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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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SIERRACITIES.COM INC.
(NAME OF SUBJECT COMPANY)
SIERRACITIES.COM INC.
(NAME OF PERSONS FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
826521 10 6
(CUSIP NUMBER OF CLASS OF SECURITIES)
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ALAN L. LANGUS
CORPORATE SECRETARY, EXECUTIVE VICE PRESIDENT
AND GENERAL COUNSEL
SIERRACITIES.COM INC.
399 KNOLLWOOD ROAD, SUITE G-10
WHITE PLAINS, NEW YORK 10603
(914) 286-6365
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSONS FILING STATEMENT)
WITH A COPY TO:
RICHARD D. PRITZ
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 259-8000
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is SierraCities.com
Inc., a Delaware corporation ("SierraCities"). The address of the principal
executive offices of SierraCities is 600 Travis Street, Suite 7050, Houston,
Texas 77002. The telephone number of the principal executive offices of
SierraCities is (713) 221-8822.
The title of the class of equity securities to which this Schedule 14D-9
relates is the common stock, par value $0.01 per share, of SierraCities,
including the associated rights issued pursuant to the Rights Agreement, dated
as of December 30, 1998, as amended (the "Rights Agreement"), between
SierraCities and Harris Trust and Savings Bank, as rights agent, (the "Shares").
As of February 23, 2001 there were 18,918,640 Shares outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
The name, business address and business telephone number of SierraCities,
which is the person filing this Schedule 14D-9, are set forth in Item 1 above.
This Schedule 14D-9 relates to the tender offer by American Express Travel
Related Services Company, Inc., a New York corporation ("American Express"),
through its wholly-owned subsidiary, AMTRS Corp., a Delaware corporation (the
"Purchaser"), disclosed in a Tender Offer Statement on Schedule TO (as amended
or supplemented from time to time, the "Schedule TO"), dated February 27, 2001,
to purchase all outstanding Shares at a purchase price of $5.68 per Share, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated February 27, 2001 (as amended or supplemented from
time to time, the "Offer to Purchase"), and in the related Letter of Transmittal
(which, together with the Offer to Purchase, as each may be amended or
supplemented from time to time, collectively constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 14, 2001 (the "Merger Agreement"), by and among American Express,
the Purchaser and SierraCities. The Merger Agreement provides that, among other
things, as soon as practicable following the satisfaction or waiver of the
conditions set forth in the Merger Agreement, the Purchaser will be merged with
and into SierraCities (the "Merger"). At the effective time of the Merger, each
Share outstanding immediately prior to the effective time of the Merger (other
than Shares held by American Express, the Purchaser, any direct or indirect
wholly-owned subsidiary of American Express or SierraCities or by stockholders
who perfect appraisal rights under Delaware law), will be converted into the
right to receive the highest price paid per Share pursuant to the Offer. As a
result of the Offer and the Merger, SierraCities will become a wholly-owned
subsidiary of American Express.
The Schedule TO states that the principal executive offices of American
Express and the Purchaser are located at 200 Vesey Street, New York, New York
10285.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
The information regarding the executive officers and directors of
SierraCities contained in the Information Statement which is attached hereto as
Schedule I, is incorporated herein by reference. Except as described in this
Schedule 14D-9 or incorporated herein by reference, to the knowledge of
SierraCities, as of the date of this Schedule 14D-9, there exists no material
agreement, arrangement or understanding or any actual or potential conflict of
interest between SierraCities or its affiliates and (1) SierraCities' executive
officers, directors or affiliates or (2) American Express or the Purchaser or
their respective executive officers, directors or affiliates.
EMPLOYMENT AGREEMENTS.
Four executive officers, Thomas J. Depping, Sandy B. Ho, David L. Pederson
and E. Roger Gebhart, have employment agreements with SierraCities and two
executive officers, Ms. Ho and Mr. Gebhart, have
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change in control agreements with SierraCities. Mr. Depping is also a director
of SierraCities. The employment agreements and the change in control agreements
provide that after a change in control of SierraCities (including the Offer and
the Merger) these officers will receive the benefits described under the caption
"Employment Agreements" in the Information Statement attached as Schedule I
hereto.
The summary of the terms of the employment agreements and the change in
control agreements is qualified in its entirety by reference to the complete
text of the employment agreements, which have been filed as Exhibits (e)(8)
through (e)(11) hereto, and the change in control agreements, which have been
filed as Exhibits (e)(12) and (e)(13) hereto, and are incorporated herein by
reference. Further information regarding the employment agreements and the
change in control agreements is included in the Information Statement attached
as Schedule I hereto.
STOCK OPTIONS.
The Merger Agreement provides that all outstanding options to purchase
Shares under the SierraCities stock option plans will be cancelled in exchange
for a cash payment (less applicable withholding tax) payable by SierraCities, as
the surviving corporation of the Merger, equal to the amount, if any, by which
the Merger Consideration (as defined in the Merger Agreement) exceeds the per
share exercise price of such option to purchase Shares, multiplied by the number
of Shares then subject to such option to purchase Shares. As of February 23,
2001, executive officers and directors held options to purchase a total of
1,430,641 Shares, with an average exercise price of approximately $11.38.
MERGER AGREEMENT AND TENDER AGREEMENTS; INDEMNIFICATION.
A summary of the material terms of the Merger Agreement and the Tender
Agreements, dated as of February 14, 2001, between American Express and certain
stockholders of SierraCities, is contained in Section 11 of the Offer to
Purchase, which is filed as Exhibit (a)(1) to the Schedule TO and which is being
mailed to stockholders together with this Schedule 14D-9. Section 11 of the
Offer to Purchase is incorporated herein by reference. The summary of the Merger
Agreement and the Tender Agreements is qualified in its entirety by reference to
the Merger Agreement, which has been filed as Exhibit (e)(1) hereto, and the
Tender Agreements, which have been filed as Exhibits (e)(2) through (e)(7)
hereto, and are incorporated herein by reference.
SierraCities has entered into agreements to provide indemnification for its
directors and certain executive officers in addition to the indemnification
provided for in SierraCities' Certificate of Incorporation and By-laws. A form
of such indemnification agreement is filed as Exhibit (e)(14) hereto and is
incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The SierraCities Board of Directors (the "SierraCities Board") has approved
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, and determined that the transactions contemplated by the
Merger Agreement, including the Offer and the Merger, are fair to and in the
best interests of SierraCities and its stockholders. The SierraCities Board
unanimously recommends that SierraCities' stockholders accept the Offer and
tender their Shares pursuant to the Offer.
A letter to SierraCities' stockholders communicating the SierraCities
Board's recommendation and a press release announcing the execution of the
Merger Agreement are filed as Exhibits (a)(3) and (a)(4) hereto and are
incorporated herein by reference.
(b) BACKGROUND AND REASONS FOR THE SIERRACITIES BOARD'S RECOMMENDATION.
Background
In October 1999, SierraCities engaged an investment banking firm to explore
a possible sale. From October 1999 through April 2000, that firm contacted
approximately twenty parties including American
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Express. American Express did not respond. In April 2000, SierraCities
terminated the engagement of that investment bank.
In April 2000, SierraCities announced that it had retained Credit Suisse
First Boston Corporation (formerly Donaldson, Lufkin & Jenrette Securities
Corporation) ("CSFB") to advise on the potential division of the technology and
finance operations of SierraCities. In the next four months, CSFB contacted
approximately fifty-five parties to determine their interest in purchasing or
investing in the technology or finance operations or other strategic
transactions involving SierraCities. Twenty-seven of these parties executed
confidentiality agreements and were sent confidential information memoranda. By
September 2000, five of these parties, including American Express, submitted
preliminary indications of interest.
In August and September 2000, these five parties conducted due diligence
investigations. As set forth below, three of these parties submitted further
proposals, all at prices above $5.68 per Share, subject to various
contingencies. SierraCities circulated a form of merger agreement for these
parties to review and use as the basis for proposals. American Express did not
submit a further proposal.
Commencing in September 2000, SierraCities and VerticalNet, Inc.
("VerticalNet") negotiated the acquisition of SierraCities by VerticalNet at a
price of $7 per Share, subject to adjustment. During October, 2000, two parties
submitted proposals to acquire SierraCities, subject to various contingencies,
each at a price above $5.68 per Share, but below $7 per Share.
