shares of New WinShip as the Surviving Trust and will have
a 100% interest in the net book value and net earnings of New WinShip as the
Surviving Trust. The Majority Shareholders will be the sole beneficiaries of
any future earnings and growth of the Surviving Trust (until shares of
beneficial interest, if any, are issued to other persons) and will have the
ability to benefit from any divestitures, strategic acquisitions or other
corporate opportunities that may be pursued by the Surviving Trust in the
future. Upon the consummation of the Merger, the holders of Nonaffiliated
Shares will cease to have any ownership interests in Peregrine or rights as
shareholders. The holders of Nonaffiliated Shares will no longer benefit from
any increases in the value of Peregrine or any payment of dividends on the
Peregrine common shares and will no longer bear the risk of any decreases in
value of Peregrine. As of June 30, 2000, the Majority Shareholders had a
89.7% interest in the net book value and net earnings of Peregrine which
amounted to approximately $751,000 and $60,000, respectively. Assuming the
Merger was consummated on June 30, 2000, the Majority Shareholders would have
had a 100% interest in the net book value and net earnings of Peregrine as of
June 30, 2000 which would have amounted to approximately $837,000 and
$67,000, respectively. As a result of the Merger, New WinShip, as the
Surviving Trust, will be privately held and there will be no public market
for its equity interests. In addition, registration of the Peregrine common
shares under Section 12(g)(4) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), will be terminated following the mailing of
this Information Statement, and, accordingly, Peregrine will no longer be
required to file periodic reports with the SEC under Section 15(d) of the
Exchange Act. In particular, Peregrine will not file an Annual Report on Form
10-K for the fiscal year ended December 31, 2000.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of material federal income tax
consequences of the Merger to shareholders who receive the Merger
Consideration for their shares of Peregrine common shares pursuant to the
Merger. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations (including Proposed Regulations
and Temporary Regulations) promulgated thereunder, official pronouncements
and judicial decisions, all as in effect on the date hereof and all of which
are subject to change, possibly with retroactive effect. This summary does
not purport to discuss all tax consequences of the Merger to all
shareholders. In particular, the summary does not discuss the tax
consequences of the
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Merger to any shareholder that is an insurance company, tax-exempt
organization or financial institution or who has acquired his, her or its
shares upon the exercise of options or otherwise as compensation.
The receipt of cash by a shareholder of Peregrine in
exchange for Peregrine common shares pursuant to the Merger will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign or other tax laws. In
general, a shareholder will recognize a gain or loss equal to the difference,
if any, between the amount of cash received for his, her or its stock in the
Merger and the shareholder's adjusted tax basis in such stock. A
shareholder's adjusted basis in the Peregrine common shares generally will
equal the shareholder's purchase price for such Peregrine common shares. For
federal income tax purposes, such gain or loss will be a capital gain or loss
if the shares are a capital asset in the hands of the shareholder, and will
be treated as long-term capital gain or loss if the shares have been held for
a twelve month period. A shareholder will recognize such gain or loss as of
the Effective Time.
Because most of Peregrine's value is attributable to its
holdings of United States real estate, Peregrine is a real property holding
corporation for purposes of the Foreign Investment in Real Property Tax Act
("FIRPTA"). Thus, Peregrine common shares are treated as real property
interests for United States tax purposes and gain realized by a foreign
person on the sale of Peregrine common shares is treated as effectively
connected with a United States trade or business. As indicated above, the
receipt of cash by a shareholder of Peregrine in exchange for Peregrine
common shares is treated as a sale or exchange of the Peregrine common
shares. Thus, foreign holders of Peregrine common shares are required to file
United States tax returns with respect to their sale of the Peregrine common
shares and are liable for United States tax on that sale in the same manner
as a United States person. In addition, Peregrine is required to withhold and
remit to the Internal Revenue Service 10% of the consideration payable to the
foreign person. This withholding is not a substantive tax, but an enforcement
mechanism. The foreign person may credit the withholding tax against its
substantive tax liability and will be entitled to a refund if the amount
withheld exceeds its substantive tax liability. Withholding at the 10% rate
is not required if the foreign person obtains a withholding certificate from
the Internal Revenue Service indicating that no withholding or a lower amount
of withholding is applicable. In addition, if a foreign person receives a
withholding certificate and a greater amount than indicated on the
certificate was withheld, the foreign person may apply for an early refund.
Peregrine or the Exchange Agent (as defined below) will be
required to withhold 31% of the gross proceeds payable to a shareholder or
other payee in the Merger unless the shareholder or payee provides, in a
properly completed substitute Form W-9 included with the letter of
transmittal which will be mailed to the holders of Nonaffiliated Shares
promptly after the Effective Time (the "Letter of Transmittal") (see "THE
MERGER AGREEMENT--The Exchange Fund; Payment for Common Shares"), his, her or
its taxpayer identification number and certifies under penalties of perjury
that such number is correct and that the shareholder is not subject to backup
withholding, unless an exemption applies under applicable law and
regulations. Therefore, unless such an exemption exists and is demonstrated
in a manner satisfactory to Peregrine or the Exchange Agent, in accordance
with the instructions that will accompany the substitute Form W-9, each
shareholder should complete and sign the substitute
- 20 -
Form W-9 that will be made available to the shareholder with the Letter of
Transmittal, so as to provide the information and certification necessary to
avoid backup withholding.
Each shareholder should consult his, her or its own tax
advisor with respect to the federal income tax consequences of the Merger in
his, her or its individual circumstances and with respect to the state, local
or other income tax consequences of the Merger. Further, any shareholder who
is a citizen of a country other than the United States should consult his,
her or its own tax advisor with respect to the tax treatment in such country
of the Merger and with respect to the question of whether the tax
consequences described above may be altered by reason of the provisions of
the internal revenue code applicable to foreign persons or the provisions of
any tax treaty applicable to such shareholder.
ACCOUNTING TREATMENT
The Merger between Peregrine and New WinShip will be
accounted for as an exchange of shares between entities under common control.
As a result, the historical cost basis of Peregrine's assets and liabilities
will be carried forward to the Surviving Trust.
The cost of repurchasing the Peregrine common shares will
be accounted for as a treasury stock transaction within the context of
generally accepted accounting principles. Accordingly, the aggregate cost of
such repurchase will be accounted for as a deduction from shareholders'
equity.
FINANCING OF THE MERGER
The total amount of funds required by New WinShip to pay
the aggregate Merger Consideration due to the holders of Nonaffiliated Shares
at the closing of the Merger, is expected to be approximately $1,369,000. In
addition, New WinShip will require approximately $500,000 to pay other
expenses and costs relating to the transactions. New WinShip expects to fund
the Merger Consideration with Peregrine's cash on hand, cash from Peregrine
operations, borrowings under Peregrine's credit facility and cash generated
from sales of Peregrine properties.
On March 10, 1999, Peregrine entered into a credit facility
with Fremont Investment & Loan ("Fremont") to provide for up to $44,000,000
in borrowing capacity under a revolving line of credit. The maximum amount
that may be borrowed under the credit facility is based upon the appraised
value of certain parcels of real estate owned by Peregrine. The commitments
made under the credit facility expire on April 1, 2001, but may be extended
until April 2, 2003 with Fremont's consent. The credit facility is secured by
a first lien on three commercial properties and four hotel properties located
in California.
Principal amounts borrowed under the credit facility bear
interest at 8.6% for the first six months, then at a range from the six-month
LIBOR plus 350 basis points to LIBOR plus 400 basis points. The average
interest rate charged during the six months ended June 30, 2000 was 9.9%. The
current interest rate charged as of September 26, 2000 was 10.205%.
