SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
CHECK THE APPROPRIATE BOX:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d) (2))
[ ] Definitive Information Statement
ANCHOR PACIFIC UNDERWRITERS, INC.
(Name of Registrant As Specified in Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No Fee Required.
[ ] 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:
N/A
2) Aggregate number of securities to which transaction applies: N/A
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth in
the amount on which the filing fee is calculated and state
how it was determined): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
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ANCHOR PACIFIC UNDERWRITERS, INC.
1800 SUTTER STREET, SUITE 400
CONCORD, CA 94520
NOTICE OF STOCKHOLDER ACTION IN LIEU OF SPECIAL MEETING
TO THE STOCKHOLDERS
OF ANCHOR PACIFIC UNDERWRITERS, INC.
This Information Statement is furnished to the stockholders of Anchor
Pacific Underwriters, Inc. (the "Company") in connection with the following
corporate action approved by the written consent of the stockholders of the
Company which own sufficient voting securities of the Company to approve such
action:
An amendment to Article FOURTH of the Restated
Certificate of Incorporation of the Company to increase
the number of authorized shares of common stock, par
value $.02 per share, of the Company from 16,000,000
shares to 50,000,000 shares, and to increase the number
of authorized shares of preferred stock, par value $.02
per share, of the Company from 2,000,000 shares to
2,500,000 shares.
We are not asking you for a proxy and you are requested not to send us a
proxy. Your vote or consent is not requested or required to approve the above
amendment. This Information Statement is provided solely for your information.
This Information Statement also serves as the notice required by Section 228 of
the Delaware General Corporation Law of the taking of a corporate action without
a meeting by less than unanimous written consent of the stockholders of the
Company.
By Order of the Board of Directors
Carol Haynosch
Secretary
April ___, 2000
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INFORMATION STATEMENT
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GENERAL INFORMATION
This Information Statement is furnished by Anchor Pacific Underwriters,
Inc., a Delaware corporation (the "Company"), in connection with the following
corporate action approved by stockholders of the Company which own sufficient
voting securities of the Company to approve such actions:
An amendment to Article FOURTH of the Restated
Certificate of Incorporation of the Company to increase
the number of authorized shares of common stock, par
value $.02 per share, of the Company from 16,000,000
shares to 50,000,000 shares, and to increase the number
of authorized shares of preferred stock, par value $.02
per share, of the Company from 2,000,000 shares to
2,500,000 shares.
As more fully described in this Information Statement, the foregoing
corporate action is being taken in order to, among other things, allow the
Company to issue additional shares of its common stock, par value $.02 per share
(the "Common Stock") and additional shares of its preferred stock, par value
$.02 per share (the "Preferred Stock").
There are currently 4,710,055 shares of Common Stock issued and
outstanding and 3,908,579 shares of Common Stock reserved for issuance upon
exercise options, warrants and similar rights to acquire shares of Common Stock.
On March 9, 2000, the Company entered in to a Securities Purchase Agreement (the
"Purchase Agreement") with Ward North America Holding, Inc., a California
corporation ("Ward"), pursuant to which Ward purchased from the Company
1,853,300 shares of Series A Preferred Stock, par value $.02 (the "Series A
Preferred"). Each share of Series A Preferred is convertible into ten (10)
shares of Common Stock. In addition, Ward previously had purchased $500,000 of
convertible debt instruments in the form of a Series E Convertible Debentures
(the "Series E Debentures"), which are convertible, subject to the terms and
conditions thereof, into 1,000,000 shares of Common Stock. The Series E
Debentures also included a warrant to acquire 300,000 shares of Common Stock at
$.50 per share. In connection with the equity and debt financing provided by
Ward, a $1,000,000 convertible loan facility was also made available to the
Company (the "Convertible Loan"). The Convertible Loan is convertible into
shares of Series A Preferred, which, in turn, may be converted into shares of
Common Stock.
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As is more fully described in this Information Statement, the foregoing
corporate action was taken in order to, among other reasons, allow the Company
to reserve a sufficient number of shares of Common Stock for issuance upon
conversion of shares of Series A Preferred, the conversion of the Series E
Debentures and the exercise of warrants. If the number of authorized shares of
Common Stock were not increased, there could be instances where not enough
shares of Common Stock would be available for issuance upon conversion of shares
of Series A Preferred, the conversion of the Series E Debentures, or the
exercise of warrants. See "The Transaction". In reviewing the equity and debt
financing provided by Ward, stockholders should give attention to the matters
set forth under the caption "Certain Considerations" commencing on page 10 of
this Information Statement.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The approximate date upon which this Information Statement will first be
sent to stockholders is April 21, 2000.
