OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ATALANTA/SOSNOFF CAPITAL CORPORATION
BY
ATALANTA ACQUISITION COMPANY
WHOLLY OWNED BY
MARTIN T. SOSNOFF
AT
$13.95 NET PER SHARE
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON JULY 11, 2003, UNLESS THE OFFER IS EXTENDED.
----------------
THIS OFFER (THE "OFFER") IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF
MERGER (THE "MERGER AGREEMENT"), DATED AS OF JUNE 10, 2003, BY AND AMONG
ATALANTA/SOSNOFF CAPITAL CORPORATION (THE "COMPANY"), MARTIN T. SOSNOFF AND
ATALANTA ACQUISITION COMPANY ("PURCHASER"). SEE "SPECIAL FACTORS -- THE MERGER
AGREEMENT AND TENDER AGREEMENTS."
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, PURCHASER HAVING ACQUIRED,
AS A RESULT OF THE OFFER, A NUMBER OF SHARES, WHICH TOGETHER WITH THE SHARES
OWNED BY PURCHASER AND MARTIN T. SOSNOFF, CONSTITUTE AT LEAST 90% OF THE ISSUED
AND OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY (THE "SHARES") AS OF THE
DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER. THE OFFER IS
ALSO SUBJECT TO CERTAIN OTHER CONDITIONS DESCRIBED IN "THE OFFER -- SECTION 11.
CONDITIONS TO THE OFFER."
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), BY UNANIMOUS DECISION OF
THOSE DIRECTORS PARTICIPATING AND BASED ON THE RECOMMENDATION OF A SPECIAL
COMMITTEE OF INDEPENDENT DIRECTORS OF THE BOARD (THE "SPECIAL COMMITTEE"): (1)
HAS DETERMINED THAT IT IS FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS (OTHER THAN PURCHASER, MR. SOSNOFF AND THEIR AFFILIATES) TO
CONSUMMATE THE OFFER AND MERGER UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF
THE MERGER AGREEMENT AND IN ACCORDANCE WITH DELAWARE LAW; (2) HAS APPROVED AND
DECLARED ADVISABLE THE OFFER, THE MERGER AND THE MERGER AGREEMENT; AND (3) HAS
RESOLVED TO RECOMMEND THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT THERETO. SEE "SPECIAL FACTORS -- RECOMMENDATION OF
THE SPECIAL COMMITTEE AND THE BOARD; FAIRNESS OF THE OFFER AND MERGER."
THE BLACKSTONE GROUP L.P., THE FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE, HAS
DELIVERED TO THE SPECIAL COMMITTEE ITS WRITTEN OPINION THAT, SUBJECT TO
IMPORTANT ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS SET FORTH THEREIN, AS OF
JUNE 6, 2003, THE CONSIDERATION TO BE RECEIVED BY THE STOCKHOLDERS OF THE
COMPANY (OTHER THAN PURCHASER, MR. SOSNOFF AND THEIR AFFILIATES) FOR EACH OF
THEIR SHARES PURSUANT TO THE OFFER AND MERGER IS FAIR TO SUCH STOCKHOLDERS FROM
A FINANCIAL POINT OF VIEW. SEE "SPECIAL FACTORS -- OPINION OF FINANCIAL
ADVISOR."
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IMPORTANT
A summary of the principal terms of the Offer appears on pages 1 -- 6 hereof.
Any stockholder who wishes to tender its Shares in the Offer should either:
o complete and sign the enclosed Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of
Transmittal, have its signature thereon guaranteed (if required by
Instruction 1 to the Letter of Transmittal), mail or deliver the Letter
of Transmittal (or a facsimile thereof) and any other required documents
to the Depositary (as defined herein) and either deliver the certificates
for its Shares along with the Letter of Transmittal to the Depositary or
tender its Shares pursuant to the procedures for book-entry transfer set
forth in "The Offer -- Section 3. Procedures for Tendering Shares;" or
o request such stockholder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for such stockholder.
Any stockholder whose Shares are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee should contact
its broker, dealer, commercial bank, trust company or nominee to tender
such stockholder's Shares.
Any stockholder who desires to tender Shares and certificates evidencing such
Shares who are not immediately available, or who cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, or who cannot deliver all required documents to EquiServe Trust
Company, N.A., the Depositary for the Offer, prior to the expiration of the
Offer, may be able to tender such Shares by following the procedures for
guaranteed delivery set forth in "The Offer -- Section 3. Procedures for
Tendering Shares."
Questions and requests for assistance or for additional copies of this Offer to
Purchase, the Letter of Transmittal or other tender offer materials may be
directed to EquiServe Trust Company, N.A., the Information Agent for the Offer,
at the address and telephone number set forth on the back cover of this Offer
to Purchase. A stockholder may request additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery from
the Information Agent, or such stockholder's broker, dealer, commercial bank or
trust company.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFER OR MERGER OR PASSED UPON
THE FAIRNESS OR MERITS OF THE OFFER OR MERGER OR UPON THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS OFFER TO PURCHASE OR ANY EXHIBITS HERETO
OR THE MERGER AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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June 13, 2003
TABLE OF CONTENTS
PAGE
-----
SUMMARY TERM SHEET ..................................................................... 1
INTRODUCTION ........................................................................... 7
SPECIAL FACTORS ........................................................................ 10
Background of the Offer ............................................................ 10
Purpose and Structure of the Offer and Merger; Reasons of Purchaser and
Mr. Sosnoff for the Offer and Merger ............................................. 20
Recommendation of the Special Committee and the Board; Fairness of the Offer
and Merger ....................................................................... 21
Opinion Of Financial Advisor ....................................................... 25
Position of Purchaser and Mr. Sosnoff Regarding the Fairness of the Offer and
Merger ........................................................................... 32
The Merger; Plans for the Company after the Offer and Merger; Certain Effects of
the Offer and Merger ............................................................. 32
The Merger Agreement and Tender Agreements ......................................... 34
Conduct of the Company's Business if the Offer is Not Completed .................... 39
Appraisal Rights ................................................................... 40
Beneficial Ownership of the Shares ................................................. 43
Related Party Transactions ......................................................... 43
Interests of Certain Persons in the Offer and Merger ............................... 45
THE OFFER .............................................................................. 47
1. Terms of the Offer; Expiration Date .................................... 47
2. Acceptance for Payment and Payment for Shares .......................... 49
3. Procedures for Tendering Shares ........................................ 50
4. Withdrawal Rights ...................................................... 53
5. Material U.S. Federal Income Tax Consequences .......................... 53
6. Price Range of Shares; Dividends ....................................... 54
7. Certain Effects of the Offer on the Market for the Shares; NYSE Listing;
Registration under the Exchange Act; Margin Regulation ............... 55
8. Certain Information Concerning the Company ............................. 56
9. Certain Information Concerning Purchaser ............................... 60
10. Source and Amount of Funds ............................................. 61
11. Conditions to the Offer ................................................ 61
12. Certain Legal Matters .................................................. 63
13. Fees and Expenses ...................................................... 65
14. Miscellaneous .......................................................... 66
SCHEDULE I Information Concerning Directors and Executive Officers of the
Company
ANNEX A Section 262 of the General Corporation Law of The State Of
Delaware
i
SUMMARY TERM SHEET
Atalanta Acquisition Company ("Purchaser"), a Delaware corporation which
is wholly owned by Martin T. Sosnoff (together with Purchaser, "we" or "us"),
Chairman, Chief Executive Officer and Chief Investment Officer of
Atalanta/Sosnoff Capital Corporation ("Atalanta/Sosnoff"), is offering to
purchase all of the issued and outstanding shares of common stock, par value
$0.01 per share, of Atalanta/Sosnoff (the "Shares") for $13.95 per Share in
cash, without interest and less any required withholding taxes, and upon the
terms and subject to the conditions set forth in this Offer to Purchase and the
related Letter of Transmittal (which together constitute the "Offer"). As of
June 12, 2003, Mr. Sosnoff beneficially owned approximately 81% of the Shares
on a fully-diluted basis. The following are some of the questions that you, as
a stockholder of Atalanta/Sosnoff, may have and answers to those questions. We
urge you to carefully read the remainder of this Offer to Purchase and the
accompanying Letter of Transmittal because the information in this summary may
not answer all of your questions and additional important information is
contained in the remainder of this Offer to Purchase and the accompanying
Letter of Transmittal.
In this document, references to "dollars" or "$" are to United States
dollars, unless noted otherwise.
WHO IS OFFERING TO BUY MY SHARES?
Our name is Atalanta Acquisition Company, a Delaware corporation wholly
owned by Mr. Sosnoff, Chairman, Chief Executive Officer and Chief Investment
Officer of Atalanta/Sosnoff, formed for the purpose of acquiring all of the
Shares not already owned by Mr. Sosnoff. As of June 12, 2003, Mr. Sosnoff
beneficially owned approximately 81% of the Shares on a fully-diluted basis.
Purchaser has not conducted any activities other than as described in this
Offer to Purchase since its organization. See "Introduction" and "The Offer --
Section 9. Certain Information Concerning Purchaser." Upon the successful
completion of the Offer (including satisfaction of the Minimum Condition (as
defined below)), Mr. Sosnoff will transfer all of the Shares owned by him to
Purchaser to effect a merger of Purchaser with and into Atalanta/Sosnoff with
Atalanta/Sosnoff being the surviving corporation. See "Special Factors --
Purpose and Structure of the Offer and Merger; Reasons of Purchaser and Mr.
Sosnoff for the Offer and Merger" and "Special Factors -- The Merger Agreement
and Tender Agreements."
WHY ARE YOU MAKING THIS OFFER?
We are making this Offer to acquire all of the outstanding Shares that Mr.
Sosnoff does not already own. See "Introduction" and "Special Factors --
Purpose and Structure of the Offer and Merger; Reasons of Purchaser and Mr.
Sosnoff for the Offer and Merger."
WHAT SHARES ARE BEING SOUGHT IN THE OFFER?
We are seeking to purchase any and all of the Shares that Mr. Sosnoff does
not already own. See "Introduction" and "The Offer -- Section 1. Terms of the
Offer; Expiration Date."
HOW MUCH ARE YOU OFFERING TO PAY FOR MY SHARES? WHAT IS THE FORM OF PAYMENT?
We are offering to pay $13.95 per Share net to you in cash, without
interest and less any required withholding taxes. See "Introduction" and "The
Offer -- Section 1. Terms of the Offer; Expiration Date." You should know that
$11.35 of the offer price of $13.95 per Share represents the fair market value
of the investment capital and the book value of the other balance sheet net
assets of the Company as of the close of the markets on June 6, 2003. See
"Special Factors -- Opinion Of Financial Advisor." There can be no assurance
that the fair market value of the investment capital will not fluctuate after
such time up to and including the date on which the Offer expires. Nonetheless,
the offer price of $13.95 is fixed and will not be adjusted to reflect any
fluctuations in the fair market value of the investment capital after June 6,
2003.
WILL I HAVE TO PAY ANY FEES OR COMMISSIONS?
If you are the record owner of your Shares and you tender your Shares to
us in the Offer, you will not have to pay brokerage fees or similar expenses.
If you own your Shares through a broker or
other nominee, and your broker or nominee tenders your Shares on your behalf,
they may charge you a fee for doing so. You should consult your broker or
nominee to determine whether any charges will apply. See "Introduction" and
"The Offer -- Section 3. Procedures for Tendering Shares."
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
We will need approximately $22.7 million to purchase all Shares that Mr.
Sosnoff does not already own pursuant to the Offer and to provide funding for
the merger which may be necessary following the successful completion of the
Offer exclusive of any related transaction fees and expenses. These funds are
expected to be obtained from a loan obtained by Purchaser for this purpose,
and, to the extent any amounts are due or may be paid by Purchaser (or the
surviving corporation in the merger described below) after the consummation of
the merger (for example, funds necessary to consummate the merger and certain
transaction fees and expenses), from generally available working capital of the
surviving corporation in the merger. The Offer is not conditioned upon any
financing arrangements. See "Special Factors -- The Merger; Plans for the
Company after the Offer and Merger; Certain Effects of the Offer and Merger"
and "The Offer -- Section 10. Source and Amount of Funds."
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER SHARES?
We do not think our financial condition is material to your decision
whether to tender Shares in the Offer because:
o the Offer is being made for all of the Shares solely for cash;
o the Offer is not subject to any financing condition; and
o if we consummate the Offer and not all Shares are tendered and accepted
for payment, in the merger Purchaser will acquire all Shares not tendered
in the Offer for the same purchase price paid in the Offer.
See "The Offer -- Section 10. Source and Amount of Funds."
WHAT ARE THE MOST IMPORTANT CONDITIONS TO THE OFFER?
The Offer is conditioned upon, among other things, that enough Shares are
tendered and not withdrawn so that on the expiration date of the Offer we will
own at least 90% of the Shares (including Shares already owned by Mr. Sosnoff)
(the "Minimum Condition"). The transaction is not subject to approval of a
majority of the public stockholders of Atalanta/Sosnoff. For a complete
description of all of the conditions to which the Offer is subject, see "The
Offer -- Section 11. Conditions to the Offer."
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You have until 12:00 midnight, New York City time, on July 11, 2003, to
decide whether to tender your Shares in the Offer unless the Offer is extended.
Further, if you cannot deliver everything that is required in order to make a
valid tender by that time, you may be able to use a guaranteed delivery
procedure, which is described later in this Offer to Purchase. See "The Offer
- -- Section 3. Procedures for Tendering Shares."
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
Yes. We can elect at any time to extend the Offer. If we extend the Offer,
we will inform EquiServe Trust Company, N.A., the depositary for the Offer, of
that fact, and will make a public announcement of the extension, not later than
9:00 a.m., New York City time, on the next business day after the day on which
the Offer was scheduled to expire. We may, at our discretion, elect to provide
a subsequent offering period of 3 to 20 business days beginning after we have
purchased Shares during the Offer, during which stockholders may tender, but
not withdraw, their Shares and receive the offer consideration, although we are
not obligated to do so.
2
In the event that any of the conditions to the Offer are not satisfied or,
if applicable, waived on any scheduled expiration date of the Offer, we have
agreed to extend the Offer for a period of 10 business days and, if at the end
of such 10 business day period all of the conditions to the Offer are still not
satisfied or, if applicable, waived, an additional period of 10 business days.
Furthermore, without the consent of Atalanta/Sosnoff (including the prior
written consent of the Special Committee), we may not extend the Offer beyond
August 22, 2003. See "The Offer -- Section 1. Terms of the Offer; Expiration
Date."
HOW DO I TENDER MY SHARES?
To tender your Shares, you must deliver the certificates evidencing your
Shares, together with a completed Letter of Transmittal, to EquiServe Trust
Company, N.A., the depositary for the Offer, not later than the time the Offer
expires. If your Shares are held in street name (that is, through a broker,
dealer or other nominee), the Shares can be tendered by your nominee through
The Depositary Trust Company. If you cannot get all required documents to the
depositary by the expiration of the Offer, you may get a little extra time to
do so by having a broker, bank or other fiduciary who is a member of the
Securities Transfer Agent Medallion Program or other eligible institution
guarantee that the missing items will be received by the depositary within
three NYSE trading days. However, the depositary must receive the missing items
within that three trading day period. See "The Offer -- Section 3. Procedures
for Tendering Shares."
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You can withdraw previously tendered Shares at any time until the Offer
has expired and, if we have not agreed to accept your Shares for payment by
12:00 midnight, New York City time, on August 1, 2003, you can withdraw them at
any time after such date until we do accept your Shares for payment. This right
to withdraw will not apply to any subsequent offering period if we elect to
establish one. See "The Offer -- Section 1. Terms of the Offer; Expiration
Date."
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To withdraw Shares that have been tendered you must deliver a written
notice of withdrawal, or a facsimile of one, with the required information to
the depositary while you still have the right to withdraw the Shares. See "The
Offer -- Section 4. Withdrawal Rights."
HAS A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS BEEN FORMED TO EVALUATE THE
OFFER AND MERGER? IF SO, WHAT DOES THE SPECIAL COMMITTEE THINK OF THE OFFER AND
MERGER?
Yes. The board of directors of Atalanta/Sosnoff (the "Board") established
a special committee comprised of Jay S. Goldsmith, Ronald H. Menaker and
Thurston Twigg-Smith, who are independent directors and have no present or
former affiliation with Atalanta/Sosnoff or us except in their capacity as
directors of Atalanta/Sosnoff, to evaluate the Offer and merger. The special
committee (1) has determined that it is fair to and in the best interests of
Atalanta/Sosnoff and its stockholders (other than us and our affiliates) to
consummate the Offer and merger upon the terms and subject to the conditions of
the Merger Agreement and in accordance with Delaware General Corporation Law
(the "DGCL"); (2) has approved and declared advisable the Offer, the merger and
the Merger Agreement; and (3) has resolved to recommend that Atalanta/Sosnoff's
stockholders accept the Offer and tender their Shares pursuant thereto. See
"Special Factors -- Recommendation of the Special Committee and the Board;
Fairness of the Offer and Merger."
WHAT DOES THE BOARD OF DIRECTORS OF ATALANTA/SOSNOFF THINK OF THE OFFER?
The Board, by unanimous decision of those directors participating and
based upon the recommendation of the special committee as described in the
previous question: (1) has determined that it is fair to and in the best
interests of Atalanta/Sosnoff and its stockholders (other than us and our
affiliates) to consummate the Offer and merger upon the terms and subject to
the conditions of
3
the Merger Agreement and in accordance with Delaware law; (2) has approved and
declared advisable the Offer, the merger and the Merger Agreement; and (3) has
resolved to recommend that Atalanta/Sosnoff's stockholders accept the Offer and
tender their Shares pursuant thereto. Mr. Sosnoff and Craig B. Steinberg,
President of Atalanta/Sosnoff and a director on the Board, refrained from
voting on these matters in light of their conflicts of interest. Accordingly,
for the purpose of this approval, the Special Committee and the Board are
comprised of the same individuals. See "Special Factors -- Recommendation of
the Special Committee and the Board; Fairness of the Offer and Merger" and
"Special Factors -- Interests of Certain Person in the Offer and Merger."
HAVE ANY ATALANTA/SOSNOFF STOCKHOLDERS AGREED TO TENDER THEIR SHARES IN THE
OFFER?
Yes. Two stockholders owning approximately 7% of the Shares on a
fully-diluted basis, one who is a director and executive officer and the other
who is an executive officer of Atalanta/Sosnoff, have entered into Tender
Agreements with us pursuant to which each of them has agreed to tender his
Shares in the Offer. See "Special Factors -- The Merger Agreement and Tender
Agreements" and "Special Factors -- Beneficial Ownership of the Shares." To the
knowledge of Purchaser and Mr. Sosnoff, each other executive officer or
director of Atalanta/Sosnoff who owns Shares intends to tender his Shares in
the Offer.
HAS ATALANTA/SOSNOFF RECEIVED AN OPINION REGARDING THE FAIRNESS OF THE OFFER
AND MERGER?
Yes. In connection with the Offer and merger, The Blackstone Group L.P.,
the financial advisor to the special committee, has delivered to the special
committee its written opinion that, as of June 10, 2003, the consideration to
be received by the stockholders of Atalanta/Sosnoff (other than us and our
affiliates) in exchange for each of their Shares pursuant to the Offer and
merger is fair to such stockholders from a financial point of view. You should
be aware, however, that the opinion was based on and subject to important
assumptions, limitations and qualifications. The full text of this opinion is
set forth in full as an annex to Atalanta/Sosnoff's Solicitation/
Recommendation Statement on Schedule 14D-9, which is being mailed to
stockholders simultaneously with this Offer to Purchase. We urge you to read
that opinion in its entirety for a description of the assumptions made,
procedures followed, factors considered and limitations on the review
undertaken. See "Special Factors -- Opinion Of Financial Advisor."
You should also be aware that we did not engage a financial advisor to
perform any valuation analysis for purposes of assessing, or delivering an
opinion with respect to, the fairness of the Offer and merger to
Atalanta/Sosnoff stockholders. See "Special Factors -- Position of Purchaser
and Mr. Sosnoff Regarding the Fairness of the Offer and Merger."
IF MY TENDERED SHARES ARE ACCEPTED IN THE OFFER, WHEN WILL I GET PAID?
If the conditions to the Offer are satisfied and we consummate the Offer
and accept your Shares for payment, you will receive a check for an amount
equal to the product of the number of Shares you have tendered in the Offer
multiplied by $13.95 per Share net to you in cash, without interest and less
any required withholding taxes. The checks will be mailed out promptly
following our acceptance of Shares in the Offer. See "The Offer -- Section 2.
Acceptance for Payment and Payment for Shares."
In all cases, payment for tendered Shares will be made only after timely
receipt by us of certificates for such Shares (or of a confirmation of a
book-entry transfer of such Shares as described in "The Offer -- Section 3.
Procedures for Tendering Shares"), a properly completed and duly executed
Letter of Transmittal and any other required documents for such Shares.
WILL THE OFFER BE FOLLOWED BY A MERGER IF NOT ALL THE PUBLICLY TRADED SHARES
ARE TENDERED IN THE OFFER?
Following the successful completion of the Offer (including the
satisfaction of the Minimum Condition), we will cause a merger of
Atalanta/Sosnoff with and into Purchaser with Atalanta/Sosnoff continuing as
the surviving corporation. If the merger takes place, all of the remaining
stockholders of
4
Atalanta/Sosnoff (other than us) will receive $13.95 per Share in cash, without
interest and less any required withholding taxes (or any other higher price per
Share that is paid in the Offer). See "Special Factors -- The Merger; Plans for
the Company after the Offer and Merger; Certain Effects of the Offer and
Merger" and "Special Factors -- The Merger Agreement and Tender Agreements."
FOLLOWING THE OFFER, WILL ATALANTA/SOSNOFF CONTINUE AS A PUBLIC COMPANY?
No. If the merger described above takes place, Atalanta/Sosnoff will no
longer be publicly owned and we will take the necessary action to de-list the
Shares from the NYSE and de-register such Shares under the Exchange Act. Even
if the merger does not take place, because, among other reasons, there are
currently so few public stockholders, the Shares may no longer be eligible to
be traded on the NYSE. As a result, there may not be a public trading market
for the Shares and Atalanta/Sosnoff may cease being required to comply with SEC
rules governing publicly held companies. See "Special Factors -- The Merger;
Plans for the Company after the Offer and Merger; Certain Effects of the Offer
and Merger" and "The Offer -- Section 7. Certain Effects of the Offer on the
Market for the Shares; NYSE Listing; Registration under the Exchange Act;
Margin Regulation."
DO ANY DIRECTORS OR EXECUTIVE OFFICERS OF ATALANTA/SOSNOFF HAVE ANY INTERESTS
IN THE OFFER OR MERGER THAT ARE IN ADDITION TO OR DIFFERENT FROM THE INTERESTS
OF THE ATALANTA/SOSNOFF STOCKHOLDERS GENERALLY?
Yes. Mr. Sosnoff and certain other executive officers and directors of
Atalanta/Sosnoff have various interests in the Offer and merger that are in
addition to, or different from, the interests of the stockholders of the
Company generally, including the following:
o Mr. Sosnoff is the Chairman, Chief Executive Officer and Chief
Investment Officer of Atalanta/Sosnoff and, as a result of the Offer and
merger, will increase his beneficial ownership of Atalanta/Sosnoff common
stock from approximately 81% on a fully-diluted basis to 100%.
o Mr. Steinberg, President of Atalanta/Sosnoff and owner of approximately
7% of the Shares on a fully-diluted basis, is expected to receive a
significant minority interest in the asset management business of the
Company entitling him to, in very general terms, a portion of the future
profits and losses of such business following the merger. As noted above,
Mr. Steinberg has also entered into a Stockholder Tender Agreement
pursuant to which he has agreed to tender his Shares in the Offer.
o In the merger, options to purchase 200,000 shares of Atalanta/Sosnoff
common stock held by Atalanta/Sosnoff executive officers and directors
will be cashed out. These options are fully vested. In the aggregate,
these executive officers and directors will receive payment of
approximately $1.1 million as a result of their options being cashed out
in the merger.
o Under the terms of Atalanta/Sosnoff's Long-Term Incentive Plan (and
related award agreement), the Company has made certain loans to Mr.
Steinberg for the purpose of discharging his personal tax liability
incurred by reason of an award of restricted stock to him under this plan
in 1997. As of June 12, 2003, Mr. Steinberg owes the Company
approximately $2.3 million in respect of loans made under his award
agreement. Mr. Steinberg intends to repay this amount (together with
accrued interest through the date of repayment) in full with certain of
the proceeds received by him as a result of the tender of his Shares in
the Offer.
o It is expected that the current executive officers of Atalanta/Sosnoff
will be part of the management team of Atalanta/Sosnoff or its
subsidiaries after the Offer and merger. The current directors of
Atalanta/Sosnoff (other than Mr. Sosnoff) are not expected to continue as
directors of Atalanta/Sosnoff following the merger, although Mr.
Steinberg is expected to serve on the board of directors (or similar
governing body) or one or more of the Company's subsidiaries after the
Offer and merger.
5
o Each member of the special committee will receive compensation for
serving on the special committee equal to $2,000 (plus certain expenses)
for each meeting of the Special Committee that he attends. These amounts
are payable regardless of whether the Offer or merger is consummated.
o Atalanta/Sosnoff will continue existing indemnification arrangements for
a period of six years, and directors' and officers' liability insurance
for Atalanta/Sosnoff's past, present and future directors and officers
for a period of three years, following the merger.
See "Special Factors -- Interests of Certain Persons in the Offer and
Merger."
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
If the merger described above takes place, stockholders not tendering in
the Offer will receive the same amount of cash per Share which they would have
received had they tendered their Shares in the Offer, unless they seek a
judicial appraisal of their Shares which may result in a greater or lesser or
the same amount of cash being paid. Therefore, if the merger takes place, the
only differences to you between tendering your Shares and not tendering your
Shares is that you will be paid earlier if you tender your Shares in the Offer
and you will not have the statutory appraisal rights described in the next
question. If for some reason the merger does not take place, because, among
other reasons, there are currently so few public stockholders, the Shares may
be delisted from the NYSE and there may no longer be an active public trading
market for the Shares. As a result, Atalanta/Sosnoff may cease being required
to comply with SEC rules relating to publicly held companies. See "Special
Factors -- The Merger; Plans for the Company after the Offer and Merger;
Certain Effects of the Offer and Merger" and "The Offer -- Section 7. Certain
Effects of the Offer on the Market for the Shares; NYSE Listing; Registration
under the Exchange Act; Margin Regulation."
ARE APPRAISAL RIGHTS AVAILABLE IN THE OFFER?
If you tender your Shares in the Offer, you will not be entitled to
exercise statutory appraisal rights under Delaware law. If you do not tender
your Shares in the Offer, and if the subsequent merger occurs as described
above, you have a statutory right to demand payment of the judicially appraised
fair value of your Shares plus a fair rate of interest, if any, from the date
of the merger. This value may be more or less than or the same as the $13.95
per Share cash consideration in the Offer and merger. See "Special Factors --
Appraisal Rights" and "Annex A."
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On December 5, 2002, the last trading day prior to the date on which
Atalanta/Sosnoff announced it had received a preliminary, non-binding proposal
from us to acquire all of the outstanding Shares, the last sale price of a
Share reported on the NYSE was $10.25. On June 11, 2003, the second to last
trading day prior to commencement of the Offer, the last reported sales price
of a Share on the NYSE was $13.91. We advise you to obtain a recent quotation
for the Shares before deciding whether to tender your Shares. See "The Offer --
Section 6. Price Range of Shares; Dividends."
WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF TENDERING SHARES
AND OF THE MERGER?
Your receipt of cash for Shares in the Offer or merger will be a taxable
transaction for U.S. federal income tax purposes. You will generally recognize
gain or loss in an amount equal to the difference between (1) the amount of
cash paid to you in exchange for your Shares and (2) your adjusted tax basis in
the Shares you surrender. That gain or loss will be a capital gain or loss if
you hold the Shares as a capital asset, and will be long-term capital gain or
loss if the Shares have been held for more than one year at the time the Offer
or merger, as the case may be, is completed. You are urged to consult your own
tax advisor as to the particular tax consequences to you of the Offer and
merger. See "The Offer -- Section 5. Material U.S. Federal Income Tax
Consequences."
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call EquiServe Trust Company, N.A., the Information Agent for the
Offer, at (800) 730-6001. See the back cover of this Offer to Purchase.
