1
Offer to Purchase for Cash Exhibit (a)(1)
All Outstanding Shares of Common Stock
of
ACORDIA, INC.
at
$40.00 NET PER SHARE IN CASH
by
AICI ACQUISITION CORP.
a wholly owned subsidiary of
ANTHEM INSURANCE COMPANIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, JULY 3, 1997, UNLESS THE OFFER IS EXTENDED.
------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED,
AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, AT LEAST A
MAJORITY OF THE THEN ISSUED AND OUTSTANDING SHARES OF COMMON STOCK, PAR VALUE
$1.00 PER SHARE (THE "COMMON STOCK"), OF ACORDIA, INC. (THE "COMPANY"), OTHER
THAN SHARES OF COMMON STOCK BENEFICIALLY OWNED BY AICI ACQUISITION CORP. (THE
"PURCHASER"), ANTHEM INSURANCE COMPANIES, INC. ("PARENT"), PARENT'S OTHER
SUBSIDIARIES AND PARENT'S EXECUTIVE OFFICERS AND DIRECTORS. SEE "INTRODUCTION"
AND "THE TENDER OFFER -- CERTAIN CONDITIONS OF THE OFFER."
THE BOARD OF DIRECTORS OF THE COMPANY, BASED UPON, AMONG OTHER THINGS THE
UNANIMOUS RECOMMENDATION OF THE SPECIAL COMMITTEE OF THE COMPANY'S BOARD OF
DIRECTORS (THE "COMPANY SPECIAL COMMITTEE"), HAS DETERMINED THAT THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE MERGER
AGREEMENT, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS (OTHER THAN THE PARENT AND THE PURCHASER) AND HAS APPROVED THE
OFFER, THE MERGER AND THE MERGER AGREEMENT AND RECOMMENDS (EXCLUDING CERTAIN
INTERESTED DIRECTORS WHO ABSTAINED) THAT SUCH STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES TO THE PURCHASER PURSUANT TO THE OFFER.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE 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.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Common Stock should either (i) complete and sign the Letter of Transmittal
provided herewith (or a manually signed facsimile thereof) in accordance with
the instructions in the Letter of Transmittal, have such stockholder's signature
thereon guaranteed if required by Instruction 1 to the Letter of Transmittal and
mail or deliver the Letter of Transmittal (or such facsimile) and all other
required documents to the Depositary (as defined herein) together with the
certificates for such Common Stock to the Depositary, or tender such Common
Stock pursuant to the procedure for book-entry transfer set forth in the section
entitled "THE TENDER OFFER -- Procedures for Tendering Common Stock," or (ii)
request such stockholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such stockholder. A stockholder
having Common Stock registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such stockholder desires to tender such
Common Stock.
If a stockholder desires to tender Common Stock and such stockholder's
certificate for such Common Stock is not immediately available or the procedure
for book-entry transfer cannot be completed on a timely basis, or time will not
permit all required documents to reach the Depositary prior to the Expiration
Date, such stockholder's tender may be effected by following the procedure for
guaranteed delivery set forth in the section entitled "THE TENDER
OFFER -- Procedures for Tendering Common Stock."
Questions and requests for assistance or for additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other
related materials may be directed to the Dealer Manager or the Information
Agent, at their respective addresses and telephone numbers set forth on the back
cover of this Offer to Purchase.
The Dealer Manager for the Offer is:
[CREDIT SUISSE LOGO]
June 6, 1997
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TABLE OF CONTENTS
PAGE
----
INTRODUCTION.......................................................................... 1
SPECIAL FACTORS....................................................................... 3
Background of the Offer............................................................. 3
Analysis of Credit Suisse First Boston as Financial Advisor to Parent............... 8
Fairness of the Offer............................................................... 14
The Merger Agreement................................................................ 14
Purpose of the Offer and the Merger; Plans for the Company.......................... 17
Interests of Certain Persons; Stockholdings of Certain Officers and Directors; and
Related Transactions............................................................. 19
Certain Federal Income Tax Consequences............................................. 21
Appraisal Rights.................................................................... 21
THE TENDER OFFER...................................................................... 23
Terms of the Offer.................................................................. 23
Procedures for Tendering Common Stock............................................... 25
Withdrawal Rights................................................................... 28
Acceptance for Payment and Payment.................................................. 29
Price Range of Common Stock; Dividends on the Common Stock.......................... 30
Certain Effects of the Offer........................................................ 30
Certain Information Concerning the Company.......................................... 31
Certain Information Concerning Parent and the Purchaser............................. 32
Source and Amount of Funds.......................................................... 34
Dividends and Distributions......................................................... 34
Certain Conditions of the Offer..................................................... 34
Certain Legal Matters............................................................... 36
Fees and Expenses................................................................... 37
Miscellaneous....................................................................... 39
Schedule I -- Directors and Executive Officers of Parent and the Purchaser
Schedule II -- Parent Purchases of Common Stock
Annex I -- Section 262 of the General Corporation Law of the State of Delaware
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TO THE HOLDERS OF COMMON STOCK OF ACORDIA, INC.:
INTRODUCTION
AICI Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Anthem Insurance Companies, Inc., an Indiana mutual
insurance company ("Parent"), hereby offers to purchase all outstanding shares
of Common Stock, par value $1.00 per share (the "Common Stock"), of Acordia,
Inc., a Delaware corporation (the "Company"), not already owned by the
Purchaser, Parent or Parent's other subsidiaries at a price of $40.00 per share,
net to the seller in cash, without interest thereon (the "Offer Price"), upon
the terms and subject to the conditions set forth in this Offer to Purchase and
in the related Letter of Transmittal (which, as amended or supplemented from
time to time, together constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Common Stock by Purchaser
pursuant to the Offer. The Purchaser will pay all charges and expenses of Credit
Suisse First Boston Corporation ("Credit Suisse First Boston"), as Dealer
Manager (in such capacity, the "Dealer Manager"), First Chicago Trust Company of
New York, as Depositary (the "Depositary"), and D. F. King & Co., Inc., as
Information Agent (the "Information Agent"), incurred in connection with the
Offer. See "THE TENDER OFFER -- Fees and Expenses."
The Board of Directors of the Company, based upon, among other things, the
unanimous recommendation of the Company Special Committee, has determined that
the Merger Agreement (as defined below) and the transactions contemplated
thereby, including the Offer and the Merger (as defined below), upon the terms
and subject to the conditions set forth in the Merger Agreement, are fair to,
and in the best interests of, the Company and its stockholders (other than
Parent and the Purchaser) and has approved the Offer, the Merger and the Merger
Agreement and recommends (excluding certain interested directors who abstained)
that such stockholders accept the Offer and tender their Common Stock to the
Purchaser pursuant to the Offer. Reference is made to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being mailed to the Company's stockholders herewith. Stockholders are
urged to read the Schedule 14D-9 in its entirety for a description of the
assumptions made, factors considered and procedures followed by the Company
Special Committee and the Company's Board of Directors in making the approvals,
determinations and recommendations set forth above.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 2, 1997 (the "Merger Agreement") among the Company, Parent and the
Purchaser. The Merger Agreement provides, among other things, that promptly
following the purchase of shares of Common Stock pursuant to the Offer and
subject to the terms and conditions of the Merger Agreement, and in accordance
with the relevant provisions of the Delaware General Corporation Law (the
"DGCL"), the Purchaser will be merged with and into the Company (the "Merger").
The Company will continue as the surviving corporation (the "Surviving
Corporation") and as a wholly owned subsidiary of Parent following consummation
of the Merger. If the Purchaser owns at least 90% of the outstanding shares of
Common Stock of the Company, Purchaser will have the ability to consummate the
Merger without a meeting or vote of the stockholders of the Company pursuant to
the "short form" merger provisions of the DGCL. Pursuant to the Merger each then
outstanding share of Common Stock, other than Common Stock owned by the
Purchaser, Parent or Parent's other subsidiaries, shares held in the treasury of
the Company and Common Stock owned by stockholders who perfect their dissenters'
rights under the DGCL, would be converted into the right to receive an amount in
cash equal to the Offer Price without interest. See "SPECIAL FACTORS -- Purpose
of the Offer and the Proposed Merger; Plans for the Company" and "SPECIAL
FACTORS -- Appraisal Rights."
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THE OFFER IS CONDITIONED (THE "MINIMUM TENDER CONDITION") UPON, AMONG OTHER
THINGS, THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO
EXPIRATION OF THE OFFER AT LEAST A MAJORITY OF THE THEN ISSUED AND OUTSTANDING
SHARES OF COMMON STOCK, OTHER THAN SHARES OF COMMON STOCK BENEFICIALLY OWNED BY
THE PURCHASER, PARENT, PARENT'S OTHER SUBSIDIARIES AND THE EXECUTIVE OFFICERS
AND DIRECTORS OF PARENT (THE "MINIMUM NUMBER OF SHARES"). SEE "THE TENDER
OFFER -- CERTAIN CONDITIONS OF THE OFFER."
The Company has represented to the Purchaser that as of June 2, 1997, there
were 13,016,378 shares of Common Stock outstanding, 2,218,605 shares of Common
Stock reserved for issuance under the Company's employee stock option and award
plans (with 1,362,467 options outstanding thereunder) (the "Stock Options") and
1,500,000 shares of Common Stock reserved for issuance pursuant to outstanding
warrants to purchase 1,500,000 shares of Common Stock issued to Great American
Insurance Company in connection with the Company's 1993 acquisition of the
outstanding capital stock of American Business Insurance, Inc. from Great
American Insurance Company (the "Great American Warrants"). The Company has
10,000,000 shares of Preferred Stock authorized, but none of such shares have
been issued. As of March 10, 1997, there were approximately 450 holders of
record of the Common Stock.
Based on the foregoing and assuming that all Stock Options and the Great
American Warrants are surrendered for the cash value thereof in accordance with
the terms of the Merger Agreement (see "SPECIAL FACTORS -- Background of the
Offer; Merger Agreement") and that no new shares of Common Stock have been
issued or Stock Options have been granted and exercised after June 2, 1997,
there will be 13,016,378 shares of Common Stock outstanding on the Expiration
Date (as defined below) entitled to 13,016,378 votes. Following the contribution
of shares from Parent to the Purchaser on or prior to the Expiration Date, the
Purchaser will own 8,693,056 shares of Common Stock, representing approximately
66.8% of the outstanding shares of Common Stock on the Expiration Date. See "THE
TENDER OFFER -- Certain Information Concerning Parent and the Purchaser." As set
forth on Schedule I to this Offer to Purchase, the executive officers and
directors of Parent beneficially own, in the aggregate, 188,886 shares of Common
Stock of the Company (excluding shares subject to unexercised Stock Options).
See "SPECIAL FACTORS -- Interests of Certain Persons; Stockholdings of Certain
Officers and Directors; and Related Transactions." Thus, based on the foregoing
assumptions, 2,067,219 shares of Common Stock would be the Minimum Number of
Shares. In the event the Great American Warrants are exercised in full,
2,817,219 shares of Common Stock would be the Minimum Number of Shares.
The Purchaser has been advised by the Company, that to the best of the
Company's knowledge, except as set forth below, each of the Company's executive
officers and directors has indicated his or her respective intentions to tender
all shares of Common Stock owned by him or her pursuant to the Offer. One
director of the Company has indicated that he intends to make donations to
charitable institutions of not more than 500 shares, with the expectation that
such donees will tender such donated shares pursuant to the Offer. See "SPECIAL
FACTORS -- Interests of Certain Persons; Stockholdings of Certain Officers and
Directors; and Related Transactions."
The Offer is subject to certain other conditions. See "THE TENDER
OFFER -- Certain Conditions of the Offer." The Purchaser expressly reserves the
right, in its sole discretion, to waive any one or more of the conditions to the
Offer; provided, that the Purchaser has agreed that it will not waive the
Minimum Tender Condition without the consent of a majority of the current
members of the Company's Special Committee (the "Independent Directors").
If, after giving effect to the purchase of Common Stock in the Offer, the
Purchaser owns 90% or more of the outstanding Common Stock, the Purchaser
intends to effect the Merger as a "short-form" merger under the DGCL, without a
vote of the stockholders of the Company. In order to obtain such 90% ownership,
the Purchaser must purchase at least 3,021,685 shares of Common Stock in the
Offer, assuming all Stock Options and the Great American Warrants are
surrendered in accordance with the provisions of the Merger Agreement for cash
rather than exercised (or 5,597,905 shares of Common Stock, assuming all Stock
Options and the Great American Warrants are exercised). Such 3,021,685 shares of
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Common Stock represent approximately 69.9% of the 4,323,322 shares of Common
Stock not currently beneficially owned by Parent. If, after giving effect to the
purchase of shares of Common Stock by the Purchaser in the Offer, the Purchaser
owns less than 90% of the outstanding shares of Common Stock, the Merger will
have to be approved by the Company's stockholders. Pursuant to the terms of the
Company's Certificate of Incorporation, the Merger and the Merger Agreement must
be approved and adopted by the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock. By reason of Parent's current ownership
of shares of Common Stock (which will be transferred to the Purchaser on or
prior to the Expiration Date), the Purchaser will have sufficient voting power
to approve the Merger and the Merger Agreement without the vote of any of the
other stockholders of the Company and regardless of the number of shares of
Common Stock purchased by the Purchaser pursuant to the Offer. Parent and the
Purchaser have agreed in the Merger Agreement to vote or cause to be voted all
shares of Common Stock owned by them in favor of approval and adoption of the
Merger Agreement and the Merger.
In the event the Offer is not consummated, Parent and the Purchaser intend
to explore all options which may be available to them at such time, which may
include, without limitation, the acquisition of Common Stock through open market
purchases, privately negotiated transactions, another tender offer or exchange
offer or otherwise upon such terms and at such prices as they shall determine,
which may be more or less than the price to be paid pursuant to the Offer.
Parent and the Purchaser also reserve the right to dispose of Common Stock.
The Company's Board of Directors declared a quarterly cash dividend to
holders of record of Common Stock as of May 27, 1997 of $0.20 per share on May
13, 1997, payable on June 16, 1997. Such holders of record will be entitled to
receive the quarterly cash dividend whether or not they tender their Common
Stock pursuant to the Offer, and no adjustment will be made to the price in the
Offer or to any other terms of the Offer as a result of the payment of any such
quarterly dividend to such stockholders.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
SPECIAL FACTORS
BACKGROUND OF THE OFFER
The Company was organized and initially capitalized by Parent in September
1989. In October 1992, the Company completed its initial public offering.
Following the initial public offering, Parent owned 63.3% of the Company's
outstanding Common Stock (62.5% on a fully diluted basis). Beginning in October
1995, Parent's Board of Directors authorized the purchase of up to two million
shares of the Company's Common Stock. Purchases have been made from time to time
in the open market at prevailing prices or in privately negotiated transactions.
Parent has made no open market purchases of the Company's Common Stock since
June 1996. See Schedule II to this Offer to Purchase. Since October 1995, Parent
has acquired 487,488 additional shares of Common Stock which, in addition to the
acquisition by the Company of shares of its Common Stock in a privately
negotiated purchase, has resulted in Parent's ownership increasing to 66.8%
(54.7% on a fully diluted basis).
According to the Company's publicly available filings, the Company has
grown through the acquisition of insurance brokerage companies and third party
administrators, through the creation of new Acordia companies and the expansion
of existing Acordia companies. From 1992 through the present, a significant
portion of the Company's revenues have been derived from commissions on Parent's
products and revenues and from the provision of various administrative services
to Parent and its affiliates. Commissions and fees to the Company from entities
affiliated with Parent were $291.0 million and $233.1 million in 1996 and 1995,
respectively. See "-- Interests of Certain Persons; Stockholdings of Certain
Officers and Directors; and Related Transactions." Because of the high
percentage of the Company's revenues derived from the sale and servicing of
Parent's life and health products, the Company has stated that it is inevitable
that industry forces affecting Parent will also affect the Company.
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In addition, certain of the Company's and Parent's management has been at
times overlapping. L. Ben Lytle, the President and Chief Executive Officer of
Parent and Chairman of the Board of the Company, served as Chief Executive
Officer of the Company from the time the Company began operations through
November 1996, and as President from March 1993 through November 1994. Patrick
M. Sheridan, Executive Vice President, Chief Financial Officer and a Director of
the Company, served as Executive Vice President and Chief Financial Officer of
the Company from August 1989 through August 1996. See "-- Interests of Certain
Persons; Stockholdings of Certain Officers and Directors; and Related
Transactions."
In 1995 the Company and Parent, as part of their continuing strategic
initiatives, began looking at ways to reduce the administration and marketing
expense portion of the total healthcare premium dollar in light of the intense
competition and changes occurring in the healthcare industry. During 1996,
Parent also redefined its strategic direction to focus on its healthcare
mission, in line with its assessment of the opportunities presented by the
changing dynamics of the healthcare industry, and began divesting itself of
businesses not directly supportive of the healthcare mission. Although Parent
and the Company agreed with respect to the cancellation of the administration
and wholesale distribution functions for Parent's products outside of Indiana,
Kentucky and Ohio, as described in part below, no agreement could be reached
with respect to any modification in the arrangements regarding these functions
in Indiana, Kentucky and Ohio. The business conducted in these states represents
a material portion of the Company's operations. Discussions regarding cost
issues continued into 1997 in the context of the ongoing business relationships
between the Company and Parent and its affiliated insurers under various
administrative and marketing arrangements. Although these discussions addressed
a variety of topics and several possible alternatives, including a going private
transaction, they were not understood by either party to be, and were not
intended as, proposals regarding the acquisition by Parent of the remaining
equity interest of the Company, and these discussions did not result in
negotiations between the Company and Parent regarding any such acquisition.