THE ACTIONS DESCRIBED HEREIN HAVE BEEN APPROVED BY
STOCKHOLDERS OF THE COMPANY WHICH OWN SUFFICIENT VOTING
SECURITIES TO APPROVE SUCH ACTIONS. YOUR VOTE OR CONSENT
IS NOT REQUESTED OR REQUIRED TO APPROVE SUCH ACTION.
THIS INFORMATION STATEMENT IS PROVIDED SOLELY FOR YOUR
INFORMATION
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TABLE OF CONTENTS
Page
INFORMATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 1
General Information . . . . . . . . . . . . . . . . . . . . . . . . 1
AMENDMENT TO THE CERTIFICATE OF INCORPORATION. . . . . . . . . . . . . . . 4
The Amendment. . . . . . . . . .. . . . . . . . . . . . . . . . . . . 4
Reason for Adoption . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Transaction - Potential Advantages and Disadvantages. . . . . . . 5
THE TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Factors Considered by the Board of Directors. . . . . . . . . . . . . 8
Certain Considerations. . . . . . . . . . . . . . . . . . . . . . . . 10
Change in Control of Company. . . . . . . . . . . . . . . . . . . . . 11
No Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . 11
Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . . . 11
CERTAIN INFORMATION CONCERNING THE COMPANY . . . . . . . . . . . . . . . . 12
Description of Common Stock . . . . . . . . . . . . . . . . . . . . . 12
Information Relating to the Company's Voting Securities . . . . . . . 12
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AMENDMENT TO CERTIFICATE OF INCORPORATION
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THE AMENDMENT
The Board of Directors of the Company (the "Board of Directors") has
unanimously approved the following amendment to the Company's Certificate of
Incorporation, as amended, and a majority of the Company's Common Stock
shareholders have provided their written consent to such amendment:
NOW, THEREFORE, BE IT RESOLVED, that Article FOURTH of the Corporation's
Certificate of Incorporation be amended to read as follows:
"This corporation is authorized to issue two classes of
shares designated, respectively, 'Common Stock' and
'Preferred Stock.' The authorized number of shares of
Common Stock is 50,000,000 and the authorized number of
shares of Preferred Stock is 2,500,000. The stock,
whether Preferred Stock or Common Stock, shall have a
par value of $.02 per share."
As of March 9, 2000, the Company had 4,710,055 shares of Common Stock
outstanding. James R. Dunathan, Earl Wiklund, Steve Gonsalves, Donald Putnam,
James Wieking, Audie Dudum, Lawrence Hayes, R. William MacCullough, Michael
Sanford and Guarantee Life Insurance (collectively, the "Consenting
Shareholders"), who hold in the aggregate 2,438,743 shares of Common Stock,
which represents approximately 51.78% of the issued and outstanding shares of
Common Stock of the Company, consented to the Amendment. On such date, James
Dunathan served as the President, Chief Executive Officer and a Director of the
Company and Earl Wiklund served as the Chief Financial Officer, Senior Vice
President and a Director of the Company. Audie Dudum was the Chairman of the
Board of Directors and Messrs. Gonsalves, Putnam, Wieking, Hayes, MacCullough
and Stanford served as Directors of the Company.
ACCORDINGLY, THE VOTE OR CONSENT OF THE OTHER
STOCKHOLDERS OF THE COMPANY IS NOT REQUESTED OR REQUIRED
TO APPROVE SUCH AMENDMENT.
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REASON FOR ADOPTION
As of the date of this Information Statement, there are 4,710,055 shares
of Common Stock issued and outstanding. The Company's Certificate of
Incorporation, as amended, currently authorizes a maximum of 16,000,000 shares
of Common Stock and 2,000,000 shares of Preferred Stock. The purposes of this
amendment are to increase the authorized shares of Common Stock from 16,000,000
to 50,000,000 shares are to provide sufficient available shares of Common Stock:
(i) to permit the Company to issue shares of Common Stock or Preferred Stock to
Ward upon the conversion of certain securities issued or indebtedness incurred
in connection with the Transaction (as defined below); and (ii) for issuance in
any private or public offerings, any acquisitions or any other issuances of
shares of Common Stock or Preferred Stock by the Company as they may be
authorized pursuant to the actions of the Board of Directors. See "The
Transaction."