On November 7, 2000, SierraCities and VerticalNet signed a merger agreement
providing that VerticalNet would acquire SierraCities for $7 per Share in
VerticalNet stock, subject to adjustment based on the price of VerticalNet
shares. SierraCities had the right to terminate the merger agreement if
VerticalNet shares traded below $15 (which would result in SierraCities
stockholders receiving stock with a value below $5 per share). On November 6,
2000, the closing price of the VerticalNet shares was $29.50.
Following the execution of the VerticalNet merger agreement, on December
12, 2000, representatives of VerticalNet and American Express met with
SierraCities to discuss a possible transaction in which VerticalNet would
acquire SierraCities' technology and American Express would acquire
SierraCities' other operations and financial assets. On January 5, 2001, these
same parties met and determined not to pursue a three-party acquisition
alternative.
On January 10, 2001, VerticalNet and SierraCities issued a joint press
release announcing that they had mutually agreed to terminate their merger
agreement. In the press release, SierraCities announced that it intended to
explore strategic alternatives with others, including parties who had previously
expressed an interest in the possible acquisition of SierraCities. On the date
of termination, VerticalNet shares closed at $4.93 per share.
Following the termination of the VerticalNet merger agreement, SierraCities
contacted the other two parties which had submitted proposals, as set forth
above. In addition, a number of parties, including American Express, approached
SierraCities to discuss a possible transaction. Other than American Express,
none of these parties submitted a proposal to acquire SierraCities.
On January 11, 2001, American Express submitted a letter in which it
proposed to acquire SierraCities for $5.00 per Share and on January 12, 2001,
the parties met to discuss a possible acquisition. SierraCities responded that
this price was inadequate, and discussions and additional due diligence
continued.
On January 30, 2001, American Express submitted a revised proposal to
acquire SierraCities at a price of $5.90 per Share, less the value of contingent
liabilities identified by American Express, which would result in a net price of
not less than $5.45 per Share. After discussions with SierraCities regarding the
price, American Express submitted a revised bid of $5.60 per Share, with no
reduction for contingent liabilities. SierraCities responded that this price was
inadequate.
On February 1, 2001, following further discussions, SierraCities and
American Express signed a non-binding letter of intent for the sale of
SierraCities to American Express for $5.70 per Share. In the letter of intent,
SierraCities agreed not to discuss a transaction involving the sale of
SierraCities with any other party
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for ten days. Following the execution of the letter of intent, American Express
undertook an updating due diligence investigation of SierraCities.
On February 6, 2001, American Express submitted a draft of the Merger
Agreement and the parties commenced negotiation of the Merger Agreement. On
February 12, 2001, as a result of concern over a possible payment obligation of
SierraCities, American Express said that it may reduce the price by as much as
$0.10 per Share.
On February 13, 2001, the SierraCities Board met to consider the Merger
Agreement and related agreements. Following a discussion of the issues and
presentations by its financial and legal advisors, the SierraCities Board, by
the unanimous vote of directors present, voted to approve the Merger Agreement
and related agreements, subject to the satisfactory resolution of the open price
issue.
After further negotiation, the parties agreed on a price of $5.68 per
Share. SierraCities and American Express executed the Merger Agreement and
related agreements on February 14, 2001. Shortly thereafter, SierraCities and
American Express issued a press release announcing the Merger Agreement.
On February 27, 2001, Purchaser commenced the Offer.
Reasons for the SierraCities Board's Recommendation
In reaching its recommendation described in paragraph (a) of this Item 4,
the SierraCities Board considered a number of factors, including the following
material factors:
- The business, assets, financial condition, results of operations and
prospects of SierraCities.
- The fact that the cash purchase price to be paid for each Share pursuant
to the Offer and the Merger represents a premium of approximately 59.4%
over the closing price of the Shares on Nasdaq on February 8, 2001, and a
premium of approximately 89.3% over the closing price of the Shares on
Nasdaq on February 2, 2001.
- The recent and historical stock price performance of the Shares.
- Presentations from CSFB and the opinion of CSFB, dated February 14, 2001,
that, based upon and subject to certain considerations and assumptions,
the consideration to be received by holders of Shares pursuant to the
Offer and the Merger was fair from a financial point of view to such
holders (other than American Express). A copy of the opinion rendered by
CSFB to the SierraCities Board, setting forth the procedures followed,
the matters considered and the assumptions made by CSFB in arriving at
its opinion, is attached as Schedule II and incorporated herein by
reference. Such opinion does not constitute a recommendation to any
holder of Shares as to whether such holder should tender Shares pursuant
to the Offer or how such holder should vote or act with respect to any
other matter related to the Offer or the Merger. Stockholders are urged
to read this opinion in its entirety. The SierraCities Board was aware
that CSFB becomes entitled to certain fees described in Item 5 upon the
consummation of the Offer.
- The terms of the Merger Agreement, including:
- that the Offer provides for a prompt cash payment for all Shares
thereby enabling SierraCities' stockholders to obtain the benefits of
the transaction at the earliest possible time.
- SierraCities' ability, if required by the SierraCities Board's
fiduciary duties, to provide information to and negotiate with third
parties and to terminate the Merger Agreement upon the payment of a
termination fee, and the SierraCities Board's business judgment that
these provisions would not significantly deter a more attractive offer
from a bona fide bidder for SierraCities.
- The potential strategic alternatives available to SierraCities and the
benefits and risks associated with each alternative, including the
prospects for SierraCities on a stand-alone basis and the risks
associated with achieving and executing SierraCities' business plan.
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- The belief that, based on a review of SierraCities' strategic
alternatives and the process described in "Background," it was
unlikely any party would propose an alternative transaction that would
be more favorable to SierraCities and its stockholders than the Offer
and the Merger.
- The employment agreements and other matters discussed under Item 3 above.
The foregoing discussion of the information and factors considered by the
SierraCities Board is not intended to be exhaustive, but includes the material
factors considered by the SierraCities Board. In view of the variety of factors
considered in connection with the evaluation of the proposed Offer and Merger
and the terms of the Merger Agreement, the SierraCities Board did not deem it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching its conclusion. Individual directors
may have given different weights to different factors.
(C) INTENT TO TENDER.
To the knowledge of SierraCities, the executive officers, directors,
affiliates and subsidiaries of SierraCities will tender, pursuant to the Offer,
all Shares held of record or beneficially owned by them (other than options to
acquire Shares). The foregoing does not include any Shares over which, or with
respect to which, any such executive officer, director or affiliate acts in a
fiduciary or representative capacity or is subject to the instructions of a
third party with respect to such tender. Holders of approximately 20% of the
outstanding Shares have signed Tender Agreements under which they agreed to
tender their Shares in the Offer. See Item 3 above.
ITEM 5. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
Pursuant to the terms of an engagement letter dated May 3, 2000, as amended
on September 18, 2000, SierraCities agreed to pay to CSFB a fee that is
customary in transactions of this nature, a substantial portion of which is
contingent upon the consummation of the Merger. In addition, SierraCities agreed
to reimburse CSFB promptly for all out-of-pocket expenses, including the
reasonable fees and out-of-pocket expenses of counsel, incurred by CSFB in
connection with its engagement, and to indemnify CSFB and related persons
against liabilities in connection with its engagement, including liabilities
under the federal securities laws. The terms of the fee arrangement with CSFB
were negotiated by SierraCities and CSFB.
Except as set forth herein, neither SierraCities nor any person acting on
its behalf has employed, retained or agreed to compensate any person or class of
persons to make solicitations or recommendations in connection with the Offer or
the Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
No transactions in the Shares have been effected during the past 60 days by
SierraCities or, to the knowledge of SierraCities, any of its executive
officers, directors, affiliates or subsidiaries.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as set forth in this Schedule 14D-9, SierraCities is not currently
undertaking or engaged in any negotiations in response to the Offer that relate
to: (1) a tender offer for or other acquisition of SierraCities' securities by
SierraCities, any subsidiary of SierraCities or any other person, (2) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving SierraCities or any of its subsidiaries, (3) a purchase, sale or
transfer of a material amount of assets of SierraCities or any of its
subsidiaries, or (4) any material change in the present dividend rate or policy,
or indebtedness or capitalization of SierraCities.
There are no transactions, resolutions of the SierraCities Board,
agreements in principle, or signed contracts in response to the Offer that
relate to one or more of the events referred to in the preceding paragraph.