6
To the Holders Of Common Stock Of Atalanta/Sosnoff Capital Corporation:
INTRODUCTION
Atalanta Acquisition Company, a Delaware corporation ("Purchaser"), which
is wholly owned by Martin T. Sosnoff, Chairman, Chief Executive Officer and
Chief Investment Officer of Atalanta/Sosnoff Capital Corporation (the
"Company"), hereby offers to purchase all the issued and outstanding shares of
common stock, par value $0.01 per share, of the Company (the "Shares" or the
"Common Stock"), at $13.95 per Share net to the seller in cash (the "Offer
Price"), without interest thereon and less any required withholding taxes, upon
the terms and subject to the conditions set forth in this Offer to Purchase and
in the related Letter of Transmittal (which together, as they may be amended or
supplemented from time to time, constitute the "Offer").
As of June 12, 2003, Mr. Sosnoff beneficially owned 7,000,000 Shares
(including, for purposes of this Offer to Purchase, 84,000 Shares owned by a
private charitable foundation controlled by Mr. Sosnoff and his wife and 93,900
Shares owned by an educational institution over which Mr. Sosnoff has
investment power), representing approximately 81% of the Shares on a
fully-diluted basis that were issued and outstanding as of such date. No
consideration will be paid for Shares beneficially owned by Mr. Sosnoff or
Purchaser at the time of the Offer or the Merger (as defined below), except
Shares held by a charitable foundation controlled by Mr. Sosnoff (which will be
entitled to receive the Offer Price of $13.95 per Share). Upon the successful
completion of the Offer (including satisfaction of the Minimum Condition (as
defined below)), Mr. Sosnoff will transfer all of the Shares owned by him to
Purchaser to enable Purchaser to effect the Merger. See "Special Factors --
Purpose and Structure of the Offer and Merger; Reasons of Purchaser and Mr.
Sosnoff for the Offer and Merger" and "Special Factors -- The Merger Agreement
and Tender Agreements."
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
June 10, 2003 (the "Merger Agreement"), by and among Purchaser, Mr. Sosnoff and
the Company. The Merger Agreement provides that following successful completion
of the Offer and the satisfaction or, if applicable, waiver of the conditions
in the Merger Agreement (other than the Minimum Condition, which may not be
waived without the consent of the Special Committee), Purchaser will be merged
with and into the Company (the "Merger"), with the Company continuing as the
surviving corporation (the Company as the surviving corporation of the Merger
is sometimes referred to as the "Surviving Corporation"), and the separate
corporate existence of Purchaser will thereupon cease. Purchaser and Mr.
Sosnoff intend to effect the Merger as a "short-form" merger under Delaware
General Corporation Law (the "DGCL"), without the approval or vote of, or any
notice to, the Board or stockholders of the Company. At the effective time of
the Merger (the "Effective Time"), each Share (other than Shares held by
Purchaser) will be cancelled and retired, and converted into the right to
receive the Offer Price, payable to the holder thereof without interest and
less any required withholding taxes (the "Merger Consideration"). The Merger
and the Merger Agreement are more fully described in "Special Factors --
Background of the Offer" and "Special Factors -- Purpose and Structure of the
Offer and Merger; Reasons of Purchaser and Mr. Sosnoff for the Offer and
Merger" and "Special Factors -- The Merger Agreement and Tender Agreements."
THE BOARD, BY UNANIMOUS DECISION OF THOSE DIRECTORS PARTICIPATING AND
BASED UPON THE RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS
OF THE BOARD (THE "SPECIAL COMMITTEE"): (1) HAS DETERMINED THAT IT IS FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS (OTHER THAN
PURCHASER, MR. SOSNOFF AND THEIR AFFILIATES) TO CONSUMMATE THE OFFER AND MERGER
UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE MERGER AGREEMENT AND IN
ACCORDANCE WITH THE DGCL; (2) HAS APPROVED AND DECLARED ADVISABLE THE OFFER,
THE MERGER AND THE MERGER AGREEMENT; AND (3) HAS RESOLVED TO RECOMMEND THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
THERETO. SEE "SPECIAL FACTORS -- RECOMMENDATION OF THE SPECIAL COMMITTEE AND
THE BOARD; FAIRNESS OF THE OFFER AND MERGER."
Tendering stockholders who are the record owners of their Shares will not
be obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of
Shares pursuant to the Offer. Tendering stockholders who hold their
7
Shares through a broker or other nominee should consult such institution as to
whether it charges any fees. Purchaser (or the Surviving Corporation) will pay
all charges and expenses of EquiServe Trust Company, N.A., the Information
Agent for the Offer (the "Information Agent") and the Depositary for the Offer
(the "Depositary"). See "The Offer -- Section 13. Fees and Expenses."
The Offer is conditioned on, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined below) a
number of Shares which, together with Shares owned by Purchaser and Mr.
Sosnoff, constitutes at least ninety percent (90%) of the Shares on the
Expiration Date of the Offer (the "Minimum Condition"). We do not believe that
we need to obtain any antitrust, bank regulatory or other material governmental
approvals, consents or clearances in order to complete this Offer. Purchaser
and Mr. Sosnoff reserve the right (subject to the applicable rules and
regulations of the Securities and Exchange Commission ("SEC") and the terms of
the Merger Agreement) to amend or waive any one or more of the terms and
conditions of the Offer (other than the Minimum Condition, which may not be
waived without the consent of the Special Committee). See "The Offer -- Section
11. Conditions to the Offer." The transaction is not subject to approval of a
majority of the public stockholders of the Company.
The Company has informed Purchaser and Mr. Sosnoff and has stated in the
Schedule 14D-9 (as defined below) that, as of June 12, 2003, there were
8,664,715 Shares issued and outstanding on a fully-diluted basis (treating as
outstanding options to purchase 200,000 Shares subject to issuance at
approximately $13.95 or less to purchase 200,000 Shares). Accordingly,
Purchaser calculates that at least 798,244 shares must be tendered in order to
satisfy the Minimum Condition. Craig B. Steinberg, owner of 642,008 Shares and
an executive officer and director of the Company, and William M. Knobler, owner
of 1,100 Shares and an executive officer of the Company, have entered into
Tender Agreements pursuant to which each of them has agreed to tender his
Shares in the Offer. Accordingly, at least 155,136 Shares must be tendered by
stockholders other than these two individuals in order to satisfy the Minimum
Condition. To the knowledge of Purchaser and Mr. Sosnoff, each other executive
officer or director of the Company who owns Shares intends to tender his Shares
in the Offer. If the Minimum Condition is satisfied and Purchaser accepts for
payment the Shares tendered pursuant to the Offer, Purchaser will be able to,
and intends to, effect the Merger without the affirmative vote of, or any
notice to, the Board or any other stockholder of the Company. See "Special
Factors -- Background of the Offer" and "Special Factors -- Purpose and
Structure of the Offer and Merger; Reasons of Purchaser and Mr. Sosnoff for the
Offer and Merger" and "Special Factors -- The Merger Agreement and Tender
Agreements."
If, after the Offer is completed but prior to consummation of the Merger,
the aggregate ownership by Purchaser and Mr. Sosnoff of the outstanding Shares
should fall below 90% for any reason, or if the Offer is not completed for any
reason, Purchaser and/or Mr. Sosnoff may decide to acquire additional Shares on
the open market or in privately negotiated transactions to the extent required
for its ownership to equal or exceed 90% of the Shares. Any such purchases
would be made at market prices or privately negotiated prices at the time of
purchase, which may be higher or lower than or the same as the Offer Price. For
a discussion of other actions Purchaser may take if the Offer is not completed,
see "Special Factors -- Conduct of the Company's Business if the Offer is Not
Completed."
The Blackstone Group L.P. ("Blackstone"), financial advisor to the Special
Committee, has delivered to the Special Committee its written opinion, dated as
of June 10, 2003, that, as of June 6, 2003, and subject to important
assumptions, limitations and qualifications set forth therein, the
consideration to be received by the holders of Shares (other than Purchaser,
Mr. Sosnoff and their affiliates) in exchange for each of their Shares pursuant
to the Offer and Merger is fair from a financial point of view to such holders.
Such opinion is set forth in full as an annex to the Company's Solicitation/
Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is
being mailed to stockholders of the Company simultaneously with this Offer to
Purchase. Stockholders are urged to read the Schedule 14D-9 and such opinion
carefully in their entirety.
8
The information contained in this Offer to Purchase concerning the Company
was supplied by the Company or obtained from publicly available sources.
Neither Purchaser nor Mr. Sosnoff takes any responsibility for the accuracy of
such information.
STOCKHOLDERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED
LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR SHARES.
9
SPECIAL FACTORS
BACKGROUND OF THE OFFER
The following information was prepared by Purchaser, Mr. Sosnoff and the
Company. Information about the Company was provided by the Company, and neither
Purchaser nor Mr. Sosnoff takes any responsibility for the accuracy or
completeness of any information regarding meetings or discussions in which
Purchaser, Mr. Sosnoff or their representatives did not participate.
The Company is the successor entity to an investment management business
established by Mr. Sosnoff in 1968. The initial public offering of the Common
Stock was completed in 1986 at a price of $14.50 per Share and involved the
issuance by the Company of 1,800,000 newly-issued Shares representing
approximately 20% of its capital stock at such time.
Since the public offering of the Shares, a number of circumstances both
inside the Company and external to the Company, discussed further under
"Special Factors -- Purpose and Structure of the Offer and Merger; Reasons of
Purchaser and Mr. Sosnoff for the Offer and Merger," have occurred that have
caused Mr. Sosnoff to undertake this transaction at this time.
From time to time, the Company has explored various means of maximizing
the stockholder value of the Company informally and formally. In this regard,
in October 2000, the Company retained Putnam Lovell NBF Securities Inc.
("Putnam Lovell") to explore strategic alternatives available to the Company,
including, for example, locating a potential strategic distribution partner
for, or acquirer of, the Company. In connection with this engagement, Putnam
Lovell contacted a number of companies that Putnam Lovell and the Company
believed, based upon a variety of factors, might be interested in entering into
a strategic transaction with the Company. As part of these efforts, Putnam
Lovell and the Company had preliminary meetings with certain of these companies
to determine their level of interest, if any, in a strategic transaction with
the Company. In connection with these discussions, the Company entered into
confidentiality agreements with eleven potential strategic partners.
None of the potential strategic partners conducted a due diligence review
of, or submitted a formal proposal to, the Company in connection with a
possible strategic transaction.
During 2002, Mr. Sosnoff came to the view that it was unlikely that the
securities markets would fully recognize the value of the Company's third-party
asset management business (the "Asset Management Business") based on, among
other factors, the fact that the Company's stock price has historically traded
at or near the net asset value of the Company's investment capital and other
balance sheet net assets. In addition, by late 2002, Mr. Sosnoff came to the
view that the Company would be unable to locate a suitable strategic partner.
Accordingly, Mr. Sosnoff determined that it was in the best interests of the
Company and its stockholders for him (or an entity controlled by him) to
purchase the remaining outstanding Shares of the Company not owned by him for
these reasons and the reasons discussed below under "Special Factors -- Purpose
and Structure of the Offer and Merger; Reasons of Purchaser and Mr. Sosnoff for
the Offer and Merger."
On December 5, 2002, at a regularly scheduled meeting of the Board, Mr.
Sosnoff made a preliminary, non-binding oral proposal to the Board for the
acquisition by him (or an entity controlled by him) of all of the Shares not
already owned by him at a price of $12.50 per Share. Such price would be
subject to adjustment to reflect changes in the value of the Company's
portfolio of marketable securities from then current levels. Mr. Sosnoff
informed the Board that he expected to submit a written proposal at a later
date.
At that same meeting, the directors resolved to establish the Special
Committee comprised of Jay S. Goldsmith, Ronald H. Menaker and Thurston
Twigg-Smith, who are independent directors and have no present or former
affiliation with Purchaser, Mr. Sosnoff or the Company except in their capacity
as directors of the Company. The Special Committee was authorized, among other
things, to (i) consider and recommend to the Board the actions that the Board
should take in connection with the proposed offer by Mr. Sosnoff, including a
recommendation with respect to the position, if any, that the Board should take
in connection with the solicitation/recommendation statement on Schedule 14D-9
required by SEC rules to be filed by the Company, (ii) review, evaluate and
negotiate the terms
10
and conditions of any transaction with Mr. Sosnoff and (iii) evaluate and
explore any alternatives to the proposal. The Special Committee was also
authorized to retain independent legal and financial advisors at the Company's
expense.
On December 6, 2002, the Company issued a press release announcing that it
had received a preliminary proposal from Mr. Sosnoff to acquire all of the
Shares not already owned by him.
Also on December 6, 2002, the Company retained Skadden Arps, Slate,
Meagher & Flom LLP ("Skadden Arps") as special counsel, and entered into an
engagement letter to that effect shortly thereafter.
On or about December 9, 2003, three shareholders of the Company filed
three separate class action complaints in the Delaware Court of Chancery
against the Company and the directors of the Company. See "The Offer -- Section
12. Certain Legal Matters" for a more detailed discussion of these lawsuits.
On December 13, 2002, the Special Committee held its first meeting via
teleconferencing. In addition to the members of the Special Committee,
representatives of Kaye Scholer LLP ("Kaye Scholer") were in attendance. At
this meeting, the Special Committee resolved to retain Kaye Scholer as its
special counsel, and entered into an engagement letter to that effect shortly
thereafter. The Special Committee also discussed Mr. Sosnoff's preliminary
proposal and the powers and responsibilities of and procedures for the Special
Committee. The Special Committee unanimously appointed Mr. Goldsmith as
chairman of the Special Committee and resolved to interview prospective
financial advisors.
From mid-December 2002 through mid-January 2003, members of the Special
Committee received presentations from a number of internationally recognized
investment banking firms, including Blackstone, seeking engagement as the
Special Committee's financial advisor.
Between December 13, 2002 and the end of January, 2003, Mr. Sosnoff and
Mr. Goldsmith had numerous telephone conversations to discuss Mr. Sosnoff's
preliminary proposal and related issues. Mr. Goldsmith informed Mr. Sosnoff
that the Special Committee was awaiting receipt of a written proposal from Mr.
Sosnoff prior to engaging a financial advisor to assist the Special Committee
in evaluating the fairness of Mr. Sosnoff's preliminary proposal from a
financial point of view.
On December 16, 2002, Skadden Arps met with Mr. Sosnoff, Craig B.
Steinberg, President and a director of the Company, and Kevin Kelly, Chief
Financial Officer and Chief Operating Officer of the Company, to discuss the
details of Mr. Sosnoff's preliminary proposal and related timing and
structuring issues. The parties tentatively scheduled a meeting for early
January 2003 to continue the discussion. Mr. Sosnoff informed Skadden Arps that
the Special Committee had retained Kaye Scholer as special counsel and
requested that Skadden Arps contact Kaye Scholer. Skadden Arps spoke with Kaye
Scholer via telephone shortly thereafter and the parties agreed to speak at a
later date.
On January 8, 2003, Skadden Arps met with Mr. Sosnoff, Mr. Steinberg and
Mr. Kelly to further discuss the details of Mr. Sosnoff's preliminary proposal
and related timing and structuring issues.
Between mid-January, 2003 and mid-April, 2003, the Special Committee and
Kaye Scholer and the Company reviewed the scope and nature of the Company's
existing directors' and officers' liability insurance coverage under the
Company's existing insurance policy. Skadden Arps also participated in certain
of these discussions. The Special Committee requested, and the Company agreed
to obtain, clarification from American International Group, Inc. ("AIG"), the
Company's insurance carrier, of the scope and nature of this coverage.
Thereafter, in early April, 2003, AIG reissued the policy to clarify certain
potential ambiguities in the scope and nature of the coverage.
On January 21, 2003, the Special Committee engaged Blackstone as its
financial advisor and entered into an engagement letter to that effect. Among
the factors considered by the Special Committee in its selection of Blackstone
was its determination that Blackstone had not had a material relationship with,
nor had it acted as financial advisor to, the Company or Mr. Sosnoff within the
past two years.
On January 31, 2003, Mr. Sosnoff submitted a written proposal (the
"Proposal") to the Board to acquire all of the Shares not already owned by him
at a price of $12.50 per Share, such price subject
11
to adjustment at the time of the closing of the Offer based upon the increase
or decrease, as applicable, in the fair market value of the investment capital
of the Company from their value as at December 31, 2002. Mr. Sosnoff indicated
his intention to effectuate the acquisition by means of the Offer and Merger.
Mr. Sosnoff further indicated that he expected that the current officers of the
Company would continue to serve in those same capacities after the Offer and
Merger, and that the members of the Board (other than Mr. Sosnoff) would resign
as directors upon completion of the Merger.
In the Proposal, Mr. Sosnoff stated his belief that the proposed
transaction is in the best interests of the Company and its stockholders, and
accordingly, requested the approval of the Special Committee and the full Board
for the Offer and Merger (including the recommendation of the Offer by the
Company on Schedule 14D-9 at the appropriate time). In addition, Mr. Sosnoff
conditioned his obligation to complete the Offer and Merger on the satisfaction
of customary conditions, including the stockholders of the Company (other than
Mr. Sosnoff) tendering a number of shares which, when taken together with
Shares already owned by him, equal or exceed 90% of the Shares, no adverse
developments in the business or prospects of the Company and no significant
decline in the price of a Share on the NYSE.
On February 6, 2002, the Company issued a press release reporting
financial results for the fiscal year ended December 31, 2002. These results
(together with certain other financial information concerning the Company) are
summarized below in "The Offer -- Section 8. Certain Information Concerning the
Company."
On February 11, 2002, Blackstone submitted a preliminary information
request list to the Company requesting customary operational, financial and
legal information.
On February 13, 2003, the Special Committee met via teleconferencing with
Kaye Scholer and Blackstone. The Special Committee ratified its decision to
retain Blackstone as its financial advisor. The Special Committee asked
Blackstone to prepare an analysis of the range of values of the Shares to
assist the Special Committee in evaluating the Proposal. Blackstone reviewed
its plans for conducting a due diligence review of the Company and its initial
observations of the Proposal with the Special Committee. Kaye Scholer reported
on its discussions with Skadden Arps regarding the Company's current directors'
and officers' liability insurance and the details of the Proposal. The Special
Committee authorized Kaye Scholer to commence negotiations with Mr. Sosnoff and
his representatives regarding the terms of the Proposal.
Also on February 13, 2002, Kaye Scholer and Skadden Arps met via
teleconference to discuss the Proposal in general terms and agreed to speak in
more detail at a later date.
On February 18, 2003, Kaye Scholer and Skadden Arps again met via
teleconference to discuss the terms and conditions of the Proposal in more
detail, including (i) the proposed adjustment to the offer price contained in
the Proposal, (ii) the expected financing arrangements for the Offer and
Merger, (iii) the possible consideration of a "majority of the minority"
closing condition, (iv) other contemplated closing conditions, and (v) whether
any other officers of the Company were expected to participate in the proposed
transaction with Mr. Sosnoff. Kaye Scholer also requested certain additional
financial due diligence information on behalf of Blackstone. After a brief
discussion on these points, Skadden Arps agreed to discuss these matters in
more detail with Mr. Sosnoff as soon as possible.
On February 19, 2003, Skadden Arps met with Mr. Sosnoff, Mr. Steinberg and
Mr. Kelly via teleconference to discuss the questions raised by Kaye Scholer
during the call held on February 18th. Mr. Sosnoff confirmed that Mr. Steinberg
was the only other officer of the Company expected to participate in the
proposed transaction with him. After a brief discussion of the other questions,
the parties agreed to speak early the next week to discuss these questions in
more detail.
On February 21, 2003, Skadden Arps again met with Mr. Sosnoff, Mr.
Steinberg and Mr. Kelly via teleconference to continue discussing the questions
raised by Kaye Scholer during the call held on February 18th and other matters
related to the Proposal, including the contemplated structure of the Offer and
Merger. After a discussion of these questions, Mr. Sosnoff concluded that he
did not feel
12
that the inclusion of a "majority of the minority" closing condition was
necessary because, among other reasons, of the arms-length negotiations with
the Special Committee. Mr. Sosnoff instructed Skadden Arps to communicate his
preliminary thoughts on these matters to Kaye Scholer.
On February 24, 2003, Blackstone met with Mr. Sosnoff, Mr. Steinberg and
Mr. Kelly to analyze relevant historical business and financial information
relating to the Company, including the financial results for the three months
ended December 31, 2002 and for the fiscal year then ended reported on February
6, 2003. In addition, Blackstone requested clarification of certain terms of
the Proposal, including the pricing adjustment related to the Company's
investment capital and other balance sheet net assets. Further, the parties
discussed the Company's historical operating performance, 2003 fiscal year
budget, business segments and products, assets under management ("AUM") history
and operational strengths and challenges.
On March 3, 2003, the Special Committee held a meeting at the offices of
Mr. Goldsmith, with the other members of the Special Committee participating
telephonically. Also in attendance were representatives of Blackstone and Kaye
Scholer. The Special Committee reviewed Blackstone's preliminary findings and
observations of the Proposal and other financial information provided by the
Company. Blackstone presented the Special Committee with a preliminary
financial overview of the proposed transaction based on information it had
reviewed to date, including a review of the Company's business segments,
competitors, financial forecasts and a review of the various valuation
methodologies that it would perform. Although it had not yet finalized its due
diligence, Blackstone also presented a preliminary valuation of the Company
based on forecasts and using a comparable trading analysis, a precedent
transaction analysis, a discounted cash flow analysis and a transaction premium
analysis. Blackstone noted that it had not discussed its preliminary financial
analysis with Mr. Sosnoff. Based on this preliminary analysis, the Special
Committee instructed Blackstone to undertake further steps as it deemed
necessary to complete its analyses, including scheduling additional meetings
with Company management. Kaye Scholer then reported on its discussions with
Skadden Arps.
Between March 3 and March 14, 2003, representatives of Kaye Scholer and
Skadden Arps continued their discussions and negotiations regarding the
structure and terms, other than price, of the Proposal, including the
possibility of including a "majority of the minority" closing condition to the
Offer.
On March 10, 2003, representatives from Blackstone met with Mr. Sosnoff,
Mr. Steinberg and Mr. Kelly to discuss its preliminary financial analyses
(excluding any preliminary valuation ranges derived from those analyses) and
certain five-year financial projections for the Company prepared by Blackstone
and to review additional financial information received from the Company.
Management discussed certain historical financial information with Blackstone.
On March 13, 2003, Blackstone met with Rothstein, Kass & Company, P.C.,
the Company's independent auditors, to discuss the Company's accounting
practices and review the Company's 2002 draft financial statements.
On March 14, 2003, the Special Committee met at Mr. Goldsmith's offices
with the other members of the Special Committee participating via
teleconference. Also, in attendance were representatives of Kaye Scholer and
Blackstone. Blackstone presented its updated findings and observations based on
Blackstone's ongoing discussions with the Company. Kaye Scholer reported on its
further discussions with Skadden Arps regarding the structure and terms of the
proposed transaction, other than price. From and after March 14, 2003, Kaye
Scholer continued its discussions and negotiations with Skadden Arps over
various aspects of the Proposal, other than price.
On March 24, 2003, the Company filed its Annual Report on Form 10-K for
the fiscal year ended December 31, 2002.
On March 25, 2003, Blackstone met with Mr. Sosnoff, Mr. Steinberg and Mr.
Kelly to review the five-year financial projections of the Company under the
"Management Case" and related assumptions made therein by the Company, as well
as Blackstone's cash flow analysis and comparable company results. In addition,
the parties also discussed which balance sheet net assets of the Company were
required for or related to the Asset Management Business.
13
On March 26, 2003, Blackstone again met with Mr. Sosnoff, Mr. Steinberg
and Mr. Kelly to review the five-year financial projections of the Company
under the "Blackstone Case" and assumptions made therein by Blackstone, as well
as Blackstone's cash flow analysis and comparable company results. The parties
also continued to discuss which balance sheet net assets were required for or
were related to the Asset Management Business.
During the course of discussions between Blackstone and Mr. Sosnoff during
April, 2002, the parties agreed that the offer price would be a fixed offer
price and would not be adjusted during the offer period to reflect changes in
the fair market value of the investment portfolio of the Company as
contemplated in the Proposal. The parties came to this mutual conclusion
because of, among other factors, the complexity that would be involved in
formulating an appropriate adjustment mechanism and the uncertainty that would
be caused to stockholders of the Company in trying to determine whether or not
to tender their Shares in the Offer.
During early April, 2003, the Special Committee discussed with Mr. Sosnoff
the possibility of issuing some type of "contingent value right" or similar
security to the public stockholders of the Company in order to provide such
stockholders with the opportunity to share in the proceeds of a sale of the
Asset Management Business during some period of time following the closing of
the Merger at a price per Share higher than the offer price. During further
discussions during this time, Skadden Arps indicated that, in its view, such an
approach in this kind of transaction would not be practical because, among
other reasons, it would require the Company to remain registered under the
Exchange Act and incur significant expense. After further discussion among the
parties and their advisors, the Special Committee agreed that the use of a
contingent value right or similar security was not appropriate in the proposed
transaction.
On April 15, 2003, Skadden Arps met with Mr. Sosnoff via teleconference to
discuss the status of the discussions and negotiations with the Special
Committee and Blackstone. Mr. Sosnoff reported that Blackstone was still
performing preliminary financial due diligence.
On April 16, 2003, the Special Committee, Kaye Scholer and Blackstone met
via teleconference and Blackstone updated the Special Committee and Kaye
Scholer on the discussions between Blackstone and the Company regarding the
five-year financial projections of the Company under both the "Management Case"
and the "Blackstone Case" and related assumptions and other components of its
financial analysis of the Proposal. The Special Committee, Blackstone and Kaye
Scholer discussed a negotiation strategy to obtain a higher price per Share in
the Offer and any additional provisions that may be necessary to assure the
procedural fairness of the proposed transaction for the minority stockholders
of the Company.
On April 17, 2003, Blackstone met with Mr. Sosnoff, Mr. Steinberg and Mr.
Kelly to review preliminary information regarding the Company's investment
capital and other balance sheet net assets as of March 31, 2003, as well to
continue to discuss the five-year projections of the Company under both the
"Management Case" and the "Blackstone Case." The parties also discussed certain
updates to the Company's balance sheet net assets, as well as other terms and
conditions of the Offer, including the consideration of a "majority of the
minority" closing condition and the possibility of fixing the offer price after
the commencement of the Offer in lieu of the contemplated adjustment to the
offer price contained in the Proposal. Mr. Sosnoff agreed to consider the
inclusion of a "majority of the minority" closing condition.
At that same meeting, Blackstone indicated that, in lieu of using a
contingent value right or similar security, the Special Committee desired some
assurance that Mr. Sosnoff would not sell the Asset Management Business to an
unrelated third party shortly after the closing of the Merger. Following a
discussion of this issue, Mr. Sosnoff informed Blackstone that he had no
present plan or intention of consummating such a sale during the one year
period following the closing of the Merger. Mr. Sosnoff noted that his
statement of intention would not apply to sales involving the investment
portfolio and other balance sheet net assets of the Company. Following further
discussion, Blackstone and Mr. Sosnoff agreed to meet again as soon as possible
to continue their discussion regarding this matter and the Proposal generally.
14
Shortly after the April 17th meeting, Skadden Arps spoke with Kaye Scholer
several times via telephone to discuss the Special Committee's request raised
at the April 17th meeting. Skadden Arps requested clarity of the nature of the
Special Committee's request and the form any such commitment would take. In
particular, Skadden Arps requested clarity of whether the Special Committee's
request was for a commitment from Mr. Sosnoff as to future sales of the Asset
Management Business or simply a statement from Mr. Sosnoff of his present
intention as to such future sales. Kaye Scholer stated that this question had
not been fully discussed by the Special Committee pending an agreement in
principle with Mr. Sosnoff on the request generally, but agreed to raise the
question with the Special Committee.
On April 21, 2003, Skadden Arps met with Kaye Scholer via teleconference
to discuss the status of negotiations with the Special Committee and Blackstone
and other remaining issues related to the Proposal.
On April 22, 2003 and April 23, 2003, Skadden Arps met with Mr. Sosnoff
via teleconference to discuss the status of Mr. Sosnoff discussions and
negotiations with the Special Committee and Blackstone, including the
contemplated conditions to the Offer and expected timing of the transaction.
Skadden Arps also spoke with Kaye Scholer via telephone numerous times on those
days to communicate Mr. Sosnoff's thoughts on the terms and conditions of the
Proposal that were still being discussed with the Special Committee.
On April 23, 2003, Blackstone met with Mr. Sosnoff, Mr. Steinberg and Mr.
Kelly to discuss the Proposal and management's observations and concerns
regarding the five-year financial projections of the Company under the
"Blackstone Case." Management challenged Blackstone's assumption regarding net
inflow growth, fees, compensation expenses, selected valuation parameters and
market appreciation. The parties held preliminary discussions regarding the
price range of the Asset Management Business. Blackstone also sought
clarification from Mr. Sosnoff regarding Mr. Sosnoff's statement of intention
expressed during the April 17th meeting. In addition to such statement of
intention, Blackstone thereafter informed Mr. Sosnoff that the Special
Committee also desired some form of commitment from Mr. Sosnoff that he would
not consummate a sale of the Asset Management Business shortly after the
Merger. Following further discussion, Blackstone and Mr. Sosnoff agreed to meet
again as soon as possible to continue their discussion regarding this matter
and Blackstone's preliminary price range of the Asset Management Business.
