SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary information statement [ ]Confidential, for use of the Commission
only (as permitted by Rule 14c-5(d)(2))
[X] Definitive information statement
DUFF & PHELPS CREDIT RATING CO.
--------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, no par value per share
(2) Aggregate number of securities to which transaction applies:
5,699,826
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
$100.00
(4) Proposed maximum aggregate value of transaction:
542,384,556
(5) Total fee paid:
$108,477
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filings.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
Date Filed:
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PRELIMINARY INFORMATION STATEMENT
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
Tel: (312) 368-3100; Fax: (312) 422-4121
May 11, 2000
Dear Fellow Stockholder,
The attached Notice of Special Meeting of Stockholders and Information
Statement are being furnished to you in connection with a special meeting of
stockholders (the "Special Meeting") of Duff & Phelps Credit Rating Co., an
Illinois corporation (the "Company"), which will be held on June 1, 2000 at the
Company's New York offices located at 17 State Street (12th Floor), New York,
N.Y. 10004 commencing at 10:00 a.m. local time.
We are holding this meeting to obtain stockholder approval of an
Agreement and Plan of Merger, as amended (the "Merger Agreement"), approved by
the board of directors of the Company on March 6, 2000 providing for the merger
of FSA Acquisition Corp. ("Purchaser") with and into the Company ("Merger").
Under the Merger Agreement, each share of Duff & Phelps' outstanding common
stock, other than shares owned in Duff & Phelps' treasury or held by Purchaser,
Fimalac, Inc., a Delaware corporation, or Fimalac S.A., a societe anonyme
organized under the laws of the Republic of France ("Parent") (or any direct or
indirect wholly owned subsidiary thereof), or shares with respect to which
dissenters' rights are properly exercised under Illinois law, will be converted
into the right to receive $100.00 in cash.
The Merger is the second and final step of the acquisition of the
Company by Parent. The first step was a tender offer by Purchaser, which is a
subsidiary of Parent, for the outstanding shares of common stock of the Company
(the "Shares") at $100.00 per Share in cash. Purchaser acquired approximately
4,495,179 of the Company's outstanding Shares pursuant to the tender offer,
which expired at 12:00 midnight, New York City time, on April 11, 2000.
The affirmative vote of a majority of the outstanding shares of common
stock of the Company entitled to vote will be necessary to approve the Merger
Agreement. As a result of the consummation of Purchaser's tender offer,
Purchaser owns and has the right to vote a sufficient number of outstanding
shares such that approval of the Merger Agreement at the Special Meeting is
assured without the affirmative vote of any other stockholder.
You are welcome to attend the special meeting; however, you are not
being asked for a proxy and are requested not to send one. The accompanying
Information Statement explains the terms of the Merger. Please read the
accompanying Information Statement carefully.
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We appreciate your loyalty and support as a stockholder of our Company
in the past and as we move forward with this transition to a new ownership.
Sincerely,
/s/ Marc Ladreit de Lacharriere
-------------------------------
Marc Ladreit de Lacharriere
Chairman and Chief Executive Officer
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Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 1, 2000
To the Stockholders of Duff & Phelps Credit Rating Co.:
NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting")
of stockholders of Duff & Phelps Credit Rating Co. (the "Company") will be held
on June 1, 2000 at 10:00 a.m. local time, at 17 State Street (12th Floor), New
York, N.Y. 10004, for the following purposes:
1. To consider and vote on a proposal to approve and adopt the
Agreement and Plan of Merger dated as of March 6, 2000, as
amended by Amendment No. 1 dated as of May 4, 2000 ("Merger
Agreement") (copies of which are attached as Exhibit A to the
accompanying Information Statement) providing for the merger
of FSA Acquisition Corp., a Delaware corporation and an
indirect substantially wholly owned subsidiary of Fimalac
S.A., a societe anonyme organized under the laws of the
Republic of France, with and into the Company.
2. To consider and act upon any other business that may be
properly brought before the Special Meeting or any adjournment
or postponement thereof.
You are cordially invited to attend the Special Meeting; however,
proxies are not being solicited for the Special Meeting. If you wish to vote
your Shares, you or your representative must be present in person at the Special
Meeting.
Stockholders of the Company will be entitled to assert dissenters'
rights under Sections 11.65 and 11.70 of the Illinois Business Corporation Act
of 1983, as amended, which are attached as Exhibit B to the accompanying
Information Statement. In order to assert such rights, a stockholder is required
to adhere strictly to certain statutory requirements. Stockholders intending to
exercise their dissenters' rights must deliver to the Company, before the taking
of the vote at the Special Meeting, a written demand for payment for his or her
outstanding shares of common stock of the Company if the merger is consummated
and may not vote in favor of the merger. You are urged to review Exhibit B in
its entirety.
Neither the Company nor its management is soliciting your proxy and you
are requested not to send one.
By order of the board of directors,
/s/ Marie Becker
----------------
Marie Becker
Secretary
Chicago, Illinois
Dated: May 11, 2000
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DUFF & PHELPS CREDIT RATING CO.
55 EAST MONROE STREET
CHICAGO, ILLINOIS 60603
INFORMATION STATEMENT
This Information Statement is being furnished to holders of shares of
common stock, no par value, of Duff & Phelps Credit Rating Co. ("Shares"), an
Illinois corporation (the "Company"), in connection with a special meeting of
stockholders (the "Special Meeting") to be held on June 1, 2000, at 17 State
Street (12th Floor), New York, N.Y. 10004, commencing at 10:00 a.m. local time.
At the Special Meeting, stockholders will consider and vote on a proposal to
approve and adopt an Agreement and Plan of Merger approved by the board of
directors of the Company on March 6, 2000, as amended by Amendment No. 1 on May
4, 2000 ("Merger Agreement"), providing for, among other things, the merger (the
"Merger") of FSA Acquisition Corp., a Delaware corporation (the "Purchaser"),
with and into the Company. As a result of the Merger, you will receive $100.00
in cash for each Share you own, and the Company will become an indirect
substantially wholly owned subsidiary of Fimalac S.A., a societe anonyme
organized under the laws of the Republic of France.
The Merger is the final step of the acquisition of the Company by
Parent. The first step was a tender offer (the "Offer") commenced by Purchaser
on March 15, 2000 for all of the outstanding Shares at a purchase price of
$100.00 per Share, net to the seller in cash. Pursuant to the Offer, which
expired at 12:00 midnight, New York City time, on April 11, 2000, Purchaser
acquired 4,495,179 Shares.
Purchaser currently beneficially owns approximately 97% of the
outstanding Shares. Because Purchaser will vote all Shares it beneficially owns
in favor of the Merger Agreement, approval is assured, and the board of
directors of the Company is not soliciting your proxy.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
This Information Statement is being first mailed to stockholders on May
11, 2000.
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TABLE OF CONTENTS
SUMMARY TERM SHEET.............................................................8
THE PARTIES...................................................................12
THE SPECIAL MEETING...........................................................13
Place, Date and Time.................................................13
Purpose of the Special Meeting.......................................13
Matters to be Considered at the Meeting; Effect of Approval
of the Merger Agreement............................................13
Record Date; Voting at the Meeting...................................13
Vote Required........................................................14
Approval Assured.....................................................14
Procedures for Exchange of Certificates..............................15
SPECIAL FACTORS...............................................................16
BACKGROUND OF THE MERGER......................................................16
REASONS FOR THE MERGER AND RECOMMENDATIONS OF THE BOARD OF
DIRECTORS............................................................20
OPINION OF P.J. SOLOMON.......................................................22
CERTAIN EFFECTS OF THE MERGER.................................................24
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.................................25
THE MERGER AGREEMENT..........................................................26
Company Stock Options................................................26
Effective Time.......................................................26
Representations and Warranties.......................................26
No Solicitation of Transactions......................................28
Directors and Officers of the Company Following the Merger...........29
Indemnification......................................................30
Conditions to Consummation of the Merger.............................31
Termination..........................................................31
Fees and Expenses....................................................33
OTHER MATTERS.................................................................33
Conduct of the Business of the Company After the Merger..............33
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Regulatory Matters...................................................34
Dissenters' Rights...................................................35
Financing............................................................36
Expenses of the Transaction..........................................37
INTERESTS OF CERTAIN PERSONS IN THE MERGER....................................37
FEES PAYABLE TO P.J. SOLOMON..................................................38
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY..............................................................38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS...............................39
TRANSACTIONS BETWEEN PARENT AND THE COMPANY...................................41
ACCOUNTING TREATMENT..........................................................41
WHERE YOU CAN FIND MORE INFORMATION...........................................41
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SUMMARY TERM SHEET
A special meeting of the stockholders of Duff & Phelps Credit Rating
Co. is being called at which the stockholders will consider and vote on the
merger of FSA Acquisition Corp., which owns approximately 97% of the outstanding
shares of Duff & Phelps Credit Rating Co., with and into Duff & Phelps Credit
Rating Co. WE ARE NOT ASKING YOU FOR A PROXY IN CONNECTION WITH THE SPECIAL
MEETING AND YOU ARE REQUESTED NOT TO SEND US A PROXY. The following are some of
the questions that you, as a stockholder of Duff & Phelps Credit Rating Co., may
have and the answers to those questions. We urge you to read carefully the
remainder of this information statement because the information in this summary
term sheet is not complete. Additional important information is contained in the
remainder of this information statement.
WHEN AND WHERE IS THE SPECIAL MEETING? WHAT IS THE PURPOSE OF THE SPECIAL
MEETING?
The special meeting of stockholders of Duff & Phelps Credit Rating Co.
is being held on June 1, 2000, at 17 State Street (12th Floor), New York, N.Y.
10004 for the purpose of considering and voting to approve the merger of FSA
Acquisition Corp. with and into Duff & Phelps Credit Rating Co., following which
FSA Acquisition Corp. will cease to exist and Duff & Phelps Credit Rating Co.
will be the surviving corporate entity. See "THE SPECIAL MEETING".
WHAT IS THE HISTORY OF THE MERGER?
The merger is the second and final step of the acquisition of Duff &
Phelps Credit Rating Co. by Fimalac S.A., a French societe anonyme, acting
through its indirect substantially wholly owned subsidiary, FSA Acquisition
Corp. The first step was a tender offer commenced by FSA Acquisition Corp. on
March 15, 2000 for all of the outstanding shares of common stock of Duff &
Phelps Credit Rating Co. The tender offer expired at midnight, New York City
time, on April 11, 2000, and FSA Acquisition Corp. acquired in the tender offer
approximately 97% of the outstanding shares of Duff & Phelps Credit Rating Co.
Following the consummation of the merger, Duff & Phelps Credit Rating Co. will
be an indirect substantially wholly owned subsidiary of Fimalac S.A. See
"BACKGROUND OF THE MERGER".
WHO ARE FSA ACQUISITION CORP. AND FIMALAC S.A.?
FSA Acquisition Corp. is a Delaware corporation that has carried on no
business other than in connection with its recent tender offer to purchase all
of the outstanding shares of common stock of Duff & Phelps Credit Rating Co. FSA
Acquisition Corp. is indirectly substantially wholly owned by Fimalac S.A., a
French societe anonyme. Fimalac S.A. is a diversified French corporation engaged
principally in activities aimed at providing products and services to the
business sector, including credit rating services through its Fitch IBCA
subsidiaries. See "THE PARTIES".
WHAT WILL HAPPEN TO MY SHARES UPON THE MERGER?