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ITEM 8. ADDITIONAL INFORMATION.
Under Delaware law, if the Purchaser becomes the owner of 90% of the
outstanding Shares, the Purchaser will be able to effect the Merger without
approval of SierraCities' stockholders. However, if the Purchaser does not
become the owner of 90% of the outstanding Shares, a meeting of stockholders
will be required to approve the Merger. Assuming the Minimum Condition (as
defined in the Merger Agreement) is satisfied, the Purchaser will be able to
approve the Merger without the vote of any other stockholder. The SierraCities
Board has amended SierraCities' Rights Agreement to exempt the Offer, the Merger
Agreement, the Tender Agreements and the transactions contemplated thereby from
the Rights Agreement.
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ITEM 9. EXHIBITS.
(a)(1) Offer to Purchase, dated February 27, 2001 (incorporated
herein by reference to Exhibit (a)(1) to the Schedule TO of
American Express filed on February 27, 2001).
(a)(2) Letter of Transmittal (incorporated herein by reference to
Exhibit (a)(2) to the Schedule TO of American Express filed
on February 27, 2001).
(a)(3) Chairman's Letter to Stockholders of SierraCities, dated
February 27, 2001.*
(a)(4) Press Release of American Express and SierraCities, dated
February 14, 2001 (incorporated herein by reference to the
Schedule 14D-9-C of SierraCities filed on February 14,
2001).
(e)(1) Agreement and Plan of Merger, dated as of February 14, 2001,
among American Express, the Purchaser and SierraCities
(incorporated herein by reference to Exhibit 2 to the
Schedule 13D of American Express filed on February 26,
2001).
(e)(2) Tender Agreement, dated as of February 14, 2001, between
American Express and Depping 1999 Investment Limited
Partnership (incorporated herein by reference to Exhibit 3
to the Schedule 13D of American Express filed on February
26, 2001).
(e)(3) Tender Agreement, dated as of February 14, 2001, between
American Express and Thomas J. Depping (incorporated herein
by reference to Exhibit 4 to the Schedule 13D of American
Express filed on February 26, 2001).
(e)(4) Tender Agreement, dated as of February 14, 2001, between
American Express and Sandy B. Ho (incorporated herein by
reference to Exhibit 5 to the Schedule 13D of American
Express filed on February 26, 2001).
(e)(5) Tender Agreement, dated as of February 14, 2001, between
American Express and Redstone Group, Ltd. (incorporated
herein by reference to Exhibit 6 to the Schedule 13D of
American Express filed on February 26, 2001).
(e)(6) Tender Agreement, dated as of February 14, 2001, between
American Express and David C. Shindeldecker (incorporated
herein by reference to Exhibit 7 to the Schedule 13D of
American Express filed on February 26, 2001).
(e)(7) Tender Agreement, dated as of February 14, 2001, between
American Express and David L. Solomon (incorporated herein
by reference to Exhibit 8 to the Schedule 13D of American
Express filed on February 26, 2001).
(e)(8) Employment Agreement between Thomas J. Depping and
SierraCities (incorporated by reference to Exhibit 10.10 to
Amendment No. 2 to SierraCities' Registration Statement on
Form S-1, Commission File No. 333-22629).
(e)(9) Employment Agreement between Sandy B. Ho and SierraCities
(incorporated by reference to Exhibit 10.12 to SierraCities'
Form 10-K for the year ended December 31, 1998, Commission
File No. 0-22525).
(e)(10) Employment Agreement between David L. Pederson and
SierraCities (incorporated by reference to Exhibit 10.17 to
SierraCities' Form 10-K for the year ended December 31,
1998, Commission File No. 0-22525).
(e)(11) Employment Agreement between Roger Gebhart and SierraCities
(incorporated by reference to Exhibit 10.19 to SierraCities'
Form 10-K for the year ended December 31, 1999, Commission
File No. 0-22525).
(e)(12) Change in Control Agreement between SierraCities and Sandy
B. Ho.
(e)(13) Change in Control Agreement between SierraCities and E.
Roger Gebhart, and amendments thereto.
(e)(14) Form of Indemnity Agreement between SierraCities and certain
directors and officers of SierraCities.
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(e)(15) Opinion of Credit Suisse First Boston Corporation to the
board of directors of SierraCities, dated February 14, 2001
(included as Schedule II to this Schedule 14D-9 and
incorporated by reference herein).*
(e)(16) Amendment No. 2 to Rights Agreement, dated as of December
30, 1998, between SierraCities and Harris Trust and Savings
Bank, as rights agent.
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* Included in copies mailed to stockholders of SierraCities.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
SIERRACITIES.COM INC.
By: /s/ THOMAS J. DEPPING
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Name: Thomas J. Depping
Title: Chairman of the Board,
President and Chief Executive
Officer
Dated: February 27, 2001
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SCHEDULE I
SIERRACITIES.COM INC.
600 TRAVIS STREET
SUITE 7050
HOUSTON, TEXAS 77002
(713) 221-8822
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about February 27, 2001 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of SierraCities.com Inc. ("SierraCities" or the "Company").
You are receiving this Information Statement in connection with the possible
election of persons designated by American Express Travel Related Services
Company, Inc. ("American Express") to a majority of seats on the Board of
Directors of SierraCities (the "Board").
On February 14, 2001, SierraCities entered into an Agreement and Plan of
Merger (the "Merger Agreement") with American Express and AMTRS Corp., a
Delaware corporation and wholly-owned subsidiary of American Express (the
"Purchaser"), pursuant to which the Purchaser has commenced a tender offer to
purchase all of the outstanding shares of common stock, par value $0.01 per
share, of SierraCities, including the associated rights issued pursuant to the
Rights Agreement, dated as of December 30, 1998, as amended, between
SierraCities and Harris Trust and Savings Bank, as rights agent (the "Shares"),
at a price of $5.68 per Share, net to the Seller in cash, upon the terms and
subject to the conditions set forth in the Purchaser's Offer to Purchase, dated
February 27, 2001 (as amended or supplemented from time to time, the "Offer to
Purchase") and in the related Letter of Transmittal (the "Letter of
Transmittal," which, together with the Offer to Purchase, as each may be amended
or supplemented from time to time, collectively constitute the "Offer"). Copies
of the Offer to Purchase and the Letter of Transmittal have been mailed to
stockholders of the Company and are filed as Exhibits (a)(1) and (a)(2),
respectively, to the Tender Offer Statement on Schedule TO (as amended or
supplemented from time to time, the "Schedule TO) filed by the Purchaser with
the Securities and Exchange Commission (the "Commission") on February 27, 2001.
The Merger Agreement provides that, among other things, as soon as
practicable following the satisfaction or waiver of the conditions set forth in
the Merger Agreement, the Purchaser will be merged with and into SierraCities
(the "Merger"). At the effective time of the Merger, each Share outstanding
immediately prior to the effective time of the Merger (other than Shares held by
American Express, the Purchaser, any direct or indirect wholly-owned subsidiary
of American Express, SierraCities or, if applicable, by stockholders who perfect
appraisal rights under Delaware law) will be converted into the right to receive
$5.68 per Share, or such higher price as may be paid in the Offer. If the Offer
and the Merger are consummated, SierraCities will become a wholly-owned
subsidiary of American Express.
This Information Statement is being mailed to you in accordance with
Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 promulgated
thereunder. Information set forth herein related to American Express, the
Purchaser or the American Express Designees (as defined below) has been provided
by American Express. You are urged to read this Information Statement carefully.
You are not, however, required to take any action in connection with the matters
set forth herein.
The Purchaser commenced the Offer on February 27, 2001. The Offer is
currently scheduled to expire at 12:00 midnight, New York City time, on Monday,
March 26, 2001, unless the Purchaser extends it.