On April 24, 2003, Blackstone met with Mr. Goldsmith and Kaye Scholer at
Mr. Goldsmith's offices to review the status of Blackstone's discussions and
negotiations with Mr. Sosnoff to date, including its preliminary discussion of
the transaction structure and the offer price contained in the Proposal. In
particular, Blackstone noted that Mr. Sosnoff indicated that he would consider
Blackstone's preliminary analysis and valuation of the Company's investment
capital and other balance sheet net assets related to the Asset Management
Business and provide a response shortly.
On April 28, 2003, Blackstone met with Mr. Sosnoff, Mr. Steinberg and Mr.
Kelly to discuss management's observations regarding the five year financial
projections of the Company under the "Blackstone Case," including a revised
value for both the Company's investment capital and other balance sheet net
assets and the Asset Management Business. The parties discussed the terms of
the Proposal and Blackstone informed Mr. Sosnoff that the Special Committee had
instructed Blackstone to determine if Mr. Sosnoff agreed with Blackstone's
analysis regarding the price to be paid per Share for the Asset Management
Business. Mr. Sosnoff indicated that he would review Blackstone's analysis and
the parties agreed to meet again shortly to continue their discussion.
In late April, 2003, Kaye Scholer spoke with Skadden Arps via telephone
several times to discuss the previous question raised by Skadden Arps regarding
whether the Special Committee's request was for a commitment from Mr. Sosnoff
or simply a statement from Mr. Sosnoff of his present intention, and Kaye
Scholer indicated that the Special Committee was requesting a commitment from
Mr. Sosnoff that he would not consummate a sale of the Asset Management
Business shortly after the Merger. Skadden Arps stated that, in its view, such
a commitment was unusual, if not unprecedented,
15
in transactions of this kind, and also noted the significant practical and
legal issues associated with the Special Committee's request. The parties
thereafter reported their discussions to their respective principals.
In early May 2003, Mr. Goldsmith and Mr. Sosnoff met via teleconference to
discuss the request of the Special Committee. Mr. Goldsmith told Mr. Sosnoff
that if he was unwilling to include a "majority of the minority" condition to
the Offer, the Special Committee would require an increase in the offer price.
Mr. Sosnoff stated his view that the inclusion of a "majority of the minority"
closing condition was not appropriate in the proposed transaction in light of
the relatively small number of public shareholders and extensive negotiations
with the Special Committee and its advisors. Mr. Goldsmith acknowledged Mr.
Sosnoff's position but reiterated that the Special Committee would require an
increase in the offer price in lieu of the inclusion of such a closing
condition. Mr. Goldsmith also told Mr. Sosnoff that the Special Committee
continued to request some type of commitment from Mr. Sosnoff that he would not
consummate a sale of the Asset Management Business shortly after the Merger.
After a discussion of these matters, Mr. Sosnoff agreed to increase the offer
price by $0.15 per Share in lieu of the inclusion of a "majority of the
minority" closing condition to the Offer. Mr. Goldsmith and Mr. Sosnoff agreed
to continue to discuss, at a later date, the request of the Special Committee
for a commitment from Mr. Sosnoff regarding the future sale of the Asset
Management Business.
On May 7, 2003, Skadden Arps delivered drafts of the Offer to Purchase,
together with the related exhibits, and certain other documents to Kaye Scholer
for its review and comment.
On May 8, 2003, the Special Committee met via teleconference with Kaye
Scholer and Blackstone to discuss the most recent valuation of the Company's
investment capital and other transaction considerations, including the
structure of the transaction. After a discussion of the transaction structure,
the Special Committee concluded that structuring the transaction as a two-step
transaction pursuant to a merger agreement that would provide for the Offer and
Merger was advantageous to the minority stockholders. All of the members of the
Special Committee continued to express their desire for some type of commitment
from Mr. Sosnoff regarding the future sale of the Asset Management Business.
The Special Committee instructed Kaye Scholer to make a proposal to Skadden
Arps to address this matter.
On May 9, 2003, Skadden Arps delivered a draft of the Merger Agreement to
Kaye Scholer for its review and comment.
Also on May 9, 2003, Richard Brualdi, plaintiffs' lead counsel, sent a
letter to Kaye Scholer indicating that the plaintiffs' financial advisor had
completed a preliminary analysis relating to the adequacy of the $12.50 offer
price contained in Mr. Sosnoff's preliminary proposal. The letter noted that,
based upon such analysis, the plaintiffs' preliminary opinion was that the fair
market value of a Share was greater than $12.50 and could be as high as $16.00
per Share. Mr. Brualdi noted it was available to discuss this analysis with the
Special Committee and/or Blackstone.
On May 12, 2003, Kaye Scholer provided preliminary comments on the Merger
Agreement to Skadden Arps. As a result of the comments, Mr. Sosnoff agreed,
among other things, (i) not to waive the Minimum Condition without the consent
of the Special Committee, (ii) to extend the Offer for two separate ten
business day periods if at the end of the scheduled expiration date of the
offer (or the end of the first ten business day period) all of the conditions
to the Offer are still not satisfied or, if applicable, waived, and (iii) not
to extend the Offer beyond the date which is 50 business days from the date the
Offer is commenced without the prior written consent of the Special Committee.
Also on May 12, 2003, Kaye Scholer provided preliminary comments on the
Offer to Purchase to Skadden Arps. Over the next several days, Skadden Arps and
Kaye Scholer discussed the proposed changes to the Offer to Purchase.
During the week of May 12, 2003, Skadden Arps and Kaye Scholer engaged in
further discussions regarding the terms of the Merger Agreement.
On May 14, 2003, Skadden Arps met with Mr. Sosnoff via teleconference to
discuss the remaining issues on the Merger Agreement. After a discussion of
these issues, Mr. Sosnoff instructed Skadden
16
Arps to contact Kaye Scholer and attempt to resolve the remaining issues and
finalize the Merger Agreement. Thereafter, Skadden Arps spoke with Kaye Scholer
via telephone and informed Kaye Scholer of Mr. Sosnoff's position on the
remaining open issues in the Merger Agreement and Kaye Scholer agreed to
communicate Mr. Sosnoff's position to the Special Committee.
On May 15, 2002, Skadden Arps delivered a revised draft of the Merger
Agreement to Kaye Scholer.
On or about May 15, 2003, the Company and the Special Committee received
an unsolicited valuation report from Value Incorporated, the financial advisor
retained by certain plaintiffs' counsel to evaluate Mr. Sosnoff's preliminary
proposal. This analysis included a premium analysis, comparable company
analysis and a precedent transaction analysis. This analysis indicated that the
per Share price could be as high as $16.00.
On May 20, 2003, the Special Committee met via teleconference to discuss
the status of the negotiations. Also in attendance were representatives of Kaye
Scholer and Blackstone. Blackstone presented its analysis of the valuation
material prepared by Value Incorporated. Blackstone had reviewed this analysis
over the previous several days and presented to the Special Committee its
conclusion that the analysis suffered from fundamental defects and once the
analysis was revised by Blackstone to account for such defects, supported
Blackstone's valuation analysis. Mr. Goldsmith reported on his conversations
with Mr. Sosnoff. The Special Committee again discussed its desire for some
type of commitment by Mr. Sosnoff regarding the future sale of the Asset
Management Business shortly after the closing of the Merger. As a result, the
Special Committee instructed Kaye Scholer and Blackstone to conduct further
discussions with Mr. Sosnoff and his advisors.
On May 21, 2003, Mr. Sosnoff requested that Skadden Arps propose language
to address the points raised at the May 20th meeting by Mr. Goldsmith. Skadden
Arps sent draft language to Kay Scholer later that day.
On May 29, 2003, Mr. Goldsmith, Mr. Sosnoff, Blackstone, Kaye Scholer and
Skadden Arps met at the offices of Mr. Goldsmith to discuss the prior request
of the Special Committee for some type of commitment from Mr. Sosnoff regarding
the future sale of the Asset Management Business. At the meeting, Mr. Sosnoff
stated the basis for his view that the Special Committee's request was not
appropriate in the context of the proposed transaction, and noted that the
Proposal had already been the subject of extended discussion, negotiation and
analysis by the Special Committee and its advisors. Mr. Sosnoff repeated his
request that the Special Committee withdraw its request for this commitment.
After further discussion of the matter. Mr. Goldsmith agreed to discuss the
matter with the other members of the Special Committee as soon as possible.
On May 30, 2003, the Special Committee met via teleconference with
representatives of Kaye Scholer and Blackstone to discuss Mr. Goldsmith's
meeting with Mr. Sosnoff on May 29th. After a discussion, the Special Committee
reaffirmed its desire to receive some type of commitment from Mr. Sosnoff
regarding the sale of the Asset Management Business, and instructed Kaye
Scholer to communicate its position to Skadden Arps.
Later on May 30, 2003, Kaye Scholer spoke with Skadden Arps via telephone
and indicated that the Special Committee met to consider Mr. Sosnoff's views
expressed previously as to the nature and form of a commitment from him
regarding the future sale of the Asset Management Business and concluded that
that it still wished to receive some type of commitment from Mr. Sosnoff.
Thereafter, during the next week, Skadden Arps and Kaye Scholer exchanged
drafts describing such commitment.
On June 5, 2003, the Special Committee met via teleconference with
representatives of Kaye Scholer and Blackstone to discuss the most recent
proposal from Mr. Sosnoff and his advisors regarding the previously discussed
commitment by Mr. Sosnoff. After reviewing the language and terms of the
commitment, the Special Committee agreed to accept Mr. Sosnoff's proposal
subject to a modification to extend the length of the commitment for a period
of one year following the closing of the Merger. In addition, Blackstone stated
that it would revise its valuation material based upon recent financial and
trading metrics for the Company's publicly-traded comparable companies and for
the Company's AUM as of May 30, 2003. Blackstone also stated that, on a
preliminary basis, it
17
believed the midpoint of its valuation range for the Asset Management Business
had increased due to these factors. The Special Committee asked Blackstone to
continue updating and finalizing its fairness opinion with the supplemental
analyses in order to provide Mr. Goldsmith, and, if necessary, Mr. Sosnoff,
updated findings.
On June 6, 2003, the Company provided updated financial information to
Blackstone for purposes of allowing Blackstone to update its financial
analysis.
Thereafter, Blackstone met with Mr. Goldsmith and Kaye Scholer separately
to discuss its updated valuation of the Asset Management Business that
indicated that, in Blackstone's opinion, an increase in offer price
attributable to the Asset Management Business was appropriate. Mr. Goldsmith
authorized Blackstone to communicate to Mr. Sosnoff the revised valuation and
to seek an increase in value for the Asset Management Business. Consequently,
Blackstone met via teleconference with Mr. Sosnoff, Mr. Steinberg and Mr. Kelly
to discuss the revised valuation report, reviewing in particular the updated
valuation parameters for selected publicly-traded comparables and revised
five-year financial projections under the "Blackstone Case" based on the
Company's AUM level as of May 30, 2003. Mr. Sosnoff agreed to consider
Blackstone's updated findings.
Later on June 6, 2003, Skadden Arps and Kaye Scholer spoke via telephone
to discuss the requested change by the Special Committee to extend Mr.
Sosnoff's commitment to one year. Soon thereafter, Skadden Arps spoke with Mr.
Sosnoff and, after a brief discussion, Mr. Sosnoff agreed to the change
requested by the Special Committee. Later that day, Kaye Scholer called Skadden
Arps to confirm that the Special Committee reviewed and approved the specific
language relating to the commitment previously negotiated by Kaye Scholer and
Skadden Arps.
On June 9, 2003, Blackstone met with the Special Committee and Kaye
Scholer via teleconference to discuss their updated financial analysis based
upon the updated financial information provided to Blackstone on June 6th.
After a review of this analysis, the Special Committee requested that
Blackstone inform Mr. Sosnoff that the Special Committee concluded that the
portion of the proposed offer price attributable to the Asset Management
Business should be increased by $0.15 to reflect improved market conditions
since the date of the Blackstone's prior analysis in early May.
Blackstone then spoke with Mr. Sosnoff via telephone to review
Blackstone's updated financial analysis and to communicate the Special
Committee's request for an increase in the offer price. After a detailed
discussion concerning the reasons supporting the request for an increase in the
offer price, including the improved market conditions, Mr. Sosnoff agreed to
increase the offer price attributable to the Asset Management Business by
$0.15.
Following the telephone conversation with Mr. Sosnoff, the Special
Committee met telephonically with representatives of Kaye Scholer and
Blackstone to discuss the current status of negotiations and the potential
timetable for finalizing the transaction. The Special Committee requested its
advisors to contact Mr. Sosnoff and his advisors in order to finalize the terms
and conditions of the Offer and Merger so that the Special Committee would be
prepared to vote on the matter on the following day.
Also on June 9, 2003, Skadden Arps spoke with Mr. Brualdi, plaintiffs'
lead counsel, concerning the pending lawsuits. Over the course of the next two
days, Skadden Arps and Mr. Brualdi discussed a possible settlement of the
pending lawsuits and on June 10, 2003 reached an agreement in principle to
settle the lawsuits, subject to execution of a definitive settlement agreement
and the approval of the Delaware Court of Chancery.
On June 10, 2003, the Special Committee met via teleconference.
Representatives of Kaye Scholer and Blackstone were in attendance. At this
meeting, among other things, Blackstone presented its financial analyses of the
Offer and orally delivered its opinion, which it committed to deliver later in
writing, that, as of that date and based upon and subject to the assumptions,
limitations and qualifications set forth in its written opinion, the proposed
transaction at the Offer Price of $13.95 per Share in cash to be received by
the stockholders of the Company (other than Purchaser, Mr. Sosnoff and their
affiliates) in exchange for each of their Shares pursuant to the Offer and
Merger is fair from a financial point of view to such stockholders.
Representatives of Kaye Scholer reviewed the legal requirements and duties
applicable to the members of the Special
18
Committee and reviewed with the Special Committee the final draft of the Merger
Agreement and other agreements and documents relating to the proposed
transaction.
Mr. Sosnoff joined the meeting via telephone. At this meeting, Mr. Sosnoff
represented and gave his personal commitment to the Special Committee that,
subject to the exceptions described below, (i) he had no present plan or
intention of consummating a transaction in which he sold more than 51% of the
Asset Management Business during the one year period following the closing of
the Merger (other than sales involving the investment portfolio and other
balance sheet net assets of the Company), and (ii) he would not consummate a
transaction involving his direct or indirect sale of more than 51% of the Asset
Management Business during the one year period following the closing of the
Merger if the payment he would receive upon such consummation would be at a net
price per Share (after transaction related costs and expenses) higher than the
portion of the Offer Price determined by Blackstone to be attributable to the
Asset Management Business as currently constituted. Mr. Sosnoff went on to
state that his commitment would not apply to any transaction not specifically
described above, including, for example, (x) any transaction involving family
vehicles, family members or other personal or estate planning vehicles, or (y)
issuances by the Surviving Corporation or any of its affiliates of equity
interests to members of management or other affiliates of the Surviving
Corporation or to investors such as joint venture or distribution partners. Mr.
Sosnoff further stated that his commitment would not apply to any transaction
which may be appropriate as a result of his death, disability or other medical
problems or the need to preserve the stability of the business due to the death
or other departure for any reason of Mr. Steinberg. Mr. Goldsmith thanked Mr.
Sosnoff for his statement and noted that the clarifications of the scope of Mr.
Sosnoff's commitment were appropriate and fully consistent with the
understanding of the Special Committee. Following further discussion among the
members of the Special Committee, the Special Committee concluded that this
matter had been addressed to its satisfaction.
After a detailed discussion of the merits and benefits to the stockholders
of the Company (other than Purchaser, Mr. Sosnoff and their affiliates) of the
proposed transaction, the Special Committee concluded that the proposed Merger
was substantively and procedurally fair to such stockholders and that the
opportunity to receive $13.95 in cash per Share should be offered to the
stockholders of the Company (other than Purchaser, Mr. Sosnoff and their
affiliates). After further discussion and deliberation and taking into account,
among other things, all of the factors noted above, the Special Committee
unanimously (i) concluded that it is fair to and in the best interests of the
Company and its stockholders (other than Purchaser, Mr. Sosnoff and their
affiliates) to consummate the Offer and Merger upon the terms and subject to
the conditions of the Merger Agreement and in accordance with Delaware law,
(ii) approved and declared advisable the Offer, the Merger and the Merger
Agreement, and (iii) resolved to recommend that the Board recommend that the
stockholders of the Company accept the Offer and tender their Shares pursuant
thereto. Later that day, Kaye Scholer reported the Special Committee's decision
to Mr. Sosnoff, Mr. Steinberg and Mr. Kelly.
After the meeting of the Special Committee, a meeting of the Board was
convened via teleconference. At the meeting, the Special Committee advised the
Board of its findings and Blackstone reviewed the fairness opinion that it
delivered to the Special Committee. The Board, by unanimous decision of those
directors participating, (i) determined that it is fair to and in the best
interests of the Company and its stockholders (other than Purchaser, Mr.
Sosnoff and their affiliates) to consummate the Offer and Merger upon the terms
and subject to the conditions of the Merger Agreement and in accordance with
the DGCL, (ii) approved and declared advisable the Offer, the Merger and the
Merger Agreement, and (iii) resolved to recommend that the stockholders of the
Company (other than Purchaser, Mr. Sosnoff and their affiliates) accept the
Offer and tender their Shares pursuant thereto. Mr. Sosnoff and Mr. Steinberg
refrained from voting on these matters in light of their conflicts of interest.
Thereafter on June 10, 2003, the Merger Agreement was executed and the
execution of the Merger Agreement and the agreement in principle to settle the
pending stockholder lawsuits was announced in a joint press release by the
Company and Mr. Sosnoff the following day. The Tender Agreements were also
executed.
19
From June 10, 2003 through June 12, 2003, Skadden Arps and Kaye Scholer
finalized the Offer to Purchase and related tender offer documents. Also,
during this week, Skadden Arps continued its discussions with Mr. Brualdi
regarding the execution of a definitive settlement agreement, although no such
agreement has been executed by June 12th.
PURPOSE AND STRUCTURE OF THE OFFER AND MERGER; REASONS OF PURCHASER AND MR.
SOSNOFF FOR THE OFFER AND MERGER
Purpose and Structure. The purpose of the Offer and Merger is for Mr.
Sosnoff to increase his beneficial ownership of the outstanding Common Stock
from his current level of approximately 81% on a fully-diluted basis to 100%.
Mr. Sosnoff has formed Purchaser for the purpose of acquiring the Shares not
already owned by him. No consideration will be paid for Shares beneficially
owned by Mr. Sosnoff or Purchaser at the time of the Offer or the Merger,
except Shares held by a qualified charitable foundation controlled by Mr.
Sosnoff (which will be entitled to receive the Offer Price of $13.95 per
Share). Upon successful completion of the Offer (including satisfaction of the
Minimum Condition), Mr. Sosnoff will transfer all of his Shares to Purchaser in
order to permit Purchaser to effect the Merger. Upon the consummation of the
Merger, Purchaser will merge into the Company with the Company being the
Surviving Corporation. The acquisition of Shares not owned by Mr. Sosnoff at
the time of the Offer has been structured as a cash tender offer followed by a
cash merger in order to effect a prompt and orderly transfer of ownership of
the Company from the public stockholders to Purchaser and provide stockholders
with cash for all of their Shares as quickly as possible.
Reasons for the Transactions. Mr. Sosnoff decided to pursue the Offer and
Merger at this time for a number of reasons.
First, the Offer Price of $13.95 per Share will allow the public
stockholders of the Company to realize a significant premium of 36% above the
market price of $10.25 for a Share on December 5, 2002, the date immediately
prior to the date on which the Company announced that it had received a
preliminary proposal from Mr. Sosnoff to acquire all of the outstanding Shares.
The Offer Price also represents a premium of approximately 107% over the lowest
reported closing sale price of $6.75 on the New York Stock Exchange ("NYSE")
during the 12 months prior to such date. Further, the Offer Price represents a
premium of approximately 24% above the per Share estimated fully-diluted book
value of the Company of $11.28 at December 5, 2002, including the fair market
value of the investment capital of the Company as of such date.
Second, throughout the Company's existence as a public company, the market
value and liquidity of the Shares has been negatively impacted generally by the
inherent difficulty of attracting analyst and investor interest to a company
with a majority stockholder and a small public float. As a result, the
liquidity of the market for the Shares has remained consistently limited, with
an average daily trading volume of less than 2,000 shares since June 1986, with
no trades occurring on the NYSE in 112 of the 253 trading days prior to the
Company's public announcement of Mr. Sosnoff's preliminary proposal on December
6, 2002. Mr. Sosnoff determined that the opportunity for the public
stockholders of the Company to realize a significant premium for their Shares
was especially significant in light of its inconsistent and low historical
trading prices and volumes for the Shares. The Offer and Merger will thus
provide liquidity for the public stockholders whose ability to sell their
Shares on the NYSE has been adversely affected by the limited trading volume
and small public float in the Shares at a price per Share significantly above
recent market prices.
Third, the Company and its public stockholders are currently exposed to
significant risk in the event of the possible death or disability of Mr.
Sosnoff, currently 71 years of age. Mr. Sosnoff is the founder of the Company
and plays a vital role in both managing client assets and maintaining a high
visibility with the Company's clients. The loss of Mr. Sosnoff's services could
potentially result in a significant diminution in the value of the Shares. The
Offer and Merger will thus transfer the risk of the loss of Mr. Sosnoff's
services (and potential diminution in value of the Company) from the public
stockholders of the Company to Purchaser and Mr. Sosnoff.
Fourth, Mr. Sosnoff seeks to permit the Company to eliminate the costs and
administrative burdens of being a public company. Following the Offer and
Merger, the Company will no longer be
20
subject to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which will allow the Company to eliminate the
costs of preparing, printing and mailing certain corporate reports and proxy
statements. In addition, "going private" will allow the Company to eliminate
certain other costs and functions associated with being a public company,
including certain legal and accounting costs, the costs of maintaining a
transfer agent and the costs of investor relations activities. The elimination
of the foregoing requirements will also eliminate the time devoted by employees
and members of the Company's management to those activities, thereby providing
more freedom to focus on the Company's business and operations. Mr. Sosnoff and
the Company estimate that approximately $200,000 will be saved on an annual
basis as a result of the termination of the Company's Exchange Act reporting
obligations.
Fifth, the Company has been unable to realize many of the benefits
generally associated with public ownership. For example, (i) the Company has
not needed, and does not expect in the foreseeable future to need, to utilize
its Common Stock as currency for acquisitions, (ii) the lack of liquidity with
respect to the Common Stock discussed above has impaired the Company's ability
to use stock options or equity-based incentives as a meaningful way to
compensate employees, and (iii) the Company has not needed, and does not expect
in the foreseeable future to need, to raise capital in the public markets.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD; FAIRNESS OF THE OFFER
AND MERGER
Recommendation of the Special Committee. On June 10, 2003, the Special
Committee:
(1) determined that it is fair to and in the best interests of the Company
and its stockholders (other than Purchaser, Mr. Sosnoff and their affiliates)
to consummate the Offer and Merger, upon the terms and subject to the
conditions of the Merger Agreement and in accordance with the DGCL;
(2) determined that the Offer, the Merger and the Merger Agreement should
be approved and declared advisable by the Board; and
(3) resolved to recommend that the Company's stockholders accept the Offer
and tender their Shares pursuant thereto.
Recommendation of the Board. On June 10, 2003, the Board, by unanimous
decision of those directors participating and based upon the recommendation of
the Special Committee:
(1) determined that it is fair to and in the best interests of the Company
and its stockholders (other than Purchaser, Mr. Sosnoff and their affiliates)
to consummate the Offer and Merger upon the terms and subject to the conditions
of the Merger Agreement and in accordance with the DGCL;
(2) approved and declared advisable the Offer, the Merger and the Merger
Agreement; and
(3) resolved to recommend that the Company's stockholders accept the
Offer, and tender their Shares pursuant thereto.
Mr. Sosnoff and Mr. Steinberg, directors on the Board, refrained from
voting on these matters in light of their conflicts of interest. See "Special
Factors -- Background of the Offer" and "Special Factors -- Interests of
Certain Persons in the Offer and Merger."
Fairness of the Offer and Merger. In reaching the recommendations
described above, the Special Committee considered a number of factors,
including the following:
Company Operating and Financial Condition. The Special Committee took
into account the current and historical financial condition and results of
operations of the Company, as well as the prospects and strategic objectives of
the Company, including the risks involved in achieving those prospects and
objectives, and the current and expected conditions in the general economy and
in the industries in which the Company's businesses operate. The Special
Committee believed the Offer Price to be attractive in light of the Company's
current financial performance, profitability and growth prospects and current
and expected general economic and industry conditions.
The Special Committee (together with Blackstone) also considered certain 5
year financial projections for the Company prepared by management discussed
below at "The Offer -- Section 8. Certain Information Concerning the Company."
21
Financial Terms/Premium to Market Price. The Special Committee considered
the relationship of the Offer Price and the Merger Consideration to the
historical and projected market prices of the Shares. The Offer Price of $13.95
per Share represents a significant premium of approximately 36% over the
closing price per Share of $10.25 on December 5, 2002, the day before the
public announcement of Mr. Sosnoff's preliminary proposal to acquire all of the
outstanding Shares, a premium of approximately 107% over the lowest reported
closing price of $6.75 during the 12 months prior to such date, and a premium
of approximately 12% over Mr. Sosnoff's initial offer price of $12.50 per
Share. Also, the Offer Price represents a premium of approximately 24% above
the per Share estimated fully-diluted book value of the Company of $11.28 at
December 5, 2002, including the fair market value of the investment capital of
the Company as of such date. A significant portion of the estimated
fully-diluted book value of the Company is attributable to the investment
capital of the Company, which fluctuates on a daily basis depending on
fluctuations in the fair market value of such investment capital. Nonetheless,
as is discussed elsewhere in this Offer to Purchase, the Offer Price of $13.95
is fixed and will not be adjusted to reflect any fluctuations in the net asset
value of the Company after June 6, 2003.
Likely Effect on Market Prices of the Shares if the Offer is
Withdrawn. The Special Committee also considered the possible trading prices of
the Shares in the short term and the long term in the event that the Offer were
to be withdrawn or rejected. The Special Committee concluded that the trading
value of the Shares would likely decline substantially in the short term as a
result of the withdrawal or rejection of the Offer. In addition, as discussed
above, the Special Committee considered there to be significant risks and
impediments to the Shares trading above the Offer Price in the long term.
Discussions with Mr. Sosnoff. The Special Committee believes that, after
extensive negotiations by and on behalf of the Special Committee with Mr.
Sosnoff, the Company has obtained the highest price per Share that Mr. Sosnoff
is willing to pay. The Special Committee took into account the fact that the
terms of the Offer were determined through extensive and protracted
arm's-length negotiations between Mr. Sosnoff on the one hand, and the Special
Committee and its financial and legal advisors on the other hand, and the
judgment of the Special Committee that, based upon the negotiations that had
transpired and the downward adjusted earnings projections, a price higher than
$13.95 per Share could not likely be obtained and that further negotiations
with Mr. Sosnoff could cause Mr. Sosnoff to abandon the transaction.
Lack of Strategic Alternatives. The Special Committee also considered the
fact that the Company has been unable to locate a suitable strategic partner
despite its attempts to do so over an extended period of time as described
above in "Special Factors -- Background of the Offer." The Special Committee
also concluded that an acquisition of the Company by, or other strategic
transaction with, a third party was unlikely in light of the fact that no such
transaction could be effected without Mr. Sosnoff's support due to his
ownership of 81% of the Shares on a fully-diluted basis and, thus, was not
pursued.
Lack of "Majority of the Minority" Condition. The Special Committee also
took into account the fact that Mr. Sosnoff advised the Special Committee that
he would be unwilling to agree to make the proposed transaction subject to the
approval of a majority of the public stockholders of the Company in light of
the arms-length negotiations with the Special Committee and the other factors
described in this section "-- Recommendation of the Special Committee and the
Board; Fairness of the Offer and Merger" and "Special Factors -- Opinion Of
Financial Advisor."