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Upon the proposed merger of FSA Acquisition Corp. with and into Duff &
Phelps Credit Rating Co., each share of common stock of Duff & Phelps Credit
Rating Co. held by you will be converted into the right to receive $100.00, net
to you, in cash, and you will cease to have any ownership interest in, or any
rights as a stockholder of, Duff & Phelps Credit Rating Co. See "CERTAIN EFFECTS
OF THE MERGER".
HOW DO I RECEIVE THE MERGER CONSIDERATION?
Promptly after the merger becomes effective, Harris Trust Company of
New York, the depositary, will send you a letter of transmittal containing
instructions for the surrender by you of certificates representing shares. In
order to receive the payment to which you are entitled, you must surrender your
share certificate(s) together with a duly executed and properly completed letter
of transmittal (and any other documents that may be required) as instructed in
the letter of transmittal. Do not send your share certificates at this time;
wait for instructions from Fimalac S.A. or Harris Trust Company of New York
after the merger becomes effective. See "THE SPECIAL MEETING -- Procedures for
Exchange of Certificates".
WHAT WILL HAPPEN TO ANY OPTIONS TO PURCHASE SHARES HELD BY ME UPON THE MERGER?
Any options to purchase shares held by you became immediately
exercisable at the time FSA Acquisition Corp. purchased shares pursuant to the
tender offer. Any option to purchase shares held by you that has not been
exercised by you prior to the date on which the merger becomes effective will be
automatically canceled and you will be entitled to receive from Duff & Phelps
Credit Rating Co. for each share previously subject to the option an amount in
cash, less applicable withholding taxes, equal to any excess of $100.00 over the
exercise price of the option. See "THE MERGER AGREEMENT-- Company Stock
Options".
ARE THERE ANY CONDITIONS TO THE MERGER?
Yes. The obligations of each party to effect the merger is subject to
the satisfaction or waiver of various conditions at or prior to the time at
which the merger becomes effective, including the vote of the stockholders of
Duff & Phelps Credit Rating Co. and other customary closing conditions. In
addition, FSA Acquisition Corp. is not required to effect the merger if certain
representations and warranties made by Duff & Phelps Credit Rating Co. in the
merger agreement were not truthful when made. See "THE MERGER AGREEMENT --
Conditions to Consummation of the Merger".
WHAT DOES THE BOARD OF DIRECTORS OF DUFF & PHELPS CREDIT RATING CO. THINK OF
THE MERGER?
The board of directors of Duff & Phelps Credit Rating Co. has
unanimously approved the merger agreement, as amended, and (1) determined that
the merger and the merger agreement are advisable, fair to, and in the best
interest of, Duff & Phelps Credit Rating Co., (2) approved the merger and the
merger agreement and declared their advisability and (3) recommended that its
stockholders approve and adopt the merger and the merger agreement. See "THE
BOARD'S RECOMMENDATION".
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WHAT DID THE BOARD OF DIRECTORS OF DUFF & PHELPS CREDIT RATING CO. CONSIDER IN
MAKING ITS RECOMMENDATION?
In making its recommendation in favor of the merger, the board of
directors of Duff & Phelps Credit Rating Co. considered a number of factors,
including the consideration to be paid in the merger and the fact the $100.00
per share to be paid to the stockholders of Duff & Phelps Credit Rating Co. is
approximately 27% higher than the closing stock price per share on March 6,
2000, the day on which the board of directors of Duff & Phelps Credit Rating Co.
approved the sale of Duff & Phelps Credit Rating Co. to FSA Acquisition Corp.
The board of directors of Duff & Phelps Credit Rating Co. also considered the
opinion of its financial advisor, Peter J. Solomon Company Limited, that the
$100.00 per share cash consideration to be paid to the stockholders of Duff &
Phelps Credit Rating Co. is fair, from a financial point of view, to the
stockholders. See "REASONS FOR THE MERGER AND RECOMMENDATIONS OF THE BOARD OF
DIRECTORS".
HOW MANY VOTES ARE REQUIRED TO APPROVE THE MERGER?
The approval of the merger will require the vote of the holders of a
majority of the outstanding shares, with holders of shares being entitled to one
vote per share held by them on April 14, 2000, which is the record vote for the
meeting. See "THE SPECIAL MEETING -- Record Date; Voting at the Meeting" and
"THE SPECIAL MEETING -- Vote Required".
WILL MY VOTE HAVE ANY EFFECT ON WHETHER THE MERGER IS APPROVED?
No. FSA Acquisition Corp. owns approximately 97% of the outstanding
shares, and therefore has sufficient voting power to constitute a quorum at the
special meeting and to approve all matters to be considered at the special
meeting, regardless of the presence or vote of any other stockholder. FSA
Acquisition Corp. will vote all shares it owns in favor of the merger. As a
result, the merger will be approved and adopted at the special meeting even if
no stockholder other than FSA Acquisition Corp. votes in favor of the merger.
See "THE SPECIAL MEETING -- Approval Assured".
HOW DO I VOTE IF I WISH TO VOTE?
If you wish to vote your shares, you or your representative must be
present in person at the special meeting to be held on June 1, 2000 at 10:00
a.m. local time.
WHAT IF I DO NOT AGREE WITH THE MERGER OR THE AMOUNT TO BE PAID TO ME FOR EACH
SHARE? DO I HAVE THE RIGHT TO DISSENT?
You are entitled to assert dissenters' rights under Illinois law. In
order to assert such rights, you must deliver to Duff & Phelps Credit Rating Co.
prior to the time at which the vote is taken at the special meeting a written
demand for payment for your shares in the event the merger is consummated, and
you may not vote in favor of the merger at the special meeting. Following a
demand for payment, Duff & Phelps Credit Rating Co. will provide you with an
estimate of the fair value of the shares with supporting documentation and will
agree to purchase your shares at the estimated fair value of the shares. If you
do not agree with the estimated fair value of the shares,
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Illinois law provides procedures pursuant to which you may obtain an appraisal
of the value of the shares. See "OTHER MATTERS -- Dissenters' Rights".
HOW WILL I BE TAXED ON THE MERGER?
The receipt of cash for shares in the merger will be a taxable
transaction for U.S. federal income tax purposes (and may also be a taxable
transaction under applicable state, local or other tax laws). In general, a
stockholder will recognize gain or loss for such purposes equal to the
difference between the amount of cash received pursuant to the merger and such
stockholder's adjusted tax basis in the shares. The foregoing may not be
applicable to a stockholder who acquired shares pursuant to the exercise of
employee stock options or certain other stockholders. See "UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES".
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE MERGER?
If you have any questions about the merger, please call Marie Becker,
Secretary of Duff & Phelps Credit Rating Co., at (312) 368-3100.
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Throughout this Information Statement, the term "Merger" means the
merger of FSA Acquisition Corp., a Delaware corporation (the "Purchaser"), with
and into Duff & Phelps Credit Rating Co., an Illinois corporation (the
"Company"), with the Company being the surviving corporation. The term "Merger
Agreement" means the Agreement and Plan of Merger among Fimalac S.A., a French
societe anonyme, Fimalac, Inc., a Delaware corporation, Purchaser and the
Company, dated as of March 6, 2000, as amended by Amendment No. 1 dated as of
May 4, 2000, copies of which are attached as Exhibit A and are hereby
incorporated by reference. The term "Offer" means the tender offer by Purchaser
to purchase all of the outstanding shares of common stock, no par value, of the
Company (the "Shares") at a purchase price of $100.00 per Share.
THE PARTIES
Duff & Phelps Credit Rating Co.
The Company is an Illinois corporation with its principal executive
offices located at 55 East Monroe Street, Chicago, Illinois 60603 where its
telephone number is (312) 368-3100. The Company issues credit ratings on
domestic and international corporate bonds, sovereign bonds, preferred stocks,
commercial paper, certificates of deposit, structured financings and insurance
company claims paying ability, and, to a lesser extent, on municipal securities.
Fimalac S.A.
Fimalac S.A. (the "Parent") is a societe anonyme organized under the
laws of the Republic of France with its principal offices located at 97 rue de
Lille, 75007 Paris, France. The telephone number of Parent is (33-1)
47.53.61.75. Parent is a diversified French corporation engaged principally in
activities aimed at providing products and services to the business sector. Its
principal lines of business are: credit rating services through its Fitch IBCA
subsidiaries ("Fitch IBCA"), storage of chemical substances through its
subsidiary LBC S.A., assembly and supply of franking machines and office
equipment through its subsidiaries SECAP S.A. and ANFA S.A. and the distribution
of professional hand tools and garage equipment through its FACOM group. Parent
is a public company listed on the Paris Bourse.
FSA Acquisition Corp.
The Purchaser is a newly incorporated Delaware corporation organized by
Parent in connection with the Offer and has not carried on any activities other
than in connection with the Offer and the Merger. The principal offices of the
Purchaser are located at One State Street Plaza, New York, NY 10004. The
telephone number of Purchaser is (212) 908-0500.
Fimalac, Inc.
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Fimalac, Inc. ("Fimalac-U.S.") is a Delaware corporation with its
principal offices located at One State Street Plaza, New York, NY 10004, where
its telephone number is (212) 908-0500. Fimalac-U.S. is a holding company
through which Parent holds its ownership interest in certain U.S. subsidiaries.
Surviving Corporation
The Company will be the surviving corporation in the Merger (the
"Surviving Corporation"). Pursuant to the Merger Agreement, the directors of
Purchaser will be the directors of the Surviving Corporation, and the executive
officers of Purchaser will be the executive officers of the Surviving
Corporation.
THE SPECIAL MEETING
Place, Date and Time
A special meeting of the stockholders of the Company will be held on
June 1, 2000 at 17 State Street (12th Floor), New York, N.Y. 10004 commencing at
10:00 a.m. local time (the "Special Meeting").
Purpose of the Special Meeting
The purpose of the Special Meeting is to consider and vote on:
o a proposal to approve and adopt the Merger Agreement
o any other business that properly comes before the
Special Meeting
At the Special Meeting, holders of Shares of the Company of record as
of the close of business on the Record Date (defined under "THE SPECIAL MEETING
- -- Record Date; Voting at the Meeting" below) will be eligible to vote upon the
recommendation of the board of directors of the Company to approve and adopt the
Merger Agreement.
Matters to be Considered at the Meeting; Effect of Approval of the Merger
Agreement
At the Special Meeting, holders of Shares of the Company as of the
Record Date will be asked to consider and vote upon a proposal to approve and
adopt the Merger Agreement.
Under Illinois law, a plan of merger must initially be approved by the
majority vote of the members of the board of directors of the corporation prior
to submission of such plan to such corporation's stockholders. In accordance
with Illinois law, the board of directors of the Company has approved the Merger
Agreement and has directed that it be submitted to the stockholders for their
approval.
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Record Date; Voting at the Meeting
The board of directors has fixed the close of business on April 14,
2000 as the record date (the "Record Date") for the determination of the
stockholders entitled to notice of, and to vote at, the Special Meeting and any
adjournments and postponements of the Special Meeting. On the Record Date, there
were 4,656,454 Shares outstanding, which Shares were held by approximately 26
holders of record. The Shares are the only authorized and outstanding voting
securities of the Company. Each holder of Shares as of the Record Date is
entitled to cast one (1) vote per Share, exercisable in person or by properly
executed proxy, upon each matter properly submitted for the vote of the
stockholders at the Special Meeting. Votes at the Special Meeting will be
tabulated by an Inspector of Election appointed by the Company.