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THE AMERICAN EXPRESS DESIGNEES
Effective upon the acceptance for purchase by the Purchaser of any of the
Shares pursuant to the Offer, American Express will be entitled to designate the
number of directors, rounded up to the next whole number, on the Board (the
"American Express Designees") that equals the product of (i) the total number of
directors on the Board (giving effect to the election of any additional
directors pursuant to this provision) and (ii) the percentage that the number of
Shares beneficially owned by American Express or the Purchaser (including Shares
accepted for purchase) bears to the total number of Shares outstanding, and
SierraCities will take all action necessary to cause American Express' designees
to be elected or appointed to the Board, including, without limitation,
increasing the number of directors, or seeking and accepting resignations of
incumbent directors, or both; provided that, prior to the effective time of the
Merger (the "Effective Time"), American Express, the Purchaser and SierraCities
will use their respective best efforts to ensure that at least two members
(each, a "Continuing Director") who were directors of SierraCities prior to
consummation of the Offer, shall remain as directors of SierraCities until the
Effective Time. If the number of Continuing Directors is reduced to less than
two for any reason prior to the Effective Time, the remaining Continuing
Directors (or, if there are none, the other directors) shall be entitled to
designate a person to fill the vacancy.
The directors of the Purchaser at the Effective Time shall be the directors
of SierraCities following the Merger, until the earlier of their resignation or
removal or until their successors are duly elected and qualified.
American Express has informed SierraCities that it will choose the American
Express Designees to the Board from the directors and executive officers of
American Express Company (the parent company of American Express), American
Express and the Purchaser listed in Schedule I to the Offer to Purchase, a copy
of which is being mailed to SierraCities' stockholders together with the
Schedule 14D-9. American Express has informed SierraCities that Messrs.
Alexander, Norman and Tambor (listed in Schedule I to the Offer to Purchase)
have consented to act as a director of SierraCities, if so designated. The
information on such Schedule I is incorporated herein by reference. The name,
address, principal occupation or employment and five-year employment history for
each such person is set forth in such Schedule I.
It is expected that the American Express Designees may assume office
following the acceptance for purchase by the Purchaser of the specified minimum
number of Shares pursuant to the Offer.
INFORMATION CONCERNING SHARES
As of February 23, 2001, SierraCities had 18,918,640 Shares issued and
outstanding with the Shares being SierraCities' only class of voting securities
that would be entitled to vote for directors at a stockholder meeting if one
were to be held, each Share being entitled to one vote.
INFORMATION CONCERNING DIRECTORS AND OFFICERS OF SIERRACITIES
SierraCities' board of directors is divided into three approximately equal
classes, having three-year terms that expire in successive years.
The following list sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments for the
past five years, of each director and executive officer of SierraCities. Unless
otherwise indicated, each such person is a citizen of the United States and the
business address of such person is c/o SierraCities.com Inc., 600 Travis Street,
Suite 7050, Houston, Texas 77002.
Thomas J. Depping, age 42. Mr. Depping has served as Chairman of the Board,
President and Chief Executive Officer of the Company since its inception in June
1994. Mr. Depping has over 17 years of experience in the financial services
industry, including 11 years with SunAmerica Financial Resources and its
predecessor company (which was acquired by SunAmerica, Inc. in 1991). From 1991
to May 1994, Mr. Depping served as President of SunAmerica Financial Resources,
the equipment leasing and financial division of SunAmerica, Inc.
David L. Solomon, age 47. Mr. Solomon has served as Chairman and Co-Chief
Executive Officer of Redstone, Inc., general partner of Redstone Group, Ltd.
("Redstone"), since 1996. Redstone is an investment
I-2
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company with investments and operations in hotels, restaurants and real estate.
Mr. Solomon has also served as an executive officer and director of numerous
entities that are affiliated with Redstone and/or its predecessor entities since
1989. Mr. Solomon was a Senior Vice President with PaineWebber from August 1994
through October 1998. Mr. Solomon serves on the board of directors of TeleServe,
Inc., an affiliate of Camden Property Trust.
Robert Ted Enloe, III, age 62. Mr. Enloe has served as Managing General
Partner of Balquita Partners, Ltd., a real estate and securities investment
partnership, since 1996. From April 18, 1999 through July 31, 1999, he served as
Interim CEO of Compaq Computer Corporation ("Compaq"), a manufacturer of
personal computers and servers. From 1975 to 1986, he served as President, and
from 1992 to 1996 as Chief Executive Officer, of Liberte Investors, an entity
seeking new acquisitions. Mr. Enloe currently serves as a director of Compaq,
Leggett & Platt, Inc., a diversified manufacturer of foam, plastic, steel and
wire components for the automotive, home furnishings and office equipment
industries, SIXX Holdings, Incorporated, a restaurant company that operates the
Patrizio Italian restaurants in Dallas, Texas and Liberte Investors, Inc. Mr.
Enloe was initially elected as a director of the Company by the Board on April
30, 1998.
Norman J. Metcalfe, age 57. Mr. Metcalfe has served as managing director of
a private investment and consulting firm since January 1977. Mr. Metcalfe serves
as a director of Tejon Ranch Co., a land development and agribusiness company.
From February 1993 to December 1996, Mr. Metcalfe served as Vice Chairman and
Chief Financial Officer of The Irvine Company.
Richard J. Campo, age 46. Mr. Campo has been Chairman of the Board and
Chief Executive Officer of Camden Property Trust, a self-administered,
self-managed real estate investment trust based in Houston, Texas, since May
1993. Mr. Campo has over twenty years of experience in the real estate industry.
David C. Shindeldecker, age 52. Mr. Shindeldecker has been Chairman and
Chief Executive Officer of Northwest Bancorporation Inc. since June 1988. In
addition, he currently serves as President and Co-Chief Executive Officer of
Redstone, Inc., general partner of Redstone, and has served as an executive
officer and director of Redstone, Inc. since 1994. Redstone and Northwest
Bancorporation Inc. are affiliates of each other. Mr. Shindeldecker has also
served as an executive officer and director of numerous entities that are
affiliated with Redstone and/or its predecessor entities since 1989. He
currently serves as a director of Northwest Bank, N.A.
Sandy B. Ho, age 41. Ms. Ho has served as Executive Vice President and
Chief Financial Officer of the Company since January 1995. Ms. Ho has over 15
years of experience in the financial services industry, including ten years with
SunAmerica Financial Resources and its predecessor company (which was acquired
by SunAmerica, Inc. in 1991). From 1991 through 1994, Ms. Ho served as Vice
President of SunAmerica Financial Resources and Managing Director of SunAmerica
Corporate Finance.
David L. Pederson, age 41. Mr. Pederson has served as Executive Vice
President and Chief Information Officer of the Company since April 1998. Prior
to joining SierraCities, Mr. Pederson was President of Nexsoft, Inc., which he
founded in 1993. Nexsoft designed and developed the systems and communications
network for SierraCities. Mr. Pederson has over fifteen years of experience in
directing technology initiatives in the equipment leasing industry.
E. Roger Gebhart, age 44. Mr. Gebhart has served as Chief Operating Officer
of the Company since 2000, and as Executive Vice President, Capital Markets and
Treasurer of the Company since October of 1999. From 1997 through October of
1999, Mr. Gebhart served as Senior Vice President and Treasurer. From 1986
through May 1997, Mr. Gebhart served as a Vice President at First Union Capital
Markets Corp. in their equipment finance group. Mr. Gebhart has over fifteen
years of experience in middle market commercial lending, specializing in the
equipment leasing and finance industry providing asset-backed securitization
financing facilities. Mr. Gebhart has experience in all aspects of structured
finance including asset-backed commercial paper, revolving credit facilities,
interest rate hedging instruments, commercial paper conduit financing, and the
public and private term asset-backed funding markets.
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COMMITTEES OF THE SIERRACITIES BOARD; MEETINGS
The Board has an Audit Committee, a Compensation Committee and a Stock
Option Committee.
The Audit Committee reviews with the Company's independent auditors the
scope of their annual and interim examinations and consults with the auditors
during any audit when appropriate. The Audit Committee is also responsible for
appraising the effectiveness of the audit effort, determining that no
restrictions were placed by management on the scope of the examination or its
implementation, inquiring into the effectiveness of the Company's accounting and
internal control functions, exercising supervision over the Company's policies
that permit improper or illegal payments, reporting to the Board on the results
of the Committee's activities and recommending any changes in the appointment of
the independent auditors which the Committee deems to be in the best interests
of the Company and its stockholders. The Audit Committee held four meetings
during the fiscal year ended December 31, 2000. The Audit Committee did not
prepare any written reports to the Board during the fiscal year ended December
31, 2000. The current members of the Audit Committee are Messrs. Campo and
Solomon. Messrs. Campo and Solomon are independent as such term is defined in
Rule 4200(a)(14) of the National Association of Securities Dealers' listing
standards.