The timing of Parent's strategic review of its ownership relationship with
the Company has also been affected by a recent, comprehensive codification of
statutory accounting principles for insurers undertaken by the National
Association of Insurance Commissioners ("NAIC"). While the codification has not
yet been completed, Parent anticipates that the resulting changes may become
effective by year end 1998 and would require Parent to revise the methodology
for determining the carrying value of the Company's Common Stock held as an
investment in affiliated common stock. This change under the new principles is
expected to eliminate the entire carrying value of the Company's Common Stock,
regardless of its fair market value or published share prices. As a result of
the expected codification of the new principles by the NAIC, Parent has
determined that, whether or not the Offer or Merger is completed, Parent intends
to revise the carrying value of the Company's Common Stock to zero, effective
with its June 30, 1997 quarterly statement to be filed with the Indiana
Insurance Commissioner. Parent believes that the changes in statutory accounting
principles proposed by the NAIC would diminish the benefit to Parent of having
an investment in a publicly traded affiliate.
In September 1996, Parent retained Credit Suisse First Boston to assist its
management in reviewing alternatives with respect to Parent's interest in the
Company and Parent's healthcare mission. As part of this review, Credit Suisse
First Boston undertook, in consultation with Parent's and the Company's
management, a business and financial analysis of the Company and a review of
various alternatives. In December 1996, Parent amended its engagement with
Credit Suisse First Boston to include the analysis and evaluation of the
business, operations and financial position of the Company's insurance brokerage
operations that are independent of the administrative and marketing services
provided to Parent ("Acordia Brokers") and the exploration of a possible sale of
Acordia Brokers. During this period there were further discussions at the
management level regarding administrative and marketing costs issues as the
Company and Parent developed their respective 1997 business plans. However, no
action was taken by the Board of Directors of either Parent or the Company.
In January 1997, Parent and the Company, as part of the strategic
developments within Parent, decided that the wholesale marketing and
distribution functions for Parent's products outside of Indiana, Kentucky and
Ohio should be performed by Parent. Parent agreed to pay the Company a one-time
cancellation fee of
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$6.0 million, one-half of which was paid in the first quarter 1997 and the
remainder of which will be paid during the second quarter of 1997.
On February 6, 1997, the Company issued a press release announcing its
decision to undertake a strategic review of its business operations, including a
review of the Company's relationship with Parent. The Company also announced
that its Board had been informed by Parent that Parent was undertaking its own
strategic review, including an analysis of its business relationship with and
investment in the Company. The Company further announced that its Board of
Directors had created the Company Special Committee to evaluate any proposals
made by or involving Parent, and authorized it to retain such financial or other
advisers as might be necessary to assist the Company Special Committee in the
evaluation process. John C. Crane was designated as Chairman of the Company
Special Committee. The press release also stated that the Company was projecting
that revenues from the Company's health-related operations would be flat to
slightly down when compared to 1996.
At such time, Parent also informed the Company that no decision had as yet
been made by Parent as to what, if any, changes it believed should be made with
respect to Parent's business relationship with and investment in the Company and
that, as part of the evaluation process, Credit Suisse First Boston had been
asked to explore the possible sale of Acordia Brokers and the possible
reorganization of the Company's health business. In late February 1997, the
Board of Directors of Parent appointed a special committee of outside directors
(the "Parent Special Committee") to review and evaluate any proposals developed
regarding the Company, to make recommendations with respect to any such
proposals to the full Board of Directors of Parent and to oversee any
negotiations between Parent and others with respect to such proposals. Frank B.
Hower, Jr. was designated as Chairman of the Parent Special Committee.
Subsequent to the issuance of the February 6, 1997 press release, Credit
Suisse First Boston began soliciting indications of interest from prospective
purchasers of Acordia Brokers.
The Company Special Committee held its first meeting on February 20, 1997.
At this meeting, the Company Special Committee discussed the retention of
independent advisors and the process by which such advisors would be selected.
On March 11, 1997, the Company Special Committee met to interview five
financial advisor candidates. Following discussion, the Company Special
Committee selected Alex. Brown & Sons Incorporated ("Alex. Brown") as financial
advisor to the Company Special Committee. This selection was followed shortly
thereafter by the selection of Jones, Day, Reavis & Pogue ("Jones Day") to serve
as legal counsel to the Company Special Committee.
The Parent Special Committee held its first meeting on March 27, 1997. The
meeting was attended by representatives of Credit Suisse First Boston and Vorys,
Sater, Seymour and Pease, special counsel to Parent and the Parent Special
Committee ("Vorys Sater"). Credit Suisse First Boston advised the Parent Special
Committee on the process for valuing and analyzing the possible sale of Acordia
Brokers. Vorys Sater advised the Parent Special Committee of its fiduciary
duties under Indiana law and the legal issues to be considered with respect to
any transaction involving the Company and the possible sale of Acordia Brokers.
The next meeting of the Company Special Committee occurred on April 11,
1997. The meeting was attended by representatives of Alex. Brown and Jones Day.
At this meeting, Alex. Brown advised the Company Special Committee on the
process for valuing and analyzing the Company's business operations and on their
progress in due diligence. Jones Day briefed the Company Special Committee on
its fiduciary duties and responsibilities to minority shareholders under
Delaware law. The Company Special Committee was also updated on the status of
Credit Suisse First Boston's evaluation of a possible sale of Acordia Brokers.
Between February 1997 and early May 1997, executives of each of the Company
and Parent had frequent communications regarding day-to-day operations as well
as general discussions regarding Parent's business relationship with and
investment in the Company.
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On May 6, 1997, the Company Special Committee met. The meeting was attended
by representatives of Alex. Brown and Jones Day. At this meeting, Alex. Brown
provided the Company Special Committee with a preliminary assessment of Alex.
Brown's view on the valuation of, and valuation methodology with respect to, the
components of the Company.
On May 7, 1997, Credit Suisse First Boston met with Alex. Brown at Alex.
Brown's offices in Baltimore, Maryland. At this meeting, Credit Suisse First
Boston provided Alex. Brown with its initial views on an appropriate valuation
of, and valuation methodology with respect to, the components of the Company.
On May 9, 1997, the Parent Special Committee met and was updated on the
progress of negotiations with respect to the possible sale of Acordia Brokers
and considered the possible terms of a transaction with the Company. Vorys Sater
again briefed the Parent Special Committee on its fiduciary duties under Indiana
law and the duties owed to minority shareholders under the DGCL. In addition, on
May 9, the Parent Special Committee, through Credit Suisse First Boston,
received proposals with respect to the possible sale of Acordia Brokers.
On May 12, 1997, the Parent Special Committee met by telephone with Credit
Suisse First Boston and Vorys Sater present. Credit Suisse First Boston
described the proposals received for Acordia Brokers. Each proposal provided for
a leveraged buyout of Acordia Brokers and contained financing conditions. The
Parent Special Committee unanimously resolved to proceed to negotiations with
one of the bidders, whose proposal was within the valuation ranges ultimately
established for Acordia Brokers by Credit Suisse First Boston and Alex. Brown.
Credit Suisse First Boston recommended that the Parent Special Committee
authorize Credit Suisse First Boston to discuss a specific share price with
Alex. Brown. Following discussion of the appropriate price, the Parent Special
Committee unanimously resolved to authorize Credit Suisse First Boston to
discuss in general terms a price of $34 per share with Alex. Brown.
On May 13, 1997, the Company Special Committee met, and Mr. Crane advised
the Company Special Committee of Alex. Brown's report on its May 7 meeting with
Credit Suisse First Boston. The Company Special Committee was also updated on
the proposals received for Acordia Brokers. At the Company's Board of Directors
meeting on the same date, the Company Special Committee updated the Board with
respect to its activities to such date.
On May 15, 1997, Credit Suisse First Boston met with Mr. Crane, Alex. Brown
and Jones Day and discussed in general terms a price of $34 per share for all
shares of Common Stock not owned by Parent. A telephonic meeting of the Company
Special Committee was convened later that day with Jones Day and Alex. Brown
present to discuss the price communicated by Credit Suisse First Boston.
Following a lengthy discussion, the Company Special Committee instructed Alex.
Brown to inform Credit Suisse First Boston that the Company Special Committee
had placed a preliminary per share value for the Common Stock in excess of $40
per share.
On May 16, 1997, Credit Suisse First Boston met at its offices in New York,
New York with Alex. Brown. At this meeting, Alex. Brown advised Credit Suisse
First Boston that the Company Special Committee placed a preliminary per share
value for the Common Stock in excess of $40.
On May 19, 1997, the Parent Special Committee met again by telephone. The
Parent Special Committee's financial and legal advisers described the
negotiations with the bidder for Acordia Brokers. Credit Suisse First Boston
also reported to the Parent Special Committee that it had met with Alex. Brown
on May 16 and that Alex. Brown had reported that the Company Special Committee
placed a preliminary per share value for the Common Stock in excess of $40 per
share. The Parent Special Committee then deliberated regarding whether to
consider other alternatives or to increase the price it was willing to
recommend. Following discussion, the Parent Special Committee unanimously
resolved to authorize Credit Suisse First Boston to discuss with Alex. Brown a
per share price of $37.
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On May 20, 1997, following consideration of an increase in both the volume
and price of the Company's Common Stock, the Company and Parent issued the
following press release:
INDIANAPOLIS -- Acordia, Inc. (NYSE: ACO) and Anthem Insurance
Companies, Inc. announced today that in furtherance of the previously
announced review of their current business and financial relationship, they
are in discussions with regard to a possible reorganization of Acordia's
health business, which could include an acquisition by Anthem of the
publicly owned shares of Acordia not owned by Anthem. Anthem further
announced that it is in discussions with a third party with regard to a
possible sale of Acordia's brokerage business. There can be no assurance
that these discussions will result in any transaction, or if so, as to the
terms or timing of any such transaction.
As of May 1, 1997, Anthem owned approximately 67% of Acordia's
outstanding common stock.
On May 20, 1997, Credit Suisse First Boston also indicated to Alex. Brown
by telephone that the Parent Special Committee was prepared to discuss a per
share price of $37.
On May 21, 1997, Vorys Sater delivered to Dewey Ballantine, counsel to the
Company, and Jones Day, an initial draft of the Merger Agreement for their
review.
On May 22, 1997, the Company Special Committee held a telephonic meeting
with Alex. Brown and Jones Day present. At this meeting, Alex. Brown reported on
its May 16 meeting with Credit Suisse First Boston and subsequent discussions.
After lengthy discussion, the Company Special Committee instructed Alex. Brown
to advise Credit Suisse First Boston that the Company Special Committee believed
that the value of the Common Stock was at least $40 per share.
On May 23, 1997, Alex. Brown contacted Credit Suisse First Boston by
telephone and indicated that the Company Special Committee placed a preliminary
per share value on the Common Stock of at least $40 per share.
On the morning of May 27, 1997, the Parent Special Committee met by
telephone. Credit Suisse First Boston reported that Alex. Brown continued to
communicate that the Company Special Committee believed that the value of the
Company was at least $40 per share. The Parent Special Committee determined that
Mr. Hower should contact Mr. Crane directly. Following telephone discussions
between Mr. Crane and Mr. Hower that afternoon, the Parent Special Committee
reconvened on the evening of May 27 and Mr. Hower reported that, based on his
conversation with Mr. Crane, the Company Special Committee would likely
recommend acceptance of an offer at $40 per share. In addition, the Parent
Special Committee discussed whether the execution of a definitive agreement with
respect to the sale of Acordia Brokers should be a condition to a tender offer.
Following deliberations, the Parent Special Committee determined to recommend an
offer of $40 per share to the Parent's Board of Directors which would not be so
conditioned. Following the meeting, Vorys Sater furnished a revised draft of the
Merger Agreement to Dewey Ballantine and Jones Day.
On May 28, 1997, a telephonic meeting of the Company Special Committee was
held to discuss a per share price of $40 for the Common Stock. At the conclusion
of this meeting, the Company Special Committee determined to continue
discussions with the Parent Special Committee at a price of $40 per share
subject to the negotiation of a mutually acceptable Merger Agreement.
The Board of Directors of Parent met on May 30, 1997, with Credit Suisse
First Boston and Vorys Sater present by telephone. The Parent Special Committee
described the course of the negotiations, and Credit Suisse First Boston
provided information on the financial terms of an offer at a per share price of
$40. Credit Suisse First Boston also orally advised the directors that, as of
such date and based upon and subject to certain matters discussed with them, the
consideration to be paid by Parent in the Offer and the Merger was fair to
Parent from a financial point of view. Vorys Sater outlined the terms and
conditions of the draft Merger Agreement. The Board of Directors of Parent took
no action with respect to the Parent Special Committee's recommendation on May
30.
The Company Special Committee also met on May 30 to discuss a $40 per share
price and to consider its recommendation to the Company's Board of Directors. At
this meeting, Alex. Brown rendered its oral
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opinion, subsequently confirmed in writing, that, as of that date, the proposed
consideration of $40 per share was fair, from a financial point of view, to the
Company's stockholders other than Parent, and Jones Day outlined the terms and
conditions of the draft Merger Agreement and the open issues that remained in
that draft. At the conclusion of this meeting, the Company Special Committee
unanimously determined to recommend to the Company's Board of Directors that the
Board approve a $40 per share price, subject to the finalization of the draft
Merger Agreement.
On May 31, 1997, Parent's Board of Directors reconvened and (excluding
certain interested directors who abstained) approved the Merger, the Merger
Agreement and the Offer. Following this meeting, Mr. Hower telephoned Mr. Crane
to convey the Offer. A telephonic meeting of the Company's Board of Directors
was held later that day. Following receipt of the Company Special Committee's
recommendation and a discussion of the Offer, the Merger and the Merger
Agreement, the Company's Board of Directors (excluding certain interested
directors who abstained) approved the Merger Agreement (including the Offer and
the Merger) and recommended to the Company's stockholders (other than Parent and
the Purchaser) that such stockholders accept the Offer and tender their shares
of Common Stock pursuant to the Offer, and determined that the Offer and the
Merger are fair to, and in the best interests of, the Company's stockholders
(other than Parent and the Purchaser).
On June 1, 1997, Jones Day and Vorys Sater finalized negotiations on the
Merger Agreement, and the Merger Agreement was thereafter executed by Parent,
the Purchaser and the Company. On June 2, 1997, the Company issued a press
release announcing such execution.
ANALYSIS OF CREDIT SUISSE FIRST BOSTON AS FINANCIAL ADVISOR TO PARENT
Credit Suisse First Boston has acted as exclusive financial advisor to
Parent in connection with the Offer and the Merger. Credit Suisse First Boston
is an internationally recognized investment banking firm and is regularly
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, leveraged buyouts, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
General. In connection with Credit Suisse First Boston's engagement, Parent
requested that Credit Suisse First Boston evaluate the fairness to Parent from a
financial point of view of the consideration to be paid by Parent in the Offer
and the Merger. At a meeting of Parent's Board of Directors held on May 30,
1997, Credit Suisse First Boston orally advised Parent's Board of Directors
that, as of such date and based upon and subject to certain matters discussed
with the Board, the consideration to be paid by Parent in the Offer and the
Merger was fair to Parent from a financial point of view. Credit Suisse First
Boston's opinion was subsequently confirmed in writing on June 2, 1997 (the
"Credit Suisse First Boston Opinion").
In arriving at its opinion, Credit Suisse First Boston (i) reviewed the
Merger Agreement and certain publicly available business and financial
information relating to Parent and the Company, (ii) reviewed certain other
information, including financial forecasts, provided by Parent and the Company,
(iii) met with the managements of Parent and the Company to discuss the
businesses and prospects of Parent and the Company, (iv) considered certain
financial and stock market data of the Company compared that data with similar
data for other publicly held companies in businesses similar to that of the
Company, (vi) considered the financial terms of certain other business
combinations and other transactions which have recently been effected, and (vii)
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which Credit Suisse
First Boston deemed relevant.
In connection with the Credit Suisse First Boston Opinion, Credit Suisse
First Boston did not assume responsibility for independent verification of any
of the information provided to or otherwise reviewed by Credit Suisse First
Boston and relied upon its being complete and accurate in all material respects.
With respect to the financial forecasts, Credit Suisse First Boston assumed that
they were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the respective managements of Parent and the Company
as to the future financial performance of Parent and the Company. In addition,
Credit Suisse First Boston was not asked to and did not make an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Parent or the Company, nor was Credit Suisse First Boston
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furnished with any such evaluations or appraisals. Credit Suisse First Boston
notes in the Credit Suisse First Boston Opinion that it understood that Parent
had entered into discussions with a third parties with respect to the sale,
following consummation of the transactions contemplated by the Merger Agreement,
of all of the shares of certain subsidiary corporations and certain other assets
which comprise the independent insurance brokerage and related business of the
Company. The Credit Suisse First Boston Opinion is necessarily based on
information available to it and financial, economic, market and other conditions
as they existed and could be evaluated on the date of the Credit Suisse First
Boston Opinion. Although Credit Suisse First Boston evaluated the fairness of
the consideration to be paid by Parent in the Offer and the Merger from a
financial point of view, the specific consideration payable in the Offer and the
Merger was determined by Parent and the Company through arm's length
negotiation. No other limitations were imposed by Parent on Credit Suisse First
Boston with respect to the investigations made or procedures followed by Credit
Suisse First Boston.
Copies of the Credit Suisse First Boston Opinion have been filed as an
exhibit to the Schedule 14D-1 and may be inspected, copied and obtained in the
manner specified in "THE TENDER OFFER -- Certain Information Concerning the
Company." The Credit Suisse First Boston Opinion is directed only to the
fairness of the consideration to be paid by Parent in the Offer and the Merger
from a financial point of view, does not address any other aspect of the Offer,
the Merger or any related transaction and does not constitute a recommendation
to stockholders of the Company as to whether to tender Shares in the Offer.
Summary of Analyses. In deriving an equity value reference range for the
Company, Credit Suisse First Boston performed, as appropriate, a comparable
companies analysis, a comparable acquisition analysis and a discounted cash flow
analysis for each of the Acordia Brokers segment and the health insurance
business segment of the Company ("Acordia Health") and a leveraged buy-out
analysis for Acordia Brokers.
Credit Suisse First Boston also reviewed certain additional information
including information relating to the daily trading volume and price performance
of the Common Stock and the implications of certain "minority squeeze-out"
transactions.
The following is a summary of the material financial analyses performed by
Credit Suisse First Boston in connection with its presentation to Parent on May
30, 1997, and delivery of the Credit Suisse First Boston Opinion. Such
description does not purport to be a complete description of the analyses
conducted by Credit Suisse First Boston in arriving at its opinion.
