<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[X] Preliminary Proxy Statement []Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[] Definitive Proxy Statement
[] Definitive Additional Materials
[] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MMI COMPANIES, INC.
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[] No fee required.
[X]Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities
to which transaction applies: COMMON STOCK, PAR VALUE $0.10 PER SHARE
(2) Aggregate number of secur-
ities to which transaction applies: 7,685,336
(3) Per unit price or other underlying
value of transaction computed pursu-
ant to Exchange Act Rule 0-11 (set
forth the amount on which the filing
fee is calculated and state how it
was determined): $27.71875 (REPRESENTS THE AVERAGE OF
THE HIGH AND LOW PRICES OF THE
REGISTRANT'S COMMON STOCK ON AUGUST 4,
1997 ON THE CONSOLIDATED REPORTING
SYSTEM)
<PAGE>
(4) Proposed maximum aggregate
value of transaction: $213,027,907
(5) Total fee paid: NONE (SEE BELOW)
[] Fee paid previously with preliminary materials.
[X] 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 its filing.
(1) Amount previously paid: $71,387
(2) Form, Schedule or Registration
Statement No.: 333-32027
(3) Filing Party: MMI COMPANIES, INC.
(4) Date Filed: JULY 25, 1997
<PAGE>
[MMI Logo]
________ ___, 1997
TO OUR STOCKHOLDERS:
On behalf of the Board of Directors and management of MMI Companies, Inc.
(the "Company"), I cordially invite you to attend a Special Meeting of
Stockholders to be held on __________ __, 1997 at 9:00 a.m. at the Company's
headquarters located at 540 Lake Cook Road, Deerfield, Illinois. At the
Special Meeting, you will be asked to approve (i) the issuance of shares of
the Company's common stock (the "Share Issuance") in connection with a
share-for-share exchange (the "Acquisition") with the shareholders of
Unionamerica Holdings plc, a London-based reinsurance company
("Unionamerica"), pursuant to an Acquisition Agreement (the "Acquisition
Agreement") dated as of June 25, 1997 between the Company and Unionamerica
and (ii) an amendment to the Company's 1993 Employee Stock Plan to increase,
in connection with the Acquisition, the number of shares reserved for
issuance thereunder (the "Plan Amendment"). Following the Acquisition,
Unionamerica will continue as a wholly-owned subsidiary of the Company.
Subject to the terms and conditions of the Acquisition Agreement, each share
of Unionamerica common stock outstanding immediately prior to the effective
time of the Acquisition will be converted into 0.836 shares of the Company's
common stock. Cash will be paid in lieu of any fractional shares of the
Company's common stock.
The Board of Directors of the Company has determined that the
Acquisition, the Share Issuance and the Plan Amendment are in the best
interests of the Company and its stockholders and has approved the
Acquisition Agreement and the transactions contemplated thereby, including
the Share Issuance and the Plan Amendment. The Board unanimously recommends
that you vote in favor of the Share Issuance and Plan Amendment proposal at
the Special Meeting.
Please complete and return the enclosed proxy card whether or not you
plan to attend the Special Meeting. If your shares are registered in your
name and you do attend and wish to vote in person, you can revoke your proxy
at that time.
Sincerely,
B. Frederick Becker
Chairman of the Board and
Chief Executive Officer
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MMI COMPANIES, INC.
540 LAKE COOK ROAD
DEERFIELD, IL 60015
NOTICE OF SPECIAL STOCKHOLDERS MEETING
{Date}
MMI Companies, Inc., a Delaware corporation (the "Company"), will hold a
Special Stockholders Meeting (the "Special Meeting") on ________ __, 1997, at
9:00 a.m. at 540 Lake Cook Road, Deerfield, Illinois, for the following
purposes:
1. To approve (a) the issuance of up to 7,685,336 shares of the Company's
common stock, $0.10 par value per share, pursuant to the Acquisition
Agreement dated as of June 25, 1997 (the "Acquisition Agreement") by
and between the Company and Unionamerica Holdings plc, a corporation
registered in England and Wales under The Companies Act 1985 of the
U.K., as amended, and (b) the adoption of an amendment to the MMI
Companies, Inc. 1993 Employee Stock Plan (the "Plan") to increase, in
connection with the Acquisition Agreement, the number of shares
of the Company's common stock reserved for issuance under the Plan by
570,845 shares to an aggregate of 2,308,345 shares; and
2. To transact such other business as may properly be brought before the
Special Meeting or any adjournments or postponements thereof.
All stockholders are cordially invited to attend the Special Meeting in
person; however, to assure your representation at the Special Meeting, you
are urged to mark, sign, date and return the enclosed proxy card as promptly
as possible in the postage prepaid envelope enclosed for that purpose. You
may revoke your proxy in the manner described in the accompanying Proxy
Statement at any time before it has been voted at the Special Meeting. Any
stockholder attending the Special Meeting may vote in person even if he or
she has returned the proxy.
Wayne A. Sinclair
Secretary
<PAGE>
PROXY STATEMENT
MMI COMPANIES, INC.
540 LAKE COOK ROAD
DEERFIELD, ILLINOIS 60015
GENERAL
This Proxy Statement is being furnished in connection with the solicitation
by the board of directors (the "Board of Directors") of MMI Companies, Inc., a
Delaware corporation (the "Company") of proxies for use at a Special Meeting of
Stockholders to be held on ______ __, 1997 (the "Special Meeting"), or at any
adjournments or postponements thereof, for the purposes set forth herein and in
the accompanying Notice of Special Stockholders Meeting.
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders of record of the Company on or about _______ ___, 1997.
MATTER TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, stockholders of record of the Company will be asked
to consider and act upon the following proposal and to transact such other
business as may properly come before the Special Meeting or at any adjournments
or postponements thereof:
1. To approve (a) the issuance (the "Share Issuance") of up to 7,685,336
shares of the Company's common stock, $0.10 par value per share,
pursuant to the Acquisition Agreement (the "Acquisition Agreement")
dated as of June 25, 1997 by and between the Company and Unionamerica
Holdings plc, a corporation registered in England and Wales under The
Companies Act 1985 of the U.K., as amended, with registered number
2822469 ("Unionamerica") and (b) the adoption of an amendment to the
MMI Companies, Inc. 1993 Employee Stock Plan (the "Plan") to increase,
in connection with the Acquisition Agreement, the number of shares of
the Company's common stock reserved for issuance under the Plan by
570,845 shares, to an aggregate of 2,308,345 shares (the "Plan
Amendment").
Stockholder approval of the Share Issuance is required by The New York
Stock Exchange, Inc. because the MMI Common Stock to be issued pursuant to the
terms of the Acquisition Agreement will have, upon issuance, voting power in
excess of 20% of the voting power outstanding before the Share Issuance and the
number of shares of MMI Common Stock to be issued pursuant to the Acquisition
Agreement will be in excess of 20% of the number of shares of MMI Common Stock
outstanding before such issuance.
In connection with the closing of the transactions contemplated by the
Acquisition Agreement, Unionamerica option holders will be permitted to elect
to (i) exercise any or all of their existing Unionamerica options
<PAGE>
immediately prior to the closing of the exchange offer which is the subject
of the Acquisition Agreement, and then tender the Unionamerica American
Depositary Shares received upon such exercise in the exchange offer, or (ii)
rollover any or all of their existing options into comparable options from
the Company issued pursuant to the Plan. The Plan Amendment increases the
number of shares of MMI Common Stock reserved for issuance under the Plan to
accommodate those Unionamerica option holders who elect the rollover
alternative set forth above. Assuming all Unionamerica option holders elect
the rollover alternative, the Company will need to reserve an additional
570,845 shares of MMI Common Stock for issuance under the Plan. Stockholder
approval of the Plan Amendment is required pursuant to the terms of the Plan.
THE BOARD OF DIRECTORS HAS APPROVED THE ACQUISITION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE SHARE ISSUANCE AND THE PLAN
AMENDMENT, AND RECOMMENDS A VOTE BY THE STOCKHOLDERS OF THE COMPANY FOR
APPROVAL OF THE SHARE ISSUANCE AND PLAN AMENDMENT PROPOSAL.
RECORD DATE; VOTING AT THE SPECIAL MEETING; VOTE REQUIRED
The Board of Directors has fixed _________ ____, 1997 as the record date
for the determination of the stockholders of the Company entitled to notice
and to vote at the Special Meeting. Only holders of record of the MMI Common
Stock on the record date will be entitled to notice of and to vote at the
Special Meeting. As of June 30, 1997, there were 11,652,000 shares of MMI
Common Stock outstanding and entitled to vote, which were held by
approximately 452 holders of record. Each record holder of MMI Common Stock
on the record date is entitled to cast one vote per share, exercisable in
person or by properly executed proxy, on each matter properly submitted for
the vote of the stockholders of the Company at the Special Meeting.
The presence, in person or by properly executed proxy, of the holders of
a majority of the outstanding shares of MMI Common Stock entitled to vote at
the Special Meeting is necessary to constitute a quorum at the Special
Meeting. The approval of the Share Issuance and Plan Amendment proposal will
require the affirmative vote of at least a majority of the votes cast
thereon, provided that the total vote cast on the proposal represents over
50% in interest of the MMI Common Stock. Abstentions and broker non-votes
will be treated as shares that are present and entitled to vote for purposes
of determining the presence of a quorum, but will not be counted for purposes
of determining the approval of any matter submitted to the stockholders for a
vote. If a broker indicates on a proxy that it does not have discretionary
authority to vote on the proposal, those shares will not be considered as
present and entitled to vote with respect to the proposal.
As of June 30, 1997, directors, executive officers and affiliates of the
Company may be deemed to be the beneficial owners of approximately 3.0% of the
outstanding shares of MMI Common Stock. The directors and executive officers of
MMI have indicated that they plan to vote or direct the vote of all shares of
MMI Common Stock
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<PAGE>
over which they have voting control in favor of the Share Issuance and Plan
Amendment proposal.
PROXIES
This Proxy Statement is being furnished to holders of MMI Common Stock in
connection with the solicitation of proxies by and on behalf of the Board of
Directors for use at the Special Meeting.
All shares of MMI Common Stock that are entitled to vote and are
represented at the Special Meeting by properly executed proxies received
prior to or at the Special Meeting and not duly and timely revoked, will be
voted at the Special Meeting in accordance with the instructions indicated on
such proxies. If no instructions are indicated, such proxies will be voted
FOR approval of the Share Issuance and Plan Amendment proposal.
If any other matters are properly presented for consideration at the
Special Meeting (or any adjournments or postponements thereof) including,
among other things, consideration of a motion to adjourn or postpone the
Special Meeting to another time and/or place (including, without limitation,
for the purpose of soliciting additional proxies), the persons named in the
enclosed forms of proxy and voting thereunder will have discretion to vote on
such matters in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by
(i) filing with the Secretary of the Company at or before the taking of the
vote at the Special Meeting, a written notice of revocation bearing a later
date than the proxy, (ii) duly executing a later dated proxy relating to the
same shares and delivering it to the Secretary of the Company before the
taking of the vote at the Special Meeting or (iii) attending the Special
Meeting and voting in person (although attendance at the Special Meeting will
not in and of itself constitute a revocation of a proxy). Any written notice
of revocation or subsequent proxy should be sent so as to be delivered to MMI
Companies, Inc., 540 Lake Cook Road, Deerfield, Illinois, 60015, Attention:
Wayne A. Sinclair, Esq., Senior Vice President, General Counsel and
Secretary, or hand-delivered to the Secretary of the Company at or before the
taking of the vote at the Special Meeting.
In addition to solicitation by use of the mails, proxies may be solicited
by directors, officers and employees of the Company in person or by
telephone, telegram or other means of communication. Such directors,
officers and employees will not be additionally compensated, but may be
reimbursed for reasonable out-of-pocket expenses incurred in connection with
such solicitation. Arrangements will also by made with custodians, nominees
and fiduciaries for forwarding proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and the Company will reimburse such custodians, nominees and fiduciaries for
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<PAGE>
reasonable expenses incurred in connection therewith. In addition, the
Company may retain the services of a proxy soliciting firm to assist in the
solicitation.
Details of the Acquisition Agreement and other important information
concerning the Company and Unionamerica are more fully described in the
accompanying Offer to Exchange/Prospectus. The Acquisition Agreement is set
forth in full as Appendix A to the Offer to Exchange/Prospectus. Please give
this material your careful attention.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of shares of MMI Common Stock as of the respective dates specified
below by each person or entity known by the Company to beneficially own more
than 5% of the outstanding shares of MMI Common Stock.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
Wellington Management Company, LLP (1) 1,185,940 10.1%
75 State Street
Boston, Massachusetts 02109
Franklin Resources, Inc. (2) 990,800 8.4
777 Mariners Island Blvd.
San Mateo, California 94404
(1) These figures were reported in a Schedule 13G filed with the Securities and
Exchange Commission dated May 5, 1997. With respect to those shares, Wellington
Management Company, LLP had the sole power to vote 615,440 shares and the sole
power to direct the disposition of 1,185,940 shares.
(2) These figures were reported in a Schedule 13F filed with the Securities and
Exchange Commission as of March 31, 1997. With respect to those shares,
Franklin Resources, Inc. had the sole power to vote and the shared power to
direct the disposition of 990,800 shares.
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The following table sets forth information regarding the beneficial
ownership of shares of Common Stock as of June 30, 1997 by each director and
executive officer of the Company and all directors and executive officers of the
Company as a group.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
DIRECTORS
Richard R. Barr (4) 9,625 *
B. Frederick Becker (2)(3) 375,738 3.1%
George B. Caldwell (4) 28,182 *
K. James Ehlen, M.D. (4) 4,125 *
F. Laird Facey, M.D. (4) 34,217 *
William M. Kelley (4) 9,925 *
Andrew D. Kennedy (4) 5,959 *
Timothy R. McCormick (4) 11,701 *
Gerald L. McManis (2)(3) 204,278 1.7
Scott S. Parker (4) 9,625 *
Edward C. Peddie (4) 11,935 *
Joseph D. Sargent (4) 14,045 *
EXECUTIVE OFFICERS
Anna Marie Hajek (2)(3) 74,825 *
Paul M. Orzech (2)(3) 61,320 *
Steve A. Schleisman (2)(3) 24,125 *
Wayne A. Sinclair (2)(3) 57,266 *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(16 persons) 936,891 7.6
* Represents less than 1% of the MMI Common Stock.
(1) Includes shares of MMI Common Stock and options, exercisable within sixty
days, to purchase shares of MMI Common Stock. Each of the persons
identified above holds exclusive voting and investment power over the
shares of MMI Common Stock beneficially owned.
(2) Includes options granted under the Plan as follows: Mr. Becker - 274,875
options; Mr. McManis - 15,000 options; Ms. Hajek - 71,250 options;
Mr. Orzech -46,000 options; Mr. Schleisman - 23,000 options;
Mr. Sinclair - 54,375 options.
(3) Includes shares granted under the Company's Amended and Restated Savings
and Profit Share Plan (401(k)). Messrs. Becker, Orzech and Schleisman and
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Ms. Hajek have voting and dispositive power for 142,067 shares solely in
their capacities as trustees.
(4) Includes options granted under the 1993 Director Stock Option Plan as
follows: Dr. Ehlen - 4,125 options; Mr. Kennedy - 5,500 options; each
other noted director, 9,625 options.
STOCKHOLDER PROPOSALS
If any stockholder wishes to propose a matter for consideration at the
Company's annual meeting to be held in April 1998, the proposal should be
sent to the Secretary of the Company, Wayne A. Sinclair, at the principal
executive offices of the Company. A proposal must be received by the Company
by November 18, 1997 in order to be considered for inclusion in the Company's
1998 annual meeting Proxy Statement and form of Proxy which is expected to be
mailed in March 1998.
By order of the Board of Directors,
Wayne A. Sinclair
Secretary
____________ __, 1997
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SUBJECT TO COMPLETION, DATED JULY 24, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
O F F E R T O E X C H A N G E / P R O S P E C T U S
OFFER TO EXCHANGE
0.836 SHARES OF MMI COMMON STOCK,
PAR VALUE $0.10 PER SHARE, OF
MMI COMPANIES, INC.
FOR EACH OUTSTANDING AMERICAN DEPOSITARY SHARE
OF UNIONAMERICA HOLDINGS PLC
REPRESENTING ALL OF THE OUTSTANDING ORDINARY SHARES
OF UNIONAMERICA HOLDINGS PLC
This Offer to Exchange/Prospectus (this "Prospectus") is being furnished to
the holders of ordinary shares, nominal value $0.0448 per share (the
"Unionamerica Common Stock") and to the holders of American Depositary Shares,
each representing a share of Unionamerica Common Stock (the "Unionamerica ADSs")
(the Unionamerica ADSs and the Unionamerica Common Stock are together referred
to herein as either the "Unionamerica Securities" or the "Unionamerica ADSs"),
of Unionamerica Holdings plc, a corporation registered in England and Wales
under the U.K. Companies Act 1985 (the "Companies Act") with registered number
2822469 ("Unionamerica"), in connection with the offer, upon the terms and
subject to the conditions set forth herein and in the related Letter of
Transmittal (collectively, the "Offer"), by MMI Companies, Inc., a Delaware
corporation ("MMI"), to exchange 0.836 shares of MMI common stock, par value
$0.10 per share (the "MMI Common Stock"), for each outstanding Unionamerica ADS
(the "'Exchange Ratio"). Upon consummation of the Offer, and the subsequent
compulsory acquisition of any remaining outstanding Unionamerica ADSs (the
"Compulsory Acquisition"), Unionamerica will become a wholly-owned Subsidiary of
MMI (the "Proposed Acquisition"). Each share of MMI Common Stock issued in
connection with the Offer will be accompanied by a right (a "Right") which will
entitle the registered holder thereof to purchase from MMI a unit consisting of
one one-hundredth of a share (a "Unit") of Series B Junior Participating
Preferred Stock of MMI, par value $20.00 per share (the "Series B Preferred
Stock"), at a purchase price of $75.00 per Unit (the "Purchase Price"), subject
to adjustment, pursuant to a rights agreement between MMI and ChaseMellon
Shareholder Services L.L.C., as Rights Agent (the "Rights Agreement"). The Offer
is being made pursuant to an Acquisition Agreement dated as of June 25, 1997 by
and between MMI and Unionamerica (the "Acquisition Agreement"). See "Prospectus
Summary-- Summary of the Offer and Proposed Acquisition", "The Offer--Terms of
the Offer and Proposed Acquisition" and Appendix A--"Acquisition Agreement". See
Appendix G--"Key Definitions" for definitions of certain key terms, including
some terms not otherwise defined herein.
THE OFFER WILL EXPIRE AT 2:30 P.M., LONDON TIME, 9:30 A.M., NEW YORK CITY
TIME, ON [ ], 1997 UNLESS THE OFFER IS EXTENDED IN ACCORDANCE WITH
THE TERMS OF THE ACQUISITION AGREEMENT (THE "INITIAL OFFER PERIOD").
UNIONAMERICA ADSS WHICH ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION OF THE INITIAL OFFER PERIOD (OTHER THAN THOSE
UNIONAMERICA ADSS WHICH ARE TENDERED BY CERTAIN UNIONAMERICA SECURITYHOLDERS
(THE "SELLING STOCKHOLDERS") WHO HAVE EXECUTED IRREVOCABLE UNDERTAKINGS TO
ACCEPT THE OFFER (THE "UNDERTAKINGS")). SEE APPENDIX E--"CERTAIN ADDITIONAL
INFORMATION REQUIRED UNDER THE CITY CODE".
Upon expiration of the Initial Offer Period, including any extension
thereof, and satisfaction or, where permitted, waiver of the Conditions of the
Offer, all Unionamerica ADSs validly tendered and not validly withdrawn will be
exchanged and the Offer will be extended for a subsequent Offer Period of at
least 14 calendar days (the "Subsequent Offer Period"). Holders of Unionamerica
ADSs will not have withdrawal rights during the Subsequent Offer Period,
including any extension thereof.
------------------
UNIONAMERICA SECURITYHOLDERS SHOULD CAREFULLY CONSIDER ALL OF THE FACTORS
SET FORTH IN "RISK FACTORS", COMMENCING ON PAGE 17 OF THIS PROSPECTUS.
-------------
MMI's obligation to exchange shares of MMI Common Stock for Unionamerica
ADSs pursuant to the Offer is subject to a number of Conditions (as defined
below), including (i) the acceptance of the Offer by holders of at least 90%
(or, having obtained the prior written consent of Unionamerica, more than 50%)
of the outstanding Unionamerica ADSs, (ii) approval of the issuance of MMI
Common Stock by MMI's stockholders, and (iii) regulatory approval in the United
Kingdom (the "U.K.") and in the United States ("U.S."). See "Prospectus
Summary--Summary of the Offer and Proposed Acquisition", "The Offer--Terms of
the Offer and Proposed Acquisition" and Appendix A--"Acquisition Agreement".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION NOR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE OFFER MADE HEREBY DO NOT CONSTITUTE A SOLICITATION
OF ANY PROXIES OR CONSENTS. ANY SUCH SOLICITATIONS WILL BE MADE ONLY PURSUANT TO
SEPARATE PROXY OR CONSENT SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS
OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
ANY PERSON WHO, ALONE OR ACTING TOGETHER WITH ANY OTHER PERSON(S) PURSUANT
TO ANY AGREEMENT (FORMAL OR INFORMAL), OWNS OR CONTROLS, OR BECOMES THE OWNER OR
CONTROLLER OF, DIRECTLY OR INDIRECTLY, 1% OR MORE OF THE UNIONAMERICA ADSS OR
MMI COMMON STOCK IS REQUIRED, UNDER THE PROVISIONS OF RULE 8 OF THE CITY CODE ON
TAKEOVERS AND MERGERS OF THE U.K. (THE "CITY CODE") TO NOTIFY THE COMPANY
ANNOUNCEMENTS OFFICE OF THE LONDON STOCK EXCHANGE (THE "LSE") WHICH WILL NOTIFY
THE PANEL ON TAKEOVERS AND MERGERS OF THE U.K. (THE "PANEL") AND THE U.K. PRESS,
OF EVERY DEALING IN ANY UNIONAMERICA ADSS OR MMI COMMON STOCK UNTIL SUCH TIME AS
THE OFFER IS DECLARED UNCONDITIONAL OR LAPSES, IN ACCORDANCE WITH RULE 8.
DEALINGS BY "ASSOCIATES" (WITHIN THE MEANING OF THE CITY CODE) OF MMI OR
UNIONAMERICA IN MMI COMMON STOCK OR UNIONAMERICA ADSS DURING THE INITIAL OFFER
PERIOD MUST ALSO BE DISCLOSED. PLEASE CONSULT YOUR LEGAL COUNSEL IF YOU BELIEVE
RULE 8 MAY BE APPLICABLE TO YOU.
The Dealer Manager for the Offer is Smith Barney Inc.
<PAGE>
The date of this Prospectus is , 1997
<PAGE>
<PAGE>
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
IF YOU ARE IN ANY DOUBT ABOUT WHAT ACTION TO TAKE IN CONNECTION WITH THE
OFFER, YOU SHOULD IMMEDIATELY CONSULT YOUR STOCKBROKER, BANK MANAGER, ATTORNEY,
OR ACCOUNTANT OR AN INDEPENDENT FINANCIAL ADVISOR AUTHORIZED UNDER THE U.K.
FINANCIAL SERVICES ACT 1986.
Any Unionamerica Securityholder desiring to tender all or any portion of his
Unionamerica ADSs should either (a) complete and sign the Letter of Transmittal
or a facsimile copy thereof in accordance with the instructions in the Letter of
Transmittal, and mail or deliver the Letter of Transmittal or such facsimile and
any other required documents to ChaseMellon Shareholder Services L.L.C. (the
"Exchange Agent") and either deliver the American Depositary Receipts (the
"ADRs") for such Unionamerica ADSs to the Exchange Agent along with the Letter
of Transmittal, deliver such Unionamerica ADRs pursuant to the procedures for
book-entry transfer set forth herein or comply with the guaranteed delivery
procedures set forth below or (b) request his broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for him. A Unionamerica
Securityholder having Unionamerica ADSs registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
broker, dealer, commercial bank, trust company or other nominee if he desires to
tender such Unionamerica ADSs.
If you have sold or otherwise transferred any or all of your Unionamerica
ADSs, please forward this document with the accompanying Letter of Transmittal,
reply-paid envelope and other enclosures as soon as possible to the purchaser or
other transferee, or to the agent through whom the sale or transfer was effected
for transmission to the purchaser or other transferee. However, such documents
should not be forwarded to or transmitted in or into Australia or Japan or to a
resident of Australia or Japan.
Questions and requests for assistance may be directed to the Exchange Agent
or to Smith Barney Inc. (the "Dealer Manager" or "Smith Barney") at their
respective addresses and telephone numbers set forth on the back of this
Prospectus. Requests for additional copies of this Prospectus and the Letter of
Transmittal may be directed to the Exchange Agent, the Dealer Manager, or to
brokers, dealers, commercial banks or trust companies.
Smith Barney, which is regulated in the U.K. by the U.K. Securities and
Futures Authority Limited, is acting on behalf of MMI and no one else in
connection with the matters described herein and will not be responsible to
anyone other than MMI for providing the protections afforded to its customers or
for providing advice in relation to the matters described herein.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF MMI NOT CONTAINED IN THIS PROSPECTUS OR IN THE
LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED. MMI MAKES NO REPRESENTATION OR
WARRANTY IN RELATION TO THE OFFER OTHER THAN AS SET OUT IN THIS PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Available Information..................................................... 1
Incorporation of Certain Documents by Reference........................... 1
Forward-Looking Statements................................................ 3
Prospectus Summary........................................................ 4
Summary of the Offer and Proposed Acquisition........................... 4
Description of MMI...................................................... 7
Description of Unionamerica............................................. 8
Selected Consolidated Financial Information of MMI...................... 9
Selected Consolidated Financial Information of Unionamerica............. 11
Selected Pro Forma Condensed Combined Financial Information............. 13
Comparative Historical and Pro Forma Per Share Data..................... 14
Market Price of MMI Common Stock and Unionamerica ADSs.................. 14
MMI Common Stock and Unionamerica ADSs Held by Directors, Executive
Officer, and Their Affiliates......................................... 15
Regulatory Approval Requirements........................................ 15
Dissenters' Rights...................................................... 16
Tax Consequences of the Offer........................................... 16
Risk Factors.............................................................. 17
The Offer................................................................. 21
Terms of the Offer and Proposed Acquisition............................. 21
Procedures for Tendering Unionamerica ADSs.............................. 28
Extensions; Amendments; and Termination................................. 32
MMI's Reasons for the Proposed Acquisition and Recommendation of the MMI
Board................................................................. 36
Opinion of Financial Advisor to MMI..................................... 37
Unionamerica's Reasons for the Proposed Acquisition and Recommendation
of the Unionamerica Board............................................. 41
Opinion of Financial Advisor to Unionamerica............................ 42
Description of MMI Capital Stock........................................ 49
Description of Unionamerica Capital Stock............................... 52
Changes in the Rights of Unionamerica Securityholders................... 54
Accounting Treatment.................................................... 65
Tax Consequences of the Offer........................................... 66
Material Contracts between MMI and Unionamerica......................... 69
Unaudited Pro Forma Condensed Combined Financial Information.............. 70
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31,
1997.................................................................. 71
Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31,
1996.................................................................. 72
Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31,
1995.................................................................. 73
Unaudited Pro Forma Condensed Combined Statement of Income for the three
months ended March 31, 1997........................................... 74
Unaudited Pro Forma Condensed Combined Statement of Income for the three
months ended March 31, 1996........................................... 75
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Pro Forma Condensed Combined Statement of Income for the year
ended December 31, 1996............................................... 76
Unaudited Pro Forma Condensed Combined Statement of Income for the year
ended December 31, 1995............................................... 77
Unaudited Pro Forma Condensed Combined Statement of Income for the year
ended December 31, 1994............................................... 78
Notes to Unaudited Pro Forma Condensed Combined Financial Information... 79
Legal Matters............................................................. 80
Experts................................................................... 80
Appendices
A Acquisition Agreement
B Opinion of Smith Barney Inc., Financial Advisor to MMI
C Opinion of Donaldson Lufkin & Jenrette Securities Corporation,
Financial Advisor to Unionamerica
D Certain Market, Dividend and Exchange Rate Information
E Certain Additional Information Required Under the City Code
F Certain Provisions of the Companies Act
G Key Definitions
</TABLE>
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AVAILABLE INFORMATION
MMI has filed with the Commission a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (such Act
and the rules and regulations promulgated thereunder being referred to herein as
the "Securities Act"), with respect to the shares of MMI Common Stock offered
hereby. This Prospectus, which forms part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits and financial statements thereto, certain portions of which have
been omitted pursuant to the rules and regulations of the Commission, to which
portions reference is hereby made. Statements contained in this Prospectus as to
the contents of any contract, agreement or other document are summaries which
are not necessarily complete, and in each instance reference is made to the copy
of such contract, agreement or other document filed as an appendix to this
Prospectus or as an exhibit to the Registration Statement, each such statement
herein being qualified in all respects by such reference.
MMI and Unionamerica are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (such Act and the rules and
regulations promulgated thereunder being referred to herein as the "Exchange
Act"), and in accordance therewith, file annual and quarterly reports, proxy
statements (in the case of MMI) and other information with the Commission. Such
reports, proxy statements, other information and the Registration Statement,
including all exhibits thereto, may be inspected without charge and copied at
the public reference facilities of the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at its regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New York,
New York 10048. Any interested party may obtain copies of all or any portion of
the Registration Statement and its exhibits at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. In addition, reports,
proxy statements, other information and this Registration Statement may be
inspected at the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20
Broad Street, New York, New York 10005.
Not earlier than the date of commencement of the Offer, MMI will file with
the Commission a statement on Schedule 14D-1 pursuant to Rule 14d-3 under the
Exchange Act furnishing certain information with respect to the Offer. Pursuant
to Rules 14d-9 and 14e-2 under the Exchange Act, Unionamerica will file a
statement on Schedule 14D-9 furnishing certain information with respect to its
position concerning the Offer. Such Schedules (together with all exhibits
thereto) and any amendments thereto shall be available for inspection and
copying as set forth above (except that such Schedules and amendments thereto
will not be available at the regional offices of the Commission).
The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, such as MMI, that file electronically
with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by MMI with the Commission and are
incorporated herein by reference: (i) MMI's Annual Report on Form 10-K for the
year ended December 31, 1996; (ii) MMI's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997; (iii) MMI's Proxy Statement for the annual meeting
of stockholders held on April 17, 1997; (iv) the description of Common Stock
contained in MMI's Registration Statement on Form 8-A filed April 28, 1993,
pursuant to Section 12 of the Exchange Act and all amendments thereto filed for
the purpose of updating such description; and (v) the description of the MMI
Shareholder Rights Plan contained in MMI's Registration Statement on Form 8-A
filed June 27, 1997. All documents filed by MMI with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date
of this Prospectus and prior to the termination of the Offer, shall be deemed to
be incorporated by reference into this Prospectus. Any statement contained
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herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement or
document so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS OF MMI BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH
DOCUMENTS) ARE AVAILABLE FROM MMI, UPON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE,
TO EACH PERSON (INCLUDING ANY BENEFICIAL OWNER) TO WHOM THIS PROSPECTUS IS
DELIVERED. REQUESTS SHOULD BE DIRECTED TO MMI COMPANIES, INC., 540 LAKE COOK
ROAD, DEERFIELD, ILLINOIS 60015, ATTENTION: INVESTOR RELATIONS, TELEPHONE (847)
374-2254. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE INITIAL CLOSING
DATE.