THE TRANSACTION - POTENTIAL ADVANTAGES AND DISADVANTAGES
The amendment to the Certificate of Incorporation was approved in
connection with the equity and debt financing (the "Transaction") provided to
the Company by Ward pursuant to the terms of a Securities Purchase Agreement
dated March 9, 2000 (the "Purchase Agreement"), as more fully described below
under the caption "The Transaction." In connection with its approval of the
Transaction, the Board of Directors considered and reviewed various factors,
including, without limitation, the financial position of the Company, the
Company's results of operations, the prospects for alternative transactions, the
possible synergistic and expansion opportunities associated with the
Transaction, and the ability of the Company to secure alternative equity or debt
financing, either through perspective investors or strategic alliances. In
reaching its decision to approve the Transaction, the Board of Directors
identified the following potential benefits of the Transaction:
The determination that the Transaction is fair, from a
financial point of view, to the Company's stockholders.
The determination that, as a result of such refinancing,
the Company would remedy outstanding defaults with
respect to its borrowings and would not be at risk with
respect to any acceleration of its outstanding
borrowings and foreclosure on the assets of the Company
pursuant to security interests granted by the Company in
connection with such borrowings.
The belief that it is unlikely that the Company would
have adequate capital and other resources if it did not
complete the Transaction or an alternative transaction,
based on the then existing financial condition of the
Company.
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The belief that the Company will be able to benefit
through its association with Ward, including the
availability of increased financial resources and an
ability to attract additional capital in the future.
The belief that Ward could offer strategic relationships
and enhance the Company's ability to market its products
and services to additional customers.
In the course of its deliberations, the Board of Directors also reviewed
and considered several possible risks associated with the Transaction, including
the following:
The Board of Directors recognized that as a result of
the Transaction, Ward could determine the outcome of the
election of the directors and thereby control the
Company.
Under Delaware General Corporate Law, the Company's
stockholders were not entitled to appraisal rights in
connection with the Transaction.
For additional information with respect to the foregoing factors, see "The
Transaction - Factors Considered by the Board of Directors" and "The Transaction
- - Certain Considerations."
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THE TRANSACTION
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GENERAL
On November 29, 1999, the Company and Ward executed a letter of intent
whereby Ward would acquire a controlling ownership interest in the Company and
nominees of Ward would assume a majority of the seats on the Company's Board of
Directors. The November 29, 1999 letter of intent was further modified by the
parties pursuant to a February 18, 2000 binding Letter Agreement that
specifically bound the parties to certain funding and structural commitments.
Effective March 9, 2000, the Company and Ward entered into a Securities
Purchase Agreement ("Agreement") which superseded and replaced in its entirety
the binding Letter Agreement dated February 18, 2000 and letter of intent dated
November 29, 1999. The basic terms of the Agreement provide that Ward would
purchase from the Company a package of debt and equity securities and that it
would make available a $1,000,000 loan facility. The specific securities and
loan facility are described below:
(a) Series E Convertible Debentures (the "Series E Debentures") in the
principal amount of $500,000; paying 10% interest; two year maturity with a
provision that provides for repayment on July 1, 2000, if requested by Ward;
conversion price of $0.50 per share; "Piggyback" registration rights for three
years; for each $5,000 of Series E Debentures acquired, Ward received a five
year warrant to acquire 300,000 shares of the Company's common stock at an
exercise price of $0.50 per share; and subordination provisions that
subordinates the Series E Debentures to the Company's "Senior Debt" (as defined
in the Series E Debentures). The Series E Debentures are superior to all other
debentures of the Company, including without limitation those Series A, B, C and
D Debentures, and shall constitute "Senior Debt" for purposes of those
debentures. As of March 24, 2000, Ward has invested $500,000 in the Series E
Debentures;
(b) a $200,000 bridge loan facility to the Company evidenced by a
promissory note ("Bridge Loan"); bearing interest at the rate of 10% per annum
with a maturity date of July 1, 2000. The principal amount and all accrued
interest under the Bridge Loan were, at the election of Ward, applied toward the
purchase of Series A Convertible Preferred stock, described below;
(c) 1,853,300 shares of Series A Preferred stock ("Series A Preferred")
at a purchase price of $2,000,000, which would constitute 62.6% of
Anchor's common stock on a fully diluted basis; and
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(d) a $1,000,000 convertible loan facility (the "Convertible Loan") which
was made available immediately following the closing of the purchase of the
Series A Preferred. The Convertible Loan shall be convertible, at Ward's option,
into shares of Series A Preferred stock which are further convertible into a
number of shares of common stock, which, when added to the shares of common
stock issued or issuable pursuant to the Series E Debentures (not including the
warrants accompanying the Series E Debentures) and other shares of Series A
Preferred issued to Ward, would constitute 73.5% of the Company's common stock
on a fully-diluted basis following such conversion, assuming the maximum amount
of $1,000,000 was borrowed by the Company pursuant to the Convertible Loan.