Acordia Brokers Comparable Company Analysis. Credit Suisse First Boston
performed a comparable company analysis (the "Brokers Comparable Company
Analysis") in which it compared certain publicly available financial data,
projections of future financial performance (reflecting a composite of equity
research analysts' estimates as reported by First Call Corporation) and market
statistics (calculated based upon closing stock prices as of May 23, 1997) of
selected publicly traded insurance brokers with certain historical and projected
financial information for Acordia Brokers. Such comparable companies included:
Aon Corporation ("Aon"); Arthur J. Gallagher & Co. ("Gallagher"); E.W. Blanch
Holdings, Inc. ("Blanch"); Hilb, Rogal & Hamilton Company ("Hilb, Rogal"); Marsh
& McLennan Companies, Inc. ("Marsh & McLennan"); and Poe & Brown, Inc. ("Poe &
Brown") (the "Brokerage Comparable Companies"). Credit Suisse First Boston
further noted that in terms of total revenues, client base and geographic area
of operations, Gallagher; Hilb, Rogal; and Poe & Brown were most comparable to
Acordia Brokers. Credit Suisse First Boston calculated the Adjusted Market Value
(defined as aggregate equity value plus debt and preferred stock, net of
operating cash and cash equivalents) of the Brokerage Comparable Companies as
multiples of (i) latest twelve months ("LTM") revenues, (ii) LTM earnings before
interest, taxes, depreciation and amortization ("EBITDA") and (iii) LTM earnings
before interest and taxes ("EBIT"). Credit Suisse First Boston also derived
multiples of common stock prices per share relative to actual 1996 and a
composite equity research analysts' estimates of 1997 and 1998 earnings per
share (as reported by First Call Corporation) for the Brokerage Comparable
Companies. This analysis indicated that (i) the Adjusted Market Value to LTM
revenues ranged from 1.0x to 2.6x with a relevant multiple range of 1.0x to 1.2x
for the Brokerage Comparable Companies; (ii) the Adjusted Market Value to LTM
EBITDA multiples ranged from
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5.6x to 14.7x with a relevant multiple range of 5.6x to 7.0x for the Brokerage
Comparable Companies; and (iii) the Adjusted Market Value to LTM EBIT multiples
ranged from 6.4x to 19.2x with a relevant multiple range of 6.4x to 9.0x for the
Brokerage Comparable Companies; (iv) the common stock prices to actual 1996
earnings per share multiples ranged from 12.1x to 22.5x with a relevant multiple
range of 12.1x to 16.9x for the Brokerage Comparable Companies; and (v) the
common stock prices to estimated 1997 earnings per share multiples ranged from
11.6x to 20.6x with a relevant multiple range of 11.6x to 16.3x for the
Brokerage Comparable Companies. Credit Suisse First Boston then applied these
multiples of actual 1996 and estimated 1997 financial performance to the
appropriate benchmarks of Acordia brokers to derive equity and enterprise
reference ranges for Acordia Brokers taking into consideration control premiums
of 25% and 35%. The foregoing analysis resulted in an Enterprise Value
(including debt and earn-out obligations) reference range for Acordia Brokers of
$321 million to $396 million.
Acordia Brokers Comparable Acquisitions Analysis. Using publicly available
information, Credit Suisse First Boston reviewed 55 selected business
combinations which occurred since January 1990 involving companies in the
insurance brokerage industry. In conducting this analysis, Credit Suisse First
Boston noted that merger activity in the insurance brokerage industry had
accelerated in the prior 12 months and that valuations have varied dramatically.
Credit Suisse First Boston placed particular emphasis on recent business
combinations involving companies which (i) are similar in size to Acordia
Brokers or (ii) involved acquisitions of United States based insurance brokerage
businesses, consisting of the following transactions (listed as acquired
company/acquiror): Bain Hogg Robinson, Inc./Acordia, Inc.; Kaye International
L.P./Old Lyme Holding Corp.; H.W. Kaufman Financial Group Inc./AJK Acquisition
Company; Jardine Insurance Brokers -- U.S. Retail Operations/Alexander &
Alexander Services Inc.; The Frizzell Group Ltd. (subsidiary of Marsh &
McLennan)/Liverpool Victoria Friendly Society; Bain Hogg Group plc/Aon;
Alexander & Alexander Services Inc./Aon; JIB Group plc/Lloyd Thompson Group plc;
Lowndes Lambert Group Holdings plc/Fenchurch plc; CECAR/Marsh & McLennan;
Johnson & Higgins, Inc./Marsh & McLennan; and The Minet Group/Aon (the
"Brokerage Acquisition Comparables"). For each of the Brokerage Acquisition
Comparables, Credit Suisse First Boston (i) compared the purchase price of each
such transaction to the publicly available LTM net income of the acquired
company and (ii) compared the Adjusted Value (defined as purchase price plus
acquired company debt and preferred stock, if any, net of operating cash and
cash equivalents) to LTM revenues, EBITDA and EBIT of the acquired company.
Credit Suisse First Boston's analysis indicated that purchase price as a
multiple of LTM net income ranged from 6.0x to 24.3x with a relevant multiple
range of 20.0x to 24.0x. This analysis also indicated that Adjusted Value as a
multiple of: (i) LTM revenues ranged from 0.2x to 2.0x with a relevant multiple
range of 0.9x to 1.2x; (ii) LTM EBITDA ranged from 3.5x to 10.2x with a relevant
multiple range of 6.0x to 8.0x; and (iii) LTM EBIT ranged from 4.2x to 13.2x
with a relevant multiple range of 8.0x to 12.0x. The foregoing analysis resulted
in an Enterprise Value (including debt and earn-out obligations) reference range
for Acordia Brokers of $300 million to $400 million.
Acordia Brokers Discounted Cash Flow Analysis. Credit Suisse First Boston
performed a discounted cash flow analysis of the projected unlevered free cash
flows of Acordia Brokers for the period 1997 through 2006, based upon financial
forecasts for 1997 provided to Credit Suisse First Boston by the management of
the Company and financial forecasts for the period 1998 to 2006 developed by
Credit Suisse First Boston. The base case of this analysis assumed 4.3% revenue
growth and margin improvements to 15.2% in 1997 and held constant thereafter
(the "Base Case"). Credit Suisse First Boston also prepared, as a part of its
sensitivity analysis, a number of cases modifying certain of the assumptions
utilized to prepare the Base Case (the "Sensitivity Cases"). The Sensitivity
Cases included (i) a margin decrease case assuming, among other things, margins
decreasing by 0.8% per year until reaching 11.0% in 2002 and held constant
thereafter (the "Margin Decrease Case") and (ii) a margin increase case
assuming, among other things, increasing margins by 0.8% per year until reaching
19.8% in 2003 and held constant thereafter (the "Margin Increase Case"). Credit
Suisse First Boston utilized the "Base Case," "Margin Decrease Case" and "Margin
Increase Case" scenarios for Acordia Brokers merely as points of reference and
in no way intended to suggest parameters or forecasts as to minimum or maximum
enterprise and equity valuation ranges for Acordia Brokers. Credit Suisse First
Boston developed an Enterprise Value reference range utilizing discount rates of
10% to 14% and terminal value multiples of (i) estimated 2006 EBITDA of
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5.5x to 7.0x; (ii) estimated 2006 net income of 12.0x to 15.0x; and (iii)
estimated 2006 revenues of 0.9x to 1.2x. The foregoing analysis resulted in an
Enterprise Value (including debt and earn-out obligations) reference range of
$325 million to $400 million.
Acordia Brokers Leveraged Buyout Analysis. Credit Suisse First Boston
examined potential returns in four scenarios involving a highly leveraged
acquisition of Acordia Brokers. In this analysis, Credit Suisse First Boston
assumed revenue growth of 4.3% annually, EBITDA margins in 1997 of 15.2%, no
incremental acquisitions and a 10% carried interest for Acordia Brokers'
management. Credit Suisse First Boston analyzed the potential rates of return
available to an equity investor assuming (i) a purchase price of $367 million,
an equity contribution of $35 million and EBITDA margins increasing to 19.0% by
2001; (ii) a purchase price of $392 million, an equity contribution of $60
million and EBITDA margins increasing to 19.0% by 2001; (iii) a purchase price
of $417 million, an equity contribution of $85 million and EBITDA margins
increasing to 19.0% by 2001; and (iv) a purchase price of $367 million, an
equity contribution of $35 million and no EBITDA margin increase beyond 15.2%.
Assuming exit multiples of projected 2001 EBITDA ranging from 6.5x to 8.0x and
that an equity investor in a leveraged buy-out of Acordia Brokers would require
a 25% to 35% rate of return on its equity investment, the foregoing analysis
resulted in an Enterprise Value (including debt and earn-out obligations)
reference range of $365 million to $415 million.
Valuation Reference Range of Acordia Brokers. Based on the above analyses,
Credit Suisse First Boston derived an Enterprise Value (including debt and
earn-out obligations) reference range for Acordia Brokers of $325 million to
$375 million.
Acordia Health Comparable Companies Analysis. Credit Suisse First Boston
performed a comparable company analysis (the "Health Comparable Company
Analysis") in which it compared certain publicly available financial data,
projections of future financial performance reflecting a composite of equity
research analysts' estimates (as reported by First Call Corporation) and market
statistics (calculated based upon closing stock prices as of May 23, 1997) of
selected publicly traded health insurance service companies with certain
historical and projected financial information for Acordia Health. Such
comparable companies included: HealthCare Compare Corp.; Health Plan Services
Corporation ("HPS"); CoreVel Corporation; and Crawford & Company (the "Health
Insurance Service Comparable Companies"). Credit Suisse First Boston further
noted that (i) none of the Health Insurance Service Comparable Companies have a
concentration of business with a single customer analogous to the Company's
relationship with Parent, and (ii) the Health Insurance Service Comparable
Companies generally had high projected growth rates (18.5% to 19.9%) in contrast
to Acordia Health. Credit Suisse First Boston calculated the Adjusted Market
Value of the Health Insurance Service Comparable Companies as multiples of (i)
LTM revenues, (ii) LTM EBITDA and (iii) LTM EBIT. Credit Suisse First Boston
also derived multiples of common stock prices per share relative to actual 1996
earnings per share and a composite equity research analysts' estimates of 1997
and 1998 earnings per share (as reported by First Call Corporation) for the
Health Insurance Service Comparable Companies. This analysis indicated that (i)
the Adjusted Market Value to LTM revenues ranged from 0.9x to 1.2x with a
relevant multiple range of 0.9x to 1.2x for the Health Insurance Service
Comparable Companies; (ii) the Adjusted Market Value to LTM EBITDA multiples
ranged from 6.6x to 10.6x with a relevant multiple range of 7.0x to 9.0x for the
Health Insurance Service Comparable Companies; and (iii) the Adjusted Market
Value to LTM EBIT multiples ranged from 8.0x to 16.6x with a relevant multiple
range of 8.0x to 10.0x for the Health Insurance Service Comparable Companies;
(iv) the common stock prices to actual 1996 earnings per share multiples ranged
from 17.8x to 22.2x with a relevant multiple range of 17.0x to 19.0x for the
Health Insurance Service Comparable Companies; and (v) the common stock prices
to estimated 1997 earnings per share multiples ranged from 13.4x to 17.7x with a
relevant multiple range of 13.5x to 17.0x for the Health Insurance Service
Comparable Companies. Credit Suisse First Boston then applied these multiples of
actual 1996 and estimated 1997 financial performance to the appropriate
benchmarks of Acordia Health to derive an Enterprise Value reference range for
Acordia Health. The foregoing analysis resulted in an Enterprise Value reference
range for Acordia Health of $400 million to $500 million. Credit Suisse First
Boston considered the special relationship between Parent and the Company and
concluded that this special relationship limited the applicability of the
comparable company analysis to the valuation of Acordia Health on a stand-alone
basis and that a control premium for Acordia Health would be inappropriate.
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Acordia Health Comparable Acquisitions Analysis. Using publicly available
information, Credit Suisse First Boston reviewed various selected business
combinations which occurred since January 1991 involving third party
administration and cost-containment companies (the "Health Care Services
Acquisition Comparables"). The Health Care Services Acquisition Comparables
included (listed as acquired company/acquiror): GENEX Services Inc.
("GENEX")/Provident Companies, Inc.; MedView Services, Inc./Value Health, Inc.;
Health Risk Management Inc./HPS; Consolidated Group Inc./HPS; Harrington
Services Corp./HPS; Employee Benefit Plans/First Financial Management Corp.;
Alexsis/Continental Casualty; Electronic Tabulating Service/Equifax; GENEX/First
Financial Management Corp.; Executive Risk Consultants, Inc./Physician
Corporation of America; Community Care Network/Value Health, Inc.; Reviewco/The
Noetics Group/Foundation Health Corp.; FOCUS Healthcare Management/United
Healthcare Corporation; Preferred Health Care Ltd./Value Health, Inc.; Vantage
Computer Systems Inc./Continuum Corp.; Corporate Healthcare Financing/United
American Healthcare Corp.; American Biodyne, Inc./Medco Containment Services;
Health Economics Corp. (unit of Halliburton Company)/Equifax; Alta Health
Strategies, Inc./First Financial Management Corp.; Occupational-Urgent Care
Health Systems, Inc. (OUCH)/Health Care Compare Corp.; and Lincoln
National -- Network Unit/Investor Group. For each of the Health Care Services
Acquisition Comparables, Credit Suisse First Boston (i) compared the purchase
price of each such transaction to publicly available LTM net income of the
acquired company and (ii) compared the Adjusted Value to LTM revenues, EBITDA
and EBIT. This analysis indicated that purchase price as a multiple of LTM net
income ranged from 10.6x to 67.3x with a relevant multiple range of 12.0x to
15.0x and Adjusted Value as a multiple of: (i) LTM revenues ranged from 0.5x to
9.9x with a relevant multiple range of 0.9x to 1.4x; (ii) LTM EBITDA ranged from
4.9x to 34.5x with a relevant multiple range of 6.5x to 8.0x; and (iii) LTM EBIT
ranged from 4.0x to 39.0x with a relevant multiple range of 8.0x to 12.0x. The
foregoing analysis resulted in an Enterprise Value reference range of $450
million to $550 million. Credit Suisse First Boston considered the special
relationship between Parent and the Company and concluded that this special
relationship limited the applicability of the comparable acquisition analysis to
the valuation of Acordia Health on a stand-alone basis.
Acordia Health Discounted Cash Flow Analysis. Credit Suisse First Boston
performed a discounted cash flow analysis of the projected unlevered free cash
flows of Acordia Health for the period 1997 through 2001, based upon the
following: (i) financial forecasts for Acordia Health provided to Credit Suisse
First Boston by Parent assuming that (x) Parent achieves its planned growth in
managed care members and reduces over time its traditional health insurance
customers, (y) Acordia Health continues to serve Parent's customers, but does
not earn any revenue for the managed care which Parent provides and (z) a
reduction of EBITDA margins for Acordia from 20.1% in 1997 to 16.1% in 2001 (the
"Anthem Planned Case"), (ii) financial forecasts for Acordia Health provided to
Credit Suisse First Boston by Parent which assumed no change in the Company's
compensation or Parent's cost and which result in a decline in Parent's
business, substantially due to competitive factors, and a subsequent decline in
the Company's revenues by $57.4 million and a decline in Acordia Health's EBITDA
margin from 20.1% in 1997 to 10.0% in 1998 with a 1% per year increase
thereafter (the "Do Nothing/Margin Drop Case"), (iii) financial forecasts
developed by Credit Suisse First Boston which assumed the Company and Parent
sever their business relationship at the end of 1998 and the Company places 100%
of its business with unaffiliated carriers resulting in a decline in Acordia
Health's EBITDA margin from 20.1% in 1997 to 16.1% in 2001 (the "Independent
Acordia Case"), and (iv) financial forecasts developed by Credit Suisse First
Boston which assumed Parent achieves its planned growth in managed care members
but at a slower rate than currently planned and Acordia Health's EBITDA margin
remained constant at 20.1% (the "Slow Transition Case"). In each of the
foregoing cases Credit Suisse First Boston assumed that non-Parent revenues in
Acordia Health grow at 5% per year. Credit Suisse First Boston utilized the
"Anthem Planned Case," "Do Nothing/Margin Drop Case," "Independent Acordia Case"
and "Slow Transition Case" scenarios for Acordia Health merely as points of
reference and in no way intended to suggest parameters or forecasts as to
minimum or maximum enterprise and equity valuation ranges for Acordia Health.
Credit Suisse First Boston developed an Enterprise Value reference range
utilizing discount rates of 11% to 13% and terminal value multiples of (i)
estimated 2001 EBITDA of 5.5x to 7.0x; (ii) estimated 2001 net income of 16.0x
to 19.0x; and
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(iii) estimated 2001 revenues of 1.1x to 1.4x. The foregoing analysis resulted
in an Enterprise Value reference range of $225 million to $325 million.
Valuation Reference Range of Acordia Health. Based on the above analyses,
Credit Suisse First Boston derived an Enterprise Value reference range for
Acordia Health of $340 million to $440 million.
Combined Reference Range of Acordia Brokers and Acordia Health. Credit
Suisse First Boston combined the Enterprise Value reference range values
determined for Acordia Brokers and Acordia Health, as well as the operating cash
and cash equivalents and total debt of the Company, to determine the overall per
share reference range for the Company. For purposes of calculating the
appropriate per share reference range, Credit Suisse First Boston assumed
exercise of all outstanding options and warrants of the Company, including
proceeds of such exercises in operating cash and equivalents and including
shares issued upon such exercise in total shares and equivalents. The foregoing
analysis resulted in a Company Equity Value reference range per share and
equivalent of $33.45 to $41.63 (the "Company per Share Equity Value Reference
Range").
Additional Information. Credit Suisse First Boston also reviewed the
following: (i) the daily trading volume and per share daily closing market price
of the Company's Common Stock over the period from the Company's initial public
offering (October 21, 1992) to May 23, 1997; (ii) the relative price performance
of the Company's Common Stock against a Brokers Index composed of Aon;
Gallagher; Blanch; Hilb, Rogal; Marsh & McLennan; and Poe & Brown; (iii) the
price and volume distribution of trades of the Company's Common Stock for the
period from October 21, 1992 to May 23, 1997; and (iv) the Company's stockholder
profile.