The following documents have been filed by Unionamerica with the Commission
and are incorporated herein by reference: (i) Unionamerica's Annual Report on
Form 10-K for the year ended December 31, 1996; (ii) Unionamerica's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997; and (iii) the
description of Unionamerica Common Stock contained in Unionamerica's
Registration Statement on Form 8-A filed November 30, 1995, pursuant to Section
12 of the Exchange Act and all amendments thereto filed for the purpose of
updating such description. All documents filed by Unionamerica with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
subsequent to the date of this Prospectus and prior to the termination of the
Offer, shall be deemed to be incorporated by reference into this Prospectus. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement or document so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS OF UNIONAMERICA BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
IN SUCH DOCUMENTS) ARE AVAILABLE FROM UNIONAMERICA, UPON WRITTEN OR ORAL
REQUEST, WITHOUT CHARGE, TO EACH PERSON (INCLUDING ANY BENEFICIAL OWNER) TO WHOM
THIS PROSPECTUS IS DELIVERED. REQUESTS SHOULD BE DIRECTED TO UNIONAMERICA
HOLDINGS PLC, LONDON UNDERWRITING CENTRE, 3 MINSTER COURT, MINCING LANE, LONDON
EC3R 7DD, ENGLAND ATTENTION: TREVOR R. SMITH, TELEPHONE +44-171-617-5959. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NO
LATER THAN FIVE BUSINESS DAYS PRIOR TO THE INITIAL CLOSING DATE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY MMI OR THE DEALER MANAGER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A
SOLICITATION TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF, UNIONAMERICA SECURITYHOLDERS IN ANY JURISDICTION
IN WHICH THE MAKING OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
LAWS OF SUCH JURISDICTION. HOWEVER, MMI MAY, IN ITS SOLE DISCRETION, TAKE SUCH
ACTION AS IT MAY DEEM NECESSARY TO MAKE THE OFFER IN ANY SUCH JURISDICTION AND
EXTEND THE OFFER TO UNIONAMERICA SECURITYHOLDERS IN SUCH JURISDICTIONS. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE HEREUNDER SHALL UNDER
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<PAGE>
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF MMI OR UNIONAMERICA SINCE THE DATE AS OF WHICH INFORMATION IS
FURNISHED OR THE DATE HEREOF.
IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE
OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE
MADE ON BEHALF OF MMI BY SMITH BARNEY, AS DEALER MANAGER, OR ONE OR MORE
REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
FORWARD-LOOKING STATEMENTS
This Prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act, and Section 21E of the Exchange Act. All
statements regarding MMI's or Unionamerica's expected future financial position,
business strategy, budgets, projected costs, and plans and objectives of
management for future operations, are forward-looking statements. Although MMI
and Unionamerica believe their respective expectations reflected in such
forward-looking statements are based on reasonable assumptions, no assurance can
be given that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the
expectations reflected in the forward-looking statements herein include, among
others, those set forth under "Risk Factors", general economic and business and
market conditions, changes in U.S. and non-U.S. laws and regulations with
respect to the insurance and reinsurance industries, difficulties in achieving
expected cost savings from the Proposed Acquisition or costs or difficulties
relating to the integration of MMI's and Unionamerica's businesses, increased
competitive and/or customer pressure in the insurance and reinsurance industries
and the ability of MMI and Unionamerica to achieve the goals described in "MMI's
Reasons for the Proposed Acquisition and Recommendation of the MMI Board".
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE. ALL FINANCIAL DATA FOR MMI AND
UNIONAMERICA ARE PRESENTED ON THE BASIS OF U.S. GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES ("GAAP") UNLESS OTHERWISE STATED. UNLESS THE CONTEXT OTHERWISE
INDICATES, ALL REFERENCES TO "MMI" REFER TO MMI COMPANIES, INC. AND ITS
SUBSIDIARIES, AND ALL REFERENCES TO "UNIONAMERICA" REFER TO UNIONAMERICA
HOLDINGS PLC AND ITS SUBSIDIARIES. SEE APPENDIX G TO THIS PROSPECTUS--"KEY
DEFINITIONS", FOR DEFINITIONS OF CERTAIN KEY TERMS, INCLUDING SOME TERMS NOT
OTHERWISE DEFINED HEREIN.
SUMMARY OF THE OFFER AND PROPOSED ACQUISITION
INTRODUCTION. On June 25, 1997, MMI and Unionamerica entered into an
Acquisition Agreement pursuant to which, subject to the terms and conditions
stated therein and in this Prospectus and the accompanying Letter of
Transmittal, MMI agreed to offer 0.836 shares of MMI Common Stock for each
outstanding Unionamerica ADS. This Prospectus contains the formal offer by MMI.
THE OFFER. MMI hereby offers to acquire, on the terms and subject to the
conditions set out in this Prospectus and the accompanying Letter of Transmittal
(including if the Offer is revised, varied, extended or renewed, the terms and
conditions of any such revision, variation, extension or renewal), each
outstanding share of Unionamerica Common Stock (including shares represented by
Unionamerica ADSs) in exchange for 0.836 shares of MMI Common Stock. Each share
of MMI Common Stock issued in connection with the Offer will be accompanied by a
Right which will entitle the registered holder thereof to purchase from MMI a
Unit of Series B Preferred Stock at a purchase price of $75.00 per Unit (the
"Purchase Price"), subject to adjustment, pursuant to the Rights Agreement. The
Offer which is being made to all Unionamerica Securityholders (including U.S.
Persons) will remain open during the Initial Offer Period and the Subsequent
Offer Period. The Offer and this Prospectus are subject to the requirements of
both the Panel and the Commission.
UNDERTAKINGS. MMI has received undertakings (the "Undertakings") to accept
the Offer, subject to certain conditions, from the Selling Stockholders in
respect of not less than an aggregate of 4,272,983 Unionamerica ADSs
(representing 50.6% of Unionamerica's outstanding ADSs). For further information
regarding these Undertakings, see Appendix E--"Certain Additional Information
Required Under the City Code".
NO FRACTIONAL SHARES. Cash will be paid to Unionamerica Securityholders in
lieu of any entitlements to fractional shares of MMI Common Stock to be issued
upon the surrender for exchange of Unionamerica ADSs. All fractional shares to
be issued in the Offer will be aggregated and sold by the Exchange Agent for the
benefit of the Unionamerica Securityholders receiving such fractional shares.
See "The Offer-- Terms of the Offer and Proposed Acquisition".
DEFERRED STOCK. At the consummation of the Proposed Acquisition,
Unionamerica will, in accordance with Article 5 of the Articles of Association
of Unionamerica (the "Unionamerica Articles"), cause all of the issued and
outstanding shares of deferred stock of Unionamerica, par value L1 per share
(the "Deferred Stock"), to be transferred to MMI (with the exception of one
share of Deferred Stock which will be transferred to a Person designated by MMI
to hold such share as nominee for MMI) in exchange for one share of MMI Common
Stock for each 25,000 shares of Deferred Stock outstanding. As of the date of
this Prospectus, Unionamerica has 50,000 shares of Deferred Stock outstanding.
ACQUISITION OF REMAINING UNIONAMERICA ADSS. Following the Initial Closing
Date, if MMI has received acceptances constituting not less than 90% of the
outstanding Unionamerica ADSs, MMI shall be entitled, and intends, to apply the
provisions of Sections 428 to 430F of the Companies Act to effect the Compulsory
Acquisition and acquire compulsorily any outstanding Unionamerica ADSs. See "The
Offer--
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Terms of the Offer and Proposed Acquisition" and Appendix E--"Certain Additional
Information Required Under the City Code".
PROPOSED ACQUISITION. Following the closing of the Proposed Acquisition,
Unionamerica will become a wholly-owned Subsidiary of MMI. It is MMI's present
intention to continue the existing management and business plans of Unionamerica
after the Proposed Acquisition, and to continue to operate Unionamerica as a
distinct business entity at its present location in London.
MMI COMMON STOCK. The shares of MMI Common Stock to be issued pursuant to
the Offer will rank PARI PASSU in all respects with the issued and outstanding
MMI Common Stock, including the right to receive all future dividends (payable
in U.S. dollars), if any, and other distributions, having a record date after
the Initial Closing Date. Application will be made to list the MMI Common Stock
to be issued in connection with the Offer on the NYSE.
TAX TREATMENT. MMI and Unionamerica intend that the exchange of shares of
MMI Common Stock for Unionamerica ADSs pursuant to the Offer will be treated as
a tax-free reorganization as described in Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "IRC"). See "The Offer-- Tax Consequences
of the Offer".
POOLING-OF-INTERESTS ACCOUNTING TREATMENT. It is contemplated that the
Proposed Acquisition will be accounted for as a pooling-of-interests for
accounting purposes under GAAP. Under this accounting treatment, the accounts of
MMI and the accounts of Unionamerica will be combined for all past and future
periods presented after the Offer becomes or is declared unconditional in all
respects.
AFFILIATES' RESTRICTIONS ON SALE OF SHARES OF MMI COMMON STOCK. The shares
of MMI Common Stock to be issued pursuant to the Offer have been registered
under the Securities Act pursuant to a Registration Statement on Form S-4,
thereby allowing such securities to be traded without restriction by any former
holder of Unionamerica ADSs if such former holder (i) is not deemed to be an
"affiliate" (as defined for purposes of Rule 144 under the Securities Act) of
Unionamerica within 30 days prior to the date the Offer is declared
unconditional in all respects, and (ii) does not become an affiliate or officer
of MMI pursuant to the Offer.
In order to ensure that one of the requirements of pooling-of-interests
accounting is met, certain directors and executive officers of Unionamerica have
executed and delivered, and prior to the date of this Prospectus, certain other
directors and executive officers shall have executed and delivered, an Affiliate
Letter to MMI, pursuant to which they agreed not to sell any shares of MMI
Common Stock or Unionamerica Securities during the time period that would cause
the violation of the requirements for pooling-of-interests accounting, which
period ends when the financial results of the combined operations of MMI and
Unionamerica covering a period of at least 30 days are publicly released by MMI.
ELECTION OF REPRESENTATIVES TO THE MMI BOARD. MMI has agreed that, at or
prior to the Initial Closing Date, MMI shall increase the size of its Board by
two members to 14 members. Upon consummation of the Proposed Acquisition, MMI
shall use its best efforts to nominate both Ian G. Sinclair and Robert A. Spass
to the MMI Board. At MMI's 1998 Annual Meeting of Stockholders, MMI shall use
its best efforts to nominate the aforesaid individuals to the MMI Board and
cause them to be elected to one full three-year term. Ian G. Sinclair was
Managing Director-Underwriting of Unionamerica Insurance Company Limited, a
wholly-owned subsidiary of Unionamerica ("UICL"), from 1984 until December 31,
1996, when he was appointed Chief Executive Officer of UICL. He has been a
Director of UICL since 1977 and of Unionamerica since September 10, 1993. From
1973 to 1977, he was an underwriter with UICL focusing on casualty business.
Robert A. Spass has been a Director of Unionamerica since September 10, 1993.
From February 1994 to the present, he has served as a founder and Managing
Partner of Insurance Partners Advisors, L.P. ("IPA"). From March 1990 to the
present, he has been President and Chief Executive Officer of International
Insurance Advisors, Inc. ("IIA"). From December 1988 to March 1990, he was a
Director
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of Salomon Brothers Inc. He is also a Director of Superior National Insurance
Group, Inc., Highlands Insurance Group Inc., Tarquin plc and Charman Group Ltd.
UNIONAMERICA OPTIONS. The Offer extends to any Unionamerica ADSs
representing any shares of Unionamerica Common Stock which are unconditionally
issued or allotted upon the exercise of options granted under the Unionamerica
Share Option Schemes or otherwise while the Offer remains open for acceptance.
In addition, a proposal is being made to Option holders under the Unionamerica
Share Option Schemes in respect of unexercised options which will, in the event
the Offer becomes or is declared unconditional, enable Option holders to cancel
their options in return for the grant of a comparable option to purchase MMI
Common Stock. See "The Offer--Terms of the Offer and Proposed Acquisition".
CONDITIONS OF THE OFFER. The Offer is conditioned upon, among other things,
(i) MMI having received valid tenders pursuant to the Offer (which have not been
validly withdrawn) in respect of not less than 90% on a fully diluted basis in
nominal value of the Unionamerica ADSs (the "Minimum Acceptance Condition"), as
described in "The Offer--Terms of the Offer and Proposed Acquisition"; except
that, with the prior written consent of Unionamerica, the Minimum Acceptance
Condition may be reduced by MMI (insofar as this does not have the effect of
reducing the threshold specified above to an amount which is 50% or less) (any
voting rights attributable to any Unionamerica ADSs representing any shares of
Unionamerica Common Stock which are unconditionally allotted or issued fully
paid (including pursuant to the exercise of options granted under the
Unionamerica Share Option Schemes or otherwise) after the date of this
Prospectus and while the Offer remains open for acceptance are included for the
purpose of determining the Minimum Acceptance Condition); (ii) the approval of
the issuance of shares of MMI Common Stock pursuant to the Offer and the
Acquisition Agreement and the transactions contemplated therein by a majority of
the outstanding shares of MMI Common Stock voting on such matter (MMI, through
its Board of Directors (the "MMI Board"), will duly call, give notice of,
convene and hold a meeting of its stockholders (the "MMI Special Meeting") for
the purpose of approving the issuance of MMI Common Stock contemplated by the
Proposed Acquisition (the "MMI Stockholders' Approval") as soon as reasonably
practicable after the date of this Prospectus); (iii) the MMI Common Stock to be
issued pursuant to the Offer and such of the shares of MMI Common Stock required
to be reserved for issuance pursuant to the Acquisition Agreement, if any, being
approved for listing on the NYSE and the listing having become effective,
subject to official notice of issuance; and (iv) the Unionamerica
Securityholders approving and adopting a resolution at an extraordinary general
meeting of Unionamerica (or at any adjournment thereof) to amend the
Unionamerica Articles to disapply certain voting restrictions contained in
Articles 75 and 76 which would otherwise apply to MMI following the closing of
the Proposed Acquisition.
OFFER PERIOD. The Initial Offer Period commences at 5:00 p.m. (London
time), 12:00 noon (New York City time) on [ ], 1997 and will expire
at 2:30 p.m. (London time), 9:30 a.m. (New York City time) on [ ],
1997, unless extended. Upon expiration of the Initial Offer Period, including
any extension thereof and satisfaction or, where permitted, waiver of the
Conditions, all Unionamerica ADSs validly tendered and not validly withdrawn
will be exchanged and the Offer will be extended for a Subsequent Offer Period
of at least 14 calendar days.
WITHDRAWAL RIGHTS. Unionamerica Securityholders (other than the Selling
Stockholders) will have the right to withdraw any tendered Unionamerica ADSs
during the Initial Offer Period, including any extension thereof, but not during
the Subsequent Offer Period, including any extension thereof. Any Unionamerica
ADSs validly tendered during the Subsequent Offer Period will be accepted for
exchange. Subject to the terms of the Acquisition Agreement, MMI expressly
reserves the right (but will not be obligated) at any time or from time to time
to extend the Initial Offer Period in the manner described in "The Offer--Terms
of the Offer and Proposed Acquisition". Unionamerica may terminate any extension
(other than an extension required by the City Code or U.S. federal securities
laws or the rules and regulations thereunder) of the Initial Offer Period prior
to its scheduled expiration if all Conditions are
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satisfied or, where permitted, waived in accordance with the terms of the
Acquisition Agreement. In such event the Initial Offer Period, including any
extension thereof, and, consequently, withdrawal rights will terminate
immediately.
CERTAIN CONSEQUENCES OF THE OFFERS. The purchase of Unionamerica ADSs
pursuant to the Offer will reduce the number of Unionamerica Securityholders and
the number of Unionamerica ADSs that might otherwise trade publicly and,
depending on the number of Unionamerica ADSs so purchased, could adversely
affect the liquidity and market value of the remaining Unionamerica ADSs held by
the public. In addition, Unionamerica ADSs will cease to be quoted on the NYSE
if MMI is entitled to and does effect the Compulsory Acquisition. Even if the
Compulsory Acquisition is not effected, there would be a delisting from the NYSE
if certain minimum requirements with respect to the number of publicly held
shares and/or the number of public shareholders or other criteria are not met.
The Unionamerica ADSs may also be deregistered under the Exchange Act if minimum
requirements with respect to the number of shareholders of record are not met,
with a consequent termination of certain public reporting obligations in the
U.S.
RECOMMENDATION OF THE OFFER. The Board of Directors of Unionamerica (the
"Unionamerica Board") has determined that the terms of the Offer are fair and
reasonable to holders of Unionamerica ADSs. The Unionamerica Board has
unanimously recommended the Offer to the Unionamerica Securityholders. For a
discussion of the factors taken into consideration by the Unionamerica Board,
see "Unionamerica's Reasons for the Proposed Acquisition and Recommendation of
the Unionamerica Board".
TAX CONSEQUENCES TO UNIONAMERICA SECURITYHOLDERS. Certain tax consequences
to Unionamerica Securityholders in the U.S. and the U.K. of (i) the exchanges
pursuant to the Offer, and (ii) the receipt, ownership and disposal of MMI
Common Stock are described below under "The Offer--Tax Consequences of the
Offer". Unionamerica Securityholders should consult their own tax advisors
concerning the tax consequences and any tax reporting requirements applicable in
light of their particular circumstances.
DESCRIPTION OF MMI
MMI offers a comprehensive set of specialized insurance products and
consulting services that are designed to assist healthcare providers manage the
business, clinical, insurable and financial risks associated with the delivery
of healthcare. MMI had total revenues of $243.2 million in 1996, including net
premiums earned of $164.4 million and consulting and fee income of $34.5
million, and net income of $21.0 million.
MMI's business is organized into three operating groups:
The INSURANCE GROUP generates medical malpractice and life and health
insurance premiums by underwriting primarily professional and general
liability insurance and reinsurance for healthcare providers, including
hospitals, healthcare systems and physician groups.
The STRATEGIC MANAGEMENT CONSULTING GROUP generates fee income by
providing healthcare clients with consulting services, including strategy
development, healthcare system integration and development, managed care
strategy design and implementation, hospital/physician alignment
strategies and business process reengineering.
The HEALTHCARE SERVICES GROUP generates fee income by providing clinical
risk modification services, employee relations and human resource
consulting services, education programs, information services, managed
care and third party administrative services, physician credentials
verification and patient billing and coding services.
MMI is a Delaware corporation with its principal office located at 540 Lake
Cook Road, Deerfield, Illinois, 60015. MMI's telephone number is (847) 940-7550.
7
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For additional information regarding MMI, see documents filed with the
Commission under "Incorporation of Certain Documents by Reference".
DESCRIPTION OF UNIONAMERICA
Founded in 1971, Unionamerica is a specialty casualty and property reinsurer
and insurer operating in the London-based reinsurance and insurance market.
Unionamerica's core business is professional indemnity reinsurance (including
malpractice reinsurance for groups of healthcare providers, lawyers and other
professionals), as well as casualty reinsurance and insurance for a variety of
U.S. single industry and/or single state risks. In addition, Unionamerica
selectively underwrites other risks where it has underwriting expertise and when
management believes market conditions relating to pricing and terms are
attractive. In 1996, these coverages primarily included individual property
risk, automobile physical damage and property catastrophe coverages. Of the
$153.2 million of gross premiums written by Unionamerica in 1996 (stated before
a prior year adjustment of $7.3 million, mainly as a result of adjustments in
estimates for Unionamerica's 1995 surplus lines premium income), 80.1% were in
specialty casualty lines, 63.7% were in reinsurance and 83.2% were attributable
to U.S. insureds and reinsureds. In 1996, Unionamerica had revenues of $145.5
million, which included net premiums earned of $117.0 million. Unionamerica's
net income in 1996 totaled $19.1 million.
Unionamerica is a holding company registered in England and Wales under the
Companies Act with registered number 2822469. Its registered office and
principal place of business is located at 3 Minster Court, Mincing Lane, London
EC3R 7DD, England. Unionamerica's telephone number is +44-171-617-5959.
For additional information regarding Unionamerica, see documents filed with
the Commission under "Incorporation of Certain Documents by Reference".
8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF MMI
The following table sets forth selected consolidated financial information
of MMI for each of the years in the five-year period ended December 31, 1996 and
for each of the three month periods ended March 31, 1996 and 1997. The balance
sheet data as of December 31, 1992, 1993, 1994, 1995 and 1996 and the premium
and income data for the years ending December 31, 1992, 1993, 1994, 1995 and
1996 are derived from the audited consolidated financial statements of MMI. The
selected data as of and for each of the three month periods ended March 31, 1996
and 1997 has been derived from the unaudited consolidated financial statements
of MMI. In the opinion of MMI's management, the unaudited consolidated financial
information includes all adjustments necessary for a fair presentation of the
financial position and results of operations for such periods. The selected
consolidated financial information should be read in conjunction with MMI's
consolidated financial statements and notes thereto incorporated by reference in
this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1992(1) 1993 1994(2) 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS AND INCOME DATA:
Gross premiums written.............. $ 136,774 $ 161,421 $ 184,791 $ 210,752 $ 214,326 $ 94,222 $ 95,485
Net premiums written................ 102,350 120,237 139,800 161,188 167,392 73,200 76,155
Net premiums earned................. 100,894 116,295 132,389 155,191 164,409 42,320 42,276
Consulting and fee income........... 5,924 6,962 18,602 22,336 34,535 6,370 12,067
Net investment income............... 28,603 29,836 29,067 39,850 44,274 10,973 11,297
Total revenues...................... 142,074 154,864 177,205 218,744 243,178 61,211 66,511
Income from continuing
operations(3)..................... 6,683 14,181 15,051 22,695 26,115 7,411 6,707
Per share(4)...................... 1.01 1.90 1.72 2.34 2.42 0.72 0.56
Operating income(3)(5).............. 2,292 13,030 16,905 21,806 26,141 6,405 6,141
Per share(4)...................... 0.35 1.74 1.93 2.25 2.43 0.63 0.51
Cash dividends per common share..... 0.11 0.12 0.16 0.20 0.24 0.06 0.07
Weighted average number of common
and common equivalent shares(4)... 6,613 7,483 8,763 9,683 10,770 10,224 12,064
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and investments................ $ 414,775 $ 472,754 $ 498,177 $ 744,061 $ 789,530 $ 735,615 $ 757,568
Total assets........................ 558,998 643,773 693,804 982,678 1,058,018 1,025,138 1,097,061
Loss and loss adjustment expense
reserves.......................... 384,621 419,679 448,672 638,815 631,573 647,233 629,350
Long-term debt...................... 23,000 16,000 28,000 49,000 58,000 50,000 58,000
Net unrealized gains (losses) on
investments....................... -- -- (7,237) 18,490 12,791 6,258 6,507
Stockholders' equity................ 76,966 116,503 123,059 186,463 251,966 183,877 252,950
Book value per share................ 11.96 13.56 14.28 19.27 21.67 18.69 21.64
GAAP RATIOS (6):
Loss ratio.......................... 86.6% 87.3% 85.1% 83.8% 82.6% 83.0% 82.3%
Expense ratio....................... 36.5 22.6 20.3 22.1 23.0 21.6 23.9
--------- --------- --------- --------- --------- --------- ---------
Combined ratio...................... 123.1% 109.9% 105.4% 105.9% 105.6% 104.6% 106.2%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------------------
(1) For 1992, income from continuing operations, operating income and GAAP
ratios have been significantly affected by certain events relating to a
special assessment by the state of Florida, option termination expense, and
a provision for reinsurance and interest on a tax refund.
(2) MMI adopted a new standard on accounting for investments in 1994.
(3) Income from continuing operations excludes amounts relating to segments that
were discontinued in 1992. Losses from discontinued operations were
$7,024,000 in 1992 and $5,100,000 in 1996. (See Note 14 to the Consolidated
Financial Statements).
(4) Per share data and weighted average shares are presented on a fully diluted
basis.
9
<PAGE>
(5) Operating income represents income from continuing operations before
after-tax realized investment gains (losses) of $4,391,000 in 1992,
$1,151,000 in 1993, $(1,854,000) in 1994, $889,000 in 1995, $(26,000) in
1996, and $1,006,000 and $566,000 for the three months ended March 31, 1996
and 1997, respectively.
(6) GAAP ratios have been derived from the financial statements of American
Continental Insurance Company ("ACIC"), American Continental Life Insurance
Company ("ACLIC"), and Health Providers Insurance Company ("HPIC"), from the
date of its acquisition in 1995, as prepared on a GAAP basis for inclusion
in MMI's consolidated financial statements. Events described in Note 1
resulted in an increase in the GAAP combined ratio of 5.8 percentage points
in 1992.
(7) MMI entered into business combinations as described in Note 2 to the
Consolidated Financial Statements and acquired McManis Associates, Inc. in
December 1993.
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF UNIONAMERICA
The following table sets forth selected consolidated financial information
of Unionamerica for each of the years in the five-year period ended December 31,
1996 and for each of the three month periods ended March 31, 1996 and 1997. The
balance sheet data as of December 31, 1993, 1994, 1995 and 1996 and the premium
and income data for the years ending December 31, 1992, 1993, 1994, 1995 and
1996 are derived from the audited consolidated financial statements of
Unionamerica. The selected information as of and for each of the three month
periods ended March 31, 1996 and 1997 and the balance sheet data as of December
31, 1992 has been extracted from the unaudited consolidated financial statements
of Unionamerica. In the opinion of Unionamerica's management, the unaudited
consolidated financial information includes all adjustments necessary for a fair
presentation of the financial position and results of operations for such
periods. The selected consolidated financial information should be read in
conjunction with Unionamerica's consolidated financial statements and notes
thereto incorporated by reference in this Prospectus. Unionamerica's functional
currency has been determined to be the U.S. dollar.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY SUCCESSOR COMPANY
---------------------------- --------------------------------------------------
PERIOD FROM PERIOD FROM COMBINED PRO
JANUARY 1, SEPTEMBER 10, FORMA YEAR YEAR ENDED DECEMBER
YEAR ENDED 1993 TO 1993 TO ENDED 31,
DECEMBER 31, SEPTEMBER 9, DECEMBER 31, DECEMBER 31, --------------------
1992 1993(1) 1993(1) 1993(1) 1994 1995
------------- ------------- ------------- ------------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C>
PREMIUM AND INCOME DATA:
Gross premiums written...................... $ 130,407 $ 135,197 $ 10,756 $ 145,953 $ 140,401 $ 157,366
Net premiums written........................ 114,907 118,254 10,742 128,996 124,584 137,207
Net premiums earned......................... 111,805 89,684 36,009 125,693 135,587 117,712
Net investment income....................... 25,893 17,154 6,217 23,371 22,083 23,086
Net realized gains (losses) on
investments(2)............................ 4,536 4,672 701 5,373 (32,408) 325
Total revenues.............................. 143,055 113,845 43,060 156,905 125,262 141,123
Income (loss) before extraordinary
loss(3)................................... 14,050 13,964 5,229 19,193 (6,791) 12,953
Extraordinary loss, net of taxes(4)......... -- -- -- -- -- (4,737)
Net income (loss) available to ordinary
shareholders.............................. 4,792 (8,253) 6,699
Income (loss) per ordinary share:
Income (loss) before extraordinary loss... 1.00 (1.85) 2.28
Extraordinary loss........................ -- -- (0.94)
Net income (loss) available to ordinary
shareholders............................ 1.00 (1.85) 1.34
Operating income(5)......................... 11,011 10,834 4,322 15,156 13,460 11,218
Per share................................. 0.90 3.02 2.24
Dividend per ordinary share(6) -- -- 0.0125
Weighted average number of shares and share
equivalents............................... 4,792 -- 4,464 5,018
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and investments(7)(8).................. $ 361,417 $ 380,394 $ 350,872 $ 422,764
Total assets(8)............................. 498,772 793,977 712,607 765,118
Loss and loss adjustment expense
reserves(8)............................... 330,480 603,743 559,263 561,055
Long-term debt.............................. -- 76,000 69,000 40,000
Redeemable preference shares................ -- 15,437 16,899 --
Net unrealized gains (losses) on
investments............................... -- (3,442) (2,233) 4,219
Stockholders' equity........................ 93,357 20,932 13,893 85,803
Book value per share........................ -- -- 3.11 10.35
GAAP RATIOS:
Loss ratio.................................. 76.8% 76.9% 61.4% 72.5% 64.7% 64.8%
Expense ratio............................... 32.8 26.7 31.2 28.0 31.4 33.8
------------- ------------- ------------- ------------- --------- ---------
Combined ratio.............................. 109.6% 103.6% 92.6% 100.5% 96.1% 98.6%
------------- ------------- ------------- ------------- --------- ---------
------------- ------------- ------------- ------------- --------- ---------
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
PREMIUM AND INCOME DATA:
Gross premiums written...................... $ 145,897 $ 76,696 $ 87,945
Net premiums written........................ 122,725 62,982 69,686
Net premiums earned......................... 116,982 32,891 29,147
Net investment income....................... 29,407 6,793 6,797
Net realized gains (losses) on
investments(2)............................ (850) 388 (270)
Total revenues.............................. 145,539 40,072 35,674
Income (loss) before extraordinary
loss(3)................................... 19,105 4,810 3,918
Extraordinary loss, net of taxes(4)......... -- -- --
Net income (loss) available to ordinary
shareholders.............................. 19,105 4,810 3,918
Income (loss) per ordinary share:
Income (loss) before extraordinary loss... 2.18 0.55 0.45
Extraordinary loss........................ -- -- --
Net income (loss) available to ordinary
shareholders............................ 2.18 0.55 0.45
Operating income(5)......................... 19,675 4,550 4,099
Per share................................. 2.25 0.52 0.47
Dividend per ordinary share(6) 0.0500 0.0125 0.0125
Weighted average number of shares and share
equivalents............................... 8,754 8,729 8,761
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and investments(7)(8).................. $ 425,393 $ 414,670 $ 415,121
Total assets(8)............................. 750,790 814,011 799,692
Loss and loss adjustment expense
reserves(8)............................... 524,153 561,491 516,944
Long-term debt.............................. 35,000 40,000 35,000
Redeemable preference shares................ -- -- --
Net unrealized gains (losses) on
investments............................... 665 (2,054) (1,777)
Stockholders' equity........................ 103,200 86,523 104,570
Book value per share........................ 12.23 10.26 12.39
GAAP RATIOS:
Loss ratio.................................. 62.4% 64.7% 59.1%
Expense ratio............................... 36.9 33.5 40.7
--------- --------- ---------
Combined ratio.............................. 99.3% 98.2% 99.8%
--------- --------- ---------
--------- --------- ---------
</TABLE>
(Footnotes on following page)
11
<PAGE>
(1) Unionamerica acquired Unionamerica Insurance Company Limited from
Continental Corporation on September 10, 1993 (the "UA Acquisition"). In
this financial presentation, the statement of operations data for 1993 has
been split into the pre-UA Acquisition period from January 1, 1993 to
September 9, 1993 and the post-UA Acquisition period from September 10, 1993
to December 31, 1993. For convenience, these results have been combined on a
pro forma basis under the caption "Combined Pro Forma Year Ended December
31, 1993".
(2) In order to eliminate the ongoing effects on Unionamerica's results of
operations of the amortization of UA Acquisition-related purchase premium on
debt securities, Unionamerica sold substantially all of its debt securities
in 1994. As a result of such sales, Unionamerica realized the remaining
amount of such purchase premium $(28.2 million) as a realized loss during
the year.
(3) Net income (loss) for the post-UA Acquisition period does not reflect issued
or accrued dividends on Senior Preference Shares in issue from 1993 to 1995.
(4) The extraordinary loss is in respect of the write-off of deferred financing
costs in 1995 in the amount of $3.3 million pre-tax ($2.2 million after-tax)
upon the refinancing of Unionamerica's prior long term debt together with a
premium on early redemption of its subordinated loan notes in the amount of
$2.5 million pre-tax ($2.5 million after tax).
(5) Operating income has been presented to illustrate the operating results of
Unionamerica. This measure eliminates from net income (i) the effects of net
realized gains (losses) and related taxes, which may vary significantly from
period to period due, among other things, to early redemptions, changes in
interest rates and other factors not related to Unionamerica's operations
(ii) the extraordinary loss in respect of the write-off of deferred
financing costs and early redemption premium on the subordinated loan notes
and (iii) issued or accrued dividends on senior preference shares in issue
from 1993 to 1995. Such measure is presented for informational purposes only
and should not be considered as a substitute for net income.