Approximately $3,900,000 under the credit facility is
available as of September 26, 2000 to Peregrine for capital improvements,
property purchases and certain payments to Peregrine's public common
shareholders. Peregrine intends to repay the amounts borrowed under the
credit facility upon its maturity.
REGULATORY MATTERS
Peregrine does not believe that any material federal or
state regulatory approvals, filings or notices are required by Peregrine in
connection with the Merger other than such approvals, filings or notices
required pursuant to federal and state securities laws.
REQUIRED VOTE FOR MERGER; WRITTEN CONSENT IN LIEU OF MEETING
Under Section 23006 of the California Corporations Code ,
as amended, any two or more real estate investment trusts may be merged into
one real estate investment trust upon the approval of the holders of a
majority of the shares of beneficial interest of the real estate investment
trust (or as otherwise provided for in the declaration of trust), provided
that the merger is specifically permitted by the declaration of trust, and
that procedure is detailed in those declarations. Under Section 4.7 of
Peregrine's Restated Declaration of Trust, a merger or sale or transfer of
all or substantially all of the assets of Peregrine must be approved by the
affirmative vote or written consent of at least 75% of the outstanding common
shares of Peregrine entitled to
- 21 -
vote. Pursuant to Section 8.3 of Peregrine's Restated Declaration of Trust,
any action required or permitted to be taken at any meeting of shareholders
of Peregrine may be taken without a meeting, upon the written consent of
shareholders who would have been entitled to cast the minimum number of votes
that would be necessary to authorize the action at a meeting at which all
shareholders entitled to vote thereon were present and voting. On
_____________, 2000, the Majority Shareholders, which then held of record, in
the aggregate, 20,232,525 Peregrine common shares, representing more than 75%
of the votes entitled to be cast at a meeting to consider the Merger
Agreement and the Merger, executed and delivered to Peregrine a written
consent in lieu of a meeting of shareholders approving the Merger Agreement
and the Merger and adopting the Merger Agreement. On _____________, 2000,
there were issued and outstanding 22,552,440 Peregrine common shares. The
Merger will become effective no earlier than 20 business days after this
Information Statement is first sent or given to shareholders of Peregrine.
The Merger Agreement does not require the holders of Nonaffiliated Shares to
approve the Merger.
THE MERGER AGREEMENT
The following is a summary of the material terms of the
Merger Agreement. This summary is not a complete description of the terms and
conditions thereof, and shareholders are urged to read the Merger Agreement
which is attached hereto as Exhibit A.
CONSIDERATION TO BE PAID IN THE MERGER
At the Effective Time, by virtue of the Merger and without
any action on the part of New WinShip, Peregrine, or the holders of any
Peregrine common shares, each Nonaffiliated Share which is issued and
outstanding prior to the Effective Time shall be converted into and become a
right to receive the Merger Consideration, and, when so converted, shall
automatically be cancelled and retired and shall cease to exist. Any
certificate representing Nonaffiliated Shares that has been so converted
shall, after the effective time of the Merger, cease to have any rights with
respect thereto, except the right to receive the Merger Consideration
allocable to the shares represented by such certificate upon the surrender of
such certificate.
California law and the provisions of Peregrine's Restated
Declaration of Trust do not provide dissenters' rights to shareholders of
Peregrine. See "NO DISSENTERS RIGHTS."
THE EXCHANGE FUND; PAYMENT FOR COMMON SHARES
On or before the Closing Date, Peregrine shall appoint a
bank or trust company to act as exchange agent (the "Exchange Agent"). As of
the Effective Time, Peregrine will deposit or cause to be deposited with or
for the account of the Exchange Agent, in trust for the benefit of the
holders of Nonaffiliated Shares, an amount in cash equal to the aggregate
Merger Consideration (such amount being hereinafter referred to as the
"Exchange Fund").
As soon as reasonably practicable after the Effective Time,
the Exchange Agent will mail to each record holder of Nonaffiliated Shares
immediately prior to the Effective Time the Letter of Transmittal containing
instructions for surrendering certificates formerly representing Peregrine
common shares (the "Certificates") in exchange for the Merger Consideration.
No shareholder should surrender any Certificates until the shareholder
receives
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the Letter of Transmittal and other materials for such surrender. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together
with a Letter of Transmittal, duly executed, and such other customary
documents as may be required pursuant to the instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each Peregrine common share formerly represented by such
Certificate, less any required withholding of taxes, and the Certificate so
surrendered will be cancelled. The Merger Consideration will be delivered by
the Exchange Agent as promptly as practicable following the surrender of the
Certificate and delivery of the Letter of Transmittal and any other related
transmittal documents. Cash payments may be made by check unless otherwise
required by a depository institution in connection with the book-entry
delivery of securities.
If payment of the Merger Consideration is to be made to a
person other than the person in whose name the Certificate surrendered is
registered, it will be a condition of payment that the Certificate so
surrendered will be properly endorsed or otherwise be in proper form for
transfer and that the Exchange Agent receives evidence that any applicable
transfer or other taxes have been paid.
SHAREHOLDERS SHOULD NOT SEND THEIR CERTIFICATES NOW AND
SHOULD SEND THEM ONLY PURSUANT TO INSTRUCTIONS SET FORTH IN THE LETTER OF
TRANSMITTAL TO BE MAILED TO SHAREHOLDERS AS SOON AS PRACTICABLE AFTER THE
EFFECTIVE TIME. IN ALL CASES, THE MERGER CONSIDERATION WILL BE PROVIDED ONLY
IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THIS INFORMATION STATEMENT AND
SUCH LETTER OF TRANSMITTAL.
Six months after the Effective Time, the Exchange Agent
will return to New WinShip any portion of the Exchange Fund which remains
undistributed to the holders of Nonaffiliated Shares (including the proceeds
of any investments thereof), and any holders of Nonaffiliated Shares who have
not theretofore complied with the above-described procedures to receive
payment of the Merger Consideration may look only to New WinShip and only as
general creditors thereof for payment of their claim for Merger
Consideration. California law provides that Merger Consideration that is owed
to shareholders with addresses in California will escheat to the State of
California if such shareholders do not claim such Merger Consideration within
three years following the consummation of the Merger. The escheat laws of
other jurisdictions in which Peregrine shareholders reside may differ from
California law.
TRANSFERS OF PEREGRINE COMMON SHARES
At the Effective Time, the stock transfer books of
Peregrine will be closed, and there will be no further registration of
transfers of Peregrine common shares thereafter on the records of Peregrine.
If, after the Effective Time, Certificates are presented to the Exchange
Agent or the Surviving Trust, they will be cancelled and exchanged for the
Merger Consideration as provided above and pursuant to the terms of the
Merger Agreement.
TREATMENT OF OPTIONS
Pursuant to the Merger Agreement, at the Effective Time,
all of the outstanding options to purchase Peregrine common shares held by
the employees under the 1998 Long Term Incentive Plan, will be automatically
be converted into options to purchase New WinShip
- 23 -
common shares and all obligations of Peregrine under such option plans will
be assumed by New WinShip.
Options to purchase Peregrine common shares which are held
by trustees of Peregrine and were issued under Peregrine's Trustee Option
Plan will not be converted into options to purchase New WinShip common
shares and will be cancelled.
AMENDMENT
The Merger Agreement provides that it may not be amended
except by written agreement of each of the parties thereto.