Going Private Considerations. Credit Suisse First Boston also considered
the implications of a "minority squeeze-out" transaction whereby Parent acquired
as a majority stockholder in the Company all of the remaining Company Common
Stock, which generally requires a premium to the prevailing market price. In
particular, Credit Suisse First Boston analyzed the premium to stock price one
day, one week and one month prior to announcement of various minority
squeeze-out transactions since 1990 and determined that: (i) the mean premiums
to stock price one day, one week and one moth prior to the announcement were
20.0%, 23.1% and 25.9%, respectively; (ii) the median premiums to stock price
one day, one week and one month prior to the announcement were 26.1%, 29.6% and
31.4%, respectively; (iii) the 75th percentile of the range of premiums to stock
price one day, one week and one month prior to the announcement were 36.0%,
42.7% and 47.7%, respectively; and (iv) the 25th percentile of the range of
premiums to stock price one day, one week and one month prior to the
announcement were 10.8%, 12.5% and 8.2%, respectively. Credit Suisse First
Boston analyzed the premium of the Company Equity Value Reference Range to the
market price for Company Common Stock at selected dates and derived: (i) a range
of premiums to the market price for Company Common Stock one day prior to
Parent's February 6, 1997 announcement that it was reviewing its investment in
the Company (the "Announcement") from 20.0% to 49.3%; (ii) a range of premiums
to the market price for the Company Common Stock one week prior to the
Announcement from 19.5% to 48.7%; (iii) a range of premiums to the market price
for Company Common Stock one month prior to the Announcement from 20.0% to
49.3%; and (iv) a range of premiums to the market price for Company Common Stock
as of May 23, 1997 from (6.8)% to 16.0%. Credit Suisse First Boston further
noted that the $40 per share Offer Price represented a premium of 43.5% to the
market price for Company Common Stock one day prior to the Announcement date,
42.9% to the market price for Company Common Stock one week prior to the
Announcement date, 43.5% to the market price for Company Common Stock one month
prior to the Announcement date and 11.5% to the market price as of May 23, 1997.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the process
underlying the Credit Suisse First Boston Opinion. In arriving at its opinion,
Credit Suisse First Boston considered the results of all such analyses taken as
a whole. Furthermore, in arriving at its fairness opinion, Credit Suisse First
Boston considered the special relationship between Parent and the Company.
Credit Suisse First Boston also made qualitative judgments as to the
significance and relevance of each analysis and factor. No company or
transaction used in the above analyses as a comparison is identical to Parent,
the Company, or
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the Offer or the Merger. The analyses were prepared solely for purposes of
Credit Suisse First Boston providing its opinion to Parent as to the fairness
from a financial point of view to Parent of the consideration to be paid by
Parent in the Offer and the Merger, and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may be
sold. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses are based upon numerous
factors or events beyond the control of Parent, the Company, their respective
advisors or any other person and are inherently uncertain. Actual future results
may be materially different from those forecast.
FEE AND OTHER INFORMATION
Pursuant to the terms of Credit Suisse First Boston's engagement, for its
services in connection with the Offer and the Merger, Parent has agreed to pay
Credit Suisse First Boston a financial advisory fee of $100,000 (which is
creditable against any transaction fee) and a transaction fee of $2.5 million,
$500,000 of which was payable upon execution of the Merger Agreement and the
balance of which is payable upon acquisition by Parent of greater than 90% of
the outstanding voting securities of the Company. In addition, Parent has agreed
to pay to Credit Suisse First Boston, under certain circumstances, a separate
fee of $2.5 million in connection with any sale of Acordia Brokers. Parent also
has agreed to reimburse Credit Suisse First Boston for its out-of-pocket
expenses, including the reasonable fees and expenses of its counsel, and to
indemnify Credit Suisse First Boston and certain related persons against certain
liabilities, including liabilities under the federal securities laws.
In the ordinary course of business, Credit Suisse First Boston and its
affiliates may actively trade the securities of Parent and the Company for their
own account and for accounts of customers and, accordingly, may at any time hold
a long or short position in such securities. In the past, Credit Suisse First
Boston and its affiliates have provided financial advisory services for Parent
and the Company and have received customary fees for rendering these services.
FAIRNESS OF THE OFFER
The Board of Directors of the Company, based upon, among other things, the
unanimous recommendation by the Company Special Committee, has determined that
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, upon the terms and subject to the conditions set forth in
the Merger Agreement, are fair to, and in the best interests of, the Company and
its stockholders (other than Parent and the Purchaser) and recommends (excluding
certain interested directors who abstained) that such stockholders accept the
Offer and tender their shares of Common Stock to the Purchaser pursuant to the
Offer. Reference is made to the Company's Schedule 14D-9 mailed to stockholders
herewith for a description of the assumptions made, factors considered and
procedures followed by the Company Special Committee.
Parent and the Purchaser believe that the Offer and the Merger are fair to
the stockholders of the Company (other than Parent and the Purchaser) based on
the conclusions, and the bases therefor, unanimously reached by the Company
Special Committee in recommending the Offer and Merger to the Company's Board of
Directors, as set forth in the Company's Schedule 14D-9, and the fact that the
Offer and Merger were unanimously recommended to the Company's Board of
Directors by the Company Special Committee which was advised by experienced and
independent legal counsel and financial advisors and which received a fairness
opinion from Alex. Brown that the consideration to be received by the Company's
stockholders (other than Parent and the Purchaser) in the Offer and Merger is
fair to them from a financial point of view. However, Parent and the Purchaser
have a conflict of interest with respect to the Offer and the Merger. Parent and
the Purchaser did not find it practicable to, and did not, quantify or otherwise
attach relative weight to the specific factors considered by them.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is
filed as an exhibit to the Schedule 14D-1 filed by the Purchaser and Parent with
the Commission in connection with the Offer. Such summary is qualified in its
entirety by reference to the Merger Agreement.
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The Offer. Pursuant to the Merger Agreement, the Purchaser is obligated to
commence the Offer no later than five business days following the public
announcement of the Merger Agreement. The obligation of the Purchaser to
commence the Offer and to accept for payment and to pay for any shares of Common
Stock tendered pursuant to the Offer are subject only to the conditions
specified in "THE TENDER OFFER -- Certain Conditions of the Offer."
Although the Purchaser has expressly reserved the right to amend or make
changes in the terms and conditions of the Offer, the Merger Agreement provides
that, without the consent of a majority of the Independent Directors (as defined
in the Merger Agreement) the Purchaser may not waive the Minimum Tender
Condition or make any change in the terms or conditions of the Offer which (A)
changes the form of consideration to be paid, (B) decreases the price per share
of Common Stock payable in the Offer, (C) reduces the maximum number of shares
of Common Stock to be purchased in the Offer, (D) imposes conditions to the
Offer in addition to those set forth in "THE TENDER OFFER -- Certain Conditions
of the Offer," (E) extends the Expiration Date of the Offer (except as required
by law or the applicable rules and regulations of the Commission and except that
the Expiration Date may be extended for up to forty business days in the
aggregate in the event any condition to the Offer is not satisfied), or (F)
amends any term of the Offer in any manner materially adverse to holders of
shares of Common Stock.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, at the Effective Time the Purchaser will be merged with and
into the Company in accordance with the DGCL. The Company will continue as the
Surviving Corporation and as a wholly owned subsidiary of the Parent following
consummation of the Merger.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto. The
representations and warranties will not survive the consummation of the Merger
or the termination of the Merger Agreement.
Covenants. The Company's covenants are standard and include, among other
things, operating in the ordinary course. In addition, the Company has agreed to
convene a meeting of the Company's stockholders to vote upon the Merger, unless
a vote of stockholders is not required by the DGCL. If such a meeting is
required for consummation of the Merger, the Company will prepare and file with
the Commission a proxy statement or information statement for such a meeting to
vote upon the Merger.
Stock Options; Great American Warrants. As soon as practicable, upon the
written request of the Purchaser, the Company and the Purchaser have agreed to
take such actions as are reasonably required to provide that at the earlier of
the purchase of shares of Common Stock pursuant to the Offer and the effective
time of the Merger, each holder of a then outstanding Stock Option, whether or
not exercisable, or a then outstanding Great American Warrant will receive from
the Company the difference between the Offer Price and the exercise price of
such Stock Option or Great American Warrant, as the case may be, net in either
case of any applicable tax withholding.
Other Offers. From the date of the Merger Agreement until the termination
thereof, the Company has agreed that it and its subsidiaries will not, and the
Company shall use reasonable efforts to cause the officers, directors, employees
or other agents of the Company and its subsidiaries not to, directly or
indirectly, (i) take any action to solicit, initiate or encourage any
Acquisition Proposal (as defined below) or (ii) subject to the fiduciary duties
of the Board of Directors under applicable law as advised by counsel to the
Company, engage in negotiations with, or disclose any nonpublic information
relating to the Company or any subsidiary or afford access to the properties,
books or records of the Company or any subsidiary to, any person or entity that
may be considering making, or has made, an Acquisition Proposal; provided,
however, that nothing contained in the Merger Agreement shall prevent the
Company, the Company's directors or the Company Special Committee from
furnishing nonpublic information to, or affording access to the properties,
books or records of the Company or any subsidiary to, or entering into
discussions or agreements with, any person or entity in connection with an
unsolicited Acquisition Proposal by such person or entity or recommending an
unsolicited Acquisition Proposal to the stockholders of the Company, if and only
to the extent that (1) the Company's directors or the Company Special Committee,
as the case may be, determine in good faith after consultation with outside
legal counsel that such action is necessary to comply with their
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fiduciary duties to the stockholders of the Company under applicable law and (2)
prior to furnishing any such nonpublic information to, or entering into
discussions or negotiations with, such person or entity, the Company's directors
or the Company Special Committee, as the case may be, receive from such person
or entity an executed confidentiality agreement with customary terms. The
Company has agreed to promptly notify Parent after receipt of any Acquisition
Proposal or any indication that any person or entity is considering making an
Acquisition Proposal or any request for nonpublic information relating to the
Company or any subsidiary or for access to the properties, books or records of
the Company or any subsidiary by any person or entity that may be considering
making, or has made, an Acquisition Proposal and will keep Parent fully informed
of the status and details of any such Acquisition Proposal, indication or
request. For purposes hereof, "Acquisition Proposal" means any offer or proposal
for, or any indication of interest in, a merger or other business combination
involving the Company or any subsidiary or the acquisition of any equity
interest in, or a substantial portion of the assets of, the Company or any
subsidiary, other than the transactions contemplated by the Merger Agreement.
Directors' and Officers' Indemnification and Insurance. The Certificate of
Incorporation of the Surviving Corporation will contain provisions no less
favorable to the Company's directors and officers with respect to
indemnification than such provisions in the Company's Certificate of
Incorporation, and such provisions will not be amended, repealed or otherwise
modified for six years after the consummation of the Merger in a manner that
would materially adversely affect the rights of the Company's existing directors
and officers with respect to actions or events at or prior to the effective time
of the Merger. In addition, the Company and, following the Merger, the Surviving
Corporation have agreed to indemnify the existing directors and officers of the
Company in connection with any action or omission to act in their capacity as
directors and officers of the Company for a period of six years after the later
of the consummation of the Merger and the date of the Merger Agreement. Parent
has agreed to maintain directors' and officers' liability insurance policies
containing substantially comparable terms and conditions to the Company's
existing policies to cover the acts and omissions of the Company's current
directors and officers occurring on or prior to the consummation of the Merger
for a period of six years after the consummation of the Merger (or for such
lesser period as can be purchased for a premium not exceeding 200% of the last
intercompany allocation made by Parent to the Company with respect to directors'
and officers' insurance).
Conditions to Obligations of Each Party to Effect the Merger. Conditions
to the obligations of each party to effect the Merger include, (i) the approval
and adoption of the Merger Agreement and the transactions contemplated thereby
by the Company's stockholders to the extent required by, and in accordance with,
the DGCL and the Company's Certificate of Incorporation and Bylaws; (ii) the
Purchaser's or its permitted assignee's purchase of all shares of Common Stock
validly tendered and not withdrawn pursuant to the Offer; (iii) the taking of
all actions and making of all filings with, and the approval of, any
governmental body, agency, official or authority required to permit the
consummation of the Merger; and (iv) the absence of the issuance of any order
and of the existence of any statute, rule or regulation restraining or
prohibiting the consummation of the Merger or the effective operation of the
business of the Company and its subsidiaries after the consummation of the
Merger.
Additional Condition to Obligations of Parent and the Purchaser. The
obligation of Parent and the Purchaser to effect the Merger is also subject to
the condition that the Company shall have in all material respects performed all
of its obligations under the Merger Agreement.
Termination. The Merger Agreement may be terminated at any time prior to
the consummation of the Merger, whether prior to or after approval by the
Company's stockholders:
(i) by mutual written consent of the Company and Parent, if such
termination is also approved by a majority of the Independent Directors;
(ii) by either the Company or Parent, if the consummation of the
Merger shall not have occurred on or before October 31, 1997; provided,
however, that the right to terminate the Merger Agreement pursuant to this
clause (ii) shall not be available to any party whose failure to fulfill
any obligation under the Merger Agreement has been the primary cause of, or
resulted in, the failure of the consummation of the Merger to occur on or
before such date;
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(iii) by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining Parent
or the Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and nonappealable;
(iv) by Parent, if the Purchaser shall have (a) terminated the Offer
without having accepted any shares of Common Stock for payment thereunder
by reason of the failure to satisfy any condition under "THE TENDER
OFFER -- Certain Conditions of the Offer" or (b) failed to pay for shares
of Common Stock pursuant to the Offer within 90 days following the
commencement of the Offer, unless such failure to pay for Shares shall have
been caused by or resulted directly from the failure of Parent or the
Purchaser to perform in any material respect any material covenant or
agreement of either of them contained in the Merger Agreement or the
material breach by Parent or the Purchaser of any material representation
or warranty of either of them contained in the Merger Agreement;
(v) by the Company, upon approval of the Board of Directors of the
Company and a majority of the Independent Directors, if the Purchaser shall
have (a) failed to commence the Offer within five business days following
the date of the initial public announcement of the Offer, (b) terminated
the Offer without having accepted any shares of Common Stock for payment
thereunder by reason of the failure to satisfy any condition set forth
under "THE TENDER OFFER -- Certain Conditions of the Offer" or (iii) failed
to pay for shares of Common Stock pursuant to the Offer within 90 days
following the commencement of the Offer, unless such failure to pay for
shares of Common Stock shall have been caused by or resulted directly from
the failure of the Company to perform in any material respect any material
covenant or agreement of it contained in the Merger Agreement or the
material breach by the Company of any material representation or warranty
of it contained in the Merger Agreement; or
(vi) by the Company, upon approval of the Board of Directors of the
Company and a majority of the Independent Directors, if any representation
or warranty of Parent and the Purchaser in the Merger Agreement shall not
be true and correct in any material respect, as if such representation or
warranty was made as of such time on or after the date of the Merger
Agreement; or Parent or the Purchaser shall have failed to perform in any
material respect any obligation or to comply in any material respect with
any agreement or covenant of Parent or the Purchaser to be performed or
complied with by it under the Merger Agreement.
Expenses. All costs and expenses incurred in connection with the Merger
Agreement are to be paid by the party incurring them.
PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY
Purpose and Structure. The purpose of the Offer and the Merger is to
enable Parent to acquire, in one or more transactions, the entire equity
interest in the Company. The Offer is intended to increase the likelihood that
the Merger will be completed promptly. If the Purchaser acquires, pursuant to
the Offer or otherwise, at least 90% of the outstanding shares of Common Stock
of the Company, the Purchaser will have the ability to consummate the Merger
without a meeting of the stockholders of the Company pursuant to the "short
form" merger provisions of the DGCL. Pursuant to the Merger, each then
outstanding share of Common Stock (other than Common Stock owned by the
Purchaser, Parent or any of Parent's other subsidiaries, shares held in the
Company's treasury and Common Stock owned by stockholders who perfect their
dissenters' rights under the DGCL) would be converted into the right to receive
an amount in cash equal to the price per share of Common Stock paid by the
Purchaser pursuant to the Offer. See "-- Appraisal Rights." If the Merger is not
consummated as a "short-form" merger, under the DGCL and the Company's Restated
Certificate of Incorporation, the Merger would require the affirmative vote of
the holders of a majority of the then outstanding shares of Common Stock.
If, following consummation of the Offer, the Purchaser owns less than 90%
of the outstanding shares of Common Stock, the Purchaser and Parent reserve the
right to purchase from time to time additional shares, if market conditions
permit and subject to the availability of funds and other investment
opportunities. Such purchases may be made through the open market, privately
negotiated purchases, another tender
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offer, an exchange offer or otherwise, subject, in each case, to market
conditions, at prices which may be greater or less than those of the Offer.
There can be no assurance that the Purchaser will acquire such additional shares
in such circumstances or over what period of time such additional shares, if
any, might be acquired. Any acquisition of shares by Purchaser would have to be
made in accordance with applicable legal requirements, including those of
Regulation 13D-G and Rules 10b-18 and 13e-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
Plans for the Company. In February 1997, Parent and the Company each
announced that it was undertaking a strategic review of the relationship with
the other, and each of Parent and the Company stated that each was looking at
ways to reduce the administrative and marketing expense portion of the total
health care premium dollar in light of the intense competition and changes
occurring in the health care industry. In addition, Parent has been refining its
strategic decision to focus on its health care mission, in line with its
assessment of the opportunities presented by the changing dynamics of the
industry, and to divest its interest in other lines of business. Parent
subsequently determined that the property and casualty brokerage business might
not be consistent with Parent's long-term mission and that, in light of the
brokerage industry consolidation, there was an opportunity to capitalize on the
value of Acordia Brokers. Parent is presently negotiating with a prospective
purchaser with respect to the possible sale of Acordia Brokers. There can be no
assurance that a sale will be consummated, and neither the Offer nor the Merger
is contingent upon the possible sale of Acordia Brokers.
