SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14D-9
(Rule 14d-101)
Solicitation/Recommendation Statement Pursuant to Section
14(d)(4) of the Securities Exchange Act of 1934
OLD STONE CORPORATION
---------------------
(Name of Subject Company)
OLD STONE CORPORATION
---------------------
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE AND CUMULATIVE VOTING
CONVERTIBLE PREFERRED STOCK, SERIES B, PAR VALUE $1.00 PER SHARE
----------------------------------------------------------------
(Title of Class of Securities)
680293107 and 680293305
((CUSIP) Number of Class of Securities)
WINFIELD W. MAJOR, EDWARDS & ANGELL,
2700 HOSPITAL TRUST TOWER,
PROVIDENCE, RHODE ISLAND 02903 (401) 274-9200
---------------------------------------------
(Name, Address, and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement)
<PAGE>
Item 1. Security and Subject Company.
The statement relates to the subject company's Common Stock, par value
$1.00 per share and its Cumulative Voting Convertible Preferred Stock, Series B,
par value $1.00 per share. The name of the subject company is Old Stone
Corporation. The address of its principal executive office is 957 Warren Avenue,
East Providence, Rhode Island 02914.
Item 2. Tender Offer of the Bidder.
The tender offer to which this statement relates is the Tender Offer
Statement pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
filed by Manticore Properties, LLC, Gotham Partners, L.P. and Gotham Partners,
II, L.P., with principal executive offices at 100 East 42nd Street, 18th Floor,
New York, NY 10017.
Item 3. Identity and Background.
(a) The name of the person filing this statement is Old Stone Corporation
with a business address of 957 Warren Avenue, East Providence, Rhode Island
02914.
(b) There are no material contracts, agreements, arrangements or
understandings between the subject company or any affiliate thereof and any
executive officer or director of the subject company.
Item 4. The Solicitation or Recommendation.
(a) The subject company is unable to take a position with respect to the
tender offer.
(b) The reasons for the subject company's inability to take a position are
set forth in a letter to shareholders attached hereto as Exhibit A and
incorporated herein by reference.
Item 5. Person Retained, Employed or to be Compensated.
None
Item 6. Recent Transactions and Intent with Respect to Securities.
(a) None
(b) At this time, it is unknown whether any executive officer or director
intends to tender to the bidder, sell or hold securities of the class of
securities being sought by the bidder which are held of record or beneficially
owned by such persons.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) No negotiation is being undertaken or is underway by the subject
company in response to the tender offer which relates to or would result in:
(1) An extraordinary transaction such as a merger or reorganization,
involving the subject company or any subsidiary of the subject company;
(2) A purchase, sale or transfer of a material amount of assets by the
subject company or any subsidiary of the subject company;
(3) A tender offer for or other acquisition of securities by or of the
subject company; or
(4) Any material change in the present capitalization or dividend policy of
the subject company.
(b) There is no transaction, board resolution, agreement in principle, or a
signed contract in response to the tender offer, other than one described
pursuant to Item 3(b) of this statement, which relates to or would result in one
or more of the matters referred to in Item 7(a)(1), (2), (3) or (4).
Item 8. Additional Information to be Furnished.
None
Item 9. Material to be Filed as Exhibits.
(a) A copy of the recommendation letter which is being sent to security
holders in connection with the subject company's recommendation referred to in
Item 4 is attached hereto as Exhibit A.
(b) A copy of the Press Release dated November 25, 1997 issued by the
subject company in connection with the filing of this Schedule and the issuance
of its letter to shareholders is attached hereto as Exhibit B.
EXHIBIT A
OLD STONE CORPORATION
957 Warren Avenue
East Providence, RI 02914
November 26, 1997
Dear Old Stone Corporation Shareholder:
As you may know, Manticore Properties, LLC has recently filed a notice of
offer to purchase any and all shares of Old Stone Corporation Common Stock for
$1.00 per share and Preferred Series B Stock for $4.00 per share with the
Securities and Exchange Commission. If you have not already received the
offering materials concerning this tender offer, you should be receiving them
shortly.
Old Stone Corporation is required by law to send you this notice indicating
its position with respect to the tender offer by Manticore and its affiliates
Gotham Partners, L.P. and Gotham Partners, II, L.P., 100 E. 42nd Street, New
York, NY 10017. We wanted to share with you our position on the tender offer and
to carry out the legal requirement to explain the reasons for this position.