The holders of a majority of the outstanding shares of the Company
present in person or represented by proxy will constitute a quorum for the
transaction of business at the Special Meeting. If a quorum is not present, the
Special Meeting may be adjourned from time to time, until a quorum is present.
Abstentions and broker non-votes will be counted as present for purposes of
determining the presence of a quorum at the Special Meeting for the transaction
of business.
The board of directors of the Company has determined that the right to
receive $100.00 in cash for each Share (the "Merger Consideration") is fair to,
and in the best interests of, stockholders of the Company. However, any holder
of record of Shares as of the Record Date who, prior to the vote on the Merger
at the Special Meeting, makes a written demand by following the procedures
prescribed under Sections 11.65 and 11.70 of the Illinois Business Corporation
Act of 1983, as amended ("Illinois Law"), has the right to payment of the "fair
value" of such Shares by the Company, as the Surviving Corporation in the
Merger, in lieu of receiving the consideration provided under the Merger
Agreement (the "Dissenters' Rights"). A summary of the procedures relating to
the exercise of Dissenters' Rights under Illinois Law is included in this
Information Statement under "OTHER MATTERS -- Dissenters' Rights" and the full
text of Sections 11.65 and 11.70 of Illinois Law is included in Exhibit B
hereto, and is hereby incorporated by reference.
Vote Required
The approval and adoption of the Merger Agreement will require the
affirmative vote of the holders of a majority of the outstanding Shares entitled
to vote at the Special Meeting. A failure to vote, an abstention from voting, or
a broker non-vote, will have the same legal effect as a vote cast against
approval of the Merger Agreement. Brokers, and in many cases nominees, will not
have discretionary power to vote on the proposals to be presented at the Special
Meeting.
Approval Assured
As of the Record Date, Purchaser owned approximately 97% of the Shares.
Therefore, Purchaser has sufficient voting power to constitute a quorum and to
approve all matters to be considered at the Special Meeting, regardless of the
vote of any other stockholder. Purchaser will vote all Shares it beneficially
owns in favor of the Merger
15
Agreement. As a result, the Merger Agreement will be approved and adopted at the
Special Meeting even if no stockholder other than Purchaser votes in favor of
this proposal.
Procedures for Exchange of Certificates
Parent or Purchaser will deposit with Harris Trust Company of New York
(the "Depositary and Paying Agent") the aggregate Merger Consideration to which
holders of Shares will be entitled when, pursuant to the Merger Agreement,
Purchaser will be merged with and into the Company ("Effective Time"). Promptly
after the Effective Time, the Surviving Corporation will cause to be mailed to
each record holder, as of the Effective Time, of a certificate or certificates
(the "Certificates") that, prior to the Effective Time, represented Shares (i) a
form of letter of transmittal (which will specify that delivery will be
effected, and risk of loss and title to the Certificates will pass, only upon
proper delivery of the Certificates to the Depositary and Paying Agent, and will
be in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates for
payment of the Merger Consideration therefor. Stockholders should not return
their Certificates until they receive a letter of transmittal.
Upon the surrender of each such Certificate formerly representing
Shares, together with such letter of transmittal and any additional documents as
may reasonably be required by Parent or the Depositary and Paying Agent, in each
case duly completed and validly executed in accordance with the instructions
thereto, the Depositary and Paying Agent will pay the holder of such Certificate
the Merger Consideration multiplied by the number of Shares formerly represented
by such Certificate, in exchange therefor, and such Certificate will forthwith
be canceled. Until so surrendered and exchanged, each such Certificate (other
than Shares held by Parent, Fimalac-U.S., Purchaser or the Company, or any
direct or indirect subsidiary thereof) will represent solely the right to
receive the Merger Consideration. No interest will be paid or accrue on the
Merger Consideration.
If the Merger Consideration (or any portion thereof) is to be delivered
to any person other than to the person in whose name the Certificate formerly
representing Shares surrendered in exchange therefor is registered, it is a
condition to such exchange that the Certificate so surrendered be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such exchange pay to the Depositary and Paying Agent any transfer or
other taxes required by reason of the payment of the Merger Consideration to a
person other than the registered holder of the Certificate surrendered, or
establish to the satisfaction of the Depositary and Paying Agent that such tax
has been paid or is not applicable.
Promptly following the date which is six months after the Effective
Time, Parent will cause the Depositary and Paying Agent to deliver to the
Surviving Corporation all cash and documents in its possession relating to the
Offer and Merger and the Depositary and Paying Agent's duties will terminate
thereafter. Thereafter each holder of a Certificate formerly representing a
Share may surrender such Certificate to the Surviving Corporation and (subject
to applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Merger Consideration, without any interest thereon.
16
None of Parent, Fimalac-U.S., Purchaser or the Company will be liable
to any holder of Shares for any Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Parent or the Depositary and Paying Agent will be entitled to deduct
and withhold from the Merger Consideration otherwise payable pursuant to the
Merger Agreement to any holder of Shares such amounts as Parent or the
Depositary and Paying Agent is required to deduct and withhold with respect to
the making of such payment under the Internal Revenue Code of 1986, as amended
(the "Code"), or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Parent or the Depositary and Paying Agent, such
withheld amounts will be treated as having been paid to the holder of the Shares
in respect of which such deduction and withholding was made by Parent or the
Depositary and Paying Agent.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
The Merger is the second and final step of the acquisition of the
Company by Parent. The first step was a tender offer by Purchaser for the
Company's outstanding Shares at $100.00 per Share in cash. Purchaser acquired
approximately 97% of the Company's outstanding Shares pursuant to the tender
offer, which expired at 12:00 midnight, New York City time, on April 11, 2000.
The background of the Merger is as follows:
In the Fall of 1997, the board of directors of the Company determined
to explore strategic alternatives to maximize stockholder value. In connection
with that determination, in December 1997, the Company retained Peter J. Solomon
Company Limited ("P.J. Solomon") to prepare a confidential information
memorandum describing the Company and to assist the Company in identifying
parties that might be interested in a possible transaction with the Company.
Between December 1997 and May 1998, the Company authorized P.J. Solomon to
contact approximately 20 selected companies to discern their level of interest
in pursuing a transaction with the Company. Nine of the selected companies
entered into confidentiality agreements and were provided with the confidential
information memorandum prepared by P.J. Solomon. For a variety of reasons,
including conflicts of interest, lack of synergies and insufficient valuation,
none of the companies that were provided with the confidential information
memorandum expressed further interest regarding a possible transaction with the
Company. Accordingly, the engagement of P.J. Solomon was terminated. The Company
did not authorize P.J. Solomon to contact Parent because Parent had recently
completed its acquisition of Fitch Investors Service, L.P. ("Fitch") and was
believed to be too occupied by the combination of Fitch and IBCA Inc. to have
any interest in the Company.
Prior to June 1999, the executive officers of the Company were familiar
with the business and operations of Parent through the activities in the credit
rating business of its wholly owned subsidiary Fitch IBCA.
17
In June 1999, Robin Monro-Davies, Chief Executive Officer of Fitch
IBCA, called Paul J. McCarthy, then Chairman and Chief Executive Officer of the
Company, to ask whether Mr. McCarthy might be interested in meeting to explore
the possibility of a business combination between the Company and Fitch IBCA. On
September 17, 1999, Mr. Monro-Davies met with Mr. McCarthy in New York City to
discuss the possibility of a combination between the companies.
At the regular quarterly meeting of the board of directors on August
17, 1999, at which all of the directors were present, Mr. McCarthy advised the
board of directors of the preliminary contact received by the Company from
Parent regarding the possibility of a business combination.
On October 11, 1999, Mr. McCarthy was contacted by another third party
which expressed an interest in discussing a possible business combination with
the Company. Later in October 1999, Mr. McCarthy met with the executive vice
president of such third party to generally discuss the possibility of a business
combination with the Company.
At the regular quarterly meeting of the board of directors on November
11, 1999, at which all of the directors were present, Mr. McCarthy advised the
board of directors of the meetings he had had with Mr. Monro-Davies and the
executive vice president of the other third party, and the board of directors
discussed the possibility of a business combination between the Company and
either Fitch IBCA or the other third party.
In December 1999, Mr. McCarthy and Philip T. Maffei, then President of
the Company, met with the executive vice president of the other third party to
further explore on a preliminary basis the possibility of a business combination
between the Company and the other third party.
In December 1999, Mr. Monro-Davies again contacted Mr. McCarthy and
indicated that Parent was interested in proceeding further with discussions
regarding a possible business combination between the Company and Fitch IBCA.
Mr. Monro-Davies and Mr. McCarthy then scheduled a meeting in January 2000 with
Marc de Lacharriere, President of Parent. On January 18, 2000, Messrs. McCarthy
and Maffei met in New York City with Mr. de Lacharriere, Veronique Morali,
Managing Director of Parent, Mr. Monro-Davies and Stephen Joynt, President of
Fitch IBCA, to discuss the possibility of a business combination between the
Company and Fitch IBCA. The parties acknowledged that Parent would be a unique
buyer and that the synergies between the Company and Fitch IBCA would permit the
combined companies to better compete with the two major credit rating agencies.
The parties noted that the strengths of Fitch IBCA in U.S. securitization
markets, global banking, European rating activities and U.S. public finance
would complement the Company's expanded corporate rating capability and broader
coverage of the insurance sector, in addition to the Company's strong structured
finance group and international network. The parties also discussed the possible
structures of a combination between the Company and Fitch IBCA.
Following the January meeting with representatives of Parent, counsel
for the Company delivered to counsel for Parent a draft confidentiality
agreement and the parties began to negotiate the terms thereof. In response to
the initial draft, Parent requested that the Company agree to negotiate
exclusively with Parent regarding a potential business combination, but the
Company declined to accept pending evolution of discussions. On January 25,
2000, the Company and Parent entered into a confidentiality agreement in
18
which Parent agreed, among other things, to keep information it obtained from
the Company confidential, to refrain from soliciting employees of the Company,
and not to make an unsolicited offer to acquire the Company.
Following the execution of the confidentiality agreement, the Company
transmitted to Parent certain preliminary commercial and legal information with
respect to the Company. On February 11, 2000, Parent requested through its
counsel additional information regarding the Company, but the Company declined
to provide such additional information pending the outcome of further
discussions.
On February 2, 2000, Messrs. McCarthy and Maffei again met with the
executive vice president of the other third party to continue preliminary
discussions regarding a possible business combination with the Company.
During the regular quarterly meeting of the board of directors on
February 18, 2000, Mr. McCarthy updated all the members of the board of
directors on the status of the business combination discussions between the
Company and each of Parent and the other third party. The members of the board
of directors then discussed the benefits and disadvantages of the possible
business combinations.
On February 24, 2000, Mr. de Lacharriere, Ms. Morali and Mr. Joynt met
again with Messrs. McCarthy and Maffei in New York City. Mr. de Lacharriere, Ms.
Morali and Mr. Joynt expressed Parent's continued interest in pursuing a
business transaction with the Company and indicated that Parent was prepared to
make a cash offer for the outstanding Shares at a price of $95.00 per Share. The
representatives of Parent also stated that Parent had available to it funding
necessary to complete the Offer and Merger so that there would be no financing
contingency in the definitive agreement. The parties engaged in further
negotiations and at the end of the meeting, Mr. de Lacharriere stated that
Parent was prepared to make a cash offer of $100.00 per Share, subject to the
satisfaction of a number of conditions, including agreement on the structure of
the transaction, the satisfactory completion of due diligence and the
negotiation of a definitive agreement. Parent also requested that the Company
commit to negotiate exclusively with Parent for a limited period of time, but
the Company stated that it was not prepared to provide exclusivity and reserved
the right to communicate with the other third party with which it had had prior
discussions.