If the Merger is consummated and Acordia Brokers is sold, the Company's
primary business would be providing various health care administrative and
marketing services to Parent and its affiliates, and a substantial portion of
the Company's current management and personnel, as well as facilities, would be
transferred to the buyer of Acordia Brokers. In the event that the current
negotiations regarding Acordia Brokers do not result in a transaction involving
Acordia Brokers, Parent may seek another buyer or may retain the brokerage
business for an indefinite period.
Parent is currently reviewing, and will continue to review, various
possible business strategies with respect to the restructuring of Acordia's
health business, including the further consolidation of various claims, customer
services and other functions currently being performed by the Company for Parent
and its affiliates with and into one or more of Parent and its affiliates.
Parent currently believes that significant economic and operational efficiencies
might be achieved by consolidating various health-related functions of the
Company with those of Parent and its affiliates. It is anticipated that such
further restructuring will occur regardless of whether Acordia Brokers is sold,
assuming that the Purchaser acquires the remaining equity interest in the
Company. The restructuring may, in addition to changes in the Company's
business, include, among other things, changes in the Company's corporate
structure, capitalization and dividend policy, operations, facilities, employee
benefit plans and management and personnel. If the Offer and the Merger are not
consummated, Parent will continue to review various other possible business
strategies with respect to its business relationship with the Company, including
modifications to or the termination of one or more of the current contractual
relationships between the Company and Parent and its affiliates.
Purchaser currently intends, to the extent possible, to seek to have the
Company's Common Stock delisted from the New York Stock Exchange, Inc. (the
"NYSE") and to terminate the registration of the Common Stock under the Exchange
Act following consummation of the Offer or the Merger. Delisting of the Common
Stock may occur, in any event, at the instigation of the NYSE following
consummation of the Offer due to the reduced number of shares of Common Stock or
holders thereof then outstanding. The failure to be so listed could result in
the termination of the registration of the Common Stock under the Exchange Act.
If the Common Stock ceases to be registered under the Exchange Act, the Company,
among other things, would no longer be required to comply with the Exchange
Act's proxy or reporting rules. See "THE TENDER OFFER -- Certain Effects of the
Offer."
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INTERESTS OF CERTAIN PERSONS; STOCKHOLDINGS OF CERTAIN OFFICERS AND DIRECTORS;
AND RELATED TRANSACTIONS
Directors and Officers. As described above under "-- Background of the
Offer," three of the Company's directors, including the Chairman of the Board,
are officers or employees of Parent: Dwane R. Houser, Parent's Chairman of the
Board; L. Ben Lytle, Parent's President and Chief Executive Officer and the
Company's Chairman of the Board; and Patrick M. Sheridan, Parent's Executive
Vice President and Chief Financial Officer. A fourth director, Michael L. Smith,
is Chief Operating and Chief Financial Officer of American Health Network, a
subsidiary of Parent. The executive officers and directors of Parent
beneficially own, in the aggregate, 188,886 shares of Common Stock of the
Company (excluding shares subject to unexercised Stock Options). Messrs. Houser,
Lytle, and Sheridan beneficially own 8,449 shares, 105,000 shares and 60,000
shares, respectively, of such shares (excluding shares subject to unexercised
Stock Options). Schedule I to this Offer to Purchase sets forth the amount and
nature of such beneficial ownership for each executive officer and director of
Parent and the Purchaser.
The non-employee directors of the Company are entitled to certain fees,
stock options and/or stock awards pursuant to plans and arrangements which are
described in the Company's Proxy Statement, dated April 11, 1997. Messrs.
Houser, Lytle, Sheridan and Smith are considered employee directors for purposes
of such plans and arrangements and therefore are not entitled to, and do not
receive, any such fees, stock options or stock awards.
Stockholdings of Certain Officers and Directors. As noted above, Parent
currently owns 8,693,056 shares of Common Stock, representing approximately
66.8% of the outstanding shares of Common Stock, which shares Parent anticipates
will be contributed to the Purchaser prior to the consummation of the Offer. See
"INTRODUCTION" and " -- Background of the Offer." As of the date hereof, to the
knowledge of Purchaser, no executive officer or director of Parent or the
Purchaser beneficially owns, or has the right to acquire, directly or
indirectly, any shares of Common Stock, except as set forth on Schedule I to
this Offer to Purchase. Executive officers and directors of Parent listed in
Schedule I to this Offer to Purchase, who beneficially own, in the aggregate,
188,886 shares of Common Stock (excluding shares subject to unexercised Stock
Options), have indicated to the Purchaser that they currently intend to tender
their shares pursuant to the Offer. None of the Purchaser, Parent or, to the
knowledge of the Purchaser, any of the executive officers or directors of Parent
or the Purchaser, has engaged in any transaction in the Common Stock in the past
60 days.
Related Transactions.
(A) Marketing and Agency Agreements with Parent. The Company, through
one or more of its subsidiaries, markets insurance products underwritten by
Parent or its affiliates and/or perform administrative services in
connection with those insurance products. In connection therewith, each
such Company subsidiary has entered into a marketing and agency agreement
and/or administrative services agreement with Parent or an affiliate
insurer.
The marketing and agency agreement provides that such Company
subsidiary is appointed as an agent of Parent (or its affiliated insurer)
to solicit new applications and renewal applications for insurance coverage
marketed by it and underwritten by Parent or such affiliated insurer. The
administrative services agreement provides that the Company's subsidiary
company shall perform one or more of the following administrative services
with regard to insurance contracts underwritten by Parent or an affiliated
insurer: premium billing and collection, adjustment and settlement of
claims, customer service correspondence and general clerical and
administrative functions. In some cases, the administrative service
agreement also provides for the administration of Parent's or its
affiliated insurers' health maintenance organizations and other managed
case businesses. Parent or the affiliated insurer may, at its discretion,
grant underwriting authority to the Company's subsidiary in accordance with
the insurer's underwriting guidelines and the terms of the administrative
services agreement. As compensation for these services, Parent or the
affiliated insurer pays the Company's subsidiary a fee primarily based on a
percentage of the earned premium. Additionally, Parent and its affiliated
insurers
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permit the Company's subsidiary to charge insureds a monthly administrative
fee pursuant to the administrative services agreement. Parent and its
affiliated insurers paid an aggregate of approximately $175.6 million,
$233.1 million and $291.0 million to the Company pursuant to these
agreements for the years ended December 31, 1995 and 1996, respectively. In
accordance with insurance holding Company statutes applicable to Parent and
its affiliated insurers, the amounts paid pursuant to such agreements
cannot exceed a reasonable charge.
In January 1997, Parent and the Company, as part of strategic
developments within Parent, decided that the wholesale marketing and
distribution functions for Parent's products outside of Indiana, Kentucky
and Ohio should be performed by Parent. Parent agreed to pay the Company a
one-time cancellation fee of $6.0 million, one-half of which was paid
during the first quarter of 1997, and the remainder of which will be paid
during the second quarter of 1997. See "-- Background of the Offer."
In February 1997, the Company and Parent announced the planned
consolidation of their claims processing sites in Indiana, Kentucky and
Ohio into one central site located in Indiana. The consolidation of the
Indiana sites is virtually complete.
(B) Management Agreement. In June 1992, the Company entered into a
management agreement with Parent pursuant to which Parent has agreed to
provide to the Company the services of certain senior management employees.
Effective December 31, 1996, the Company terminated the management
agreement. Prior to the termination of the management agreement, the
Company reimbursed Parent for all allocated expenses incurred by Parent in
connection with the furnishing of the services rendered pursuant to the
management agreement. The Company paid fees for management services plus
allocated expenses to the Company in the amounts of approximately $574,000
and $180,000 for the years ended December 31, 1995 and 1996, respectively.
(C) Inter-Company Services Agreement. The Company is a party to The
Anthem Inter-Company Services Agreement (the "Services Agreement") among
Parent and its subsidiaries pursuant to which the parties thereto are
entitled to provide and receive certain administrative and systems services
including financial and payroll, legal, auditing, investment, information
services, data processing, actuarial, marketing and human resources.
Pursuant to the Agreement, the Company reimburses Parent or its affiliate
rendering such services for the actual costs and expenses which Parent or
such affiliate incurs in providing such services or on a reasonable charge
basis. In consideration of services under the Services Agreement, the
Company paid to Parent fees aggregating approximately $52.0 million and
$95.2 million for the years ended December 31, 1995 and 1996, respectively.
(D) Tax Sharing and Indemnification Agreements. Effective January 1,
1989 (or such later date as a subsidiary first became included in Parent's
consolidated tax return), the Company and its subsidiaries were included in
Parent's state and federal consolidated income tax returns and were parties
to a federal and a state income tax sharing agreement with Parent. The tax
sharing agreements provided for the allocation of tax liability among
Parent and its affiliates. Effective October 29, 1992, the Company and its
subsidiaries were not eligible to be included in Parent's federal and most
state income tax returns for periods following the October 1992 date since
Parent retained less than 80% of the voting power and the total value of
the stock of the Company. The Company and Parent file together with respect
to a few consolidated combined state tax returns. Pursuant to the tax
sharing agreements, the Company paid Parent $91,819 in 1995 for taxable
year 1994 and no amounts were paid by either party in 1996 for taxable year
1995. The Company and Parent have entered into a tax indemnification
agreement, pursuant to which Parent has agreed to indemnify the Company
with respect to any federal or state income taxes related to periods prior
to the October 1992 date when the Company was a member of Parent's
consolidated group for federal income tax purposes and reflected on the
Company's consolidated balance sheet dated December 31, 1991 or accrued in
the ordinary course of business consistent with past practices from
December 31, 1991 until the October 1992 date.
(E) Lease. In June 1992, the Company entered into a sublease
agreement with Parent pursuant to which the Company subleases certain
office space and related equipment located at 120 Monument
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Circle, Indianapolis, Indiana. For the years ended December 31, 1995 and
1996, the Company made rental payments to Parent in the amount of $690,000
and $698,000, respectively.
(F) Registration Rights Agreement. In connection with the initial
public offering of the Company's Common Stock, the Company and Parent
entered into a Registration Rights Agreement pursuant to which the Company
granted to Parent certain rights with respect to registration under the
Securities Act of 1933, as amended, of Common Stock currently held or
thereafter acquired by Parent.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for federal income tax purposes under the Internal Revenue Code of
1986, as amended (the "Code"), and may also be a taxable transaction under
applicable state, local or foreign income or other tax laws. Generally, for
federal income tax purposes, a tendering stockholder will recognize gain or loss
equal to the difference between the amount of cash received by the stockholder
pursuant to the Offer or the Merger and the aggregate tax basis in the Common
Stock tendered by the stockholder and purchased pursuant to the Offer or
converted in the Merger, as the case may be. Gain or loss will be calculated
separately for each block (i.e., Common Stock acquired at the same time in a
single transaction) of Common Stock tendered and purchased pursuant to the Offer
or converted in the Merger, as the case may be. If shares of Common Stock are
held by a stockholder as capital assets, gain or loss recognized by the
stockholder will be capital gain or loss, which will be long-term capital gain
or loss if the stockholder's holding period for the Common Stock exceeds one
year.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals and entities) that
tenders Common Stock may be subject to 31% backup withholding unless the
stockholder provides its taxpayer identification number ("TIN") and certifies
that such number is correct or properly certifies that it is awaiting a TIN, or
unless an exemption applies. A stockholder that does not furnish its TIN may be
subject to a penalty imposed by the Internal Revenue Service ("IRS"). See "THE
TENDER OFFER -- Procedures For Tendering Common Stock -- Backup Withholding."
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained by
the stockholder upon filing an appropriate income tax return.
THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY
NOT BE APPLICABLE WITH RESPECT TO COMMON STOCK RECEIVED PURSUANT TO THE EXERCISE
OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION OR WITH RESPECT TO
HOLDERS OF COMMON STOCK WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE,
SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND
FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF COMMON STOCK IN LIGHT
OF INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE
APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS)
OF THE OFFER AND THE PROPOSED MERGER.
APPRAISAL RIGHTS
UNDER THE DGCL, HOLDERS OF SHARES OF COMMON STOCK NOT PURCHASED BY
PURCHASER ARE NOT ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE OFFER.
However, if following consummation of the Offer, Purchaser consummates the
Merger, holders of shares of Common Stock not purchased by Purchaser in the
Offer will be entitled to seek appraisal rights under the DGCL in connection
with the Merger as follows.
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The following discussion is not a complete statement of the law pertaining
to appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL ("Section 262") which is attached hereto as
Annex I and is incorporated herein by this reference. All references in Section
262 and in this summary to a "stockholder" or "holders" are to the record holder
of the shares of Common Stock as to which appraisal rights are asserted.
Under the DGCL, holders of shares of Common Stock ("Appraisal Shares") who
follow the procedures set forth in Section 262, and who have neither voted in
favor of the Merger nor consented thereto in writing, will be entitled to have
their Appraisal Shares appraised by the Delaware Chancery Court and to receive
payment in cash of the "fair value" of such Appraisal Shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, as determined by such court.
Under Section 262, if the Merger must be submitted to the stockholders of
the Company because Purchaser does not own 90% of the outstanding shares of
Common Stock or otherwise, the Company must, not less than 20 days prior to the
meeting held for the purpose of obtaining stockholder approval of the Merger,
notify each of the Company's stockholders entitled to appraisal rights that such
rights are available, and must include in such notice a copy of Section 262. If
no stockholder vote is required or if stockholder approval is obtained by
written consent in lieu of a meeting, the Company, either before the effective
date of the Merger or within ten days thereafter, must notify each of the
stockholders entitled to appraisal rights of the effective date of the Merger
and that appraisal rights are available, and must include in such notice a copy
of Section 262.
A holder of Appraisal Shares wishing to exercise such holder's appraisal
rights will be required to deliver to Purchaser within 20 days after the date of
mailing of the notice described in the preceding paragraph a written demand for
appraisal of such holder's Appraisal Shares. A holder of Appraisal Shares
wishing to exercise such holder's appraisal rights must be the record holder of
such Appraisal Shares on the date the written demand for appraisal (as described
below) is made and must continue to hold such Appraisal Shares of record through
the effective date of the Merger. Accordingly, a holder of Appraisal Shares who
is the record holder of Appraisal Shares on the date the written demand for
appraisal is made (if such demand is made prior to the effectiveness of the
Merger), but who thereafter transfers such Appraisal Shares prior to the
consummation of the Merger, will lose any right to appraisal in respect of such
Appraisal Shares.
Within 120 days after the effective date of the Merger, but not thereafter,
Purchaser or any stockholder who has complied with the statutory requirements
summarized above and who is otherwise entitled to appraisal rights may file a
petition in the Delaware Chancery Court demanding a determination of the fair
value of the Appraisal Shares. Purchaser is under no obligation to file a
petition with respect to the appraisal of the fair value of the Appraisal Shares
and does not intend to do so. Accordingly, it will be the obligation of the
stockholders seeking appraisal rights to initiate all necessary action to
perfect any appraisal rights within the time prescribed in Section 262.
Within 120 days after the effective date of the Merger, any stockholder who
has complied with the statutory requirements summarized above will be entitled,
upon written request, to receive from Purchaser a statement setting forth the
aggregate number of Appraisal Shares with respect to which demands for appraisal
have been received and the aggregate number of holders of such Appraisal Shares.
Such statements must be mailed within ten days after a written request therefor
has been received by Purchaser or within ten days after expiration of the period
for delivery of demands for appraisal, whichever is later.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine the stockholders entitled
to appraisal rights and will appraise the "fair value" of their Appraisal
Shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value.
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In determining the "fair value" of the Appraisal Shares, a court could
consider factors other than, or in addition to, the market value of the Common
Stock, including, among other things, asset values and earning capacity of the
Company. In Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among
other things, that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceeding.
Therefore, the value so determined in any appraisal proceeding could be
different from the Merger Consideration (as defined in the Merger Agreement).
Several decisions by the Delaware courts, which may or may not apply to the
Merger, have held that a controlling stockholder of a company involved in a
merger has a fiduciary duty to other stockholders which requires that the merger
be "entirely fair" to such other stockholders. In determining whether a merger
is fair to minority shareholders, Delaware courts have considered, among other
things, the type and amount of the consideration to be received by the
stockholders and whether there was fair dealing among the parties. The Delaware
Supreme Court stated in Weinberger that, although the remedy ordinarily
available in a merger that is found not to be "fair" to minority stockholders is
the right to appraisal described above, such appraisal remedy may not be
adequate "in certain cases, particularly where fraud, misrepresentation,
self-dealing, deliberate waste of corporate assets, or gross and palpable
overreaching are involved," and that in such cases the Delaware Chancery Court
would be free to fashion any form of appropriate relief.
The costs of the proceeding may be determined by the Delaware Chancery
Court and taxed upon the parties as the Delaware Chancery Court deems equitable
in the circumstances. Upon application of a stockholder, the Delaware Chancery
Court may also order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts, to
be charged pro rata against the value of all of the Appraisal Shares entitled to
appraisal.
Any holder of Appraisal Shares who has duly demanded an appraisal in
compliance with Section 262 will not, from and after the effective date of the
Merger, be entitled to vote the Appraisal Shares subject to such demand for any
purpose or to receive payment of dividends or other distributions on those
Appraisal Shares (except dividends or other distributions payable to
stockholders of record at a date which is prior to the effective date of the
Merger).
If any stockholder who properly demands appraisal of his or her Appraisal
Shares under Section 262 fails to perfect, or effectively withdraws or loses,
his or her right to appraisal, as provided in the DGCL, the Appraisal Shares of
such stockholder will be converted into the right to receive the consideration
receivable with respect to such Appraisal Shares pursuant to the Merger. A
stockholder will fail to perfect, or effectively lose or withdraw, his or her
right to appraisal if, among other things, no petition for appraisal is filed
within 120 days after the consummation of the Merger, or if the stockholder
delivers to Purchaser a written withdrawal of his or her demand for appraisal.
Any such attempt to withdraw an appraisal demand more than 60 days after the
consummation of the Merger will require the written approval of Purchaser.