APPLICABLE LAW
The Merger Agreement is governed by the laws of the State
of California.
ESTIMATED FEES AND EXPENSES
Whether or not the Merger is not consummated, and except as
otherwise provided herein, all fees and expenses incurred by Peregrine and
the Majority Shareholders in connection with the Merger will be paid by
Peregrine.
Estimated fees and expenses to be incurred by Peregrine or
New WinShip in connection with the Merger are as follows:
Financial Advisors Fees and Expenses...............$84,365
SEC Filing Fees........................................275
Legal Fees and Expenses............................170,000
Accounting Fees......................................5,000
Printing and Mailing Expenses.......................85,000
Exchange Agent Fees................................102,000
Information Agent Fees..............................25,000
Total .........................................$471,640
The Majority Shareholders believe Peregrine will be able to
achieve savings of approximately $500,000 per year in legal, printing,
accounting and public relations costs by being freed of public reporting
obligations. On a long-term basis, such savings will outweigh the estimated
costs of the transaction described above.
NO DISSENTERS RIGHTS
California law and the provisions of Peregrine's Restated
Declaration of Trust do not provide dissenters' rights to shareholders of
Peregrine. However, Section 7.2 of Peregrine's Restated Declaration of Trust
provides that any holder of the Nonaffiliated Shares may inspect Peregrine's
share register, books of account and minutes of shareholder proceedings at
any reasonable time upon the written demand of such shareholder in connection
with the Merger or for a purpose reasonably related to his or her interests
as a shareholder. The provisions of Peregrine's Restated Declaration of Trust
do not provide the shareholders of Peregrine a right to obtain counsel at the
expense of Peregrine.
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CERTAIN INFORMATION REGARDING PEREGRINE
Peregrine is a California real estate investment trust
headquartered in Sacramento, California. As of June 30, 2000, Peregrine's
investments included eight commercial properties located primarily in the
Sacramento area, four hotel properties located in Northern California,
partnership interests in two general partnerships, and one mortgage note
secured by real property.
Peregrine was organized in California pursuant to a
Declaration of Trust dated July 31, 1973. Pursuant to a Plan of
Reorganization under Chapter 11 of the United States Bankruptcy Code
Peregrine was reorganized under a Restated Declaration of Trust dated October
7, 1994. Peregrine's Restated Declaration of Trust gives the Board of
Trustees the power to borrow money on behalf of Peregrine; to make loans to
other persons; to invest in the securities of other issuers under certain
circumstances; to make investments in property; to purchase outstanding
shares of Peregrine for such consideration as they deem advisable; to issue
an annual report to shareholders; to issue debt securities; to allocate
investments between direct and indirect ownership; and to exercise other
powers in connection with Peregrine's operations. The Trustees can also make
decisions regarding investment and sales activities without the prior
approval of shareholders.
Peregrine's principal offices are located at 1300 Ethan
Way, Suite 200, Sacramento, California, 95825. Its telephone number is (916)
929-8244.
CERTAIN INFORMATION REGARDING NEW WINSHIP
New WinShip was organized by Oaktree and TCW to acquire all
the outstanding shares of Peregrine common shares pursuant to the Merger
Agreement.
New WinShip has not conducted any unrelated activities
since its organization. All of the outstanding equity interests of New
WinShip are currently owned by TCW and Oaktree, and immediately prior to the
consummation of the Merger will be owned by the Majority Shareholders, who
collectively own 89.7% of the issued and outstanding common shares of
Peregrine. Immediately prior to the consummation of the Merger, the Majority
Shareholders will contribute all of the Peregrine common shares owned by them
to New WinShip in exchange for shares of capital stock of New WinShip.
Kenneth Liang, Phil Hofmann and Russel S. Bernard are the
sole officers and trustees of New WinShip and will become the sole trustees
of New WinShip, as the Surviving Trust, as a result of the Merger.
The principal offices of New WinShip are located at 1300
Ethan Way, Suite 200, Sacramento, California 95825 and its telephone number
is (916) 9298244.
CERTAIN INFORMATION REGARDING THE MAJORITY SHAREHOLDERS
TCW. TCW owns 8,647,723 Peregrine common shares, which represents
38.3 % of the Peregrine common shares and approximately 38.3% of the voting
power of the shareholders of Peregrine. TCW is comprised of TCW Special
Credits Fund IV, a California limited partnership;
- 25 -
TCW Special Credit Plus Fund, a California limited partnership; TCW Special
Credits Trust IV, a trust organized under the laws of the United States; TCW
Special Credits Trust IVA, a trust under the laws of the United States; and
TCW Special Credits, as investment manager of the Weyerhaeuser Company Master
Retirement Trust Separate Account. TCW's principal business is to provide
investment advice and management services to institutional and individual
investors. TCW has not been convicted in any criminal proceedings during the
past five years. TCW has not been a party to any judicial or administrative
proceeding during the past five years that resulted in a judgment or final
order enjoining TCW from future violations of federal or state securities
laws or in a finding of any violation of federal or state securities laws.
The principal offices of TCW are located at 865 South Figueroa Street, Suite
1800, Los Angeles, California 90017 and its telephone number is (213)
244-0000.
OAKTREE. Oaktree owns 6,196,188 Peregrine common shares, which
represents 27.5 % of the Peregrine common shares and approximately 27.5% of
the voting power of the shareholders of Peregrine. Oaktree is comprised of
OCM Real Estate Opportunities Fund A, L.P., a Delaware limited partnership;
OCM Real Estate Opportunities Fund B, L.P., a Delaware limited partnership;
and Oaktree Capital Management, LLC as investment manager of Gryphon Domestic
VII, LLC's separate account. Oaktree's principal business is to provide
investment advice and management services to institutional and individual
investors. Oaktree has not been convicted in any criminal proceedings during
the past five years. Oaktree has not been a party to any judicial or
administrative proceeding during the past five years that resulted in a
judgment or final order enjoining Oaktree from future violations of federal
or state securities laws or in a finding of any violation of federal or state
securities laws. The principal offices of Oaktree are located at 333 South
Grand Avenue, 28th Floor, Los Angeles, California 90071 and its telephone
number is (213) 830-6300.
PRUDENTIAL. Prudential owns 5,387,989 Peregrine common shares, which
represents 23.9% of the Peregrine common shares and approximately 23.9% of
the voting power of the shareholders of Peregrine. Prudential is comprised of
The Prudential Insurance Company of America, a corporation organized in New
Jersey and Gateway Recovery Trust, a business trust organized in Delaware.
Prudential's principal business is insurance and financial services.
Prudential has not been convicted in any criminal proceedings during the past
five years. Prudential has not been a party to any judicial or administrative
proceeding during the past five years that resulted in a judgment or final
order enjoining Prudential from future violations of federal or state
securities laws or in a finding of any violation of federal or state
securities laws. The principal offices of The Prudential Insurance Company of
America are located at Prudential Plaza, 751 Broad Street, Newark, New Jersey
07102-3777 and its telephone number is (973) 802-8787. The principal offices
of The Gateway Recovery Trust are located at Four Gateway Center, 9th Floor,
Newark, New Jersey 07102 and its telephone number is (973) 802-7500.
TRUSTEES AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS.