(6) Unionamerica declared its first dividend, a quarterly dividend, of $0.0125
per share of Unionamerica Common Stock on January 31, 1996 and has declared
quarterly dividends of $0.0125 per share of Unionamerica Common Stock each
quarter since that date.
(7) During 1995 Unionamerica received $63.1 million related to a commutation
with Accord Re.
(8) At December 31, 1993, and all subsequent reporting dates, both assets and
outstanding losses and loss adjustment expenses and unearned premiums were
grossed-up separately to account for reinsurance recoverables in accordance
with Statement of Financial Accounting Standards No. 113. Prior periods have
not been similarly presented.
12
<PAGE>
SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The selected pro forma condensed combined financial information as of
December 31, 1994, 1995 and 1996 and for each of the years in the three year
period ended December 31, 1996 and as of March 31, 1996 and 1997 and for each of
the three months then ended is derived from the pro forma condensed combined
financial information included elsewhere in this Prospectus. See "Pro Forma
Condensed Combined Financial Information". The pro forma condensed combined
financial information does not purport to represent what the combined financial
position or results of operations actually would have been if the Proposed
Acquisition had been completed at the beginning of the periods presented. The
information presented below should be read in conjunction with the historical
financial statements of MMI and Unionamerica incorporated by reference and the
pro forma condensed combined financial statements included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
PREMIUMS AND INCOME DATA:
Gross premiums written..................... $ 323,070 $ 365,747 $ 357,718 $ 169,594 $ 182,403
Net premiums written....................... 264,384 298,395 290,117 136,182 145,841
Net premiums earned........................ 267,976 272,903 281,391 75,211 71,423
Consulting and fee income.................. 18,602 22,336 34,535 6,370 12,067
Net investment income...................... 51,150 62,936 73,681 17,766 18,094
Total revenues............................. 302,467 359,867 388,717 101,283 102,185
Income from continuing operations.......... 8,260 35,648 45,220 12,221 10,625
Per share................................ 0.54 2.46 2.50 0.70 0.55
Operating income........................... 31,827 34,541 45,816 10,955 10,240
Per share................................ 2.55 2.49 2.53 0.63 0.53
Dividends per common share outstanding at
end of period............................ 0.11 0.12 0.15 0.03 0.05
Weighted average number of common and
common equivalent shares................. 12,495 13,878 18,088 17,521 19,388
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and investments....................... $ 849,049 $ 1,166,825 $ 1,214,923 $ 1,150,285 $ 1,172,689
Total assets............................... 1,406,411 1,741,758 1,802,558 1,832,237 1,890,218
Loss and loss adjustment expense
reserves................................. 1,007,935 1,194,233 1,149,918 1,202,640 1,140,627
Long-term debt............................. 97,000 89,000 93,000 90,000 93,000
Net unrealized gains (losses) on
investments.............................. (9,470) 22,709 13,456 4,204 4,730
Stockholders' equity....................... 136,952 272,266 355,166 270,400 357,520
Book value per share....................... 11.04 16.39 19.01 16.01 19.07
GAAP RATIOS:
Loss ratio................................. 74.8% 75.6% 74.2% 75.0% 72.8%
Expense ratio.............................. 25.9 27.2 28.8 26.8 30.8
------------ ------------ ------------ ------------ ------------
Combined ratio............................. 100.7% 102.8% 103.0% 101.8% 103.6%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
13
<PAGE>
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
The following table sets forth MMI's and Unionamerica's historical per share
data and pro forma combined per share data for the years ended December 31,
1994, 1995 and 1996 and for the three months ended March 31, 1996 and 1997
giving effect to the Proposed Acquisition, to be accounted for as a pooling-
of-interests, and is derived from the historical financial statements of MMI and
Unionamerica and the pro forma condensed combined financial information. The pro
forma combined financial information does not purport to represent what the
combined financial position or results of operations actually would have been if
the Proposed Acquisition had been completed at the beginning of the periods
presented. The information presented below should be read in conjunction with
the historical financial statements of MMI and Unionamerica incorporated by
reference and the pro forma condensed combined financial statements included
elsewhere in this Prospectus. See "Pro Forma Condensed Combined Financial
Information".
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
MMI
Book value (at end of period)............................ $ 14.28 $ 19.27 $ 21.67 $ 18.69 $ 21.64
Cash dividends........................................... 0.16 0.20 0.24 0.06 0.07
Income from continuing operations........................ 1.72 2.34 2.42 0.72 0.56
UNIONAMERICA
Book value (at end of period)............................ 3.11 10.35 12.23 10.26 12.39
Cash dividends........................................... -- 0.0125 0.05 0.0125 0.0125
Income (loss) before extraordinary loss.................. (1.85) 2.28 2.18 0.55 0.45
MMI PRO FORMA COMBINED
Book value (at end of period)............................ 11.04 16.39 19.01 16.01 19.07
Cash dividends........................................... 0.11 0.12 0.15 0.03 0.05
Income from continuing operations........................ 0.54 2.46 2.50 0.70 0.55
</TABLE>
MARKET PRICE OF MMI COMMON STOCK AND UNIONAMERICA ADSS
On June 25, 1997 MMI announced the signing of the Acquisition Agreement and
its intent to make the Offer. The following table sets forth the closing price
of MMI Common Stock and Unionamerica ADSs on the NYSE on June 24, 1997 (being
the last trading day prior to the announcement that Unionamerica and MMI had
entered into the Acquisition Agreement), and for July 18, 1997 (being the latest
practicable date prior to the filing of this Prospectus with the Commission),
and the equivalent market price for the amount of MMI Common Stock being offered
per Unionamerica ADS, based on the Exchange Ratio of 0.836 shares of MMI Common
Stock per Unionamerica ADS.
<TABLE>
<CAPTION>
CLOSING EQUIVALENT
PRICE MARKET PRICE
----------- ---------------
<S> <C> <C>
June 24, 1997:
MMI Common Stock.................... $ 26.50 --
Unionamerica ADSs................... 19.50 $ 22.15
July 18, 1997:
MMI Common Stock.................... $ 26.81 --
Unionamerica ADSs................... 21.69 $ 22.41
</TABLE>
The amounts set forth in the above table for June 24, 1997 represent an
increase in value of Unionamerica ADSs (assuming the exchange was completed on
such date) of $2.65 or 13.59% (without accounting for any liability for taxes or
for sales expenses associated with a transfer of Unionamerica ADSs, and assuming
the issuance of fractional shares).
14
<PAGE>
MMI COMMON STOCK AND UNIONAMERICA ADSS HELD BY DIRECTORS, EXECUTIVE OFFICERS AND
THEIR AFFILIATES
MMI. As of June 30, 1997, 16 directors and executive officers of MMI as a
group reported beneficial ownership, directly and indirectly, of 366,000 shares
of MMI Common Stock and 571,000 options, exercisable within 60 days, to purchase
shares of MMI Common Stock. The number of shares of MMI Common Stock and options
beneficially held by directors and executive officers, totaling 937,000,
represents 7.6% of the total of the number of shares of MMI Common Stock
outstanding as of June 30, 1997 plus the options held by the directors and
executive officers of MMI.
As reported in a Schedule 13G filed with the Commission and dated May 5,
1997, Wellington Management Company, LLP ("Wellington") reported beneficial
ownership of 1,185,940 shares of MMI Common Stock, representing 10.10% of the
issued share capital of MMI. With respect to those shares, Wellington had the
sole power to vote 615,440 shares and the sole power to direct the disposition
of 1,185,940 shares.
UNIONAMERICA. The existing shareholders of Unionamerica as of December 4,
1995, including 15 directors and officers of Unionamerica, are parties to an
amended Shareholders' Agreement (the "Shareholders' Agreement") which contains
certain restrictions on the transfer of Unionamerica Common Stock by certain of
the parties thereto, as well as certain voting agreement provisions. As a result
of the Shareholders' Agreement, the parties thereto may be deemed to constitute
a group within the meaning of Rule 13d-5 under the Exchange Act. As such, the
group has reported that it may be deemed to own beneficially an aggregate of
4,867,778 Unionamerica ADSs, representing 55% of the Unionamerica ADSs
outstanding as of December 31, 1996. One of the parties to the Shareholders'
Agreement, UA Partners, L.P., reported beneficial ownership of 1,147,355
Unionamerica ADSs, representing 12.99% of the issued and outstanding
Unionamerica ADSs as of December 31, 1996. With the application of the
Unionamerica Articles' voting provisions, the Unionamerica ADSs owned by UA
Partners, L.P. represents 4.20% of the voting Unionamerica Securities.
As of June 30, 1997 the number of Unionamerica ADSs and options beneficially
held by directors and officers, totaling 624,754, represents 7.1% of the total
number of Unionamerica ADSs outstanding as of June 30, 1997 plus the options
held by the directors and officers of Unionamerica.
As reported in a Schedule 13G filed with the Commission and dated May 10,
1996 and based on information subsequently provided by the reporting person, FMR
Corp. reported beneficial ownership of 1,077,600 Unionamerica ADSs, representing
12.20% of the issued and outstanding Unionamerica ADSs as of December 31, 1996.
With the application of the Unionamerica Articles' voting provisions, the
Unionamerica ADSs beneficially owned by FMR Corp. represents 15.04% of the
voting Unionamerica Securities. The power to vote the 1,077,600 Unionamerica
ADSs is held by the Board of Trustees of various FMR Corp. investment companies.
REGULATORY APPROVAL REQUIREMENTS
In accordance with certain U.K. and U.S. antitrust laws, various regulatory
approvals are required to be obtained under the Offer: (i) prior to the time the
Offer becomes or is declared unconditional in all respects, MMI will apply for
consent from the U.K. Department of Trade and Industry to its becoming a
controller (as defined in the Insurance Companies Act 1982) of a Subsidiary of
Unionamerica, Unionamerica Insurance Company Limited; (ii) prior to the time the
Offer becomes or is declared unconditional in all respects, MMI will apply for
the consent from Lloyd's to MMI becoming a controller of Jago Capital Limited
and to MMI becoming a controller of Jago Managing Agency Limited, a Lloyd's
managing agency in which Unionamerica has an effective equity interest of
approximately 39%; and (iii) prior to the time the Offer becomes or is declared
unconditional in all respects, MMI will apply to the Federal Trade Commission to
grant the request of MMI for early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the
15
<PAGE>
"HSR Act"). In addition, the Offer will lapse if it is referred to the Mergers
and Monopolies Commission of the U.K. (the "MMC") before 2:30 p.m. (London
time), 9:30 a.m. (New York time) on the Initial Closing Date or the date on
which the Offer becomes or is declared unconditional in all respects, whichever
is the later.
For a complete discussion of the regulatory approvals necessary to
consummate the Offer and the Proposed Acquisition, see "The Offer--Terms of the
Offer and Proposed Acquisition--Conditions of the Offer" and Appendix
E--"Certain Additional Information Required Under the City Code--Certain Legal
and Regulatory Matters". MMI is unable to predict the amount of time necessary
to obtain the governmental and regulatory approvals and consents required to
consummate the Offer and the Proposed Acquisition contemplated herein. It is
anticipated, however, that in the event the time necessary to obtain such
governmental and regulatory approvals and consents extends beyond the Initial
Closing Date, MMI will extend the Initial Offer Period pursuant to the terms of
the Acquisition Agreement.
DISSENTERS' RIGHTS
UNIONAMERICA. Under English law, shareholders do not generally have
dissenters' rights, as the concept is understood under the General Corporation
Law of the State of Delaware, as amended from time to time (the "DGCL"), and the
Unionamerica Articles do not contain any dissenters' rights. Certain limited
rights analogous to dissenters' rights exist where an offeror who, pursuant to a
takeover offer for a company, has acquired or contracted to acquire not less
than nine-tenths in value of the shares to which the offer relates, seeks to
acquire the outstanding minority shareholdings pursuant to the compulsory
acquisition provisions under the Companies Act. See "The Offer--Changes in the
Rights of Unionamerica Securityholders--Required Vote for Authorization of
Certain Corporate Actions and Certain Provisions Relating to Business
Combinations" and Appendix F--"Certain Provisions of the Companies Act".
MMI. Under the DGCL, holders of MMI Common Stock are not entitled to
dissenters' rights in connection with the Offer and the Proposed Acquisition.
TAX CONSEQUENCES OF THE OFFER
Exchanges of Unionamerica ADSs for MMI Common Stock pursuant to the Offer
and the Proposed Acquisition should be treated for U.S. federal income tax
purposes as exchanges pursuant to a transaction described in Section
368(a)(1)(B) of the IRC, and no gain or loss should be recognized by (i) MMI or
Unionamerica as a result of the Offer or the Proposed Acquisition or (ii) a
holder of Unionamerica ADSs upon the exchange in the Offer or the Proposed
Acquisition of such Unionamerica ADSs solely for MMI Common Stock, except with
respect to the receipt of cash in lieu of fractional shares of MMI Common Stock.
It is a Condition of the Offer that Paul, Weiss, Rifkind, Wharton & Garrison,
special U.S. tax counsel to Unionamerica, provide an opinion to the foregoing
effect.
All Unionamerica Securityholders should carefully read the summary of the
income tax consequences of the Offer and the Proposed Acquisition under "The
Offer--Tax Consequences of the Offer" and are urged to consult with their own
tax advisors as to the U.S., U.K., state and local tax consequences in their
particular circumstances.
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RISK FACTORS
Unionamerica Securityholders should carefully consider the following
matters, together with the other information contained in this Prospectus, in
evaluating the Offer.
FIXED EXCHANGE RATIO DESPITE CHANGE IN RELATIVE STOCK PRICES. The Exchange
Ratio is expressed in the Acquisition Agreement as a fixed ratio of 0.836 shares
of MMI Common Stock for each Unionamerica ADS. Accordingly, the Exchange Ratio
will not be adjusted in the event of any increase or decrease in the price of
either MMI Common Stock or Unionamerica ADSs. The price of MMI Common Stock at
the closing of the Proposed Acquisition will vary from its price at the date of
this Prospectus and at the date of the MMI Special Meeting. Such variations may
be the result of changes in the business, operations or prospects of MMI or
Unionamerica, market assessments of the likelihood that the Proposed Acquisition
will be consummated and the timing thereof, regulatory considerations, general
market and economic conditions and other factors. Unionamerica Securityholders
are urged to obtain current market quotations for MMI Common Stock and
Unionamerica ADSs.
FAILURE TO QUALIFY FOR POOLING-OF-INTERESTS ACCOUNTING TREATMENT. The Offer
and the Proposed Acquisition are intended to qualify for pooling-of-interests
treatment under GAAP. Under pooling-of-interests treatment, the accounts of MMI
will be combined with those of Unionamerica at their historical carrying amount
and MMI's financial statements for all prior periods will be restated to reflect
the accounts of MMI as if the two companies had been combined for all periods.
Should the Proposed Acquisition become or be declared unconditional in all
respects and not qualify for pooling-of-interests treatment, the purchase method
of accounting would be applied. Under that method, the estimated fair value of
the MMI Common Stock issued to effect the Proposed Acquisition would be recorded
as the cost of acquiring Unionamerica's business. That cost would be allocated
to the individual assets acquired and liabilities assumed according to their
respective fair values with the excess of the estimated fair value of MMI Common
Stock over the fair value of net assets acquired recorded as goodwill, to be
amortized over a period up to 40 years. The estimated fair value of the MMI
Common Stock to be issued in the Proposed Acquisition is substantially in excess
of the amount at which the net assets are carried in Unionamerica's accounts.
Accordingly, purchase accounting treatment may have a material adverse impact on
the reported operating results of the combined companies as compared to that
under pooling-of-interests treatment. See "The Offer--Terms of the Offer and
Proposed Acquisition", and "Accounting Treatment".
FUTURE SALES OF MMI COMMON STOCK ISSUED IN OFFER AND COMPULSORY
ACQUISITION. Assuming the Offer and the Compulsory Acquisition are successfully
completed, up to 7,685,336 shares of MMI Common Stock will be issued, of which
up to 5,995,999 shares will be immediately freely tradeable under the Securities
Act. The remaining 1,689,337 shares, which will be issued to affiliates of
Unionamerica, will be freely tradeable after MMI has published financial results
covering at least 30 days of combined operations. Sales of a substantial number
of such shares of MMI Common Stock could adversely affect the market price of
the MMI Common Stock. See "The Offer--Terms of the Offer and Proposed
Acquisition".
CHANGES IN THE RIGHTS OF UNIONAMERICA SECURITYHOLDERS. Unionamerica is
incorporated under English law. Those Unionamerica Securityholders who exchange
their Unionamerica ADSs for MMI Common Stock and whose rights as Unionamerica
Securityholders are currently governed by English law, including the Companies
Act, and by the Unionamerica Articles, will, upon the exchange of Unionamerica
ADSs, become stockholders of MMI and their rights as stockholders will be
governed by the laws of the U.S., and by the DGCL, the Restated Certificate of
Incorporation of MMI (the "MMI Certificate"), and the Amended and Restated
Bylaws of MMI (the "MMI Bylaws"). MMI and Unionamerica are both currently
subject to the U.S. securities laws and the rules and regulations of the NYSE.
Certain differences between the rights of Unionamerica Securityholders and the
stockholders of MMI arise from differences between English law and the laws of
the U.S. and the DGCL, as well as from differences between the corporate
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governing instruments of the two companies, and the rules and regulations of the
regulatory bodies governing the two companies. These differences may have a
material effect on the rights of Unionamerica Securityholders to nominate, vote
for and remove directors, approve certain corporate action, receive dividends,
and inspect corporate records, among other things. See "The Offer--Description
of MMI Capital Stock", "The Offer--Description of Unionamerica Capital Stock"
and "The Offer--Changes in the Rights of Unionamerica Securityholders".
REALIZATION OF OPERATING SYNERGIES. The Proposed Acquisition involves the
combination of two companies that have previously operated independently of each
other. Although MMI expects to achieve savings in operating costs, delays or
unexpected expenses related to operating the companies under common ownership
could result in reductions in net income. In addition, it is possible that MMI
or Unionamerica may experience the loss of personnel or customers as a result of
the Proposed Acquisition.
INDUSTRY FACTORS AND COMPETITION. Many factors influence the financial
results of the medical malpractice insurance and reinsurance businesses, several
of which are beyond the control of MMI. The supply of insurance, or the
industry's underwriting capacity, is determined principally by the industry's
level of capitalization, historical underwriting results, returns on investment
and perceived premium rate adequacy. MMI and Unionamerica compete with numerous
insurance companies and consulting businesses, many of which have greater
financial resources than do MMI and Unionamerica. These factors, together with
competitive pricing, could result in fluctuations in underwriting results and
net income.
UNDERWRITING LOSSES AND RESERVES. The reserves for losses and loss
adjustment expenses established by MMI and by Unionamerica are estimates of
amounts needed to pay reported and unreported claims and related loss adjustment
expenses. The estimates are based on assumptions related to the ultimate cost of
settling such claims. If the reserves are inadequate, MMI will be required to
increase its reserves and thus reduce its net income in the period in which the
deficiency is identified. Unanticipated underwriting losses or materially
underestimated reserves could have a material adverse effect on MMI.
REINSURANCE. In order to reduce risk and to increase its underwriting
capacity, MMI and Unionamerica obtain reinsurance from unaffiliated reinsurers,
although they generally retain a portion of each risk reinsured. MMI and
Unionamerica are subject to credit risk with respect to their reinsurers because
reinsurance does not relieve the ceding company of liability to its insureds for
the risks ceded to reinsurers. Although MMI believes that its and Unionamerica's
reinsurance is maintained with financially stable reinsurers and that any
reinsurance security maintained is adequate to protect their interests, a
reinsurer's insolvency or inability to make payments under the terms of a
reinsurance treaty could have a material adverse effect on MMI.
HOLDING COMPANY STRUCTURE AND RESTRICTIONS ON INSURANCE SUBSIDIARIES. As a
holding company, MMI depends on dividends and other permitted payments from its
Subsidiaries to meet its cash needs, including servicing its debt and paying
stockholder dividends. The Missouri and Illinois insurance laws and regulations
impose restrictions on the amount of dividends that may be paid to stockholders
by insurance companies domiciled in the respective states without prior approval
of the Director of Insurance in such states. ACIC may not, without the prior
approval of the Missouri Director of Insurance, pay a dividend that, together
with any other dividends paid within the twelve-month period ending on the date
when the dividend will be paid, exceeds the lesser of ACIC's net investment
income for the prior calendar year or ten percent of its statutory surplus as of
December 31 of the prior calendar year. HPIC may not, without the prior approval
of the Illinois Director of Insurance, pay a dividend that, together with any
other dividends paid within the twelve-month period ending on the date when the
dividend will be paid, exceeds the greater of ten percent of its statutory
surplus as of December 31 of the prior calendar year or net income for the prior
calendar year.
In connection with Unionamerica's authorization in the U.K., the Secretary
of State for Trade and Industry acting through the Insurance Directorate of the
U.K. Department of Trade and Industry ("DTI")
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has set forth Unionamerica's Notice of Requirements, the provisions of which
include, among other things, that Unionamerica may not pay any dividends unless
it has given the DTI 14 days advance notice and the DTI has not objected. The
DTI has the power to prohibit or require Unionamerica to reduce the amount of a
dividend, restrict the amount of its writings and to prohibit transactions by
Unionamerica with affiliates.
MMI's bank credit agreement restricts dividends and share repurchases in an
amount not to exceed for each fiscal year 20% of MMI's consolidated net earnings
after taxes of the previous fiscal year, but MMI may in one fiscal year during
the term of the bank credit agreement pay an amount of dividends up to the
amount paid in the prior fiscal year without regard to the amount of its
consolidated net earnings after taxes in such prior fiscal year. Unionamerica's
bank credit agreement contains covenants, including among others, limitations on
dividend payments, minimum statutory capital and surplus requirements and fixed
charge ratios.
REGULATION. Unionamerica and its Subsidiaries, and MMI's insurance
Subsidiaries, are subject to supervision and regulation of their businesses and
financial condition by the jurisdictions in which they transact business. The
primary purpose of such supervision and regulation is the protection of the
interests of policyholders as opposed to the interests of the holders of MMI
Common Stock and Unionamerica ADSs. Such supervision and regulation generally
derives from statutes which delegate broad regulatory, supervisory and
administrative authority to insurance departments and other governmental
entities.
In addition to state-imposed insurance laws and regulations, MMI is subject
to statutory accounting practices and the reporting format of the National
Association of Insurance Commissioners (the "NAIC"). The NAIC and many states
have adopted risk-based capital formulas to establish minimum capital and
surplus requirements for insurance companies and a model act for regulation of
such companies. The risk based capital formula measures a company's asset risk,
insurance risk, interest rate risk and business risk. As of December 31, 1996,
the surplus of each of MMI's insurance Subsidiaries exceeded the minimum
requirements under the NAIC formula.
The impact on MMI of any changes in these laws, or of changes in or the
adoption of any other laws or regulations, can not be predicted.
Unionamerica is a U.K. authorized insurance company subject to regulation
and supervision in the U.K. under U.K. domestic and European Community law. The
Insurance Companies Act 1982, as amended, imposes on U.K. insurance companies
solvency and liquidity standards and auditing and reporting requirements, and
further grants to the DTI powers to supervise, investigate and intervene in the
affairs of insurance companies. Unionamerica is subject to a Notice of
Requirements issued by the DTI (as is frequently the DTI's practice in
connection with an acquisition of a U.K. insurance company) which, among other
things, restricts Unionamerica from entering into certain transactions with
affiliates and sets a ceiling on the annual amount of gross premiums that may be
written by Unionamerica. In addition, before it may pay any dividend,
Unionamerica is required to give 14 days' advance notice to the DTI, which has
the ability to reduce or prohibit such payment. Unionamerica is permitted to
seek the approval of the DTI for an increase in the gross premiums ceiling in
respect of one or more years and may do so depending on future business
conditions. Neither Unionamerica nor any of its Subsidiaries is incorporated or
licensed as an insurance company in any jurisdiction of the U.S. Each state of
the U.S. regulates to an extent the purchase of insurance and reinsurance by its
citizens from alien insurers and reinsurers, such as Unionamerica. Recently,
insurance regulation in the U.S., particularly as it relates to alien insurers
and reinsurers, has been subject to increased scrutiny by the NAIC and
legislative and regulatory bodies.
Medical malpractice and hospital professional indemnity coverages written
for U.S. reinsureds and insureds constituted 28% of Unionamerica's gross
premiums written in 1996. Changes in U.S. laws relating to medical malpractice
liability have been proposed from time to time in recent years. The impact on
MMI and Unionamerica of such changes in these laws, if adopted, or of changes in
or the adoption of any other laws or regulations, can not be predicted.
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TAXATION. The combined entity's operations will be subject to taxation in
jurisdictions outside the U.S. Specifically, as a result of the Proposed
Acquisition, certain of MMI's operations will be subject to both U.S. taxation
and U.K. taxation, and may be subject to taxation in other jurisdictions. The
U.S. taxation system provides credit for federal taxes paid to other
jurisdictions, subject to certain limitations. If such limitations on available
credits apply, and excess foreign tax credits exist, the effective tax rate
relating to the foreign operations of MMI in any one taxable period could exceed
the U.S. federal statutory rate. MMI's management intends to implement planning
such that foreign tax credits are fully utilized.
In addition, the tax laws of the U.S. and the U.K. could change which may
result in additional taxes.
FAILURE TO QUALIFY FOR U.S. TAX FREE REORGANIZATION TREATMENT. The Internal
Revenue Service (the "IRS") may challenge the tax free nature of the
reorganization. If the IRS were to prevail, the tender of Unionamerica ADSs in
exchange for MMI Common Stock would constitute a sale or exchange of a capital
asset to the former Unionamerica Securityholders who are not broker/dealers.
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THE OFFER
TERMS OF THE OFFER AND PROPOSED ACQUISITION
INTRODUCTION. On June 25, 1997, MMI and Unionamerica entered into an
Acquisition Agreement pursuant to which, subject to the terms and conditions
stated therein and in this Prospectus and the accompanying Letter of
Transmittal, MMI agreed to offer 0.836 shares of MMI Common Stock for each
outstanding Unionamerica ADS. This Prospectus contains the formal offer by MMI.
THE OFFER. MMI hereby offers to acquire, on the terms and subject to the
conditions set out in this Prospectus and the accompanying Letter of Transmittal
(including if the Offer is revised, varied, extended or renewed, the terms and
conditions of any such revision, variation, extension or renewal), each
outstanding share of Unionamerica Common Stock (including shares represented by
Unionamerica ADSs) in exchange for 0.836 shares of MMI Common Stock. Each share
of MMI Common Stock issued in connection with the Offer will be accompanied by a
Right which will entitle the registered holder thereof to purchase from MMI a
Unit of Series B Preferred Stock at the Purchase Price, subject to adjustment,
pursuant to the Rights Agreement. The Offer which is being made to all
Unionamerica Securityholders (including U.S. Persons) will remain open during
the Initial Offer Period and the Subsequent Offer Period. The Offer and this
Prospectus are subject to the requirements of both the Panel and the Commission.
UNDERTAKINGS. MMI has received Undertakings to accept the Offer, subject to
certain conditions, from the Selling Stockholders in respect of not less than an
aggregate of 4,272,983 Unionamerica ADSs (representing 50.6% of Unionamerica's
outstanding ADSs). For further information regarding these Undertakings, see
Appendix E--"Certain Additional Information Required Under the City Code".
NO FRACTIONAL SHARES. No certificates or scrip representing fractional
shares of MMI Common Stock shall be issued upon the surrender for exchange of
Unionamerica ADSs, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of MMI. As promptly as
practicable following the Initial Closing Date, the Exchange Agent shall
determine the excess of (x) the number of full shares of MMI Common Stock
delivered to the Exchange Agent by MMI pursuant to the Offer over (y) the
aggregate number of full shares of MMI Common Stock to be distributed to holders
of Unionamerica ADSs pursuant to the Offer (such excess being herein called the
"Excess Shares"). As soon after the Initial Closing Date as practicable, the
Exchange Agent, as agent for the former holders of Unionamerica ADSs, shall sell
the Excess Shares at then prevailing prices on the NYSE, all in the manner
provided below.
The sale of the Excess Shares by the Exchange Agent shall be executed on the
NYSE through one or more member firms of the NYSE and shall be executed in round
lots to the extent practicable. Until the net proceeds of such sale or sales
have been distributed to the former holders of Unionamerica ADSs, the Exchange
Agent will hold such proceeds in trust for the former Unionamerica
Securityholders (the "Excess Shares Trust"). All commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and compensation,
of the Exchange Agent incurred in connection with such sale of the Excess
Shares, shall be paid out of the Excess Shares Trust. The Exchange Agent shall
determine the portion of the Excess Shares Trust to which each former holder of
Unionamerica ADSs shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Excess Shares Trust by a fraction the
numerator of which is the amount of the fractional share interest to which such
former holder of Unionamerica ADSs is entitled and the denominator of which is
the aggregate amount of fractional share interests to which all former holders
of Unionamerica ADSs are entitled. As soon as practicable after the
determination of the amount of cash, if any, to be paid to former holders of
Unionamerica ADSs in respect of any fractional share interests of MMI Common
Stock, the Exchange Agent shall make available such amounts to such former
holders of Unionamerica ADSs.
DEFERRED STOCK. At the consummation of the Proposed Acquisition,
Unionamerica will, in accordance with Article 5 of the Unionamerica Articles,
cause all of the issued and outstanding shares of its Deferred
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Stock to be transferred to MMI (with the exception of one share of Deferred
Stock which will be transferred to a Person designated by MMI to hold such share
as nominee for MMI) in exchange for one share of MMI Common Stock for each
25,000 shares of Deferred Stock outstanding. As of the date of this Prospectus,
Unionamerica has 50,000 shares of Deferred Stock outstanding.
ACQUISITION OF REMAINING UNIONAMERICA ADSS. If, on or before the Initial
Closing Date, as a result of the Offer or otherwise, MMI acquires or contracts
to acquire Unionamerica ADSs representing at least 90% of the Unionamerica ADSs
to which the Offer relates then (i) MMI will be entitled, and intends, to effect
a Compulsory Acquisition to compel the purchase of the remainder of the
outstanding Unionamerica ADSs on the same terms as those offered in the Offer in
accordance with Section 428 to 430F of the Companies Act; and/or (ii) a holder
of Unionamerica ADSs may require MMI to purchase his or her Unionamerica ADSs on
the same terms as those offered in the Offer in accordance with Sections 430A
and 430B of the Companies Act. See Appendix F--"Certain Provisions of the
Companies Act".
If for any reason the Compulsory Acquisition is not made, MMI will evaluate
its other alternatives to obtain the remaining Unionamerica ADSs not purchased
pursuant to the Offer. Such alternatives could include acquiring additional
Unionamerica ADSs in the open market, in a privately negotiated transaction, in
another tender or exchange offer or by means of the DGCL, a scheme of
arrangement under the Companies Act, or otherwise. Any such additional
acquisitions could be for a consideration greater or less than, or equal to, the
consideration for Unionamerica ADSs in the Offer, and could be for cash or other
consideration. Prior to making any such acquisitions, MMI would consider the
effect such acquisitions, and the methods employed, would have on the Proposed
Acquisition, including the impact on the tax consequences to MMI and the
Unionamerica Securityholders, and the pooling-of-interests treatment. However,
under the City Code, except with the consent of the Panel, if the Offer becomes
or is declared wholly unconditional, neither MMI nor any Person acting or deemed
to be acting in concert with MMI for the purposes of the Offer may acquire any
Unionamerica ADSs on better terms than those of the Offer within six months of
the termination of the Offer.
PROPOSED ACQUISITION. Following the closing of the Proposed Acquisition,
Unionamerica will become a wholly-owned Subsidiary of MMI. It is MMI's present
intention to continue the existing management and business plans of Unionamerica
after the Proposed Acquisition, and to continue to operate Unionamerica as a
distinct business entity at its present location in London.