Under the terms of the Agreement, Ward agreed that during the 36 month
period following the closing of the Transaction neither Ward nor its affiliates
would make any further acquisitions of the Company's securities unless Ward
first made a tender offer (the "Tender Offer") to buy all of the shares of the
Company's common stock not then owned by Ward or its affiliates at a purchase
price equal to the greater of: (i) $0.80 per share (as adjusted for stock
splits, combinations or dividends with respect to such shares) or (ii) the price
per share determined by assuming the value of the Company to the be equal to the
Company's earnings before income taxes ("EBIT") for the twelve (12) full
calendar months preceding the month in which the offer is made, multiplied by
six (6) and divided by the number of shares outstanding of the Company on a
fully diluted basis.
In connection with Transaction, all of Company's directors resigned with
the exception of James R. Dunathan. Gordon Silverstein, Donald Putnam and R.
William MacCullough resigned on March 9, 2000. Earl Wiklund, Audie Dudum, James
Wieking, Michael Sanford, Lawrence Hayes and Steven Gonsalves resigned on March
14, 2000. As the sole remaining director, Mr. Dunathan appointed Jeffrey S.
Ward, Kevin P. Jasper, Russ A. Whitmarsh, Gerard A.C. Bakker, William Beasley
and John F. Darden to the Board of Directors.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
In connection with approval of the Transaction, the Board of Directors
considered the relative value of the Company, the financial condition of the
Company, the Company's need for additional capital for continued operations, the
potential benefits of the Transaction and the risks of the Transaction to the
Company's existing stockholders. The Board of Directors determined that the
amount paid by Ward to acquire the shares of Common Stock and Series A Preferred
pursuant to the Agreement and the terms and conditions of the Series E
Debentures and the Convertible Loan are fair, from a financial point of view, to
the Company's stockholders.
In early 1999, in an attempt to bolster the Company's deteriorating
financial position, the Board of Directors directed James R. Dunathan to
investigate alternative sources of financing for the Company. In order to fund
operations, the Company continued to issue convertible debt instruments. This
increasing level of indebtedness had important consequences for the Company,
including: (i) cash flow from operations dedicated to payment of principal and
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interest on its indebtedness was not available for capital expenditures or other
purposes; (ii) the Company's level of indebtedness limited its flexibility in
planning for or reacting to changes in its business; and (iii) the Company's
level of indebtedness made it more vulnerable in the event of a downturn in its
business or the economy in general. Had the Company been unable to generate cash
flow from operations or obtain additional financing for debt service
requirements, the Company faced substantial liquidity problems. Under the
circumstances, the Board of Directors determined that the Transaction eliminated
or substantially reduced the likelihood of the foregoing consequences occurring.
The Board of Directors believed that the Company will benefit from its
association with Ward which has prior and current experience in the claims
administration and risk management for general insurance, workers' compensation,
automobile, professional liability and employment practice liability businesses.
In addition to the synergistic benefits, the Board of Directors believed
that the capital contribution would increase the Company's capital base and
that the relationship with Ward would improve the Company's ability to pursue
further expansion opportunities, and thereby enhance the Company's long-term
growth prospects. The Board of Directors believed that it is unlikely that the
Company would have had adequate resources or capital to implement its business
plan if it did not complete the Transaction, based on the then existing
financial condition of the Company.
The Board of Directors also reviewed and considered several possible risks
associated with the Transaction, including, among others, the assumption of debt
and the change in control that resulted from the Transaction. For a description
of such possible risks, see "Certain Considerations" immediately below. Based on
the foregoing considerations as well as those discussed elsewhere herein, the
Board of Directors determined that the terms and conditions contemplated by the
Transaction were fair and in the best interest of the Company and its
stockholders.
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CERTAIN CONSIDERATIONS
In addition to the other information contained in this Information
Statement, the Company's stockholders should be aware of the following risks
related to the Transaction and the Company.