The name and ages of all executive officers of Peregrine as
of September 1, 2000 and principal occupation and business experience during
at least the last five years for each are set forth below:
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NAME AGE POSITION
- ---- --- --------
Roger D. Snell............................... 44 President, Chief Executive Officer, Chairman of the
Board of Trustees
Ken Leone.................................... 45 Vice President of Hotel Operations
David Topping................................ 37 Vice President of Commercial Real Estate
Larry Knorr.................................. 48 Vice President, Chief Accounting Officer and Secretary
ROGER D. SNELL, PRESIDENT, CHIEF EXECUTIVE OFFICER,
CHAIRMAN OF THE BOARD OF TRUSTEES, AND ACTING SECRETARY. On May 30, 1997,
immediately following the Annual Shareholders Meeting, Mr. Snell was
appointed to serve as the Chairman of the Board of Trustees, Acting
Secretary, President and Chief Executive Officer of Peregrine. Mr. Snell is
the founder of Snell&Co, a firm focused on real estate investments, advisory,
and development. Prior to founding Snell&Co in 1996, he was President and
Chief Executive Officer of Pacific Gateway Properties, from 1992 to 1995, and
also served as a member of the Board of Directors and acting Chairman.
Between 1985 and 1992, Mr. Snell was a Partner with Paragon Group, a national
development company. Mr. Snell has a BS degree from the University of
California, at Berkeley and an MBA from Harvard University.
KEN LEONE, VICE PRESIDENT OF HOTEL OPERATIONS. Mr. Leone
is the Vice-President of Hotel Operations for Peregrine and is responsible
for overseeing the operations of the company's hotel properties. From
December 1993 to February 2000 Mr. Leone was Regional Director of Operations
for Meristar Hotels in San Jose, California. Prior to Meristar Hotels, Mr.
Leone served as Vice President and General Manager for J.G. Enterprises Inc.
in Monterey, California from August 1988 to December 1993. Mr. Leone
attended California State University, Chico, California.
LARRY KNORR, VICE PRESIDENT, CHIEF ACCOUNTING OFFICER. Mr.
Knorr was hired by Peregrine in June 1998 as the Vice President, Chief
Accounting Officer and Secretary. He is responsible for overseeing all
aspect of accounting and financial controls of the Trust. From 1996 until he
joined Peregrine, he served as Controller for Classic Development Corporation
in Irvine, California, a single-family homebuilder and owner of apartments
and commercial projects. Before joining Classic Development Corporation, Mr.
Knorr was Vice President and Controller for Paragon Group Property Services
from 1983 to 1995. Mr. Knorr holds a BA from Ohio University and MBA from
Boston University.
DAVID TOPPING, VICE PRESIDENT OF COMMERCIAL REAL ESTATE.
Mr. Topping has been the Vice President of Commercial Real Estate for
Peregrine since June 2000. Prior to joining Peregrine, Mr. Topping was Vice
President and Director of Operations for CarrAmerica from September 1997
through June 2000. Prior to that, Mr. Topping was a Senior Property Manager
for Heitman Properties from January 1992 to August 1997. Mr. Topping
received a B.A. from Humboldt State University in Physical Education. In
addition, he holds a California Real Estate License as well as numerous
professional certifications.
- 27 -
TRUSTEES.
The following sets forth certain information with respect
to the trustees of Peregrine as of September 1, 2000 based on information
furnished to Peregrine by each trustee. There are no arrangements or
understandings between any trustee and any other person pursuant to which the
trustee was selected as a trustee. There are no family relationships among
any of the trustees.
DATE FIRST BECAME A
NAME, AGE TRUSTEE POSITION WITHIN THE TRUST
- --------- ------------------- -------------------------
Roger D. Snell.......................... February 1997 President, Chief Executive Officer, Chairman of
Age 44 the Board of Trustees
Michael C. Joseph....................... October 1997 Trustee
Age 43
D. Richard Masson....................... May 1997 Trustee
Age 41
Carson R. McKissick..................... May 1997 Trustee
Age 67
Matthew L. Witte........................ May 1997 Trustee
Age 42
ROGER D. SNELL, PRESIDENT, CHIEF EXECUTIVE OFFICER,
CHAIRMAN OF THE BOARD OF TRUSTEES, AND ACTING SECRETARY. For information
about Mr. Snell's professional background, see "Executive Officers."
MICHAEL C. JOSEPH, TRUSTEE. Mr. Joseph is currently a
Director with Cohn Financial a national real estate finance company, Cohn
Financial acquired Merriman Mortgage Partners in March 1999, in which Mr.
Joseph was a principal from June 1994 until March 1999. He is a graduate of
Lafayette College with an MBA from the Wharton School.
D. RICHARD MASSON, TRUSTEE. Mr. Masson currently serves as
a Principal of Oaktree Capital Management, LLC ("OCM"), an investment
advisory firm of which he is one of the founding Principals. Prior to
co-founding OCM in May 1995, he served as a Managing Director of Trust
Company of the West ("TCW") and TCW Asset Management Company ("TAMCO"),
wholly owned subsidiaries of The TCW Group, Inc., where he served from 1988
to present in various other capacities for TCW Special Credits. TCW Special
Credits serves as a general partner and investment advisor to certain limited
partnerships, trusts, and accounts invested in securities and debt
obligations of financially distressed companies. TAMCO is the managing
general partner of TCW Special Credits, and Mr. Masson is a general partner
of TCW Special Credits. Mr. Masson also serves as a member of the Board of
Directors of Aureal, Inc.
- 28 -
CARSON R. MCKISSICK, TRUSTEE. Mr. McKissick was a Senior
Advisor of TCW, from 1992 to 1997. Mr. McKissick currently serves as a
member of the Board of Directors of Alexander & Baldwin, Inc.
MATTHEW L. WITTE, TRUSTEE. Mr. Witte has been a Director
and Officer of Marwit Capital ("Marwit"), a private investment firm with
diversified holdings in approximately 20 middle-market companies primarily
based in Western United States. He was appointed President and Chief
Executive Officer of Marwit in April 1994 and is responsible for managing the
day-to-day operations. He also serves as a member of Marwit's Investment
Committee. He is a graduate of Cornell University, and is a member of the
Southland Venture Alliance, and is a Director of Infotec Commercial Systems,
New West Communications, Inc., H&W Foods, Protrave Services, Inc., and
Signature Theatres, LLC.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of
September 1, 2000 with respect to the beneficial ownership of the outstanding
Peregrine common shares by (i) all persons known by Peregrine to own more
than five percent of either class of shares, or to be a member of a group
that owns more than five percent of either class of shares, based on
information furnished by such persons or contained in filings made with the
Securities and Exchange Commission, (ii) by the Chief Executive Officer of
Peregrine and each of the four most highly compensated executive officers of
Peregrine (the "Named Executive Officers"), and (iii) by the trustees of
Peregrine and Named Executive Officers as a group:
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNERS (1) BENEFICIAL OWNERSHIP (2) CLASS
- ----------------------------------------- ------------------------ -----
TCW Group, Inc. (3)..............................................
865 South Figueroa Street
Los Angeles, California 90017 8,647,723 38.3%
Oaktree Capital Management, LLC (4)..............................
333 South Grand Avenue, 28th Floor
Los Angeles, California 90017 6,196,188 27.5%
The Prudential Insurance Company of America (5)..................
9th Floor, Four Gate Center
100 Mulberry Center
Newark, NY 07102-4069 5,388,614 23.9%
Roger D. Snell...................................................