Following the meeting with the representatives of Parent, on February
24, 2000, Mr. McCarthy contacted the members of the board of directors by
telephone to advise them of the offer made by Parent. On February 24, 2000, the
Company again engaged P.J. Solomon to review the terms of the proposed
transaction from a financial point of view and to perform such other financial
advisory services as requested by the Company.
After the meeting between representatives of the Company and Parent
through the execution of the Merger Agreement, Parent and its advisors conducted
more intensive due diligence with respect to the Company and were in regular
contact with the Company and its advisors relating thereto.
On February 25, 2000, Mr. McCarthy was contacted by the executive vice
president of the other third party that had previously expressed an interest in
a possible business combination with the Company. Mr. McCarthy advised the other
third party that the Company had received a cash offer for a business
combination at a significant
19
premium to its current market valuation and that Parent was beginning to prepare
appropriate documentation. No further contact was received from the other third
party and no business combination proposal was ever received from such other
third party.
On February 28, 2000, Mr. McCarthy received a letter from Ms. Morali
stating Parent's continued interest in acquiring the Company and requesting that
the Company enter into a 14 day exclusive period during which the Company would
not discuss or negotiate any other potential business combination. The Company
advised Parent that the Company would not enter into such an exclusivity
agreement with respect to discussions and negotiations regarding potential
business combinations. In response to repeated requests from Parent and its
counsel for assurances that the Company was negotiating in good faith, however,
on February 29, 2000, the Company provided a letter to Parent stating that the
Company intended to engage in good faith negotiations with Parent with respect
to a business combination and that it was not engaged in negotiations with
respect to a possible combination with any other third party. Furthermore, the
Company agreed that prior to March 7, 2000, it would not take any further steps
to solicit proposals with respect to any other potential business combinations
while negotiating with Parent and that in the event that the Company was
contacted by a third party with respect to a business combination, the Company
would promptly advise Parent of any such proposal.
On February 29, 2000, Parent's counsel provided the Company with an
initial draft of an agreement and plan of merger. During the next week,
representatives of the Company and Parent and their counsel and financial
advisors negotiated the terms of the Merger Agreement, while Parent continued
its due diligence review of the Company. On March 2, 2000, each of the directors
of the Company was provided with a notice of meeting of the board of directors
called for March 6, 2000, an agenda of the meeting, material relating to the
fiduciary duties of the board of directors in connection with a potential
business combination transaction, and a copy of the draft agreement and plan of
merger, which had been marked to reflect the revisions proposed by the Company,
its counsel and financial advisors.
On March 5 and 6, 2000, representatives of the Company and counsel and
financial advisors for the Company met with representatives of Parent and
counsel and financial advisors for Parent in New York City to continue
negotiating the terms and conditions of the agreement and plan of merger.
On March 6, 2000, the board of directors met in New York City to
discuss Parent's offer. Mr. McCarthy reviewed the background of the Company's
relationship with Parent and discussed the terms of the proposed transaction.
The directors discussed the reasons for engaging in a combination with Parent.
The Company's counsel reviewed the terms of the Merger Agreement and the
conditions to Parent's obligation to complete the Offer and Merger. Counsel to
the Company also reviewed with the members of the board of directors their
fiduciary obligations in considering a potential business combination
transaction. The representatives of P.J. Solomon then made a financial
presentation to the board of directors supporting P.J. Solomon's opinion as to
the fairness, from a financial point of view, of the $100.00 per Share cash
consideration to be received in the Offer and the Merger by holders of Shares.
The board of directors then asked senior management and the advisors a number of
questions regarding the terms, conditions and timing of the proposed
transaction. At 5:30 p.m., the board of directors adjourned while final
revisions to the agreement and plan of merger were being made.
20
The board of directors reconvened at 9:30 p.m. on March 6, 2000 and
reviewed the definitive agreement and plan of merger. After further discussion
of the proposed transaction, the board of directors, by unanimous vote of those
present, approved, among other things, the Merger Agreement and the transactions
contemplated thereby, determined that the Offer and the Merger were fair to and
in the best interests of the Company and its stockholders and resolved to
recommend to the stockholders of the Company that they accept the Offer, tender
their Shares pursuant to the Offer and approve and adopt the Merger Agreement
and the Merger.
The Merger Agreement was then executed late in the evening on March 6,
2000 by Parent, Fimalac-U.S., Purchaser and the Company. On March 7, 2000,
Parent and the Company publicly announced the execution of the Merger Agreement
in a joint press release.
Jonathan Ingham, a member of the board of directors, was unable to
attend the board meeting on March 6, 2000. However, on March 8, 2000, after
discussing the proposed transaction with Mr. McCarthy and the Company's counsel
and having been provided with copies of all relevant documents, Mr. Ingham
ratified and approved the Merger Agreement, the transactions contemplated
thereby and the other actions taken by the board of directors at its March 6,
2000 meeting.
On March 15, 2000, Parent and Purchaser commenced the Offer. On April
12, 2000 Purchaser announced that it had accepted for payment and would promptly
pay for all 4,496,138 Shares validly tendered pursuant to the Offer. Purchaser
has subsequently acquired 4,495,179 such Shares that were delivered.
The Merger Agreement as originally executed provided that, following
the Offer, at the option of Parent, either the Company would be merged with and
into the Purchaser, with the Purchaser being the surviving corporation or the
Purchaser would be merged with and into the Company, with the Company being the
surviving corporation. Upon determination by Parent that the Purchaser should be
merged into the Company, with the Company being the surviving corporation, the
board of directors of the Company unanimously approved Amendment No. 1. on April
12, 2000. Amendment No. 1 was then executed on May 4, 2000 by Parent,
Fimalac-U.S., Purchaser and the Company.
REASONS FOR THE MERGER AND RECOMMENDATIONS OF THE BOARD OF DIRECTORS
On March 6, 2000, the board of directors of the Company unanimously (1)
determined that the Offer, the Merger and the Merger Agreement (as of such date)
are advisable, fair to, and in the best interest of, the Company, (2) approved
the Merger, the Offer, the Merger Agreement (as of such date) and the other
transactions contemplated by the Merger Agreement (as of such date) and declared
their advisability and (3) recommended that its stockholders accept the Offer
and tender their shares pursuant thereto and approve and adopt the Merger
Agreement (as of such date). On April 12, 2000 the board of directors of the
Company unanimously approved Amendment No. 1.
21
In making the determinations and recommendations set forth above, the
board of directors of the Company considered a number of factors including,
without limitation, the following:
(A) The consideration to be paid in the Merger, and, in
particular, the fact that the $100.00 per Share to be received
by the Company's stockholders in the Merger represents an
approximate 27% premium over the closing stock price per Share
on March 6, 2000, the day the board of directors approved the
Offer and the Merger;
(B) The Company's financial condition, results of operations,
assets, liabilities, liquidity, business and prospects and
industry, economic and market conditions, including the
inherent risks and uncertainties in the Company's business in
each case on a historical, current and prospective basis. The
board of directors determined that in its view, the
acquisition of the Company by Parent presented the best means
of achieving the greatest value for holders of its Shares;
(C) The strategic fit of the Company with Fitch IBCA. Fitch IBCA's
key strengths have been in U.S. securitization markets, global
banking, European rating activities and U.S. public finance.
The Company brings to Fitch IBCA an expanded corporate rating
capability and broader coverage of the insurance sector, in
addition to a strong structured finance group and
international network;
(D) Analysis of the future prospects of the Company on a stand
alone basis;
(E) The historical and recent market prices for the Shares and
potential future share prices;
(F) The opinion of P.J. Solomon, dated March 6, 2000, to the
effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the $100.00 per Share
cash consideration to be received in the Offer and the Merger
by holders of Shares (other than Parent and its affiliates)
was fair, from a financial point of view, to such holders. The
full text of P.J. Solomon's written opinion, dated March 6,
2000, which sets forth the assumptions made, matters
considered and limitations on the review undertaken by P.J.
Solomon, is attached hereto as Exhibit C, which is herein
incorporated by reference. The opinion is directed only to the
fairness, from a financial point of view, of the $100.00 per
Share cash consideration to be received in the Offer and the
Merger by holders of Shares (other than Parent and its
affiliates) and is not intended to constitute, and does not
constitute, a recommendation as to whether any stockholder
should tender Shares pursuant to the Offer or how any
stockholder should vote on the Merger. HOLDERS OF SHARES ARE
URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY;
(G) The availability of appraisal rights under Section 11.65 of
the Illinois Law;
(H) The terms and conditions of the Merger Agreement, including
provisions that (a) although prohibiting the Company and its
representatives from
22
soliciting or initiating any inquiries or proposals regarding
an Acquisition Proposal (as defined in "THE MERGER AGREEMENT
-- No Solicitation of Transactions"), permit the Company and
its representatives to furnish information or data (including,
without limitation, confidential information or data) relating
to the Company or its subsidiaries to, and participate in
negotiations with, any third party making an unsolicited bona
fide written Acquisition Proposal, to the extent the board of
directors reasonably believes that such Acquisition Proposal
may constitute a Superior Proposal (as defined in "THE MERGER
AGREEMENT -- No Solicitation of Transactions") and (b) permit
the Company to terminate the Merger Agreement to accept a
Superior Proposal, subject to (i) the Company entering into a
definitive agreement providing for the transactions
contemplated by such Acquisition Proposal immediately
following such termination, (ii) the board of directors having
given Parent at least two business days prior written notice
of its determination to terminate the Merger Agreement and
having afforded Parent a reasonable opportunity within such
two business day period to amend its Offer and (iii) payment
of a termination fee of $16,000,000 plus actual out-of-pocket
expenses of Parent and Purchaser not to exceed $2,000,000;
(I) The proposed structure of the Offer and the Merger involving
an immediate cash tender offer followed by a merger for the
same consideration and the fact that there is no financing or
due diligence contingency to the Offer. In this connection,
the board of directors also considered the likelihood that the
proposed acquisition would be consummated, including the
likelihood of satisfaction of the conditions to the Offer and
the Merger contained in the Merger Agreement, and the risks to
the Company if the acquisition was not consummated; and
(J) The recommendation of the Company's management with respect to
the proposed transaction.
The board of directors evaluated the factors listed above in light of
the directors' knowledge of the business and operations of the Company and in
their business judgment. In view of the variety of factors considered by the
board of directors in connection with its evaluation of the Merger Agreement and
the Offer and the Merger, the board of directors did not find it practicable to
and did not quantify or otherwise assign relative weight to the specific factors
considered in reaching its determination. In addition, individual members of the
board of directors may have given different weights to different factors in
making their individual determinations.
OPINION OF P.J. SOLOMON
In its opinion addressed to the board of directors of the Company dated
March 6, 2000, P.J. Solomon set forth its opinion that, as of such date, and
based upon and subject to the limitations set forth in such opinion, the cash
consideration of $100.00 per Share to be received by the stockholders of the
Company was fair, from a financial point of view, to the stockholders of the
Company.