Blackstone Fairness Opinion. The Special Committee took into account
presentations from Blackstone and the opinion of Blackstone, dated as of June
10, 2003, that, based upon and subject to certain important assumptions,
limitations and qualifications, the consideration to be received by holders of
Shares (other than Purchaser, Mr. Sosnoff and their affiliates) in exchange for
each of their Shares pursuant to the Offer and Merger is fair from a financial
point of view to such holders. The financial analysis and opinion of Blackstone
are described below in "Special Factors -- Opinion Of Financial Advisor." A
copy of the opinion rendered by Blackstone and the assumptions made by
Blackstone in arriving at its opinion is included as an annex to the Schedule
14D-9, which is being
22
mailed to stockholders of the Company simultaneously with this Offer to
Purchase. Stockholders are urged to read this opinion in its entirety. The
Special Committee was aware that Blackstone becomes entitled to certain fees
described under "The Offer -- Section 13. Fees and Expenses" upon delivery of
its opinion.
Absence of a Breakup Fee. If the Special Committee or Board concludes that
its fiduciary duties to stockholders require a change in the Special
Committee's recommendation, no "break up" or "topping" fee is required and
there is no minimum amount by which a third party offer must exceed the Offer
Price.
Timing of Completion of the Offer and Merger. The Special Committee
considered the anticipated timing of consummation of the transactions
contemplated by the Offer and Merger Agreement, including the structure of the
transactions as a tender offer for all of the Shares for cash, which should
allow stockholders to receive the Offer Price earlier than in an alternative
form of transaction, followed by the Merger in which remaining stockholders
will receive the same consideration as received by stockholders who tender
their Shares in the Offer.
Form of the Consideration; Taxable Transaction. The Special Committee
considered the form of consideration to be paid to holders of Shares in the
Offer and Merger. The Special Committee was aware that the consideration
received by holders of Shares in the Offer and Merger would be taxable to
holders for federal income tax purposes.
Delisting of the Shares. The Special Committee considered the fact that,
because there are currently so few public stockholders of the Company and
because the Shares currently do not satisfy certain of the NYSE's other
published listing guidelines, the Shares do not meet the standards for
continued inclusion in the NYSE. Accordingly, the Shares may be delisted from
the NYSE and, as a result, the market for the Shares would be adversely
affected.
Fluctuations in the Fair Market Value of the Investment Capital and
Balance Sheet Net Assets of the Company. The Special Committee considered the
fact that $11.35 of the Offer Price of $13.95 per Share represents the fair
market value of the investment capital and the book value of other balance
sheet net assets of the Company as of the close of the markets on June 6, 2003,
and that the Offer Price of $13.95 is fixed and will not be adjusted to reflect
any fluctuations in the fair market value of such investment capital after such
date. See "Special Factors -- Opinion of Financial Advisor."
Limited Conditions to Consummation. The Special Committee considered the
fact that the obligation of Mr. Sosnoff and Purchaser to consummate the Offer
and Merger is subject to a limited number of conditions, with no financing
condition. Moreover, the Special Committee concluded that Mr. Sosnoff and
Purchaser have the financial resources to consummate the Offer and Merger
expeditiously.
Appraisal Rights. The Special Committee considered the fact that
stockholders who do not tender their Shares pursuant to the Offer have the
right to dissent from the Merger and to demand appraisal of the fair value of
their Shares under the DGCL, as described under "Special Factors -- Appraisal
Rights."
Possible Conflicts of Interest. The Special Committee also took into
account the possible conflicts of interest of certain directors and executive
officers of the Company discussed below under "Special Factors -- Interests of
Certain Persons in the Offer and Merger." Despite these conflicts, the Special
Committee concluded that, in view of the economic benefit of the Offer, the
Offer is in the best interests of holders of the Shares and should be accepted.
Procedural Fairness. The Special Committee believes that the Offer is
procedurally fair because:
o the Offer was the result of extensive and protracted arm's-length
discussions between representatives of the Special Committee (comprised
of the independent directors of the Company who were advised by
independent legal counsel and financial advisors) and Mr. Sosnoff
described above in "Special Factors -- Background of the Offer";
23
o the Offer Price was found by Blackstone, the Special Committee's
financial advisor, as of June 10, 2003, and subject to important
assumptions, limitations and qualifications, to be fair, from a financial
point of view, to holders of the Shares other than Purchaser, Mr. Sosnoff
and their affiliates (see "Special Factors -- Opinion Of Financial
Advisor");
o the commitment from Mr. Sosnoff received by the Special Committee at the
meeting of the Special Committee held on June 10, 2003 (see "Special
Factors -- Background of the Offer");
o the completion of the Offer is subject to the satisfaction of the
Minimum Condition, which may not be waived by Purchaser without the prior
written consent of the Special Committee, thereby ensuring that Purchaser
will acquire all Shares not tendered in the Offer for the same purchase
price paid in the Offer (other than Shares owned by shareholders who
elect to seek an appraisal of such Shares in connection with the Merger)
(see "Special Factors -- The Merger; Plans for the Company after the
Offer and Merger; Certain Effects of the Offer and Merger"); and
o Purchaser may not, without the prior written consent of the Special
Committee, amend or modify certain key terms of the Offer, including the
conditions to the Offer (see "The Offer -- Section 1. Terms of the Offer;
Expiration Date").
In reaching its determinations referred to above, the Board considered the
following factors, each of which, in the view of the Board, supported such
determinations: (i) the conclusions and recommendations of the Special
Committee; (ii) the factors referred to above as having been taken into account
by the Special Committee, including the receipt by the Special Committee of the
opinion of Blackstone that, based upon and subject to the assumptions,
limitations and qualifications stated therein, as of June 6, 2003, the $13.95
per Share to be received by the stockholders of the Company (other than
Purchaser, Mr. Sosnoff and their affiliates) in exchange for each of their
Shares pursuant to the Offer and Merger is fair from a financial point of view
to such holders, and the analysis presented by Blackstone to the Board; and
(iii) the fact that the Offer Price and the terms and conditions of the Merger
Agreement were the result of extensive and protracted arm's-length negotiations
between the Special Committee and Mr. Sosnoff.
The members of the Board (other than Mr. Sosnoff and Mr. Steinberg),
which, for this purpose, are the same individuals comprising the Special
Committee, evaluated the Offer and Merger in light of their knowledge of the
business, financial condition and prospects of the Company, and based upon the
advice of Blackstone and legal advisors.
The Board believes that the Offer is procedurally fair because:
o the Special Committee consisted of independent directors appointed to
represent the interests of the Company's stockholders (other than
Purchaser, Mr. Sosnoff and their affiliates);
o the Special Committee retained and was advised by its own independent
legal counsel;
o the Special Committee retained and was advised by Blackstone, as its
independent financial advisor, to assist it in evaluating a potential
transaction with Mr. Sosnoff; and
o the other factors described above relied upon by the Special Committee
in determining the Offer is procedurally fair.
The Board (and, as noted above, the Special Committee) recognized that the
Offer is not structured to require the approval of a majority of the
stockholders of the Company other than Purchaser, Mr. Sosnoff and their
affiliates and the individuals set forth in Schedule I.
The Special Committee and the Board also recognized that, while
consummation of the Offer and Merger will result in all stockholders (other
than Purchaser, Mr. Sosnoff and their affiliates) being entitled to receive
$13.95 in cash for each of their Shares, it will eliminate the opportunity for
current stockholders (other than Purchaser, Mr. Sosnoff and their affiliates)
to participate in the benefit of increases, if any, in the value of business of
the Company following the Merger. Nevertheless, the Special Committee and the
Board concluded that this fact did not justify foregoing the receipt of the
immediate cash premium represented by the Offer Price of $13.95 per Share.
24
Neither the Special Committee nor the Board considered the liquidation of
the Company's assets and neither considered liquidation to be a viable course
of action based on Mr. Sosnoff's desire for the Company to continue to operate
as a going concern. Therefore, no appraisal of liquidation values was sought
for purposes of evaluating the Offer and Merger. The Special Committee was not
aware of any firm offers for the merger or sale of the Company, the sale or
transfer of all or any substantial part of the Company's assets or any purchase
of the Company's securities that would result in the purchaser obtaining
control of the Company. The Special Committee also concluded that any such
transaction was unlikely in light of the fact that no such transaction could be
effected without Mr. Sosnoff's support due to his ownership of 81% of the
Shares on a fully-diluted basis and, thus, was not pursued.
In view of the number and wide variety of factors considered in connection
with making a determination as to the fairness of the Offer and Merger to the
Company's public stockholders, and the complexity of these matters, neither the
Special Committee nor the Board found it practicable to, nor did they attempt
to, quantify, rank or otherwise assign relative weights to the specific factors
they considered. Moreover, neither the Special Committee nor the Board have
undertaken to make any specific determination to assign any particular weight
to any single factor, but have conducted an overall analysis of the factors
described above.
The foregoing discussion of the information and factors considered by the
Special Committee and the Board is not intended to be exhaustive but is
believed to include all material factors considered by the Special Committee
and the Board. The Company's executive officers (other than, as required under
the rules of the SEC, Mr. Sosnoff and Mr. Steinberg) have not been asked to
make a recommendation as to the Offer or the Merger. Mr. Steinberg has filed a
separate Transaction Statement on Schedule 13E-3 (a "Schedule 13E-3") in
respect of the Offer and Merger which is incorporated herein by reference in
its entirety.
OPINION OF FINANCIAL ADVISOR
General. Under a letter agreement, dated January 21, 2003 (the "Engagement
Letter"), the Special Committee engaged Blackstone to act as its financial
advisor in connection with the Proposal. On June 10, 2003, Blackstone delivered
to the Special Committee its oral opinion (subsequently confirmed in writing on
June 10, 2003) that subject to the assumptions, limitations and qualifications
set forth therein, as of June 6, 2003, the consideration to be received by the
holders of Common Stock (other than Purchaser, Mr. Sosnoff and their
affiliates) in exchange for each of their Shares pursuant to the Offer and
Merger was fair, from a financial point of view, to such holders.
Opinion. THE FULL TEXT OF THE OPINION, DATED AS OF JUNE 10, 2003, WHICH
SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY BLACKSTONE IN RENDERING ITS OPINION, IS
SET FORTH IN FULL AS AN ANNEX TO THE SCHEDULE 14D-9, WHICH IS BEING MAILED TO
STOCKHOLDERS OF THE COMPANY SIMULTANEOUSLY WITH THIS OFFER TO PURCHASE.
BLACKSTONE'S WRITTEN OPINION IS DIRECTED TO THE SPECIAL COMMITTEE AND ONLY
ADDRESSES THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF
COMMON STOCK (OTHER THAN PURCHASER, MR. SOSNOFF AND THEIR AFFILIATES) IN THE
OFFER AND MERGER FROM A FINANCIAL POINT OF VIEW AS OF JUNE 6, 2003.
BLACKSTONE'S WRITTEN OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE OFFER OR
THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF THE
COMPANY AS TO WHETHER SUCH SHAREHOLDER SHOULD TENDER ITS SHARES. THE FOLLOWING
IS ONLY A SUMMARY OF THE BLACKSTONE OPINION. YOU ARE URGED TO READ THE ENTIRE
OPINION.
In arriving at its opinion, Blackstone reviewed, among other things:
o the draft of the Merger Agreement, dated June 10, 2003, and the most
recent drafts of the documents relating to the Offer;
o certain publicly available information concerning the business,
financial condition, and operations of the Company that Blackstone
believed to be relevant to its inquiry;
25
o certain internal information, financial analyses, estimates and
forecasts relating to the Company prepared by and furnished to Blackstone
by the management of the Company that Blackstone believed to be relevant
to its inquiry;
o the audited financial statements of the Company for the year ended
December 31, 2002, December 31, 2001 and December 31, 2000 and unaudited
financial statements of the Company for the quarter ended March 31, 2003;
o the historical reported trading price for the Shares;
o a comparison of certain financial information for the Company with
similar information for certain other asset management companies that
Blackstone deemed relevant;
o the financial terms of certain recent business combinations in the asset
management industry and related industries that Blackstone deemed
relevant; and
o other studies and analyses and took into account other matters as deemed
appropriate.
In addition, Blackstone held discussions with members of the management of
the Company concerning their business, operating environment, financial
condition, prospects, and strategic objectives and with the Company's auditors,
Rothstein, Kass & Company, P.C., to review accounting policies and preparation
of 2002 financial statements.
In conducting its analysis and in arriving at its opinion, Blackstone
relied upon the accuracy and completeness of the foregoing information
discussed with or reviewed by it and did not assume any responsibility for any
independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of the Company, or concerning the
solvency or fair value of the Company. With respect to financial forecasts
prepared or provided by the Company, Blackstone assumed that they had been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of management of the Company as to the future financial
performance of the Company. Blackstone assumed no responsibility for and
expressed no view as to such forecasts or the assumptions on which they were
based. Blackstone's opinion was necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made available to
Blackstone as of, the date of its opinion.
In rendering its opinion, Blackstone assumed, with the consent of the
Special Committee, that Purchaser's acquisition of the Company would be
consummated on the terms described in the draft of the Merger Agreement it
reviewed, without any waiver of any material terms or conditions by the
Company, and that obtaining any necessary regulatory approvals for Purchaser's
acquisition of the Company will not have an adverse effect on the Company or
the transaction. Blackstone noted in its opinion that, in arriving at its
opinion, with the consent of the Special Committee, it did not solicit interest
from any party with respect to the acquisition of the Company or any of its
assets.
The following is a summary of the material financial analyses used by
Blackstone in connection with providing its opinion to the Special Committee.
In preparing its opinion, Blackstone valued the Company based upon two
components:
o the investment capital and other balance sheet net assets of the
Company; and
o the Asset Management Business.
Blackstone valued the Company's investment capital at the net realizable value
as of June 6, 2003 since they consist principally of liquid, marketable and
quoted securities. Blackstone valued the Asset Management Business utilizing a
number of methodologies discussed below, adjusting the Company's financials to
reflect only the operating performance of such business. Pursuant to
Blackstone's analysis, the indicative value for the Company is the sum of the
indicative value of the Company's investment capital and other balance sheet
net assets and the indicative value of the Asset Management Business.
THIS SUMMARY INCLUDES INFORMATION PRESENTED IN TABULAR FORMAT. THESE
TABLES ALONE ARE NOT A COMPLETE DESCRIPTION OF BLACKSTONE'S FINANCIAL ANALYSES.
THESE TABLES SHOULD BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY.
26
Investment Capital and Other Balance Sheet Net Assets. Blackstone valued
the Company's balance sheet net assets (other than investment capital) based
upon the Form 10-Q dated March 31, 2003 and more recent financial information
provided by the Company to bring down the March 31, 2003 numbers as of June 6,
2003, and the Company's investment capital based upon the prices of the
publicly quoted securities held in the Company's investment accounts as of June
6, 2003. Included as components of value in these items were the working
capital of the Company, deferred taxes (net), estimated transaction costs to be
borne by the Company, loans due from officers and the cash and marketable
securities which are principally held in the Company's investment accounts.
Based on this analysis, Blackstone determined that as of June 6, 2003 the
implied value per Share of the Company's investment capital and other balance
sheet net assets was approximately $11.35 per Share.
Historical Stock Trading Analysis. Blackstone reviewed the historical
trading prices and volumes for the Shares for the period from December 5, 1997,
through December 5, 2002, the date of Mr. Sosnoff's preliminary proposal.
Blackstone also compared the trading performance of the Shares for the period
from December 5, 1997, to December 5, 2002, to an index of selected companies
and the Standard & Poor's ("S&P") 500 Index for the comparable period. The
index of selected comparable companies was comprised of Affiliated Managers
Group, Inc., Alliance Capital Management Holding L.P., BKF Capital Group Inc.,
BlackRock, Inc., Eaton Vance Corp., Federated Investors, Inc., Franklin
Resources, Inc., Gabelli Asset Management, Inc., Legg Mason, Inc., Neuberger
Berman Inc., Nuveen Investments, Inc., Sceptre Investment Counsel Ltd., T. Rowe
Price Group, Inc., U.S. Global Investors, Inc., Waddell & Reed Financial, Inc.
and Westwood Holdings Group, Inc. During the year prior to the initial
announcement of Mr. Sosnoff's preliminary proposal on December 6, 2002, the
closing price of a Share ranged from $6.75 to $12.35. Over this one-year
period, the Common Stock provided a return of 1.5%, while the index of selected
comparable companies provided a return of negative 12.4% and the S&P 500 Index
provided a return of negative 22.5%. As such, the Company out performed the
index of comparable companies over this period by 13.9% and out performed the
S&P 500 Index over this period by 24.0%.
The following table summarizes the relationship of the Offer Price to the
historical price of a Share with respect to the one year prior to the initial
announcement of Mr. Sosnoff's preliminary proposal on December 6, 2002, as well
as the corresponding premium of the Offer Price to each of these price
statistics:
PRIOR TO DECEMBER 6, 2002
-------------------------
PRICE % PREMIUM
----------- ----------
Offer Price $ 13.95 NA
1 Day $ 10.25 36.1%
6-Month Average $ 9.59 45.5%
1-Year Average $ 10.27 35.8%
3-Year Average $ 10.23 36.4%
1-Year High $ 12.35 13.0%
1-Year Low $ 6.75 106.7%
Blackstone noted that the offer price of $13.95 per Share for the Company
represented a 36.1% premium to the closing stock price as of December 5, 2002,
the date immediately prior to announcement of Mr. Sosnoff's preliminary
proposal, and 36.4% premium to the average closing stock price of the Company
over the three-year period ending December 5, 2002.
Asset Management Business.
Public Market Valuation Analysis for the Asset Management Business. In
order to assess how the public market values shares of non-controlled, fully
distributed publicly traded companies with similar operating characteristics as
the Company, Blackstone reviewed and compared certain financial information
relating to the Company with selected companies that Blackstone deemed
comparable to the Company. These companies consisted of:
27
Affiliated Managers Group, Inc. Legg Mason, Inc.
Alliance Capital Management Holding L.P. Neuberger Berman Inc.
BKF Capital Group Inc. Nuveen Investments, Inc.
BlackRock, Inc. Sceptre Investment Counsel Ltd.
Eaton Vance Corp. T. Rowe Price Group, Inc.
Federated Investors, Inc. U.S. Global Investors, Inc.
Franklin Resources, Inc. Waddell & Reed Financial, Inc.
Gabelli Asset Management, Inc. Westwood Holdings Group, Inc.
Blackstone calculated and compared various financial multiples and ratios
based on information it obtained from SEC filings, publicly available research
reports and the Institutional Brokers Estimate System ("IBES"). The multiples
for each of the selected companies were based on the most recent SEC filings,
publicly available research reports, IBES reports and closing prices on June 6,
2003. The results of the analyses are summarized below:
SELECTED COMPANIES
RANGE
---------------
ASSETS UNDER MANAGEMENT / TOTAL ENTERPRISE VALUE 0.8% -- 4.5%
TOTAL ENTERPRISE VALUE AS A MULTIPLE OF: (1)
Revenues
LTM(2) 0.9x -- 7.0x
2003E 3.3x -- 6.6x
EBITDA(3)
LTM 6.1x -- 18.6x
2003E 8.5x -- 18.6x
EQUITY VALUE AS A MULTIPLE OF:
Pre-Tax Income(4)
LTM 9.5x -- 19.7x
2003E 8.9x -- 19.6x
Net Income
LTM 15.1x -- 28.5x
2003E 14.3x -- 27.0x
(1) Total enterprise value ("TEV") means the market value of common
equity plus the book value of net debt, preferred equity and minority
interests.
(2) LTM means the latest twelve months ending for the Company and for
other comparable companies based upon the most recent SEC filings and
publicly available information.
(3) EBITDA means earnings before interest, taxes, depreciation and
amortization.
(4) Pre-Tax Income means earnings before taxes.
Based on these analyses, Blackstone determined that the implied equity
value per Share of the Asset Management Business ranged from approximately
$1.95 to $3.05 per Share.
Select Precedent Transactions Analysis for the Asset Management Business.
Blackstone reviewed and compared the purchase price and multiples in selected
business combination transactions in the asset management industry deemed
relevant by Blackstone to arriving at its opinion. Blackstone chose the
transactions used in the analysis based on the similarity of the target
companies in the transactions to the Company in the mix and characteristics of
their business, growth, returns and margins. The transactions consisted of the
following, with the dates they were announced:
o Bank of Montreal / myCFO Inc. (September 27, 2002)
o Northern Trust Corp. / Deutsche Bank AG Passive Asset Management
(September 27, 2002)
28
o Nuveen Investments / NWQ Investment Management Co. (May 29, 2002)
o Bank of Ireland Asset Management / Iridian Asset Management LLC (May 15,
2002)
o Independent Community Bankshares, Inc. / Gilkison Patterson Investment
Advisors (April 12, 2002)
o First Republic Bank Corp. / Starbuck Tisdale & Associates (December 17,
2001)
o Deutsche Bank AG / Zurich Scudder Investments Inc (September 24, 2001)
o Eaton Vance Corp. / Atlanta Capital Management Co. (August 2, 2001)
o Eaton Vance Corp. / Fox Asset Management Inc. (July 26, 2001)
o EnvestNet Group Inc. / Portfolio Management Consultants, Inc. (July 12,
2001)
o Oppenheimer Acquisition Corp. / Tremont Advisors Inc. (July 10, 2001)
o UBS Asset Management (UBS AG) / RT Capital Management (June 20, 2001)
o John Nuveen Co. / Symphony Asset Management LLC (June 18, 2001)
o Waddell & Reed Financial Inc. / MacKenzie Investment Management, Inc.
(May 29, 2002)
o FleetBoston Financial Corp. / Liberty Financial Companies (June 5, 2001)
o Legg Mason / Private Capital Management L.P. (May 29, 2001)
o AMVESCAP plc / Pell Rudman & Co. (April 27, 2001)
o Investor Group / Parametric Portfolio Associates (April 18, 2001)
o Boston Private Financial Holdings Inc. / E.R. Taylor Investments Inc.
(February 28, 2001)
o Investors Group Inc. / Mackenzie Financial Corp. (January 29, 2001)
o State Street Corp. / Bel Air Investment Advisors LLC (December 7, 2000)
o Neuberger Berman Inc. / Delta Capital Management (October 31, 2000)
o Franklin Resources Inc. / Fiduciary Trust Co. Int. (October 25, 2000)
o ABN AMRO NV / Alleghany Asset Management (October 19, 2000)
o Pinnacle Global Group Inc. / Cummer/Moyers Securities Inc. (October 3,
2000)
o Phoenix Home Life Mutual / Phoenix Inv. Partners, Ltd. (September 11,
2000)
o Alliance Capital Management L.P. / Sanford C. Bernstein Co. Inc. (June
20, 2000)
o Caisse des Depots Group / Nvest L.P. (June 16, 2000)
o Boston Private Financial Holdings Inc. / Sand Hill Advisors Inc. (June
12, 2000)
o UniCredito Italiano SpA / Pioneer Group -- Global Inv. Mgmt. (May 15,
2000)
o AMVESCAP plc / Trimark Financial Corp. (May 8, 2000)
o Northern Trust Corp. / Carl Domino Associates LP (March 17, 2000)
o ReliaStar Financial Corp. / Lexington Global Asset Mgrs. (March 1, 2000)
o Waddell & Reed Financial Inc. / Legend Group (February 28, 2000)
o Charles Schwab / U.S. Trust (January 13, 2000)
Blackstone considered the implied equity purchase price as a multiple of
the LTM pre-tax income, the LTM net income, the current fiscal year estimated
net income and the next fiscal year estimated net income. In addition,
Blackstone considered the assets under management as a percentage of the
implied TEV purchase price and the implied TEV purchase price as a multiple of
29
the LTM revenue and the LTM EBITDA. The Blackstone analysis indicated the
following:
SELECTED PRECEDENT TRANSACTIONS
METRIC RANGE
------ -----
ASSETS UNDER MANAGEMENT / TOTAL EQUITY VALUE 0.2% -- 10.7%
TEV PURCHASE PRICE AS A MULTIPLE OF:
Revenues
LTM 0.4x -- 3.2x
EBITDA
LTM 7.7x -- 20.7x
EQUITY PURCHASE PRICE AS A MULTIPLE OF:
Pre-Tax Income
LTM 6.6x -- 26.7x
Net Income
LTM 11.0x -- 41.6x
Current Fiscal Year 14.4x -- 38.1x
Next Fiscal Year 15.7x -- 24.9x
Based on these analyses, Blackstone determined that the implied equity
value per Share of the Asset Management Business ranged from approximately
$2.15 to $3.10 per Share.
Discounted Cash Flow Analysis for the Asset Management Business.
Blackstone performed a discounted cash flow analysis, which is an analysis of
the present value of projected cash flows using discount rates and forward
earnings multiples, to determine the indicative range of present values per
Share of the Asset Management Business based on projections provided by the
Company for the years 2003 through 2007 (the "Management Case"). Blackstone
also analyzed an additional case (the "Blackstone Case") pursuant to which the
assumptions underlying the Management Case were adjusted to reflect greater
market appreciation, sustainable asset management fee scales, and certain cost
reductions/controls. In each case, the range was determined by adding (i) the
present values of the estimated future unlevered free cash flows that the
Company could generate over the five-year period 2003 to 2007 with respect to
the Asset Management Business, and (ii) the present value of the Asset
Management Business' "terminal value" at the end of year 2007. The Asset
Management Business' terminal value at the end of the period was determined by
applying a range of LTM EBITDA exit multiples to estimated 2007 EBITDA.
Blackstone used a LTM EBITDA multiple range of 7.5x to 8.5x and a weighted
average cost of capital of 11.0% to 13.0% to discount the unlevered free cash
flows and the terminal value back to present value for both the Management and
the Blackstone Cases. The discounted cash flow analysis resulted in an equity
value for the Asset Management Business of the Company of $0.30 to $0.37 per
Share under the Management Case and $2.25 to $2.68 per Share under the
Blackstone Case. Based on a weighting of 75% for the Blackstone Case and 25%
for the Management Case, Blackstone determined that the implied equity value
per Share of the Asset Management Business ranged from approximately $1.76 to
$2.10 per Share. Blackstone used discount rates in this analysis that are
commonly used by financial advisors in conducting similar discounted cash flow
analyses of organizations comparable to the Company.
Third-Party Sale Value for the Asset Management Business. Blackstone also
analyzed the potential value of the Asset Management Business in a sale to a
strategic buyer assuming that an acquiror could achieve greater EBITDA margins
on the revenues generated by the Company through elimination of certain costs
and expenses. In this analysis Blackstone assumed a range of EBITDA purchase
price multiples of 7.5x to 8.5x and a range of EBITDA margins of 15% to 20%
representing the effective margin for the Asset Management Business if the
Company and the potential acquiror were to share the value of the synergies
generated between each other. Blackstone did not suggest that any particular
third party sale could be necessarily consummated on the same terms. Based on
these analyses, Blackstone determined that the implied equity value per Share
of the Asset Management Business ranged from approximately $2.00 to $2.75 per
Share.
30
Indicative Value for the Asset Management Business. Based on the above
methodologies, Blackstone determined that the implied indicative equity value
per Share of the Asset Management Business ranged from approximately $2.00 to
$2.75 per Share. A summary of the valuation of the Asset Management Business is
presented below:
SUMMARY VALUATION OF ASSET MANAGEMENT BUSINESS
METHODOLOGY RANGE
- ----------- -----
Public-Market Valuation Analysis $1.95 -- $3.05
Precedent Transactions Analysis $2.15 -- $3.10
Discounted Cash Flow Analysis $1.76 -- $2.10
Third-Party Sale Analysis $2.05 -- $2.75
---------------
INDICATE REFERENCE RANGE $2.00 -- $2.75
Indicative Value for the Company. Based on the above analysis, Blackstone
determined that the implied indicative equity value per Share for the Company
ranged from approximately $13.35 to $14.10 per Share representing $11.35 per
Share for the Company's investment capital and other balance sheet net assets
and a range of $2.00 to $2.75 per Share for the Company's Asset Management
Business.
Blackstone performed a variety of financial and comparative analyses
solely for the purpose of providing its opinion to the Special Committee that
the consideration to be received by the holders of Shares (other than
Purchaser, Mr. Sosnoff and their affiliates) in exchange for each of their
Shares pursuant to the Offer and Merger was fair from a financial point of view
to such holders. The summary of these analyses is not a complete description of
the analyses performed by Blackstone. Preparing a fairness opinion is a complex
analytic process and is not readily susceptible to partial analysis or summary
description. Blackstone believes that its analyses must be considered as a
whole. Selecting portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying the analyses and its opinion.
In its analyses, Blackstone made numerous assumptions with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of the
Company. The estimates contained in these analyses and the valuation ranges
resulting from any particular analysis do not necessarily indicate actual
values or predict future results or values, which may be significantly more or
less favorable than those suggested by these analyses. In addition, analyses
and estimates relating to the value of the businesses or securities are not
appraisals and do not reflect the prices at which the businesses or securities
may actually be sold or the prices at which their securities may trade. As a
result, these analyses and estimates are inherently subject to substantial
uncertainty. No company or transaction used in the analysis as a comparison is
identical to the Company or the contemplated transaction.