THE TENDER OFFER
TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment and pay for all shares of
Common Stock validly tendered prior to the Expiration Date and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights" on or prior
to the Expiration Date. The term "Expiration Date" means 12:00 midnight, New
York City time, on Thursday, July 3, 1997, unless and until the Purchaser,
subject to the terms of the Merger Agreement, shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchaser, will expire. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE FOR TENDERED COMMON STOCK, WHETHER OR NOT THE PURCHASER EXERCISES
ITS RIGHT TO EXTEND THE OFFER.
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THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OF THE
MINIMUM TENDER CONDITION AND THE SATISFACTION OF THE OTHER CONDITIONS SET FORTH
UNDER "-- CERTAIN CONDITIONS OF THE OFFER."
If by the Expiration Date any or all of the conditions to the Offer have
not been satisfied or waived, the Purchaser reserves the right (but shall not be
obligated), subject to the applicable rules and regulations of the Commission
and the terms of the Merger Agreement, to (a) terminate the Offer and not accept
for payment or pay for any Common Stock and return all tendered Common Stock to
tendering stockholders, (b) waive all the unsatisfied conditions and accept for
payment and pay for all Common Stock validly tendered prior to the Expiration
Date and not theretofore withdrawn, (c) extend the Offer and, subject to the
right of stockholders to withdraw Common Stock until the Expiration Date, retain
the Common Stock that have been tendered during the period or periods for which
the Offer is extended or (d) amend the Offer.
The rights reserved by the Purchaser in the two preceding paragraphs are in
addition to the Purchaser's rights set forth under "-- Certain Conditions of the
Offer." There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement. In the case of an extension,
Rule 14e-1(d) under the Exchange Act requires that the announcement be issued no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date, or the first opening of the NYSE on the
next business day after the previously scheduled Expiration Date, in accordance
with the public announcement requirements of Rule 14d-4(c) under the Exchange
Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to inform
stockholders of such change), and without limiting the manner in which the
Purchaser may choose to make any public announcement, the Purchaser will not
have any obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service. As used in this Offer to Purchase, "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Common Stock) is delayed in its purchase of
or payment for Common Stock or it is unable to pay for Common Stock pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Common Stock on behalf of
the Purchaser, and such Common Stock may not be withdrawn except to the extent
tendering stockholders are entitled to withdrawal rights as described under
"-- Withdrawal Rights." However, the ability of the Purchaser to delay the
payment for Common Stock that the Purchaser has accepted for payment is limited
by Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the
consideration offered or return the securities tendered by or on behalf of
holders of securities promptly after the termination or withdrawal of such
bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will, or Parent will cause the Purchaser to, extend the Offer and
disseminate additional tender offer materials to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act or otherwise. The minimum
period during which the Offer must remain open following material changes in the
terms of the Offer or information concerning the Offer, other than a change in
price or a change in the percentage of securities sought, will depend upon the
facts and circumstances then existing, including the relative materiality of the
changed terms or information. In the Commission's view, an offer should
generally remain open for a minimum of five business days from the date a
material change is first published, sent or given to stockholders. With respect
to a change in price or, subject to certain limitations, a change in the
percentage of securities sought, a minimum period of 10 business days is
generally required to allow for adequate dissemination to stockholders and
investor response. Accordingly, if prior to the Expiration Date, in accordance
with the terms of the Merger Agreement, the Purchaser decreases the number of
shares of Common Stock being sought, or increases or decreases the Offer Price,
and if the Offer is scheduled to expire at any time earlier than the period
ending on the tenth business day from the date that notice of such increase or
decrease is first published, sent or
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given to holders of shares of Common Stock, the Offer will be extended at least
until the expiration of such 10 business day period.
The Company is providing to the Purchaser its list of stockholders and
security position listings for the purpose of disseminating the Offer to holders
of Common Stock. This Offer to Purchase and the related Letter of Transmittal
and other relevant materials will be mailed to record holders of Common Stock
and will be furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
Company's stockholder list or, if applicable, who are listed as participants in
a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Common Stock.
PROCEDURES FOR TENDERING COMMON STOCK
Valid Tender. For a stockholder validly to tender Common Stock pursuant to
the Offer, either (a) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message (as
defined herein), and any other required documents, must be received by the
Depositary at its address set forth on the back cover of this Offer to Purchase
prior to the Expiration Date and either certificates for tendered Common Stock
must be received by the Depositary at such address or such Common Stock must be
delivered pursuant to the procedures for book-entry transfer set forth below
(and a Book-Entry Confirmation (as defined below) received by the Depositary),
in each case prior to the Expiration Date, or (b) the tendering stockholder must
comply with the guaranteed delivery procedures set forth below.
Participants in the Acordia 401(k) Long Term Savings Investment Plan, the
ABI 401(k) and Profit Sharing Plan and The Associated Group 401(k) Long Term
Savings Investment Plan (the "401(k) Plans") desiring to tender shares of Common
Stock held on their behalf should so instruct the 401(k) Plans Trustee by
completing the form which will be provided to participants for that purpose.
401(k) Plans participants cannot tender Common Stock allocated to their 401(k)
Plans accounts by executing the Letter of Transmittal.
Book-Entry Transfer. The Depositary will make a request to establish
accounts with respect to the Common Stock at The Depository Trust Company and
the Philadelphia Depository Trust Company (the "Book-Entry Transfer Facilities")
for purposes of the Offer within two business days after the date of this Offer
to Purchase. Any financial institution that is a participant in any of the
Book-Entry Transfer Facilities' systems may make book-entry delivery of Common
Stock by causing a Book-Entry Transfer Facility to transfer such Common Stock
into the Depositary's account in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Common
Stock may be effected through book-entry transfer into the Depositary's account
at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and all other required documents, or an Agent's Message (as defined
below), must, in any case, be transmitted to, and received by, the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date, or the tendering stockholder must comply with the
guaranteed delivery procedures described below.
The confirmation of a book-entry transfer of Common Stock into the
Depositary's account at a Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Common Stock that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
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THE METHOD OF DELIVERY OF COMMON STOCK, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. COMMON
STOCK, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (a) the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes hereof, includes any participant in any of
the Book-Entry Transfer Facilities' systems whose name appears on a security
position listing as the owner of the Common Stock) of Common Stock tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) such Common Stock is tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution"). In all other cases, all signatures on the
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the certificates for
Common Stock are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made or certificates for Common
Stock not tendered or not accepted for payment are to be returned to a person
other than the registered holder of the certificates surrendered, the tendered
certificates must be endorsed in blank or accompanied by appropriate stock
powers, in either case signed exactly as the name or names of the registered
holders appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as described above. See Instructions 1 and 5 to the
Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Common Stock
pursuant to the Offer and such stockholder's certificates for Common Stock are
not immediately available or the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Depositary prior to the Expiration Date, such stockholder's tender may
be effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary, as provided below, on or prior to the Expiration Date;
and
(iii) the certificates, representing all tendered shares of Common
Stock, in proper form for transfer (or a Book-Entry Confirmation with
respect to all such Common Stock), together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message, and any other required documents are received by the
Depositary within three trading days after the date of execution of such
Notice of Guaranteed Delivery. A "trading day" is any day on which the NYSE
is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution and a
representation that the stockholder owns the Common Stock tendered within the
meaning of, and that the tender of the Common Stock effected thereby complies
with, Rule 14e-4 under the Exchange Act, each in the form set forth in such
Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Common Stock
accepted for payment pursuant to the Offer will in all cases be made only after
timely receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Common Stock, (b) a Letter of Transmittal (or
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facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Common Stock or Book-Entry Confirmations with respect
to Common Stock are actually received by the Depositary. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE COMMON STOCK TO BE PAID BY
THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above (including through delivery of an Agent's Message), a tendering
stockholder irrevocably appoints designees of the Purchaser and each of them as
such stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Common Stock tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Common Stock or other securities or rights issued or issuable in
respect of such Common Stock on or after June 6, 1997 (the "Applicable Date").
All such powers of attorney and proxies will be irrevocable and considered
coupled with an interest in the tendered Common Stock. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts such Common
Stock for payment pursuant to the Offer. Upon such acceptance for payment, all
prior powers of attorney, proxies and consents given by such stockholder with
respect to such Common Stock and other securities or rights will, without
further action, be revoked and no subsequent powers of attorney, proxies,
consents or revocations may be given (and, if given, will not be deemed
effective). The designees of the Purchaser will thereby be empowered to exercise
all voting and other rights with respect to such Common Stock and other
securities or rights in respect of any annual, special, adjourned or postponed
meeting of the Company's stockholders, actions by written consent in lieu of any
such meeting or otherwise, as they in their sole discretion deem proper. The
Purchaser reserves the right to require that, in order for Common Stock to be
deemed validly tendered, immediately upon the Purchaser's acceptance for payment
of such Common Stock, the Purchaser must be able to exercise full voting,
consent and other rights with respect to such Common Stock and other securities
or rights, including voting at any meeting of stockholders (whether annual or
special or whether or not adjourned) or acting by written consent without a
meeting in respect of such Common Stock.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Common Stock will be determined by the Purchaser, in its sole discretion,
whose determination will be final and binding on all parties. The Purchaser
reserves the absolute right to reject any or all tenders determined by it not to
be in proper form or the acceptance for payment of or payment for which may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any condition of the Offer or any defect or
irregularity in the tender of any Common Stock of any particular stockholder
whether or not similar defects or irregularities are waived in the case of other
stockholders. No tender of Common Stock will be deemed to have been validly made
until all defects or irregularities relating thereto have been cured or waived.
None of the Purchaser, Parent, any of their affiliates or assigns, the
Depositary, the Information Agent, the Dealer Manager or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding on all parties.
Backup Withholding. In order to avoid "backup withholding" of federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Common Stock in the Offer must, unless an exemption applies, provide the
Depositary with such stockholder's correct Taxpayer Identification Number
("TIN") on a Substitute Form W-9 and certify under penalties of perjury that
such TIN is correct and that such stockholder is not subject to backup
withholding. If a stockholder does not provide such stockholder's correct TIN or
fails to provide the certifications described above, the IRS may impose a
penalty on such stockholder and the payment of cash to such stockholder pursuant
to the Offer may be subject to backup withholding of 31% of the amount of such
payment. All stockholders surrendering Common Stock pursuant to the Offer should
complete and sign the main signature form and the Substitute Form W-9 included
as part
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of the Letter of Transmittal to provide the information and certification
necessary to avoid backup withholding (unless an applicable exemption exists and
is proved in a manner satisfactory to the Purchaser and the Depositary). Certain
stockholders (including, among others, all corporations and certain foreign
individuals and entities) are not subject to backup withholding. Noncorporate
foreign stockholders should complete and sign the main signature form and a Form
W-8, Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 10 to the
Letter of Transmittal.
Other Requirements. A tender of shares of Common Stock pursuant to any one
of the procedures described above will constitute the tendering stockholder's
acceptance of the terms and conditions of the Offer, as well as the tendering
stockholder's representation and warranty that (i) such stockholder has the full
power and authority to tender, sell, assign and transfer the tendered shares of
Common Stock (and any and all other shares or other securities issued or
issuable in respect of such Common Stock on or after June 2, 1997) and (ii) when
the same are accepted for payment by the Purchaser, the Purchaser will acquire
good and unencumbered title thereto, free and clear of all liens, restrictions,
charges, encumbrances and not subject to any adverse claims. Purchaser's
acceptance for payment of shares of Common Stock tendered pursuant to the Offer
will constitute a binding agreement between the tendering stockholder and
Purchaser upon the terms and subject to the conditions of the Offer.
WITHDRAWAL RIGHTS
Except as otherwise provided in this section, tenders of Common Stock
pursuant to the Offer are irrevocable. Common Stock tendered pursuant to the
Offer may be withdrawn pursuant to the procedures set forth below at any time
prior to the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after August
4, 1997. If the Purchaser extends the Offer, is delayed in its acceptance for
payment of Common Stock or is unable to purchase Common Stock validly tendered
pursuant to the Offer for any reason, then without prejudice to the Purchaser's
rights under the Offer, the Depositary may nevertheless, on behalf of the
Purchaser, subject to Rule 14e-1(c) under the Exchange Act, retain tendered
Common Stock and such Common Stock may not be withdrawn except to the extent
that tendering stockholders are entitled to withdrawal rights as described in
this section. Any such delay will be accompanied by an extension of the Offer to
the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Common Stock to be
withdrawn, the number of shares of Common Stock to be withdrawn and the name of
the registered holder of the Common Stock to be withdrawn, if different from the
name of the person who tendered the Common Stock. If certificates for Common
Stock to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Common Stock has been tendered by an Eligible Institution, the
signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Common Stock has been delivered pursuant to the procedure for
book-entry transfer as set forth under "-- Procedures for Tendering Common
Stock," any notice of withdrawal must also specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be credited with the
withdrawn Common Stock and otherwise comply with such Book-Entry Transfer
Facility's procedures.
Withdrawals of tenders of Common Stock may not be rescinded, and any Common
Stock properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer. However, withdrawn Common Stock may be retendered by
again following one of the procedures described under "-- Procedures for
Tendering Common Stock" at any time on or prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding on all parties. None
of the Purchaser, Parent, any of their affiliates or assigns, the Depositary,
the Information
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Agent, the Dealer Manager or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and will pay for all Common
Stock validly tendered on or prior to the Expiration Date and not properly
withdrawn in accordance with the terms set forth under "-- Withdrawal Rights"
promptly after the Expiration Date. All questions as to the satisfaction of such
terms and conditions will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding on all parties. See
"-- Withdrawal Rights" and "-- Certain Conditions of the Offer." The Purchaser
expressly reserves the right, in its sole discretion, to delay acceptance for
payment of or payment for Common Stock in order to comply in whole or in part
with any applicable law. See "-- Certain Legal Matters." Any such delays will be
effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to a
bidder's obligation to pay for or return tendered securities promptly after the
termination or withdrawal of such bidder's offer).
In all cases, payment for Common Stock accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (a)
certificates for (or a timely Book-Entry Confirmation with respect to) such
Common Stock, (b) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and (c) any other documents
required by the Letter of Transmittal. The consideration per share of Common
Stock paid to any stockholder pursuant to the Offer will be the highest
consideration paid to any other stockholder of the same class pursuant to the
Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Common Stock validly tendered to the
Purchaser and not withdrawn as, if and when the Purchaser gives oral or written
notice to the Depositary of the Purchaser's acceptance for payment of such
Common Stock pursuant to the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Common Stock accepted for payment pursuant to the
Offer will be made by deposit of the Offer Price therefor with the Depositary,
which will act as agent for validly tendering stockholders for the purpose of
receiving payment from the Purchaser and transmitting payment to tendering
stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE OF
THE COMMON STOCK TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE
OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. Upon the deposit of funds with the
Depositary for the purpose of making payments to tendering stockholders, the
Purchaser's obligation to make such payment shall be satisfied and tendering
stockholders must thereafter look solely to the Depositary for payment of
amounts owed to them by reason of the acceptance for payment of Common Stock
pursuant to the Offer. The Purchaser will pay any stock transfer taxes with
respect to the transfer and sale to it or its order pursuant to the Offer,
except as otherwise provided in Instruction 6 of the Letter of Transmittal, as
well as any charges and expenses of the Depositary and the Information Agent.
If the Purchaser is delayed in its acceptance for payment of or payment for
Common Stock or is unable to accept for payment or pay for Common Stock pursuant
to the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange
Act), the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Common Stock, and such Common Stock may not be withdrawn except to the
extent tendering stockholders are entitled to exercise, and duly exercise,
withdrawal rights as described under "-- Withdrawal Rights."
If any tendered shares of Common Stock are not purchased pursuant to the
Offer for any reason, certificates for any such unpurchased Common Stock will be
returned, without expense to the tendering stockholder (or, in the case of
Common Stock delivered by book-entry transfer of such Common Stock into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth under "-- Procedures for Tendering Common Stock," such Common Stock
will be credited to an account maintained at the appropriate Book-Entry Transfer
Facility), as promptly as practicable after the expiration, termination or
withdrawal of the Offer.
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The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to Parent, or to one or more direct or indirect wholly
owned subsidiaries of Parent, the right to purchase Common Stock tendered
pursuant to the Offer, but any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer and will in no way prejudice the
rights of tendering stockholders to receive payment for Common Stock validly
tendered and accepted for payment pursuant to the Offer.
PRICE RANGE OF COMMON STOCK; DIVIDENDS ON THE COMMON STOCK
The Common Stock currently is listed and traded on the NYSE under the
symbol ACO. The following table sets forth the high and low closing prices per
share of Common Stock together with the per share dividends paid by the Company
for the periods indicated as reported in publicly available sources.
HIGH LOW DIVIDENDS
---- --- ---------
1995:
First quarter.................................................. $34 1/2 $31 3/8 $ .18
Second quarter................................................. 33 1/8 30 .18
Third quarter.................................................. 32 1/8 26 .18
Fourth quarter................................................. 29 7/8 23 1/2 .18
1996:
First quarter.................................................. 31 3/4 27 3/4 .20
Second quarter................................................. 33 3/4 30 7/8 .20
Third quarter.................................................. 33 5/8 30 1/8 .20
Fourth quarter................................................. 30 3/4 28 .20
1997:
First quarter.................................................. 33 27 1/2 .20
Second quarter through June 5, 1997............................ 39 1/2 31 1/2 .20
On February 5, 1997, the last full trading day before Parent announced its
consideration of a change in its strategic plan with respect to, and
relationship with and investment in, the Company, the last reported sale price
of the Common Stock on the NYSE was $27 7/8. On May 30, 1997, the last full
trading day before the first public announcement of the Offer, the last reported
sales price of the Common Stock on the NYSE was $35 1/2. STOCKHOLDERS ARE URGED
TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK.
CERTAIN EFFECTS OF THE OFFER
Market for the Shares. The purchase of Common Stock pursuant to the Offer
will reduce the number of holders of Common Stock and the number of shares of
Common Stock that might otherwise trade publicly and could adversely affect the
liquidity and market value of the remaining Common Stock held by the public.