23
P.J. Solomon, as part of its investment banking business is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, private placements of equity and debt and negotiated
underwritings. P.J. Solomon was selected by the Company to deliver a fairness
opinion in this transaction based on P.J. Solomon's investment banking
relationship and familiarity with the Company; in December 1997, the Company
retained P.J. Solomon to prepare a confidential information memorandum
describing the Company and to assist the Company in identifying parties that
might be interested in a possible transaction with the Company. P.J. Solomon
believes that its analyses must be considered as a whole and that selecting
portions of its analyses, without considering all factors and analyses, could
create an incomplete view of the processes underlying its analyses and opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analyses or summary description.
Pursuant to the terms of P.J. Solomon's engagement, the Company has
agreed to pay P.J. Solomon the following amounts: (i) a retention fee of
$100,000, (ii) $200,000 for rendering an opinion as to the fairness, from a
financial point of view, of the consideration to be received in the Offer and
the Merger by the holders of Shares and (iii) $700,000 upon consummation of the
Offer and the Merger. The Company also has agreed to reimburse P.J. Solomon for
reasonable out-of-pocket expenses, including the reasonable fees, disbursements
and other charges of its legal counsel, and to indemnify P.J. Solomon and
related parties against certain liabilities, including liabilities under the
federal securities laws, arising out of P.J. Solomon's engagement.
P.J. Solomon was retained by the Company solely to render an opinion as
to the fairness from a financial point of view of the consideration to be
received by the holders of Shares in the purchase of the Company by Parent. P.J.
Solomon did not make any recommendation with respect to the amount of such
consideration. P.J. Solomon was not engaged to solicit, and did not solicit,
interest from any party with respect to a merger or other business combination
transaction involving the Company.
P.J. Solomon assumed and relied upon the accuracy and completeness of
the information reviewed by it for the purposes of its opinion and did not
assume any responsibility for independent verification of such information. With
respect to the financial projections, P.J. Solomon assumed that the financial
projections were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. P.J. Solomon did not make an independent evaluation or appraisal of the
assets or liabilities of the Company, nor was it furnished with any such
evaluation or appraisal. Its opinion is necessarily based on economic, market
and other conditions as in effect on, and the information made available to it
as of, March 6, 2000.
In arriving at its fairness opinion, P.J. Solomon, among other things:
(i) reviewed the Annual Reports to Stockholders and Annual Reports
on Form 10-K of the Company for the three years ended December
31, 1998, and certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of the Company, and certain
other public communications from the Company to its
stockholders;
24
(ii) reviewed certain internal financial analyses and forecasts of
the Company prepared by the management of the Company;
(iii) discussed the past and current operations, financial condition
and prospects of the Company with senior management of the
Company;
(iv) reviewed the reported prices and trading activity of the
Shares of the Company;
(v) compared the financial performance and condition of the
Company and the reported prices and trading activity of the
Shares of the Company with that of certain other comparable
publicly traded companies;
(vi) reviewed publicly available information regarding the
financial terms of certain recent business combination
transactions in the financial services industry specifically
and other industries generally which were comparable, in whole
or in part, to the Offer and Merger;
(vii) participated in certain discussions among representatives of
each of the Parent and the Company;
(viii) reviewed the Merger Agreement; and
(ix) performed such other analyses as it deemed appropriate.
The full text of the written P.J. Solomon opinion, dated March 6, 2000,
which sets forth, among other things, assumptions made, procedures followed,
matters considered, and limitations on the scope of review undertaken by P.J.
Solomon in rendering the P.J. Solomon opinion is attached as Exhibit C. P.J.
Solomon has consented to the reproduction in full of its fairness opinion in
this Information Statement. Stockholders are urged to read the P.J. Solomon
opinion carefully in its entirety.
CERTAIN EFFECTS OF THE MERGER
The Merger will become effective at the time the articles of merger and
certificate of merger, respectively, together with any required related
certificate, are filed with the Secretary of State of Illinois and the Secretary
of State of Delaware, in such form as required by, and executed in accordance
with, the relevant provisions of the laws of Illinois and Delaware. At the
Effective Time, pursuant to the Merger Agreement, Purchaser will be merged with
and into the Company. At such Effective Time, each outstanding Share will be
converted into and represent the right to receive the Merger Consideration,
without interest, except for (i) Shares held in the Company's treasury
immediately before the Effective Time, and each Share held by Parent,
Fimalac-U.S., Purchaser, or any of their respective direct or indirect wholly
owned subsidiaries immediately before the Effective Time (all of which will be
canceled) and (ii) Shares with respect to which dissenters' rights are properly
exercised under Illinois Law.
Current stockholders of the Company will not have an opportunity to
continue their equity interest in the Company after the Merger. As a result of
the completion of the Offer, the Shares are no longer quoted on the New York
Stock Exchange and trading
25
information is no longer available. Parent and Purchaser plan to request that
the registration of the Shares under the Securities Exchange Act of 1934, as
amended, be terminated.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash for Shares in the Merger will be a taxable
transaction for United States federal income tax purposes (and may also be a
taxable transaction under applicable state, local or other tax laws). In
general, a stockholder will recognize gain or loss for such purposes equal to
the difference between the amount of cash received and such stockholder's
adjusted tax basis in the Shares. Gain or loss must be determined separately for
each block of Shares (i.e., Shares acquired at the same cost in a single
transaction) converted to cash in the Merger. Such gain or loss will be capital
gain or loss if the Shares are a capital asset in the hands of the stockholder
and will be long term capital gain or loss if the Shares were held for more than
one year on the effective time of the Merger. The receipt of cash for Shares
pursuant to the exercise of dissenters' rights, if any, will generally be taxed
in the same manner as described above.
Payments in connection with the Merger may be subject to "backup
withholding" at a rate of 31%. Backup withholding generally applies if the
stockholder (a) fails to furnish such stockholder's taxpayer identification
number ("TIN"), (b) furnishes an incorrect TIN or (c) under certain
circumstances, fails to provide a certified statement, signed under penalties of
perjury, that the TIN provided is such stockholder's correct number and that
such stockholder is not subject to backup withholding. Backup withholding is not
an additional tax but merely an advance payment, which may be refunded to the
extent it results in an overpayment of tax. Certain persons generally are
entitled to exemption from backup withholding, including corporations,
non-United States persons and financial institutions, provided they properly
establish their status when required to do so by completing and providing the
appropriate IRS forms. Certain penalties apply for failure to furnish correct
information and for failure to include reportable payments in income. Each
stockholder should consult with his own tax advisor as to such stockholder's
qualification for exemption from backup withholding and the procedure for
obtaining such exemption.
The foregoing discussion may not be applicable to a stockholder who
acquired Shares pursuant to the exercise of employee stock options or otherwise
as compensation, to a stockholder who is related to Purchaser for purposes of
Section 302 of the Code or to a stockholder who is not a United States person or
who is otherwise subject to special tax treatment under the Code (for example,
brokers, dealers in securities, banks, insurance companies, tax-exempt
organizations and financial institutions). For these purposes, a United States
person means a person who or which is (i) an individual who is a citizen or
resident of the United States for United States federal income tax purposes,
(ii) a corporation or other entity taxable as a corporation created or organized
under the laws of the United States or any state thereof (including the District
of Columbia), (iii) an estate the income of which is subject to United States
federal income tax regardless of its source or (iv) a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. In addition, the
foregoing discussion does not address the tax treatment of holders of options to
acquire Shares.
26
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL OR NON-UNITED STATES
INCOME AND OTHER TAX LAWS.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger
Agreement that are not otherwise discussed herein. Such summary is qualified in
its entirety by reference to the Merger Agreement. Stockholders are urged to
review the Merger Agreement carefully in its entirety.
Company Stock Options
Each outstanding option (a "Stock Option") to purchase shares of common
stock of the Company ("Common Stock"), granted under the Company's 1994
Long-Term Stock Incentive Plan or pursuant to any other employee stock option
plan or agreement entered into by the Company with any employee of the Company
or any subsidiary thereof (the "Company Stock Option Plan"), became exercisable
on April 12, 2000, the date of which Purchaser purchased Shares pursuant to the
Offer, whether or not then exercisable, subject to the terms of the Company
Stock Option Plan pursuant to which such Stock Option was issued. If and to the
extent that a Stock Option is not exercised at the Effective Time, such Stock
Option will be canceled automatically. Each holder of a canceled Stock Option
will be entitled to receive as soon as practicable after the first date payment
can be made without liability to such person under Section 16(b) of the Exchange
Act from the Company in consideration for such cancellation an amount in cash
(less applicable withholding taxes) equal to the product of (i) the number of
shares of Common Stock previously subject to such Stock Option multiplied by
(ii) the excess, if any, of $100.00 over the exercise price per share of Common
Stock previously subject to such Stock Option upon surrender of such Stock
Option to the Company or an affidavit of loss in the form requested by Parent,
together with such additional documentation as may be reasonably required by
Parent or the Company.
Effective Time
The Merger will become effective at the time the articles of merger and
certificate of merger, together with any required related certificate, are filed
with the Secretary of State of Illinois and the Secretary of State of Delaware,
respectively. The Effective Time is currently expected to occur as soon as
practicable after the Special Meeting, subject to approval of the Merger
Agreement at the Special Meeting and satisfaction or waiver of the terms and
conditions set forth in the Merger Agreement.
Representations and Warranties
27
Pursuant to the Merger Agreement, the Company has made customary
representations and warranties to Parent and Purchaser with respect to, among
other things: its organization and qualification and subsidiaries; its articles
of incorporation and bylaws; capitalization; authority relative to the Merger
Agreement; material contracts; no conflicts; required filings and consents;
compliance with law; SEC filings; financial statements; absence of certain
changes or events; undisclosed liabilities; litigation; employee benefit plans;
employment and labor matters; Offer documents and proxy statement; restrictions
on business activities; title to property; taxes; environmental matters;
intellectual property; interested party transactions; insurance; opinion of
financial advisor; brokers; the applicability of Sections 7.85 and 11.75 of
Illinois Law; and required votes.
Certain representations and warranties in the Merger Agreement made by
the Company are qualified as to "materiality" or "Material Adverse Effect" on
the Company. For purposes of the Merger Agreement, when used in connection with
the Company or any of its subsidiaries, the term "Material Adverse Effect" means
any change, effect or circumstance that is, or is reasonably likely to be,
materially adverse to the business, assets, condition (financial or otherwise)
or results of operations of the Company and its subsidiaries, in each case taken
as a whole, other than any such changes, effects or circumstances (i) expressly
set forth in the Company's disclosure schedules to the Merger Agreement or (ii)
specifically set forth or described in the Company SEC Reports, other than
general risk factors. The following, considered alone without regard to any
other effects, changes, events, circumstances or conditions, do not constitute a
Material Adverse Effect: (i) a change in the trading prices of the Company's
securities between the date of the Merger Agreement and the Effective Time; (ii)
effects, changes, events, circumstances or conditions generally affecting the
industry in which the Company operates or arising from changes in general
business or economic conditions; (iii) any effects, changes, events,
circumstances or conditions resulting from any change in law or generally
accepted accounting principles; (iv) any effects, changes, events, circumstances
or conditions resulting from the announcement or pendency of any of the
transactions contemplated by the Merger Agreement other than a breach of a
representation or warranty pursuant to the Merger Agreement which would occur
except for this clause (iv) or clause (v) of this definition of Material Adverse
Effect; and (v) any effects, changes, events, circumstances or conditions
resulting from actions taken by the Parent or the Company in order to comply
with the terms of the Merger Agreement other than a breach of a representation
or warranty pursuant to the Merger Agreement which would occur except for this
clause (v) or clause (iv) of this definition of Material Adverse Effect.