The Board adopted a written charter for the Audit Committee on June 14,
2000, a copy of which is attached as Appendix A to this Information Statement.
The Compensation Committee determines the cash compensation of the officers
of the Company. The Compensation Committee held one meeting during the fiscal
year ended December 31, 2000. The current members of the Compensation Committee
are Messrs. Campo, Metcalfe and Solomon.
The Stock Option Committee administers the Company's 1997 Stock Option
Plan. The Stock Option Committee held five meetings during the fiscal year ended
December 31, 2000, and also acted from time to time by unanimous written
consent. The current members of the Stock Option Committee are Messrs. Campo,
Metcalfe and Solomon.
The Board held nine meetings during the fiscal year ended December 31,
2000, and also acted from time to time by unanimous written consent. During
2000, Mr. Enloe attended fewer than 75% of the aggregate of the total number of
meetings of the Board and all committees on which he served. No other director
attended fewer than 75% of the aggregate of the total number of meetings of the
Board and all committees on which he served.
COMPENSATION OF DIRECTORS
Each director who is not an officer or employee of the Company or any of
its subsidiaries or affiliated with Redstone Group, Ltd. (each, an "Outside
Director") is eligible to receive, (i) as of the date of each annual meeting of
stockholders, at the election of the Outside Director either (a) a cash retainer
of $25,000 or (b) options to purchase (at an exercise price equal to the fair
market value of the Shares on the date of grant) a number of Shares equal to
$25,000 divided by one-half of the closing price of the Shares on the date of
grant, and (ii) at the time that the Company grants annual stock options to its
employees, options to purchase 2,500 Shares at an exercise price equal to the
fair market value of the Shares on the date of grant. In addition, directors are
reimbursed for their out-of-pocket expenses incurred in connection with
attending meetings of the Board and committees thereof.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Shares as of
February 23, 2001 by (i) each stockholder known by the Company to be the
beneficial owner of more than 5% of the outstanding Shares, (ii) each director,
(iii) each executive officer named in the Summary Compensation Table, and (iv)
all directors and executive officers as a group. Unless otherwise indicated,
each such person (alone or with family members) has sole voting and dispositive
power with respect to the shares listed opposite such person's name. The address
of Redstone Group, Ltd., Redstone, Inc. and Messrs. Shindeldecker and Solomon is
109 North Post Oak Lane, Suite 200, Houston, Texas 77024. According to a
Schedule 13G filed with the Securities and Exchange Commission, the address of
Becker Capital Management, Inc. is 1211 SW Fifth Avenue, Suite 2185, Portland,
Oregon 9720. Except as otherwise indicated, the address of all other named
individuals is c/o SierraCities.com Inc., 600 Travis Street, Suite 7050,
Houston, Texas 77002. The following information is based in part on documents
filed with the SEC and in part on information provided by former beneficial
owners of more than 5% the outstanding Shares.
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF
OWNED CLASS(1)
------------ ----------
Thomas J. Depping(2)........................................ 2,045,936(3) 10.8%
Redstone Group, Ltd.(2)(4).................................. 1,183,151 6.3%
David L. Solomon(2)......................................... 1,895,696(5) 10.0%
David C. Shindeldecker(2)................................... 1,350,714(5) 7.1%
Sandy B. Ho(2).............................................. 352,355(6) 1.9%
Becker Capital Management, Inc.............................. 1,130,800 6.0%
Virgil Pettigrew............................................ 1,130,100(7) 6.0%
Richard J. Campo............................................ 81,121(8) *
Norman J. Metcalfe.......................................... 63,181(9) *
Michael A. Sabel............................................ 177,773(10) *
Robert Ted Enloe, III....................................... 15,503(10) *
E. Roger Gebhart............................................ 45,750(11) *
David L. Pederson........................................... 27,100(12) *
All directors and executive officers (11 persons)........... 4,871,978(13) 25.8%
American Express Travel Related Services Company, Inc....... 3,817,057(14) 20.2%
- ---------------
* Less than one percent
(1) The applicable percentage of ownership is based upon 18,918,640 Shares
outstanding as of February 23, 2001.
(2) Stockholder has entered into a tender agreement with American Express
Travel Related Services Company, Inc. to tender such stockholder's shares
in the Offer. Such stockholder's voting and dispositive power with respect
to the shares listed opposite such person's name may be limited by the
provisions of the tender agreements.
(3) Includes 372,736 shares issuable pursuant to options exercisable within
sixty days and 1,595,800 shares held of record by the Depping 1999
Investment Limited Partnership.
(4) According to an amended Schedule 13G filed as of February 14, 2000,
Redstone Group Ltd. ("Redstone") is a Texas limited partnership, of which
Redstone, Inc., a Texas corporation ("Redstone, Inc."), is the general
partner.
(5) Includes 82,696 shares issuable pursuant to options exercisable within
sixty days and 1,183,151 shares which are owned of record by Redstone.
Messrs. Shindeldecker and Solomon are Co-Chief Executive Officers of
Redstone, Inc., the general partner of Redstone.
(6) Includes 106,365 shares issuable pursuant to options exercisable within
sixty days.
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(7) According to a Schedule 13G filed as of January 5, 2001, includes 597,000
shares owned by the Crown Hill Trust, of which Mr. Pettigrew is trustee
(such number does not include an aggregate of 27,000 shares which are owned
directly by the adult beneficiaries of the Crown Hill Trust) and 483,100
shares owned by Crown Oaks Inc. Profit Sharing Plan, which is directly
owned by the Crown Hill Trust. Mr. Pettigrew shares voting and dispositive
power over the 483,100 shares owned by Crown Oaks Inc. Profit Sharing Plan.
The address of Virgil Pettigrew is 2000 East Lamar Boulevard, Suite 150,
Arlington, Texas 76006.
(8) Includes 16,761 shares issuable pursuant to options exercisable within
sixty days.
(9) Includes 25,181 shares issuable pursuant to options exercisable within
sixty days.
(10) Consists entirely of shares issuable pursuant to options exercisable within
sixty days.
(11) Includes 36,000 shares issuable pursuant to options exercisable within
sixty days.
(12) Includes 27,000 shares issuable pursuant to options exercisable within
sixty days.
(13) Includes 942,711 shares issuable pursuant to options exercisable within
sixty days.
(14) Includes shares subject to tender agreements. Does not include shares
issuable pursuant to options exercisable within 60 days. The address for
American Express Travel Related Services Company, Inc. is 200 Vesey Street,
New York, NY 10285.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of the Shares, to
file with the SEC initial reports of ownership and reports of changes in
ownership of Shares and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders also are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms that
are filed with the SEC. To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and representations that no
other reports were required, during the fiscal year ended December 31, 2000, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table presents summary information concerning compensation of
the Chief Executive Officer and each of the other four most highly compensated
executive officers as of December 31, 2000 (together, the "Named Executive
Officers") for the periods indicated for services rendered to the Company and
its subsidiaries.
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL
---------------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ---- -------- -------- ------------ ------------
Thomas J. Depping.................. 2000 $400,000 -- -- $ 8,440(2)
President, Chairman of the 1999 349,500 -- 101,067(1) 8,089(2)
Board and Chief Executive Officer 1998 250,000 $350,000(3) -- 5,000(2)
Sandy B. Ho........................ 2000 215,000 -- -- 4,374(2)
Executive Vice President, 1999 200,000 47,800(4) 25,000(1) 8,333(2)
Chief Financial Officer and Asst. 1998 185,000 100,000(3) 60,000(5) 5,000(2)
Secretary
Michael A. Sabel(6)................ 2000 262,500 -- -- 6,881(2)
Executive Vice President 1999 249,999 53,201(4) 55,000(1) 8,750(2)
and Chief E-Commerce Officer 1998 148,437 -- 804,521(7) --
E. Roger Gebhart................... 2000 210,000 -- -- 4,288(2)
Chief Operating Officer, 1999 165,667 48,878(4) 45,000(1) 10,000(2)
Executive Vice President, 1998 112,925 100,000(3) 45,000(8) 4,517(2)
Capital Markets and Treasurer
David L. Pederson(9)............... 2000 250,000 -- -- 8,417(2)
Executive Vice President 1999 204,375 53,200(4) 45,000(1) 6,750(2)
and Chief Information Officer 1998 110,738 82,500(3) 45,000 3,063(2)
- ---------------
(1) Consists of options granted in 2000 based upon the Named Executive Officer's
performance during 1999.