Stock Exchange Listing. Depending on the number of shares of Common Stock
purchased in the Offer, the Common Stock may no longer meet the requirements of
the NYSE for continued listing. According to the NYSE's published guidelines,
the NYSE would consider delisting the Common Stock if, among other things, (i)
the number of record holders of at least 100 shares should fall below 1,200,
(ii) the number of publicly held shares of Common Stock (exclusive of holdings
of officers, directors, members of their immediate families and other
concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall
below 600,000 or (iii) the aggregate market value of publicly held Common Stock
(exclusive of NYSE Excluded Holdings) should fall below $5,000,000. According to
the Company's Annual Report on Form 10-K for the year ended December 31, 1996
(the "Company 10K"), as of March 10, 1997, there were 450 holders of record of
Common Stock and, as of March 1, 1997, there were 13,005,106 shares of Common
Stock outstanding.
If the NYSE were to delist the Common Stock, it is possible that the Common
Stock would trade on another securities exchange or in the over-the-counter
market and that price quotations for the Common Stock would be reported by such
exchange, the Nasdaq Stock Market or other sources. The extent of the public
market for the Common Stock and availability of such quotations would depend,
however, upon such factors as the number of holders, the aggregate market value
of the publicly held Common Stock at such
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time, the interest in maintaining a market in the Common Stock on the part of
securities firms, the possible termination of registration of the Common Stock
under the Exchange Act and other factors. The Purchaser cannot predict whether
the reduction in the number of Common Stock that might otherwise trade publicly
would have an adverse or beneficial effect on the market price for or
marketability of the Common Stock or whether it would cause future market prices
to be greater or less than the price per share to be paid pursuant to the Offer.
Exchange Act Registration. The Common Stock is currently registered under
the Exchange Act. Registration of the Common Stock under the Exchange Act may be
terminated upon application of the Company to the Commission if the Common Stock
is neither listed on a national securities exchange or quoted on Nasdaq nor held
by 300 or more holders of record. Termination of registration of the Common
Stock under the Exchange Act would substantially reduce the information required
to be furnished by the Company to its stockholders and to the Commission and
would make certain provisions of the Exchange Act no longer applicable to the
Company, such as the short-swing profit recovery provisions of Section 16(b) of
the Exchange Act, the requirement of furnishing a proxy statement pursuant to
Section 14(a) of the Exchange Act in connection with stockholders' meetings and
the related requirement of furnishing an annual report to stockholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933, as amended, may be impaired or eliminated. The Purchaser intends to seek
to cause the Company to apply for termination of registration of the Common
Stock under the Exchange Act as soon after the completion of the Offer as the
requirements for such termination are met.
If registration of the Common Stock is not terminated prior to the Merger,
then the Common Stock will be delisted from all stock exchanges and the
registration of the Common Stock will be terminated following the consummation
of the Merger.
Margin Regulations. The shares of Common Stock are currently "margin
securities" under the regulations of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among other
things, of allowing brokers to extend credit on the collateral of the Common
Stock. Depending upon factors similar to those described above regarding listing
and market quotations, it is possible that, following the Offer, the Common
Stock would no longer constitute "margin securities" for the purposes of the
margin regulations of the Federal Reserve Board and therefore could no longer be
used as collateral for loans made by brokers for the purpose of buying, carrying
or trading in securities.
CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal offices at 120
Monument Circle, Indianapolis, Indiana 46204 and its telephone number is (317)
488-6666.
The Company is a holding company for a nationwide network of operating
business units engaged in providing insurance broking, risk management
consulting, managed health care integration and administration, workers
compensation administration, underwriting management and employee benefits
consulting services to government, not-for-profit and private sector employers,
groups, trusts and associations, and individual consumers. The Company offers to
its customers, as broker or agent, a range of products tailored to the specific
needs of their particular business which may include health related products
(including indemnity insurance, employee benefit programs, and third-party
administration), managed care programs, property and casualty insurance, life
and disability insurance, and other select financial services. The Company
derived approximately 44% of its revenues for the year ended December 31, 1996
from the sale and administration of life and health insurance products
underwritten by Parent and or its affiliated insurers.
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted from the information
contained in the Company 10-K and the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997 (the "Company 10-Q"). More comprehensive
financial information is included in the Company 10-K and such Company 10-Q and
other documents filed by the Company with the Commission, and the following
summary is qualified in its entirety
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by reference to such information. The Company 10-K and the Company 10-Q and such
other documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "-- Available Information."
ACORDIA, INC.
SELECTED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT SHARES, PER SHARE AMOUNTS AND RATIOS)
THREE MONTHS ENDED YEAR ENDED DECEMBER
MARCH 31, 31,
------------------- -------------------
1997 1996 1996 1995
------- ------- ------- -------
(UNAUDITED)
INCOME STATEMENT DATA:
Revenues......................................... $ 165.8 $ 164.7 $ 661.0 $ 555.1
Operating income................................. 22.1 22.3 87.3 175.4
Net income....................................... 6.7 7.3 29.9 23.6
Earnings per share............................... 0.50 0.51 2.09 1.64
Earnings per share, fully diluted................ 0.49 0.50 2.09 1.64
Cash dividends per share......................... 0.20 0.20 0.80 0.72
Ratio of earnings to fixed charges............... 1.5x 2.8x 1.4x 2.0x
Weighted average shares outstanding.............. 13,395 14,361 14,324 14,379
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets..................................... $ 734.5 $ 721.7 $ 745.6 $ 736.5
Long-term debt................................... 136.7 138.7 136.2 131.6
Other long-term liabilities...................... 58.1 36.4 49.2 34.2
Stockholders' equity............................. 206.2 216.9 202.4 212.1
Book value per share............................. $ 15.86 $ 15.50 $ 15.58 $ 15.19
Available Information. The Company is subject to the informational
requirements of the Exchange Act and, in accordance therewith, is required to
file reports relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options and other matters, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities of the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, NY 10048
and Citicorp Center, 500 West Madison Street (Suite 1400), Chicago, IL 60661.
Copies of such information should be obtainable, by mail, upon payment of the
Commission's customary charges, by writing to the Commission's principal office
at 450 Fifth Street, N.W., Washington, DC 20549. The Commission also maintains a
World Wide Web site on the Internet at http://www.sec.gov that contains reports
and other information regarding registrants that file electronically with the
Commission. Such material should also be available for inspection at the offices
of the NYSE, 20 Broad Street, New York, New York 10005.
Company Information. The information concerning the Company contained in
this Offer to Purchase has been taken from or based upon publicly available
documents on file with the Commission and other publicly available information.
Although Parent and the Purchaser do not have any knowledge that any such
information is untrue, neither the Purchaser nor Parent takes any responsibility
for the accuracy or completeness of such information or for any failure by the
Company to disclose events that may have occurred and may affect the
significance or accuracy of any such information.
CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER
Parent is an Indiana domiciled mutual insurance company and is one of the
nation's largest health insurance and managed care companies. As an independent
licensee of the Blue Cross Blue Shield
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Association, Parent offers Blue Cross Blue Shield ("BCBS") branded insurance
products in Indiana and, through its subsidiaries, in Ohio and Kentucky. As of
December 31, 1996, the Company provided health care coverage or services to
approximately four million people throughout these states, and its share of the
health insurance and managed care market ranged from 20-30% of the total
population in this tri-state region. Parent is licensed to do business in 30
states and, including subsidiary operations, conducts business in all fifty
states. As of December 31, 1996, Parent had total assets of $5.0 billion and
policyholders' surplus of $1.3 billion.
The Purchaser is a newly incorporated Delaware corporation and a wholly
owned subsidiary of Parent which to date has not conducted any business other
than in connection with the Offer and the Merger. The principal executive
offices of Parent and the Purchaser are located at 120 Monument Circle,
Indianapolis, Indiana 46204. Of the 8,693,056 shares of Common Stock owned
beneficially by Parent, 8,693,056 shares of Common Stock are currently held of
record by Parent and no shares of Common Stock are currently held of record by
the Purchaser. Prior to the closing of the Offer, all of the shares of Common
Stock held of record by Parent will be contributed to Purchaser.
The name, citizenship, business address, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of the Purchaser and Parent is set forth in Schedule I hereto
and incorporated herein by reference.
During the last five years, none of the Purchaser, Parent or, to the
Purchaser's or Parent's knowledge, any person named in Schedule I hereto, has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, Federal or
state securities laws or finding any violation of such laws.
Set forth below is a summary of certain selected consolidated financial
information with respect to Parent and its subsidiaries for the three months
ended March 31, 1997 and March 31, 1996, and for the years ended December 31,
1996 and 1995.
Parent is not subject to the informational reporting requirements of the
Exchange Act, and, accordingly, does not file reports or other information with
the Commission relating to its business, financial condition or other matters.
Parent files certain financial and other information with the Departments of
Insurance for the 30 states in which it is licensed to transact insurance
business. In addition, the Indiana Department of Insurance conducts regular
financial examinations of Parent and, from time to time, state insurance
regulatory authorities in any of the 30 jurisdictions may make inquiries
regarding Parent's compliance with regulations regarding the conduct of its
insurance business. Parent is also subject to the insurance holding company act
of each state in which it is licensed. These laws contain requirements and
restrictions regarding transactions between an insurance company and its
affiliates. Reports that are required to be filed under such holding company
acts include information concerning capital structure, ownership, management,
general financial condition and certain intercompany transactions. Although
state laws vary somewhat, reports and other information submitted by, or
otherwise concerning, Parent are generally available from the Departments of
Insurance where Parent does business.
Parent's selected consolidated financial data included herein have been
prepared in accordance with generally accepted accounting principles.
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ANTHEM INSURANCE COMPANIES, INC.
SELECTED FINANCIAL INFORMATION
(IN MILLIONS)
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
--------------------- ---------------------
1997 1996 1996 1995
-------- -------- -------- --------
(UNAUDITED)
INCOME STATEMENT DATA:
Revenues..................................... $1,599.0 $1,598.0 $6,269.6 $6,037.5
Income (loss) before income taxes and
minority interest.......................... 13.5 39.5 119.1 (121.3)
Minority interest in consolidated
subsidiaries............................... (1.7) (2.8) (12.1) (8.8)
Net income (loss)............................ 4.8 20.1 64.2 (98.0)
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets................................. $4,880.8 $5,344.9 $4,968.0 $5,345.7
Policy liabilities........................... 1,780.3 1,950.2 1,804.8 1,953.7
Total policyholders' surplus................. 1,316.2 1,281.4 1,347.4 1,314.9
SOURCE AND AMOUNT OF FUNDS
The Offer is not conditioned upon obtaining any arrangements for the
financing of the Offer. Purchaser estimates that the total amount of funds
required by the Purchaser to purchase all of the Common Stock pursuant to the
Offer, to pay the surrender value of all outstanding Stock Options and all
outstanding Great American Warrants and to pay fees and expenses related to the
Offer and the Merger will be approximately $216 million. The Purchaser plans to
obtain all funds needed for the Offer and the Merger through a capital
contribution from Parent.
Parent plans to obtain funds for such capital contribution from available
cash on hand, assuming the closing of the sale of the assets of Anthem Casualty
Insurance Group, Inc., one of Parent's subsidiaries, which is scheduled to close
on June 30, 1997, or, if such closing does not occur, from the liquidation of
outstanding short-term investment securities.
DIVIDENDS AND DISTRIBUTIONS
The Company's Board of Directors declared a quarterly cash dividend to
holders of record of Common Stock on May 27, 1997, of $0.20 per share on May 13,
1997, payable on June 16, 1997. Such holders of record will be entitled to
receive the quarterly cash dividend whether or not they tender their Common
Stock pursuant to the Offer, and no adjustment will be made to the price in the
Offer or to any other terms of the Offer as a result of the payment of any such
quarterly dividend to such stockholders.
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term or provision of the Offer, the Purchaser
will not be required to accept for payment or, subject to any applicable rules
and regulations of the Commission, to pay for any Common Stock not theretofore
accepted for payment or paid for (and the Purchaser may postpone the acceptance
for payment or, subject to the restriction set forth above, payment for any
tendered Common Stock pursuant to the Offer), and may amend or terminate the
Offer, to the extent provided in the Merger Agreement, unless the Minimum Tender
Condition shall have been satisfied or waived in accordance with the terms of
the Merger Agreement. Furthermore, notwithstanding any other term or provision
of the Offer, the Purchaser will not be required to accept for payment or, in
its good faith discretion, subject as aforesaid, to pay for any Common Stock not
theretofore accepted for payment or paid for, and may terminate or amend the
Offer if, at any time on or after the date of the Merger Agreement (June 2,
1997), and before the acceptance of such
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Common Stock for payment or, subject to any applicable rules and regulations of
the Commission, the payment therefor, any of the following conditions exist:
(a) an order shall have been entered in any action or proceeding
before any federal or state court or governmental agency or other
regulatory body or a permanent injunction by any federal or state court of
competent jurisdiction in the United States shall have been issued and
remain in effect (i) making illegal the purchase of, or payment for, any
shares of Common Stock by the Purchaser, Parent or any of Parent's other
subsidiaries; (ii) otherwise preventing the consummation of the Offer or
the Merger; or (iii) imposing limitations on the ability of the Purchaser,
Parent or any of Parent's other subsidiaries to exercise effectively full
rights of ownership of any shares of Common Stock, including, without
limitation, the right to vote any shares of Common Stock acquired by the
Purchaser pursuant to the Offer on all matters properly presented to the
Company's stockholders, which would effect a material diminution in the
value of the shares acquired by the Purchaser;
(b) there shall have been any federal or state statute, rule or
regulation enacted, enforced, promulgated, amended or made applicable to
the Company, the Purchaser, Parent or any other affiliate of Parent or the
Company on or after the date of the Offer by any governmental, regulatory
or administrative authority or agency, domestic, foreign or supranational
(each, a "Governmental Entity") that could reasonably be expected to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (iii) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) any
extraordinary or material adverse change in the financial markets or major
stock exchange indices in the United States from that existing at the close
of business on the date of the Merger Agreement, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iv) any limitation (whether or not mandatory) by any
government, domestic, foreign or supranational, or Governmental Entity on,
or other event that, in the reasonable judgment of the Purchaser, is
reasonably likely to materially adversely affect the extension of credit by
banks or other lending institutions, (v) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or (vi) in the case of any of the
foregoing situations described in clauses (i) through (v) of this paragraph
(c) existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(d) any approval, permit, authorization, favorable review or consent
of any Governmental Entity, including, but not limited to, the Indiana
Insurance Commissioner, shall not have been obtained;
(e) the Purchaser shall have reached an agreement or understanding
with the Company, including with a majority of the Independent Directors,
providing for termination of the Offer;
(f) the Company shall have breached or failed to perform in any
material respect any of its covenants or agreements under the Merger
Agreement, or any of the representations and warranties of the Company set
forth in the Merger Agreement shall not be true in any material respect
when made or at any time prior to consummation of the Offer as if made at
and as of such time;
(g) the Merger Agreement shall have been terminated in accordance with
its terms; or
(h) the Board of Directors of the Company shall have withdrawn, or
materially modified or amended in a manner materially adverse to Parent or
the Purchaser, its approval or recommendation of the Offer or the Merger;
which, in the reasonable judgment of the Purchaser in any such case, and
regardless of the circumstances (including any action or inaction by the
Purchaser, Parent or any of Parent's other subsidiaries) giving rise to any such
condition, makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment or payment.
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CERTAIN LEGAL MATTERS
General. In connection with the Offer and the Merger, Parent must obtain
approval from the Indiana Insurance Commissioner for the creation of the
Purchaser, the contribution of the shares of Common Stock owned by Parent to the
Purchaser and the contribution of cash to the Purchaser to fund the Offer, the
Merger and the other transactions contemplated by the Merger Agreement. Parent
received the requisite approval to form the Purchaser on June 2, 1997 and
expects to receive the other requisite approvals from the Indiana Insurance
Commissioner prior to the expiration of the Offer, and such approvals are a
condition to the Offer.
Except as otherwise disclosed herein, based on a review of publicly
available information filed by the Company with the Commission, neither the
Purchaser nor Parent is aware of (i) any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Common
Stock by the Purchaser pursuant to the Offer or the Merger or (ii) any approval
or other action, by any Governmental Entity, that would be required for the
acquisition or ownership of Common Stock by the Purchaser as contemplated
herein. Should any such approval or other action be required, the Purchaser
currently contemplates that such approval or action would be sought. While the
Purchaser does not currently intend to delay the acceptance for payment of
Common Stock tendered pursuant to the Offer pending the outcome of any such
matter, there can be no assurance that any such approval or action, if needed,
would be obtained or would be obtained without substantial conditions or that
adverse consequences might not result to the business of the Company, the
Purchaser or Parent or that certain parts of the businesses of the Company, the
Purchaser or Parent might not have to be disposed of in the event that such
approvals were not obtained or any other actions were not taken. The Purchaser's
obligation under the Offer to accept for payment and pay for Common Stock is
subject to certain conditions. See "-- Certain Conditions of the Offer."
Going Private Transaction. The Offer may be deemed to constitute a "Going
Private" transaction under Rule 13e-3 under the Exchange Act. Therefore,
Purchaser has filed with the Commission a Transaction Statement on Schedule
13E-3, together with exhibits, in addition to filing with the Commission a
Tender Offer Statement on Schedule 14D-1. Pursuant to Rule 13e-3, this Offer to
Purchase contains information relating to, among other matters, the fairness of
the Offer to the Company's stockholders.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice and the
FTC and certain waiting period requirements have been satisfied. Because Parent
already owns more than 50% of the outstanding voting securities of the Company,
Parent does not believe that it is required to make any filings pursuant to the
HSR Act or that the Offer and the Proposed Merger are subject to the HSR Act.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in such states. In
Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws governing corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were
inapplicable only under certain conditions. Subsequently, a number of Federal
courts ruled that various state takeover statutes were unconstitutional insofar
as they apply to corporations incorporated outside the state of enactment.