President, Chief Executive Officer, Chairman of the Board of Trustees, and 1,062,500 4.5%
Acting Secretary (6)
D. Richard Masson, Trustee (7)................................... --- *
Michael C. Joseph, Trustee (8)................................... 20,000 *
- 29 -
Carson R. McKissick, Trustee (8)................................. 20,000 *
Matthew L. Witte, Trustee (8).................................... 20,000 *
Larry Knorr, Vice President Chief Accounting Officer (6)......... 133,334 *
Named Executive Officers and Trustees as a Group (8 Persons) (8). 1,255,834 5.3%
- -------------
* Less than 1%
(1) Unless otherwise indicated, the address of each of the security
holders listed in the table above is: c/o The Peregrine Real Estate
Trust, d.b.a. WinShip Properties, 1300 Ethan Way, Suite 200,
Sacramento, California 95825.
(2) As used in the table above, a beneficial owner includes any person who
directly or indirectly, through contract, arrangement, understanding,
relationship or otherwise has or shares (i) the power to vote, or
direct the voting, of such security or (ii) investment power which
includes the power to dispose, or to direct the disposition of, such
security. In addition, a person is deemed to be the beneficial owner of
a security if that person has the right to acquire beneficial ownership
of such security within 60 days.
(3) TCW Group, Inc., is a holding company of entities involved in the
principal business of providing investment advice and management
services to various entities, including among others, TAMCO and TCW.
TAMCO, is managing general partner of TCW Special Credits and
therefore may be deemed to be a beneficial owner of 5,966,926 or
26.5% of the Peregrine common shares. Trust Company of the West is
an investment advisor and provides investment advice and management
services to institutional and individual investors, and is the
trustee of TCW Special Credits Trust IV which directly owns
2,161,932 or 9.6% of Peregrine common shares and TCW Special Credits
Trust IVA which directly owns 518,865 or 2.3% of Peregrine common
shares and therefore Trust Company of the West may be deemed to be a
beneficial owner of 2,680,797 or 11.9% of the Peregrine common
shares. TCW Special Credits provides investment advice and
management services to, and is the general partner of, several
limited partnerships including TCW Special Credits Fund IV which
directly owns 2,507,837 or 11.1% of the Peregrine common shares, TCW
Special Credits Plus Fund which directly owns 2,680,795 or 11.9% of
the Peregrine common shares and a third party account which directly
owns 778,294 or 3.5% of the Peregrine common shares. Therefore, TCW
Special Credits may be deemed to be a beneficial owner of 5,966,926
or 26.5% of Peregrine common shares (all the foregoing entities
comprise the "TCW Related Entities"). The TCW Related Entities may
be deemed to be beneficially owned by TCW Group, Inc., for purposes
of the reporting requirements of the Securities Exchange Act of
1934. Robert Day is Chairman of the Board and Chief Executive
Officer of the TCW
- 30 -
Group, Inc., and may be deemed to control the TCW Group, Inc.,
although Mr. Day expressly disclaims such control and disclaims
beneficial ownership of any securities beneficially owned by TCW
Group, Inc.
(4) OCM is the investment manager and general partner for OCM Real Estate
Opportunities Fund A, LP, which directly owns 2,044,744 or 9.1% of the
Peregrine common shares, and OCM Real Estate Opportunities Fund B, LP,
which directly owns 3,531,825 or 15.7% of the Peregrine common shares.
OCM is also the investment manager of a third party account, which
directly owns 619,619 or 2.7% of the Peregrine common shares. The funds
and accounts which OCM manages may be deemed to be beneficially owned
by OCM for purposes of the reporting requirements of the Exchange
Act, although 0CM disclaims such beneficial ownership.
(5) The Prudential Insurance Company of America directly owns 1,643,962 of
7.3% of the Peregrine common shares and is the asset manager and
principal beneficiary of the Gateway Recovery Trust which directly owns
3,744,652 or 16.6% of the Peregrine common shares, and, therefore, The
Prudential Insurance Company of America may be deemed to be a
beneficial owners of such securities for purposes of the reporting
requirements of the Securities Exchange Act of 1934.
(6) Reflects options to purchase Peregrine common shares, all of which
are immediately exercisable.
(7) D. Richard Masson is a general partner of TCW Special Credits and a
principal of OCM and therefore, may be deemed to control 5,966,926 of
the Peregrine common shares of TCW Special Credits, or 26.5% of the
outstanding Peregrine common shares, and 6,196,188 of the Peregrine
common shares of OCM, or 27.5% of the outstanding Peregrine common
shares. Mr. Masson expressly disclaims such control and disclaims
beneficial ownership of any securities beneficially owned by TCW
Special Credits or OCM.
(8) Represents options to purchase Peregrine common shares held by the
respective trustee, all of which are immediately exercisable.
CERTAIN RELATIONSHIPS
During 1999, Peregrine paid $275,000 to E.S. Merriman in
connection with the services provided in the negotiations of the terms of
Peregrine's line of credit. During the negotiations for the line of credit, one
of Peregrine's trustees, Michael Joseph, was an agent for E.S. Merriman and
assisted in the negotiations of the terms of Peregrine's line of credit.
On November 2, 1998, Peregrine entered into an exchange
agreement (the "Exchange Agreement") with Oaktree, TCW and Prudential wherein
such holders agreed to exchange all of their redeemable convertible preferred
stock (the "Preferred Stock") in the original face amount of $22,500,000, for
Peregrine common shares (the "Exchange"). The Exchange Agreement effectively
accelerated the mandatory conversion of the Preferred Shares for Peregrine
common shares, which was to occur in April 1999. The Exchange was consummated on
November 18, 1998. As a result of the Exchange, all of the issued and
outstanding Preferred Shares were converted into Peregrine common shares and
each holder of
- 31 -
Preferred Shares received 1.0541145 Peregrine common shares for each
outstanding Preferred Shares. OCM, TCW and Prudential received an aggregate
of 17,672,000, Peregrine common shares, in exchange for their Preferred
Shares, increasing their aggregate percentage ownership of Peregrine common
shares to approximately 89.7%.
On May 26, 2000, Prudential sold to OCM Real Estate
Opportunities Fund II, L.P. $4,281,162.80 in aggregate principal amount of
8.5% Senior Secured Notes due October 1, 2000 ("Notes"), issued by Peregrine.
In connection with such sale, and following discussions with Peregrine, each
of Oaktree, TCW and Prudential executed a Shareholders' Agreement (the
"Shareholders' Agreement") pursuant to which each such party agreed to
contribute the Peregrine common shares held by such entity to New WinShip, a
newly-formed entity that will be wholly-owned by Oaktree, TCW and Prudential,
and to vote in favor of the Merger. The initial term of such agreement to
contribute Peregrine common shares to New WinShip and vote in favor of the
Merger continues until December 31, 2000, and such agreement will continue
for successive six month terms unless terminated not less than one month
prior to the expiration of the initial term or the applicable successive term.
In addition, Oaktree and TCW have agreed pursuant to the
Merger Agreement, to exchange all of the total amount of Notes held by
Oaktree and TCW, respectively, for common shares of New WinShip. Oaktree and
TCW agreed in the Shareholders' Agreement that they will not (1) exchange
such Notes for common shares at an exchange price of less than the greater of
(a) $0.50 per share or (b) $0.10 per share less than the highest price paid
by Peregrine to purchase any Peregrine common shares following the date of
the Shareholders' Agreement and prior to the date of such exchange of Notes
or (2) effect any subsequent exchange of Notes into common shares at an
exchange price that is less than the exchange price of the first exchange of
Notes into common shares by Oaktree and TCW. Such agreement relating to the
conversion of Notes into common shares will terminate at such time, if any,
that Prudential terminates the agreement contained in the Shareholders'
Agreement relating to the contribution of Peregrine common shares to New
WinShip and voting in favor of the Merger.