APPROVAL OF HOLDERS OF MMI COMMON STOCK. The Offer is conditioned upon the
approval of the issuance of shares of MMI Common Stock pursuant to the Offer by
a majority of the outstanding shares of MMI Common Stock voting on such matter.
MMI, through the MMI Board, will duly call, give notice of, convene and hold the
MMI Special Meeting for the purpose of obtaining the MMI Stockholders' Approval
as soon as reasonably practicable after the date of this Prospectus.
MMI COMMON STOCK. The shares of MMI Common Stock to be issued pursuant to
the Offer will rank pari passu in all respects with the issued and outstanding
MMI Common Stock, including the right to receive all future dividends (payable
in U.S. dollars), if any, and other distributions having a record date after the
Initial Closing Date. Application will be made to list the MMI Common Stock to
be issued in connection with the Offer on the NYSE.
TAX TREATMENT. MMI and Unionamerica intend that the exchange of shares of
MMI Common Stock for Unionamerica ADSs pursuant to the Offer will be treated as
a tax-free reorganization as described in Section 368(a)(1)(B) of the IRC. See
"The Offer--Tax Consequences of the Offer".
POOLING-OF-INTERESTS ACCOUNTING TREATMENT. It is contemplated that the
Proposed Acquisition will be accounted for as a pooling-of-interests for
accounting purposes under GAAP. Under this accounting treatment, the accounts of
MMI and the accounts of Unionamerica will be combined for all past and future
periods presented after the Offer becomes or is declared unconditional in all
respects.
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AFFILIATES' RESTRICTIONS ON SALE OF SHARES OF MMI COMMON STOCK. The shares
of MMI Common Stock to be issued pursuant to the Offer have been registered
under the Securities Act pursuant to a Registration Statement on Form S-4,
thereby allowing such securities to be traded without restriction by any former
holder of Unionamerica ADSs if such former holder (i) is not deemed to be an
"affiliate" (as defined for purposes of Rule 144 under the Securities Act) of
Unionamerica within 30 days prior to the date the Offer is declared
unconditional in all respects, and (ii) does not become an affiliate or officer
of MMI pursuant to the Offer.
In order to ensure that one of the requirements of pooling-of-interests
accounting is met, certain directors and executive officers of Unionamerica have
executed and delivered, and prior to the date of this Prospectus, certain other
directors and executive officers shall have executed and delivered, an Affiliate
Letter to MMI, pursuant to which they agreed not to sell any shares of MMI
Common Stock or Unionamerica Securities during the time period that would cause
the violation of the requirements for pooling-of-interests accounting, which
period ends when the financial results of the combined operations of MMI and
Unionamerica covering a period of at least 30 days are publicly released by MMI.
ELECTION OF REPRESENTATIVES TO THE MMI BOARD. MMI has agreed that, at or
prior to the Initial Closing Date, MMI shall increase the size of its Board by
two members to 14 members. Upon consummation of the Proposed Acquisition, MMI
shall use its best efforts to nominate both Ian G. Sinclair and Robert A. Spass
to the MMI Board. At MMI's 1998 Annual Meeting of Stockholders, MMI shall use
its best efforts to nominate the aforesaid individuals to the MMI Board and
cause them to be elected to one full three-year term. Ian G. Sinclair was
Managing Director - Underwriting of UICL, from 1984 until December 31, 1996,
when he was appointed Chief Executive Officer of UICL. He has been a Director of
UICL since 1977 and of Unionamerica since September 10, 1993. From 1973 to 1977,
he was an underwriter with UICL focusing on casualty business. Robert A. Spass
has been a Director of Unionamerica since September 10, 1993. From February 1994
to the present, he has served as a founder and Managing Partner of IPA. From
March 1990 to the present, he has been President and Chief Executive Officer of
IIA. From December 1988 to March 1990, he was a Director of Salomon Brothers
Inc. He is also a Director of Superior National Insurance Group, Inc., Highlands
Insurance Group Inc., Tarquin plc and Charman Group Ltd.
UNIONAMERICA OPTIONS. The Offer extends to any Unionamerica ADSs
representing any shares of Unionamerica Common Stock which are unconditionally
issued or allotted upon the exercise of options granted under the Unionamerica
Share Option Schemes or otherwise while the Offer remains open for acceptance.
In addition, a proposal is being made to Option holders under the Unionamerica
Share Option Schemes in respect of unexercised options pursuant to which such
Option holders may elect (i) to exercise their existing Unionamerica options
immediately following the closing of the Proposed Acquisition, and then tender
the Unionamerica ADSs received upon such exercise in the Offer, or (ii) to
rollover their existing options. Option holders who elect to rollover their
options will receive comparable options from MMI issued pursuant to MMI's
Amended 1993 Employee Stock Plan. Entitlements to fractional shares of MMI
Common Stock will be treated as set forth above. The proposal to Option holders
is conditioned upon the Offer becoming or being declared unconditional in all
respects.
CONDITIONS OF THE OFFER. In addition to the conditions discussed above, the
Offer is subject to the following additional conditions (collectively, the
"Conditions"):
(a) the issuance of shares in connection with the Offer having been approved
by the MMI stockholders under the DGCL;
(b) the Minimum Acceptance Condition having been met, that is, at least 90%
on a fully diluted basis in nominal value of voting shares of
Unionamerica Common Stock and all of the non-voting shares of
Unionamerica Common Stock to which the Offer relates (such expression to
be construed in accordance with Sections 428 through 430F of the
Companies Act) having been validly tendered and not properly withdrawn
prior to the expiration of the Offer;
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(c) any waiting period (and any extension thereof) applicable to the
consummation of the transactions contemplated by the Acquisition
Agreement under the HSR Act having expired or been terminated;
(d) all authorizations, orders, grants, recognitions, confirmations,
permits, consents, clearances, permissions, approvals, waivers and
actions of, filings with and notices to, any Governmental or Regulatory
Authority or any other public or private third parties required of MMI,
Unionamerica or any of their Subsidiaries to consummate the transactions
contemplated by the Acquisition Agreement, other than those the failure
of which to be obtained or taken could not be reasonably expected to have
a material adverse effect on MMI and its Subsidiaries or Unionamerica and
its Subsidiaries, in each case taken as a whole, or on the ability of MMI
and Unionamerica to consummate the transactions contemplated by the
Acquisition Agreement having been obtained or taken; provided that no
such permit, consent, approval, waiver or action shall be subject to any
condition which could reasonably be expected prior to or following the
date on which the Offer becomes or is declared unconditional in all
respects to have a material adverse affect on MMI and its Subsidiaries
taken as a whole, or on Unionamerica and its Subsidiaries taken as a
whole, or otherwise result in a material diminution of the benefits to
MMI of the transactions contemplated by the Acquisition Agreement;
(e) the Office of Fair Trading indicating, in terms reasonably satisfactory
to MMI, that it is not the intention of the Secretary of State for Trade
and Industry of the U.K. to refer the proposed acquisition of
Unionamerica ADSs by MMI or any matter relating thereto to the MMC;
(f) the Secretary of State for Trade and Industry of the U.K. confirming, in
terms reasonably satisfactory to MMI, that in accordance with Section 61
of the U.K. Insurance Companies Act 1982 there is no objection to MMI and
any relevant stockholders or officers of MMI becoming controllers of
Unionamerica or, in the absence of such confirmation in relation to any
such Person, the period during which such Secretary of State may serve a
notice of objection pursuant to Section 61 of the U.K. Insurance
Companies Act 1982 in relation to such Person having elapsed without the
Secretary of State having served any such notice of objection;
(g) the Council of Lloyd's approving, in terms reasonably satisfactory to
MMI, MMI and any relevant stockholders of MMI as controllers of Jago
Capital Limited (a Lloyd's corporate member) and Jago Managing Agency
Limited (a Lloyd's managing agency);
(h) the U.K. Inland Revenue issuing notification pursuant to Section 138 of
the Taxation of Chargeable Gains Act 1992 of the U.K. that it is
satisfied that the transactions contemplated by the Acquisition Agreement
will be effected for bona fide commercial reasons and will not form part
of any such scheme or arrangements as are mentioned in Section 137 of the
Taxation and Chargeable Gains Act 1992 of the U.K.;
(i) the Registration Statement becoming and continuing to be effective prior
to and following the date on which the Offer becomes or is declared
unconditional in all respects and no stop order suspending effectiveness
of the Registration Statement being issued, no action, suit, proceeding
or investigation by the Commission to suspend the effectiveness thereof
being initiated and be continuing or, to the knowledge of MMI or
Unionamerica, threatened, and all necessary approvals under state
securities laws relating to the issuance or trading of the MMI Common
Stock to be issued to Unionamerica Securityholders in connection with the
Offer having been received;
(j) the MMI Common Stock to be issued pursuant to the Offer and such other
shares of MMI Common Stock required to be reserved for issuance pursuant
to the Acquisition Agreement, if any, having been approved for listing on
the NYSE, subject to official notice of issuance;
(k) the opinion of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), dated June 25, 1997 (included as Appendix C) to the effect that,
as of June 25, 1997, the Exchange Ratio is fair
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from a financial point of view to the Unionamerica Securityholders not
having been withdrawn (see "Opinion of Financial Advisor to
Unionamerica");
(l) the opinion of Paul, Weiss, Rifkind, Wharton & Garrison, special U.S.
tax counsel to Unionamerica, with respect to the qualification of the
Proposed Acquisition under Section 368(a)(1)(B) of the IRC not having
been withdrawn;
(m) there not having been any law or order promulgated, entered, enforced,
enacted, issued or deemed applicable to the transactions contemplated by
the Acquisition Agreement by any court of competent jurisdiction or other
competent Governmental or Regulatory Authority which, directly or
indirectly:
(i) prohibits or imposes any material limitations on the ownership or
operation by MMI (or that of any of its Subsidiaries or affiliates)
of any portion of its business or assets (or those of Unionamerica
or any of its Subsidiaries) which is material to the business of
Unionamerica and its Subsidiaries taken as a whole, or material to
the business of MMI and its Subsidiaries taken as a whole, or
compels MMI (or its Subsidiaries or affiliates) to dispose of or
hold separate any portion of the business or assets of Unionamerica
or any of its Subsidiaries which is material to the business of
Unionamerica and its Subsidiaries taken as a whole or material to
the business of MMI and its Subsidiaries taken as a whole, or
otherwise results in a material diminution of the benefits to MMI of
the transactions contemplated by the Acquisition Agreement;
(ii) prohibits, restrains or makes illegal any of the transactions
contemplated by the Acquisition Agreement;
(iii) imposes material limitations on the ability of MMI (or any of its
Subsidiaries or affiliates) effectively to acquire or to hold or
exercise full rights of ownership of Unionamerica Securities
including, without limitation, the right to vote such Unionamerica
Securities on all matters properly presented to Unionamerica
Securityholders;
(iv) imposes limitations on the ability of MMI (or any of its
Subsidiaries or affiliates) effectively to control in any material
respect any material portion of the business or assets of
Unionamerica and its Subsidiaries taken as a whole, or any material
portion of the business or assets of MMI and its Subsidiaries taken
as a whole; or
(v) has the effect of making illegal or otherwise restricting,
preventing or prohibiting consummation of the transactions
contemplated by the Acquisition Agreement;
(n) there not having been instituted or be pending any action or proceeding
(whether civil or criminal) before any Person or Governmental or
Regulatory Authority (or any such action threatened by any Person or
Governmental or Regulatory Authority) which (i) in the case of any such
action or proceeding brought by any Governmental or Regulatory Authority,
seeks any order, decree or injunction having any effect set forth in
paragraph (m) above or (ii) in the case of any such action or proceeding
brought by any other Person, could reasonably be expected to result in
any order, decree or injunction having any effect set forth in paragraph
(m) above;
(o) there not having occurred and be continuing:
(i) any general suspension of trading in, or limitation on prices for,
securities on any U.S. national securities exchange or in the
over-the-counter market;
(ii) a declaration of a banking moratorium or any suspension of payments
in respect of banks in the U.S. or the U.K. (whether or not
mandatory);
(iii) any limitation (whether or not mandatory) by any Governmental or
Regulatory Authority on the extension of credit by banks or other
financial institutions;
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(iv) a commencement of war or armed hostilities or other national or
international crisis directly or indirectly involving the U.S.
having a significant adverse effect on the functionality of the
financial markets in the U.S.; or
(v) in the case of any of the foregoing existing on the date of the
Acquisition Agreement, in the good faith judgment of MMI, a material
acceleration or worsening thereof;
(p) the representations and warranties made by Unionamerica in the
Acquisition Agreement that are subject to, or qualified by, "material
adverse effect", "material adverse change" or other materiality
qualification being true and correct, and the representations and
warranties made by Unionamerica in the Acquisition Agreement that are not
so qualified being true and correct except in any respect which could not
reasonably be expected to have a material adverse effect on Unionamerica
and its Subsidiaries taken as a whole, in each case as of the date on
which the Offer becomes or is declared unconditional in all respects;
(q) Unionamerica performing and complying in all material respects (without
any reference to a materiality qualification contained therein) with all
obligations and covenants required to be performed or complied with by it
under the Acquisition Agreement on or before the date on which the Offer
becomes or is declared unconditional in all respects;
(r) the opinion of Smith Barney dated June 24, 1997 to the effect that the
Exchange Ratio is fair to MMI from a financial point of view not having
been withdrawn;
(s) each of the irrevocable Undertakings executed and delivered to MMI by
the Selling Stockholders along with all relevant letters of direction and
legal opinions relating thereto being in full force and effect and not
having been withdrawn;
(t) neither Unionamerica nor its affiliates having taken any action which
has prevented or would prevent MMI from treating the acquisition of
Unionamerica as a pooling-of-interests in accordance with GAAP;
(u) the Acquisition Agreement not having been terminated in accordance with
its terms and remaining in full force and effect;
(v) the Unionamerica Securityholders having approved and adopted a
resolution at an extraordinary general meeting of Unionamerica (or at any
adjournment thereof) to amend the Unionamerica Articles to disapply
certain voting restrictions (the "IRC Voting Restrictions") contained in
Articles 75 and 76 which would otherwise apply to MMI following the
closing of the Proposed Acquisition and to remove the rights of the
Designated Shareholders (as defined in the Unionamerica Articles) to
appoint directors to the Unionamerica Board;
(w) each of the Designated Affiliates (as defined in Appendix G--"Key
Definitions") having executed and delivered to MMI an Affiliate Letter,
there having been no breaches of any of the terms of such agreements by
any Designated Affiliate prior to the date on which the Offer becomes or
is declared unconditional in all respects, and the Affiliate Letters
remaining in full force and effect;
(x) the representations and warranties made by MMI in the Acquisition
Agreement that are subject to, or qualified by, "material adverse
effect," "material adverse change" or other materiality qualification
being true and correct, and the representations and warranties made by
MMI in the Acquisition Agreement that are not so qualified being true and
correct except in any respect which could not reasonably be expected to
have a material adverse effect on MMI and its Subsidiaries taken as a
whole, in each case as of the date on which the Offer becomes or is
declared unconditional in all respects; and
(y) MMI performing and complying with in all material respects (without any
reference to a materiality qualification contained therein) with all
obligations and covenants required to be
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performed or complied with by it under the Acquisition Agreement on or
before the date on which the Offer becomes or is declared unconditional in
all respects.
MMI reserves the right, subject to the provisions of the Acquisition
Agreement, to waive, in whole or in part, all or any of Conditions (a) to (w)
provided that MMI may only waive Conditions (a) to (l) with the prior written
consent of Unionamerica. Unionamerica reserves the right, subject to the
provisions of the Acquisition Agreement, to waive, in whole or in part, all or
any of Conditions (x) and (y). Reducing the Minimum Acceptance Condition
requires the prior written consent of Unionamerica and the Minimum Acceptance
Condition may not be reduced such as to have the effect of reducing the 90%
threshold specified in Condition (b) above to an amount which is 50% or less.
The Offer will lapse if it is referred to the MMC before 2:30 p.m. (London
time), 9:30 am. (New York City time) on the Initial Closing Date or the date on
which the Offer becomes or is declared unconditional in all respects, whichever
is the later and if the Offer so lapses the Offer will cease to be capable of
further acceptance and accepting Unionamerica Securityholders and MMI will cease
to be bound by Letters of Transmittal submitted before the time when the Offer
lapses.
OFFER PERIOD. MMI hereby offers to purchase, upon the terms and subject to
the Conditions (including, if the Offer is revised, varied, extended or renewed,
the terms and conditions of any such revision, variation, extension or renewal),
all Unionamerica ADSs validly tendered pursuant to the Offer during (i) the
Initial Offer Period and not withdrawn prior to the Initial Closing Date and
(ii) the Subsequent Offer Period, in each case in accordance with the procedures
set forth in this Prospectus and the Letter of Transmittal. The term "Initial
Offer Period" shall mean the period which commences at 5:00 p.m. (London time),
12:00 noon (New York City time) on the date of this Prospectus to and including
the Initial Closing Date. The term "Initial Closing Date" shall mean 2:30 p.m.
London time, 9:30 a.m. (New York City time) on the date being 30 business days
from the date of this Prospectus, unless and until MMI shall have extended the
Initial Offer Period in accordance with the terms of the Acquisition Agreement,
in which event the term "Initial Closing Date" shall mean the latest time and
date at which the Initial Offer Period, as so extended by MMI, shall be
terminated or expire. If all the Conditions have not been satisfied or, where
permitted, waived, by midnight (London time), 7.00 p.m. (New York City time), on
the date being 60 calendar days from the date of this Prospectus, the Offer will
lapse, unless otherwise agreed by the Panel.
The purchase of Unionamerica ADSs pursuant to the Offer is subject to the
satisfaction or, where permitted, waiver of all the Conditions including, among
other things, the Minimum Acceptance Condition. The procedures for the waiver of
these Conditions are governed by the Acquisition Agreement. If, on the Initial
Closing Date, any Condition shall not have been satisfied or, where permitted,
waived, MMI shall, no later than 8.30 a.m. (London time), 3.30 a.m. (New York
City time) on the following business day elect, subject to the terms of the
Acquisition Agreement, to (i) extend the Initial Offer Period and, subject to
applicable withdrawal rights, retain all tendered Unionamerica ADSs until the
expiration of the Initial Offer Period, as so extended, or (ii) terminate the
Offer and not purchase any Unionamerica ADSs and promptly return all tendered
Unionamerica ADSs to tendering Unionamerica Securityholders.
If the Offer becomes or is declared unconditional so that Unionamerica ADSs
are purchased at the end of the Initial Offer Period, the Offer will remain open
for acceptance following the Initial Closing Date and MMI will purchase
Unionamerica ADSs validly tendered during the Subsequent Offer Period in
accordance with the procedures set forth in this Prospectus and the Letter of
Transmittal. Pursuant to the City Code, the Offer will remain open during the
Subsequent Offer Period for at least 14 calendar days from the Initial Closing
Date and MMI may elect for it to remain open thereafter until further notice, in
which event not less than 14 calendar days' notice will be given prior to the
termination of the Subsequent Offer Period. See "--Extension; Amendments and
Termination".
This Prospectus and the Letter of Transmittal are being mailed by MMI to
holders of record of Unionamerica ADSs, and are being furnished by MMI to
brokers, dealers, commercial banks, trust
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companies and similar Persons, whose names, or the name of whose nominees,
appear as holders of record for subsequent transmittal to beneficial owners of
Unionamerica ADSs. Any accidental omission to dispatch this Prospectus, a Letter
of Transmittal or any notice required to be dispatched under the terms of the
Offer to, or any failure to receive the same by, any Person to whom the Offer
is, or should be, made, will not invalidate the Offer.
PROCEDURES FOR TENDERING UNIONAMERICA ADSS
There is a Letter of Transmittal for use in connection with the Offer. This
section should be read together with the instructions to the Letter of
Transmittal. The provisions of this section shall be deemed to be incorporated
in, and form a part of, the Letter of Transmittal. The instructions printed on
the Letter of Transmittal shall be deemed to form part of the terms of the
Offer.
VALID TENDER OF UNIONAMERICA ADSS. For a holder of Unionamerica ADSs to
tender Unionamerica ADSs validly pursuant to the Offer, either (i) a properly
completed and duly executed Letter of Transmittal, together with any required
signature guarantees and any other required documents, must be received by the
Exchange Agent at its address set out on the back cover page of this Prospectus,
and Unionamerica ADRs evidencing such Unionamerica ADSs must be either received
by the Exchange Agent at such address or delivered pursuant to the procedures
for book-entry transfer set out below (and a confirmation of receipt of such
transfer received by the Exchange Agent) or (ii) such holder must comply with
the "Guaranteed Delivery Procedures" (as defined below). All Letters of
Transmittal, Unionamerica ADRs evidencing Unionamerica ADSs and other required
documents delivered to the Exchange Agent by Unionamerica Securityholders will
be deemed (without any further action by the Exchange Agent) to constitute
acceptance of the Offer by such Unionamerica Securityholder with respect to such
Unionamerica ADSs subject to the terms and conditions set out in the Letter of
Transmittal. The acceptance of the Offer by a tendering Unionamerica
Securityholder pursuant to the procedures described above, subject to the
withdrawal rights described below, will be deemed to constitute a binding
agreement between such tendering Unionamerica Securityholder and MMI upon the
terms and subject to the Conditions of the Offer. IF A UNIONAMERICA ADS HAS BEEN
TENDERED BY A UNIONAMERICA SECURITYHOLDER, THE UNIONAMERICA COMMON STOCK
REPRESENTED BY SUCH UNIONAMERICA ADS MAY NOT BE TENDERED INDEPENDENTLY. A LETTER
OF TRANSMITTAL AND OTHER REQUIRED DOCUMENTS CONTAINED IN AN ENVELOPE POSTMARKED
IN JAPAN OR AUSTRALIA OR OTHERWISE APPEARING TO MMI OR ITS AGENTS TO HAVE BEEN
SENT FROM JAPAN OR AUSTRALIA WILL NOT CONSTITUTE A VALID ACCEPTANCE OF ANY
OFFER.
BOOK-ENTRY TRANSFER. The Exchange Agent will establish an account at the
Book-Entry Transfer Facilities with respect to Unionamerica ADSs held in
book-entry form for purposes of the Offer within two business days after the
date of this Prospectus. Any financial institution that is a participant in any
of the Book-Entry Transfer Facilities' systems may make book-entry delivery of
Unionamerica ADSs by causing a Book-Entry Transfer Facility to transfer such
Unionamerica ADSs into the Exchange Agent's account at such Book-Entry Transfer
Facility in accordance with that Book-Entry Transfer Facility's procedure for
such transfer. Although delivery of Unionamerica ADSs may be effected through
book-entry transfer into the Exchange Agent's account at a Book-Entry Transfer
Facility, either (i) the Letter of Transmittal, properly completed and duly
executed, together with any required signature guarantees or (ii) an Agent's
Message (as defined below), and, in either case, any other required documents,
must in any case be transmitted to, and received by, the Exchange Agent at its
address set out on the back cover of this Prospectus before Unionamerica ADSs
will be either counted as a valid acceptance, for the purposes of the Minimum
Acceptance Condition, or exchanged, or such holder must comply with the
Guaranteed Delivery Procedures (as described below). The term "Agent's Message"
means a message transmitted by a Book-Entry Transfer Facility to, and received
by, the Exchange Agent and forming a part of a Book-Entry Confirmation that
states that such Book-Entry Transfer Facility has received an express
acknowledgment from the participant in such Book-Entry Transfer Facility
tendering the Unionamerica ADSs that such participant has received and agrees to
be bound by the terms of the Letter of Transmittal and that MMI
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may enforce such agreement against the participant. Delivery of documents to a
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures does not constitute delivery to the Exchange Agent.
NO ACKNOWLEDGEMENT OF RECEIPT OF ANY LETTER OF TRANSMITTAL OR OTHER REQUIRED
DOCUMENTS WILL BE GIVEN BY, OR ON BEHALF OF, MMI. THE METHOD OF DELIVERY OF
UNIONAMERICA ADRS AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF
THE TENDERING UNIONAMERICA SECURITYHOLDER. UNIONAMERICA ADSS WILL BE DEEMED
DELIVERED ONLY WHEN THE UNIONAMERICA ADRS REPRESENTING SUCH UNIONAMERICA ADSS
ARE ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY AND IN ANY
EVENT TO ENSURE DELIVERY BY NO LATER THAN 2:30 P.M. (LONDON TIME) 9:30 A.M. (NEW
YORK CITY TIME) ON [ ], 1997.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal if: (i) the Letter of Transmittal is signed by the registered holder
of the Unionamerica ADSs tendered therewith and such registered holder has not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" in the Letter of Transmittal or (ii)
such Unionamerica ADSs are tendered for the account of an Eligible Institution.
In all other cases, all signatures on Letters of Transmittal must be guaranteed
by an Eligible Institution. See the instructions to the Letter of Transmittal.
If the Unionamerica ADSs are registered in the name of a person other than
the person who signs the Letter of Transmittal, or if shares of MMI Common Stock
are to be issued to a person other than the registered owner of the Unionamerica
ADSs surrendered, then the tendered Unionamerica ADRs must be endorsed or
accompanied by appropriate stock powers, signed exactly as the name or names of
the registered owner or owners appear on the Unionamerica ADRs, with the
signatures on the Unionamerica ADRs or stock powers guaranteed as aforesaid. See
the instructions to the Letter of Transmittal.
PARTIAL TENDERS. If fewer than all of the Unionamerica ADSs evidenced by
any Unionamerica ADRs delivered to the Exchange Agent are to be tendered, the
holder thereof should so indicate in the Letter of Transmittal by filling in the
number of Unionamerica ADSs which are to be tendered in the box entitled "Number
of Unionamerica ADSs Tendered". In such case, a new Unionamerica ADR for the
remainder of the Unionamerica ADSs represented by the old Unionamerica ADR will
be sent to the person(s) signing such Letter of Transmittal (or delivered as
such person properly indicates thereon) as promptly as practicable following the
date the tendered Unionamerica ADSs are purchased. All Unionamerica ADSs
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. See Instruction to the Letter of Transmittal. In the
case of partial tenders, Unionamerica ADSs not tendered will not be reissued to
a person other than the registered holder.
GUARANTEED DELIVERY PROCEDURES. If a Unionamerica Securityholder desires to
tender Unionamerica ADSs pursuant to the Offer and the Unionamerica ADRs
evidencing such Unionamerica ADSs are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis, or if
time will not permit all required documents to reach the Exchange Agent prior to
the termination of the Initial Offer Period or the Subsequent Offer Period, as
the case may be, such holder's tender of Unionamerica ADSs may be effected if
all the following conditions are met (the "Guaranteed Delivery Procedures"):
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by MMI is received by the
Exchange Agent, as provided below, prior to the termination of the Initial
Offer Period or the Subsequent Offer Period, as the case may be; and
(iii) the Unionamerica ADRs evidencing all tendered Unionamerica ADSs
(or, in the case of Unionamerica ADSs held in book-entry form, timely
confirmation of the book-entry transfer of such
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Unionamerica ADSs into the Exchange Agent's account at a Book-Entry Transfer
Facility as described above), together with a properly completed and duly
executed Letter of Transmittal with any required signature guarantees and
any other documents required by the Letter of Transmittal, are received by
the Exchange Agent within three NYSE trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mailed to the
Exchange Agent and must include a signature guarantee by an Eligible Institution
in the form set out in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, delivery of shares of MMI Common
Stock for Unionamerica ADSs exchanged pursuant to the Offer will in all cases be
made only after timely receipt by the Exchange Agent of the Unionamerica ADRs
evidencing such Unionamerica ADSs (or, in the case of Unionamerica ADSs held in
book-entry form, timely confirmation of a book-entry transfer of such
Unionamerica ADSs into the Exchange Agent's account at a Book-Entry Transfer
Facility pursuant to the procedures set out above), together with a properly
completed and duly executed Letter of Transmittal with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message) and
any other required documents.
RECEIPT OF A NOTICE OF GUARANTEED DELIVERY WILL NOT BE TREATED AS A VALID
ACCEPTANCE FOR THE PURPOSE OF SATISFYING THE REQUIREMENT OF THE CITY CODE
(CONTAINED IN THE MINIMUM ACCEPTANCE CONDITION) THAT MMI SHALL HAVE ACQUIRED OR
AGREED TO ACQUIRE, DIRECTLY OR INDIRECTLY, PURSUANT TO THE OFFER OR OTHERWISE,
NOT LESS THAN 90% ON A FULLY DILUTED BASIS IN NOMINAL VALUE OF THE UNIONAMERICA
ADSS. TO BE COUNTED TOWARDS SATISFACTION OF SUCH REQUIREMENT, THE UNIONAMERICA
ADRS EVIDENCING UNIONAMERICA ADSS REFERRED TO IN THE NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT (OR, IN THE CASE OF UNIONAMERICA
ADSS HELD IN BOOK-ENTRY FORM, TIMELY CONFIRMATION OF A BOOK-ENTRY TRANSFER OF
SUCH UNIONAMERICA ADSS INTO THE EXCHANGE AGENT'S ACCOUNT AT A BOOK-ENTRY
TRANSFER FACILITY PURSUANT TO THE PROCEDURES SET OUT ABOVE), TOGETHER WITH A
DULY EXECUTED LETTER OF TRANSMITTAL WITH ANY REQUIRED SIGNATURE GUARANTEES (OR,
IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE) AND ANY OTHER REQUIRED
DOCUMENTS.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal as set out
above, the tendering Unionamerica Securityholder will agree that effective from
and after the date the Offer becomes or is declared unconditional, (i) MMI shall
be entitled to direct the exercise of any votes attaching to any Unionamerica
ADSs, in respect of which the Offer has been accepted or is deemed to have been
accepted and any other rights and privileges attaching to such Unionamerica ADSs
and (ii) the execution of the Letter of Transmittal and its delivery to the
Exchange Agent will constitute (a) an authority to Unionamerica and the
Depositary (as defined below) or their respective agents from the tendering
Unionamerica Securityholder to send any notice, circular, warrant, document or
other communication, which may be sent to him or her as a Unionamerica
Securityholder, to MMI at its registered office, (b) an authority to MMI or its
agent to sign any consent to short notice of a general meeting or separate class
meeting on behalf of the tendering Unionamerica Securityholder and/or to execute
a form of proxy in respect of such Unionamerica ADSs appointing any person
nominated by MMI to attend general meetings or separate class meetings of
Unionamerica (or any adjournments thereof) and to exercise the votes attaching
to such Unionamerica ADSs on the holder's behalf and (c) the agreement of the
tendering Unionamerica Securityholder not to exercise any of such rights without
the consent of MMI and the irrevocable undertaking of the tendering Unionamerica
Securityholder not to appoint a proxy for or to attend general meetings or
separate class meetings. Such proxy will not entitle MMI to attend and vote at,
and such agreement will not apply to, the Unionamerica extraordinary general
meeting which is scheduled to be held prior to the Offer becoming or being
declared unconditional in all respects.
VALIDITY OF ACCEPTANCES. Subject to the City Code, MMI reserves the right
to treat as valid in whole or in part any acceptance of the Offer which is not
entirely in order or which is not accompanied by the relevant Unionamerica ADR
and/or other document(s) of title or which is received by it at a place or
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places other than as set out in the Prospectus or the Letter of Transmittal. In
that event, the consideration under the Offer will only be dispatched when the
acceptance is entirely in order and the relevant Unionamerica ADR or other
document(s) of title or indemnities satisfactory to MMI has/have been received.
If the Offer lapses, all documents tendered will be returned within 14
calendar days thereafter.
If you are in any doubt about the procedure for acceptance, please telephone
the Exchange Agent at the number set out on the back cover page of the
Prospectus.
Any omission or failure to dispatch this Prospectus or the Letter of
Transmittal or any notice required to be dispatched under the terms of the Offer
to, or any failure to receive the same by, any Person to whom the Offer is or
should be made, shall not invalidate the Offer in any way or create any
implication that the Offer has not been made to any such Person. Additional
copies of this Prospectus and the Letter of Transmittal may be obtained from the
Exchange Agent at the address and telephone number set out on the back cover
page of this Prospectus. No acknowledgement of receipt of any Letter of
Transmittal, ADR and/or other documents of title will be given.