Pursuant to the Merger Agreement, Parent, Fimalac-U.S. and Purchaser
have made customary representations and warranties to the Company with respect
to, among other things: their organization and qualification; their
subsidiaries; authority relative to the Merger Agreement; no conflicts; required
filings; consents; the Offer documents; the prior activities of Purchaser; the
ability of Parent and Purchaser to finance the transactions contemplated by the
Merger Agreement; and ownership of Shares. Certain representations and
warranties in the Merger Agreement made by the Parent, Fimalac- U.S. and
Purchaser are qualified as to "materiality" or "Material Adverse Effect" on the
Parent.
None of the representations and warranties made by Parent,
Fimalac-U.S., Purchaser or the Company in the Merger Agreement survive the
Effective Time.
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No Solicitation of Transactions
In the Merger Agreement, the Company has agreed not to (nor to permit
its subsidiaries, or its or its subsidiaries' officers, directors or
representatives or agents to) (including, without limitation, any investment
banker, financial advisor, attorney or accountant retained by the Company or any
of its subsidiaries), directly or indirectly, (i) solicit, initiate or knowingly
encourage (including by way of furnishing information or assistance), or take
any other action to facilitate the initiation of any inquiries or proposals
regarding an Acquisition Proposal, (ii) engage in negotiations or discussions
concerning, or provide any nonpublic information to any person relating to, any
Acquisition Proposal, or (iii) agree to approve or recommend any Acquisition
Proposal. The Merger Agreement provides, however, that nothing in the Merger
Agreement prohibits the Company or the board of directors from taking and
disclosing to stockholders a position contemplated by Rule 14e-2 promulgated
under the Exchange Act or from making any disclosure to the Company's
stockholders if, in the good faith reasonable judgment of the board of directors
after consultation with outside legal counsel, the failure to so disclose would
be inconsistent with its fiduciary obligations to stockholders under applicable
law. The Merger Agreement also provides, that, prior to the time at which
Purchaser shall have accepted Shares for payment pursuant to the Offer and to
the extent that the board of directors determines in good faith (after
consultation with outside legal counsel) that not to do so would be inconsistent
with its fiduciary duties to stockholders under applicable law, (x) the board of
directors on behalf of the Company may, in response to an unsolicited bona fide
written Acquisition Proposal, make such inquiries of the Third Party making such
unsolicited bona fide written Acquisition Proposal as may be necessary to inform
itself of the particulars of the Acquisition Proposal and, if the board of
directors reasonably believes that such Acquisition Proposal may constitute a
Superior Proposal, furnish information or data (including, without limitation,
confidential information or data) relating to the Company or its subsidiaries
to, and participate in negotiations with, the Third Party making such
unsolicited bona fide written Acquisition Proposal and (y) following receipt of
a Superior Proposal, the board of directors may withdraw or modify its
recommendation relating to the Offer or the Merger if the board of directors
determines in good faith after consultation with outside legal counsel that
failure to take such action would be inconsistent with its fiduciary duties to
stockholders under applicable law. Subject to the Company's right to terminate
the Merger Agreement, nothing in the Merger Agreement and no action taken by the
board of directors pursuant to the foregoing provision will permit the Company
to enter into any agreement or undertaking providing for any transaction
contemplated by an Acquisition Proposal for so long as the Merger Agreement
remains in effect.
"Acquisition Proposal" means a proposal for either (i) a transaction
pursuant to which any person (or group of persons) other than the Parent or its
affiliates (a "Third Party") would acquire 25% or more of the outstanding shares
of the Common Stock of the Company pursuant to a tender offer or exchange offer
or otherwise, (ii) a merger or other business combination involving the Company
pursuant to which any Third Party would acquire 25% or more of the outstanding
shares of the Common Stock of the Company or of the entity surviving such merger
or business combination, (iii) any other transaction pursuant to which any Third
Party would acquire control of assets (including for this purpose the
outstanding equity securities of subsidiaries of the Company, and the entity
surviving any merger or business combination including any of them) of the
Company having a fair market value equal to 25% or more of the fair market value
of all the assets of the Company immediately prior to such transaction, (iv) any
public
29
announcement by a Third Party of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing, (v) a self tender
offer, or (vi) any transaction subject to Rule 13(e)-3 under the Exchange Act.
The Merger Agreement clarifies that no Acquisition Proposal received by the
Company following the date of the Merger Agreement will be deemed to have been
solicited by the Company or any of its officers, directors, employees,
representatives and agents (including, without limitation, any investment
banker, attorney or accountant retained by the Company) in violation of the
non-solicitation provisions of the Merger Agreement solely by virtue of the fact
that the person or entity making such Acquisition Proposal made an Acquisition
Proposal prior to the date of the Merger Agreement or the fact that the Company
or any of its officers, directors, employees, representatives and agents
(including, without limitation, any investment banker or attorney retained by
the Company) solicited such Acquisition Proposal prior to February 29, 2000.
"Superior Proposal" means an Acquisition Proposal that (i) is not
subject to any financing contingencies or is, in the good faith judgment of the
board of directors after consultation with a nationally recognized financial
advisor, reasonably capable of being financed and (ii) the board of directors
determines in good faith, based upon such matters as it deems relevant,
including an opinion of a nationally recognized financial advisor, would, if
consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the Offer and the Merger.
The Merger Agreement also provides that the Company shall, prior to
providing any information to or entering into discussions with any person in
connection with an Acquisition Proposal, receive from such person an executed
confidentiality agreement in reasonably customary form, notify Parent orally and
in writing of any Acquisition Proposal (including, without limitation, the
material terms and conditions thereof and the identity of the person making it)
or any inquiries indicating that any person is considering making or wishes to
make an Acquisition Proposal, as promptly as practicable (but in no case later
than 24 hours) after its receipt thereof, and provide Parent with a copy of any
written Acquisition Proposal, and shall thereafter inform Parent on a prompt
basis of (i) any material changes to the terms and conditions of such
Acquisition Proposal, and shall promptly give Parent a copy of any information
provided to such person which has not previously been provided to Parent and
(ii) any request by any person for nonpublic information relating to its or any
of its subsidiaries' properties, books or records.
The Company also agreed in the Merger Agreement to immediately cease
any existing discussions or negotiations with any person (other than Parent and
Purchaser) conducted theretofore with respect to any of the foregoing. The
Company also agreed not to release any third party from the confidentiality
provisions of any confidentiality agreement to which the Company is a party.
Directors and Officers of the Company Following the Merger
The Merger Agreement provides that promptly upon the purchase by
Purchaser of Shares pursuant to the Offer and from time to time thereafter,
Parent may designate up to such number of directors, rounded up to the next
whole number on the board of directors that equals the product of (i) the total
number of directors on the board of directors (giving effect to the election of
any additional directors as provided herein) and (ii) the percentage that the
number of Shares owned by Purchaser and its affiliates (including any
30
Shares purchased pursuant to the Offer) bears to the total number of outstanding
Shares, and the Company will upon request by Parent, promptly either increase
the size of the board of directors (and will, if necessary, amend the Company's
by-laws to permit such an increase) or use its reasonable best efforts to secure
the resignation of such number of directors as is necessary to enable Parent's
designees to be elected to the board of directors and will cause Parent
designees to be so elected. The Merger Agreement also provides, however, that,
at all times prior to the Effective Time, the Company's board of directors will
include at least two members who are not designees of Parent. Promptly upon
request by Parent, the Company will use its reasonable best efforts to cause
persons designated by Parent to constitute the same percentage as the number of
Parent's designees to the board of directors bears to the total number of
directors on the board of directors on (i) each committee of the board of
directors, (ii) each board of directors or similar governing body or bodies of
each subsidiary of the Company designated by Parent and (iii) each committee of
each such board or body. The Company's obligations to appoint Parent's designees
to the board of directors will be subject to Section 14(f) of the Exchange Act,
and Rule 14f-1 promulgated thereunder.
Following the election or appointment of Parent's designees pursuant to
the foregoing paragraph and prior to the Effective Time, any amendment of the
Merger Agreement or any amendment to the articles of incorporation or by-laws of
the Company inconsistent with the Merger Agreement, any termination of the
Merger Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Parent or Purchaser,
any waiver of any of the Company's rights under the Merger Agreement or any
other action by the Company under or in connection with the Merger Agreement
that would adversely affect the ability of the stockholders of the Company to
receive the Merger Consideration will require the concurrence of two-thirds of
the directors of the Company then in office who are not designees of Parent.
The executive officers of Purchaser immediately prior to the Effective
Time will be the initial executive officers of the Surviving Corporation.
Indemnification
The Merger Agreement provides that the articles of incorporation and
by-laws of the Surviving Corporation must contain provisions with respect to
indemnification and exculpation at least as protective to any officer or
director as those set forth in the articles of incorporation and by-laws of the
Company, and that those provisions may not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at or prior to
the Effective Time were directors, officers, employees or agents of the Company,
unless such modification is required by law.
The Merger Agreement provides that the Company shall, to the fullest
extent permitted under applicable law or under the Company's articles of
incorporation or by- laws and regardless of whether the Merger becomes
effective, indemnify and hold harmless, and that, after the Effective Time,
Fimalac-U.S. and the Surviving Corporation shall, to the fullest extent
permitted under applicable law or under the Surviving Corporation's articles of
incorporation or by-laws, indemnify and hold harmless, each present and former
director, officer or employee of the Company or any of its
31
subsidiaries against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages and liabilities incurred in connection
with, and amounts paid in settlement of, any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative and
wherever asserted, brought or filed, (x) arising out of or pertaining to the
transactions contemplated by the Merger Agreement or (y) otherwise with respect
to any acts or omissions or alleged acts or omissions occurring at or prior to
the Effective Time, to the same extent as provided in the respective articles of
incorporation or by-laws of the Company or the subsidiaries or any applicable
contract or agreement as in effect on the date of the Merger Agreement, in each
case for a period of six years after the date of the Merger Agreement. The
indemnity agreements of Fimalac- U.S. and the Surviving Corporation extend, on
the same terms to, and inure to the benefit of and are enforceable by, each
person or entity who controls, or in the past controlled, any present or former
director, officer or employee of the Company or any of its subsidiaries.
Conditions to Consummation of the Merger
The Merger Agreement provides that the respective obligations of the
parties to the Merger Agreement to effect the Merger is subject to the
satisfaction or waiver of the following conditions: (i) Purchaser will have
accepted and purchased Shares pursuant to the Offer, (ii) the waiting period
applicable to the consummation of the Merger under the HSR Act will have expired
or been earlier terminated; (iii) no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger will be in effect; and there will not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal;
(iv) there will not be in effect any judgment, decree or order of any
governmental authority, administrative agency or court of competent jurisdiction
prohibiting or limiting Parent from exercising all material rights and
privileges pertaining to its ownership of the Surviving Corporation or the
ownership or operation by Parent or any of its subsidiaries of all or a material
portion of the business or assets of Parent or any of its subsidiaries, or
compelling Parent or any of its subsidiaries to dispose of or hold separate all
or any material portion of the business or assets of Parent or any of its
subsidiaries (including the Surviving Corporation and its subsidiaries), as a
result of the Merger or the transactions contemplated by the Merger Agreement;
and (v) the Merger will have been approved by the stockholders of the Company,
if and to the extent a vote of the stockholders of the Company is required in
respect of the Merger in accordance with the Illinois Law. In addition, Parent,
Fimalac-U.S. and Purchaser are not required to effect the Merger if the
representations and warranties of the Company set forth in the Merger Agreement
were not true and correct in all material respects when made.