This offer comes at a time when there is considerable speculation about the
outcome of litigation filed by the Corporation and similar companies against the
U.S. government. A more detailed description of the Old Stone case is attached
to this letter. As I am sure you are aware, Old Stone Corporation has remained
in business since the time of the takeover of Old Stone Bank in January, 1993
primarily to prosecute this lawsuit. Our claim arises out of the action the
government took in 1989 that wiped out approximately $80 million of the Bank's
regulatory capital. Were it not for that event, we believe that the Bank would
still be here today and the Bank and the Corporation would be thriving.
Old Stone has pursued the lawsuit actively, but the government has fought
us and the other companies every step of the way. We have retained experienced
counsel in Washington who have been working on this case for over five years -
on a contingency fee basis. In January of 1998 the discovery stage of our case
will begin to go forward, but this is a complex lawsuit and ours is one of over
100 similar cases. Given the current posture of the government, it is difficult
to predict when our case will be decided.
We believe we have a compelling case. However, the government has
considerably greater resources and has embarked on a strategy of delay and
appeal. Because of this uncertainty, we are unable to determine at this time
what the ultimate judgment might mean for the value of our shares today.
Consequently, Old Stone Corporation is unable to take a position with respect to
this offer.
We hope that the background provided in this letter will be useful to you
in making your own decision.
Sincerely,
Bernard V. Buonanno, Jr.
Chairman
<PAGE>
Old Stone Corporation
Legal Proceedings
On September 16, 1992, Old Stone Corporation (the "Corporation") and Old
Stone Bank, a Federal Savings Bank (the "Bank") initiated a lawsuit against the
U.S. Government (the "Government") based upon the Government's breach of the
contracts by which the Corporation acquired Rhode Island Federal S&L and
Citizens Federal S&L of Seattle. The Government breached these contracts
following the enactment of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"). The Government filed an answer denying
liability and asserting a counterclaim against the Corporation for alleged
breach of a net worth maintenance covenant. The Corporation has denied this
counterclaim.
After the Resolution Trust Corporation seized the Bank in January, 1993,
Old Stone Corporation filed an amended complaint solely in its own name. This
amended complaint addressed only the claims of the Corporation, which are
separate and distinct from those of the Bank. Subsequently, the Federal Deposit
Insurance Corporation ("FDIC") intervened in the case to take over the claims of
the Bank and it is now pursuing those claims against the Government. If the FDIC
obtains a recovery for the Bank's claims, much or all of this recovery may
ultimately be returned to the Government.
Earlier this year, the Corporation filed a second amended complaint, again
addressing its separate claims against the Government. This complaint alleges
that, in exchange for the Corporation's agreements to acquire the two troubled
thrifts, the U.S. Government, acting through the Federal Home Loan Bank Board
("FHLBB") and the Federal Savings and Loan Insurance Corporation ("FSLIC"),
agreed to provide the Corporation and the Bank with certain capital credits and
supervisory goodwill and to treat these capital credits and supervisory goodwill
as regulatory net worth of the Bank, both for the purposes of compliance by the
Bank with its regulatory net worth requirements and compliance by the
Corporation with its net worth maintenance obligation.
Following the enactment of FIRREA, the Office of Thrift Supervision ("OTS")
required the Bank to eliminate approximately $80 million of the capital credits
and supervisory goodwill from the Bank's regulatory capital. The OTS then
required the Corporation to raise and contribute additional capital to the Bank.
The second amended complaint alleges that these actions by the OTS constituted
breaches of contract and caused the Corporation substantial damages. Among other
things, the Corporation incurred substantial damages in the process of selling
off valuable assets and subsidiaries to meet the Government's demands that it
raise and contribute capital to the Bank. The Corporation suffered further
damages when the Government seized the Bank and all of its assets, including
approximately $70 million of additional capital which the Corporation had
contributed to the Bank. Finally, the government's breach resulted in the
takeover of the Bank.
Old Stone Corporation's lawsuit is one of about 130 similar cases pending
before the U.S. Court of Federal Claims. These cases are collectively referred
to as the Winstar-related cases. In 1992, the Court of Federal Claims entered
partial summary judgments in three lead cases, ruling that the Government was
liable to the thrift and thrift holding company plaintiffs in these cases for
breach of contract. In 1996, the U.S. Supreme Court upheld these rulings and
returned these three cases to the Court of Federal Claims for a determination of
the amount of the plaintiffs' damages. The Court of Federal Claims is now
conducting a damages trial in the first of these three cases. This trial began
in February 1997 and is now expected to continue until March 1998. The court has
not yet made a determination of the measure or amount of damages in this case.
Depending on the outcome, one or both parties are likely to appeal the court's
determination of damages.