Blackstone's opinion and financial analyses were not the only factors
considered by the Special Committee and the Board in making their evaluation of
the Offer and Merger and should not be viewed as determinative of the views of
the Special Committee, the Board or the Company's management. See "Special
Factors -- Recommendation of the Special Committee and the Board; Fairness of
the Offer and Merger."
The opinion of Blackstone was not intended to and does not constitute a
recommendation to any holder of the Shares as to whether such holder should
tender such holder's Shares in the tender offer.
Under the terms of the Engagement Letter, the Company has agreed to pay
Blackstone certain fees and to reimburse Blackstone for certain expenses. See
"The Offer -- Section 13. Fees and Expenses."
Blackstone is an internationally recognized investment banking firm and is
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, leveraged
31
buyouts, and valuations for real estate, corporate and other purposes.
Blackstone was selected to act as investment banker to the Special Committee
because of its expertise and its reputation in investment banking and mergers
and acquisitions.
POSITION OF PURCHASER AND MR. SOSNOFF REGARDING THE FAIRNESS OF THE OFFER AND
MERGER
The rules of the SEC require Mr. Sosnoff and Purchaser to express their
reasonable belief as to the fairness of the Offer and Merger to the Company's
public stockholders.
Although neither Purchaser nor Mr. Sosnoff has engaged a financial advisor
to perform any valuation analysis for the purposes of assessing, or delivering
an opinion with respect to, the fairness of the Offer and Merger to
stockholders of the Company (other than Purchaser, Mr. Sosnoff and their
affiliates), they reasonably believe that the Offer and Merger is substantively
and procedurally fair to the public stockholders of the Company. Purchaser's
and Mr. Sosnoff's reasonable belief that the Offer and Merger are procedurally
and substantively fair, however, should not be construed as a recommendation to
whether a stockholder should tender its Shares. Purchaser and Mr. Sosnoff
believe this conclusion is supported by the factors described above in "Special
Factors -- Recommendation of the Special Committee and the Board; Fairness of
the Offer and Merger" and the other following factors:
o the conclusions and recommendations of the Special Committee and the
Board that each of the Offer and Merger is fair to and in the best
interests of the Company's stockholders (other than Purchaser, Mr.
Sosnoff and their affiliates); and
o the fact that the Merger Agreement permits a change in the
recommendation of the Special Committee and the Board if necessary to
comply with their fiduciary duties to stockholders.
In view of the number and wide variety of factors considered in connection
with making a determination as to the fairness of the Offer and Merger to the
Company's public stockholders, and the complexity of these matters, neither
Purchaser nor Mr. Sosnoff found it practicable to, nor did they attempt to,
quantify, rank or otherwise assign relative weights to the specific factors
they considered. Moreover, neither Purchaser nor Mr. Sosnoff have undertaken to
make any specific determination to assign any particular weight to any single
factor, but have conducted an overall analysis of the factors described above.
The foregoing discussion of the information and factors considered by
Purchaser and Mr. Sosnoff is not intended to be exhaustive but is believed to
include all material factors considered by Purchaser and Mr. Sosnoff.
THE MERGER; PLANS FOR THE COMPANY AFTER THE OFFER AND MERGER; CERTAIN EFFECTS
OF THE OFFER AND MERGER
The Merger. If, pursuant to the Offer, Purchaser acquires Shares which,
together with Shares beneficially owned by Mr. Sosnoff, constitute at least 90%
of the outstanding Shares (and, thus, satisfies the Minimum Condition), Mr.
Sosnoff will transfer the Shares owned by him to Purchaser in order to permit
Purchaser to consummate a "short-form" merger pursuant to Section 253 of the
DGCL as promptly as practicable following successful completion of the Offer.
Section 253 of the DGCL provides that if Purchaser owns at least 90% of the
outstanding Shares, Purchaser may merge the Company into itself by executing,
acknowledging and filing, in accordance with Section 103 of the DGCL, a
certificate of such ownership and merger setting forth a copy of the resolution
of Purchaser's board of directors to so merge (including a statement of the
terms and conditions of the merger and the consideration to be paid upon
surrender of Shares not owned by Purchaser) and the date of its adoption. Under
Section 253 of the DGCL, such a merger of the Company with Purchaser would not
require the approval or any other action on the part of, or any notice to, the
Board or the stockholders of the Company. Therefore, if at least 90% of the
outstanding Shares are acquired pursuant to the Offer or otherwise, Purchaser
will be able to, and intends to, effect the Merger without meeting or vote of
the Board or the Company's stockholders. As a practical matter, unless the
Minimum Condition is waived (which would require the prior written consent of
the Special
32
Committee), upon the successful completion of the Offer, Purchase will be able
to (and is required to) effect the short-form merger described above.
If, after the Offer is completed but prior to consummation of the Merger,
the aggregate ownership by Purchaser of the outstanding Shares should fall
below 90% for any reason, Purchaser and Mr. Sosnoff may decide to acquire
additional Shares on the open market or in privately negotiated transactions to
the extent required for such ownership to equal or exceed 90%. Any such
purchases would be made at market prices or privately negotiated prices at the
time of purchase, which may be higher or lower than or the same as the Offer
Price.
Alternatively, whether or not the Offer is consummated, Purchaser and Mr.
Sosnoff might seek to effect a merger of the Company with Purchaser (or another
entity controlled by Mr. Sosnoff) pursuant to Section 251 of the DGCL. Under
the Company's Certificate of Incorporation and the DGCL, approval of the Board
and a vote of at least a majority of the outstanding Shares of the Company
entitled to vote thereon would be required to approve such a merger. Even if
the Minimum Condition is not satisfied, Mr. Sosnoff presently has a sufficient
number of votes to effect the stockholder approval of a merger pursuant to
Section 251 of the DGCL, which approval could be effected by a vote at a
meeting of stockholders or by written consent. Approval of such a merger would
nonetheless also require the approval of the Board.
THIS OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES OR CONSENTS. ANY
SUCH SOLICITATION WHICH PURCHASER OR MR. SOSNOFF MIGHT MAKE WILL BE MADE
PURSUANT TO SEPARATE PROXY OR CONSENT SOLICITATION MATERIALS COMPLYING WITH THE
REQUIREMENTS OF SECTION 14(a) OF THE EXCHANGE ACT.
Plans for the Company after the Offer and Merger. Following the Offer and
Merger, Mr. Sosnoff may undertake a reorganization of the Surviving Corporation
and its subsidiaries to, among other things, (i) create a more tax-efficient
corporate structure in light of his ownership of 100% of the Surviving
Corporation, (ii) make ASCC Corp. ("ASCC"), currently an indirect subsidiary of
the Company, a direct subsidiary of the Surviving Corporation, and (iii)
facilitate the granting of an interest in the profits and losses in
Atalanta/Sosnoff Capital Corporation (Delaware) ("Atalanta/Sosnoff Capital")
and Atalanta/Sosnoff Management Corporation ("Atalanta/Sosnoff Management"),
the two operating subsidiaries of the Company, to Mr. Steinberg as described
below.
The reorganization may include the merger of one or more of the
subsidiaries of the Surviving Corporation with and into newly formed limited
liability companies, with the limited liability companies expected to be the
surviving companies. If one or more of these mergers is consummated, Mr.
Sosnoff (though his ownership of 100% of the Surviving Corporation) is expected
to continue to own, directly or indirectly, 100% of the issued and outstanding
equity interests of each of the subsidiaries of the Surviving Company, other
than the profits interest expected to be issued to Mr. Steinberg described in
the following paragraph.
Mr. Steinberg is also currently expected to receive a significant minority
interest in the Asset Management Business following the Offer and Merger. In
very general terms, this interest is expected to entitle Mr. Steinberg to
receive a portion of the future profits and losses of such Asset Management
Business and future appreciation in the fair market value of such Asset
Management Business. Mr. Steinberg is not expected to share in the profits and
losses of the investment portfolio of the Surviving Corporation and its
subsidiaries. Mr. Steinberg may also serve on the board of directors (or
similar governing body) of Atalanta/Sosnoff Capital (or its successor) and may
have consent rights over certain fundamental company actions.
Except as otherwise described in the preceding paragraphs or otherwise in
this Offer to Purchase, neither Purchaser nor Mr. Sosnoff has any current plans
or proposals or negotiations which relate to or would result in: (i) an
extraordinary corporate transaction, such as a merger (other than the Merger),
reorganization or liquidation involving the Company; (ii) any purchase, sale or
transfer of a material amount of assets of the Company (other than purchases,
sales or transfers of the investment portfolio of the Company and its
subsidiaries); (iii) any change in the management of the Company or any change
in any material term of the employment contract of any executive officer; or
(iv) any other
33
material change in the Company's business. As discussed above, after the
Merger, the directors of the Company (other than Mr. Sosnoff and Mr. Steinberg)
will resign and terminate their relationship with the Company and its
subsidiaries.
Nevertheless, Purchaser and Mr. Sosnoff expect to continue to review the
Company's and its subsidiaries' assets, corporate structure, capitalization,
operations, properties, policies, management and personnel to determine what
changes, if any, would be desirable following the Offer and Merger in order to
best organize and integrate the activities of the Company and its subsidiaries.
In particular, Purchaser and Mr. Sosnoff expressly reserve the right to make
any changes that they deem necessary or appropriate in light of their review or
in light of future developments, which may include modifying or abandoning some
or all of the reorganization described above.
Certain Effects of the Offer. As a result of the Offer, the direct and
indirect interest of Purchaser and Mr. Sosnoff in the Company's net book value
and net earnings or loss will increase to the extent of the number of Shares
acquired under the Offer. Except as described in this Offer to Purchase,
following consummation of the Merger, Purchaser's and Mr. Sosnoff's direct or
indirect interest in such items will increase to 100% and Purchaser and Mr.
Sosnoff will be entitled to all benefits resulting from that interest,
including all income generated by the Company's operations and any future
increase in the Company's value. Similarly, Purchaser and Mr. Sosnoff will also
bear the risk of losses generated by the Company's operations and any decrease
in the value of the Company after the Merger. Upon consummation of the Merger,
the Company will become a privately held corporation. Accordingly, except as
described in this Offer to Purchase, former stockholders will not have the
opportunity to participate in the earnings and growth of the Company after the
Merger and will not have any right to vote on corporate matters. Similarly,
except as described in this Offer to Purchase, former stockholders will not
face the risk of losses generated by the Company's operations or decrease in
the value of the Company after the Merger. Based on the Company's results for
the fiscal year ended December 31, 2002, upon the completion of the Merger,
Purchaser's and Mr. Sosnoff's beneficial interest in the Company's net book
value, net loss and operating income would have increased from approximately
81% to 100% or by approximately $18 million, ($0.409 million) and $0.206
million, respectively.
Purchaser and Mr. Sosnoff believe that the employees of the Company are an
essential asset to the business and operations of the Company and its
subsidiaries. Purchaser and Mr. Sosnoff understand that continuing retention
incentives will be necessary to encourage employees to remain with the Company
and its subsidiaries following the successful completion of the Offer and
Merger.
THE MERGER AGREEMENT AND TENDER AGREEMENTS
The Merger Agreement. The foregoing is a summary of certain provisions of
the Merger Agreement. The summary is qualified in its entirety by reference to
the Merger Agreement, which is incorporated herein by reference. A copy of the
Merger Agreement has been filed by Purchaser and Mr. Sosnoff, pursuant to Rule
14d-3 under the Exchange Act, as exhibit (d)(i) to the Schedule TO. The Merger
Agreement may be examined and copies may be obtained at the places and in the
manner set forth in "The Offer -- Section 8. Certain Information Concerning the
Company." Capitalized terms not otherwise defined in the following summary have
the meanings given such terms in the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer. The
Merger Agreement provides that Purchaser and Mr. Sosnoff will commence the
Offer as promptly as practicable, but in no event later than five business days
from the public announcement by Purchaser and the Company of the execution of
the Merger Agreement. Subject to applicable SEC regulations, Purchaser (i) will
not be required to purchase, (ii) may delay the payment for, and (iii) may
terminate the Offer as to any Shares not already paid for if any of the events
described in "The Offer -- Section 11. Conditions to the Offer" occur at any
time on or after June 13, 2003 and immediately prior to the Expiration Date.
Although Purchaser has expressly reserved the right to amend or make
changes in the terms and conditions of the Offer, Purchaser agreed in the
Merger Agreement that it will not, without prior
34
written consent of the Company (including the prior written consent of the
Special Committee): (i) decrease the Offer Price or change the form of the
consideration payable in the Offer; (ii) waive or modify the Minimum Condition;
(iii) decrease the number of Shares sought in the Offer; (iii) impose any
additional conditions to the Offer from those described below in "The Offer --
Section 11. Conditions to the Offer," or (iv) otherwise amend the Offer in a
manner that would adversely affect holders of Shares. The Company has agreed
that no Shares owned by the Company for its account will be tendered pursuant
to the Offer.
The "Initial Expiration Date" of the Offer will be Midnight on July 11,
2003. Notwithstanding anything in the Merger Agreement to the contrary, without
the consent of the Company, Purchaser and Mr. Sosnoff have the right to extend
the Offer beyond the Initial Expiration Date in the following events: (i) from
time to time if, at the Initial Expiration Date (or an extended expiration date
of the Offer, if applicable), any of the conditions to the Offer have not been
satisfied or waived; (ii) for any period required by any rule, regulation,
interpretation or position of the SEC or the staff thereof applicable to the
Offer or any period required by applicable Law (as defined in the Merger
Agreement) or (iii) pursuant to an amendment to the Offer providing for a
"subsequent offering period" to the extent permitted under, and in compliance
with, Rule 14d-11 under the Exchange Act. Notwithstanding the foregoing, if any
of the conditions to the Offer are not satisfied or, if applicable, waived on
any scheduled expiration date of the Offer, Purchaser and Mr. Sosnoff will be
required to extend the Offer for a period of 10 business days and, if at the
end of such 10 business day period all of the conditions to the Offer are still
not satisfied or, if applicable, waived, an additional period of 10 business
days. Purchaser and Mr. Sosnoff may not, without the consent of the Company
(including the prior written consent of the Special Committee), extend the
Offer beyond August 22, 2003.
Recommendation. Each of the Special Committee and the Board, at meetings
duly called and held, has (i) determined that each of the Offer and the Merger
is fair to and in the best interests of the Company's stockholders (other than
Purchaser, Mr. Sosnoff and their affiliates); (ii) approved the Merger
Agreement and the transactions contemplated thereby, including, without
limitation, the Offer and Merger; and (iii) resolved to recommend that the
Company's stockholders accept the Offer and tender their Shares pursuant
thereto. However, this recommendation may be withdrawn or modified to the
extent that the Board, based on the recommendation of the Special Committee,
determines in good faith, after receiving advice of outside counsel, that such
recommendation would be inconsistent with its fiduciary duties to the Company's
stockholders under applicable law.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, at the Effective Time (as defined below), Purchaser
will be merged with and into the Company. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article 7 of the Merger
Agreement, as described below in "The Offer -- Section 11. Conditions to the
Offer," (or on such other date as the parties to the Merger Agreement agree to
in writing), Purchaser and the Company will cause the Merger to be consummated
by filing a certificate of ownership and merger (the "Merger Certificate") with
the Secretary of State of the State of Delaware in accordance with the DGCL.
The filing of the Merger Certificate or such later time as may be agreed to by
the parties to the Merger Agreement and set forth in the Merger Certificate
will be the "Effective Time" of the Merger.
As a result of the Merger, the separate corporate existence of Purchaser
will cease and the Company will be the Surviving Corporation, with all of its
rights, privileges, immunities, powers and franchises continuing unaffected by
the Merger. The certificate of incorporation and bylaws of the Company as in
effect immediately prior to the Effective Time will be the certificate of
incorporation and bylaws of the Surviving Corporation, until thereafter amended
as provided by law and such certificate of incorporation and bylaws. Other than
Mr. Sosnoff, the individuals serving as directors of the Company at the
Effective Time will cease to be the directors of the Surviving Corporation from
and after the Effective Time, although Mr. Steinberg is expected to serve in a
similar capacity with one or more of the Surviving Corporation's subsidiaries.
The individuals serving as officers of the Company and its subsidiaries at the
Effective Time are expected to continue to serve in such capacities from and
after the Effective Time with one or more of the Surviving Corporation's
subsidiaries.
35
At the Effective Time, (i) each Share issued and outstanding immediately
prior to the Effective Time (other than Shares owned by Purchaser or by holders
exercising dissenters' rights, as described below in "Special Factors --
Appraisal Rights," and Shares to be cancelled as provided in (ii) below) will
be converted into the right to receive the Merger Consideration; (ii) each
Share held in the treasury of the Company or owned by Purchaser or any direct
or indirect wholly owned subsidiary of Purchaser or the Company immediately
prior to the Effective Time will be cancelled, and no payment or distribution
will be made with respect to such Shares; and (iii) each share of common stock,
par value $0.01 per share, of Purchaser issued and outstanding immediately
prior to the Effective Time will be converted into one share of Common Stock of
the Surviving Corporation.
Agreements of Purchaser, Mr. Sosnoff and the Company. The Merger Agreement
provides that if, as a result of the purchase of Shares pursuant to the Offer,
Purchaser owns in the aggregate at least 90% of the Shares upon completion of
the Offer, the parties will take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after satisfaction or
waiver of the conditions to the Merger set forth in Article 7 of the Merger
Agreement, as described below in "The Offer -- Section 11. Conditions to the
Offer," without prior notice to, or any other action by, any other stockholder
in accordance with Section 253 of the DGCL. Such method is referred to herein
as a "Short-Form Merger."
Certain Covenants. The Company and Purchaser and Mr. Sosnoff have agreed
to give prompt notice to the other party of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause (A) any representation or warranty contained in the Merger
Agreement to be untrue or inaccurate or (B) any covenant, condition or
agreement contained in the Merger Agreement not to be complied with or
satisfied and; (ii) any failure of the Company or Purchaser, as the case may
be, to comply with or satisfy any covenant, condition or agreement under the
Merger Agreement.
From and after the Effective Time, Purchaser and Mr. Sosnoff will, and
will cause the Surviving Corporation to, fulfill and honor in all respects the
obligations of the Company pursuant to any indemnification agreements between
the Company and its directors and officers immediately prior to the Effective
Time (the "Indemnified Parties"), and any provisions of the Company's
Certificate of Incorporation or By-laws, subject to applicable Law. The parties
to the Merger Agreement have agreed that the certificate of incorporation and
bylaws of the Surviving Corporation will contain the provisions relating to the
exculpation and indemnification that are comparable to the provisions contained
in the Certificate of Incorporation and By-laws of the Company, as in effect on
the date of the Merger Agreement, and that, for a period of six years after the
Effective Time, such provisions will not be amended, repealed or otherwise
modified in any way that would adversely affect the rights of individuals who,
immediately prior to the Effective Time, were directors, officers, employees or
agents of the Company, unless such modification is required by applicable Law
(as defined in the Merger Agreement).
For a period of three years after the Effective Time, Purchaser and Mr.
Sosnoff will cause, or will cause the Surviving Corporation to, be maintained
in effect for the benefit of the Company's current directors and officers
liability insurance covering those persons who are covered by the Company's
directors' and officers' liability insurance policy as of the date the Merger
Agreement on terms comparable to such policy for a period of three years;
provided, however, that the Surviving Corporation has no obligation to provide
or maintain levels of coverage in excess of those to which directors and
officers of the Company are at the time entitled.
For six years after the Effective Time, the Surviving Corporation will
indemnify and hold harmless the Indemnified Parties to the fullest extent
permitted under applicable Law, with respect to all actions or omissions by
them prior to the Effective Time in their capacities as officers or directors
of the Company or any of its subsidiaries (including with respect to all acts
or omissions by them in their capacities as officers or directors of the
Company or any of its subsidiaries in connection with the adoption and approval
of this Merger Agreement and the transactions contemplated hereby). In the
event any claim in respect of which indemnification is available pursuant to
the foregoing provisions is
36
asserted or made within such six-year period, all rights to indemnification
will continue until such claim is disposed of or all judgments, orders, decrees
or other rulings in connection with such claim are duly satisfied.
Representations and Warranties. The Merger Agreement contains certain
limited representations and warranties of the parties thereto including
representations by the Company with respect to, among other things: authority
relative to the Merger Agreement; brokers; opinion of financial advisor, and
state takeover statutes. Certain representations and warranties in the Merger
Agreement are qualified as to "materiality."
The Merger Agreement contains certain representations by Purchaser and, as
applicable, Mr. Sosnoff with respect to, among other things, its organization
and qualification, its or his authority relative to the Merger Agreement;
financing; the operations of Purchaser; and brokers.
Conditions to the Merger. The Merger Agreement provides that the
obligations of Purchaser and the Company to consummate the Merger are subject
to the satisfaction or waiver (where permissible) of the following conditions:
o no Governmental Entity has enacted, issued, promulgated, enforced or
entered any Order that is then in effect and has the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger; and
o Purchaser has purchased Shares pursuant to the Offer.
Termination. The Merger Agreement may be terminated and the Offer and
Merger may be abandoned at any time prior to the Effective Time,
o by the Company (expressed in a resolution adopted by both the Special
Committee and the Board) and Mr. Sosnoff (on behalf of himself and
Purchaser);
o by either Mr. Sosnoff (on behalf of himself and Purchaser) or the
Company (expressed in a resolution adopted by both the Special Committee
and the Board), if any Governmental Entity has enacted, issued,
promulgated, enforced or entered any Order or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
consummation of the Offer or the Merger;
o by Mr. Sosnoff (on behalf of himself and Purchaser), if the Special
Committee fails to reaffirm (publicly, if so requested) its
recommendation in favor of the adoption and approval of the Merger
Agreement and that the stockholders of the Company accept the Offer and
tender their Shares to Purchaser pursuant to the Offer within three (3)
calendar days after Mr. Sosnoff and Purchaser request in writing that
such recommendation be reaffirmed;
o by either Mr. Sosnoff (on behalf of himself and Purchaser) or the
Company (expressed in a resolution adopted by the Special Committee), if
as a result of any of the conditions to the Offer being incapable of
being satisfied (a) Purchaser and Mr. Sosnoff have failed to commence the
Offer within five business days following the date of the Merger
Agreement or (b) the Offer has expired without any Shares being purchased
pursuant thereto; provided, however, that the right to terminate the
Merger Agreement pursuant to the foregoing shall not be available to any
party whose failure to fulfill any obligation under the Merger Agreement
or the Offer has been the cause of, or resulted in, the failure of the
Shares to have been purchased pursuant to the Offer;
o by either Mr. Sosnoff (on behalf of himself and Purchaser) or the
Company (expressed in a resolution adopted by both the Special Committee
and the Board), if the Offer has not been consummated on or before
September 30, 2003; provided, however, that the right to terminate this
Merger Agreement pursuant to the foregoing shall not be available to any
party whose failure to fulfill any obligation under the Merger Agreement
or the Offer has been the cause of, or resulted in, the failure of the
Offer to have been consummated by such date;
37
o by the Company (expressed in a resolution adopted by both the Special
Committee and the Board), (a) if the Purchaser and Mr. Sosnoff materially
breach any of their covenants, obligations or other agreements under the
Merger Agreement, or (b) if the representations and warranties of the
Purchaser and Mr. Sosnoff set forth in the Merger Agreement are not true
and correct (without giving effect to any limitation as to "materiality"
or "Material Adverse Effect" set forth therein) at and as of June 10,
2003 and as of the expiration of the date of termination of the Merger
Agreement (except to the extent expressly made as of an earlier date, in
which case as of such date) except where the failure to be so true and
correct, individually or in the aggregate would not reasonably be
expected to materially delay or prevent the commencement of the Offer or
otherwise materially impair the ability of Purchaser and Mr. Sosnoff to
fulfill their obligations in respect of the Offer; provided, further that
the breach of the covenant, obligation, agreement, representation or
warranty is incapable of being or has not been cured by Purchaser and Mr.
Sosnoff prior to or on the date which is 10 business days immediately
following written notice by the Company to Purchaser and Mr. Sosnoff of
such breach or failure to perform; or
o by Mr. Sosnoff (on behalf of himself and Purchaser), (a) if the Company
has materially breached any of its respective covenants, obligations or
other agreements under the Merger Agreement, or (b) if the
representations and warranties of the Company set forth in the Merger
Agreement are not true and correct (without giving effect to any
limitation as to "materiality" set forth therein) at and as of June 10,
2003 and as of the expiration of the date of termination of this Merger
Agreement (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure to be so true and
correct, individually or in the aggregate would not reasonably be
expected to have, a Company Material Adverse Effect; provided, further
that the breach of the covenant, obligation, agreement, representation or
warranty is incapable of being or has not been cured by the Company prior
to or on the date which is 10 business days immediately following written
notice by Purchaser and Mr. Sosnoff to the Company of such breach or
failure to perform.
Fees and Expenses. Except as set forth in this Offer to Purchase, all
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such expenses, whether
or not the Offer, the Merger or any other transaction is consummated.
Amendment and Waivers. To the fullest extent permitted by the DGCL, the
Merger Agreement may be amended by the parties by action taken by or on behalf
of their respective boards of directors or sole stockholders at any time prior
to the Effective Time, provided that any such amendment on behalf of the
Company must be approved by the Special Committee. The Merger Agreement may not
be amended except by an instrument in writing signed by the parties thereto.
At any time prior to the Effective Time, any party to the Merger Agreement
may (i) extend the time for the performance of any obligation or other act of
another party to the Merger Agreement, (ii) waive any inaccuracy in the
representations and warranties of another party contained in the Merger
Agreement or in any document delivered pursuant to the Merger Agreement and
(iii) waive compliance with any agreement of another party or condition to its
own obligations contained in the Merger Agreement, provided that, if the
Company seeks to make such extension or waiver as provided in clause (i), (ii)
or (iii) above, it must first obtain the approval of the Special Committee. Any
such extension or waiver will be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
Tender Agreements. The following is a summary of certain provisions of the
Stockholder Tender Agreements dated as of June 10, 2003 by and among Purchaser
and Mr. Sosnoff and each of Mr. Steinberg and William M. Knobler (each referred
to as a "Tendering Stockholder" and collectively as the "Tendering
Stockholders"). The Tendering Stockholders are executive officers, and in the
case of Mr. Steinberg also a director, of the Company and have voting and
dispositive power with respect to an aggregate of 643,108 Shares on a
fully-diluted basis (the "Subject Shares") representing approximately 7% of the
Shares outstanding on a fully-diluted basis on the date of the Merger
38
Agreement. The summary is qualified in its entirety by reference to the Tender
Agreements, which are incorporated herein by reference and copies of which have
been filed with the SEC as exhibits to the Schedule TO.
As a condition to the willingness of Purchaser and Mr. Sosnoff to enter
into the Merger Agreement, and as inducement and in consideration therefor,
each Tendering Stockholder has entered into a Tender Agreement.
Each Tendering Stockholder has also agreed that unless the Tender
Agreement is terminated as stated below, (i) each Tendering Stockholder will
tender the Subject Shares to Purchaser in the Offer as promptly as practicable,
and in any event no later than the tenth Business Day following the
commencement of the Offer, and (ii) each Tendering Stockholder will not
withdraw any Subject Shares tendered unless the Offer is terminated or has
expired without Purchaser purchasing all Shares validly tendered in the Offer.
Each Tendering Stockholder has acknowledged and agreed that Purchaser and Mr.
Sosnoff's obligation to accept for payment Shares in the Offer, including any
Shares tendered by the Tendering Stockholder, is subject to the terms and
conditions of the Merger Agreement and the Offer.
Each Tendering Stockholder has agreed that, prior to the termination of
the Tender Agreement pursuant to its terms, it will not (i) sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of (collectively, a
"Transfer"), or enter into any contract, option or other agreement with respect
to, or consent to, a Transfer of, any or all of the Subject Shares, or (ii)
take any action that would have the effect of preventing, impeding, interfering
with or adversely affecting its ability to perform their obligations under the
Tender Agreements.
Each Tendering Stockholder has agreed that it will not, nor will it permit
any of its affiliates to, nor will such Tendering Stockholder act in concert
with or permit any of its affiliates to act in concert with any person to make,
or in any manner participate in, directly or indirectly, a "solicitation" of
"proxies" (as such terms are used in the rules of the SEC) or powers of
attorney or similar rights to vote, or seek to advise or influence any person
with respect to the voting of, any Shares in connection with any vote or other
action on any matter, other than to recommend that stockholders of the Company
accept the Offer and tender their Shares in the Offer and otherwise as
expressly provided by the Tender Agreements. Each Tendering Stockholder has
agreed that it will not, nor will it permit any of its affiliates to, nor will
such Tendering Stockholder act in concert with or permit any of its affiliates
to act in concert with any person to, deposit any Shares in a voting trust or
subject any Shares to any arrangement or agreement with any person with respect
to the voting of such Shares.