Termination
The Merger Agreement provides that it may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company:
(a) by mutual written consent duly authorized by the boards of
directors or any committee thereof of Parent, Fimalac-U.S.,
Purchaser and the Company;
32
(b) by either Parent or the Company if a court of competent
jurisdiction or governmental authority shall have issued a
nonappealable final order, decree or ruling or taken any other
action having the effect of permanently restraining, enjoining
or otherwise prohibiting the Offer or the Merger (except that
this right to terminate is not available to any party who has
not complied with its obligations set forth in the Merger
Agreement to use reasonable best efforts to take all
appropriate action to do or cause to be done all things
necessary to consummate the Offer and the Merger if such
noncompliance materially contributed to the issuance of any
such order, decree or ruling or the taking of such action);
(c) by either Parent or the Company if (A) as the result of the
failure of any of the Offer Conditions, the Offer shall have
expired or Purchaser shall have terminated the Offer in
accordance with its terms without Purchaser having purchased
any Shares pursuant to the Offer or (B) Purchaser shall have
failed to accept for purchase and pay for Shares pursuant to
the Offer by May 12, 2000 unless such failure by Purchaser is
a result of the receipt by the Company of a bona fide
unsolicited Acquisition Proposal or a request for additional
information under the HSR Act or the failure to obtain any
necessary governmental or regulatory approval, in which case
the date by which Purchaser shall accept for purchase and pay
for Shares shall be extended to June 30, 2000 (except that
this right to terminate is not available to any party whose
breach or failure to fulfill any obligation under the Merger
Agreement has been the cause of or resulted in any of the
circumstances described in clauses (A) and (B) before such
dates);
(d) by Parent, prior to the purchase of Shares pursuant to the
Offer, if the board of directors shall have (i) withdrawn or
modified in a manner adverse to Parent, Fimalac-U.S. or
Purchaser, or publicly taken a position materially
inconsistent with, its approval or recommendation of the
Offer, the Merger or the transactions contemplated by the
Merger Agreement, (ii) approved, endorsed or recommended an
Acquisition Proposal or (iii) publicly disclosed any intention
to do any of the foregoing;
(e) by the Company, prior to the purchase of Shares pursuant to
the Offer, or the Parent, at any time prior to the Effective
Time, (i) if any representation or warranty of the Company or
Parent, respectively, set forth in the Merger Agreement that
are qualified by reference to materiality shall not be true
and correct when made or any representation or warranty of the
Company or Parent, respectively, set forth in the Merger
Agreement that are not qualified by reference to materiality
shall not be true and correct in all material respects when
made, or (ii) upon a breach of or failure to perform in any
material respect any covenant or agreement on the part of the
Company or Parent, respectively, set forth in the Merger
Agreement except, in each of (i) and (ii) above, where the
failure to perform such covenants or agreements or the failure
of such representations and warranties to be so true and
correct would not have a Material Adverse Effect on the
Company, Parent or the Offer (either (i) or (ii) above being a
"Terminating Breach"); provided however, that, if such
Terminating Breach is curable by the Company or Parent, as the
case may be, through the exercise of its reasonable best
efforts and for so long as the Company
33
or Parent, as the case may be, continues to exercise such
reasonable best efforts, neither Parent nor the Company,
respectively, may so terminate the Merger Agreement, and
provided further that the right to terminate the Merger
Agreement shall not be available to any party whose breach of
or failure to fulfill its obligations under the Merger
Agreement resulted in the failure of any such condition; or
(f) by the Company, following the receipt by the Company after the
date of the Merger Agreement, under circumstances not
involving any breach of the non-solicitation provisions set
forth in the Merger Agreement, of an unsolicited bona fide
Superior Proposal, if the board of directors, after
consultation with outside legal counsel, shall have determined
in good faith that the failure to terminate the Merger
Agreement would be inconsistent with its fiduciary duties to
the Company's stockholders under applicable law; provided that
(i) the Company has complied with the non-solicitation
provisions of the Merger Agreement, including the notice
provisions therein, (ii) such termination shall only be
effective if the Company enters into a definitive agreement
providing for the transactions contemplated by such
Acquisition Proposal immediately following such termination;
(iii) the board of directors shall have given Parent at least
two business days prior written notice of its determination to
so terminate the Merger Agreement and shall have afforded
Parent a reasonable opportunity within such two business
day-period to amend its Offer; and (iv) the Company pays
Parent the $16 million (plus up to $2 million in expenses)
termination fee in accordance with the provisions of the
Merger Agreement.
Fees and Expenses
Except as otherwise set forth in the Merger Agreement, all fees and
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 Merger is consummated.
OTHER MATTERS
Conduct of the Business of the Company After the Merger
It is expected that, initially following the Merger, the business and
operations of the Company will be continued by the Surviving Corporation
substantially as they are currently being conducted. The directors of Purchaser
will be the initial directors of the Surviving Corporation, and the executive
officers of the Purchaser will be the initial executive officers of the
Surviving Corporation.
Parent intends to conduct a detailed review of the Company and its
assets, corporate structure, capitalization, operations, policies, management
and personnel. After such review, Parent will determine what actions or changes,
if any, would be desirable in light of the circumstances which then exist,
including steps to integrate the operations of the Surviving Corporation and the
operations of Fitch IBCA. In parallel, Parent plans to give consideration to any
potential avenues that may be open for further strengthening the
34
Company's marketing and financial position, including through possible
alliances, or partnership or joint venture arrangements with third parties.
As a result of the Offer, the Shares are no longer quoted on the New
York Stock Exchange and trading information is no longer available. Parent and
Purchaser intend to cause the Company to make an application for termination of
registration of the Shares under the Securities Exchange Act of 1934, as
amended, as soon as possible after the Shares are then eligible for such
termination. In such event, there will be no publicly traded Shares outstanding.
Regulatory Matters
GENERAL. Except as described below, based on a review of publicly
available filings by the Company with the SEC and other publicly available
information concerning the Company, Purchaser is not aware of any license or
regulatory permit that appears to be material to the business of the Company and
that might be adversely affected by Parent's acquisition of the Company pursuant
to the Merger, or of any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of the Company by Parent
pursuant to the Merger. Should any such approval or other action be required, it
is presently contemplated that such approval or action would be sought, except
as described below under "State Takeover Laws." There can be no assurance that
any such approval or other action, if required, would be obtained without
substantial conditions or that adverse consequences would not result to the
Company's business or that certain parts of the Company's business would not
have to be disposed of in the event that such approvals were not obtained or
such other actions were not taken in order to obtain any such approval or other
action.
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of Illinois. In general, Section 11.75 prevents an "interested
stockholder" (including a person who owns or has the right to acquire 15% or
more of the outstanding voting shares of a corporation) from engaging in a
"business combination" (defined to include mergers and certain other actions
with an Illinois corporation) for a period of three years following the date
such person became an interested stockholder unless, among other things, the
"business combination" is approved by the board of directors of such corporation
prior to such date. The board of directors of the Company approved the Merger on
March 6, 2000 and on April 12, 2000. Accordingly, Section 11.75 is inapplicable
to the Merger.
The Company and certain of its subsidiaries conduct business in a
number of states throughout the United States, some of which have adopted laws
and regulations applicable to offers to acquire shares of corporations that are
incorporated or have substantial assets, stockholders and/or a principal place
of business in such states. In EDGAR V. MITE CORP., the Supreme Court of the
United States held that the Illinois Business Takeover Statute, which involved
state securities laws that made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and was therefore
unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA, however, the
Supreme Court of the United States held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target
35
corporation without prior approval of the remaining stockholders, provided that
such laws were applicable only under certain conditions, in particular, that the
corporation has a substantial number of stockholders in and is incorporated
under the laws of such 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 applied 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.
Neither Parent nor Purchaser has determined whether any other state
takeover laws and regulations will by their terms apply to the Merger, and,
except as set forth above, neither Parent nor Purchaser has presently sought to
comply with any state takeover statute or regulation. Parent and Purchaser
reserve the right to challenge the applicability or validity of any state law or
regulation purporting to apply to the Merger. In the event it is asserted that
one or more state takeover statutes is applicable to the Merger and an
appropriate court does not determine that such statute is inapplicable or
invalid as applied to the Merger, Parent or Purchaser might be required to file
certain information with, or to receive approval from, the relevant state
authorities, and Purchaser might be delayed in consummating the Merger.
ANTITRUST IN THE UNITED STATES. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") 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 and the
FTC and certain waiting period requirements have been satisfied. Because Parent
already owns more than 50% of the voting securities of the Company, the
acquisition of the remaining voting securities of the Company pursuant to the
Merger is exempt from the notification and waiting period of the HSR Act.
Dissenters' Rights
The stockholders of the Company are entitled to dissent and obtain
payment for their shares (also referred to herein as "appraisal rights") under
Section 11.65 of the Illinois Law ("Section 11.65") as to Shares owned by them.
The procedure for asserting such appraisal rights is set forth below and is set
forth in detail in Section 11.70 of the Illinois Law ("Section 11.70"). Sections
11.65 and 11.70 are reprinted in their entirety in Exhibit B. All references in
this summary to a "stockholder" are to the record holder of the Shares as to
which appraisal rights are asserted. A person having a beneficial interest in
Shares that are held of record in the name of another person, such as a broker
or nominee, must act promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect whatever appraisal
rights the beneficial owner may have.
The following summary is not a complete statement of the law relating
to appraisal rights and is qualified in its entirety by reference to Exhibit B.
If you wish to exercise your statutory appraisal rights or wish to preserve the
right to do so, you should carefully
36
review this summary and Exhibit B because failure to comply strictly with the
procedures set forth in the statute will result in the loss of your appraisal
rights.
Under Section 11.70, a stockholder may assert dissenters' rights only
if he or she sends to the Company before the vote at the special meeting a
written demand for payment for his or her shares and the stockholder does not
vote in favor of the Merger. A vote against the Merger will not, in itself,
satisfy the notice requirements with respect to dissenters' rights. Pursuant to
Section 11.65, a stockholder entitled to dissent and obtain payment for his or
her Shares may not challenge the corporate action creating his or her
entitlement unless such action is fraudulent or constitutes a breach of a
fiduciary duty owed to the stockholder.
In accordance with Section 11.70, the Company is required to mail to
each holder of Shares as of the record date (other than the Purchaser) notice
that such stockholder is entitled to dissenters' rights for their Shares and the
procedure to dissent (the "Notice"). The Notice of Special Meeting of
Stockholders to be held on June 1, 2000 and this Information Statement is
intended to provide the Notice. Prior to or in connection with delivering such
Notice, the Company is required to furnish to the stockholders material
information with respect to the Merger that will objectively enable a
stockholder to determine whether or not to exercise his or her appraisal rights.
This Information Statement is intended to provide that information.
A stockholder may assert its dissenters' rights only if he or she
delivers to the Company before the vote on the Merger Agreement is taken at the
Special Meeting a written demand for payment of his or her shares if the Merger
is consummated (the "Payment Demand").