The Court of Federal Claims had previously suspended proceedings in the
remaining Winstar-related cases pending the decision of the Supreme Court in the
three lead cases. Following this decision, the court lifted the suspension, and
plaintiffs in approximately thirty of the remaining cases have now filed motions
for partial summary judgment as to liability. In essentially all of these cases,
the Government has denied that the plaintiffs had enforceable contracts with the
Government and has cross-moved for summary judgment in its own favor. In August
1997, the court held a hearing on the summary judgment motions filed in four of
these cases. The court has not yet ruled on these motions. As part of the August
hearing, the court also heard argument on eleven issues which the Government has
raised in many of the pending cases. The court may issue such rulings at any
time, and any such rulings could affect some or all of the remaining cases.
Old Stone Corporation intends shortly to file a motion for partial summary
judgment as to liability. The Government will have a period of approximately
four months in which to respond to this motion and to file a cross-motion for
summary judgment. There is no fixed date by which the court must rule on these
motions. In January, 1998, the Corporation and the Government will commence a
one-year period of discovery. Unless the Government wins summary judgment, the
case will then be assigned to a trial judge for trial on liability and damages
or on damages alone, depending on the outcome of the Corporation's motion for
partial summary judgment. The Corporation cannot predict when the court will
schedule such a trial or the outcome of such a trial. At any such trial, the
Corporation will have to prove the amount of its damages.
EXHIBIT B
OLD STONE CORPORATION
PRESS RELEASE
November 25, 1997
Contact:
Bernard V. Buonanno, Jr.
Winfield W. Major
401-274-9200
The Board of Directors of Old Stone Corporation has met to review the
Corporation's position with respect to the tender offer filed on November 14,
1997 by Manticore Properties, LLC and affiliated companies.
The Corporation's response to the tender offer is contained in the attached
letter from Old Stone Corporation Chairman Bernard V. Buonanno, Jr. to
shareholders. This letter is being mailed to shareholders in the next few days.
The Corporation is filing a Form 14D-9 immediately with the SEC stating its
position regarding the tender offer and the reasons for taking this position.
Old Stone Corporation is a former savings and loan holding company whose
principal subsidiary, Old Stone Bank, a Federal Savings Bank, was taken over by
the Resolution Trust Corporation in January, 1993. The Corporation's shares of
Common and Preferred Series B stock were delisted from trading by the NASD at
that time.
<PAGE>
OLD STONE CORPORATION
957 Warren Avenue
East Providence, RI 02914
November 26, 1997
Dear Old Stone Corporation Shareholder:
As you may know, Manticore Properties, LLC has recently filed a notice of
offer to purchase any and all shares of Old Stone Corporation Common Stock for
$1.00 per share and Preferred Series B Stock for $4.00 per share with the
Securities and Exchange Commission. If you have not already received the
offering materials concerning this tender offer, you should be receiving them
shortly.
Old Stone Corporation is required by law to send you this notice indicating
its position with respect to the tender offer by Manticore and its affiliates
Gotham Partners, L.P. and Gotham Partners, II, L.P., 100 E. 42nd Street, New
York, NY 10017. We wanted to share with you our position on the tender offer and
to carry out the legal requirement to explain the reasons for this position.
This offer comes at a time when there is considerable speculation about the
outcome of litigation filed by the Corporation and similar companies against the
U.S. government. A more detailed description of the Old Stone case is attached
to this letter. As I am sure you are aware, Old Stone Corporation has remained
in business since the time of the takeover of Old Stone Bank in January, 1993
primarily to prosecute this lawsuit. Our claim arises out of the action the
government took in 1989 that wiped out approximately $80 million of the Bank's
regulatory capital. Were it not for that event, we believe that the Bank would
still be here today and the Bank and the Corporation would be thriving.
Old Stone has pursued the lawsuit actively, but the government has fought
us and the other companies every step of the way. We have retained experienced
counsel in Washington who have been working on this case for over five years -
on a contingency fee basis. In January of 1998 the discovery stage of our case
will begin to go forward, but this is a complex lawsuit and ours is one of over
100 similar cases. Given the current posture of the government, it is difficult
to predict when our case will be decided.
We believe we have a compelling case. However, the government has
considerably greater resources and has embarked on a strategy of delay and
appeal. Because of this uncertainty, we are unable to determine at this time
what the ultimate judgment might mean for the value of our shares today.
Consequently, Old Stone Corporation is unable to take a position with respect to
this offer.
We hope that the background provided in this letter will be useful to you
in making your own decision.
Sincerely,
Bernard V. Buonanno, Jr.