(2) Consists of amounts contributed by the Company on behalf of the Named
Executive Officer to the Company's 401(k) plan.
(3) This amount was paid during 1999 based upon the Named Executive Officer's
performance during 1998.
(4) This amount was paid during 2000 based upon the Named Executive Officer's
performance during 1999.
(5) Includes 50,000 replacement options granted in November 1998 upon
cancellation of 50,000 options previously granted in March 1998.
(6) Mr. Sabel's employment with the Company began as of May 27, 1998. As of
December 31, 2000, Mr. Sabel's employment with the Company was terminated.
(7) Includes 500,000 options granted upon commencement of Mr. Sabel's employment
with the Company in May 1998. Also includes 304,521 replacement options
granted in November 1998 upon cancellation of 449,041 of the options granted
in May 1998.
(8) Includes 35,000 replacement options granted in November 1998 upon
cancellation of 35,000 options previously granted in March 1998.
(9) Mr. Pederson's employment with the company began as of April 13, 1998.
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STOCK OPTIONS
OPTION GRANTS IN 2000
The following table sets forth information concerning the grant of stock
options during 2000 to the Named Executive Officers:
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENTAGE OF AT ASSUMED ANNUAL RATE OF
SHARES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------------
NAME GRANTED(1) FISCAL 2000 (PER SHARE) DATE 5% 10%
- ---- ---------- ------------- -------------- ---------- ----------- -----------
Thomas J. Depping........ 101,067(3) 20.39% $16.8125 01/03/2010 $1,068,612 $2,708,070
Sandy B. Ho.............. 25,000(3) 5.04% 16.8125 01/03/2010 264,333 669,870
Michael A. Sabel(4)...... 55,000(3) 11.09% 16.8125 01/03/2010 N/A N/A
E. Roger Gebhart......... 45,000(3) 9.08% 16.8125 01/03/2010 475,799 1,250,766
David L. Pederson........ 45,000(3) 9.08% 16.8125 01/03/2010 475,799 1,205,766
- ---------------
(1) All of such options were granted pursuant to the Company's 1997 Stock Option
Plan and vest in increments of 20% per year over a period of five years
beginning on the first anniversary of the date of grant.
(2) Represents the potential realizable value of each grant of options assuming
that the market price of the underlying security appreciates in value from
the date of grant to the end of the option term at the rates of 5% and 10%
compounded annually.
(3) Consists of options granted January 3, 2000 based upon the Named Executive
Officer's performance during 1999. These options were previously reported as
part of the Named Executive Officer's 1999 compensation.
(4) Mr. Sabel's employment with the Company was terminated as of December 31,
2000.
No options have been granted during 2001 to the Named Executive Officers.
No options were exercised during 2000 by the Named Executive Officers. The
following table sets forth information concerning fiscal year-end option values:
NUMBER OF SECURITIES VALUE OF
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2000 DECEMBER 31, 2000(1)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Thomas J. Depping.......................... 308,522 380,081 $0 $0
Sandy B. Ho................................ 101,365 112,576 0 0
Michael A. Sabel(2)........................ 177,773 232,707 0 0
E. Roger Gebhart........................... 27,000 78,000 0 0
David L. Pederson.......................... 18,000 72,000 0 0
- ---------------
(1) Calculated as the difference between the aggregate fair market value of such
options based on the last reported sale price of the Shares as of December
29, 2000 ($2.50 per share) and the aggregate exercise price.
(2) Mr. Sabel's employment with the Company was terminated as of December 31,
2000.
CERTAIN TRANSACTIONS
Upon completion of the Company's initial public offering in May 1997, the
Company entered into a $5 million subordinated revolving credit facility with
Redstone, with the commitment level thereunder decreasing by $1 million per
year. Due to availability of funds under other facilities, it was determined
that the revolving credit facility was no longer needed and was terminated in
1999, based upon mutual agreements of all parties involved. Advances under the
subordinated revolving credit facility bore interest at 11.00% per annum.
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The Company and an affiliate of Redstone (the "Redstone Affiliate") are
parties to an agreement dated December 20, 1996 (the "Referral Agreement")
whereby the Redstone Affiliate may introduce potential lease customers or
vendors of equipment to the Company. Pursuant to this agreement, the Company is
required to pay a referral fee to the Redstone Affiliate equal to 5.0% of the
total equipment cost funded for each lease the Company enters into with a
customer referred to it by the Redstone Affiliate, which fee is consistent with
referral fees paid by the Company to other referral sources. As of December 31,
2000, the Company had paid less than $1,000.00 to the Redstone Affiliate
pursuant to the Referral Agreement.
During 1998, in the ordinary course of business, the Company entered into
lease financing agreements with Augusta Foods, LLC ("Augusta Foods"), the sole
owner of Cafe Express Holdings ("Cafe Express"), which operates restaurants, for
the financing of restaurant equipment. Augusta Foods and Cafe Express are
affiliates of Redstone. Pursuant to Guaranty Agreements entered into in
connection with these transactions, Redstone guaranteed payment of Augusta
Foods' and Cafe Express' obligations under the leases. The aggregate amount of
equipment financed pursuant to such leases during 1998 was approximately $6.2
million and during 1999 was approximately $1.1 million No equipment was financed
pursuant to such leases during 2000. In May 2000, Cafe Express paid in full the
outstanding balances under nine leases in the amount of approximately
$7,062,000.
During 1999, in the ordinary course of business, the Company entered into a
lease agreement with Houstonian Golf, Ltd. ("Houstonian Golf"), for the
financing of golf course maintenance equipment related to the Houstonian Golf
Course located at the Houstonian Hotel, Club and Spa in Houston, Texas.
Houstonian Golf is an affiliate of Redstone. Pursuant to Guaranty Agreements
entered into in connection with this transaction, Redstone guaranteed payment of
Houstonian Golf's obligations under the lease. The aggregate amount financed
pursuant to the lease during 1999 was approximately $669,000 and no amounts were
financed in 2000.
During November 2000, in the ordinary course of business, the Company
entered into a purchase agreement with Mr. Pederson and two other employees of
the Company to purchase all right, title and interest of such employees in the
Credit Bureau software used by the Company. The aggregate purchase price for the
software was $250,000, with approximately $83,333 being received by Mr.
Pederson.
The Company entered into a revolving credit agreement with Mr. Sabel for up
to $365,000, which loan was secured by a pledge of Shares beneficially owned by
Mr. Sabel. Such indebtedness bore interest at 10.00% per annum. The outstanding
principal balance under the loan of $364,000, plus accrued interest of
approximately $21,280, was paid in full on or about December 29, 2000.
The Company believes that the terms of the foregoing transactions are no
less favorable to the Company than the terms of any similar transaction that
could have been obtained through arms' length negotiations with an unaffiliated
third party.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Campo, Metcalfe and Solomon are the members of the Compensation and
Stock Option Committees of the Board. No member of the Company's Compensation
Committee or Stock Option Committee was an officer or employee of the Company or
any of its subsidiaries during 2000 or was formerly an officer of the Company or
any of its subsidiaries. No executive officer of the Company served as a
director or member of the Compensation Committee or Stock Option Committee of
another entity, one of whose executive officers served as a director or member
of the Compensation Committee or Stock Option Committee of the Company.
SierraCities does not believe that any interlocks exist between any members
of the Compensation Committee and any third party represented on the Board or
providing significant services to SierraCities.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has an employment agreement with Mr. Thomas J. Depping,
effective as of May 20, 1997. Mr. Depping's employment agreement has an initial
term of three years with an evergreen three year
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extension continuing after the initial term unless either the Company or Mr.
Depping gives ninety days' notice of termination. Pursuant to his employment
agreement, Mr. Depping is entitled to receive an annual salary of not less than
$250,000. In addition, if the agreement is terminated without cause by the
Company, or by Mr. Depping for good reason (defined in the employment agreement
to include a termination by Mr. Depping within one year of a change in control
of the Company), the Company is obligated to pay Mr. Depping a termination fee
equal to three times the sum of (i) the amount of Mr. Depping's then-current
annual base compensation and (ii) his bonus for the year prior to the
termination (or, in the case of a good reason termination, the bonus paid in the
year prior to the change in control, if greater). In addition, the agreement
contains a covenant prohibiting Mr. Depping from competing with the Company for
a period of one year following termination of his employment with the Company,
other than in the case of a termination by the Company without cause or a
termination by Mr. Depping for good reason. The agreement also provides for
customary benefits and perquisites.