Within 10 days after the date on which the Merger is effective or 30
days after the stockholder delivers to the Company the Payment Demand, whichever
is later, the Company will send each stockholder who has delivered a Payment
Demand a statement setting forth the opinion of the Company as to the estimated
fair value of the Shares, certain financial statements of the Company and a
commitment by the Company to pay for the Shares at the estimated fair value upon
transmittal to the Company of the certificates representing the Shares. "Fair
value", with respect to a dissenters' shares, means the value of the Shares
immediately before the consummation of the Merger excluding any appreciation or
depreciation in anticipation of the Merger, unless exclusion would be
inequitable. Section 11.70 sets forth the procedures to be followed in the event
that a stockholder does not agree with the opinion of the Company as to the
estimated fair value of the Shares. See Exhibit B.
Financing
Purchaser estimates that the total amount of funds required to purchase
all Shares validly tendered pursuant to the Offer, to consummate the Merger and
to pay all related fees and expenses will be approximately US$531.5 million.
Purchaser and Parent expect to obtain the financing partially from Parent's
internal resources and also from borrowings under the facilities described
below.
37
Parent has received commitments for financing that will be sufficient
to purchase the tendered Shares, consummate the Merger and pay related costs and
expenses and to refinance certain existing indebtedness of Parent and its
subsidiaries.
Pursuant to a commitment letter, dated March 6, 2000, Credit Agricole
Indosuez and Credit Lyonnais (collectively, the "Arrangers") have severally
committed to provide secured credit facilities (the "Credit Facilities") in the
aggregate amount of e1,155 million, and the Arrangers have agreed to arrange and
syndicate the Credit Facilities to a group of financial institutions.
The Credit Facilities will be comprised of (i) a e265 million
amortizing term loan facility (the "A Term Loan") and (ii) a e585 million
amortizing term loan facility (together with the A Term Loan, the "Term Loans")
and (iii) a e305 million revolving credit facility (the "Revolving Credit
Facility"). The borrowers under the Term Loans are expected to be Parent or
Purchaser in an allocation to be agreed with the Arrangers. Parent will be the
borrower under the Revolving Credit Facility.
The Term Loans will bear interest at a rate equal to the aggregate of
the applicable Euro interbank offered rate ("EURIBOR") (in the case of a Term
Loan in Euros) or US dollar London interbank offered rate ("USD LIBOR") (in the
case of a Term Loan in US dollars) for the applicable interest period (such
interest period to be of one, two, three or six months, as selected by the
borrowers) and a margin originally equal to 1.90%. The Revolving Credit Facility
will bear interest at a rate equal to the aggregate of the applicable EURIBOR
(in the case of a revolving loan in Euros) or USD LIBOR (in the case of a
revolving loan in US dollars) for the duration of the revolving loan selected by
the borrower and a margin originally equal to 1.90%. The foregoing margins will
be subject to semi-annual downward adjustments to as low as 0.7%, depending upon
achievement of certain performance criteria by Parent.
Certain fees will be payable by Parent in connection with the Credit
Facilities, including, without limitation, (i) arrangement fees, (ii) agency
fees and (iii) commitment fees.
Expenses of the Transaction
As a result of the proposed acquisition of the Company by Parent, the
Company will incur various costs, currently estimated at approximately
$1,470,000 in connection with consummating the Merger. These costs consist of
approximately $400,000 of legal and accounting fees and costs, approximately
$20,000 for printing costs, filing fees, and expenses associated with the
Special Meeting, and approximately $1,050,000 of advisory fees payable to P.J.
Solomon as financial advisory (inclusive of out-of-pocket expenses). The exact
timing, nature and amount of these costs are subject to change. See "OPINION OF
P.J. SOLOMON" and "FEES PAYABLE TO P.J. SOLOMON" for a description of the fees
to be paid to P.J. Solomon in connection with its engagement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
38
The Merger Agreement includes provisions relating to the
indemnification of certain officers and directors and employees of the Company
and its subsidiaries. See "THE MERGER AGREEMENT -- Indemnification".
Certain members of the board of directors or executive officers of the
Company may own Shares of the Company. See "SECURITY OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY".
In particular, the Merger Agreement provides that, on the date on which
Shares are purchased pursuant to the Offer, each Stock Option will become
exercisable. At the Effective Time, each Stock Option will be converted into the
right to receive the product of (i) the number of Shares subject to such stock
option multiplied by (ii) the excess of the Merger Consideration over the
exercise price per Share of such option.
Members of the board of directors of the Company at the time the Offer
and the Merger were approved on March 6, 2000, will collectively receive in
respect of options to purchase Shares held by them an aggregate of approximately
$11.1 million (of this amount, Mr. McCarthy is entitled to receive approximately
$4.5 million, Mr. Maffei is entitled to receive approximately $1.7 million, Mr.
Meigs is entitled to receive approximately $2.8 million, Mr. Ingham is entitled
to receive approximately $1.9 million and Mr. Westerlund is entitled to receive
approximately $270,000). Executive officers of the Company (including Messrs.
McCarthy and Maffei) will collectively receive in respect of options to purchase
Shares held by them an aggregate of $17.9 million. See "THE MERGER AGREEMENT --
Company Stock Options" and "SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY".
The Company entered into Severance Protection Agreements with each of
the executive officers of the Company in 1994 (1999 in the case of Mr. Paul
Taylor) providing them with severance compensation equal to 2.9 times their
annual salary and bonus in the event their employment is terminated for
specified reasons within 36 months following a change in control of the Company
or in the event the executive officer terminates his employment for any reason
during the 60-day period commencing on the first anniversary of a change in
control of the Company.
FEES PAYABLE TO P.J. SOLOMON
As compensation for its services as financial advisor to the Company,
the Company has agreed to pay P.J. Solomon the following amounts: (i) a
retention fee of $100,000, (ii) $200,000 for rendering an opinion as to the
fairness, from a financial point of view, of the consideration to be received in
the Offer and the Merger by the holders of Shares and (iii) $700,000 upon
consummation of the Offer and Merger. The Company has also agreed to reimburse
P.J. Solomon for reasonable out-of-pocket expenses, including reasonable fees,
disbursements and other charges of its legal counsel, and to indemnify P.J.
Solomon and related parties against certain liabilities, including liabilities
under the federal securities laws, arising out of P.J. Solomon's engagement. See
"OPINION OF P.J. SOLOMON".
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
39
The following table sets forth information as to beneficial ownership of Shares
of each person who has been since the last fiscal year or currently is a
director or executive officer of the Company as of April 14, 2000.
Name of Beneficial Shares Beneficially
Owner Owned (1) Percent of Shares
----- --------- -----------------
Marc Ladreit de 4,495,279 (2) 96.5%
Lacharriere
Veronique Morali 0 /
Robin Monro-Davies 0 /
Stephen Joynt 0 /
Paul J. McCarthy 70,000 *
Philip T. Maffei 34,000 *
Milton L. Meigs 34,192 *
Jonathan Ingham 24,872 *
Robert N. Westerlund 7,116 *
Ernest T. Elsner 75,950 *
Peter J. Stahl 39,200 *
Paul G. Taylor 47,200 *
Current and former 4,827,809 96.8%
directors and executive
officers as a group
* less than 1%
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act. Accordingly, a beneficial owner of a security includes
any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares the power to vote such
security or the power to dispose of such security, or who has the right to
acquire beneficial ownership of a security through any contract or arrangement,
including the exercise of an option. All Shares beneficially owned by each
director or executive officer of the Company (except for Mr. Ladreit de
Lacharriere) are Shares that could be acquired through the exercise of Stock
Options.
(2) Marc Ladreit de Lacharriere indirectly controls FSA Acquisition Corp. and
Fitch IBCA, Inc., and is therefore deemed to beneficially own the Shares owned
directly by Fitch IBCA, Inc. and FSA Acquisition Corp.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
40
The following table sets forth information as to beneficial ownership of Shares
of all persons known to the Company to beneficially own 5% or more of any class
of voting stock of the Company as of April 14, 2000.
Name and Address of Shares Beneficially Percent of
Beneficial Owner Owned (1) Shares
- ---------------- --------- ------
FSA Acquisition Corp., 4,495,179 96.5%
One State Street Plaza
New York, NY 10004, USA
Fitch IBCA, Inc. 4,495,279 (2) 96.5%
One State Street Plaza
New York, NY 10004, USA
Fimalac, Inc. 4,495,279 (3) 96.5%
97, rue de Lille
75007 Paris, France
Fimalac Communication S.A. 4,495,279 (3) 96.5%
97, rue de Lille
75007 Paris, France
Minerais & Engrais S.A. 4,495,279 (3) 96.5%
97, rue de Lille
75007 Paris, France
Fimalac S.A., 4,495,279 (3) 96.5%
97, rue de Lille
75007 Paris, France
Fimalac et Cie, 4,495,279 (3) 96.5%
97, rue de Lille
75007 Paris, France
Fimalac Participations 4,495,279 (3) 96.5%
c/o Fimalac S.A.
97, rue de Lille
75007 Paris, France
Marc Ladreit de Lacharriere, 4,495,279 (3) 96.5%
c/o Fimalac S.A.
97, rue de Lille
75007 Paris, France
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act. Accordingly, a beneficial owner of a security includes
any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares the power to vote such
security or the power to dispose of such security.
41
(2) Fitch IBCA, Inc. directly controls FSA Acquisition Corp. and is therefore,
deemed to beneficially own the Shares owned by FSA Acquisition Corp. Fitch IBCA,
Inc. also directly owns 100 Shares.
(3) Each of Fimalac, Inc., Fimalac Communication S.A., Minerais & Engrais S.A.,
Fimalac S.A., Fimalac et Cie, Fimalac Participations and Marc Ladreit de
Lacharriere are deemed to beneficially own the Shares owned by FSA Acquisition
Corp. and Fitch IBCA, Inc. due to the direct or indirect control of FSA
Acquisition Corp. and Fitch IBCA, Inc. by each of them.
TRANSACTIONS BETWEEN PARENT AND THE COMPANY
There were no negotiations, transactions or material contacts during the past
two years between the Company (including its subsidiaries) and the Parent or its
affiliates other than those disclosed in this Information Statement. There is no
present or proposed material agreement, arrangement, understanding or
relationship between the Purchaser or any of its executive officers, directors,
controlling persons or subsidiaries and the Company or any of its executive
officers, directors, controlling persons or subsidiaries other than those
disclosed in this Information Statement.
ACCOUNTING TREATMENT
The acquisition of the Company by Parent in the Merger will be treated
as a "purchase" under U.S. generally accepted accounting principles.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can read and copy any materials that we file with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W. Washington,
D.C. 20549; the SEC's regional offices located at Seven World Trade Center, New
York, New York 10048 and at 500 West Madison Street, Chicago, Illinois 60661.
You can obtain information about the operation of the SEC's Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web site
that contains information we file electronically with the SEC, which you can
access over the Internet at http://www.sec.gov. Copies of these materials may
also be obtained by mail from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Washington, D.C., 20549 at prescribed rates.
By order of the board of directors
/s/ Marie Becker
----------------
Marie Becker, Secretary
Dated: May 11, 2000
42
LIST OF EXHIBITS
Exhibit A Agreement and Plan of Merger, dated as of March 6, 2000, among
the Company, Parent, Fimalac-U.S. and Purchaser, as amended by
Amendment No. 1, dated as of May 4, 2000.
Exhibit B Sections 11.65 and 11.70 of the Illinois Business Corporation
Act of 1983
Exhibit C Opinion of P.J. Solomon dated as of March 6, 2000