Each Tendering Stockholder has made certain representations and warranties
in the Tender Agreements, including with respect to (i) the authority to enter
into and perform the obligations under the Tender Agreements, (ii) being the
lawful owner of the Subject Shares and the absence of liens or any other
encumbrances with regard to the Subject Shares, and (iii) the absence of
required consents and statutory or contractual conflicts or violations.
The Tender Agreements, and all rights and obligations of the parties
thereto, will terminate upon the earliest to occur of (i) the mutual consent of
Purchaser and Mr. Sosnoff and each individual Tendering Stockholder, (ii) the
Effective Time, and (iii) the date of termination of the Merger Agreement in
accordance with its terms. Termination of the Tender Agreements will not
prevent any party thereunder from seeking any remedies (at law or in equity)
against any other party hereto for such party's breach of any of the terms of
the Stockholder Tender Agreements.
Each Tendering Stockholder has entered into a Tender Agreement solely in
his, her or its capacity as a record and beneficial owner of the Subject
Shares, and, if applicable, nothing therein will limit or affect any actions
taken in his, her or its capacity as an officer or director of the Company.
CONDUCT OF THE COMPANY'S BUSINESS IF THE OFFER IS NOT COMPLETED
If the Offer is not completed because the Minimum Condition or another
condition is not satisfied or, if applicable, waived, Purchaser and Mr. Sosnoff
expect that the Company's current management will continue to operate the
Company's business substantially as presently operated.
39
However, Mr. Sosnoff anticipates that if the Offer is not completed, he will
continue to evaluate the current ownership structure of the Company and its
status as a publicly traded company. In particular, Mr. Sosnoff may consider:
o engaging in open market or privately negotiated purchases of Shares to
increase his aggregate ownership of the Shares to at least 90% of the
then outstanding Shares and then effecting a Short-Form Merger;
o proposing that Purchaser and the Company enter into a merger agreement,
which would require the approval of the Board and the vote of his Shares
in favor of that merger;
o keeping outstanding the public minority interest in the Company, in
which case the public stockholders of the Company would receive no cash
for their Shares and would bear the risk that the trading price per Share
could decline to a price that is less than the Offer Price; or
o engaging in a sale, merger or other similar transaction with a third
party.
If Mr. Sosnoff were to pursue any of these alternatives, it might take
longer for the public stockholders of the Company to receive any consideration
for their Shares (other than through sales in the open market or in private,
negotiated sales) than if they had tendered their Shares in the Offer. Any such
transaction may result in proceeds per Share to the public stockholders of the
Company that are more or less than or the same as the Offer Price and which may
or may not consist of cash.
APPRAISAL RIGHTS
Under Section 262 of the DGCL, any holder of Shares at the Effective Time
(a "Remaining Stockholder") who does not wish to accept the Merger
Consideration pursuant to the Merger has the right to seek an appraisal and be
paid the "fair value" of its Shares at the Effective Time (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
judicially determined and paid to it in cash provided that such holder complies
with the provisions of such Section 262 of the DGCL.
The following is a brief summary of the statutory procedures to be
followed by a Remaining Stockholder in order to dissent from the Merger and
perfect appraisal rights under the DGCL. This summary is not intended to be
complete and is qualified in its entirety by reference to Section 262 of the
DGCL, the text of which is set forth in Annex A hereto. Any Remaining
Stockholder considering demanding appraisal is advised to consult legal
counsel. Dissenters' rights will not be available unless and until the Merger
is consummated.
Remaining Stockholders of record who desire to exercise their appraisal
rights must fully satisfy all of the following conditions. A written demand for
appraisal of Shares must be delivered to the Secretary of the Company within 20
days after the date that the Surviving Corporation mails to the Remaining
Stockholders a notice (the "Notice of Merger") to the effect that the Merger
has been approved and/or is effective and that appraisal rights are available
(and includes in such notice a copy of Section 262 of the DGCL and any other
information required thereby) if the Merger is being effected without a vote or
meeting of the Company's stockholders either in a Short-Form Merger pursuant to
Section 253 of the DGCL or otherwise by stockholder written consent without a
meeting of stockholders (both of which are referred to in this discussion as a
"Short-Form Merger"). Any holder of Shares who votes or delivers a written
consent in favor of the Merger Agreement, as the case may be, will lose
appraisal rights under Section 262.
In the case of a Short-Form Merger, a demand for appraisal must be
executed by or for the stockholder of record, fully and correctly, as such
stockholder's name appears on the stock certificates. If Shares are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
such demand must be executed by the fiduciary. If Shares are owned of record by
more than one person, as in a joint tenancy or tenancy in common, such demand
must be executed by all joint owners. An authorized agent, including an agent
for two or more joint owners, may execute the demand for appraisal for a
stockholder of record; however, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, he is acting as
agent for the record owner.
40
A record owner, such as a broker, who holds Shares as a nominee for
others, may exercise appraisal rights with respect to the Shares held for all
or less than all beneficial owners of Shares as to which the holder is the
record owner. In such case the written demand must set forth the number of
Shares covered by such demand. Where the number of Shares is not expressly
stated, the demand will be presumed to cover all Shares outstanding in the name
of such record owner. Beneficial owners who are not record owners and who
intend to exercise appraisal rights should instruct the record owner to comply
strictly with the statutory requirements with respect to the exercise of
appraisal rights within 20 days following the mailing of the Notice of Merger
in the case of a Short-Form Merger.
Remaining Stockholders who elect to exercise appraisal rights must mail or
deliver their written demands to the Secretary of the Company, at 101 Park
Avenue, New York, NY 10178. The written demand for appraisal should specify the
stockholder's name and mailing address, the number of Shares covered by the
demand and that the stockholder is thereby demanding appraisal of such Shares.
In the case of a long-form merger, the Company must, within ten days after the
Effective Time, provide notice of the Effective Time to all stockholders who
have complied with Section 262 of the DGCL and have not voted for approval and
adoption of the Merger Agreement.
Voting or consenting in favor of the approval and adoption of the Merger
Agreement, or delivering a proxy in connection with the stockholders' meeting
called to approve the Merger Agreement (unless the proxy votes against, or
expressly abstains from the vote on, the approval and adoption of the Merger
Agreement), will constitute a waiver of the stockholder's right of appraisal
and will nullify any written demand for appraisal submitted by the stockholder.
Within 120 days after the Effective Time, either the Company or any
Remaining Stockholder who has complied with the required conditions of Section
262 of the DGCL and who is otherwise entitled to appraisal rights may file a
petition in the Delaware Court of Chancery demanding a determination of the
fair value of the Shares of the dissenting stockholders. This petition must
also be served on the Surviving Corporation. If a petition for an appraisal is
timely filed, after a hearing on such petition, the Delaware Court of Chancery
will determine which stockholders are entitled to appraisal rights and
thereafter will appraise the Shares owned by such stockholders, determining the
fair value of such Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest to be paid, if any, upon the amount determined to be the fair value.
In determining fair value, the Delaware Court of Chancery is to take into
account all relevant factors. In Weinberger v. UOP, Inc., et al., the Delaware
Supreme Court discussed the factors that could be considered in determining
fair value in an appraisal proceeding, stating 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 and
that "[f]air price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court stated that in
making this determination of fair value the court must consider "market value,
asset value, dividends, earnings prospects, the nature of the enterprise and
any other facts which were known or which could be ascertained as of the date
of merger which throw any light on future prospects of the merged corporation
...." The Delaware Supreme Court has construed Section 262 of the DGCL to mean
that "elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." However, the court noted that
Section 262 provides that fair value is to be determined "exclusive of any
element of value arising from the accomplishment or expectation of the merger."
Remaining Stockholders who in the future consider seeking appraisal should
have in mind that the fair value of their Shares determined under Section 262
of the DGCL could be more than, the same as, or less than the Merger
Consideration if they do seek appraisal of their Shares, and that opinions of
investment banking firms as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262 of the DGCL. The cost
of the appraisal proceeding may be determined by the Delaware Court of Chancery
and taxed upon the parties as the Delaware Court of Chancery deems equitable in
the circumstances. Upon application of a dissenting stockholder, the Delaware
Court of Chancery may order that all or a portion of the expenses incurred by
any dissenting stockholder in connection with the appraisal proceeding,
including, without limitation,
41
reasonable attorneys' fees and the fees and expenses of experts, be charged pro
rata against the value of all Shares entitled to appraisal. In the absence of
such a determination or assessment, each party bears its own expenses.
Any Remaining Stockholder who has duly demanded appraisal in compliance
with Section 262 of the DGCL will not, after the Effective Time, be entitled to
vote for any purpose the Shares subject to such demand or to receive payment of
dividends or other distributions on such Shares, except for dividends or other
distributions payable to stockholders of record at a date prior to the
Effective Time.
At any time within 60 days after the Effective Time, any former holder of
Shares has the right to withdraw his or her demand for appraisal and to accept
the Merger Consideration. After this period, such holder may withdraw his or
her demand for appraisal only with the consent of the Company as the Surviving
Corporation. If no petition for appraisal is filed with the Delaware Court of
Chancery within 120 days after the Effective Time, stockholders' rights to
appraisal will cease and all stockholders will be entitled to receive the
Merger Consideration. Inasmuch as the Company has no obligation to file such a
petition, and Purchaser has no present intention to cause or permit the
Surviving Corporation to do so, any stockholder who desires such a petition to
be filed is advised to file it on a timely basis. No petition timely filed in
the Delaware Court of Chancery demanding appraisal will be dismissed as to any
stockholder without the approval of the Delaware Court of Chancery, and such
approval may be conditioned upon such terms as the Delaware Court of Chancery
deems just.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET
FORTH ABOVE IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO STOCKHOLDERS IF THE MERGER IS CONSUMMATED. STOCKHOLDERS WHO WILL
BE ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE
ADDITIONAL INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE
FOLLOWED IN CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY
ACTION RELATING THERETO.
STOCKHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE
APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE PRICE PAID
IN THE OFFER THEREFOR.
42
BENEFICIAL OWNERSHIP OF THE SHARES
The following table sets forth certain information regarding beneficial
ownership of the Shares as of December 31, 2002 (unless otherwise noted), for
(i) each person who is known by the Company to be the beneficial owner of more
than five percent of any class of the Shares, (ii) each director and each named
executive officer of the Company and (iii) all directors and officers of the
Company as a group. Unless otherwise indicated, Purchaser and Mr. Sosnoff
believe, based on reports filed with the SEC and on information supplied by the
Company, that the individuals listed each have sole voting and investment power
with respect to such shares.
NUMBER OF SHARES PERCENTAGE OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED (1)
- ------------------------------------------ ------------------ ----------------------
Martin T. Sosnoff (2) 7,000,000 80.8%
Craig B. Steinberg (4) 642,008 7.4%
William M. Knobler (5) 1,100 *
James D. Staub (3) (4) 100,000 1.2%
Ronald H. Menaker 2,000 *
Thurston Twigg-Smith 1,000 *
All Directors and Executive Officers as a
Group (9 persons) 7,746,108 89.4%
- ----------
* Less than 0.1% of Shares outstanding.
(1) Calculated on the basis of 8,664,715 Shares outstanding on a
fully-diluted basis as of December 31, 2002, including stock options
exercisable for 200,000 Shares issued to certain executive officers of
the Company as described in this Offer to Purchase.
(2) For purposes of this Offer to Purchase, the amount reported includes
84,000 Shares owned by a private charitable foundation that is controlled
by Mr. Sosnoff and his wife. On June 12, 2003, Mr. Sosnoff transferred
93,900 Shares to an educational institution as part of a pre-existing
charitable giving commitment to such institution. These Shares are held
in an account in the name of such educational institution over which the
Company has discretionary investment authority. Accordingly, for purposes
of this Offer to Purchase, the amount reported includes these 93,900
Shares.
(3) On the date hereof, or within 60 days after that date, the following
individual has exercisable options to acquire Shares awarded under the
Company's Long-Term Incentive Plan (the "LTIP"): Mr. Staub -- 50,000.
Such options are reflected in the table above.
(4) On the date hereof, or within 60 days hereafter, the following
individuals have exercisable options to acquire Shares awarded under the
Company's Stock Option Plan: Mr. Steinberg -- 100,000; Mr. Staub --
50,000. Such options are reflected in the table above.
(5) The amount reported includes 300 Shares held by Mr. Knobler's wife and
200 Shares are held by a private charitable foundation controlled by Mr.
Knobler.
RELATED PARTY TRANSACTIONS
Purchaser is wholly owned by Mr. Sosnoff. As of June 12, 2003, Purchaser
did not directly own any Shares. As described in this Offer to Purchase, upon
the successful completion of the Offer (including satisfaction of the Minimum
Condition), Mr. Sosnoff will transfer all of the Shares owned by him to
Purchaser to enable Purchaser to effect the Merger. As majority stockholder of
the Company, Mr. Sosnoff is in a position to cause the election of a majority
of the Board and to control the Company's affairs.
Except as set forth in this Offer to Purchase, none of Purchaser, Mr.
Sosnoff or any of their respective affiliates, or, to the best knowledge of
Purchaser and Mr. Sosnoff, any of the persons listed
43
on Schedule I, on one hand, has had, any business relationships or transactions
with the Company or any of its executive officers, directors or affiliates, on
the other hand, that would require reporting under the rules and regulations of
the SEC applicable to the Offer. Information regarding such business
relationships or transactions, including the amounts involved, is summarized
below and set forth in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2002. This Annual Report is incorporated by reference
in this Offer to Purchase, and a copy may be examined at or obtained from the
SEC and the NYSE in the manner set forth below. Stockholders should obtain and
carefully review a copy of the Annual Report to review the details of these
business relationships and transactions in more detail. See "The Offer --
Section 8. Certain Information Concerning the Company."
LTIP. Officers, directors and employees of the Company are eligible to
receive options to purchase Shares pursuant to the LTIP. Under the LTIP, awards
of stock, restricted stock, options and other stock-based awards totaling
880,000 Shares are available for award.
In 1997, the Company awarded 600,000 shares of restricted stock and
175,000 shares of restricted stock at the issue of price of $.01 per share to
Mr. Steinberg and Mr. Anthony G. Miller, a former Executive Vice President and
Chief Operating Officer, respectively, under the terms of the LTIP and the
related Award Agreements (each an "Award Agreement"). There have been no other
awards under the LTIP. These restricted shares are fully vested as of the date
hereof. Mr. Steinberg and Mr. Miller paid $6,000 and $1,750, respectively, for
the purchase of the restricted stock. In May 2002, the Company repurchased all
of Mr. Miller's Shares at $10.96 per Share.
Stock Option Plan. Under the Company's previous Stock Option Plan, which
was terminated by the Company in connection with the approval of the LTIP, the
Company granted options to purchase Shares to the following executive officers:
Mr. Steinberg -- 100,000 at $9.50 per Share; Mr. Staub -- 50,000 at $6.13 per
Share. Mr. Miller forfeited all of his options in 2002. All of the remaining
options are fully vested and exercisable by the officers at any time. As of the
date hereof, none of these options have been exercised.
Loans To Directors And Officers. Under the terms of the respective Award
Agreements, the Company has made certain loans to Mr. Steinberg and Mr. Miller
for the purpose of discharging their personal tax liability incurred by reason
of the award of the restricted stock, the lapse at annual intervals of the
Company's right to repurchase the restricted stock and any dividends received
thereon. Mr. Steinberg and Mr. Miller are required to pledge shares of
restricted stock of a fair market value equivalent to the amount of the loan to
secure their respective obligation to repay such indebtedness to the Company.
At September 20, 2002, indebtedness, including principal and interest, in
the amount of $565,421 became due under loans made by the Company to Mr.
Steinberg under his Award Agreement. As permitted by the terms of his Award
Agreement, Mr. Steinberg elected to repay such indebtedness by applying a
certain number of shares of restricted stock at its closing sales price as of
the close of business on such day. The closing sales price on September 24,
2002, the date upon which Mr. Steinberg elected to apply the Shares to his
obligation, was $9.75 per share. Accordingly, Mr. Steinberg applied to the
payment of his obligation to the Company 57,992 shares of his restricted stock.
As of June 12, 2003, Mr. Steinberg owes the Company approximately $2.3 million
in respect of loans made under his Award Agreement. Mr. Steinberg intends to
repay this amount (together with accrued interest through the date of
repayment) in full with proceeds received by him as a result of the tender of
his Shares in the Offer.
In May 2002, Mr. Miller terminated his employment with the Company. At
such time, indebtedness, including principal and interest, in the amount of
approximately $913,000 was due under loans made by the Company to Mr. Miller
under his Award Agreement. As permitted by the terms of his Award Agreement,
Mr. Miller elected to repay such indebtedness by applying a certain number of
shares of restricted stock at its closing sales price as of the close of
business on such day. The closing sales price on April 30, 2002, the date upon
which Mr. Miller elected to apply the Shares to his obligation, was $10.96 per
Share. Accordingly, Mr. Miller applied to the payment of his obligation to the
Company approximately 83,300 shares of his restricted stock.
44
Employment Related Agreements. Under the terms of an employment agreement
with Mr. Knobler, Mr. Knobler was entitled to certain payments in three
installments in January 1999, 2000 and 2001 based upon a multiple of annualized
revenues from accounts managed by him. The Company paid Mr. Knobler
approximately $2,900,000 under this agreement. No other amounts are owed to Mr.
Knobler from the Company under this agreement.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND MERGER
Purchaser and Mr. Sosnoff and certain executive officers and directors of
the Company have various interests in the Offer and Merger that are in addition
to, or different from, the interests of the stockholders of the Company
generally. The Company's stockholders should keep this in mind when considering
the recommendations of the Special Committee and the Board.
Ownership of Shares. As of June 12, 2003, Mr. Sosnoff beneficially owned
7,000,000 Shares (including, for purposes of this Offer to Purchase, 84,000
Shares owned by a private charitable foundation controlled by Mr. Sosnoff and
his wife and 93,900 Shares owned by an educational institution over which Mr.
Sosnoff has investment power) representing approximately 81% of the Shares on a
fully-diluted basis and, thus, he controls the Company. As of June 12, 2003,
Craig B. Steinberg, an executive officer and director of the Company, and
William M. Knobler, an executive officer of the Company, owned an aggregate of
643,108 Shares, representing approximately 7% of the Shares, on a fully-diluted
basis. As discussed above, each of them has entered into a Tender Agreement
pursuant to which each of them has agreed to tender their Shares in the Offer.
See "Special Factors -- The Merger Agreement and Tender Agreements" and
"Special Factors -- Beneficial Ownership of the Shares. To the knowledge of
Purchaser and Mr. Sosnoff, each other executive officer or director of the
Company who owns Shares intends to tender their Shares in the Offer.
Exercise of Stock Options. As of the date hereof, executive officers and
directors hold options to purchase 200,000 Shares, all of which are vested and
have exercise prices below $13.95 per share. In the Merger, all of these
options will be converted into the right to receive cash in an amount equal to
the product of $13.95 minus the applicable exercise price per share of the
option, multiplied by the number of Shares issuable upon the exercise of the
option. Accordingly, these executive officers and directors will receive
payment of $1.1 million as a result of their options being cashed out in the
merger.
Repayment of Loan. Under the terms of the LTIP (and related Award
Agreement), the Company has made certain loans to Mr. Steinberg for the purpose
of discharging his personal tax liability incurred by reason of an award of
restricted stock to him under this plan in 1997. As of June 12, 2003, Mr.
Steinberg owes the Company approximately $2.3 million in respect of loans made
under his award agreement. Mr. Steinberg intends to repay this amount (together
with accrued interest through the date of repayment) in full with certain of
proceeds received by him as a result of the tender of his Shares in the Offer.
See "Special Factors -- Related Party Transactions."
Certain Post-Merger Arrangements. As discussed above, upon completion of
the Merger, Mr. Steinberg is expected to receive an equity interest in the
operating subsidiaries of the Company entitling him to, among other things, a
significant portion of the profits and losses of such subsidiaries following
the Merger. See "Special Factors -- The Merger; Plans for the Company after the
Offer and Merger; Certain Effects of the Offer and Merger" above.
Indemnification. Under the Merger Agreement, the Surviving Corporation has
agreed to continue the existing indemnification arrangements of the Company for
a period of six years, and directors' and officers' liability insurance for the
Company's past, present and future directors and officers for a period of three
years, following the Merger.
Special Committee Compensation. Each member of the Special Committee
received compensation in connection with serving on the Special Committee equal
to $2,000 (plus certain expenses) for each meeting of the Special Committee
that he has attended, regardless of whether any proposed transaction was
entered into or completed. The Board and the Special Committee believe that the
foregoing payments do not affect the Special Committee's independence or
impartiality.
45
Officers of the Surviving Corporation. Following completion of the Merger,
it is currently expected that the current officers of the Company and its
subsidiaries will remain as officers of the Surviving Company or one of its
subsidiaries. Following completion of the Merger, the current directors on the
Board (other than Mr. Sosnoff) will cease to serve on the Board of the
Surviving Corporation, although it is currently expected that Mr. Steinberg
will serve on the board of directors (or similar governing body) with one or
more of the Company's subsidiaries. See "Special Factors -- The Merger; Plans
for the Company after the Offer and Merger; Certain Effects of the Offer and
Merger."
Use of Employees of the Company. Mr. Steinberg and Kevin Kelly, Chief
Operating Officer and Chief Financial Officer of the Company, have assisted Mr.
Sosnoff in the preparation of his proposal and related analyses of the Offer
and Merger, including the preparation of the 5 Year Projections (defined and
discussed below at "The Offer -- Section 8. Certain Information Concerning the
Company."
The Special Committee and the Board were aware of these actual and
potential conflicts of interest and considered them along with the other
matters described under "Special Factors -- Recommendation of the Special
Committee and the Board; Fairness of the Offer and Merger."
46
THE OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not thereafter properly withdrawn in
accordance with "The Offer -- Section 4. Withdrawal Rights." The term
"Expiration Date" means 12:00 a.m. Midnight, New York City time, on Friday,
July 11, 2003, unless and until Purchaser has extended the period during which
the Offer is open, in which event the term "Expiration Date" means the latest
time and date at which the Offer, as so extended by Purchaser, will expire.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition and the other conditions described in "The Offer -- Section
11. Conditions to the Offer." If all such conditions are not satisfied prior to
the Expiration Date, Purchaser reserves the right (but is not obligated) to (i)
decline to purchase any of the Shares tendered and terminate the Offer, subject
to the terms of the Merger Agreement, (ii) waive any of the conditions to the
Offer to the extent permitted by applicable law and the provisions of the
Merger Agreement, and, subject to complying with applicable rules and
regulations of the SEC, purchase all Shares validly tendered, (iii) subject to
the terms of the Merger Agreement, extend the Offer or (iv) subject to the
terms of the Merger Agreement, amend the Offer.
Subject to the terms of the Merger Agreement, Purchaser may (i) extend the
period of time during which the Offer is open and thereby delay acceptance for
payment of, and the payment for, any Shares, by giving oral or written notice
of such extension to the Depositary or (ii) amend the Offer by giving oral or
written notice of such amendment to the Depositary. Any extension, amendment or
termination of the Offer will be followed as promptly as practicable by public
announcement thereof, the announcement in the case of an extension to be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(d) under the Exchange Act. Without limiting the
obligation of Purchaser under such Rule or the manner in which Purchaser may
choose to make any public announcement, Purchaser currently intends to make
announcements by issuing a press release to the Dow Jones News Service.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE TO BE PAID
BY PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
The Merger Agreement provides that Purchaser will not, without the prior
written consent of the Board and the Special Committee, (i) decrease the price
per Share payable in the Offer, (ii) change the form of consideration payable
in the Offer, (iii) waive or modify the Minimum Condition, (iv) reduce the
maximum number of Shares sought to be purchased in the Offer, (iv) impose
conditions to the Offer in addition to those described in "The Offer -- Section
11. Conditions to the Offer," (v) make any changes in the terms and conditions
of the Offer that are in any manner adverse to the holders of the Shares, or
(vi) except as provided below, extend the Offer beyond the date that is twenty
(20) business days after the commencement of the Offer (the "Initial Expiration
Date"). Notwithstanding the foregoing, Purchaser may, without the consent of
the Company (i) extend the Offer beyond the scheduled Expiration Date, which
initially will be the Initial Expiration Date if, as of such expiration, any of
the Offer Conditions (as defined in the Merger Agreement) are not satisfied or
waived, (ii) extend the Offer for any period required by any rule, regulation
or interpretation of the SEC, the staff thereof or the NYSE applicable to the
Offer, and (iii) provide a "Subsequent Offering Period" in accordance with Rule
14d-11 under the Exchange Act; provided, that notwithstanding anything to the
contrary, if any of the conditions to the Offer are not satisfied or, if
applicable, waived on any scheduled expiration date of the Offer, Purchaser
will be required to extend the Offer for a period of 10 business days and, if
at the end of such 10 business day period all of the conditions to the Offer
are still not satisfied or, if applicable, waived, an additional period of 10
business days; provided further, that, without the consent of the Company,
Purchaser may not extend the Offer beyond August 22, 2003.
47
A Subsequent Offering Period would be an additional period of time from
three (3) to twenty (20) business days in length, following the expiration of
the Offer, during which stockholders may tender Shares for the Offer Price.
Rule 14d-11 under the Exchange Act provides that Purchaser may include a
Subsequent Offering Period so long as, among other things, (i) the Offer
remained open for a minimum of twenty (20) business days and has expired, (ii)
Purchaser offers the same form and amount of consideration to stockholders in
both the initial and subsequent offering period, (iii) Purchaser accepts and
promptly pays for all Shares tendered during the Offer prior to the Expiration
Date, (iv) Purchaser announces the results of the Offer, including the
approximate number and percentage of Shares deposited in the Offer, no later
than 9:00 a.m., New York City time, on the next business day after the
Expiration Date and immediately begins the Subsequent Offering Period, and (v)
Purchaser immediately accepts and promptly pays for Shares as they are tendered
during the Subsequent Offering Period.
In a public release, the SEC has expressed the view that the inclusion of
a Subsequent Offering Period would constitute a material change to the terms of
the Offer requiring Purchaser to disseminate new information to stockholders in
a manner reasonably calculated to inform them of such change sufficiently in
advance of the Expiration Date (generally five (5) business days). The SEC,
however, has recently stated that such advance notice may not be required under
certain circumstances. In the event Purchaser elects to include a Subsequent
Offering Period, it will notify stockholders of the Company consistent with the
requirements of the SEC. Purchaser does not currently intend to include a
Subsequent Offering Period in the Offer, although it reserves the right to do
so in its sole discretion. Pursuant to Rule 14d-7 under the Exchange Act, no
withdrawal rights apply to Shares tendered during a Subsequent Offering Period,
and no withdrawal rights apply during the Subsequent Offering Period with
respect to Shares tendered in the Offer and accepted for payment. During a
Subsequent Offering Period, Purchaser will promptly purchase and pay for all
Shares tendered at the same price paid in the Offer. In addition, Purchaser may
increase the Offer Price and extend the Offer to the extent required by law in
connection with such increase, in each case in its sole discretion and without
the Company's consent. Notwithstanding the foregoing, Purchaser may, without
the consent of the Company, extend the Offer for any period required by any
rule, regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer.
If Purchaser extends the Offer, or if Purchaser (whether before or after
its acceptance for payment of Shares) is delayed in its purchase of or payment
for Shares or is unable to pay for Shares pursuant to the Offer for any reason,
then, without prejudice to Purchaser's rights under the Offer, the Depositary
may retain tendered Shares on behalf of Purchaser, and such Shares may not be
withdrawn except to the extent tendering stockholders are entitled to
withdrawal rights as described in "The Offer -- Section 4. Withdrawal Rights."
However, the ability of Purchaser to delay the payment for Shares which
Purchaser has accepted for payment is limited by Rule 14e-l(c) under the
Exchange Act, which requires that a bidder pay the consideration offered or
return the securities deposited by or on behalf of holders of securities
promptly after the termination or withdrawal of the Offer.
If 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,
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the
Exchange Act. 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 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 SEC's
view, an offer should remain open for a minimum of five (5) business days from
the date a material change is first published, sent or given to security
holders and that, if material changes are made with respect to information not
materially less significant than the offer price and the number of shares being
sought, a minimum of ten (10) business days may be required to allow adequate
dissemination and investor response. The requirement to extend the Offer will
not apply to the extent that the number of business days remaining between the
occurrence of the change and the then-scheduled Expiration
48
Date equals or exceeds the minimum extension period that would be required
because of such amendment. As used in this Offer to Purchase, "business day"
has the meaning set forth in Rule 14d-1 under the Exchange Act.