In April 2000, Peregrine and an entity managed by OCM
formed Sacramento Renaissance Tower, L.L.C., ("SRT") a Delaware limited
liability company. In April 2000, SRT purchased a 28-story office building in
Sacramento, California. Pursuant to the Operating Agreement of SRT, the
entity managed by OCM contributed 100% of the acquisition price. Peregrine
did not make any capital contribution to SRT. Peregrine is responsible for
the management of the building. Pursuant to the Operating Agreement of SRT,
Peregrine receives an asset management fee of a percentage of the gross
revenues of the office building and has a profit participation right after
the entity managed by OCM achieves a certain rate of return.
In December 1999, Peregrine and an entity managed by OCM
formed Airport Boulevard Hotel, L.L.C., ("ABH") a Delaware limited liability
company. In December 1999, ABH purchased a 301-room hotel in Burlingame,
California. Pursuant to the Operating Agreement of ABH, the entity managed by
OCM contributed 100% of the acquisition price. Peregrine did not make any
capital contribution to ABH. Peregrine is responsible for the management of
the hotel. Pursuant to the Operating Agreement of ABH, Peregrine receives an
asset management fee of a percentage of the gross revenues of the hotel and
has a profit participation right after the entity managed by OCM achieves a
certain rate of return.
COMMON SHARE PURCHASE INFORMATION
On November 2, 1998, Peregrine entered into the Exchange
Agreement with Oaktree, TCW and Prudential wherein such holders agreed to
exchange all of their Preferred Stock in the original face amount of
$22,500,000, for Peregrine common shares. The Exchange Agreement effectively
accelerated the mandatory conversion of the Preferred Shares for Peregrine
common shares, which was to occur in April 1999. The Exchange was consummated
on November 18, 1998. As a result of the Exchange, all of the issued and
outstanding Preferred Shares were converted into Peregrine common shares and
each holder of Preferred Shares received 1.0541145 Peregrine common shares
for each outstanding Preferred Shares. OCM, TCW and Prudential received an
aggregate of 17,672,000, Peregrine common shares, in exchange for their
Preferred Shares, increasing their aggregate percentage ownership of
Peregrine common shares to approximately 89.7%. From November 1998 through
September 1, 2000, none of Peregrine, the Majority Shareholders or any
trustee, executive officer or controlling person of Peregrine or New WinShip
has effected any purchases or sales of Peregrine common shares. Since
September 1, 2000, none of the Majority Shareholders or New WinShip has
purchased any Peregrine common shares.
- 32 -
INDEPENDENT ACCOUNTANTS
The firm of Deloitte & Touche LLP has served as Peregrine's
independent accountants since 1997. The consolidated financial statements of
Peregrine as of December 31, 1998, and December 31, 1999, and for each of the
three fiscal years in the period ended December 31, 1999, have been audited
by Deloitte & Touche LLP, independent accountants, as stated in their report
appearing therein.
SHAREHOLDER PROPOSALS
If the Merger is consummated, there will be no public
shareholders of Peregrine and no public participation in any future meetings
of shareholders of Peregrine. However, if the Merger is not consummated,
Peregrine's public shareholders will continue to be entitled to attend and
participate in Peregrine's shareholder meetings. Pursuant to Rule 14a-8
promulgated by the SEC, any shareholder of Peregrine who wishes to present a
proposal at the next Annual Meeting of shareholders of Peregrine (in the
event the Merger is not consummated), and who wishes to have such proposal
included in Peregrine's proxy statement for that meeting must deliver a copy
of such proposal to The Peregrine Real Estate Trust, 1300 Ethan Way, Suite
200, Sacramento, California, 95825, Attention: Larry Knorr, Vice President
and Chief Accounting Officer within a reasonable time before Peregrine
delivers its proxy statement to shareholders for that meeting in order for
such proposal to be considered by the Board of Trustees for inclusion in the
proxy statement.
In order for a shareholder to bring other business before a
shareholder meeting, timely notice must be received by Peregrine within a
reasonable time before Peregrine delivers its proxy statement to shareholders
for that shareholder meeting. Such notice must include a description of the
proposed business, the reasons therefor, and other specific matters. These
requirements are separate from and in addition to the requirements a
shareholder must meet to have a proposal considered for inclusion in
Peregrine's proxy statement. In each case, the notice must be given to the
Secretary of Peregrine at the address listed above. Any shareholder desiring
a copy of Peregrine's by-laws will be furnished one without charge upon
written request to the Secretary.
AVAILABLE INFORMATION
Because the Merger is a "going private" transaction, New
WinShip, the Majority Shareholders and Peregrine have filed a Rule 13e-3
Transaction Statement on Schedule 13E-3 under the Exchange Act with respect
to the Merger. The Schedule 13E-3 and Peregrine's reports, proxy statements
and other information previously filed with the SEC contain additional
information about Peregrine. A copy of the written report presented by Duff &
Phelps to the Special Committee, including Duff & Phelps's opinion as to the
fairness of the consideration to be received in the Merger, was filed as an
exhibit to such Schedule 13E-3. Copies of the Schedule 13E-3 are available
for inspection and copying at the principal executive offices of Peregrine
during regular business hours by any interested shareholder of Peregrine, or
a representative who has been so designated in writing, and may be inspected
and copied, or obtained by mail by written request directed to The Peregrine
Real Estate Trust, 1300 Ethan
- 33 -
Way, Suite 200, Sacramento, California 95825, telephone (916) 929-8244,
Attention: Larry Knorr, Vice President and Chief Accounting Officer.
Peregrine has been subject to the informational
requirements of the Exchange Act since 1979, and, in accordance therewith,
filed reports, proxy statements and other information with the SEC. Such
reports and other information may be inspected and copied or obtained by mail
upon payment of the SEC's prescribed rates at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W. Room 1024, Washington, D.C.
20549 and at the following regional offices of the SEC: New York Regional
Office, 7 World Trade Center, New York, New York 10048, and Chicago Regional
Office, 500 West Madison Avenue, 14th Floor, Chicago, Illinois 60661. Certain
reports, proxy statements and other information filed by Peregrine may also
be obtained at the SEC's World Wide Web site, located at http://www.sec.gov.
This Information Statement includes information required to
be disclosed pursuant to Rule 14c-2 under the Exchange Act.
The SEC allows us to "incorporate by reference" information
into this Information Statement, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be a part of
this Information Statement, except for any information superseded by
information contained directly in this Information Statement This Information
Statement incorporates by reference the documents set forth below that
Peregrine has previously filed with the SEC. These documents contain
important information about Peregrine and its financial condition.
DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST TO: D.F. KING & CO., INC., 77 WATER STREET, NEW YORK,
NEW YORK 10005, TELEPHONE NUMBER (212) 269-5550.
The following documents filed with the SEC by Peregrine are
incorporated herein by reference:
(1) Peregrine's Annual Report on Form 10-K for
the year ended December 31, 1999;
(2) Peregrine's Quarterly Reports on Form 10-Q
for the periods ended March 31, 2000 and June 30, 2000; and
(3) Peregrine's Current Report on Form 8-K dated September 1,
2000.
All documents filed by Peregrine pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act from the date of this information
statement to the date that is 20 business days following the mailing of this
information statement, shall also be deemed to be incorporated herein by
reference.