Losses from Operations and Need for Financing. During the past several
years, the Company sustained losses from operations. The Company incurred net
losses of $2,477,971 and $775,330 during the last two fiscal years ended
December 31, 1999 and 1998, respectively. The Company expects to require
additional financing in order to fully implement the Company's business
strategy. To raise such additional financing, the Company may have to seek such
funds through alternative public or private equity or debt financing. Should the
Company raise capital through an equity financing arrangement, the then existing
stockholders may experience substantial additional dilution in their investment
in the Company. Should such alternative financing not be obtained, the Company
may have to decline certain projects where the cost of financing would reduce
the profit to minimal amounts. There is no assurance that any such alternative
financing is available to the Company on competitive terms. At the present time,
there are no agreements, understandings or arrangements with any parties, other
than Ward, with respect to additional financing for the Company.
Competition. The insurance claims administration and service business is
highly competitive and there are many claims administration and service
organizations who actively compete with the Company in every area of its
business. The Company competes directly with national insurance administrators,
insurance companies and health maintenance organizations that market their own
products, through independent agencies, brokers and third-party administrators,
as well as with entities which self insure or sponsor other insurance programs.
Many of these competitors are larger than the Company and have greater
resources. The Company seeks to compete by specializing in specific market
segments, developing specialty products for those markets, and maintaining
relationships with consumers by providing personal service normally associated
with small local businesses, together with the expertise, flexibility and
diversity of products that can only be provided by a larger firm.
No Appraisal Rights. Under the applicable provisions of the Delaware
General Corporation Law, the Company's stockholders are not entitled to any
dissenters' appraisal rights in connection with the Transaction or any other
transaction described in this Information Statement.
No Dividends. Due to sustained losses, the Company has not paid any cash
dividends on the Common Stock, and does not anticipate paying any cash dividends
on the Common Stock in the foreseeable future. Rather, the Company intends to
retain earnings, if any, to provide funds for general corporate purposes and the
expansion of the Company's business. The payment of any future dividends by the
Company will be dependent upon the earnings of the Company, its financial
requirements and other relevant factors.
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Control by Principal Stockholder. Upon conversion of the Series A
Preferred, the Series E Debentures and the Convertible Loan, Ward will own
approximately 74.5% of the issued and outstanding shares of Common Stock. As a
result, Ward is in a position to determine the outcome of the election of
directors and thereby control the Company.
CHANGE IN CONTROL OF COMPANY
A change in control of the Company occurred upon the closing of the
Transaction. See "The Transaction General." As discussed above, Ward is in a
position to determine the outcome of the election of directors and thereby
control the Company.
NO APPRAISAL RIGHTS
Under the applicable provisions of the Delaware General Corporation Law,
the Company's stockholders are not entitled to any dissenters' appraisal rights
in connection with the Transaction or any other transaction described in this
Information Statement.
REGULATORY REQUIREMENTS
The Company is not aware of any federal or state regulatory requirements
that must be complied with or regulatory approval that must be obtained in
connection with the Transaction, other than the filing of: (i) a Certificate of
Amendment to the Company's Certificate of Incorporation pursuant to the
applicable provisions of the Delaware General Corporation Law; (ii) this
Information Statement on Schedule 14C with the SEC; and (iii) an Information
Statement pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder as a result of a change in majority of directors of the
Board of Directors.
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CERTAIN INFORMATION CONCERNING THE COMPANY
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DESCRIPTION OF COMMON STOCK
Holders of the Common Stock are entitled to one vote for each share held
by them of record on the books of the Company in all matters to be voted on by
the Company's stockholders. No cumulative voting of the Common Stock is
permitted. Holders of the Common Stock do not have any conversion, preemptive or
preferential rights with respect to the Common Stock. The holders of the Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available for the payment of
dividends. There are no redemptive or sinking fund provisions applicable to the
Common Stock. The Common Stock is eligible for trading on the Over the Counter
Bulletin Board under the symbol APUX.
INFORMATION RELATING TO THE COMPANY'S VOTING SECURITIES
The outstanding voting securities of the Company include the Common Stock
and the Series A Preferred, which vote on a 10 for 1, as converted basis. As of
March 9, 2000, there were 4,710,055 shares of Common Stock, issued and
outstanding.
ANCHOR PACIFIC UNDERWRITERS, INC.
By: /s/ Carol Haynosch
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Name: Carol Haynosch
Title: Secretary
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