The Company has an employment agreement with Ms. Sandy B. Ho, effective as
of April 1, 1998. The employment agreement has an initial term of three years
with an evergreen three year extension continuing after the initial term unless
either the Company or Ms. Ho gives ninety days' notice of termination. Pursuant
to the agreement, Ms. Ho is entitled to receive an annual base salary of not
less than $185,000. If the agreement is terminated without cause by the Company,
the Company is obligated to pay Ms. Ho termination fees equal to the aggregate
of three times her annual salary and three times the bonus received by Ms. Ho
for the year immediately preceding such termination (each paid over a period of
thirty-six months), and an additional lump sum equal to the bonus received by
Ms. Ho for the year immediately preceding her termination as prorated for the
number of days in the year prior to such termination. Ms. Ho may terminate the
agreement within one year of a change in control of the Company and receive an
amount equal to her annual salary plus a bonus equal to the bonus she received
for the year immediately preceding such termination or the bonus she received in
the year immediately preceding the change in control, whichever is greater. The
agreement contains covenants prohibiting Ms. Ho from competing with the Company
for a period of one year following the termination of her employment with the
Company other than in the case of a termination by the Company without cause or
a termination by Ms. Ho within one year of a change in control. The agreement
also provides for customary benefits and perquisites.
The Company has an employment agreement with Mr. Michael A. Sabel,
effective as of May 27, 1998. Mr. Sabel's employment agreement has a term of
five years. Pursuant to his employment agreement, Mr. Sabel is entitled to
receive an annual salary of not less than $249,999. If the agreement is
terminated without cause by the Company, the Company is obligated to pay Mr.
Sabel a termination fee (over a period of twelve months) equal to the aggregate
of Mr. Sabel's annual salary plus the bonus he received for the year immediately
preceding such termination. In the event of a "change in control" of the Company
(as defined in the agreement), the Company is obligated to pay Mr. Sabel an
amount equal to 2.99 times the amount of cash compensation paid to Mr. Sabel for
the year immediately preceding the change in control, subject to certain
adjustments. In addition, in the event that the payment under the agreement,
together with any other payments due to him on account of such change in
control, are deemed to be excess parachute payments under Section 280G of the
Internal Revenue Code, the severance payment will be reduced so that there would
be no excess parachute payment. The agreement contains a covenant prohibiting
Mr. Sabel from competing with the Company for a period of one year following
termination of his employment with the Company. The agreement also provides for
customary benefits and perquisites. Mr. Sabel's employment with the Company was
terminated as of December 31, 2000.
The Company has an employment agreement with Mr. David L. Pederson,
effective as of April 13, 1998. Mr. Pederson's employment agreement has a term
of five years. Pursuant to his employment agreement, Mr. Pederson is entitled to
receive an annual salary of not less than $175,000. If the agreement is
terminated without cause by the Company, the Company is obligated to pay Mr.
Pederson a termination fee equal to the balance of the base compensation due Mr.
Pederson over the remaining portion of the five-year term of the agreement
(payable, at the discretion of the Company, on a monthly basis). If Mr.
Pederson's employment is terminated following the acquisition of the Company by
another entity where the Company is not the surviving entity, Mr. Pederson is
entitled to receive a termination fee equal to the amount of his base salary
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due over the remaining months in the five-year term of the employment agreement.
In addition, the agreement contains a covenant prohibiting Mr. Pederson from
competing with the Company following the termination of his employment with the
Company until the earlier of (i) if Mr. Pederson is terminated without cause by
the Company, a period of one year after the period through which the Company
agrees to pay Mr. Pederson's termination fee, or (ii) the expiration of six
years from the date of the employment agreement. The agreement also provides for
customary benefits and perquisites.
The Company has an employment agreement with Mr. Roger Gebhart, effective
as of October 13, 1998. Mr. Gebhart's employment agreement has a term of three
years. Pursuant to his employment agreement, Mr. Gebhart is entitled to receive
an annual salary of not less than $130,000. If the agreement is terminated
without cause by the Company, the Company is obligated to pay Mr. Gebhart a
termination fee equal to 125% of twelve months of Mr. Gebhart's base
compensation then in effect. In addition, the agreement contains a covenant
prohibiting Mr. Gebhart from competing with the Company for a period of one year
following termination of his employment with the Company. The agreement also
provides for customary benefits and perquisites. In the event that the Company
is acquired prior to the date specified in the agreement and Mr. Gebhart signs a
commercially reasonable employment agreement with the acquiror, Mr. Gebhart will
receive a sign on bonus of $600,000.
The Company has a change in control agreement with Mr. Roger Gebhart,
effective as of January 21, 1999. Under the agreement, as amended, in the event
of Mr. Gebhart's involuntary termination (including a termination by the Company
without cause or by Mr. Gebhart on account of a change of duties) within two
years of a change in control of the Company, Mr. Gebhart will receive a lump sum
severance payment generally equal to two times the sum of (i) 120% of his base
salary and (ii) his bonus amount; provided, however, that such severance payment
shall be reduced by the present value of any other cash severance payment due to
Mr. Gebhart from the Company; provided, further, that payment of a sign on bonus
under the employment agreement will be in lieu of any severance payment under
this agreement. In the event any payments to Mr. Gebhart following a change in
control are deemed to be excess parachute payments, such payments will be
reduced so that no payment is an excess parachute payment if such reduction
would result in a better net after-tax payment to Mr. Gebhart.
The Company has a change in control agreement with Sandy B. Ho, effective
as of March 8, 2000. Under the agreement, in the event of Ms. Ho's involuntary
termination (including a termination by the Company without Cause or by Ms. Ho
on account of a change of duties) within two years of a change in control of the
Company, Ms. Ho will receive a lump sum severance payment generally equal to two
times the sum of (i) 120% of her base salary and (ii) her bonus amount. The
severance payment under this agreement shall be in addition to any other cash
severance payment due to Ms. Ho from the Company. In the event any payments to
Ms. Ho following a change in control are deemed to be excess parachute payments,
such payments will be reduced so that no payment is an excess parachute payment
if such reduction would result in a better net after-tax payment to Ms. Ho.
INDEMNIFICATION.
SierraCities has entered into agreements with two executive officers, Mr.
Depping and Ms. Ho and with directors David L. Solomon, David C. Shindeldecker,
Robert Ted Enloe III and Richard J. Campo to provide indemnification for those
directors and certain executive officers in addition to the indemnification
provided for in SierraCities' Certificate of Incorporation and By-Laws.
SierraCities has agreed to indemnify such persons against any and all
liabilities and expenses in connection with any proceeding arising by virtue of
the fact that such person is an agent of SierraCities, provided that such
individual acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of SierraCities. A form of such
indemnification agreement is filed herewith as Exhibit (e)(14) and is
incorporated herein by reference.
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APPENDIX A
SIERRACITIES.COM INC.
AUDIT COMMITTEE CHARTER
JUNE 2000
NATURE AND PURPOSE
The primary function of the audit committee of SierraCities.com Inc. (the
"Company") is to assist the board in fulfilling its oversight responsibilities
by:
- reviewing the Company's quarterly and annual financial information;
- identifying business and financial risks that impact or could impact the
Company;
- understanding the system of internal controls management has established
to control those risks;
- reviewing compliance with laws and regulations; and
- overseeing internal and external audit activities.
The audit committee will contain at least two independent auditors
directors through June 2001 after which time the committee will contain at least
three independent directors. A director will not be considered "independent" if,
among other things, he or she has:
- been employed by the Company or its affiliates in the current or past
three years;
- accepted any compensation from the Company or its affiliates in excess of
$60,000 during the previous fiscal year (except for board service,
retirement plan benefits, or non-discretionary compensation);
- an immediate family member who is, or has been in the past three years,
employed by the Company or its affiliates as an executive officer;
- been a partner, controlling shareholder or an executive officer of any
for-profit business to which the Company made, or from which it received,
payments (other than those which arise solely from investments in the
Company's securities) that exceed five percent of the organization's
consolidated gross revenues for that year, or $200,000, whichever is
more, in any of the past three years; or
- been employed as an executive of another entity where any of the
Company's executives serve on that entity's compensation committee.