PURSUANT TO RULE 14D-7 UNDER THE EXCHANGE ACT, NO WITHDRAWAL RIGHTS APPLY
DURING THE SUBSEQUENT OFFERING PERIOD. FURTHERMORE, THE SAME CONSIDERATION, THE
OFFER PRICE, WILL BE PAID TO STOCKHOLDERS TENDERING SHARES IN THE OFFER OR IN A
SUBSEQUENT OFFERING PERIOD, IF ONE IS INCLUDED.
This Offer to Purchase and the related Letter of Transmittal will be
mailed by the Company to record holders of Shares and will be furnished by the
Company to brokers, dealers, banks and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable, who
are listed as participants in a clearing agency's security position listing,
for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
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), Purchaser will accept for payment, and will pay for,
all Shares validly tendered prior to the Expiration Date and not properly
withdrawn in accordance with "The Offer -- Section 4. Withdrawal Rights,"
promptly after the Expiration Date, provided that the Offer has not been
terminated by such date. If there is a Subsequent Offering Period, all Shares
tendered prior to the Expiration Date will be immediately accepted for payment
and promptly paid for following the Expiration Date and all Shares tendered
during a Subsequent Offering Period will be immediately accepted for payment
and paid for as they are tendered. Subject to compliance with Rule 14e-1(c)
under the Exchange Act (relating to a bidder's obligation to pay the
consideration offered or return the securities deposited by or on behalf of
holders of securities promptly after the termination or withdrawal of such
bidder's offer), Purchaser expressly reserves the right to delay acceptance for
payment of, or payment for, Shares in order to comply in whole or in part with
any other applicable law. See "The Offer -- Section 12. Certain Legal Matters."
For a description of Purchaser's right to terminate the Offer and not accept
for payment or pay for Shares or to delay acceptance for payment or payment for
Shares, see "The Offer -- Section 1. Terms of the Offer; Expiration Date."
In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) the certificates evidencing such Shares (the "Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depositary Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Offer -- Section 3. Procedures for Tendering Shares," (ii) the Letter of
Transmittal (or a 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 (as defined below) in lieu of the Letter of
Transmittal and (iii) any other documents required by the Letter of
Transmittal. The per share consideration paid to any holder of Common Stock
pursuant to the Offer will be the highest per share consideration paid to any
other holder of such Shares pursuant to the Offer.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary, as agent for the tendering stockholders, of Purchaser's acceptance
for payment of such Shares pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Shares accepted for payment pursuant
to the Offer will be made by deposit of the purchase price therefore with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from Purchaser and transmitting such payments to
tendering stockholders whose Shares have been accepted for payment.
If any tendered Shares are not accepted for payment for any reason
pursuant to the terms and conditions of the Offer, or if Certificates are
submitted evidencing more Shares than are tendered, Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at
49
the Book-Entry Transfer Facility pursuant to the procedure set forth in "The
Offer -- Section 3. Procedures for Tendering Shares," such Shares will be
credited to an account maintained at the Book-Entry Transfer Facility),
promptly following the expiration or termination of the Offer.
Purchaser reserves the right to transfer or assign, in whole or in part,
to any affiliate of Purchaser, the right to purchase all or any portion of the
Shares tendered pursuant to the Offer, but any such transfer or assignment will
not relieve Purchaser of its obligations under the Offer and will in no way
prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES
Valid Tender. For a stockholder to validly tender Shares pursuant to the
Offer, either (i) 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 below), and
any other required documents, must be 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, except with respect to any Subsequent Offering Period, and
either certificates for tendered Shares must be received by the Depositary at
one of such addresses or such Shares must be delivered pursuant to the
procedures for book-entry transfer set forth below (and a Book-Entry
Confirmation received by the Depositary), in each case, prior to the Expiration
Date or (ii) the tendering stockholder must comply with the guaranteed delivery
procedures set forth below.
The term "Agent's Message" means a message, transmitted by electronic
means to, and received by, the Depositary and forming a part of a Book-Entry
Confirmation which states that the Book-Entry Transfer Facility has received an
express acknowledgment from the participant in the Book-Entry Transfer Facility
tendering the Shares which are the subject of such Book-Entry Confirmation,
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal and that Purchaser may enforce such agreement against
such participant. For Shares to be validly tendered during any Subsequent
Offering Period, the tendering stockholder must comply with the foregoing
procedures except that the required documents and certificates must be received
during the Subsequent Offering Period.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depositary Trust Company (the "Book-Entry Transfer
Facility") 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 the
Book-Entry Transfer Facility's systems may make a book-entry delivery of Shares
by causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, either the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents, must, in any case, be
transmitted to and received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date
(except with respect to any Subsequent Offering Period, if one is provided), or
the tendering stockholder must comply with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. DELIVERY OF
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SHARES 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.
50
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section 3, includes any participant
in the Book-Entry Transfer Facility's systems whose name appears on a security
position listing as the owner of the Shares) of Shares 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 (ii) if such Shares are 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 Security
Transfer Agent's Medallion Program, or by any other "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Exchange Act
(each, an "Eligible Institution" and, collectively, "Eligible Institutions").
In all other cases, all signatures on Letters of Transmittal must be guaranteed
by an Eligible Institution. See Instructions 1 and 5 to the Letter of
Transmittal. If the certificates for Shares 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 Shares not tendered or not accepted for payment
are to be returned, to a person other than the registered holder of the
certificates surrendered, then the tendered certificates for such Shares must
be endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name or names of the registered holders or owners appear on the
certificates, with the signatures on the certificates or stock powers
guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and the Certificates evidencing such stockholder's Shares are not
immediately available, the procedures 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 Shares may nevertheless
be tendered, if all of the following conditions are satisfied:
o such tender is made by or through an Eligible Institution;
o a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser, is received prior to the
Expiration Date by the Depositary as provided below; and
o the Certificates for, or a Book-Entry Confirmation with respect to, such
Shares, together with the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature
guarantees or, in connection with a book-entry transfer, an Agent's
Message, and any other documents required by the Letter of Transmittal
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 or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery made available by Purchaser.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser in its sole discretion, which
determination will be final and binding on all parties. Purchaser reserves the
absolute right to reject any and all tenders of any Shares determined by it not
to be in proper form or the acceptance for payment of, or payment for, which
may, in the opinion of Purchaser, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, to waive any of the conditions of the
Offer or any defect or irregularity in the tender of any particular Shares,
whether or not similar defects or irregularities are waived in the case of
other stockholders, and Purchaser's interpretation of the terms and conditions
of the Offer (including the Letter of Transmittal and the instructions thereto
and any other related documents) will be final and binding on all persons.
No tender of Shares will be deemed to have been validly made until all
defects or irregularities relating thereto have been cured or waived to the
satisfaction of Purchaser. None of Purchaser,
51
Mr. Sosnoff, the Information Agent or the Depositary, 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.
Other Requirements. Notwithstanding any other provision of this Offer to
Purchase or any exhibits or annexes hereto, payment for Shares tendered and
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) the Certificates evidencing such Shares or a
timely Book-Entry Confirmation of a book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility, (ii) a Letter of
Transmittal (or a 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 in lieu of the Letter of Transmittal and (iii) any
other documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when Share
Certificates or Book-Entry Confirmations with respect to Shares are actually
received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
OFFER PRICE TO BE PAID BY PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
Appointment. By executing the Letter of Transmittal (or facsimile thereof)
or, in the case of a book-entry transfer, an Agent's Message in lieu of a
Letter of Transmittal as set forth above, a tendering stockholder irrevocably
appoints designees of Purchaser as such stockholder's attorneys-in-fact and
proxies, each with full power of substitution, in the manner set forth in the
Letter of Transmittal, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for payment by
Purchaser (and with respect to any and all other Shares or other securities
issued or issuable in respect of such Shares on or after the date of this Offer
to Purchase). All such powers of attorney and proxies will be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, Purchaser accepts such Shares for
payment as provided herein. Upon the effectiveness of such appointment, all
prior powers of attorney, proxies and consents given by such stockholder with
respect to such Shares (and such other Shares and securities) will be revoked
without further action, and no subsequent powers of attorney, proxies and
consents may be given nor any subsequent written consent executed by such
stockholder (and, if given or executed, will not be deemed to be effective)
with respect thereto. The designees of Purchaser will, with respect to the
Shares for which the appointment is effective, be empowered to exercise all
voting and other rights of such stockholder as they in their sole discretion
may deem proper at any annual or special meeting of the Company's stockholders
or any adjournment or postponement thereof, by written consent in lieu of any
such meeting or otherwise. Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon Purchaser's
payment for such Shares, Purchaser must be able to exercise full voting,
consent and other rights with respect to such Shares and other related
securities, including voting at any meeting of stockholders.
Tender Constitutes an Agreement. The acceptance for payment by Purchaser
of Shares pursuant to any of the procedures described above will constitute a
binding agreement between the tendering stockholder and Purchaser upon the
terms and subject to the conditions of the Offer.
Backup Withholding. To prevent backup withholding with respect to payment
of the purchase price of Shares purchased pursuant to the Offer, a tendering
registered holder, or his assignee (in either case, the "Payee"), must provide
the Depositary with such stockholder's correct taxpayer identification number
("TIN") and certify that such stockholder is not subject to backup withholding
by completing and signing the Substitute Form W-9 provided in the Letter of
Transmittal. If backup withholding applies with respect to a stockholder, the
Depositary is required to withhold and deposit with the Internal Revenue
Service 28%, or other applicable withholding percentage, of any payments made
to such stockholder. Certain stockholders (including, among others, all
corporations and certain foreign individuals and entities) are not subject to
backup withholding. In order for a foreign stockholder to qualify as an exempt
recipient, the stockholder must submit a Form W-8BEN, signed under penalties of
perjury, attesting to the stockholder's exempt status. See Instruction 9 to the
Letter of Transmittal.
52
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, tenders of the Shares made
pursuant to the Offer are irrevocable except that such Shares may be withdrawn
at any time prior to the Expiration Date and, unless theretofore accepted for
payment and paid for by Purchaser pursuant to the Offer, may also be withdrawn
at any time after August 1, 2003. If Purchaser extends the Offer or if
Purchaser (whether before or after its acceptance for payment of Shares) is
delayed in its acceptance for payment of Shares or is unable to accept Shares
for payment pursuant to the Offer for any reason, then, without prejudice to
Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf
of Purchaser, retain tendered Shares, and such Shares may not be withdrawn
except to the extent that tendering stockholders are entitled to withdrawal
rights as described in this Section 4. Any such delay will be accompanied by an
extension of the Offer to the extent required by law. However, the ability of
Purchaser to delay the payment for Shares which Purchaser has accepted for
payment is limited by Rule 14e-l(c) under the Exchange Act, which requires that
a bidder pay the consideration offered or return the securities deposited by or
on behalf of holders of securities promptly after the termination or withdrawal
of the Offer.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address set forth on the back cover page of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares to be withdrawn, if different from the
name of the person who tendered such Shares. If Certificates evidencing Shares
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 the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure
for book-entry transfer as set forth in "The Offer -- Section 3. Procedures for
Tendering Shares," 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 Shares and otherwise comply with such Book-Entry
Transfer Facility's procedures. Withdrawals of tenders of Shares may not be
rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered by again following one of the procedures described in "The Offer --
Section 3. Procedures for Tendering Shares," at any time prior to the
Expiration Date or during any Subsequent Offering Period if one is provided.
No withdrawal rights will apply to Shares tendered into a Subsequent
Offering Period under Rule 14d-11 of the Exchange Act and no withdrawal rights
apply during a Subsequent Offering Period under Rule 14d-11 of the Exchange Act
with respect to Shares tendered in the Offer and accepted for payment. See "The
Offer -- Section 1. Terms of the Offer; Expiration Date."
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Purchaser, in its sole
discretion, which determination will be final and binding. None of Purchaser,
Mr. Sosnoff, the Information Agent, the Depositary 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.
5. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material United States federal income
tax consequences of the Offer and Merger relevant to a beneficial holder of
Shares whose Shares are sold for cash pursuant to the Offer or converted into
the right to receive cash in the Merger (a "Holder"). This discussion is for
general informational purposes only and does not address all aspects of United
States federal income taxation that may be relevant to particular Holders of
Shares in light of their specific investment or tax circumstances. The
discussion is based on current provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as in effect as of the
date hereof and all of
53
which are subject to change, possibly with retroactive effect. This discussion
applies only to Holders who hold Shares as "capital assets" within the meaning
of Section 1221 of the Code and does not apply to Holders who acquired their
Shares pursuant to the exercise of employee stock options or otherwise as
compensation. In addition, this discussion does not apply to certain types of
Holders subject to special tax rules including, but not limited to, insurance
companies, tax-exempt organizations, financial institutions, broker dealers and
persons who hold their Shares as a part of "straddle," "hedge," "conversion
transaction," "synthetic security" or other integrated investment. The tax
consequences of the Offer and Merger to Holders who hold their Shares through a
partnership or other pass-through entity generally will depend upon such
Holder's status for United States federal income tax purposes. This discussion
does not address the United States federal income tax consequences to a Holder
that, for United States federal income tax purposes, is: (i) an individual who
is not a U.S. resident or citizen, (ii) a foreign corporation, (iii) a foreign
partnership, or (iv) a foreign estate or trust, nor does it consider the effect
of any state, local or foreign income tax or other tax laws.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for United States federal income tax purposes. In
general, a Holder who receives cash in exchange for Shares pursuant to the
Offer or the Merger will recognize gain or loss for United States federal
income tax purposes equal to the difference, if any, between the amount of cash
paid to the Holder and the Holder's adjusted tax basis in the Shares sold
pursuant to the Offer or surrendered for cash pursuant to the Merger. Gain or
loss will be determined separately for each block of Shares (i.e., Shares
acquired at the same cost in a single transaction) sold for cash pursuant to
the Offer or surrendered for cash pursuant to the Merger. Such gain or loss
will generally be capital gain or loss and will generally be long-term capital
gain or loss if such Shares have been held for more than one year at the time
of the consummation of the Offer or the Merger, as the case may be. Certain
limitations may apply to the use of capital losses.
In general, cash received by stockholders who exercise statutory appraisal
rights under Section 262 of the DGCL in respect of such appraisal rights will
result in the recognition of gain or loss to such stockholders. Any stockholder
who is considering exercising its statutory appraisal rights should consult
with its own tax advisor for a full understanding of the tax consequences of
the receipt of cash in respect of appraisal rights pursuant to the Merger.
A holder whose shares are purchased in the Offer may be subject to backup
withholding at the applicable rate (currently 28%) unless certain information
is provided to the Depositary or an exemption applies.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW, WHICH IS SUBJECT TO
CHANGE POSSIBLY WITH RETROACTIVE EFFECT. STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL OR OTHER FOREIGN INCOME AND OTHER TAX
LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS
Price Range of Shares. The Shares have been listed and traded on the NYSE
since June 1986 under the symbol "ATL." The following table sets forth, for
each of the calendar quarters indicated, the high and low closing sales price
per Share on the NYSE as reported on the NYSE Composite Tape:
54
HIGH LOW
----------- ----------
Fiscal 2000:
First Quarter .......... $ 10.50 $ 7.88
Second Quarter ......... 10.63 9.00
Third Quarter .......... 10.75 9.50
Fourth Quarter ......... 11.63 10.25
Fiscal 2001:
First Quarter .......... $ 11.25 $ 9.90
Second Quarter ......... 11.60 10.00
Third Quarter. ......... 11.45 9.40
Fourth Quarter ......... 10.71 9.45
Fiscal 2002:
First Quarter .......... $ 11.90 $ 9.70
Second Quarter ......... 12.35 10.85
Third Quarter .......... 11.15 8.10
Fourth Quarter ......... 12.30 6.75
Fiscal 2003:
First Quarter .......... $ 12.23 $ 11.00
On June 11, 2003, the second to last full trading day prior to the date on
which the Offer was commenced, the last reported sales price on the NYSE was
$13.91 per Share. Stockholders are urged to obtain a current market quotation
for the Shares.
Dividends on the Shares. According to the Company's Annual Report on Form
10-K for the year ended December 31, 2002, the Company declared a special cash
dividend of $0.20 per common share for fiscal year 2001 and the Company
declared a special cash dividend of $0.25 per common share for fiscal year
2000. The Company did not pay a dividend for fiscal year 2002.
7. CERTAIN EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; NYSE LISTING;
REGISTRATION UNDER THE EXCHANGE ACT; MARGIN REGULATION
Market for the Shares. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
If the Merger is consummated, stockholders who have not tendered their
Shares in the Offer will receive cash in an amount equal to the price per Share
provided pursuant to the Offer. Therefore, if such Merger takes place, the only
difference between tendering Shares in the Offer and not tendering Shares in
the Offer is that tendering stockholders will be paid earlier. If, however, the
Merger is not consummated, the purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and may reduce
the number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than Purchaser.
We cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Shares or whether such reduction
would cause future market prices to be greater or less than the Offer Price.
NYSE Listing. The Shares are currently listed and traded on the NYSE,
which constitutes the principal trading market for the Shares. According to the
NYSE's published guidelines, the NYSE would consider delisting the Shares if,
among other things (i) there were fewer than 400 holders, (ii) there were fewer
than 1,200 holders and the average monthly trading volume was less than
55
100,000 Shares over the most recent 12 months, (iii) the number of publicly
held Shares (excluding Shares held by officers, directors, their immediate
families and other concentrated holdings of 10% or more) were less than
600,000, or (iv) the aggregate market value of the publicly held Shares was
less than $50 million.
As a result of the Merger, public trading of Shares will cease and the
registration of such shares under the Exchange Act will be terminated. The
Surviving Company will no longer be a public company and its stock will no
longer be traded on the NYSE.
In the event the Shares are no longer listed on the NYSE, quotations might
still be available from other sources. The extent of the public market for the
Shares and the availability of such quotations would, however, depend upon the
number of holders of such Shares remaining at such time, the interest in
maintaining a market in such Shares on the part of securities firms, and the
possible termination of registration of such Shares under the Exchange Act.
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on
the market price for, or marketability of, the Shares or whether it would cause
future market prices to be greater or lesser than the Offer Price.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Purchaser will seek to cause the Company to terminate the
registration of the Shares under the Exchange Act as soon as practicable after
consummation of the Offer if, as expected, the requirements for termination of
registration are met. The termination of the registration of the Shares under
the Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the SEC and would make
certain provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy statement
pursuant to Section 14(a) or 14(c) in connection with stockholders' meetings
and the requirements of Rule 13e-3 under the Exchange Act with respect to the
"going private" transactions, no longer applicable to the Shares. In addition,
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 Rule 144A promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), may be impaired or eliminated.
Margin Regulations. The Shares are currently "margin securities" as such
term is defined under the rules 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 such
securities. Depending upon factors similar to those described above regarding
listing and market quotations, it is possible that, following the Offer, the
Shares might no longer constitute "margin securities" for purposes of the
margin regulations of the Federal Reserve Board, in which event such Shares
could no longer be used as collateral for loans made by brokers. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY
General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or based
upon publicly available documents and records on file with the SEC and other
public sources. Neither Purchaser nor Mr. Sosnoff assumes any responsibility
for the accuracy or completeness of the information concerning the Company or
contained in such documents and records or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to Purchaser or Mr.
Sosnoff.
The Company, through its operating subsidiaries, Atalanta/Sosnoff Capital
and Atalanta/Sosnoff Management, provides discretionary investment advisory,
brokerage and other related services to investment advisory clients. Such
clients include corporate and public retirement plans, endowments, charitable
and religious organizations, and individuals in both taxable and tax-exempt
accounts. The Company is a Delaware corporation with its principal executive
offices located at 101 Park Avenue, New York, NY 10178 (telephone number (212)
867-5000).
56
The names, business address, principal occupation or employment, five year
employment history and citizenship of each director and executive officer of
the Company and certain other information are set forth on Schedule I to this
Offer to Purchase.
Selected Financial Information. Set forth below is certain selected
consolidated financial information with respect to the Company, excerpted or
derived from the Company's Annual Reports on Form 10-K for the fiscal years
ended December 31, 2002, December 31, 2001 and December 31, 2000, the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 and the
Company's books and records. More comprehensive financial information is
included in such reports and in other documents filed by the Company with the
SEC. The following summary is qualified in its entirety by reference to such
reports and other documents and all of the financial information (including any
related notes) contained therein. Such reports and other documents may be
inspected and copies may be obtained from the SEC in the manner set forth
below.
ATALANTA/SOSNOFF CAPITAL CORPORATION
SELECTED FINANCIAL INFORMATION
THREE MONTHS FISCAL YEAR ENDED DECEMBER 31,
ENDED MARCH 31, ------------------------------------------
2003 2002 2001 2000
---------------- ------------ ------------ ------------
(UNAUDITED)
(AMOUNTS IN 000S, EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS:
Net income ......................................... $ (3,123) $ (2,154) $ 283 $ 11,503
Net income per share -- diluted .................... N/A (0.25) .03 1.27
-- basic ...................... (0.37) (0.25) .03 1.27
Total Revenues ..................................... (1,571) 5,691 15,090 40,588
Operating revenues ................................. 3,136 14,065 15,458 21,179
Operating expenses ................................. 3,165 12,980 14,627 18,008
Operating income ................................... (29) 1,085 831 3,171
Operating margin ................................... N/A 8% 5% 15%
Net interest and dividend income ................... 491 1,351 1,047 1,234
Net realized and unrealized gains
(losses) from investments ........................ (5,197) (9,725) (1,415) 18,176
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets ....................................... $ 92,380 $ 98,626 $109,495 $126,914
Stockholders' equity ............................... 91,250 93,546 102,403 107,066
Book value per share ............................... 10.78 11.05 11.52 11.89
Cash dividends declared per share .................. None None .20 .25
Common stock, shares outstanding ................... 8,465 8,465 8,886 9,005
Assets under management (millions) ................. 2,121 2,042 2,356 2,707
AVERAGE ASSETS UNDER MANAGEMENT (MILLIONS): ......... $ 2,075 $ 2,206 $ 2,202 $ 2,638
The results of the Company for the fiscal quarter ended March 31, 2003 are
preliminary results that have been prepared by the Company's management and are
subject to audit.
Certain Company Projections. In April 2003, in connection with the
evaluation of the Offer, the Company (including with the assistance of Mr.
Sosnoff) prepared certain projections of future operating results for fiscal
years 2003 through 2007 (the "5 Year Projections"). These forward-looking
statements (as that term is defined in the Private Securities Litigation Reform
Act of 1995) are subject to certain risks and uncertainties that could cause
actual results to differ materially from the projections. The 5 Year
Projections were not prepared with a view to complying with published
guidelines of the SEC or the American Institute of Certified Public Accountants
regarding projections or generally accepted accounting principles regarding
projections. While presented with numerical specificity, the 5 Year Projections
are based upon a variety of assumptions relating to the business of the Company
at the time they were prepared. The 5 Year Projections do not reflect any of
the effects
57
of the Offer, the Merger or other changes that may in the future be deemed
appropriate concerning the Company and its assets, business, operations,
properties, policies, corporate structure, capitalization and management in
light of the circumstances then existing. The Company considered such
assumptions reasonable as of the time they were made. Such assumptions are,
however, subject to significant risks and uncertainties, all of which are
difficult to predict and many of which are beyond the Company's control. These
risks and uncertainties include, among other things, changes in general
economic conditions and prevailing interest rates, market volatility or further
sustained decreases in the market prices of securities generally, significant
increases or decreases in trading activity by the Company's customers, customer
attrition, the development and acceptance of new products and services, and
increased competition. These risks and uncertainties make it difficult to
project results of operations with any degree of certainty. Accordingly, none
of the Company, Purchaser or Mr. Sosnoff can predict whether the assumptions
made in preparing the 5 Year Projections will prove accurate. Such projections
are inherently imprecise, and there can be no assurances that the results
presented in the actual results will not differ materially from the results
presented in the 5 Year Projections.
The 5 Year Projections were not prepared with a view to public disclosure.
The inclusion of the 5 Year Projections herein should not be regarded as a
representation by the Company, Purchaser,
Mr. Sosnoff or any other entity or person that the projected results will be
achieved, and none of the Company, Purchaser or Mr. Sosnoff assumes any
responsibility for the accuracy of such information or any responsibility to
update such projections in light of changed circumstances or additional
information. The Special Committee and its advisors have prepared their own
projections based upon discussions with management, publicly available research
and certain other information discussed in "Special Factors -- Opinion Of
Financial Advisor" and did not review or receive the 5 Year Projections. The
Company's independent auditors have not examined or compiled the 5 Year
Projections presented herein and, accordingly, assume no responsibility for
them. Stockholders are cautioned not to place undue reliance on the 5 Year
Projections.
The 5 Year Projections set forth below have been prepared by the Company
taking into account three possible scenarios during the relevant fiscal years
- -- a "Low Case," "Base Case," and an "Upside Case." Each of these scenarios
share the following common key assumptions:
o Market Appreciation. No change in the level of the overall stock market
from the end of 2002 to the end of 2003.
o Net Client Cash Flows. No change in the net cash flows from investment
management clients (i.e., client deposits and withdrawals) of the Company
from 2002 to 2003.
o Investment Management Fee Levels. No change in the weighted average
investment management fees charged by the Company to its clients from
2002 to 2003 and a decline in such fees of 1 basis point per annum in
years 2004 through 2007.
o Commissions and Other Revenue. Commissions and other revenues of the
Company will equal $700,000 in 2003 and increase in years 2004 through
2007 in proportion to the increase in investment management fee revenue
in those years.
o Operating Expenses. Operating expenses of the Company will decrease by
2% from 2002 levels in 2003.
o Tax Rate. The Company's effective tax rate will be 42% in each of years
2003 though 2007.
Each of these scenarios make the following different key assumptions:
o Market Appreciation. The Low Case and the Base Case each assume that the
level of the overall stock market will increase 5% per annum in years
2004 though 2007, and the Upside Case assumes that overall stock market
will increase 7.5% per annum in each of those years.
58
o Net Client Cash Flows. The Low Case assumes that net cash flows from
investment management clients of the Company will remain flat in years
2004 through 2007, and the Base Case and Upside Case each assume such net
cash flows will increase 2.5% per annum in each of those years.
o Operating Expenses. The Low Case assumes that operating expenses of the
Company will increase by 2.5% per annum in years 2004 though 2007, the
Base Case assumes that operating expenses will increase by 5.0% per annum
in each of those years, and the Upside Case assumes that operating
expenses will increase by 6.0% per annum in years 2004 though 2006 and
7.0% in 2007.
All of these projections should be read together with the information
contained in the consolidated financial statements of the Company available in
its filings with the SEC, and the information set forth above in this section.
5 YEAR PROJECTIONS -- "LOW CASE"
FISCAL YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2003 2004 2005 2006 2007
--------- --------- --------- --------- -----------
(AMOUNTS IN 000S)
Assets under management (at fiscal year end) ......... $ 2,042 $ 2,093 $ 2,145 $ 2,199 $ 2,254
Operating revenues ................................... 12,530 12,620 12,710 12,800 12,880
Operating expenses ................................... 12,740 13,060 13,400 13,750 14,120
Operating income ..................................... (210) (440) (690) (950) (1,240)
Depreciation ......................................... 400 300 150 100 80
EBITDA ............................................... 190 (140) (540) (850) (1,160)
Net income ........................................... $ (120) $ (250) $ (400) $ (550) $ (720)
5 YEAR PROJECTIONS -- "BASE CASE"
FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2003 2004 2005 2006 2007
--------- --------- --------- --------- ---------
(AMOUNTS IN 000S)
Assets under management (at fiscal year end) ......... $ 2,042 $ 2,195 $ 2,360 $ 2,537 $ 2,727
Operating revenues ................................... 12,530 13,200 13,890 14,620 15,370
Operating expenses ................................... 12,740 13,360 14,020 14,710 15,440
Operating income ..................................... (210) (170) (130) (90) (70)
Depreciation ......................................... 400 300 150 100 80
EBITDA ............................................... 190 130 20 10 0
Net income ........................................... $ (120) $ (100) $ (70) $ (50) $ (40)
5 YEAR PROJECTIONS -- "UPSIDE CASE"
FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2003 2004 2005 2006 2007
--------- --------- --------- --------- ---------
(AMOUNTS IN 000S)
Assets under management (at fiscal year end) ......... $ 2,042 $ 2,246 $ 2,471 $ 2,718 $ 2,990
Operating revenues ................................... 12,530 13,500 14,550 15,660 16,860
Operating expenses ................................... 12,740 13,550 14,420 15,350 16,360
Operating income ..................................... (210) (50) 130 310 500
Depreciation ......................................... 400 300 150 100 80
EBITDA ............................................... 190 250 280 410 580
Net income ........................................... $ (120) $ (30) $ 70 $ 180 $ 290
Available Information. The Shares are registered under the Exchange Act.