Except as described herein, Purchaser has not attempted to comply with any
state takeover statutes in connection with the Offer. Purchaser reserves the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer, and nothing in this Offer to Purchase nor any action
taken in
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connection herewith is intended as a waiver of that right. In the event that any
state takeover statute is found applicable to the Offer, the Purchaser might be
unable to accept for payment or pay for shares of Common Stock tendered pursuant
to the Offer or be delayed in continuing or consummating the Offer. In such
case, the Purchaser may not be obligated to accept for payment or pay for shares
of Common Stock tendered. See "-- Certain Conditions of the Offer."
Delaware Statute. Section 203 of the DGCL, in general, prohibits a
Delaware corporation, such as the Company, from engaging in a business
combination with the holder of 15% or more of its outstanding shares (an
"interested stockholder") for a period of three years from the time such
interested stockholder became the holder of 15% or more of such shares unless
such stockholder owned shares in excess of the 15% limitation as of December 23,
1987, such stockholder acquired more than 15% of the stock with the prior
approval of the board of the corporation or certain other conditions are
satisfied. Parent initially acquired the shares of Common Stock it beneficially
owned with the prior approval of the Company's Board of Directors, and more than
three years have elapsed since Parent acquired more than 15% of the Common Stock
and became an "interested stockholder." Accordingly, Purchaser does not believe
that Section 203 of the DGCL is applicable to the Offer or will be applicable to
the Merger. See "SPECIAL FACTORS -- Background of the Offer."
Certain Litigation. On June 4, 1997, an individual and purported class
action was commenced in the Court of Chancery of the State of Delaware, New
Castle County, purportedly on behalf of stockholders of the Company. The
defendants are the Company and its following officers and directors: L. Ben
Lytle, Frank C. Witthun, Patrick M. Sheridan, John C. Alpin, Birch E. Bayh, John
C. Crane, Mitchell E. Daniels, Jr., Catherine E. Dolan, Ernie E. Green, Dwane R.
Houser, Thomas C. Roberts, William W. Rosenblatt, James B. Stradtner, and
Michael L. Smith. The complaint alleges that in connection with the decision to
enter into the definitive Merger Agreement with Parent the individual defendants
"suffer from conflicts of interest either because they are affiliated with
Parent or maintain close business and personal relationships with the members of
the Company's senior management," and that the defendants "have violated
fiduciary and other common law duties owed to the plaintiff and the other
members of the class in that they have not and are not exercising independent
judgment, and have acted and are acting to the detriment of the Class." The
complaint seeks damages in an unspecified amount, and preliminary and permanent
injunctive relief enjoining defendants from proceeding with or consummating the
transaction with Parent or rescission in the event the transaction is
consummated. The Company intends to, and understands that the other defendants
intend to, vigorously defend this lawsuit, including the request for a
preliminary injunction. The foregoing description of the complaint is qualified
in its entirety by reference to such complaint filed as exhibit (c)(4) to the
Schedule 14D-1 and incorporated by reference.
On June 4, 1997, another individual and purported class action was
commenced in the Court of Chancery of the State of Delaware, New Castle County,
purportedly on behalf of stockholders of the Company. The defendants are the
Company, Parent, L. Ben Lytle, Patrick M. Sheridan, Dwane R. Houser, and Frank
C. Whitthun. The complaint alleges that in connection with the proposed merger
transaction with Parent, the defendants, among other things, have violated
fiduciary duties, failed to exercise independent business judgment, and acted to
the detriment of the Company's public stockholders for their own personal
benefit. The complaint seeks damages in an unspecified amount, preliminary and
permanent injunctive relief enjoining Parent from acquiring the outstanding
shares of the Company not already owned by it, and an order directing defendants
to carry out their fiduciary duties to plaintiff and the purported class. The
Company intends to, and understands that the other defendants intend to
vigorously defend this lawsuit, including the request for preliminary
injunction. The foregoing description of the complaint is qualified in its
entirety by reference to such complaint filed as exhibit (c)(5) to the Schedule
14D-1 and incorporated by reference.
FEES AND EXPENSES
Credit Suisse First Boston is acting as Dealer Manager in connection with
the Offer and serving as financial advisor to Parent in connection with its
proposed acquisition of the Common Stock. Parent has agreed to pay Credit Suisse
First Boston an advisory fee of $100,000 (creditable against the transaction
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fee) and a transaction fee of $2.5 million in connection with the effort to
acquire all of the outstanding Common Stock of the Company, $500,000 of which
was payable upon the execution of the Merger Agreement, and the balance of which
is payable upon the closing of the Offer if at such time Parent beneficially
owns more than 90% of the outstanding shares of Common Stock of the Company or
upon the closing of the Merger. Parent has also agreed to reimburse Credit
Suisse First Boston for all out-of-pocket expenses, including the fees and
expenses of its legal counsel and will indemnify Credit Suisse First Boston
against certain liabilities and expenses in connection herewith, including,
without limitation, certain liabilities under federal securities laws. In
addition, Parent has agreed to pay Credit Suisse First Boston a separate fee of
$2.5 million in connection with the sale of Acordia Brokers, which fee shall be
payable upon the sale of all or a substantial amount of the assets or capital
stock of Acordia Brokers.
Credit Suisse First Boston may from time to time in the future render
various investment banking services to Parent and its affiliates, for which it
is expected it would be paid customary fees. In the ordinary course of business,
Credit Suisse First Boston and its affiliates may actively trade the securities
of Parent and the Company for their own account and for the account of customers
and accordingly may, at any time, hold long or short positions in such
securities. Credit Suisse First Boston has from time to time rendered various
investment banking services to the Company.
D. F. King & Co., Inc. has been retained by the Purchaser as Information
Agent in connection with the Offer. The Information Agent may contact holders of
Common Stock by mail, telephone, telex, telegraph and personal interview and may
request brokers, dealers and other nominee stockholders to forward material
relating to the Offer to beneficial owners of Common Stock. The Purchaser will
pay the Information Agent reasonable and customary compensation for all such
services in addition to reimbursing the Information Agent for reasonable
out-of-pocket expenses in connection therewith. The Purchaser has agreed to
indemnify the Information Agent against certain liabilities and expenses in
connection with the Offer, including, without limitation, certain liabilities
under the federal securities laws.
First Chicago Trust Company of New York has been retained as the
Depositary. The Purchaser will pay the Depositary reasonable and customary
compensation for its services in connection with the Offer, will reimburse the
Depositary for its reasonable out-of-pocket expenses in connection therewith and
will indemnify the Depositary against certain liabilities and expenses in
connection therewith, including, without limitation, certain liabilities under
the federal securities laws.
Except as set forth above, neither Parent nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person for soliciting tenders
of Common Stock pursuant to the Offer. Brokers, dealers, commercial banks and
trust companies and other nominees will, upon request, be reimbursed by Parent
or the Purchaser for customary clerical and mailing expenses incurred by them in
forwarding offering materials to their customers.
The Merger Agreement provides that all costs and expenses incurred in
connection with the Merger Agreement will be paid by the party incurring the
expense. Estimated costs and fees to be incurred by Parent in connection with
the Offer and the Merger are as follows:
Investment banking fees................................................. $2,500,000
Legal fees.............................................................. 350,000
S.E.C. filing fees...................................................... 57,487
Printing costs.......................................................... 50,000
Solicitation costs...................................................... 20,000
Miscellaneous........................................................... 22,513
--------
Total......................................................... 3,000,000
========
The Company has advised Parent that the estimated fees and expenses to be
incurred by the Company in connection with the Offer and the Merger will be
approximately $1,000,000.
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MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Common Stock in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. Neither the Purchaser
nor Parent is aware of any jurisdiction in which the making of the Offer or the
acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Purchaser may, in its discretion, take such action as
it may deem necessary to make the Offer in any jurisdiction and extend the Offer
to holders of Common Stock in such jurisdiction. In any jurisdiction the
securities, blue sky or other laws of which require the Offer to be made by a
licensed broker or dealer, the Offer is being made on behalf of the Purchaser by
the Dealer Manager or one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser and Parent have filed with the Commission a Transaction
Statement on Schedule 13E-3 pursuant to Rule 13e-3 under the Exchange Act,
together with Exhibits, and a Tender Offer Statement on Schedule 14D-1 pursuant
to Rule 14D-3 under the Exchange Act, together with Exhibits, each of which
furnishes certain additional information with respect to the Offer, and may file
amendments thereto. Such Schedule 13E-3 and Schedule 14D-1, and any amendments
thereto, including Exhibits, may be inspected and copies may be obtained in the
manner set forth under "-- Certain Information Concerning the Company" (except
that such material will not be available at the regional offices of the
Commission).
AICI ACQUISITION CORP.
June 6, 1997
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
1. Directors and Executive Officers of Parent. Set forth below is the
name, current business address, citizenship and the present principal occupation
or employment and material occupations, positions, offices or employments for
the past five years, as well as the amount and nature of the beneficial
ownership of the Company's Common Stock, of each director and executive officer
of Parent. The principal address of Parent and the current business address for
each individual listed below is 120 Monument Circle, Indianapolis, Indiana. Each
of the individuals listed below is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; STOCK OWNERSHIP
MATERIAL POSITIONS HELD DURING THE PAST FIVE OF THE COMPANY'S
NAME YEARS COMMON STOCK
- ------------------------------ --------------------------------------------- ----------------
Dwane R. Houser............... Chairman of the Board of Parent. Mr. Houser 8,449(1)
has been Chairman of Board of Parent since
October 1995 and a director of the Company
since September 1995. Prior to his
affiliation with Parent, he was Chairman of
the Board and Chief Executive Officer of
Community Mutual Insurance Company, a
health insurance company which merged with
Parent in October 1995 ("CMIC").
L. Ben Lytle.................. Chief Executive Officer, President and 136,500(2)
Director of Parent. Mr. Lytle has been
President, Chief Executive Officer and a
director of Parent since March 1989 and
Chairman of the Board of the Company since
it began operations. He served as the
Company's Chief Executive Officer from the
time it began operations until November
1996. From February 1994 to October 1995,
he served as Chairman of the Board of
Parent.
Stephen T. Bow................ Director of Parent. Mr. Bow has been a 2,050
director of Parent since 1993. From 1994
until his retirement in December 1996, Mr.
Bow was Chairman and Chief Executive
Officer of Anthem Life Insurance Companies,
and from July 1993 through June 1994 was
President and Chief Executive Officer of
Southeastern Group, Inc., the successor to
Southeastern Mutual Insurance Company,
d/b/a BC/BS of Kentucky (which merged into
Parent in 1993), for whom he served as
President and Chief Executive Officer since
1989.
Vincent A. Chiarucci.......... Director of Parent. Mr. Chiarucci has been a --
director of Parent since October 1995. From
June 1987 until his retirement in January
1995, Mr. Chiarucci was President of Figgie
International, Inc.
Kenneth K. Harper............. Director of Parent. Mr. Harper has been a 205
director of Parent since 1993. Mr. Harper has
been President of The Harper Realty Group,
L.L.C. since 1986.
John R. Hodowal............... Director of Parent. Mr. Hodowal has been a --
director of Parent since 1991. Mr. Hodowal
has been Chairman and Chief Executive
Officer of IPALCO Enterprises, Inc. since
1989.
Frank B. Hower, Jr. .......... Director of Parent. Mr. Hower has been a 1,000
director of Parent since 1993. From 1980
until his retirement in 1990, Mr. Hower was
Chairman and Chief Executive Officer of
Liberty National Bancorp, Inc.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; STOCK OWNERSHIP
MATERIAL POSITIONS HELD DURING THE PAST FIVE OF THE COMPANY'S
NAME YEARS COMMON STOCK
- ------------------------------ --------------------------------------------- ----------------
William G. Mays............... Director of Parent. Mr. Mays has been a 1,000
director of Parent since 1993. Mr. Mays has
been the President of Mays Chemical Co.,
Inc. since 1980.
James W. McDowell, Jr. ....... Director of Parent. Mr. McDowell has been a --
director of Parent since 1993. He has been
President of McDowell & Associates since
1992 and was Chief Executive Officer of
Dairyman, Inc. from 1980 to 1992.
James A. Perkins.............. Director of Parent. Mr. Perkins has been a 450
director of Parent since 1989. From 1964
until his retirement in May 1995, he was
International Representative of United Auto
Workers, Region 3.
George A. Schaeffer, Jr. ..... Director of Parent. Mr. Schaefer has been a --
director of Parent since October 1995. He has
served as President and Chief Executive
Officer of Fifth Third Bancorp/Fifth Third
Bank since 1990.
Andrew W. Skrobola............ Director of Parent. Mr. Skrobola has been a --
director of Parent since October 1995. He has
served as Senior Vice President of Finance
of Thomas Steel Strip Corp. since 1975.
Charles C. Smith, Jr.,
M.D. ....................... Director of Parent. Dr. Smith has been a --
director of Parent since 1993. Dr. Smith has
been a physician since 1962.
Dennis J. Sullivan, Jr. ...... Director of Parent. Mr. Sullivan has been a --
director of Parent since October 1995. Since
1993, Mr. Sullivan has been Executive
Counselor of Dan Pinger Public Relations.
From 1987 until 1993, he was Executive Vice
President and Chief Financial Officer of
Cincinnati Bell, Inc.
Sr. Francis M. Thrailkill..... Director of Parent. Sister Thrailkill has --
been a director of Parent since October 1995.
She has served as President of College of
Mount St. Joseph since 1987.
Fred C. Tucker III............ Director of Parent. Mr. Tucker has been a 2,930
director of Parent since 1989. He has been
President of F. C. Tucker Company, Inc.
since 1977.
Thomas C. Walker.............. Director of Parent. Mr. Walker has been a 1,000
director of Parent since 1979. From 1980
until his retirement in 1990, Mr. Walker
was Executive Vice President and Chief
Financial Officer of Indiana Bell Telephone
Company, Inc.
Patrick M. Sheridan........... Executive Vice President and Chief Financial 78,000(2)
Officer of Parent. Mr. Sheridan has served as
Executive Vice President and Chief
Financial Officer of Parent since 1987, and
he was Treasurer of Parent from 1987 to
1991. From 1989 until August 1996, he
served as Executive Vice President and
Chief Financial Officer of the Company. Mr.
Sheridan has been a director of the Company
since 1989.
David R. Frick................ Executive Vice President and Chief 5,278(1)
Administrative Officer of Parent. Mr. Frick
has served as Executive Vice President and
Chief Administrative Officer of Parent
since 1995. Prior to joining the Parent, he
was an attorney with Baker & Daniels and
was Managing Partner of the firm from 1987
to 1992.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; STOCK OWNERSHIP
MATERIAL POSITIONS HELD DURING THE PAST FIVE OF THE COMPANY'S
NAME YEARS COMMON STOCK
- ------------------------------ --------------------------------------------- ----------------
Bain J. Farris................ Executive Vice President of Integrated Health 1,524
Care Delivery of Parent. Mr. Farris has
served as Executive Vice President since
January 1995. From 1986 through 1994, he
was President and Chief Executive Officer
of St. Vincent Hospital and Health Center.
- ---------------
(1) Amount includes restricted stock as to which the executive has the right to
vote and receive dividends but does not have the right to dispose of such
stock until the expiration of various restriction periods as follows: Mr.
Houser -- 5,076 restricted shares and Mr. Frick -- 3,045.5 restricted
shares. During such restriction periods, the restricted stock is subject to
forfeiture upon termination of the executive's employment with Parent or one
of its subsidiaries.
(2) Amount includes 31,500 exercisable options held by Mr. Lytle; and 18,000
exercisable options held by Mr. Sheridan.
2. Directors and Executive Officers of the Purchaser. The executive
officers of the Purchaser are Dwane R. Houser, Chairman; L. Ben Lytle,
President; Patrick M. Sheridan, Treasurer; and David R. Frick, Secretary. The
directors of the Purchaser are Messrs. Houser, Lytle, Sheridan and Frick. The
current business address, citizenship and present occupation or employment and
material occupations, positions, offices or employments for the past five years,
as well as the amount and nature of the beneficial ownership of the Company's
Common Stock, of each such officer and director of the Purchaser are as set
forth above.
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SCHEDULE II
PURCHASES OF COMMON STOCK BY PARENT
Set forth below are the amount of shares of Common Stock purchased by
Parent since January 1, 1995, the range of prices paid for such shares and the
average purchase price for each quarterly period of the Company during such
period:
FISCAL QUARTER NUMBER OF SHARES PRICE RANGE AVERAGE PRICE
- ----------------------------------------------- ---------------- ----------- ----------------
4th Quarter 1995............................... 58,400 $27 1/2-29 1/8 $28.36125
1st Quarter 1996............................... 418,600 $27 3/4-31 39.375
2nd Quarter 1996............................... 4,500 $31 7/8-32 1/2 32.1875
3rd Quarter 1996............................... -- -- --
4th Quarter 1996............................... -- -- --
1st Quarter 1997............................... 5,988(1) N/A(1) N/A(1)
- ---------------
(1) The transactions reported consist of Parent's acceptance of restricted
shares of Common Stock in satisfaction of tax withholding obligations of
participants in the Anthem Acordia Stock Plan upon the lapse of restrictions
upon such shares, at the request of the participants, pursuant to the plan.
S-II-1
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ANNEX I
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Section 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Section
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
A-I-1
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the
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effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound,
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49
as the Court may direct. Payment shall be so made to each such stockholder, in
the case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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50
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for shares of
Common Stock and any other required documents should be sent or delivered by
each Stockholder or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at one of the addresses set forth below:
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Hand: By Overnight Delivery:
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of New York of New York of New York
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 c/o The Depository Trust Company Suite 4680
P.O. Box 2569 55 Water Street, DTC TAD 14 Wall Street
Jersey City, New Jersey 07303 Vietnam Veterans Memorial Plaza New York, New York 10005
New York, New York 10041
By Facsimile Transmission To Confirm Receipt of
(For Eligible Institutions Only): Notice of Guaranteed Delivery:
(201) 222-4720 (201) 222-4707
or
(201) 222-4721
Any questions and request for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent at the telephone numbers and addresses
below. You may also contact your local broker, dealer, commercial bank or trust
company for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Call Toll Free (800) 207-2872
The Dealer Manager for the Offer is:
[CREDIT SUISSE LOGO]
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (888) 624-6123
June 6, 1997