All directors of the audit committee must be able to read and understand
the fundamental financial statements, including the Company's balance sheet,
income statement, and cash flow statement. At least one director must have past
employment experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or background,
including a current or past position as a chief executive or financial officer
or other senior officer with financial oversight responsibilities.
GENERAL RESPONSIBILITIES
1. The audit committee will provide open avenues of communication among
management, the internal auditors, the independent auditor and the board of
directors.
2. The audit committee will report committee actions to the full board of
directors and may make appropriate recommendations.
3. The audit committee has the power to conduct or authorize investigations into
matters within the committee's scope of responsibilities. The committee is
authorized to retain independent counsel, independent accountants or others
it needs to assist in an investigation.
4. The committee will meet at least four times each year, more frequently if
circumstances make that preferable. The audit committee chairman may call a
committee meeting whenever he or she thinks there
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is a need. An audit committee member should not vote on any matter in which
he or she is not independent. The committee may ask members of management,
the independent auditor or others to attend meetings and is authorized to
receive all pertinent information from management.
5. The committee will do whatever else the law, the Company's bylaws or the
board of directors require.
RESPONSIBILITIES FOR ENGAGING INDEPENDENT AUDITORS AND APPOINTING THE INTERNAL
AUDITOR
1. The audit committee will select the independent auditor for the Company's
audits. The committee's selection is subject to approval by the full board of
directors. The audit committee also will review and approve any fee
arrangement with the independent auditor and review and approve dismissal of
the independent auditors.
2. The audit committee will review and have veto power over the appointment,
replacement, reassignment or dismissal of the director of internal audit.
3. The audit committee will confirm and assure the independence of the internal
auditor and the independent auditor, including a review of consulting
services provided by the independent auditor and the fees paid for them.
4. The audit committee is responsible for ensuring that the independent auditor
submits a formal written statement regarding relationships and services which
may affect objectivity and independence, for discussing any relevant matters
with the independent auditors, and for recommending that the full board take
appropriate action to address the independence of the auditor.
5. The audit committee will review and identify with management, the internal
auditor and the independent auditor the business and financial risks that
impact or could potentially impact the Company and the system of internal
controls designed and implemented by management to address those risks. It
will then consider, in consultation with the independent auditor and the
director of internal auditing, the audit scope and procedural plans made by
the internal auditors and the independent auditor.
6. The audit committee will listen to management and the primary independent
auditor if either thinks there might be a need to engage additional auditors.
It will then decide whether to engage an additional firm and, if so, which
one.
7. The audit committee will make sure that the director of internal auditing and
the independent auditor coordinate the internal and external audits to
address key business and financial risks. The purpose of coordinating these
efforts is to ensure completeness of coverage, to reduce redundancy and to
use audit resources effectively.
RESPONSIBILITIES FOR REVIEWING INTERNAL AUDITS, THE ANNUAL EXTERNAL AUDIT AND
QUARTERLY AND ANNUAL FINANCIAL STATEMENTS
1. The audit committee will ascertain that the independent auditor:
- views the board of directors as its client;
- be ultimately accountable to the board of directors and the audit
committee;
- will be available to the full board of directors at least annually;
- will provide the committee with a timely analysis of significant business
risk and financial reporting issues; and
- will provide the committee with a qualitative assessment of management's
accounting and financial reporting practices.
2. The audit committee will ask management, the director of internal auditing
and the independent accountant about significant business and financial risks
and exposures and will assess management's steps to minimize the potential
impact.
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3. The audit committee will review the following with the independent accountant
and the director of internal auditing:
- the adequacy of the Company's internal controls, including computerized
information system controls and security;
- any significant findings and recommendations made by the independent
auditor or internal auditing, together with management's responses.
4. Shortly after the annual audit is completed, the audit committee will review
the following with management and the independent auditor:
- the Company's annual financial statements and related footnotes;
- the independent auditor's audit of and report on the financial
statements;
- the auditor's qualitative assessment about the quality, not just the
acceptability, of accounting principles and financial disclosures;
- any serious difficulties or disputes with management encountered during
the course of the audit; and
- anything else about the audit procedures or findings that GAAS requires
the auditors to communicate to the committee.
5. The audit committee will consider and review with management and the director
of internal auditing:
- any significant findings during the year and management's responses to
them;
- any difficulties the internal auditor encountered while conducting
audits, including any restrictions on the scope of their work or access
to required information;
- any changes to the planned scope of management's internal audit plan that
the committee thinks advisable;
- the internal auditing department's budget and staffing;
- the internal auditing department's charter; and
- whether the internal auditing department has complied with the Institute
of Internal Auditing's Standards for the Professional Practice of
Internal Auditing.
6. The audit committee will review annual filings with the SEC and other
published documents containing the Company's financial statements and will
consider whether the information in the filings is consistent with the
information in the financial statements.
7. The audit committee will review the interim financial reports with
management, the independent accountant and the director of internal auditing
before those interim reports are released to the public or filed with the SEC
or other regulators.
8. The audit committee will prepare a letter for inclusion in the proxy
statement relevant to the committee's required disclosures.
PERIODIC RESPONSIBILITIES
1. Review and update the committee's charter annually.
2. Review legal and regulatory matters that may have a material effect on the
Company's financial statements, compliance policies and programs and reports
from regulators.
3. Meet with the director of internal auditing, the independent auditor and
management in separate executive sessions to discuss any matters the
committee or these groups believe should be discussed privately with the
audit committee.
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SCHEDULE II
[CREDIT SUISSE FIRST BOSTON CORPORATION LETTERHEAD]
February 14, 2001
Board of Directors
SierraCities.com Inc.
600 Travis Street, 70th Floor
Houston, Texas 77002
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders
of Company Common Stock (as defined below), other than American Express Travel
Related Services Company, Inc. (the "Acquiror"), of the Consideration (as
defined below) to be received by such holders pursuant to the terms of the
Agreement and Plan of Merger, dated as of February 14, 2001 (the "Merger
Agreement") among SierraCities.com Inc. (the "Company"), the Acquiror and AMTRS
Corp., a wholly-owned subsidiary of Acquiror ("Merger Sub").
Pursuant to the Merger Agreement (i) Merger Sub will commence a tender
offer (the "Offer") for all outstanding shares of the common stock, par value
$0.01 per share ("Company Common Stock"), at $5.68 per share in cash (the
"Consideration") and (ii) following the consummation of the Offer, Merger Sub
will merge (the "Merger" and, together with the Offer, the "Transaction") with
the Company and each outstanding share will be converted into the right to
receive the Consideration.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company, as well as the
Merger Agreement. We have also reviewed certain other information, including
financial forecasts provided to or discussed with us by the Company, and have
met with the Company's management to discuss the business and prospects of the
Company.
We have also considered certain financial and stock market data of the
Company, and we have compared those data with similar data for other publicly
held companies in businesses similar to the Company and we have considered the
financial terms of certain business combinations and other transactions which
have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company. In
addition, we have not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, nor have we been furnished with any such evaluations or
appraisals. Our opinion is necessarily based upon information available to us
and financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. In connection with our engagement, we approached
third parties to solicit indications of interest in a possible acquisition of
the Company and held preliminary discussions with certain of these parties prior
to the date hereof.
We and our affiliate, Donaldson, Lufkin & Jenrette Securities Corporation,
have acted as financial advisor to the Board of Directors in connection with the
Transaction and will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Transaction. We will also
receive a fee for rendering this opinion. In the past, we have provided certain
investment banking and financial services to the Acquiror in connection with
matters unrelated to the Transaction, for which we have received compensation.
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In the ordinary course of our business, we and our affiliates may actively
trade the debt and equity securities and obligations of both the Company and the
Acquiror for our and our affiliates' own accounts and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities and obligations.
It is understood that this letter is for the information of the Board of
Directors in connection with its consideration of the Transaction and does not
constitute a recommendation as to whether any stockholder of the Company should
tender shares pursuant to the Offer or how such stockholder should vote or act
on any matter related to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be received by the holders of Company Common
Stock pursuant to the Transaction is fair to such holders, other than Acquiror,
from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ WILLIAM D. ADDAS
-------------------------------------------------------------
Managing Director
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