- 34 -
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "MERGER AGREEMENT"), dated as
of September 26, 2000, is entered into by and between The Peregrine Real
Estate Trust, a California real estate investment trust ("PEREGRINE"),
WinShip Properties, a California real estate investment trust ("WINSHIP"),
TCW Special Credits Fund IV, TCW Special Credit Plus Fund, TCW Special
Credits Trust IV, TCW Special Credits Trust IVA, TCW Special Credits, as
investment manager of the Weyerhaeuser Company Master Retirement Trust
Separate Account, OCM Real Estate Opportunities Fund A, L.P., OCM Real Estate
Opportunities Fund B, L.P. and Oaktree Capital Management, LLC as investment
manager of Gryphon Domestic VII, LLC Separate Account (collectively, the
"OAKTREE ENTITIES").
RECITALS
1. Peregrine is a California real estate trust organized pursuant to
the Restated Declaration of Trust of Peregrine, dated as of October 7, 1994, as
amended from time to time ("DECLARATION OF TRUST").
2. WinShip is a California real estate trust organized pursuant to
the Declaration of Trust of WinShip, dated as of September 22, 2000.
3. At the time of the consummation of the Merger, WinShip will own
20,231,900 Common Shares of Peregrine (the "WINSHIP PEREGRINE SHARES").
4. The Trustees of Peregrine and WinShip have determined that it is
advisable and in the best interests of their respective entity and its
equityholders that the Peregrine merge with and into WinShip (the "MERGER").
TERMS AND PROVISIONS OF MERGER
In consideration of the foregoing Recitals and of the following terms and
provisions, and subject to the following conditions, it is agreed:
1. MERGER. The effective time of the Merger (the "EFFECTIVE TIME")
shall be a date to be agreed upon by the parties hereto, which date shall be not
more than five (5) business days following receipt of all necessary third party
consents and approvals, including, without limitation, all required shareholder
approvals and all required filings required pursuant to applicable state and
federal securities laws. As of the Effective Time, Peregrine shall be merged
with and into WinShip. Following the Effective Time, WinShip shall be the
surviving entity of the Merger (hereinafter sometimes referred to as the
"SURVIVING ENTITY"), and the separate organizational existence of Peregrine
shall cease.
2. GOVERNING DOCUMENTS. The Declaration of Trust of WinShip, as it may
be amended or restated subject to applicable law, and as in effect immediately
prior to the Effective Time, shall constitute the Declaration of Trust of the
Surviving Entity without further change or amendment until thereafter amended in
accordance with the provisions thereof and applicable law.
3. TRUSTEES. The persons who are trustees of WinShip immediately prior
to the Effective Time shall, after the Effective Time, be the trustees of the
Surviving Entity, without change until their successors have been duly elected
or appointed and qualified or until their death, disability, resignation or
removal in accordance with the Declaration of Trust of the Surviving Entity and
applicable law.
4. NAME. The name of the Surviving Entity shall continue to be WinShip
Properties.
5. SUCCESSION. At the Effective Time, the Surviving Entity shall
acquire and possess all the rights, privileges, powers and franchises of a
public or private nature and be subject to all the restrictions, disabilities
and duties of Peregrine; and all property, real, personal and mixed, and all
debts due to Peregrine on whatever account, including all other things and
causes of action, shall be vested in the Surviving Entity; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Entity as they
were of Peregrine, and the title to any real property vested by deed or
otherwise shall not revert or be in any way impaired by reason of the Merger;
but all rights of creditors and liens upon any property of Peregrine shall be
preserved unimpaired, and all debts, liabilities and duties of Peregrine shall
thenceforth attach to the Surviving Entity and may be enforced against the
Surviving Entity to the same extent as if such debts, liabilities and duties had
been incurred or contracted by the Surviving Entity; PROVIDED, HOWEVER, that
such liens upon property of Peregrine shall be limited to the property affected
thereby immediately prior to the Merger.
6. FURTHER ASSURANCES. From time to time, as and when required or
requested by the Surviving Entity or by its successors and assigns, there shall
be executed and delivered on behalf of Peregrine such deeds, assignments and
other instruments, and there shall be taken or caused to be taken by it all such
further and other action, as shall be appropriate or necessary in order to vest,
perfect or confirm, of record or otherwise, in the Surviving Entity the title to
and possession of all property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Peregrine and otherwise to carry
out the purposes of this Merger Agreement, and the Trustees and authorized
officers of the Surviving Entity are fully authorized in the name and on behalf
of Peregrine or otherwise, to take any and all such action and to execute and
deliver any and all such deeds, assignments and other instruments.
7. CONVERSION OF CAPITAL STOCK. Each issued and outstanding Common
Share of Peregrine (other than the WinShip Peregrine Shares) shall be
automatically converted into the right to receive $0.59 in cash per share (the
"MERGER PRICE").
-2-
8. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE PROCEDURES. As soon as reasonably practicable after
the Effective Time, the Surviving Entity shall mail to each holder of record of
a certificate or certificates which immediately prior to the Effective Time
represented outstanding Common Shares of Peregrine (the "CERTIFICATES") whose
shares are converted pursuant to SECTION 7 into the right to receive the Merger
Price (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Surviving Entity and shall be in such form
and have such other provisions as the Surviving Entity may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Price. Upon surrender of a Certificate for cancellation
to the Surviving Entity, together with such letter of transmittal duly executed
and completed in accordance with its terms, the holder of such Certificate shall
be entitled to receive in exchange therefor a check representing the Merger
Price per Common Share of Peregrine represented thereby, which such holder has
the right to receive pursuant to the provisions of SECTION 7, and the
Certificate so surrendered shall forthwith be canceled. In no event shall the
holder of any Certificate be entitled to receive interest on any funds to be
received in the Merger. In the event of a transfer of ownership of Common Shares
of Peregrine which is not registered in the transfer records of Peregrine, the
Merger Price may be issued to a transferee if the Certificate representing such
Common Shares of Peregrine is presented to the Surviving Entity accompanied by
all documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this SECTION 8, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Price per Common Share represented thereby as contemplated
by SECTION 7 and this SECTION 8.
(b) NO FURTHER OWNERSHIP RIGHTS IN COMMON SHARES OF PEREGRINE. All
cash paid upon the surrender for exchange of Certificates in accordance with the
terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Common Shares of Peregrine represented thereby. From
and after the Effective Time, the stock transfer books of Peregrine shall be
closed and there shall be no further registration of transfers on the stock
transfer books of the Surviving Entity of the shares of Common Shares of
Peregrine which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving Entity for
any reason, they shall be canceled and exchanged as provided in this SECTION 8.
(c) WITHHOLDING RIGHTS. The Surviving Entity shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Merger Agreement to any holder of Common Shares of Peregrine such amounts as the
Surviving Entity is required to deduct and withhold with respect to the making
of such payment under the Internal Revenue Code of 1986, as amended (the
"CODE"), or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Entity, such withheld amounts shall be
treated for all purposes of this Merger Agreement as having been paid to the
holder of the Common Shares of Peregrine in respect of which such deduction and
withholding was made by the Surviving Entity.
-3-
9. EMPLOYEE BENEFIT PLANS. As of the Effective Time, the Surviving
Entity shall assume all obligations of Peregrine under any and all employee
benefit plans in effect as of the Effective Time or with respect to which
employee rights or accrued benefits are outstanding as of the Effective Time
including without limitation the obligations of Peregrine pursuant to its 1998
Long Term Incentive Plan, but excluding the obligations of Peregrine under its
Trustee Stock Option Plan which shall be terminated pursuant to the terms
thereof as a result of the Merger.