All powers of attorney, appointments of agents and authorities on the terms
conferred by or referred to in this Prospectus or in the Letter of Transmittal
are given by way of security for the performance of the obligations of the
Unionamerica Securityholder concerned and are irrevocable in accordance with
Section 4 of the U.K. Powers of Attorney Act 1971, except in the circumstance
where a donor validly withdraws his or her acceptance.
The terms, provisions, instructions and authorities contained in or deemed
to be contained in the Letter of Transmittal constitute part of the terms of the
Offer.
Except with the consent of the Panel, settlement of the consideration due
under the Offer will be made in full in accordance with the terms of the Offer
without regard to any lien, right of set-off, counterclaim or other analogous
right to which MMI may otherwise be, or claim to be, entitled as against a
Unionamerica Securityholder.
WITHDRAWAL RIGHTS. Unionamerica Securityholders (other than the Selling
Stockholders) will have the right to withdraw any tendered Unionamerica ADSs
during the Initial Offer Period, including any extension thereof, but not during
the Subsequent Offer Period, including any extension thereof. Any Unionamerica
ADSs validly tendered during the Subsequent Offer Period will be accepted for
exchange. Subject to the terms of the Acquisition Agreement, MMI expressly
reserves the right (but will not be obligated) at any time or from time to time
to extend the Initial Offer Period in the manner described above. Unionamerica
may terminate any extension (other than an extension required by the City Code
or U.S. federal securities laws or the rules and regulations thereunder) of the
Initial Offer Period prior to its scheduled expiration if all Conditions are
satisfied or, where permitted, waived in accordance with the terms of the
Acquisition Agreement. In such event the Initial Offer Period, including any
extension thereof, and, consequently, withdrawal rights will terminate
immediately.
To be effective, a written notice of withdrawal must be timely received by
the Exchange Agent at the address set out on the back cover page of this
Prospectus and must specify the name of the Person who has tendered the
Unionamerica ADSs to be withdrawn, the number of Unionamerica ADSs to be
withdrawn and (if Unionamerica ADRs have been tendered) the name of the
registered holder of the Unionamerica ADSs, if different from the name of the
person who tendered the Unionamerica ADSs.
In respect of Unionamerica ADSs, if Unionamerica ADRs have been delivered or
otherwise identified to the Exchange Agent, then, prior to the physical release
of such Unionamerica ADRs, the serial numbers shown on such Unionamerica ADRs
must be submitted and, unless the Unionamerica ADSs evidenced by such
Unionamerica ADRs have been tendered by an Eligible Institution or by means of a
Letter of Transmittal, the signatures on the notice of withdrawal must be
guaranteed by an Eligible
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Institution. If Unionamerica ADSs have been delivered pursuant to the procedures
for book-entry transfer set out in "Procedures for Tendering Unionamerica ADSs",
any notice of withdrawal must also specify the name and number of the account at
the appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Unionamerica ADSs and must otherwise comply with such Book-Entry Transfer
Facility's procedures.
Withdrawals of tendered Unionamerica Securities may not be rescinded
(without MMI's consent), and any Unionamerica Securities properly withdrawn will
thereafter be deemed not validly tendered for the purposes of the Offer.
Withdrawn Unionamerica Securities may be subsequently retendered, however, by
following one of the procedures described above in "--Procedures for Tendering
Unionamerica ADSs", at any time prior to the expiration of the Subsequent Offer
Period.
All questions as to the validity (including time of receipt) of any notice
of withdrawal will be determined by MMI, whose determination (except as required
by the Panel) will be final and binding. None of MMI, Unionamerica, the Exchange
Agent, the Dealer Manager or any other Person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
EXTENSIONS; AMENDMENTS; AND TERMINATION
INITIAL OFFER PERIOD. Subject to the provisions of the Acquisition
Agreement, MMI expressly reserves the right (but will not be obligated) at any
time or from time to time to extend the Initial Offer Period and, in such event,
will make a public announcement of such extension in the manner described under
"--Announcements" below and give oral or written notice of such extension to the
Exchange Agent. MMI may terminate any extension (other than an extension
required by the City Code or U.S. federal securities laws and the rules and
regulations thereunder) of the Initial Offer Period prior to its scheduled
expiration if all the Conditions have been satisfied or, where permitted,
waived. If all the Conditions have not been satisfied or, where permitted,
waived by MMI by 2:30 p.m. (London time), 9:30 a.m. (New York City time), on
, MMI currently intends to extend the Initial Offer Period until
such time as the Conditions have been satisfied or, where permitted, waived.
There can be no assurance, however, that MMI will, in such circumstances, extend
the Initial Offer Period and if no such extension is made, the Offer will lapse
on the Initial Closing Date and no Unionamerica Securities will be exchanged
pursuant to the Offer. If all the Conditions have not been satisfied or, where
permitted, waived prior to , or such later date as the Panel may
determine, in the absence of a competitive situation and/or unless the Panel
otherwise agrees, the Offer will lapse. If the Offer was to lapse, pursuant to
the City Code neither MMI nor any Person acting or deemed to be acting in
concert with MMI for the purpose of the Offer nor any of their respective
affiliates could make an offer (whether in or outside the U.K.) for Unionamerica
Securities for a period of one year following the date of such lapse, except
with the permission of the Panel.
Under the City Code, the Offer, if revised, must remain open for acceptance
for a period of at least 14 calendar days following the date on which any
revised Offer is mailed to Unionamerica Securityholders. No revisions to the
Offer may be made in the absence of a competitive situation, except with the
permission of the Panel, after . Although no revision of the Offer
is anticipated, if the Offer (in its original or any previously revised form) is
revised either in its terms or conditions or in the value or form of the
consideration offered or otherwise, and such revision represents, on the date on
which such revision is announced (on such basis as MMI may consider
appropriate), an improvement in the value of the consideration under the Offer
as so revised compared with the consideration currently offered, the benefit of
the revised Offer will be made available to Unionamerica Securityholders who
have already validly tendered and not validly withdrawn their Unionamerica
Securities prior to the date of such revision (a "previous acceptor").
The acceptance by or on behalf of a previous acceptor of the Offer in its
original or any previously revised form(s) shall, subject as provided in this
paragraph and subject to the withdrawal rights of such
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acceptor as described under "--Withdrawal Rights", be deemed an acceptance of
the Offer as revised and shall constitute an authority to MMI or its agents as
his or her attorney to accept any such revised Offer on behalf of such previous
acceptor and, if such revised Offer includes alternative forms of consideration,
to make elections for, and/or accept, alternative forms of consideration on his
or her behalf as such attorney may in his or her absolute discretion think fit,
and to execute on behalf of and in the name of such previous acceptor all such
further documents (if any) as may be required to give effect to such acceptances
and/or elections. In making any such elections and/or acceptances, such attorney
shall take into account the nature of any original acceptance made by the
previous acceptor and such other facts or matters as he or she may reasonably
consider relevant. The deemed acceptances and/or elections referred to in this
paragraph shall not apply and the authority and powers of attorney referred to
shall not be exercised by MMI or any of its agents if, as a result thereof, the
previous acceptor would (on such basis as MMI may consider appropriate) thereby
receive less in aggregate in consideration than he or she would have received in
aggregate in consideration as a result of any previous acceptance of the Offer
(or any previous revision thereof), unless such previous acceptor has previously
agreed in writing to receive less in aggregate consideration. The powers of
attorney and authority referred to in this paragraph and any acceptance of the
revised Offer shall be irrevocable until the previous acceptor properly
withdraws his or her acceptance as described under "--Withdrawal Rights". MMI
reserves the right to treat as valid any executed Letter of Transmittal relating
to the Offer (in its original or any previously revised form(s)) which is
received after the announcement or issue of the Offer in any revised form as a
valid acceptance of the Offer, as revised, and such acceptance shall constitute
authority in terms of this paragraph on behalf of the relevant Unionamerica
Securityholder. The deemed acceptances and elections referred to in this
paragraph shall not apply and the power of attorney and authorities conferred by
this paragraph shall be ineffective to the extent that a previous acceptor
lodges, within 14 calendar days of the posting of the document pursuant to which
the revision of the Offer referred to in this paragraph is made available to
Unionamerica Securityholders, a Letter of Transmittal in which he or she validly
elects to receive the consideration receivable by him or her under the revised
Offer in some other manner.
In a published release, the Commission has stated that in its view an offer
must remain open for a minimum period of time following a material change in the
terms of the offer. The release states that an offer should remain open for a
minimum of five business days from the date the material change is first
published, sent or given to shareholders and that, if material changes are made
with respect to information that approaches the significance of price (i.e., the
value of the offer) and share levels (i.e., the amount to be purchased in the
offer), a minimum of ten business days may be required to allow for adequate
dissemination and investor response. The Commission has, however, confirmed that
providing at least three business days' notice would not be inconsistent with
applicable regulatory requirements under the U.S. federal securities laws and
the rules and regulations thereunder. Accordingly, if MMI reduces the percentage
contained in the Minimum Acceptance Condition, the Initial Offer Period will
remain open for a minimum of three business days from the date the reduction is
first published, sent or given to Unionamerica Securityholders and Unionamerica
Securityholders (other than the Selling Stockholders) will have withdrawal
rights during this period.
If all the Conditions are not satisfied or, where permitted, waived at the
expiration of the Initial Offer Period, the Offer will, unless the Panel
otherwise agrees, lapse and all Unionamerica Securities previously tendered and
not validly withdrawn will be returned. MMI expressly reserves the right (a) not
to extend the Initial Offer Period if all the Conditions are not satisfied or,
where permitted, waived on the Initial Closing Date and to terminate the Offer
(in which event all Unionamerica Securities for which acceptances have been
received will be returned), and (b) at any time on or after the Initial Closing
Date, if all Conditions are not satisfied or, where permitted, waived, to
terminate the Offer and not accept any Unionamerica Securities not tendered on
or before that date and, in such event, will give oral or written notice of such
termination to the Exchange Agent and make a public announcement in the manner
provided below under "--Announcements".
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If a competitive situation arises after a "no increase" and/or a "no
extension" statement has been made in relation to the Offer, MMI may if it
specifically reserves the right to do so at the time such statement is made, or
otherwise with the consent of the Panel, withdraw such statement and be free to
revise or increase the Offer if it announces such withdrawal within four
business days after the announcement of the competing offer and notifies
Unionamerica Securityholders to that effect in writing at the earliest
opportunity thereafter. MMI may choose not to be bound by the terms of a "no
increase" and/or "no extension" statement if, having reserved the right to do so
at the time such statement is made, it posts an increased or improved offer
which is recommended for acceptance by the Unionamerica Board or in any other
circumstances permitted by the Panel.
All references in this Prospectus and in the Letter of Transmittal to
shall (except where the context otherwise requires) be deemed, if the
Initial Offer Period is extended, to refer to the Initial Closing Date of the
Offer as so extended.
SUBSEQUENT OFFER PERIOD. If the Offer becomes or is declared unconditional
at the end of the Initial Offer Period, including any extension thereof, the
Offer will remain open for acceptance during the Subsequent Offer Period for at
least 14 calendar days following the Initial Closing Date. The Offer may not be
revised or amended during the Subsequent Offer Period. MMI expressly reserves
the right, however, at any time or from time to time, to extend the Subsequent
Offer Period and, in such event, will give oral or written notice of such
extension to the Exchange Agent and make a public announcement of such extension
in the manner described below in "--Announcements"; provided, however, not less
than 14 calendar days' notice will be given prior to the termination of the
Subsequent Offer Period.
CERTAIN CONSEQUENCES OF THE OFFERS. The purchase of Unionamerica ADSs
pursuant to the Offer will reduce the number of Unionamerica Securityholders and
the number of Unionamerica ADSs that might otherwise trade publicly and,
depending on the number of Unionamerica ADSs so purchased, could adversely
affect the liquidity and market value of the remaining Unionamerica ADSs held by
the public. In addition, Unionamerica ADSs will cease to be quoted on the NYSE
if MMI is entitled to and does effect the Compulsory Acquisition. Even if the
Compulsory Acquisition is not effected, there would be a delisting from the NYSE
if certain minimum requirements with respect to the number of publicly held
shares and/or the number of public shareholders or other criteria are not met.
The Unionamerica ADSs may also be deregistered under the Exchange Act if minimum
requirements with respect to the number of shareholders of record are not met,
with a consequent termination of certain public reporting obligations in the
U.S.
DELIVERY OF CONSIDERATION. Subject to the Offer becoming or being declared
unconditional in all respects, share certificates in respect of MMI Common Stock
in settlement of the consideration due under the Offer will be dispatched by
first class post to accepting Unionamerica Securityholders or their appointed
agents at their own risk: (i) in the case of acceptances received, complete and
in order in all respects by the date on which the Offer becomes or is declared
unconditional in all respects, within 14 days of such date; or (ii) in the case
of acceptances received, complete and in order in all respects after such date
but while the Offer remains open for acceptance, within 14 days of such receipt.
Except with the consent of the Panel, settlement of the consideration due
under the Offer will be made in full in accordance with the terms of the Offer
without regard to any lien, right of set-off, counterclaim or other analogous
right to which MMI may otherwise be, or claim to be, entitled as against a
Unionamerica Securityholder.
UNIONAMERICA SECURITYHOLDERS RESIDENT OUTSIDE THE U.S. OR THE U.K. The
Offer is being made to all Unionamerica Securityholders; provided, however, the
receipt of this Prospectus does not constitute the making of the Offer to (and
tenders of Unionamerica Securities will not be accepted from or on behalf of)
Unionamerica Securityholders in any jurisdiction in the U.S. in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. MMI is not currently aware of any jurisdiction in the U.S.
that prohibits the making of the Offer. MMI may, in its discretion,
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take such action as it may deem necessary to make the Offer in any such
jurisdiction and extend the offer to Unionamerica Securityholders in such
jurisdictions.
The making of the Offer in, or to persons resident in or citizens or
nationals of, jurisdictions outside the U.S. or the U.K. may be affected by the
laws of such jurisdictions. Unionamerica Securityholders not resident in the
U.S. or the U.K. should inform themselves about and observe any applicable legal
requirements. It is the responsibility of any Person outside the U.S. or U.K.
wishing to accept the Offer to satisfy himself or herself as to the full
observance of the laws of the relevant jurisdiction in connection therewith,
including the obtaining of any governmental or other consents which may be
required, the compliance with other necessary formalities and the payment of any
taxes or other requisite payments due in such jurisdiction.
The Offer extends to any Unionamerica Securityholders not resident in the
U.K. to whom this Prospectus, the Letter of Transmittal and any related
documents may not be dispatched and such Unionamerica Securityholders may
collect copies of those documents from the Exchange Agent or the Dealer Manager
at the addresses set out on the back cover page of this Prospectus.
ANNOUNCEMENTS. Any termination, revision, variation, extension or renewal
of the Offer or extension of the Initial Offer Period or the Subsequent Offer
Period will be followed as promptly as practicable by public announcements
thereof no later than 8:30 a.m. (London time) in the U.K. and 8:30 a.m. (New
York City time) in the U.S., on the business day following the day of such
termination, revision, variation, extension or renewal (or such later time
and/or date as the Panel may agree). Announcements will also be made no later
than 8:30 a.m. (London time) in the U.K. and 8:30 a.m. (New York City time) in
the U.S. on the business day following the Initial Closing Date. Without
limiting the manner in which MMI may choose to make any public announcement and
subject to MMI's obligations under applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act relating to MMI's obligation to disseminate
promptly public announcements concerning material changes to the Offer), MMI
will have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News Service
and the NYSE. Such announcement will also state (as nearly as practicable) the
total number of Unionamerica Securities (i) for which acceptances of the Offer
have been received and not validly withdrawn, (ii) acquired or agreed to be
acquired by or on behalf of MMI or any person deemed to be acting in concert
(determined in accordance with the City Code) with it during the offer period as
such expression is defined in the City Code, (iii) held by or on behalf of MMI
or any Persons deemed to be acting in concert with it prior to June 25, 1997 and
(iv) for which acceptances of the Offer have been received from any Person
deemed to be acting in concert with MMI. The announcement will also specify the
percentage of the Unionamerica Securities represented by each of these figures.
The announcement of an extension will state the time and date to which the
Initial Offer Period has been extended. In computing the number of Unionamerica
Securities represented by acceptances and/or tenders, there may be included or
excluded for announcement purposes, subject to the City Code, acceptances and
tenders not in all respects in order or subject to verification.
References to the making of an announcement by MMI include the release of an
announcement by public relations consultants or MMI to the press and delivery by
telephone or facsimile transmission of such announcement to the Dow Jones News
Service and the NYSE.
PUBLICATION; NOTIFICATION; GENERAL INFORMATION. The Offer will be made by
means of this Prospectus and the Letter of Transmittal and may be accepted from
and after that time.
MMI and the Exchange Agent reserve the right to send notices regarding any
matter, including the making of the Offer, to a Unionamerica Securityholder:
1. with a registered address outside the U.K. or the U.S.; or
2. whom MMI knows to be a custodian, trustee or nominee holding
Unionamerica ADSs for Persons who are citizens, residents or nationals of
jurisdictions outside the U.K or the U.S.,
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by announcement or by paid advertisement in a newspaper published and circulated
in the U.K. or the U.S. The notice will be deemed to have been sufficiently
given, despite any failure by a Unionamerica Securityholder to receive or see
that notice. A reference in this Prospectus to a notice or the provision of
information in writing by or on behalf of MMI is to be construed accordingly.
The Unionamerica Securities which are the subject of the Offer will be
acquired free from all liens, charges, restrictions (including restrictions
imposed by law), third party rights and encumbrances and will be acquired with
all rights now or hereafter attaching thereto, including voting rights and the
right to all dividend and other distributions declared, made or paid hereafter,
other than any regular quarterly dividend of $0.0125 per share of Unionamerica
Common Stock to be paid on or prior to the date on which the offer becomes or is
declared unconditional in all respects, or the Initial Closing Date, whichever
is later..
If the Offer lapses or is withdrawn, the Letters of Transmittal, ADRs and
all document(s) of title will be returned by posting the same within 14 days
thereafter to the Person or agent whose name and address is set out in the
appropriate box on the Letter of Transmittal or, if none is set out, to the
first-named holder at his registered address.
All documents and remittances sent by, to or from Unionamerica
Securityholders or their appointed agents will be sent at their own risk.
Neither MMI nor its agents nor any other Person acting on behalf of it or
them shall have any liability to any Person for any loss or alleged loss arising
from the price, timing or manner of any exchange made pursuant to the authority
set out above or otherwise in connection therewith.
THE OFFER AND ALL CONTRACTS ARISING FROM ACCEPTANCES OF, OR PURSUANT TO, IT
AND THE LETTERS OF TRANSMITTAL (OTHER THAN IN RELATION TO THE COMPULSORY
ACQUISITION WHICH SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
ENGLISH LAW) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF DELAWARE.
Execution and delivery by or on behalf of a Unionamerica Securityholder of a
Letter of Transmittal constitutes such Person's: (i) irrevocable submission, in
relation to all matters arising out of the Offer and the Letter of Transmittal,
to the jurisdiction of the courts of England and (ii) agreement that nothing
shall limit the right of MMI to bring any action, suit or proceeding arising out
of or in connection with the Offer in any manner permitted by law and in any
competent court of jurisdiction. The conduct of the Offer is, however, also
subject to the U.S. federal securities laws and the securities laws of the
states of the U.S. in which the Offer is being made. All references in this
Prospectus to any statute or statutory provision shall include any statute or
statutory provision which amends, consolidates or replaces the same. This
Prospectus is issued by MMI.
MMI'S REASONS FOR THE PROPOSED ACQUISITION AND RECOMMENDATION OF THE MMI BOARD
MMI believes that its target market, the healthcare industry, is undergoing
structural change and organizational consolidation. MMI further believes that
the medical malpractice industry is also undergoing consolidation, in part in
response to the dynamics of its target market. MMI believes that current market
conditions favor larger, strongly capitalized companies with multiple licenses,
broad distribution systems and a full complement of insurance and risk
management products and services. Consequently a key element of MMI's business
strategy has been to seek growth through acquisition in order to achieve these
objectives.
MMI believes that the acquisition of Unionamerica offers MMI an opportunity
to improve its competitive position. A substantial portion of Unionamerica's
business involves operating as a reinsurer of medical malpractice insurance
companies throughout the U.S. This distribution system affords MMI an
opportunity to substantially increase its medical malpractice assumed
reinsurance premium writings by virtue of the Proposed Acquisition and to form
and expand upon strategic business relationships with
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direct writers of medical malpractice insurance. Although MMI intends to
continue to operate Unionamerica as a distinct business entity under its present
management and business plans, the combined capitalization of the combined
entities would be among the largest of specialty medical malpractice writers.
The medical malpractice business environment is currently in a prolonged
soft market, where competitive pricing pressures have reduced the opportunity
for MMI to obtain rate increases and thereby revenue growth. Unionamerica's
business plan includes prospects for premium growth in areas outside of the
medical malpractice line of business, including both U.S. property and casualty
lines and London market and European property and casualty lines, and MMI
believes that Unionamerica's management has the background and experience to
manage such growth profitably.
Material factors considered by the MMI Board in its evaluation of the
acquisition of Unionamerica included the following: (i) Unionamerica's core line
of business, professional indemnity reinsurance, is complementary to MMI's
principal line of business, medical malpractice insurance; approximately 27% of
Unionamerica's gross premiums written are derived from reinsurance of U.S.
medical malpractice insurance companies; (ii) Unionamerica has a strong
historical record of underwriting profit and return on equity and strong
prospects for revenue and earnings growth; (iii) Unionamerica has strong growth
prospects in international medical malpractice and non-professional liability
markets that provide opportunity for earnings growth and geographical and line
of business diversification of underwriting exposure; (iv) Unionamerica has a
management group with substantial depth and reinsurance and London market
experience; (v) Unionamerica's ADSs have historically traded at a discount to
comparable companies in part due to liquidity issues; (vi) MMI expects to obtain
operating synergies and expense reductions (by eliminating certain functional
redundancies) by virtue of Unionamerica ceasing to be a separate entity and
becoming a wholly-owned Subsidiary of MMI; (vii) the impact of an increase in
shares outstanding may serve to improve trading liquidity of MMI Common Stock,
thereby improving shareholder value; and (viii) the opinion rendered to the MMI
Board by Smith Barney with regard to the fairness of the Exchange Ratio, from a
financial point of view, to MMI.
Based on this analysis, the MMI Board determined that the Proposed
Acquisition is fair to, and in the best interests of, the MMI stockholders. The
foregoing discussion of the information and factors considered by the MMI Board
is not intended to be exhaustive, and were considered collectively by the MMI
Board in connection with its review of the Acquisition Agreement. In view of the
variety of factors considered in connection with its evaluation of the Proposed
Acquisition, the MMI Board did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of the MMI Board may
have given different weights to different factors. For a discussion of the
interests of MMI's directors and executive officers in MMI, see "Prospectus
Summary--MMI Common Stock and Unionamerica ADSs Held by Directors, Executive
Officers and Their Affiliates".
THE MMI BOARD BELIEVES THAT THE TERMS OF THE ACQUISITION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF MMI
AND ITS STOCKHOLDERS. ACCORDINGLY, AT ITS JUNE 24, 1997 MEETING, THE MMI BOARD
APPROVED THE ACQUISITION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND
HEREBY RECOMMENDS THAT HOLDERS OF MMI COMMON STOCK VOTE FOR APPROVAL OF THE
ISSUANCE OF SHARES OF MMI COMMON STOCK IN CONNECTION WITH THE PROPOSED
ACQUISITION.
OPINION OF FINANCIAL ADVISOR TO MMI
SMITH BARNEY. Smith Barney was retained by MMI to act as its financial
advisor in connection with the Proposed Acquisition. In connection with such
engagement, MMI requested that Smith Barney evaluate the fairness, from a
financial point of view, to MMI of the consideration proposed to be paid by MMI
pursuant to the terms of the Acquisition Agreement. On June 24, 1997, at a
meeting of the MMI
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Board held to evaluate the Proposed Acquisition, Smith Barney delivered an oral
opinion (subsequently confirmed by delivery of a written opinion dated June 24,
1997) to the MMI Board to the effect that, as of the date of such opinion and
based upon and subject to certain matters stated therein, the Exchange Ratio was
fair, from a financial point of view, to MMI.
In arriving at its opinion, Smith Barney reviewed a draft of the Acquisition
Agreement and held discussions with certain senior officers, directors and other
representatives and advisors of MMI and certain senior officers and other
representatives and advisors of Unionamerica concerning the businesses,
operations and prospects of MMI and Unionamerica. Smith Barney examined certain
publicly available business and financial information relating to MMI and
Unionamerica as well as certain financial forecasts and other information and
data for MMI and Unionamerica which were provided to, or otherwise discussed
with, Smith Barney by the respective managements of MMI and Unionamerica,
including information relating to certain strategic implications and operational
benefits anticipated to result from the Proposed Acquisition. Smith Barney
reviewed the financial terms of the Proposed Acquisition as set forth in the
Acquisition Agreement in relation to, among other things (i) current and
historical market prices and trading volumes of MMI Common Stock and
Unionamerica ADSs; (ii) the historical and projected earnings and other
operating data of MMI and Unionamerica; and (iii) the capitalization and
financial condition of MMI and Unionamerica. Smith Barney also considered, to
the extent publicly available, the financial terms of certain other similar
transactions recently effected which Smith Barney considered relevant in
evaluating the Proposed Acquisition and analyzed certain financial, stock market
and other publicly available information relating to the businesses of other
companies whose operations Smith Barney considered relevant in evaluating those
of MMI and Unionamerica. Smith Barney also evaluated the potential pro forma
financial impact of the Proposed Acquisition on MMI. In addition to the
foregoing, Smith Barney conducted such other analyses and examinations and
considered such other financial, economic and market criteria as Smith Barney
deemed appropriate in arriving at its opinion. Smith Barney noted that its
opinion was necessarily based upon information available, and financial, stock
market and other conditions and circumstances existing and disclosed to Smith
Barney as of the date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Smith Barney. Smith Barney also assumed, with the
consent of the MMI Board, that the final terms of the Acquisition Agreement
reviewed by Smith Barney in draft form would not vary materially from the draft
reviewed by Smith Barney. With respect to financial forecasts and other
information and data furnished to or otherwise reviewed by or discussed with
Smith Barney, the managements of MMI and Unionamerica advised Smith Barney that
such forecasts and other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
respective managements of MMI and Unionamerica as to the future financial
performance of MMI and Unionamerica and the strategic implications and
operational benefits anticipated to result from the Proposed Acquisition. Smith
Barney assumed, with the consent of the MMI Board, that the Proposed Acquisition
will be treated as a pooling-of-interests in accordance with GAAP and as a
tax-free reorganization for U.S. federal income tax purposes. Smith Barney's
opinion, as set forth therein, relates to the relative values of MMI and
Unionamerica. Smith Barney did not express any opinion as to what the value of
the MMI Common Stock actually will be when issued pursuant to the Offer or the
price at which the MMI Common Stock will trade subsequent to the consummation of
the Proposed Acquisition. Smith Barney did not make and, with the exception of
certain reserve reports relating to Unionamerica, was not provided with an
independent evaluation or appraisal of the assets, liabilities (contingent or
otherwise) or reserves of MMI or Unionamerica nor did Smith Barney make any
physical inspection of the properties or assets of MMI or Unionamerica. Smith
Barney was not requested to consider, and Smith Barney's opinion does not
address, the relative merits of the Proposed Acquisition as compared to any
alternative business strategies that might exist for MMI or the effect of any
other transaction in which MMI might engage. Although Smith Barney evaluated the
Exchange Ratio from a
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financial point of view, Smith Barney was not asked to and did not recommend the
specific consideration payable in the Proposed Acquisition, which was determined
through negotiation between MMI and Unionamerica. No other limitations were
imposed by MMI on Smith Barney with respect to the investigations made or
procedures followed by Smith Barney in rendering its opinion.
In preparing its opinion to the MMI Board, Smith Barney performed a variety
of financial and comparative analyses, including those described below performed
by Smith Barney in connection with its opinion dated June 24, 1997. The summary
of such analyses does not purport to be a complete description of the analyses
underlying Smith Barney's opinion. The preparation of a financial opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Smith Barney believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and factors, without considering all analyses and factors, could create
a misleading or incomplete view of the processes underlying such analyses and
its opinion. In its analyses, Smith Barney made numerous assumptions with
respect to MMI, Unionamerica, industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of MMI and Unionamerica. The estimates contained in such analyses and
the valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by such analyses.
In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. Smith Barney's opinion and
financial analyses were only one of many factors considered by the MMI Board in
its evaluation of the Proposed Acquisition and should not be viewed as
determinative of the views of the MMI Board or management with respect to the
Exchange Ratio or the Proposed Acquisition.
The following is a summary of the material financial analyses performed by
Smith Barney in connection with its written opinion dated June 24, 1997:
SELECTED COMPANY ANALYSIS. Using publicly available information, Smith
Barney analyzed, among other things, the market values and trading multiples of
MMI, Unionamerica and seven selected publicly traded companies in the insurance
and reinsurance industry, consisting of: SCPIE Holdings, Inc., MAIC Holdings
Inc., FPIC Insurance Group, Inc., NAC Re Corp., Terra Nova (Bermuda) Holdings
Ltd., Trenwick Group Inc. and Chartwell Re Corporation (collectively, the
"Selected Companies"). Smith Barney compared, among other things, market values
of the Selected Companies as multiples of, among other things, estimated
calendar 1997 and calendar 1998 net operating income computed in accordance with
GAAP, and GAAP book value as of March 31, 1997. Smith Barney also compared the
relationship between the price to book value multiples and projected return on
average equity ("ROE") of the Selected Companies with that of Unionamerica. Net
income projections for the Selected Companies were based on estimates of
selected investment banking firms and net income projections for MMI and
Unionamerica were based on internal estimates of the managements of MMI and
Unionamerica. All multiples were based on closing stock prices as of June 11,
1997. Applying a range of selected multiples for the Selected Companies of
estimated calendar 1997 and 1998 GAAP net operating income and estimated GAAP
book value as of March 31, 1997, of 9.1x to 11.7x, 8.3x to 10.5x and 1.31x to
1.69x, respectively, to corresponding financial data of Unionamerica resulted in
equity reference ranges for Unionamerica of approximately $18.66 to $23.76 per
share (on a fully diluted basis). Based on the relationship of the price to book
value multiples and projected ROE of the Selected Companies, the implied equity
value for Unionamerica was approximately $22.05 per share on a fully diluted
basis. Based on a closing stock price of MMI Common Stock on June 24, 1997, the
Exchange Ratio equated to an implied equity value for Unionamerica of
approximately $22.15 per share.
SELECTED MERGER AND ACQUISITION TRANSACTIONS ANALYSIS. Using publicly
available information, Smith Barney analyzed the purchase price and implied
transaction multiples paid in nine selected transactions in
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the insurance and reinsurance industry consisting of (target/acquiror):
SAFR/PartnerRe Ltd., Zurich Reinsurance Centre Holdings, Inc./Zurich Insurance
Company, Piedmont Management Company, Inc./ Chartwell Re Corporation, Discover
Re Managers, Inc./USF&G Corporation, Re Capital Corporation/ Zurich Reinsurance
Centre Holdings, Inc., Underwriters Reinsurance Corp./Alleghany Corporation,
American Re Corporation/Kohlberg Kravis Roberts & Co., Chartwell Re
Corporation/Wand Partners Inc. and National Re Corp./National Re Holdings Corp.
(collectively, the "Selected Transactions"). Smith Barney compared the purchase
prices in such transactions as multiples of, among other things, last twelve
month GAAP net income ("LTM GAAP net income"), one-year forward GAAP net income
and March 31, 1997 book value. All multiples for the Selected Transactions were
based on information available at the time of announcement of the transaction.