Accordingly, the Company files annual, quarterly and special reports, proxy
statements and other information with the
59
SEC. You may read and copy any such reports, statements or other information at
the SEC 's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549, or at the SEC 's public reference rooms in New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. The Company's filings with the SEC
are also available to the public from commercial document retrieval services
and at the Internet worldwide web site maintained by the SEC at
http://www.sec.gov. Although Purchaser and Mr. Sosnoff have no knowledge, as of
the date of this Offer to Purchase, that any such information is untrue,
neither Purchaser nor Mr. Sosnoff take responsibility for the accuracy or
completeness of information concerning the Company provided by the Company or
contained in the documents and records referred to herein 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.
During the past three years, the Company has not made any underwritten
public offering of the Shares that was (i) registered under the Securities Act
of 1933, as amended (the "Securities Act") or (ii) exempt from registration
under the Securities Act pursuant to Regulation A thereunder.
To the best of the Company's knowledge, after reasonable inquiry, all of
the directors or executive officers of the Company, other than those
individuals, if any, for whom the tender of Shares could cause them liability
under the provisions of Section 16(b) of the Exchange Act or to the extent
their Shares are restricted Shares, have agreed or otherwise intend to tender
Shares held by them pursuant to the Offer. See "Special Factors -- The Merger
Agreement and Tender Agreements."
9. CERTAIN INFORMATION CONCERNING PURCHASER
Atalanta Acquisition Company, a Delaware corporation, was formed by Mr.
Sosnoff to acquire all of the outstanding Shares not already owned by him
pursuant to this Offer and Merger and has not conducted any activities other
than in connection with this Offer and Merger since its organization. Mr.
Sosnoff currently owns all of the issued and outstanding capital stock of
Purchaser. The principal executive offices of Purchaser are located at 101 Park
Avenue, New York, NY 10178 (telephone number (212) 867-5000).
Purchaser currently does not own any Shares. Upon successful completion of
this Offer (including satisfaction of the Minimum Condition), Mr. Sosnoff
currently intends to transfer all Shares owned by him to Purchaser to permit
Purchaser to effect the Merger. See "Special Factors -- The Merger; Plans for
the Company after the Offer and Merger; Certain Effects of the Offer and
Merger."
As of the date hereof, Martin S. Sosnoff is the President and Secretary of
Purchaser and the sole member of the board of directors of Purchaser. See
Schedule I to this Offer to Purchase for Mr. Sosnoff's business address,
principal occupation or employment, five year employment history and
citizenship. As described in this Offer to Purchase, following completion of
the Merger, it is currently expected that the current officers of the Company
and its subsidiaries will remain as officers of the Surviving Company or one of
its subsidiaries and the current directors on the Board (other than Mr.
Sosnoff) will cease to serve on the Board of the Surviving Corporation,
although Mr. Steinberg is currently expected to serve on the board of directors
(or similar governing body) of one or more of the Company's subsidiaries.
Except as set forth in this Offer to Purchase, none of Purchaser, Mr.
Sosnoff or, to the best knowledge of Purchaser and Mr. Sosnoff, any of the
persons listed on Schedule I, or any associate or majority-owned subsidiary of
any of the foregoing, beneficially owns or has a right to acquire any Shares;
and (b) none of Purchaser, Mr. Sosnoff, or, to the best knowledge of Purchaser
and Mr. Sosnoff, any of the persons or entities referred to above, nor any of
the respective executive officers, directors or subsidiaries of any of the
foregoing, has effected any transaction in Shares during the past 60 days.
Except as set forth in this Offer to Purchase, no purchases of Shares were
made by Purchaser or Mr. Sosnoff during the past two years.
Except as provided by the Merger Agreement or as set forth in this Offer
to Purchase, none of Purchaser or Mr. Sosnoff or, to the best knowledge of
Purchaser and Mr. Sosnoff, any of the persons
60
listed on Schedule I, has any agreement, arrangement or understanding with any
other person with respect to any Shares (including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss, or
the giving or withholding of proxies).
Except as set forth in this Offer to Purchase, during the past two years
there have been no contacts, negotiations or transactions concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
election of directors or a sale or other transfer of a material amount of
assets between (i) Purchaser or Mr. Sosnoff or any of their respective
affiliates or, to the best knowledge of Purchaser and Mr. Sosnoff, any of the
persons listed on Schedule I, on one hand, and the Company or its affiliates,
on the other hand; (ii) any affiliates of the Company, Purchaser or Mr.
Sosnoff; or (iii) the Company or any of its affiliates, on one hand, and any
person not affiliated with the Company, on the other hand.
10. SOURCE AND AMOUNT OF FUNDS
The Offer is not conditioned upon any financing arrangements. The total
amount of funds required by Purchaser to consummate the Offer and the Merger,
and expected to be incurred by Mr. Sosnoff, is estimated to be approximately
$22.7 million exclusive of any related transaction fees and expenses. These
funds are expected to be obtained from a loan obtained by Purchaser from Bear
Stearns for this purpose (the "Loan"), and, to the extent any amounts are due
or may be paid by Purchaser or the Surviving Corporation after the consummation
of the Merger (for example, funds necessary to consummate the Merger and
certain transaction fees and expenses), from generally available working
capital of the Surviving Corporation.
The Loan is secured by certain assets of Mr. Sosnoff to be held at Bear
Stearns, including all of his Shares. Mr. Sosnoff has entered into a Pledge
Agreement to that effect. Mr. Sosnoff has also entered into a Guarantee
Agreement (the "Guarantee") with Bear Stearns which provides that Mr. Sosnoff
unconditionally guarantees the full and prompt payment and performance when due
by Purchaser of any and all obligations of Purchaser under the Loan. The
Guarantee also contains representations and warranties, covenants and other
provisions generally found in similar agreements.
Mr. Sosnoff will pay a fee of $25,000 to Bear Stearns to secure the Loan.
The Loan will bear interest at a rate equal to the margin rate as defined by
Bear Stearns at the time the funds are actually borrowed by Purchaser.
Purchaser intends to repay any amounts borrowed from Bear Stearns through
the generally available corporate funds of the Surviving Corporation after the
consummation of the Merger.
Because (i) the only consideration in the Offer and Merger is cash, (ii)
the Offer is to purchase all outstanding Shares, and (iii) there is an absence
of a financing condition, Purchaser and Mr. Sosnoff believe the financial
condition of Purchaser is not material to a decision by a holder of Shares
whether to sell, tender or hold Shares pursuant to the Offer.
11. CONDITIONS TO THE OFFER
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time in its sole discretion in accordance with the terms (and subject to the
limitations) of the Merger Agreement, Purchaser will not be required to accept
for payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-l(c) under the Exchange Act, pay for, and may delay the
acceptance for payment of, or, subject to the restriction referred to above,
the payment for, any validly tendered Shares (whether or not any Shares
theretofore have been accepted for payment or paid for pursuant to the Offer),
and may terminate the Offer as to any Shares not then paid for, if (i)
immediately prior to the Expiration Date, the Minimum Condition has not been
satisfied or (ii) at any time on or after June 13, 2003 and immediately prior
to the Expiration Date, any of the following events occur (other than as a
direct or indirect result of any action or inaction by Purchaser or Mr.
Sosnoff):
61
o There has been any statute, rule, regulation, judgment, order or
injunction promulgated, entered, enforced, enacted, issued or rendered
applicable to the Offer or the Merger by any domestic or foreign federal
or state governmental regulatory or administrative agency or authority or
court or legislative body or commission which (i) prohibits or imposes
any material limitations on, Purchaser's ownership or operation of all or
a material portion of the Company's businesses or assets, (ii) prohibits
or makes illegal the acceptance for payment, payment for or purchase of
Shares or the consummation of the Offer or the Merger, (iii) results in a
material delay in or restricts the ability of Purchaser, or renders
Purchaser unable, to accept for payment, pay for or purchase some or all
of the Shares, or (iv) imposes material limitations on the ability of
Purchaser effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by
it on all matters properly presented to the Company's stockholders;
o The representations and warranties of the Company contained in the
Merger Agreement and in any document delivered in connection with the
Merger Agreement are not true and correct (without giving effect to any
qualification as to "materiality" set forth in the Merger Agreement) both
when made and at and as of the Expiration Date, as if made at and as of
such time (except to the extent such representations and warranties speak
of a specified earlier date, in which case such representations and
warranties are not true and correct as of such date), except where the
failure of such representations and warranties to be so true and correct
(without giving effect to any qualification as to "materiality" set forth
in the Merger Agreement) would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect;
o The Board, based on the recommendation of the Special Committee, has
(in-cluding by amendment to the Schedule 14D-9) withdrawn, amended or
modified in a manner adverse to Purchaser its approval or recommendation
of the Offer, the Merger or the Merger Agreement or has publicly
announced or re-solved to do any of the foregoing;
o The Company, acting through the Board (as agreed to by the Special
Committee), and Purchaser and Mr. Sosnoff have agreed that Purchaser and
Mr. Sosnoff will terminate the Offer or postpone the acceptance for
payment of or payment for Shares thereunder;
o Any of the following have occurred: (1) any general suspension of
trading in, or limitation on prices for, securities on the NYSE, the
American Stock Exchange or the Nasdaq for a period in excess of 24 hours
(excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges not related to market
conditions), (2) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States (whether or not
mandatory), (3) a commencement or material worsening of a war, armed
hostilities or other national or international calamity directly or
indirectly involving the United States or any terrorist activities which
would reasonably be expected to have a Company Material Adverse Effect or
materially and adversely affect the ability of financial institutions in
the United States to extend credit or syndicate loans, other than the
current U.S. military operations in Iraq, (4) any material limitation
(whether or not mandatory) by any Governmental Entity on the extension of
credit generally by banks or other financial institutions, or (5) a
change in general financial, bank or capital market conditions which
materially and adversely affects the ability of financial institutions in
the United States to extend credit or syndicate loans;
o The Company has not performed, in all material respects, all of its
covenants and agreements contained in the Merger Agreement that are
required to be performed by the Company at or prior to the Expiration
Date;
o From the date of the Merger Agreement through the Expiration Date, there
has occurred any event that has had a Company Material Adverse Effect;
o The death of Mr. Sosnoff; or
62
o The Merger Agreement has been terminated in accordance with its terms.
The above conditions are for the sole benefit of Purchaser and Mr. Sosnoff
and may, subject to the terms (and limitations) of the Merger Agreement, be
asserted or, if applicable, waived by them, in whole or in part, at any time
and from time to time prior to the Expiration Date in the sole discretion of
Purchaser and Mr. Sosnoff. The failure by Purchaser or Mr. Sosnoff at any time
to exercise any of the foregoing rights will not be deemed a waiver of any such
right. The waiver of any such right with respect to particular facts and
circumstances will not be deemed a waiver with respect to any other facts and
circumstances and each such right will be deemed an ongoing right that may be
asserted at any time and from time to time.
Notwithstanding the fact that Purchaser and Mr. Sosnoff reserve the right
to assert the occurrence of a condition following acceptance of properly
tendered Shares for payment but prior to payment for such Shares, Purchaser
will either promptly pay for such Shares or promptly return such Shares. A
public announcement will be made of a material change in, or waiver of, such
conditions, and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver. All conditions must be satisfied or
waived prior to the commencement of any Subsequent Offering Period.
12. CERTAIN LEGAL MATTERS
General. Neither Purchaser nor Mr. Sosnoff is aware of any licenses or
regulatory permits that appear to be material to the business of the Company,
taken as a whole, that might be adversely affected by the acquisition of Shares
in the Offer or the Merger. In addition, except as described below, neither
Purchaser nor Mr. Sosnoff is aware of any filings, approvals or other actions
by or with any governmental authority or administrative or regulatory agency
that would be required for Purchaser's acquisition or ownership of the Shares.
Should any such approval or other action be required, Purchaser and Mr. Sosnoff
expect to seek such approval or action. Should any such approval or other
action be required, Purchaser and Mr. Sosnoff cannot be certain that they would
be able to obtain any such approval or action without substantial conditions or
that adverse consequences might not result to the Company's businesses, or that
certain parts of the business of the Company might not have to be disposed of
or held separate in order to obtain such approval or action. In that event,
Purchaser may not be required to purchase any Shares in the Offer. See
"Introduction" and "The Offer -- Section 11. Conditions to the Offer."
State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (including a person who owns or has the right to acquire 15% or
more of the corporation's outstanding voting stock) from engaging in a
"business combination" (defined to include mergers and certain other actions)
with a Delaware corporation for a period of three years following the date such
person became an interested stockholder. Section 203 does not apply to any
stockholder which became an interested stockholder at a time when the
corporation was not publicly held. Since Mr. Sosnoff owned all the outstanding
stock of the Company prior to its public offering in June 1986, Purchaser and
Mr. Sosnoff do not believe that Section 203 would apply to the Merger. In
addition, Purchaser and Mr. Sosnoff believe that Section 203 is inapplicable to
the Merger because Mr. Sosnoff or his affiliates have been interested
stockholders of the Company for more than three years.
A number of other states have adopted laws which purport, to varying
degrees, to apply to attempts to acquire corporations that are incorporated in,
or which have substantial assets, stockholders, principal executive offices or
principal places of business or whose business operations otherwise have
substantial economic effects in, such states. The Company, directly or through
subsidiaries, conducts business in a number of states throughout the United
States, some of which have enacted such laws. Except as described herein,
neither Purchaser nor Mr. Sosnoff knows whether any of these laws will, by
their terms, apply to the Offer or any merger or other business combination
between Purchaser or any of its affiliates and the Company and neither
Purchaser nor Mr. Sosnoff has complied with any such laws. To the extent that
certain provisions of these laws purport to apply to the Offer or any such
merger or other business combination, Purchaser and Mr. Sosnoff believe that
there are reasonable bases for contesting such laws.
63
In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Statute
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in 1987 in CTS Corp. v.
Dynamics Corp. of America, the Supreme Court held that the State of Indiana
could, as a matter of corporate law, constitutionally disqualify a potential
acquiror from voting shares of a target corporation without the prior approval
of the remaining stockholders where, among other things, the corporation is
incorporated, and has a substantial number of stockholders, in the state.
Subsequently, in TLX Acquisition Corp. v. Telex Corp., a Federal District Court
in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as
they apply to corporations incorporated outside Oklahoma in that they would
subject such corporations to inconsistent regulations. Similarly, in Tyson
Foods, Inc. v. McReynolds, a Federal District Court in Tennessee ruled that
four Tennessee takeover statutes were unconstitutional as applied to
corporations incorporated outside Tennessee. This decision was affirmed by the
United States Court of Appeals for the Sixth Circuit. In December 1988, a
Federal District Court in Florida held in Grand Metropolitan PLC v.
Butterworth, that the provisions of the Florida Affiliated Transactions Act and
the Florida Control Share Acquisition Act were unconstitutional as applied to
corporations incorporated outside of Florida.
If any government official or third party should seek to apply any state
takeover law to the Offer or any merger or other business combination between
Purchaser and the Company, Purchaser will take such action as then appears
desirable, which action may include challenging the applicability or validity
of such statute in appropriate court proceedings. In the event it is asserted
that one or more state takeover statutes is applicable to the Offer or any such
merger or other business combination and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer or any
such merger or other business combination, Purchaser might be required to file
certain information with, or to receive approvals from, the relevant state
authorities or holders of Shares, and Purchaser might be unable to accept for
payment or pay for Shares tendered pursuant to the Offer, or be delayed in
continuing or consummating the Offer or any such merger or other business
combination. In such case, Purchaser may not be obligated to accept for payment
or pay for any tendered Shares. See "The Offer -- Section 11. Conditions to the
Offer."
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
and the rules 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 (the "Antitrust Division") and the FTC and certain
waiting period requirements have been satisfied. The purchase of Shares
pursuant to the Offer is not subject to such requirements because Mr. Sosnoff
currently owns in excess of 50% of the issued and outstanding Common Stock and
Purchaser is wholly-owned by Mr. Sosnoff.
The Antitrust Division and the FTC scrutinize the legality under the
antitrust laws of transactions such as the acquisition of Shares by Purchaser
pursuant to the Offer and Merger. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could take such
action under the antitrust laws of the United States as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking divestiture of the Shares so acquired
by Purchaser or divestiture of substantial assets of Purchaser or the Company.
Private parties, as well as state governments, may also bring legal actions
under the antitrust laws of the United States. Purchaser does not believe that
the consummation of the Offer will result in a violation of any applicable
antitrust laws. However, there can be no assurance that a challenge to the
Offer or Merger on antitrust grounds will not be made, or if such a challenge
is made, what the result will be. See "The Offer -- Section 11. Conditions of
the Offer," including conditions with respect to litigation and certain
governmental actions.
Stockholder Litigation. In December, 2002, three stockholders of the
Company filed three separate class action complaints in the Delaware Court of
Chancery against the Company and the directors of the Company (Berger v.
Sosnoff, et al. (C.A. 20068), Breakwater Partners, LP v. Sosnoff, et al. (C.A.
20073) and Schneider v. Atalanta/Sosnoff Capital Corp., et al. (C.A. 20088)).
Each of these actions was brought as a putative class action on behalf of all
holders of Shares other than the defendants and persons related to or
affiliated with the defendants. These actions have been
64
consolidated for all purposes under the caption In re Atalanta/Sosnoff Capital
Corp. Stockholder's Litigation, Consolidated C.A. 20063. The complaints in the
three actions generally alleged that:
o The Company and the individual directors of the Company breached their
fiduciary duties as a result of the Mr. Sosnoff's original proposal of
December 5, 2002;
o The $12.50 per Share price originally proposed by Mr. Sosnoff was
inadequate; and
o Mr. Sosnoff is engaging in unfair self-dealing, and not acting in good
faith towards the Company's public stockholders.
The lawsuits sought, among other things, to recover unspecified damages
and costs and to enjoin or rescind the transactions contemplated by this Offer
to Purchase. On June 10, 2003, the Company reached an agreement in principle
with plaintiffs to settle all claims in the pending litigation, subject to
execution of a definitive settlement agreement and the approval of the Delaware
Court of Chancery. Among other things, and subject to the execution of a
definitive settlement agreement and the approval of the Delaware Court of
Chancery, the agreement in principle generally provides for the certification
of a mandatory class settlement including all stockholders of the Company
(other than Purchaser, Mr. Sosnoff and their affiliates) and a release by such
stockholders of all claims against the defendants. Without admitting any
wrongdoing or merit to the allegations summarized above, the defendants
acknowledged, among other things, that the preliminary analysis prepared on
behalf of the plaintiffs was a factor reviewed and utilized by the Special
Committee in negotiating and obtaining an increase in the original offer price
of $12.50 to the Offer Price of $13.95. The Company has agreed to pay the fees
and expenses of plaintiffs' counsel of no more than $350,000.
Provisions for Unaffiliated Security Holders. In connection with the Offer
and Merger, none of the Company, Purchaser or Mr. Sosnoff has granted to
unaffiliated security holders access to their corporate files or arranged for
counsel or appraisal services at the expense of the Company, Purchaser or Mr.
Sosnoff.
13. FEES AND EXPENSES
Except as set forth below, none of Purchaser, Mr. Sosnoff or the Company
will pay any fees or commissions to any broker, dealer or other person for
soliciting tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies will be reimbursed by Purchaser for
customary handling and mailing expenses incurred by them in forwarding material
to their customers.
In connection with the Offer, Purchaser and the Company (on behalf of the
Surviving Company) have retained EquiServe Trust Company, N.A. as the
Depositary and the Information Agent. Purchaser or the Surviving Company will
pay EquiServe reasonable and customary compensation for its services in
connection with the Offer, plus reimbursement for reasonable out-of-pocket
expenses, and will indemnify EquiServe against certain liabilities and expenses
in connection with their services, including certain liabilities under federal
securities laws.
Pursuant to the Engagement Letter, the Special Committee agreed that
Blackstone would be paid a fee for its services to the Special Committee by the
Company as follows:
o $250,000 payable upon execution of the Engagement Letter;
o $500,000 payable if an opinion is rendered regarding the fairness of the
Offer or any alternative transaction to the Company and its stockholders
(other than Purchaser, Mr. Sosnoff and their affiliates), payable upon
delivery of such opinion; and
o $250,000 payable if a subsequent opinion is rendered by Blackstone if so
requested by the Company or the Special Committee, payable upon delivery
of such subsequent opinion.
The Company has also agreed to reimburse Blackstone for its expenses as
incurred in connection with its engagement. In addition, the Company has agreed
to indemnify Blackstone and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Blackstone
or any of its affiliates against certain liabilities and expenses, including
certain liabilities under the federal securities laws, arising out of
Blackstone's engagement.
65
The following is an estimate of fees and expenses to be incurred by the
Company in connection with the Offer and Merger:
Blackstone Fee ................................................... $ 765,000
Legal Fees Related to the Settlement of Pending Lawsuits ......... 350,000
Legal Fees, Printing and Miscellaneous ........................... 360,000
----------
Total ......................................................... $1,475,000
==========
The following is an estimate of fees and expenses to be incurred by
Purchaser (or the Surviving Corporation) and Mr. Sosnoff in connection with the
Offer and Merger:
Filing Fee ....................................... $ 1,900
Information Agent and Depositary Fees and Expenses
(including mailing) ............................. 25,000
Legal Fees and Miscellaneous ..................... 450,000
--------
Total ......................................... $476,900
========
14. MISCELLANEOUS
The Offer is being made to all holders of Shares other than Mr. Sosnoff.
Neither Purchaser nor Mr. Sosnoff is aware of any jurisdiction in which the
making of the Offer or the tender of Shares in connection therewith would not
be in compliance with the laws of such jurisdiction. If Purchaser or Mr.
Sosnoff becomes aware of any jurisdiction in which the making of the Offer
would not be in compliance with applicable law, Purchaser and Mr. Sosnoff will
make a good faith effort to comply with any such law. If, after such good faith
effort, Purchaser and Mr. Sosnoff cannot comply with any such law, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
holders of Shares residing in such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by
one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
Purchaser and Mr. Sosnoff have filed with the SEC the Schedule TO,
together with all exhibits thereto, pursuant to Rule 14d-3 under the Exchange
Act, furnishing certain additional information with respect to the Offer which
includes the information required by Schedule 13E-3. The Company has filed the
Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, together with
exhibits thereto, setting forth its recommendation and furnishing certain
additional related information. In addition, the Company and Mr. Steinberg have
each filed with the SEC a Schedule 13E-3, together with all exhibits thereto,
pursuant to Rule 13E-3 under the Exchange Act. Such Schedules and any
amendments thereto, including exhibits, may be examined and copies may be
obtained from the offices of the SEC in the manner set forth in "The Offer --
Section 8. Certain Information Concerning the Company" (except that they will
not be available at the regional offices of the SEC).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR MR. SOSNOFF NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Atalanta Acquisition Company
Martin T. Sosnoff
June 13, 2003
66
SCHEDULE I
Information Concerning Directors and Executive Officers of the Company
The name, current principal occupation or employment and material
occupations, positions, offices or employment during the past five years of
each director and executive officer of the Company are set forth below. The
principal place of business of the Company and, unless otherwise indicated
below, the business address of each director and executive officer is care of
Atalanta/Sosnoff Capital Corporation, 101 Park Avenue, New York, NY 10178. The
Company's telephone number is (212) 867-5000.
Unless otherwise indicated, (a) none of these individuals has been
convicted in a criminal proceeding during the past five years (excluding
traffic violations or similar misdemeanors), nor has any of these persons been
a party to any judicial or administrative proceeding during the past five years
that resulted in a judgment, decree or final order enjoining the person from
future violations of, or prohibiting activities subject to, federal or state
securities laws or a finding of any violation of federal or state securities
laws; (b) each executive officer of the Company has been employed in such
position or in other executive or management positions with the Company for at
least five years; (c) each occupation set forth opposite an individual's name
refers to employment with the Company; and (d) each individual is a citizen of
the United States.
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND, IF APPLICABLE, ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------------------------- ----------------------------------------------------------------
Martin T. Sosnoff Mr. Sosnoff is the founder of the Company and has been
Chairman of the Board, Chief Executive Officer and Chief
Investment Officer of the Company and certain of its
subsidiaries since its inception in 1976.
Craig B. Steinberg Mr. Steinberg has been President of the Company and certain of
its subsidiaries since 1997. Mr. Steinberg has been Director of
Research of the Company and its subsidiaries since 1994.
Mr. Steinberg has been a director of the Company since 1997.
Kevin S. Kelly Mr. Kelly has been Senior Vice President of Finance with the
Company since May 1999 and became Chief Financial Officer
and Senior Vice President with the Company in December 2000.
Mr. Kelly became President and Chairman of Atalanta/Sosnoff
Management Corporation, a wholly owned subsidiary of the
Company, in May 2002 and became Chief Operating Officer of
the Company in December 2002. Mr. Kelly was a senior
manager at Grant Thornton LLP from December 1996 until he
joined the Company.
William M. Knobler Mr. Knobler has been Senior Vice President of Atalanta/Sosnoff
Management Corporation since 1985.
James D. Staub Mr. Staub has been Senior Vice President, and held other
offices, with Atalanta/Sosnoff Management Corporation and
Atalanta/Sosnoff Capital Corporation (Delaware), wholly owned
subsidiaries of the Company, since 1984.
I-1
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND, IF APPLICABLE, ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ---------------------------------- ------------------------------------------------------------------
Jay S. Goldsmith Mr. Goldsmith has been a director of the Company since 2001.
1 West 72nd Street He has served as President of Balfour Investors, Inc., a
Apartment 64 merchant banking firm since 1975, and as the Vice Chairman of
New York, NY 10023 PubliCARD, Inc., a "smart-card" technology company, since
1985.
In a judgment in 1998 in the United States District Court,
Southern District of New York, Mr. Goldsmith was held liable
pursuant to Section 16(b) of the Exchange Act to repay to New
Valley Corp. certain "short-swing" profits he earned from
certain purchases and sales of that corporation's B Preferred
Stock. Mr. Goldsmith has advised the Company and the
Company has concluded after review, that the decision was
based on a technical analysis of the language in Section 16(b) of
the Exchange Act. The Court of Appeals for the Second Circuit,
in affirming the decision, mentioned that the District Court had
suggested that ". . . the defendants, though liable, might well
have acted in good faith."
Ronald H. Menaker Mr. Menaker has been a director of the Company since 1999.
700 Smoke Hollow Trail He has been retired since January 1, 2000. From July, 1998
Franklin Lakes, NJ 07417 through December, 1999 Mr. Menaker was an Advisory Director
of, and since 1982 he was a Managing Director of, and held
other offices with, J.P. Morgan & Co., Inc since 1966.
Thurston Twigg-Smith Mr. Twigg-Smith has been a director of the Company since 1994.
4224 Waialae Av. #389 He has been retired since March, 2002. From 1961 to 2002, he
Honolulu, HI 96816 was Chairman of the Board and Chief Executive Officer of
Persis Corporation, a newspaper publishing and investment
company.
I-2
ANNEX A
Section 262 of the General Corporation Law
of the State of Delaware
(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 consoli-dation, 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 will be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's 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 "depositary receipt" mean a receipt or other instrument issued by a
depositary representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depositary.
(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
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 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 depositary 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 stockholders 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 Sections 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 depositary receipts in respect thereof;
b. Shares of stock of any other corporation, or depositary receipts
in respect thereof, which shares of stock (or depositary receipts in
respect thereof) or depositary 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 depositary
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depositary receipts and
cash in lieu of fractional shares or fractional depositary 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-1
(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 such stockholder's shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand
for appraisal of such stockholder'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 stockholder's 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
28 or Section 253 of this title, then, either a constituent corporation
before the effective date of the merger or consolidation, or the
surviving or resulting corporation 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. 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 20 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 stockholder 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
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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 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 such stockholder's 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 such stockholder's 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 one or more publications at least one 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
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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,
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 such stockholder's 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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Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. Letters of Transmittal, certificates for Shares and
any other required documentation should be sent or delivered by each
stockholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary at the address set forth below:
The Depositary for the Offer is:
EQUISERVE TRUST COMPANY, N.A.
BY FIRST CLASS MAIL: BY HAND: BY OVERNIGHT DELIVERY:
EquiServe Corporate Actions Securities Transfer & EquiServe Corporate Actions
P.O. Box 43014 Reporting Services, Inc. 150 Royall Street
Providence, RI 02940-3014 c/o Boston EquiServe LP Canton, MA 02021
100 William St/Galleria
NY, NY 10038
BY FACSIMILE TRANSMISSION: CONFIRM RECEIPT OF FACSIMILE
(FOR ELIGIBLE INSTITUTIONS ONLY) BY TELEPHONE:
(781) 575-2901 (800) 730-6001
Questions or requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information Agent
at the addresses and phone numbers set forth below. Stockholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer.
The Information Agent for the Offer is:
EQUISERVE TRUST COMPANY, N.A.
150 Royall Street
Canton, MA 02021
Call Toll-Free (800) 730-6001