Chairman
<PAGE>
Old Stone Corporation
Legal Proceedings
On September 16, 1992, Old Stone Corporation (the "Corporation") and Old
Stone Bank, a Federal Savings Bank (the "Bank") initiated a lawsuit against the
U.S. Government (the "Government") based upon the Government's breach of the
contracts by which the Corporation acquired Rhode Island Federal S&L and
Citizens Federal S&L of Seattle. The Government breached these contracts
following the enactment of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"). The Government filed an answer denying
liability and asserting a counterclaim against the Corporation for alleged
breach of a net worth maintenance covenant. The Corporation has denied this
counterclaim.
After the Resolution Trust Corporation seized the Bank in January, 1993,
Old Stone Corporation filed an amended complaint solely in its own name. This
amended complaint addressed only the claims of the Corporation, which are
separate and distinct from those of the Bank. Subsequently, the Federal Deposit
Insurance Corporation ("FDIC") intervened in the case to take over the claims of
the Bank and it is now pursuing those claims against the Government. If the FDIC
obtains a recovery for the Bank's claims, much or all of this recovery may
ultimately be returned to the Government.
Earlier this year, the Corporation filed a second amended complaint, again
addressing its separate claims against the Government. This complaint alleges
that, in exchange for the Corporation's agreements to acquire the two troubled
thrifts, the U.S. Government, acting through the Federal Home Loan Bank Board
("FHLBB") and the Federal Savings and Loan Insurance Corporation ("FSLIC"),
agreed to provide the Corporation and the Bank with certain capital credits and
supervisory goodwill and to treat these capital credits and supervisory goodwill
as regulatory net worth of the Bank, both for the purposes of compliance by the
Bank with its regulatory net worth requirements and compliance by the
Corporation with its net worth maintenance obligation.
Following the enactment of FIRREA, the Office of Thrift Supervision ("OTS")
required the Bank to eliminate approximately $80 million of the capital credits
and supervisory goodwill from the Bank's regulatory capital. The OTS then
required the Corporation to raise and contribute additional capital to the Bank.
The second amended complaint alleges that these actions by the OTS constituted
breaches of contract and caused the Corporation substantial damages. Among other
things, the Corporation incurred substantial damages in the process of selling
off valuable assets and subsidiaries to meet the Government's demands that it
raise and contribute capital to the Bank. The Corporation suffered further
damages when the Government seized the Bank and all of its assets, including
approximately $70 million of additional capital which the Corporation had
contributed to the Bank. Finally, the government's breach resulted in the
takeover of the Bank.
Old Stone Corporation's lawsuit is one of about 130 similar cases pending
before the U.S. Court of Federal Claims. These cases are collectively referred
to as the Winstar-related cases. In 1992, the Court of Federal Claims entered
partial summary judgments in three lead cases, ruling that the Government was
liable to the thrift and thrift holding company plaintiffs in these cases for
breach of contract. In 1996, the U.S. Supreme Court upheld these rulings and
returned these three cases to the Court of Federal Claims for a determination of
the amount of the plaintiffs' damages. The Court of Federal Claims is now
conducting a damages trial in the first of these three cases. This trial began
in February 1997 and is now expected to continue until March 1998. The court has
not yet made a determination of the measure or amount of damages in this case.
Depending on the outcome, one or both parties are likely to appeal the court's
determination of damages.
The Court of Federal Claims had previously suspended proceedings in the
remaining Winstar-related cases pending the decision of the Supreme Court in the
three lead cases. Following this decision, the court lifted the suspension, and
plaintiffs in approximately thirty of the remaining cases have now filed motions
for partial summary judgment as to liability. In essentially all of these cases,
the Government has denied that the plaintiffs had enforceable contracts with the
Government and has cross-moved for summary judgment in its own favor. In August
1997, the court held a hearing on the summary judgment motions filed in four of
these cases. The court has not yet ruled on these motions. As part of the August
hearing, the court also heard argument on eleven issues which the Government has
raised in many of the pending cases. The court may issue such rulings at any
time, and any such rulings could affect some or all of the remaining cases.
Old Stone Corporation intends shortly to file a motion for partial summary
judgment as to liability. The Government will have a period of approximately
four months in which to respond to this motion and to file a cross-motion for
summary judgment. There is no fixed date by which the court must rule on these
motions. In January, 1998, the Corporation and the Government will commence a
one-year period of discovery. Unless the Government wins summary judgment, the
case will then be assigned to a trial judge for trial on liability and damages
or on damages alone, depending on the outcome of the Corporation's motion for
partial summary judgment. The Corporation cannot predict when the court will
schedule such a trial or the outcome of such a trial. At any such trial, the
Corporation will have to prove the amount of its damages.