Applying a range of selected multiples for the Selected Transactions of LTM GAAP
net income, one-year forward GAAP net income and March 31, 1997 book value of
9.5x to 12.5x, 10.6x to 13.9x and 1.27x to 1.70x, respectively, to corresponding
financial data for Unionamerica resulted in an average equity reference range
for Unionamerica of approximately $17.12 to $22.55 per share on a fully diluted
basis, as compared to the equity value implied by the Exchange Ratio of
approximately $22.15 per share based on a closing price of MMI Common Stock on
June 24, 1997.
No company, transaction or business used as a comparison in the "Selected
Company Analysis" or "Selected Merger and Acquisition Transactions Analysis" is
identical to MMI, Unionamerica or the Proposed Acquisition. Accordingly, an
analysis of the results of the foregoing is not entirely mathematical; rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the Selected Companies, Selected
Transactions or the business segment, company or transaction to which they are
being compared.
DISCOUNTED CASH FLOW ANALYSIS. Smith Barney performed a discounted cash
flow analysis of the projected dividendable net income of Unionamerica for
fiscal years 1997 through 2001, based on internal estimates of the management of
MMI and Unionamerica. The range of the estimated terminal value for Unionamerica
at the end of the five-year period was calculated by applying terminal multiples
ranging from 9.0x to 13.0x to Unionamerica's projected 2002 net income,
representing Unionamerica's estimated value at June 30, 2000. The net income
terminal value of Unionamerica was discounted to June 30, 1997 using rates
ranging from 9% to 14%. This analysis resulted in an equity reference range for
Unionamerica of approximately $16.03 to $22.01 per share, as compared to the
equity value implied by the Exchange Ratio of approximately $22.15 per share
based on a closing price of MMI Common Stock on June 24, 1997.
PRO FORMA MERGER ANALYSIS. Smith Barney analyzed certain pro forma effects
resulting from the Proposed Acquisition, including, among other things, the
impact of the Proposed Acquisition on the projected earnings per share ("EPS")
of MMI for the fiscal years ending 1997 and 1998, based on internal estimates of
the management of MMI and internal estimates of the management of Unionamerica.
The results of the pro forma merger analysis suggested that the Offer could be
accretive to MMI's EPS in each of the fiscal years analyzed. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
OTHER FACTORS AND COMPARATIVE ANALYSES. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) the historical and
projected financial results of MMI and Unionamerica; (ii) the history of trading
prices and volume for Unionamerica ADSs and the relationship between movements
of such securities with that of the MMI Common Stock; (iii) premiums paid in
selected stock-for-stock transactions in the insurance and reinsurance industry;
and (iv) the pro forma ownership of the combined company. In addition, Smith
Barney analyzed the respective contributions of MMI and Unionamerica to the net
premiums written and net operating income of the combined company for fiscal
year 1996.
Pursuant to the terms of Smith Barney's engagement, MMI has agreed to pay
Smith Barney for its services in connection with the Proposed Acquisition an
aggregate financial advisory fee of $1.672 million,
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a substantial portion of which is payable only if the Proposed Acquisition is
consummated. MMI has also agreed to reimburse Smith Barney for reasonable travel
and other reasonable out-of-pocket expenses incurred by Smith Barney in
performing its services, including the reasonable fees and expenses of its legal
counsel, and to indemnify Smith Barney and related Persons against certain
liabilities, including liabilities under the federal securities laws, arising
out of Smith Barney's engagement.
Smith Barney has advised MMI that, in the ordinary course of business, Smith
Barney and its affiliates may actively trade or hold the securities of MMI and
Unionamerica for their own account or for the account of customers and,
accordingly, may at any time hold a long or short position in such securities.
Smith Barney has in the past provided certain investment banking services to MMI
unrelated to the Proposed Acquisition, including serving as a managing
underwriter in the initial public offering of MMI Common Stock in June 1993 and
the subsequent public offering of MMI Common Stock in September 1996, for which
services Smith Barney has received compensation. In addition, Smith Barney and
its affiliates (including Travelers Group Inc. and its affiliates) may maintain
relationships with MMI and Unionamerica.
Smith Barney is a nationally recognized investment banking firm and was
selected by MMI based on Smith Barney's experience, expertise and familiarity
with MMI and its business. Smith Barney regularly engages in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted securities, private placements and valuations for estate, corporate
and other purposes.
THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY DATED JUNE 24, 1997,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED HERETO AS APPENDIX B AND IS INCORPORATED HEREIN
BY REFERENCE. HOLDERS OF MMI COMMON STOCK ARE URGED TO READ THIS OPINION
CAREFULLY IN ITS ENTIRETY. SMITH BARNEY'S OPINION IS DIRECTED TO THE MMI BOARD
AND RELATES ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF
VIEW TO MMI, DOES NOT ADDRESS ANY OTHER ASPECT OF THE OFFER OR RELATED
TRANSACTIONS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO
HOW SUCH STOCKHOLDER SHOULD VOTE AT THE MMI SPECIAL MEETING OR AS TO WHETHER ANY
UNIONAMERICA SECURITYHOLDER SHOULD ACCEPT THE OFFER. THE SUMMARY OF THE OPINION
OF SMITH BARNEY SET FORTH IN THIS PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
UNIONAMERICA'S REASONS FOR THE PROPOSED ACQUISITION AND RECOMMENDATION OF THE
UNIONAMERICA BOARD
The Unionamerica Board has unanimously approved the Acquisition Agreement
and the transactions contemplated thereby. In reaching its conclusion to approve
the Acquisition Agreement, the Unionamerica Board considered many factors,
including, but not limited to, the following:
(i) the terms and conditions of the Offer and the Acquisition Agreement,
including the amount and form of consideration to be received by
Unionamerica Securityholders in the Offer;
(ii) the Unionamerica Board's familiarity with, among other things, the
business, operations, financial condition, competitive position and
prospects of Unionamerica, the nature of the reinsurance industry in which
Unionamerica participates, and current industry, economic and market
conditions, both on a historical and on a prospective basis;
(iii) the Unionamerica Board's review of the historical and prospective
market prices of the Unionamerica ADSs compared to the Exchange Ratio;
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(iv) the Unionamerica Board's review of presentations by, and
discussions of the terms and conditions of the Offer with, the senior
executives of Unionamerica, representatives of its legal counsel and
representatives of DLJ;
(v) the Unionamerica Board's receipt of the opinion of DLJ, dated June
25, 1997 to the effect that, as of such date and based on, and subject to,
the assumptions, limitations and qualifications set forth in such opinion,
the Exchange Ratio to be offered to the Unionamerica Securityholders was
fair from a financial point of view to such Securityholders (see "Opinion of
Financial Advisor to Unionamerica");
(vi) the financial condition of MMI and MMI's standing in the healthcare
risk management industry;
(vii) the potential efficiencies and synergies to be realized by
combining the operations of MMI and Unionamerica;
(viii) the regulatory approvals required to consummate the Proposed
Acquisition and the favorable prospects for receiving all such approvals;
(ix) the ability of the Unionamerica Securityholders to maintain an
ownership stake in the combined entity and potentially realize the benefits
from the Proposed Acquisition;
(x) the structure of the Proposed Acquisition, which would permit
Unionamerica Securityholders to exchange their Unionamerica ADSs for MMI
Common Stock on a tax-free basis; and
(xi) the terms and conditions of the Acquisition Agreement, including,
among other things, the fact that Unionamerica's obligations under the
Acquisition Agreement will be fully discharged in the event a higher
competing offer is made or a firm intention to make a higher competing offer
is announced and MMI does not prior to midnight on the tenth business day
after the day on which the relevant higher competing offer is made or, if
earlier, publicly announced, announce a revised offer on terms which
provide, in the reasonable opinion of DLJ, a substantially equivalent or
greater consideration than the higher competing offer, and a $5 million fee
is paid to MMI.
Based on this analysis, the Unionamerica Board determined that the Proposed
Acquisition is fair to, and in the best interests of, the Unionamerica
Securityholders. The foregoing discussion of the information and factors
considered by the Unionamerica Board is not intended to be exhaustive, and were
considered collectively by the Unionamerica Board in connection with its review
of the Acquisition Agreement. In view of the variety of factors considered in
connection with its evaluation of the Proposed Acquisition, the Unionamerica
Board did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Unionamerica Board may
have given different weights to different factors. For a discussion of the
interests of Unionamerica's directors and executive officers in Unionamerica,
see "Prospectus Summary-- MMI Common Stock and Unionamerica ADSs held by
Directors, Exectuve Officers and Their Affiliates".
THE UNIONAMERICA BOARD UNANIMOUSLY RECOMMENDS THAT UNIONAMERICA
SECURITYHOLDERS TENDER THEIR UNIONAMERICA ADSs IN THE OFFER.
OPINION OF FINANCIAL ADVISOR TO UNIONAMERICA
In its role as financial advisor to Unionamerica, DLJ was asked by
Unionamerica to render its opinion to the Unionamerica Board as to the fairness,
from a financial point of view, to the holders of Unionamerica ADSs of the
Exchange Ratio to be offered to the holders of Unionamerica ADSs pursuant to the
terms of the Acquisition Agreement. On June 25, 1997, DLJ delivered its written
opinion (the "DLJ Opinion") to the effect that as of the date of such opinion
and based upon and subject to the assumptions, limitations and qualifications
set forth in such opinion, the Exchange Ratio was fair, from a financial point
of view, to the holders of Unionamerica ADSs.
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A COPY OF THE DLJ OPINION IS ATTACHED HERETO AS APPENDIX C. UNIONAMERICA
SECURITYHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY
DLJ.
The DLJ Opinion was prepared for the Unionamerica Board and is directed only
to the fairness, from a financial point of view, to the holders of Unionamerica
ADSs, and does not constitute a recommendation to any U.S. Securityholder as to
whether to tender their Unionamerica ADSs.
The DLJ Opinion does not constitute an opinion as to the price at which MMI
Common Stock will actually trade at any time. The Exchange Ratio was determined
in arms' length negotiations between Unionamerica and MMI, in which negotiations
DLJ advised Unionamerica. No restrictions or limitations were imposed by the
Unionamerica Board upon DLJ with respect to the investigations made or the
procedures followed by DLJ in rendering its opinion.
In arriving at its opinion, DLJ reviewed the Acquisition Agreement,
including the exhibits and schedules thereto. DLJ also reviewed financial and
other information that was publicly available or furnished to it by Unionamerica
and MMI, including information provided during discussions with their respective
managements. Included in the information provided during discussions with their
respective managements were certain financial projections of Unionamerica and
MMI for the years ending December 31, 1997 and December 31, 1998 prepared by the
managements of Unionamerica and MMI, respectively. In addition, DLJ compared
certain financial and securities data of Unionamerica and MMI with various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of Unionamerica ADSs and MMI Common Stock,
reviewed prices and premiums paid in other business combinations and conducted
such other financial studies, analyses and investigations as DLJ deemed
appropriate for purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to it from public sources, that was provided to it by Unionamerica or
MMI or any of their respective representatives, or that was otherwise reviewed
by it. With respect to the financial projections of Unionamerica supplied to it,
DLJ assumed that they have been reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the management of
Unionamerica as to the future operating and financial performance of
Unionamerica. With respect to the financial projections of MMI supplied to it,
DLJ assumed that they have been reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the management of MMI as to
the future operating and financial performance of MMI. DLJ did not assume any
responsibility for making an independent evaluation of any of the information
reviewed by it. DLJ relied as to all legal matters on advice of counsel to
Unionamerica.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on June 25, 1997, and on the information made
available to it as of, June 25, 1997. It should be understood that, although
subsequent developments may affect its opinion, DLJ does not have any obligation
to update, revise or reaffirm its opinion.
The following is a summary of the presentation made by DLJ to the
Unionamerica Board at its June 13, 1997 meeting, which presentation was
confirmed at the Unionamerica Board meeting held on June 24, 1997.
At the close of business on June 11, 1997, MMI's stock price was $25.25 per
share, resulting in a value per Unionamerica ADS of approximately $21.11, based
on the Exchange Ratio of 0.836 shares of MMI Common Stock for each Unionamerica
ADS.
TRANSACTION ANALYSIS. DLJ reviewed publicly available information for
selected transactions involving: (i) the acquisition of property and casualty
insurance companies since January 1, 1989 (the "Selected
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Property and Casualty Transactions") and, (ii) the acquisition of property and
casualty insurance companies from January 1, 1996 through June 11, 1997 (the
"Selected Recent Property and Casualty Transactions") (together, the "Selected
Transactions"). In reviewing the Selected Transactions, several factors were
considered, including: (i) the lack of publicly available information for
subsidiary and private company transactions which represent a significant
portion of the merger and acquisition activity; and (ii) the lack of directly
comparable transactions. The Selected Transactions were not intended to
represent the complete list of property and casualty insurance company
transactions which have occurred. Such transactions were used in this analysis
because the companies involved were deemed by DLJ to operate in similar
businesses or have similar financial characteristics to Unionamerica and MMI.
DLJ reviewed the consideration paid in the Selected Transactions in terms of
the price paid for the common stock in the Selected Transactions as a multiple
of GAAP operating earnings for the latest twelve months ("LTM") ended prior to
the announcement of such transactions and as a multiple of shareholders' equity
as of the end of the latest fiscal quarter ("LFQ") ended prior to the
announcement of such transactions. In analyzing acquisitions of property and
casualty insurance companies, the purchase price paid may be described in terms
of multiples of the price paid for common stock to GAAP operating earnings and
to shareholders' equity. Variances in multiples for different transactions may
reflect such considerations as the consistency, quality and growth of earnings
and the company's capitalization, asset quality and return on capital. Since
GAAP operating earnings and shareholders' equity already reflect the cost of a
company's debt or preferred stock financing, analyses of multiples of GAAP
operating earnings or shareholders' equity are usually based on the price paid
for the company's common stock, which excludes the cost of assuming, repaying or
redeeming such debt or preferred stock financing. Comparing the multiples of the
price offered to be paid for Unionamerica ADSs by MMI to the GAAP operating
earnings and shareholders' equity of Unionamerica with multiples paid by
acquirors in other transactions indicates whether the valuation being placed on
Unionamerica is within the range of values paid for other property and casualty
insurance companies.
The low, average and high multiples of price paid for common stock to LTM
GAAP operating earnings were 5.0x, 18.5x and 57.3x, respectively, for the
Selected Property and Casualty Transactions. Based on an offer price of $21.11
per share, the implied multiple of price paid for common stock to Unionamerica's
GAAP operating earnings for the LTM ended March 31, 1997 was 9.7x. This multiple
is between the low and average multiples of the Selected Property and Casualty
Transactions. The low, average and high multiples of price paid for common stock
to shareholders' equity as of the end of the LFQ ended prior to the announcement
of the transaction were 0.36x, 1.61x and 3.92x, respectively, for the Selected
Property and Casualty Transactions. Based on an offer price of $21.11 per share,
the implied multiple of price paid for common stock to Unionamerica's
shareholders' equity as of March 31, 1997 was 1.75x. This multiple is higher
than the average multiple of the Selected Property and Casualty Transactions.
The low, average and high multiples of price paid for common stock to LTM
GAAP operating earnings were 7.5x, 16.0x and 29.7x, respectively, for the
Selected Recent Property and Casualty Transactions. Based on an offer price of
$21.11 per share, the implied multiple of price paid for common stock to
Unionamerica's GAAP operating earnings for the LTM ended March 31, 1997 was
9.7x. This multiple is between the low and average multiples of the Selected
Recent Property and Casualty Transactions. The low, average and high multiples
of price paid for common stock to shareholders' equity as of the end of the LFQ
ended prior to the announcement of the transaction were 1.00x, 2.14x and 3.92x,
respectively, for the Selected Recent Property and Casualty Transactions. Based
on an offer price of $21.11 per share, the implied multiple of price paid for
common stock to Unionamerica's shareholders' equity as of March 31, 1997 was
1.75x. This multiple is between the low and average multiple of the Selected
Recent Property and Casualty Transactions.
DLJ determined the percentage premium of the offer prices (represented by
the purchase price per share in cash transactions and the price of the
constituent securities times the exchange ratio in the case of stock-for-stock
mergers) over the public market trading prices one day, one week and one month
prior to
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the announcement date of the selected transactions involving property and
casualty insurance companies where the acquired company's stock was publicly
traded (the "Selected Public Property and Casualty Transactions"). The average
premiums of offer prices to public market trading prices one day, one week and
one month prior to the announcement date were 35.6%, 40.2% and 52.1%,
respectively, for the Selected Public Property and Casualty Transactions. An
offer price of $21.11 per share represents premiums to the trading prices of
Unionamerica ADSs, one day, one week and one month prior to June 11, 1997, of
11.8%, 26.0% and 26.0%, respectively. These premiums are lower than the
corresponding average premiums of the Selected Public Property and Casualty
Transactions.
DLJ also determined the percentage premium of the offer prices (represented
by the purchase price per share in cash transactions and the price of the
constituent securities times the exchange ratio in the case of stock-for-stock
mergers) over the public market trading prices one day, one week and one month
prior to the announcement date of comparably sized transactions over the latest
twelve months ended June 11, 1997 where the acquired company's stock was
publicly traded (the "Selected Public Transactions"). The average premiums of
offer prices to public market trading prices one day, one week and one month
prior to the announcement date were 15.4%, 20.9% and 26.4%, respectively, for
the Selected Public Transactions. An offer price of $21.11 per share represents
premiums to the trading prices of Unionamerica ADSs, one day, one week and one
month prior to June 11, 1997 of 11.8%, 26.0% and 26.0%, respectively. These
premiums are below, above and below the corresponding average premiums of the
Selected Public Transactions.
PUBLIC COMPANY ANALYSIS. To provide comparative market information, DLJ
compared selected historical and projected operating and financial ratios of
Unionamerica to the corresponding data and ratios of selected reinsurance
companies whose securities are publicly traded. Such companies included
Chartwell, Everest Re, NAC Re, and Trenwick (the "Selected U.S. Broker Market
Reinsurance Companies") as well as Sphere Drake and Terra Nova (Bermuda)
Holdings (the "Selected London Market Reinsurance Companies") (together, the
"Selected Reinsurance Companies").
Such analysis included, among other things, the ratios of stock price to
GAAP operating earnings per share ("EPS") for the LTM ended March 31, 1997,
estimated GAAP operating EPS for 1997 and 1998 (as estimated by research
analysts and compiled by Institutional Brokers Estimating Service for the
Selected Reinsurance Companies), and shareholders' equity per share as of March
31, 1997. Closing prices as of June 11, 1997 were used in this analysis. The
ratios described in this paragraph have been designed to reflect the value
attributable in the public equity markets to various valuation measures of
reinsurance companies. Measures utilized in the public marketplace to value the
stock of publicly traded companies in the reinsurance industry are based on,
among other things, a company's historical and projected GAAP operating earnings
as well as shareholders' equity. The multiples of stock price to GAAP operating
EPS reflect the value attributed to a company by public equity market investors
based on the company's historical and projected earnings. The multiples of stock
price to shareholders' equity per share reflect the values attributed to a
company by public equity market investors based on the company's net worth.
Variances in multiples for different companies may reflect such considerations
as the consistency, quality and growth of earnings and the company's
capitalization, asset quality and return on capital. Since GAAP operating
earnings and shareholders' equity already reflect the cost of a company's debt
or preferred stock financing, analyses of multiples of GAAP operating earnings
or shareholders' equity are usually based on the price paid for the company's
common stock, which excludes debt or preferred stock financing. Comparing the
multiples of price offered to be paid by MMI to the GAAP operating EPS and
shareholders' equity of Unionamerica with the multiples at which the Selected
Reinsurance Companies trade indicates whether the valuation being placed on
Unionamerica is within the range of values at which the Selected Reinsurance
Companies trade.
The low, average and high, multiples of public stock price to GAAP operating
EPS for the LTM ended March 31, 1997 were 10.9x, 13.1x and 14.9x, respectively,
for the Selected U.S. Broker Market Reinsurance
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Companies. Based on an offer price of $21.11 per share, the implied multiple of
offer price to Unionamerica's GAAP operating EPS for the LTM ended March 31,
1997 was 9.6x. This multiple is lower than the low multiple of the Selected U.S.
Broker Market Reinsurance Companies. The low, average and high multiples of
public stock price to estimated 1997 GAAP operating EPS were 9.9x, 11.7x and
12.9x, respectively, for the Selected U.S. Broker Market Reinsurance Companies.
Based on an offer price of $21.11 per share, the implied multiple of offer price
to Unionamerica's estimated 1997 GAAP operating EPS was 10.1x. This multiple is
between the low and average multiple of the Selected U.S. Broker Market
Reinsurance Companies. The low, average and high multiples of public stock price
to estimated 1998 GAAP operating EPS were 9.1x, 10.5x and 11.4x, respectively,
for the Selected U.S. Broker Market Reinsurance Companies. Based on an offer
price of $21.11 per share, the implied multiple of offer price to Unionamerica's
estimated GAAP operating EPS for 1998 was 9.0x. This multiple is lower than the
low multiple of public stock price to estimated 1998 GAAP operating EPS of the
Selected U.S. Broker Market Reinsurance Companies. The low, average and high
multiples of public stock price to shareholders' equity per share as of March
31, 1997 were 1.14x, 1.41x and 1.68x, respectively, for the Selected U.S. Broker
Market Reinsurance Companies. Based on an offer price of $21.11 per share, the
implied multiple of offer price to Unionamerica's shareholders' equity per share
as of March 31, 1997 was 1.75x. This multiple is higher than the high multiple
of the Selected U.S. Broker Market Reinsurance Companies.
The low, average and high multiples of public stock price to GAAP operating
EPS for the LTM ended March 31, 1997 were 5.8x, 7.9x and 9.9x, respectively, for
the Selected London Market Reinsurance Companies. Based on an offer price of
$21.11 per share, the implied multiple of offer price to Unionamerica's GAAP
operating EPS for the LTM ended March 31, 1997 was 9.6x. This multiple is higher
than the average multiple of the Selected London Market Reinsurance Companies.
The low, average and high multiple of public stock price to estimated 1997 GAAP
operating EPS were 8.9x, 9.0x and 9.1x, respectively, for the Selected London
Market Reinsurance Companies. Based on an offer price of $21.11 per share, the
implied multiple of offer price to Unionamerica's estimated 1997 GAAP operating
EPS was 10.1x. This multiple is higher than the high multiple of the Selected
London Market Reinsurance Companies. The low, average and high multiples of
public stock price to estimated 1998 GAAP operating EPS were 7.7x, 8.0x and
8.3x, respectively, for the Selected London Market Reinsurance Companies. Based
on an offer price of $21.11 per share, the implied multiple of offer price to
Unionamerica's estimated GAAP operating EPS for 1998 was 9.0x. This multiple is
higher than the high multiple of public stock price to estimated 1998 GAAP
operating EPS of the Selected London Market Reinsurance Companies. The low,
average and high multiples of public stock price to shareholders' equity per
share as of March 31, 1997 were 0.67x, 1.08x and 1.49x, respectively, for the
Selected London Market Reinsurance Companies. Based on an offer price of $21.11
per share, the implied multiple of offer price to Unionamerica's shareholders'
equity per share as of March 31, 1997 was 1.75x. This multiple is higher than
the high multiple of the Selected London Market Reinsurance Companies.
Since the consideration received pursuant to the Offer will be in the form
of MMI Common Stock, to provide comparative market information, DLJ compared
selected historical and projected operating and financial ratios of MMI to the
corresponding data and ratios of W.R. Berkley, Frontier, Gainsco, HCC, Markel,
Navigators, NYMagic, Penn-America and RLI Corp. (the "Selected Specialty
Insurance Companies") and FPIC, MAIC Holdings, PICOM, St. Paul Companies and
SCPIE (the "Selected Medical Malpractice Companies") (together, the "Selected
Companies").
Such analysis included, among other things, the ratios of stock price to
GAAP operating EPS for the LTM ended March 31, 1997, estimated GAAP operating
EPS for 1997 and 1998 (as estimated by research analysts and compiled by
Institutional Brokers Estimating Service for the Selected Companies), and to
shareholders' equity per share as of March 31, 1997. Closing prices as of June
11, 1997 were used in this analysis. Comparing the multiples at which the
Selected Companies trade indicates whether MMI's Common Stock price is within
the range of values at which the Selected Companies trade.
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The low, average and high multiples of public stock price to GAAP operating
EPS for LTM ended March 31, 1997, were 9.8x, 15.3x and 22.3x, respectively, for
the Selected Specialty Insurance Companies, and 9.0x, 11.8x and 16.1x,
respectively, for the Selected Medical Malpractice Companies. The multiple of
price to MMI's GAAP operating EPS for LTM ended March 31, 1997 was 10.9x. This
multiple is between the low and average multiple of both the Selected Specialty
Insurance Companies and the Selected Medical Malpractice Companies. The low,
average and high multiples of public stock price to estimated 1997 GAAP
operating EPS were 9.6x , 13.6x and 19.1x, respectively, for the Selected
Specialty Insurance Companies, and 9.1x, 11.5x and 13.6x, respectively, for the
Selected Medical Malpractice Companies. The multiple of price to MMI's estimated
1997 GAAP operating EPS was 10.7x. This multiple is between the low and the
average multiple of both the Selected Specialty Insurance Companies and the
Selected Medical Malpractice Companies. The low, average and high multiples of
public stock price to estimated 1998 GAAP operating EPS were 8.1x, 11.6x and
15.6x, respectively, for the Selected Specialty Insurance Companies, and 8.7x,
10.4x and 12.5x, respectively, for the Selected Medical Malpractice Companies.
The multiple of price to MMI's estimated 1998 GAAP operating EPS was 9.4x. This
multiple is between the low and the average multiple of both the Selected
Specialty Insurance Companies and the Selected Medical Malpractice Companies.
The low, average and high multiples of public stock price to shareholders'
equity per share as of March 31, 1997 were 1.12x, 2.11x and 3.84x, respectively,
for the Selected Specialty Insurance Companies, and 0.89x, 1.46x and 1.84x,
respectively, for the Selected Medical Malpractice Companies. The multiple of
price to MMI's shareholders' equity per share as of March 31, 1997 was 1.20x.
This multiple is between the low and the average multiple of both the Selected
Specialty Insurance Companies and the Selected Medical Malpractice Companies.
No company or transaction used in the Transaction Analysis or the Public
Company analysis described above was directly comparable to Unionamerica, MMI or
the Proposed Acquisition. Accordingly, an analysis of the results of the
foregoing was not simply mathematical nor necessarily precise; rather, it
involved complex considerations and judgments concerning differences in
financial and operating characteristic of companies and other factors that could
affect the transaction values and trading prices. For example, many qualitative
factors are involved in valuing a company or analyzing a transaction in the
property and casualty insurance industry, including assessments of the quality
of management, the attractiveness of the company's target market, the economics
of the products being sold and the company's market position relative to its
competitors. Other factors that could affect the transaction values or trading
prices include differences in distribution, products, geographic or demographic
customer concentration, size, accounting practices, asset portfolio quality,
interest rate sensitivity and other factors. These factors may affect the
transaction values of trading prices in each case by affecting in varying
degrees investors' expectations of such factors as the company's risk and future
operating profitability.
STOCK TRADING HISTORY. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices and their relative
relationships for both Unionamerica ADSs and MMI Common Stock for various
periods ended prior to June 11, 1997. DLJ also reviewed the daily closing prices
of Unionamerica ADSs and MMI Common Stock and compared the Unionamerica and MMI
closing stock prices with the S&P 500 Index and indices of selected publicly
traded companies. In addition, DLJ reviewed the trading history of Unionamerica
ADSs and MMI Common Stock relative to indices of selected publicly traded
companies in order to assess the relative stock price performance of
Unionamerica, MMI and such indices.
PRO FORMA MERGER ANALYSIS. DLJ analyzed certain pro forma financial effects
resulting from the Proposed Acquisition. In conducting its analysis, DLJ relied
upon certain assumptions described above and financial projections provided by
the managements of Unionamerica and MMI. DLJ analyzed the pro forma effect of
the Proposed Acquisition on the EPS, shareholders' equity per share and leverage
ratios of the combined companies. MMI's management has indicated that it
believes that the Proposed Acquisition will offer some modest consolidation
opportunities which will result in revenue enhancements and expense savings
relative to the stand-alone projected revenues and expenses of Unionamerica and
MMI. DLJ
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incorporated estimates of such revenue enhancements and expense savings,
determined in conjunction with the managements of Unionamerica and MMI, in its
analysis, although DLJ did not express any opinion as to the likelihood of such
revenue enhancements or expense savings realized. The results of the pro forma
merger analysis are not necessarily indicative of future operating results or
financial position. Based on this analysis and on an offer price of $21.11 per
share, holders of MMI's Common Stock would realize EPS accretion of 2.8%, and
6.5%, respectively, in 1997 and 1998. Based on this analysis and on an offer
price of $21.11 per share, the MMI ratio of debt to total capitalization as of
March 31, 1997 would be 19.9%, assuming the Proposed Acquisition is completed.
There can be no assurance as to whether the assumptions regarding financial
projections set forth in this paragraph will occur, and such assumptions are
used only for purposes of illustration.
CONTRIBUTION ANALYSIS. DLJ analyzed Unionamerica's and MMI's relative
contributions to the combined company with respect to GAAP operating revenues,
GAAP operating earnings, shareholders' equity and total assets and compared this
with the relative ownership of Unionamerica Securityholders in the combined
company after the Proposed Acquisition. Such analysis was considered on a
percentage contribution basis and was made, where appropriate, (i) for 1996 and
for the LTM ended March 31, 1997 based on MMI's and Unionamerica's historical
financial results and (ii) with respect to estimated GAAP operating earnings for
1997 and 1998, as projected by Unionamerica's and MMI's management.
Unionamerica's relative contribution to the combined company with respect to
revenues and net operating income for 1996 were 37.7% and 43.0%, respectively,
of the total. Unionamerica's relative contribution to the combined company with
respect to estimated GAAP operating earnings for 1997 and 1998 were 38.0% and
37.1%, respectively, of the total. Unionamerica's relative contribution to the
combined company with respect to total assets was 41.5% of the total.
Unionamerica's relative contribution to shareholder's equity as of December 31,
1996 was 30.0% of the total.
Based on the Exchange Ratio of 0.836, Unionamerica Securityholders would own
approximately 38.0% of the combined company after the Proposed Acquisition. The
results of these contribution analyses are not necessarily indicative of the
contributions that the respective business may actually make in the future.
The summary set forth above does not purport to be a complete description of
the analysis performed by DLJ but describes, in summary form, the principal
elements of the presentation made by DLJ to the Unionamerica Board on June 13,
1997 in connection with its preparation of the DLJ Opinion. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Each of the analyses conducted by DLJ was
carried out in order to provide a different perspective on the Proposed
Acquisition and add to the total mix of information available. DLJ did not form
a conclusion as to whether any individual analysis, considered in isolation,
supported or failed to support an opinion as to fairness, from a financial point
of view. Rather, in reaching its conclusion, DLJ considered the results of the
analyses in light of each other and ultimately reached its opinion based on the
results of all analyses taken as a whole. DLJ did not place particular reliance
or weight on any individual analysis, but instead concluded that its analyses,
taken as a whole, supported its determination. Accordingly, notwithstanding the
separate factors summarized above, DLJ believes that its analyses must be
considered as a whole and the selected portions of its analyses and the factors
considered by it, without considering all analyses and factors, may create an
incomplete view of the evaluation process underlying the DLJ Opinion. In
performing its analyses, DLJ made numerous assumptions with respect to industry
performance, business and economic conditions and other matters. The analyses
performed by DLJ are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses.
The Unionamerica Board selected DLJ as its financial advisor because it is a
nationally recognized investment banking firm that has substantial experience in
transactions similar to the Proposed Acquisition
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and is familiar with Unionamerica, its business and the property and casualty
insurance industry. Pursuant to the terms of an engagement letter dated June 13,
1997 between Unionamerica and DLJ, Unionamerica paid DLJ $250,000 upon rendering
of the DLJ Opinion. Pursuant to the terms of the engagement letter, Unionamerica
will pay DLJ, on the Closing Date, cash compensation equal to seven-eighths of
one percent (0.875%) of the Transaction Value, less the $250,000 paid to date.