10. ACCOUNTING MATTERS. WinShip agrees that upon the Effective Time, the
assets, liabilities, reserves and accounts of Peregrine shall be taken up or
continued on the books of WinShip in the amounts at which such assets,
liabilities, reserves and accounts shall have been carried on the books of
Peregrine immediately prior to the Effective Time, subject to such adjustments
as may be appropriate to give effect to the Merger.
11. CONVERSION OF NOTES. The Oaktree Entities hereby agree to convert
the Senior Secured Notes due 2001 held by the Oaktree Entities into equity of
the Surviving Entity immediately after the consummation of the Merger pursuant
to the terms of the Shareholders Agreement dated May 26, 2000 between The
Prudential Insurance Company of America, Gateway Recovery Trust and the Oaktree
Entities.
12. REPRESENTATIONS OF WINSHIP. WinShip hereby represents and warrants
that, as of the date hereof, it is not aware of any facts relating to the assets
and operations of Peregrine that have not been disclosed to Peregrine, or of
which Peregrine does not otherwise have knowledge, that could be reasonably
expected to materially positively affect the value of the Common Shares of
Peregrine.
13. GOVERNING LAW. This Merger Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts entered into and to be performed wholly within the State of
California.
14. AMENDMENT. Subject to applicable law, this Merger Agreement may be
amended, modified or supplemented by written agreement of the parties hereto at
any time prior to the Effective Time with respect to any of the terms contained
herein.
15. DEFERRAL OR ABANDONMENT. At any time prior to the Effective Time,
this Merger Agreement may be terminated and the Merger may be abandoned or the
time of consummation of the Merger may be deferred for a reasonable time by the
Trustees of Peregrine or of WinShip, or any combination or all of them, if
circumstances arise which, in the opinion of such Trustees, make the Merger
inadvisable or such deferral of the time of consummation advisable.
16. COUNTERPARTS. This Merger Agreement may be executed in any number of
counterparts each of which when taken alone shall constitute an original
instrument and when taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of this Merger Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.
-4-
17. ASSURANCE. Peregrine and WinShip agree to execute any and all
documents, and to perform such other acts, which may be necessary or expedient
to further the purposes of this Merger Agreement.
-5-
IN WITNESS WHEREOF, Peregrine and WinShip have caused this Merger
Agreement to be signed by their respective duly authorized officers and
delivered this 26th day of September, 2000.
THE PEREGRINE REAL ESTATE TRUST, a
California real estate investment trust
By: /s/ Roger D. Snell
------------------------------------
Name: Roger D. Snell
Title: President and CEO
WINSHIP PROPERTIES, a California real estate
investment trust
By: /s/ Roger D. Snell
------------------------------------
Name: Roger D. Snell
Title: President
TCW SPECIAL CREDITS FUND IV
By: TCW Special Credits
Its: General Partner
By: TCW Asset Management Company
Its: Managing General Partner
By: /s/ Richard Masson
-------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
--------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
-6-
TCW SPECIAL CREDITS PLUS FUND
By: TCW Special Credits
Its: General Partner
By: TCW Asset Management Company
Its: Managing General Partner
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
TCW SPECIAL CREDITS TRUST IV
By: Trust Company of the West, Trustee
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
-7-
TCW SPECIAL CREDITS TRUST IVA
By: Trust Company of the West, Trustee
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
OCM REAL ESTATE OPPORTUNITIES FUND A,
L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Principal
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Managing Director & General
Counsel
-8-
OCM REAL ESTATE OPPORTUNITIES FUND B,
L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Principal
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Managing Director & General
Counsel
GRYPHON DOMESTIC VII, LLC SEPARATE ACCOUNT
By: Oaktree Capital Management, LLC
Its: Investment Manager
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Principal
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Managing Director & General
Counsel
-9-
WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST
By: TCW Special Credits
Its: Investment Manager
By: TCW Asset Management Company
Its: Managing General Partner
By: /s/ Richard Masson
--------------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
--------------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
-10-
Appendix B
September 1, 2000
Special Committee of the Board of Trustees
Peregrine Real Estate Trust
d.b.a. WinShip Properties
1300 Ethan Way, Suite 200
Sacramento, California 95825
To the Special Committee of the Board of Trustees:
Duff & Phelps, LLC ("Duff & Phelps") has been engaged by Peregrine Real Estate
Trust ("Peregrine" or the "Company"), as financial advisor to the Special
Committee of the Board of Trustees of the Company in connection with a
contemplated transaction (the "Proposed Transaction") involving the Company.
Specifically, Duff & Phelps has been engaged to provide an opinion (the
"Opinion") as to whether the Proposed Transaction is fair to the Company's
common shareholders from a financial point of view.
It is our understanding that the Proposed Transaction contemplates a merger of
the Company with and into a newly formed company that will be owned by certain
persons who are currently shareholders of the Company and that certain minority
interest shareholders of the Company will receive cash as merger consideration
in the amount of $0.59 per share. These minority interest shareholders currently
hold approximately 10% of the Company's common stock outstanding. In connection
with the Proposed Transaction, the Company will cease to exist as a separate
entity and the newly created entity owned by Prudential, Gateway and the Oaktree
Entities, as described in the Shareholders' Agreement dated May 26, 2000, will
succeed to all of the assets and liabilities of the Company.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. Met with certain members of senior management of Peregrine at the
Company's headquarters in Sacramento, California, to discuss the
history, financial condition, future prospects and projected
performance of the Company;
2. Reviewed a recent draft of the Peregrine Schedule 14C filing;
3. Reviewed the final draft of the Agreement and Plan of Merger (the
"Merger Agreement") among The Peregrine Real Estate Trust, a
California real estate investment trust, and WinShip Properties, a
California real estate investment trust;
4. Reviewed the final draft of the Declaration of Trust of WinShip
Properties;
Special Committee of the Board of Trustees
Peregrine Real Estate Trust
September 1, 2000
Page 2
5. Visited selected properties of the Company and reviewed appraisals
and management estimates of the values of the properties;
6. Reviewed financial projections for Peregrine, as prepared by
Peregrine management;
7. Reviewed unaudited financial statements for Peregrine for the six
months ended June 30, 2000, and audited financial statements for
Peregrine for the years ended December 31, 1995 through 1999;
8. Reviewed miscellaneous SEC filings for the Company;
9. Reviewed the historical trading price and volume of Peregrine common
stock;
10. Reviewed other operating and financial information provided by
management of the Company; and
11. Reviewed economic, industry and market information and conducted
such studies, analyses and investigations as we deemed appropriate.
Our Opinion assumes the accuracy and completeness of the information provided to
us. Duff & Phelps has not independently verified the accuracy and completeness
of the information supplied to us with respect to the Company and does not
assume any responsibility with respect to it. Furthermore, we have assumed that
there has been no material change in the assets, financial condition, business,
or prospects of the Company since the date of the most recent financial
statements made available to us. Furthermore, industry information and data on
comparable companies used as background for our analysis were obtained from
regularly published sources. We did not independently verify the accuracy and
completeness of the information obtained from published sources. Any
inaccuracies in the information on which we relied could materially affect our
opinion. Duff & Phelps has previously provided financial advisory services to
the Company.
In rendering this Opinion, we have assumed that the Proposed Transaction occurs
on terms that are described in the Merger Agreement. Nonetheless, it should be
recognized that we are not making any recommendation as to whether the
shareholders of the Company should vote in favor of the Proposed Transaction or
any other matter.
Based upon and subject to the foregoing, it is our opinion that, as of date
hereof, the Proposed Transaction is fair to the Company's common shareholders
from a financial point of view.
Respectfully submitted,
Duff & Phelps, LLC