Transaction Value is defined as the aggregate amount of consideration received
by Unionamerica and/or the Unionamerica Securityholders (treating any shares
issuable upon exercise of options, warrants or other rights of conversion that
are outstanding as of June 25, 1997, as outstanding, and subtracting from this
amount the exercise price of these options, warrants or other rights of
conversion), plus the amount of any debt assumed, acquired, remaining
outstanding, retired or defeased or preferred stock redeemed or remaining
outstanding in connection with the Proposed Acquisition, including, in the case
of a sale or other disposition by Unionamerica of assets, the net value of any
assets not sold by Unionamerica. Based on an assumed Transaction Value,
Unionamerica will pay DLJ, on the Closing Date, cash compensation of
approximately $1.9 million, less the $250,000 paid to date. Unionamerica also
agreed to reimburse DLJ for all out-of-pocket expenses (including the reasonable
fees and out-of pocket expenses of counsel) incurred by DLJ in connection with
its engagement and to indemnify DLJ and certain related persons against certain
liabilities in connection with its engagement, including liabilities under the
federal securities laws. The terms of the fee arrangement with DLJ, which DLJ
and Unionamerica believe are customary in transactions of this nature, were
negotiated at arms' length between Unionamerica and DLJ and the Unionamerica
Board are aware of such arrangement, including the fact that a significant
portion of the aggregate fee payable to DLJ is contingent upon consummation of
the Proposed Acquisition.
In the ordinary course of business, DLJ may actively trade the securities of
both Unionamerica and MMI for its own account and for the accounts of its
customers and accordingly, may at any time hold a long or short position in such
securities. DLJ, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with
mergers, acquisitions, underwritings, sales, and distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. DLJ has performed investment banking and other services for
Unionamerica in the past, including lead-managing Unionamerica's initial public
offering in December, 1995, and has received usual and customary compensation
for such services. DLJ has performed investment banking and other services in
transactions involving MMI in the past including representing HPIC in its sale
to MMI, and has received usual and customary compensation for such services.
DESCRIPTION OF MMI CAPITAL STOCK
The authorized capital stock of MMI as of the completion of the Offer will
consist of 30,000,000 shares of Common Stock, $0.10 par value per share, and
5,000,000 shares of Preferred Stock, $20.00 par value per share, the rights,
preferences and powers of which may be designated by the MMI Board.
COMMON STOCK. Each share of MMI Common Stock entitles its holder to one
vote on each matter brought before a meeting of the stockholders.
The MMI Certificate does not grant MMI's stockholders preemptive rights to
subscribe for any additional issues of MMI Common Stock. The shares of MMI
Common Stock have no redemption or conversion rights. All outstanding shares of
MMI Common Stock are legally issued, fully paid and non-assessable.
Subject to the limitations on dividends and other restrictions described in
Appendix D--"Certain Market, Dividend and Exchange Rate Information", registered
holders of shares of MMI Common Stock are entitled to receive such dividends as
may be declared from time to time by the MMI Board out of the funds legally
available therefor.
PREFERRED STOCK. The MMI Board is authorized by the MMI Certificate,
without first obtaining the approval of the holders of MMI Common Stock, to
issue from time to time shares of Preferred Stock which may have such voting
powers, full or limited, or no voting powers, and such designations,
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preferences and relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof, as shall be stated in the
resolution or resolutions providing for the issuance of such stock adopted by
the MMI Board. The MMI Board without obtaining stockholder approval could issue
shares of Preferred Stock with voting and conversion rights that could adversely
affect the voting power of the holders of shares of MMI Common Stock and
discourage a hostile takeover of MMI.
SHAREHOLDER RIGHTS PLAN. On June 14, 1997, the MMI Board adopted a
shareholder rights plan pursuant to the Rights Agreement between MMI and
ChaseMellon Shareholder Services L.L.C., as Rights Agent, and declared a
dividend distribution of one Right for each outstanding share of MMI Common
Stock, payable to MMI's stockholders of record at the close of business on June
30, 1997. One Right attaches to each share of MMI Common Stock and each Right
will entitle the registered holder to purchase from MMI a Unit of Series B
Preferred Stock, at a purchase price of $75.00 per Unit (the "Purchase Price"),
subject to adjustment. All shares of MMI Common Stock issued in the Offer to the
holders of Unionamerica ADSs will entitle such holders to the Rights set forth
in the Rights Agreement.
The Rights will separate from the MMI Common Stock upon the earlier of (i)
ten days following a public announcement that a Person or group of affiliated or
associated Persons (an "Acquiring Person") has acquired, or obtained the right
to acquire beneficial ownership of 15% or more of the outstanding shares of MMI
Common Stock (the "Stock Acquisition Date"), or (ii) ten business days (or such
later date as the MMI Board may determine) following the commencement of a
tender offer or exchange offer that would result in a Person or group becoming
an Acquiring Person (a Person or group of affiliated or associated Persons who
has acquired beneficial ownership of 15% or more of the outstanding MMI Common
Stock). The earlier of (i) and (ii) is known as the "Distribution Date". The
Rights are not exercisable until the Distribution Date and will expire at the
close of business on June 30, 2007, unless earlier redeemed or extended by MMI.
The MMI Board has excluded from the number of shares used to determine whether
or not a Person becomes an Acquiring Person the shares of MMI Common Stock
received directly from MMI by any Person by exchange in the Offer for
Unionamerica ADSs which such Person beneficially owned as of June 25, 1997
solely on account of such receipt; provided, however, that neither (i) any such
Person who acquires any additional beneficial ownership of MMI Common Stock, nor
(ii) any transferee from such Person, is excluded.
In the event that any Person becomes an Acquiring Person, each holder of a
Right will thereafter have the right to receive upon exercise MMI Common Stock
(or, in certain circumstances, cash, property or other securities of MMI) having
a value equal to two times the Purchase Price. Notwithstanding any of the
foregoing, following the occurrence of such a flip-in event, all Rights that are
beneficially owned by any Acquiring Person will be null and void.
In the event that following the Stock Acquisition Date, (i) MMI engages in a
merger or business combination transaction in which MMI is not the surviving
corporation; (ii) MMI engages in a merger or business combination transaction in
which MMI is the surviving corporation and the MMI Common Stock is changed or
exchanged; or (iii) 50% or more of the MMI assets or earning power is sold or
transferred, each holder of a Right (except Rights which have previously been
voided as set forth above) shall thereafter have the right to receive, upon
exercise of the Right, common stock of the acquiring company having a value
equal to two times the Purchase Price.
Generally, at any time until ten days following the Stock Acquisition Date,
MMI may redeem the Rights in whole, but not in part, at a price of $0.01 per
Right. Until a Right is exercised, the holder thereof will have no rights as a
stockholder of MMI, including, without limitation, the right to vote or receive
dividends.
DELAWARE LAW AND CERTAIN CORPORATE PROVISIONS. Pursuant to the MMI
Certificate, the MMI Board is divided into three classes serving staggered
three-year terms. Directors can be removed from office only with cause and only
by the affirmative vote of the holders of a majority of the then outstanding
shares of
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capital stock entitled to vote in an election of directors. Vacancies on the MMI
Board may be filled only by the remaining directors, and not by the
stockholders.
The MMI Certificate also provides that any action required or permitted to
be taken by the stockholders of MMI may be effected only at an annual or special
meeting of stockholders and prohibits stockholder action by written consent in
lieu of a meeting. The MMI Certificate and the MMI Bylaws provide that special
meetings of stockholders may be called only by the MMI Board. Stockholders are
not permitted to call a special meeting or to require that the MMI Board call a
special meeting of stockholders except as applicable law may require.
The MMI Certificate authorizes, and the MMI Bylaws establish, an advance
notice procedure for the nomination, other than by or at the direction of the
MMI Board, of candidates for election as directors, as well as for other
stockholder proposals to be considered at annual meetings of stockholders. In
general, notice of intent to nominate a director or raise business at such
meeting must be received by MMI not less than 30 days prior to the date of the
meeting, and must contain certain specified information concerning the person to
be nominated or the matter to be brought before the meeting and concerning the
stockholder submitting the proposal.
MMI is subject to Section 203 of the DGCL ("Section 203"). Section 203
restricts certain transactions and business combinations between a corporation
and an "Interested Stockholder" owning 15% or more of the corporation's
outstanding voting stock, for a period of three years from the date the
stockholder becomes an Interested Stockholder. Subject to certain exceptions,
unless the transaction is approved by the MMI Board and the holders of at least
66.67% of the outstanding voting stock of the corporation (excluding shares held
by the Interested Stockholder), Section 203 prohibits significant business
transactions such as a merger with, disposition of assets to, or receipt of
disproportionate financial benefits by, the Interested Stockholder, or any other
transaction that would increase the Interested Stockholder's proportionate
ownership of any class or series of the corporation's stock. The statutory ban
does not apply if, upon consummation of the transaction in which any Person
becomes an Interested Stockholder, the Interested Stockholder owns at least 85%
of the outstanding voting stock of the corporation (excluding shares held by
Persons who are both directors and officers or by certain employee stock plans).
The foregoing provisions regarding the "Shareholder Rights Plan" and
"Delaware Law and Certain Corporate Provisions" could have the effect of
discouraging attempts to acquire MMI or remove incumbent directors even if some
or a majority of MMI's stockholders deem such an attempt to be in MMI's and
their best interest and even if the potential acquiror is willing to pay a
premium over the prevailing market price of MMI Common Stock.
LIMITATIONS ON DIRECTORS' LIABILITY. The MMI Certificate provides that no
director of MMI shall be liable to MMI or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to MMI or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) in respect of certain unlawful dividend payments
or stock redemptions or repurchases, or (iv) for any transaction from which the
director derived an improper personal benefit. The effect of these provisions is
to eliminate the rights of MMI and its stockholders (through stockholders'
derivative suits on behalf of MMI) to recover monetary damages against a
director for breach of certain fiduciary duties as a director (including
breaches resulting from grossly negligent behavior), except in the situations
described above. These provisions will not limit the liability of directors
under federal securities laws.
TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for the MMI
Common Stock is ChaseMellon Shareholder Services L.L.C., New York, New York.
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DESCRIPTION OF UNIONAMERICA CAPITAL STOCK
The amount of the authorized capital stock of Unionamerica consists of
20,000,000 shares of Unionamerica Common Stock and 50,000 shares of Deferred
Stock. The Unionamerica Common Stock is represented by the Unionamerica ADSs
evidenced by ADRs issued by Morgan Guaranty Trust Company of New York, as
depositary (the "Depositary"), pursuant to a Deposit Agreement (the "Deposit
Agreement") dated as of December 1, 1995 among Unionamerica, the Depositary and
the owners from time to time of ADRs issued thereunder.
COMMON STOCK. As of July 18, 1997, Unionamerica had 8,448,728 shares of
Unionamerica Common Stock issued and outstanding, each such share of
Unionamerica Common Stock being represented by a Unionamerica ADS. The holders
of Unionamerica Common Stock are entitled to receive such dividends as may be
recommended by the Unionamerica Board and approved by Unionamerica in a general
meeting. No larger dividend may be declared than is recommended by the
Unionamerica Board, but the Unionamerica Securityholders may by ordinary
resolution declare a smaller dividend. In addition, the Unionamerica Board may
declare interim dividends from time to time. Under English law, dividends may
only be paid from the distributable profits of a company determined on an
unconsolidated basis under U.K. GAAP and calculated on a cumulative basis,
netting undistributed realized profits from all periods against realized losses
(including provisions) from all periods.
Subject to the restrictions referred to below, at a meeting of shareholders
every holder of Unionamerica Common Stock present in person or, in the case of a
corporation, by a duly authorized representative or proxy shall have one vote on
a show of hands, and on a poll, every holder of Unionamerica Common Stock
present in person or by a duly authorized representative or proxy shall have one
vote for every share held. Notwithstanding the foregoing, the Unionamerica
Articles contain certain provisions that limit the voting rights that may be
exercised by certain Unionamerica Securityholders. The first set of such
provisions, the IRC Voting Provisions, are intended to prevent Unionamerica
Securityholders (and holders of Unionamerica ADSs) from certain adverse
consequences under the "controlled foreign corporation" rules under the IRC,
although no assurance can be given that such provisions will in fact effectively
prevent such consequences. Under the IRC Voting Provisions, if, and so long as,
any U.S. Holder (as defined below) directly, indirectly or constructively owns,
within the meaning of Section 958 of the IRC, shares of Unionamerica Common
Stock having ten percent or more or the total number of votes exercisable in
respect of the Unionamerica Common Stock, the voting rights attributable to such
shares will be limited, in the aggregate, to such whole number of votes which is
nearest to, but less than, ten percent of the total number of votes. The IRC
Voting Provisions further provide that (i) Acadia Partners, L.P. will not be
permitted to vote any shares of Unionamerica Common Stock and (ii) the Estate of
Bernice P. Bishop and UA Partners, L.P. will not be permitted to exercise any
votes in excess of percentages of the total number of votes determined in
accordance with separate formulas set forth in the Unionamerica Articles, which
formulas will in no event permit the Estate of Bernice P. Bishop or UA Partners,
L.P. to vote more than the whole number of votes which is nearest to, but less
than, ten percent of the total number of votes and may, depending on the
circumstances, limit further their voting rights. "U.S. Holder" means any U.S.
Person that directly or indirectly owns, within the meaning of Section 958(a) of
the IRC, any shares of Unionamerica Common Stock, and "U.S. Person" has the same
meaning as set out in Section 7701(a)(30) of the IRC and includes (i) a citizen
or resident of the U.S., (ii) a domestic partnership, (iii) a domestic
corporation, and (iv) any estate or trust (other than a foreign estate or
foreign trust).
Under the second set of limitations in the Unionamerica Articles (the
"Section 212 Provisions"), a holder of Unionamerica Common Stock shall not be
entitled to vote shares at any general meeting of shareholders:
(a) if (i) the shares of Unionamerica Common Stock in question represent
at least three percent of the issued shares and the holder or any other
Person appearing to be interested in that holder's shares has been given a
notice under Section 212 of the Companies Act (as described below) and has
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failed to give Unionamerica any information required by the notice within 14
days of the date of service, or (ii) in any other case, the holder or any
other Person appearing to be interested in the holder's shares has failed to
supply the required information within 28 days from the date of any such
notice; or
(b) unless all amounts presently payable by him in respect of such
shares have been paid.
The Unionamerica Articles provide that the IRC Voting Provisions and the
Section 212 Provisions are to be applied simultaneously in determining the
number of votes exercisable by any holder and the total number of votes
exercisable in respect of the shares, such that after application of such
provisions, no holder will have a larger portion of the total number of votes
than is permitted by such provisions. Since these provisions have the effect of
reducing the total number of votes that may be exercised with respect to any
matter, the application of such provisions will result in a proportional
increase in the relative voting power of each Unionamerica Securityholder whose
voting power is not reduced by the provisions. Such provisions apply to holders
of Unionamerica ADSs as well as to holders of Unionamerica Common Stock, and do
not apply to the Depositary or to International Insurance Advisors, Inc., as
agent for certain Unionamerica Securityholders. Such provisions could make it
difficult or impossible for any Person or group of Persons acting in concert to
acquire control of Unionamerica without agreement by the Unionamerica Board and
Unionamerica Securityholders.
AMERICAN DEPOSITARY RECEIPTS. ADRs evidencing Unionamerica ADSs are
issuable by the Depositary pursuant to the Deposit Agreement. Each Unionamerica
ADS represents one share of Unionamerica Common Stock or the right to receive
such share of Unionamerica Common Stock deposited with the London office of the
Depositary. An ADR may represent any number of Unionamerica ADSs. Only persons
in whose names ADRs are registered will be treated by Unionamerica and the
Depositary as owners and holders of ADRs.
Unionamerica will pay certain charges of the Depositary under the Deposit
Agreement, but such charges do not include stock transfer or other taxes and
other governmental charges (which are payable by ADR holders) and cable, telex,
facsimile transmission and delivery charges incurred at the request of ADR
holders delivering ADRs (which are payable by such holders). Any tax or other
governmental charge payable by or on behalf of any custodian or the Depositary
with respect to any ADR shall be payable by the holder of such ADR to the
Depositary. The Depositary may refuse to effect registration of transfer of such
ADR until such payment is made, and may withhold or deduct from any
distributions on deposited shares of Unionamerica Common Stock or may sell for
the account of the holder thereof any part or all of the deposited shares of
Unionamerica Common Stock underlying such ADR and may apply such withholding or
deduction or the proceeds of any such sale in payment of any such tax or other
governmental charge, the holder of such ADR remaining liable for any deficiency.
As a condition precedent to the registration of transfer of any ADR, the
Depositary or any custodian may require: (a) the payment of a sum sufficient to
pay or reimburse it for payment of (i) any stock transfer or other tax or other
governmental charge with respect thereto, (ii) any stock transfer or
registration fees for the registration of transfers of shares of Unionamerica
Common Stock upon any applicable register and (iii) any charges of the
Depositary upon delivery of ADRs against deposits of shares of Unionamerica
Common Stock; (b) the production of proof satisfactory to it as to the identity
and genuineness of any signature and as to citizenship, residence, exchange
control provision, legal or beneficial ownership or other information as it may
deem necessary or proper or as Unionamerica may require by written request to
the Depositary; and (c) compliance with such reasonable regulations, if any, as
the Depositary and Unionamerica may establish consistent with the provisions of
the Deposit Agreement. The transfer of ADRs, in particular circumstances or
generally, may be suspended when the transfer books of the Depositary or
Unionamerica are closed or whenever any such action is deemed necessary or
advisable by the Depositary or Unionamerica.
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DEFERRED STOCK. As of July 18, 1997, Unionamerica had 50,000 shares of
Deferred Stock allotted and issued, credited as fully paid. The holders of the
Deferred Stock have no rights to receive notice of, or to attend, speak or vote
at any general meeting of Unionamerica, nor are they entitled to receive any
dividend or other distribution. Upon the winding up of Unionamerica, the holders
of Deferred Stock shall only be entitled to the amounts paid upon the Deferred
Stock after repayment of the capital paid up on the Unionamerica Common Stock
plus the payment of $10 million per each share of such Unionamerica Common
Stock. Unionamerica has the authority to appoint any Person to execute on behalf
of the holders of Deferred Stock a transfer or agreement to transfer the
Deferred Stock without the consent of the holders of the Deferred Stock and
without any payment to the holders for the Deferred Stock.
The Deferred Stock has no conversion rights, redemption rights or preemption
rights and otherwise does not provide any material rights to holders other than
as described above. The Deferred Stock was issued to assure Unionamerica's
compliance with certain technical provisions of the Companies Act which require
that at least L50,000 of the capital of Unionamerica be denominated in U.K.
currency. The remainder of Unionamerica's share capital is denominated in U.S.
dollars.
CHANGES IN THE RIGHTS OF UNIONAMERICA SECURITYHOLDERS
The following discussion is a comparison of certain rights of Unionamerica
Securityholders and MMI stockholders. Such comparison does not purport to be a
complete description of the differences between the statutory and other rights
of Unionamerica Securityholders and MMI stockholders. Such differences can be
determined in full by reference to the laws and applicable regulatory
requirements in England and the U.S., the Companies Act, the DGCL and the common
law thereunder, the Unionamerica Articles and Memorandum of Association and the
MMI Certificate and MMI Bylaws.
IN GENERAL. Unionamerica is incorporated under English law. Those
Unionamerica Securityholders who exchange their holdings of Unionamerica ADSs
for MMI Common Stock and whose rights as shareholders are currently governed by
English law, including the Companies Act, and the Unionamerica Articles, will,
upon the exchange of Unionamerica ADSs, become MMI stockholders and their rights
as stockholders will be governed by the laws of the U.S. and by the DGCL and the
common law thereunder, the MMI Certificate and MMI Bylaws. Both Unionamerica and
MMI are subject to the regulations of the NYSE.
Certain differences between the rights of Unionamerica Securityholders and
MMI stockholders are set out below. These differences arise from differences
between English law and the laws of the U.S. and the DGCL as well as from
differences between the corporate governing instruments of the two companies.
VOTING RIGHTS AND QUORUM REQUIREMENTS
UNIONAMERICA. Under English law, the voting rights of shareholders are
regulated by a company's articles of association. A separate resolution must be
proposed for the appointment of each director (other than the directors
appointed by the Unionamerica Board) and, accordingly, Unionamerica
Securityholders are not entitled to cumulative voting rights in the election of
directors. Cumulative rights, if they existed, would entitle a Unionamerica
Securityholder to cast as many votes for directors as he has shares of stock
multiplied by the number of directors to be elected. Each shareholder may then
allocate such shareholder's votes for one or more of the candidates. The
Unionamerica Articles specify that two Unionamerica Securityholders (regardless
of the number of shares held by them) present in person or by proxy and entitled
to vote upon the business to be transacted at the meeting shall be a quorum. Any
Unionamerica Securityholder on the register may vote in person or, assuming the
proxy is received by Unionamerica at least 48 hours prior to the time set for
the meeting, by proxy. There is no record date for meetings under English law.
Subject to disenfranchisement in the event of non-compliance with a
statutory notice requiring disclosure as to beneficial ownership, each
registered Unionamerica Securityholder present in person (or,
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if a corporation, present by a duly authorized representative or proxy) is
entitled to one vote at any Unionamerica meeting for each resolution (ordinary
or special) considered on a show of hands. Voting occurs by show of hands unless
a poll is demanded. If a poll is taken, every Unionamerica Securityholder, or
his proxy, is entitled to cast one vote for each unit of Unionamerica Common
Stock held or represented by a Unionamerica ADS. At shareholder meetings a poll
may be demanded by: (i) the chairman of the meeting; (ii) at least two
shareholders present in person or by proxy and entitled to vote at the meeting;
(iii) a shareholder or shareholders present in person or by proxy representing
not less than one-tenth of the total voting rights of all shareholders having
the right to vote at the meeting; or (iv) a shareholder or shareholders present
in person or by proxy holding shares of Unionamerica Securities conferring the
right to vote at the meeting on which an aggregate sum has been paid up equal to
not less than one-tenth of the total sum paid up on all shares conferring that
right. If a poll is demanded, one may be taken at the meeting (and must be on a
poll demanded on the election of a chairman or on a question of adjournment) or
not more than 30 days following the meeting as the chairman shall direct. The
Unionamerica Articles provide that in certain circumstances, rights, including
voting rights, of shares in Unionamerica may be suspended. See "Description of
Unionamerica Capital Stock". Furthermore, the Unionamerica Articles state that
the voting rights of certain named Unionamerica Securityholders are restricted.
MMI. Under the DGCL, each holder of MMI Common Stock at the record date set
for a meeting of stockholders is entitled to one vote per share owned, subject
to certain limitations discussed below. See "Required Vote for Authorization of
Certain Corporate Actions and Certain Provisions Relating to Business
Combinations".
Under the DGCL, a corporation with stock outstanding or subscribed
ordinarily may amend its charter provided that the amendment is recommended by
the board of directors and approved by the affirmative vote of a majority of all
the votes entitled to be cast. Holders of a class of stock may vote as a class
if the amendment would increase or decrease the number of authorized shares of
such class or the par value of shares of such class, or would alter the
preferences, powers, or special rights of any class so as to affect them
adversely.
The MMI Certificate does not provide for any supermajority requirements or
any special voting rights for MMI Common Stock. However, the MMI Board is
authorized by the MMI Certificate, without first obtaining the approval of the
holders of MMI Common Stock, to issue from time to time shares of Preferred
Stock which may have such voting powers, full or limited, or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights, qualifications, limitations or restrictions thereof, as
shall be stated in the resolution or resolutions providing for the issue of such
stock adopted by the MMI Board. The MMI Directors, without obtaining stockholder
approval, could issue shares of Preferred Stock with voting and conversion
rights that could adversely affect the voting power of the holders of shares of
MMI Common Stock.
Unionamerica Securityholders who are currently entitled to vote as a class
on certain changes under English law or the Unionamerica Articles will no longer
be entitled to do so after the consummation of the Offer (including in the case
of merger and other business combinations, as discussed below). For a discussion
of the MMI Certificate, see "Description of MMI Capital Stock--Delaware Law and
Certain Corporate Provisions".
MEETINGS OF UNIONAMERICA SECURITYHOLDERS
UNIONAMERICA. Under English law, the annual general meeting ("AGM") of a
public limited company must be held each year and at least once every fifteen
months. An extraordinary general meeting ("EGM") of a company may be convened by
the board of directors or, notwithstanding any provision to the contrary in a
company's articles of association, by a request from shareholders holding not
less than one-tenth of the paid-up capital of the company carrying voting rights
at general meetings. An EGM at which an ordinary resolution is proposed requires
14 days' notice (other than an ordinary resolution to
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remove a director which requires 28 days' notice). An ordinary resolution
requires a majority of those present (in person or by proxy) and voting to vote
in favor. An EGM at which a special resolution is proposed requires 21 days'
notice and such resolution requires a three quarter majority of those present
(in person or by proxy) and voting to vote in favor. An AGM requires 21 days'
notice regardless of the types of resolution to be proposed. Such notice periods
exclude the day when the notice is given or deemed to be given and the day for
which it is given.
MMI. Under the DGCL, MMI is required to hold an annual meeting of
stockholders. The MMI Bylaws provide that the annual meeting shall be held
within 180 days after December 31 of each year at such time and place as may be
determined by the MMI Board. The MMI Certificate and MMI Bylaws provide that
special meetings of stockholders may be called only by the MMI Board.
Stockholders are not permitted to call a special meeting or to require that the
MMI Board call a special meeting of stockholders except as applicable law may
require. Under the MMI Bylaws, MMI stockholders must receive written notice of
any special meeting not less that ten, or in the case of a merger or
consolidation, not less than 20, but not more than 60 days prior to such
meeting. MMI stockholders are entitled to written notice of any annual meeting
not less than 10 days prior to such annual meeting. The record date for the
meetings of the stockholders shall not be less than 10 days (or 20 days if a
merger or consolidation is to be acted upon at such meeting) nor more than 60
days before the date of such meetings.
CERTAIN ACTIONS AT SHAREHOLDER MEETINGS
UNIONAMERICA. Under English law and the Unionamerica Articles, certain
business may be conducted at an AGM or an EGM only if the requisite notice of
such business has been given prior to such meeting. As discussed above, to be
properly brought before a general meeting, notice of such business must be given
to shareholders a certain number of days prior to the meeting. Under the
Companies Act, shareholders holding not less than one-twentieth of the total
voting rights of all shareholders having the right to vote at the relevant
meeting (or not less than 100 shareholders holding shares on which there has
been paid up an average per shareholder of not less than L100) may require
Unionamerica to circulate notice of any resolution which those shareholders may
properly propose and wish to propose at that meeting. In addition, pursuant to
the Unionamerica Articles, the Unionamerica Securityholders can, by ordinary
resolution in general meeting appoint any person who is willing to act to be a
director. Furthermore, certain "Designated Shareholders" (as defined in the
Unionamerica Articles) can appoint up to two directors to the Unionamerica Board
provided they maintain a certain percentage shareholding.
MMI. Pursuant to the MMI Certificate, any action required or permitted to
be taken by the MMI stockholders must be effected at an annual or duly called
special meeting of the stockholders, and may not be effected by any consent in
writing by such stockholders. Except as otherwise required by the DGCL, special
meetings of stockholders may be called at any time and only pursuant to a
resolution of a majority of the MMI Board. At any special meeting of the MMI
stockholders, only such business may be conducted as shall have been brought
before the meeting by or at the direction of the MMI Board.
Pursuant to the MMI Bylaws, at any annual meeting of the MMI stockholders,
only such business shall be conducted as shall have been brought before the
meeting (i) by or at the direction of the MMI Board or (ii) by any MMI
stockholder who is entitled to vote with respect thereto and who complies with
the following notice requirements. For business to be properly brought before an
annual meeting by a MMI stockholder, the stockholder's notice must be delivered
or mailed to and received at the principal executive offices of MMI not less
than 30 days prior to the date of the annual meeting; provided, however, that in
the event that less than 40 days' notice or prior public disclosure of the date
of the meeting is given or made to MMI stockholders, to be timely, an MMI
stockholder's notice must be so received not later than the close of business on
the tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. An MMI stockholders'
notice to the secretary of MMI shall set forth as to each matter such
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting
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such business at the annual meeting; (b) the name and address, as they appear on
MMI's books, of the stockholder proposing such business; (c) the class and
number of shares of MMI capital stock that are beneficially owned by such
stockholder, and (d) any material interest of such stockholder in such business.
Notwithstanding anything in the MMI Bylaws to the contrary, no business shall be
brought before or conducted at any annual meeting except in accordance with the
provisions set forth above. The officer of MMI or other person presiding at the
annual meeting shall, if the facts so warrant, determine and declare to the
meeting that business was not properly brought before the meeting in accordance
with such provisions and, if he or she should determine, he or she shall so
declare to the meeting and any such business so determined to be not properly
brought before the meeting shall not be transacted.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN CORPORATE ACTIONS AND CERTAIN
PROVISIONS RELATING TO BUSINESS COMBINATIONS
UNIONAMERICA. Under the Companies Act, the Unionamerica Articles generally
may be amended and other fundamental corporate changes, such as the passing of a
resolution for winding up, non pro rata issuances of shares for cash, reductions
of capital (subject to sanction by the court), and certain repurchases of
shares, may be authorized by a special resolution passed at a general meeting of
shareholders. Subject to the provisions of the Companies Act, if, at such time,
the capital of Unionamerica is divided into different classes of shares and the
amendment or other resolution would cause any of the special rights attached to
any class of shares to be varied or abrogated, the amendment must also be
sanctioned in writing by the holders of at least two-thirds in nominal value of
the issue shares of the class concerned or by resolution approved by the holders
of not less than two-thirds in nominal value of the issued shares of the class
concerned or by resolution at a separate general meeting of the holders of the
shares of that class.
Mergers or consolidations of English companies are normally conducted
pursuant to takeover offers, schemes of arrangement or, in certain
circumstances, a scheme of reconstruction under Section 110 of the Insolvency
Act 1986. The Companies Act provides that where a takeover offer is made for the
shares of a company and, within four months of the date of the offer, the
offeror has by virtue of acceptances of the offer, acquired or contracted to
acquire at least 90% in value of the shares to which the offer relates, the
offeror may, within two months of reaching the 90% level, by notice, acquire the
shares held by shareholders who have not accepted the offer on the same terms as
the offer. Such a shareholder may apply to the court within six weeks of the
date on which notice was given objecting to the transfer or its proposed terms.
The court may order that the shareholder shall not be required to transfer his
shares, or may specify such terms for the transfer as it finds appropriate. In
addition, where the offeror holds or has contracted to acquire at least 90% in
value of the shares of the company and does not give such a notice to
shareholders who have not accepted the offer, such a shareholder is entitled to
require the offeror to purchase his shares on the same terms as the offer, even
if the offer is otherwise closed for acceptance.
Schemes of arrangement are arrangements or compromises between a company and
any class or classes of its shareholders (or any class or classes of its
creditors) and are used for certain types of reconstructions, amalgamations,
capital reorganizations or takeovers. Schemes of arrangement require the
approval at an extraordinary general meeting of the company of a majority in
number, representing 75% in value, of holders of the relevant class of shares
(or creditors) present and voting, either in person or by proxy, and the
sanction of the High Court of Justice in England and Wales. Once so approved and
sanctioned, all shareholders (or, as the case may be, creditors) of the relevant
class are bound by the terms of the scheme. A scheme of reconstruction under
Section 110 of the Insolvency Act 1986 may be made when a company is being wound
up voluntarily. Under the terms of such a scheme with the sanction of a special
resolution of shareholders in a general meeting, the whole or part of the
company's business or property is transferred to a second company in
consideration for the issue or transfer to them of shares in the second company.
Any dissenting shareholder can require the liquidator to abstain from carrying
the resolution into effect or to purchase his interest at a price agreed or
determined by arbitration.
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In the U.K., takeovers of public limited companies, such as Unionamerica,
are regulated by the City Code. The City Code is administered by the Panel, a
body comprising representatives of certain City of London financial and
professional institutions which oversees the conduct of such takeovers. The City
Code includes certain restrictions on action being taken by a target company to
frustrate a takeover offer, including the issue of new shares without the prior
approval of its shareholders.
MMI. For a discussion of the required vote for authorization of certain
corporate actions and certain provisions relating to business combinations, see
"Description of MMI Capital Stock."
MMI is subject to the requirements of the Exchange Act, including those
provisions which regulate tender offers. The Exchange Act imposes requirements
on the form of an offer to purchase a registered corporation's shares and also
requires bidders to make comprehensive and detailed disclosures when their
offers commence. The requirements relating to a tender offer prescribe a 20
business day minimum offering period, shareholder withdrawal rights coextensive
with the offering period, withdrawal rights after 60 days from the date of the
initial offer if the offeror has failed to pay, PRO RATA acceptance for
oversubscribed offers, nondiscrimination among offerees, and the extension of
any price increase during the tender offer to all shareholders who have already
tendered. Also, during the tender offer, purchases otherwise than pursuant to a
tender offer and any short tenders by offerees are prohibited. The Exchange Act,
unlike the City Code, does not contain provisions which (i) require an offer to
be for a minimum amount of stock, (ii) require mandatory cash offers, or (iii)
restrict the implementation of certain defensive actions by the directors of a
target company without first obtaining shareholder approval; however, the DGCL
and applicable common law may impose certain restrictions on such actions.
The foregoing provisions regarding the Shareholder Rights Plan, Section 203
of the DGCL, and the Exchange Act could have the effect of discouraging attempts
to acquire MMI or remove incumbent directors even if some or a majority of MMI's
stockholders deem such an attempt to be in MMI's and their best interest and
even if the potential acquiror is willing to pay a premium over the prevailing
market price of MMI Common Stock.
DISSENTERS' RIGHTS
UNIONAMERICA. Under English law, shareholders do not generally have
dissenters' rights, as the concept is understood under the DGCL, and the
Unionamerica Articles do not contain any dissenters' rights. Certain limited
rights analogous to dissenters' rights exist where an offeror who, pursuant to a
takeover offer for a company, has acquired or contracted to acquire not less
than nine-tenths in value of the shares to which the offer relates, seeks to
acquire outstanding minority shareholdings pursuant to the compulsory
acquisition provisions under the Companies Act. Similarly, under a scheme of
reconstruction under Section 110 of the U.K. Insolvency Act 1986, a dissenting
shareholder can require the liquidator to abstain from carrying the resolution
into effect or to purchase his interest at a price agreed or determined by
arbitration. See "Required Vote for Authorization of Certain Actions and Certain
Provisions Relating to Business Combinations". In addition, under English law,
any shareholder who complains that the affairs of the company are being
conducted or that the powers of the directors of the company are being exercised
in a manner unfairly prejudicial to him or some part of the shareholders
(including himself), or in disregard of his proper interests as a shareholder,
may apply to the High Court of Justice in England for relief. If the High Court
finds the complaint to be justified, it may in the exercise of its discretion
order the purchase of the shares of any shareholders by other shareholders or by
the company itself, on such terms including as to price as the High Court may
determine. See "Required Vote for Authorization of Certain Actions and Certain
Provisions Relating to Business Combinations".
MMI. Under the DGCL, a stockholder of a corporation participating in
certain major corporate transactions may, under varying circumstances, be
entitled to receive cash equal to the fair market value of the shares held by
such stockholder (as determined by a court of competent jurisdiction or by
agreement of the stockholder and the corporation), in lieu of the consideration
such stockholder would otherwise receive
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in the transaction. The DGCL does not require dissenters' rights with respect to
(a) a sale of assets, (b) a merger by a corporation, if the shares of the
corporation are either listed on a national securities exchange or designated as
a national market security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held by more than 2,000 shareholders
of record or if stockholders receive shares of the surviving corporation or of a
listed or widely-held corporation, or (c) a merger in which the corporation is
the surviving corporation if no vote of its stockholders is required to approve
the merger.
DIVIDENDS
UNIONAMERICA. English law permits payment of dividends by a company only
out of distributable profits (which are its accumulated, realized profits (not
previously utilized by distribution or capitalization) less accumulated,
realized losses) and not out of share capital or share premium. The payment of
dividends on ordinary shares is subject to the prior right to dividends of any
preference shares. The excess of the consideration for the issue of shares over
the par value of such shares must (except in certain limited circumstances) be
credited to a share premium account and may not be paid out as dividends but
may, however, be used to pay up unissued shares which may then be distributed to
shareholders in proportion to their holdings and for other limited purposes. In
addition, Unionamerica, as a public limited company, may make a distribution at
any time only if, at that time and immediately after such distribution, the
amount of its net assets is not less than the aggregate of its called-up (i.e.
issued and paid up) share capital and undistributable reserves. Under English
law, a dividend must be declared by reference to relevant accounts showing the
availability of distributable reserves for such dividend. As a public limited
company, the relevant accounts for Unionamerica are its last audited accounts
or, where such accounts do not show sufficient distributable reserves, interim
accounts (which need not be audited) prepared and filed with the Registrar of
Companies of England and Wales.
Under the Unionamerica Articles, the directors may pay to Unionamerica
Securityholders such interim dividends (i.e. dividends resolved to be paid by
directors without the approval of shareholders in a general meeting), as appear
to the directors to be justified by the distributable profits of Unionamerica.
Any dividend unclaimed after the period of 12 years from the date of its
declaration may, at the discretion of the directors, be forfeited and shall
revert to Unionamerica. Each dividend on Unionamerica ADSs will be paid to those
holders of Unionamerica ADSs on the register of members on the record date for
such dividend who have not waived their entitlement thereto. Such record date
will normally be about six weeks before the date of payment.
MMI. The DGCL permits the payment of dividends out of surplus or, if there
is no surplus, out of net profits for the fiscal year in which dividends are
declared and preceding fiscal year (provided that the amount of capital of the
corporation is not less than the aggregate amount of the capital represented by
the issued and outstanding stock of all classes having a preference upon the
distribution of assets). In addition, the DGCL generally provides that a
corporation may redeem or repurchase its own shares only if such redemption or
repurchase would not "impair the capital" of the corporation. The ability of a
Delaware corporation to pay dividends on, or redeem or to make repurchases or
redemptions of, its shares is dependent on the financial status of the
corporation standing alone and not on a consolidated basis. In determining the
amount of surplus of a Delaware corporation, the assets of the corporation,
including stock of subsidiaries owned by the corporation, must be valued at
their fair market value as determined by the board of directors, without regard
to their historical value.
The MMI Certificate does not contain restrictions or preferences on the
declaration or payment of dividends. The policy of the MMI Board is to pay
regular quarterly cash dividends. The declaration and payment of dividends is
subject to the discretion of the MMI Board and will depend upon general business
conditions, legal and contractual restrictions on the payment of dividends and
other factors that the MMI Board deems relevant.
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As an insurance holding company, MMI depends in large part on dividends and
other payments from its Subsidiaries for the payment of cash dividends to MMI
stockholders. In the case of MMI's insurance Subsidiaries, such payments are
restricted by insurance laws, and insurance regulators have authority in certain
circumstances to prohibit payments of dividends and other amounts by MMI's
insurance Subsidiaries that would otherwise be permitted without regulatory
approval. MMI's bank credit agreement also restricts the payment of dividends.
Unionamerica Securityholders who receive MMI Common Stock in the Offer in
exchange for their Unionamerica ADSs will be entitled to any dividend declared
on shares of MMI Common Stock with a record date after the Initial Closing Date.
The NYSE generally requires a listed company to notify the NYSE of the
record date for the payment of any dividend no later than ten days prior to such
record date.
PRE-EMPTIVE RIGHTS
UNIONAMERICA. Under English law when a company issues equity shares (or
grants certain other rights to acquire equity shares) ("equity securities") in
consideration for payment of cash, then unless certain provisions of the
Companies Act are disapplied by a special resolution of shareholders, existing
shareholders are entitled to participate in the offer for such equity securities
pro rata to their existing shareholdings. The usual practice of a listed company
is, pursuant to the Companies Act, to seek general disapplication by special
resolution of statutory pre-emption rights on an annual basis (i) in respect of
its entire unissued ordinary share capital, where the equity securities are to
be issued by way of rights to existing shareholders and (ii) to disapply the
statutory pre-emption rights on the issue for cash of equity securities
representing not more than five percent of the company's then issued ordinary
share capital. The Unionamerica Articles disapply the statutory pre-emption
provisions to the fullest extent permitted under the Companies Act, so that
pursuant to the Unionamerica Articles all unissued shares of Unionamerica Common
Stock are at the disposal of the Unionamerica Board, which may offer, allot,
grant options for or otherwise dispose of them to such Persons, at such time,
for such consideration and upon such terms and conditions as the Unionamerica
Board may determine. However, under English law, shares may not be issued at a
discount (i.e., may not be issued in consideration for a payment of an amount
less than the nominal or par value of the shares so issued).
MMI. Under the DGCL, stockholders do not have preemptive rights unless a
corporation affirmatively elects preemptive rights in its certificate of
incorporation. The MMI Certificate does not provide holders of shares of MMI
Common Stock with preemptive rights.
The NYSE requires shareholder approval when shares of common stock or
securities convertible into or exercisable for common stock are to be issued in
any transaction or series of related transactions, other than a public offering
for cash, (i) if the common stock to be issued will have voting power equal to
or greater than 20% or more of the voting power outstanding before such
issuance, or (ii) the number of shares of common stock to be issued will be in
excess of 20% of the number of shares of common stock outstanding before the
issuance of the stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
UNIONAMERICA. English law does not permit a company to indemnify a
director, secretary or other officer of the company against any liability which
by virtue of any rule of law would otherwise attach to him in respect of
negligence, default, breach of duty or breach of trust in relation to the
company except liability incurred by such director or officer in defending any
legal proceeding (whether civil or criminal) in which judgment is given in his
favor or in which he is acquitted or in certain instances where, although he is
liable, a court finds such director or officer acted honestly and reasonably and
that having regard to all the circumstances he ought fairly to be excused and
relief is granted by the court. However, a company is permitted to purchase
insurance for directors and officers against such liability which by virtue of
law or
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otherwise would attach to such directors and officers in respect of any
negligence, default, breach of duty or breach of trust of which they or any of
them may be guilty in relation to Unionamerica. Unionamerica has purchased and
maintains in force such insurance.
MMI. The DGCL provides that the indemnification provided for in the DGCL
shall not be deemed exclusive of any other rights under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise, and provides that
expenses may be advanced to officers and directors in a specific case upon
receipt of an undertaking to repay such amount if it is ultimately determined
that the indemnified party is not entitled to be indemnified. In addition, the
DGCL permits the determination as to whether an officer or director has met the
applicable standard of conduct to be made in certain circumstances by
independent legal counsel.
The DGCL provides that the board of directors has the ultimate
responsibility for managing the business and affairs of a corporation. In
discharging this function, the law holds directors to fiduciary duties of care
and loyalty to the corporation and its stockholders. The Delaware Supreme Court
has held that the duty of care requires the exercise of an informed business
judgment. An informed business judgment means that directors have informed
themselves of all material information reasonably available to them. Having
become so informed, they then must act with requisite care in the discharge of
their duties. Liability of directors of a Delaware corporation to the
corporation or its stockholders for breach of the duty of care in some
circumstances requires a finding by a court that the directors were grossly
negligent. For additional information, see "Description of MMI Capital
Stock--Limitations on Directors' Liability."
Directors also have a duty of loyalty to the corporation and its
stockholders. The duty of loyalty requires that, in making a business decision,
directors act in good faith and in the honest belief that the action taken was
in the best interests of the corporation.
The MMI Bylaws provide for indemnification for any person who is or was a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of MMI) by reason of the
fact that such person is or was a director, officer, employee or agent of MMI,
or who is or was serving at the request of MMI as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, if such person acted in good
faith and in a manner he believed to be in, or not opposed to, the best
interests of MMI, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
In addition, the MMI Bylaws provide for indemnification for any person who
is or was a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit by or in the right of MMI to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of MMI, or who is or was serving at the
request of MMI as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if such person
acted in good faith and in a manner he believed to be in, or not opposed to, the
best interests of MMI, except that no indemnification is made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or a misconduct in the performance of his duty to MMI,
unless, and only to the extent that, the court in which action or suit was
brought shall determine upon application that, despite the adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the court shall
deem proper.
To the extent a director, officer, employee or agent, or former director,
officer, employee or agent of MMI has been successful, on the merits or
otherwise, in the defense of any action, suit or proceeding
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referred to in the MMI Bylaws, or in the defense of any claim, issue or matter
therein, he will be indemnified by MMI against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
The indemnification provided by the MMI Bylaws is not deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
the MMI Certificate, the MMI Bylaws, any agreement, vote of MMI stockholders or
disinterested directors, or otherwise, both as to actions in his official
capacity and as to actions in another capacity while holding such office.
UNIONAMERICA SECURITYHOLDERS' SUITS
UNIONAMERICA. In addition to having the right to institute proceedings on
behalf of a company, in certain limited circumstances, English law allows an
individual shareholder to bring an action in his own name as the representative
of shareholders where his (and their) rights as shareholders are threatened. In
addition a shareholder can petition the court for relief where the company's
affairs are being or have been conducted in a manner unfairly prejudicial to the
interests of the shareholders generally or of some group of the shareholders, of
which the petitioning shareholder must be a member, or where any actual or
proposed act or omission of the company is or would be so prejudicial. A court
when granting relief in an action complaining of unfair prejudice has wide
discretion, including authorizing civil proceedings to be brought in the name of
the company by a shareholder against the Persons responsible for the prejudicial
actions. Except in these limited respects, English law does not permit class
action lawsuits by shareholders on behalf of a company or on behalf of other
shareholders.
MMI. Under Delaware law, a stockholder may only bring a derivative action
on behalf of the corporation if the stockholder was a stockholder of the
corporation at the time of the transaction in question or his or her stock
thereafter was received by him or her by operation of law. An individual
stockholder also may commence a class action suit on behalf of himself or other
similar situated stockholders where the requirements for maintaining a class
action under Delaware and U.S. federal law have been met.
BOARD OF DIRECTORS
CLASSIFICATION AND APPOINTMENT OF DIRECTORS
UNIONAMERICA. The Unionamerica Articles provide that unless otherwise
determined by special resolution, there shall be not less than two directors but
there shall be no maximum number. They further
provide that at each AGM one-third (or the number nearest to one-third) of the
directors who are subject to retirement by rotation shall retire from office.
The directors appointed by the Designated Shareholders are not subject to
retirement by rotation. The directors to retire by rotation in every year are
those who have been longest in office since their last election, but, as between
persons who became directors on the same day, those to retire (unless they
otherwise agree among themselves) are to be determined by lot. A retiring
director is eligible for re-election. All directors not initially appointed at
an AGM hold office only until the end of the next AGM and are then eligible for
re-election (but are not taken into account in determining the directors who are
to retire at such meeting). See "Certain Actions at Shareholder Meetings" above.
Any director may be removed from office at any time by an ordinary resolution
passed by the Unionamerica Securityholders of which special notice has been
given in accordance with the Companies Act, except that this is without
prejudice to the rights of the Designated Shareholders to appoint a director.
See "Certain Actions at Shareholder Meetings".
MMI. Pursuant to the MMI Certificate, the MMI Board is divided into three
classes serving staggered three-year terms. Directors can be removed from office
only with cause and only by the affirmative vote of the holders of a majority of
the then outstanding shares of capital stock entitled to vote in an election of
directors. Vacancies on the MMI Board may be filled only by the remaining
directors, and not by the stockholders.
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The MMI Bylaws provide that the number, terms of office and qualification of
the directors of MMI is as specified in Article Sixth of the MMI Certificate.
Article Sixth of the MMI Certificate provides that the number of directors which
constitutes the MMI Board shall be as provided from time to time by resolution
of the MMI Board, which number is currently set at 12. In connection with the
Offer, the MMI shall increase the size of its Board by two members to 14
members. Under the DGCL, the certificate of incorporation or a bylaw adopted by
the vote of the stockholders may provide for the division of directors into two
or three classes and specify the term of office of each class. The MMI
Certificate currently provides for a board of directors of three classes of
nearly equal size, each with three year terms. Accordingly, at each annual
meeting of MMI stockholders, approximately one-third of the MMI Board will stand
for election. The MMI Certificate provides that each director elected shall hold
office for the number of years elected, and upon the anniversary date of his or
her election, his or her term shall expire unless terminated earlier by his
death, resignation or removal. Vacancies and newly-created directorships
resulting from any increase in the authorized number of directors may be filled
by the vote of a majority of the directors then in office, although less than a
quorum, and any director so chosen shall hold office until the next annual
election of directors and until his successor is duly elected and qualified or
until his earlier death, resignation or removal. Directors of MMI need not be
stockholders of MMI.
CONFLICTS OF INTEREST
UNIONAMERICA. The Unionamerica Articles provide that a director who is a
party to, or otherwise interested in, any transaction or arrangement with
Unionamerica shall declare the nature and extent of his material interest to the
Unionamerica Board, and having so disclosed his interest may be a party to that
transaction or arrangement. The director may act for himself in a professional
capacity for Unionamerica, other than as auditor, and is entitled to
remuneration for those services. The director is not accountable to Unionamerica
for any benefit he derives through that transaction or arrangement.
MMI. The MMI Bylaws provide that no director, officer or employee of MMI
shall have any position with, or a substantial interest in, any other business
enterprise whether operated for a profit or not, the existence of which would
conflict or might reasonably be supposed to conflict with the proper performance
of his or her duties or responsibilities to MMI, or which might tend to affect
his or her independence of judgment with respect to transactions between MMI and
such other business enterprise, without full and complete disclosure thereof to
the MMI Board. Each director, officer or employee who has such a conflicting
interest with respect to any transaction which he or she knows is under
consideration by the MMI Board or any of its committees is required to make
timely disclosure thereof so that it may be part of the directors' consideration
of the transaction. The MMI Board, who may act through an appropriate committee,
shall adopt such regulations and procedures as shall from time to time appear to
them sufficient to secure compliance with this policy.
BORROWING POWERS
UNIONAMERICA. Subject to the provisions of the Companies Act, the
Unionamerica Articles provide that its directors may exercise all the powers of
Unionamerica to borrow money and to mortgage and charge its property,
undertaking and assets, including its uncalled or unpaid capital, and to issue
debentures and other securities and to give guarantees.
MMI. The MMI Bylaws provide that no loans shall be contracted on behalf of
MMI and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the MMI Board, except that indebtedness in the
ordinary course of MMI's business not in excess of $1,000,000 or of one year
duration in a single or series of related transactions, may be incurred upon
written approval of the President and Treasurer. The authority granted may be
general or confined to specific instances.
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COMPENSATION
UNIONAMERICA. The Unionamerica Articles provide that the fees of the
directors for holding office as such shall not exceed L30,000 per annum in
aggregate or such greater sum as shall from time to time be determined by the
shareholders by ordinary resolution. The directors may also grant additional
remuneration to a director who performs special services to Unionamerica at its
request, and may determine the remuneration of any director holding executive
office. Directors are also entitled to be repaid all traveling, hotel and other
expenses properly incurred by them in connection with their attendance at
meetings and discharge of their duties.
MMI. The MMI Bylaws provide that the directors may be paid their expenses,
if any, of attendance at each meeting of the MMI Board and any committee thereof
of which they are members. Furthermore, the MMI Bylaws provide that the MMI
Board, irrespective of any personal interest of any of its members, has
authority to fix compensation of all directors for service to MMI as directors,
officers, or otherwise.
SHAREHOLDERS' RIGHTS OF INSPECTION
UNIONAMERICA. Except when such registers are closed in accordance with the
provisions of the Companies Act, the register and index of names of shareholders
of an English company, together with certain other registers required to be
maintained by such a company, may be inspected by its shareholders during
business hours without charge (and by other Persons upon payment of a charge)
and copies of such registers may be obtained on payment of an appropriate
charge. A shareholder in an English company may, without charge, also inspect
the minutes of meetings of the shareholders during business hours and obtain
copies upon payment of a charge. The published directors' report and audited
annual accounts of an English company are required to be laid before the
shareholders in a general meeting and a shareholder is entitled to a copy of
such reports and accounts. Further copies are filed with the Registrar of
Companies in England and Wales from whom copies are publicly available upon
payment of the appropriate fee. The shareholders have no further statutory
rights to inspect the accounting records of a company or the minutes of meetings
of directors.
MMI. The DGCL gives any stockholder of record the right to inspect the
stockholders' list for a purpose reasonably related to such Person's interest as
a stockholder and, during the ten days preceding a stockholders' meeting, for
any purpose germane to that meeting. In addition, the MMI Bylaws provide that
any MMI stockholder shall, upon written demand under oath stating the purpose
thereof, have the right during usual business hours to inspect for any proper
purpose MMI's stock ledger, a list of the MMI stockholders, and its other books
and records, and to make copies or extracts therefrom.
DISCLOSURE OF INTERESTS
UNIONAMERICA. Section 198 of the Companies Act provides that a Person
(including a company and other legal entities) who acquired an interest of three
percent or more of any class of shares comprised in a public limited company's
"relevant share capital" (which, for these purposes, means that company's issued
share capital carrying rights to vote in all circumstances at general meetings
of the company) is obliged to notify that company of his interest within two
business days following the day on which the obligation to notify arises. After
the three percent level is exceeded, similar notifications must be made in
respect of whole percentage figure increases or decreases, rounding down to the
next whole number.
For the purposes of the notification obligation, the interest of a Person in
shares means any kind of interest in any shares including interests in any
shares (i) in which his spouse, or his child or stepchild under the age of 18 is
interested, (ii) if a body corporate is interested in them and either (a) that
body corporate or its directors are accustomed to act in accordance with that
Person's directions or instructions or (b) that Person controls one-third or
more of the voting power of that body corporate, or (iii) if another party is
interested in shares and the Person and that other party are parties to a
"concert party" agreement under Section 204 of the Companies Act (being an
agreement which provides for one or more parties to it
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to acquire interests in shares of a particular company, which imposes
obligations or restrictions on any one or more of the parties as to the use,
retention or disposal of such interests acquired pursuant to such agreement and
any interest in the company's shares is in fact acquired by any of the parties
pursuant to the agreement). Such a concert party agreement need not be in
writing.
In addition, Section 212 of the Companies Act provides that a public company
may by notice in writing require a Person whom the company knows or has
reasonable cause to believe to be, or to have been at any time during the three
years immediately preceding the date on which the notice is issued, interested
in shares comprised in the company's "relevant share capital" to confirm that
fact or (as the case may be) to indicate whether or not that is the case, and
where he holds or has during the relevant time held an interest in such shares,
to give such further information as may be required relating to his interest and
any other interest in the shares of which he is aware. The disclosure must be
made within such reasonable period as may be specified in the relevant notice
(which may, depending on the circumstances, be as short as one or two days). The
Unionamerica Articles provide that where the information has not been provided
within the specified time period, in respect of those shares (the "default
shares"), the board can in its absolute discretion direct that the member shall
not be entitled to vote at a general meeting either personally or by proxy or
exercise any other membership right in respect of the default shares. In
addition, the board can make further directions, including retention of any
dividend payments and prevention of transfer, where the default shares represent
at least three percent of their class of shares. Furthermore, where notice is
served by a company under these provisions on a Person who is or was interested
in shares of the company and that Person fails to give the company any
information required by the notice within the time specified in the notice, the
company may apply to the High Court for an order directing that the shares in
question be subject to restrictions prohibiting, among other things, any
transfer of those shares, and the exercise of voting rights in respect of such
shares. In addition, a Person who fails to fulfill the obligations described
above is subject to criminal penalties.
MMI. As discussed above, MMI is subject to the Exchange Act, which requires
any Person who acquires directly or indirectly the beneficial ownership of five
percent or more of a public company's outstanding equity security to file with
the Commission, within ten days of acquiring such interest, a notice stating the
acquiror's identity and background, source and amount of funds used in making
the purchase, the purpose of the acquisition, the nature of his interest in the
securities, and any contract, arrangements, understandings or relationships with
respect to the securities of the issuer.
ACCOUNTING TREATMENT
At the closing of the Proposed Acquisition, each of MMI and Unionamerica
will receive letters, dated as of such closing, from Ernst & Young LLP and KPMG
Audit Plc regarding those firms' concurrence with MMI managements' and
Unionamerica managements' conclusions, respectively, as to the appropriateness
of pooling-of-interests accounting for the Proposed Acquisition under Accounting
Principles Board Opinion No. 16, if the Proposed Acquisition is closed and
consummated in accordance with the terms and conditions of the Acquisition
Agreement. Accordingly, the assets and liabilities of Unionamerica will be
combined with MMI's at their historical recorded bases. Results of operations of
MMI will include the results of Unionamerica for the entire fiscal year in which
the Acquisition occurs. The reported balance sheet amounts and results of
operations of the separate corporations for prior periods will be combined,
reclassified and conformed as appropriate, to reflect the combined balance
sheets and statements of results of operations for MMI.
MMI believes the Proposed Acquisition would not qualify as a
pooling-of-interests under GAAP if, among other things, MMI Common Stock is
exchanged for less than 90% of the outstanding Unionamerica ADSs. A condition to
the closing of the Proposed Acquisition is the requirement that shares
representing 90% of the voting shares of Unionamerica be validly tendered. MMI
does not intend to waive this condition if the 90% tender requirement is not
achieved.
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Certain other transactions could have the effect of violating other
requirements for the use of pooling-of-interests accounting, including sales of
MMI Common Stock or Unionamerica ADSs by directors, executive officers or
affiliates of either MMI or Unionamerica. MMI is not aware of any such
transactions. In connection with the Acquisition Agreement, certain directors
and executive officers of Unionamerica have executed Affiliate Letters, pursuant
to which they agreed not to sell any shares of MMI Common Stock or Unionamerica
Securities during the time period that would cause the violation of the
requirements for pooling-of-interests accounting. See "The Offer--Terms of the
Offer and the Proposed Acquisition".
TAX CONSEQUENCES OF THE OFFER
GENERAL. The following discussion of taxation is included for general
information and only relates to the position of a Person (other than a dealer)
who is the absolute beneficial owner of Unionamerica ADSs. The summaries of U.S.
and U.K. tax laws set out below are based on laws and, in the case of the U.K.,
Inland Revenue practice, including the treaty for the prevention of double
taxation between the U.S. and the U.K. (the "Treaty") and, in the case of both
the U.S. and the U.K., judicial and administrative precedent as of the date of
this Prospectus. The summaries are subject to any changes in laws, Inland
Revenue practice (in the case of the U.K.) and precedent occurring after that
date and do not discuss any tax laws other than those of the U.S. and the U.K.
Unionamerica Securityholders (including those resident, ordinarily resident or
domiciled in jurisdictions other than the U.S. or the U.K.) are urged to consult
their own professional advisors as to the specific tax consequences to them of
the Offer.
U.K. TAXATION. The following paragraphs summarize certain U.K. tax
consequences associated with the exchange of securities pursuant to the Offer
and are intended as a general guide only to the position of Unionamerica
Securityholders who are resident or ordinarily resident in the U.K. for tax
purposes (a "U.K. Resident") or who are U.S. Residents holding Unionamerica ADSs
as investments. This summary, which is based upon an opinion provided by Lovell
White Durrant, U.K. counsel to Unionamerica, is a general guide as to current
legislation and Inland Revenue practice, and does not purport to be
comprehensive nor to describe all potentially relevant tax consequences.
Unionamerica Securityholders should therefore consult their own tax advisors
regarding the tax consequences and any tax reporting requirements applicable to
their own tax situation.
Taxation of U.K. Residents
Taxation of Capital Gains. The exchange of Unionamerica ADSs by a
U.K. Resident in return for MMI Common Stock will not be treated as a
disposal or partial disposal of Unionamerica ADSs for the purposes of
U.K. taxation of chargeable gains provided that the Unionamerica
Securityholder, either alone or together with Persons connected with him,
owns not more than five percent of the issued share capital of
Unionamerica. The MMI Common Stock will instead be treated as the same
asset as the Unionamerica ADSs acquired at the same time as, and for the
same price as, the Unionamerica ADSs were acquired. A Unionamerica
Securityholder who, either alone or together with Persons connected with
him, holds more than five percent of the issued share capital of
Unionamerica is advised that clearance has been applied for from the U.K.
Inland Revenue under Section 138 of the Taxation of Chargeable Gains Act
1992 of the U.K. in relation to the Offer to the effect that the Board of
Inland Revenue is satisfied that the exchange of securities pursuant to
the Offer will be implemented for bona fide commercial reasons and not
for tax avoidance purposes and provided such clearance is obtained, the
exchange of Unionamerica ADSs for MMI Common Stock will similarly not be
treated as a disposal or partial disposal of Unionamerica ADSs for the
purposes of the taxation of chargeable gains. To the extent a U.K.
Resident receives cash, in lieu of a fractional share of MMI Common
Stock, as consideration, it will be treated as making a disposal which
may, depending upon its
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individual circumstances, give rise to a liability to U.K. taxation of
chargeable gains. A subsequent disposal of MMI Common Stock by a U.K.
Resident may, depending upon individual circumstances, give rise to a
liability to U.K. taxation of chargeable gains.
Stamp Duty and Stamp Duty Reserve Tax. No U.K. stamp duty or stamp
duty reserve tax will be payable by a U.K. Resident on the transfer of
its Unionamerica ADSs to MMI. Any liability to U.K. stamp duty or stamp
duty reserve tax on the transfer of such Unionamerica ADSs to MMI will be
borne by MMI. No U.K. stamp duty or stamp duty reserve tax will be
payable on the issue of MMI Common Stock to a U.K. Resident.
Dividends. Dividends, if any, paid on MMI Common Stock to a U.K.
Resident will normally be subject to U.K. tax, subject to any applicable
credit for U.S. tax borne in respect of the dividend.
Taxation of U.S. Residents
This summary, which is based upon an opinion by Lovell White Durrant,
U.K. counsel to Unionamerica, is a general guide as to current U.K.
legislation and practice, and does not purport to be comprehensive nor to
describe all potentially relevant tax considerations. U.S. Residents
should therefore consult their own tax advisors regarding the tax
consequences and any tax reporting requirements applicable to their own
tax situation.
U.K. Taxation of Capital Gains. The exchange of Unionamerica ADSs by
a U.S. Resident in return for MMI Common Stock will not normally be
subject to U.K. taxation of chargeable gains unless at the time of the
disposal such U.S. Resident carries on a trade, profession or vocation in
the U.K. through a branch or agency and the Unionamerica ADSs are or have
been used, held or acquired for the purposes of such trade (or profession
or vocation), branch or agency, in which event such U.S. Resident should
refer to the relevant comments contained above in "Taxation of U.K.
Residents"--"Taxation of Capital Gains".
Stamp Duty and Stamp Duty Reserve Tax. No U.K. stamp duty or stamp
duty reserve tax will be payable by a U.S. Resident on the transfer of
its Unionamerica ADSs to MMI. Any liability to U.K. stamp duty or stamp
duty reserve tax on the transfer of such Unionamerica ADSs to MMI will be
borne by MMI. No U.K. stamp duty or stamp duty reserve tax will be
payable on the issue of MMI Common Stock to a U.S. Resident.
Dividends. Dividends, if any, paid on MMI Common Stock to a U.S.
Resident will not be subject to U.K. tax in the hands of the U.S.
Resident unless the U.S. Resident carries on business in the U.K. through
a branch or agency to which the MMI Common Stock is attributable or,
subject to certain exceptions, the U.S. Resident is also resident in the
U.K for tax purposes.
U.S. TAXATION. The following comments on U.S. tax consequences are intended
only as a general guide to current U.S. federal income tax law and IRS authority
applicable to Unionamerica Securityholders who are either U.S. Residents or who
are resident in the U.K. for tax purposes (in the case of an individual,
ordinarily resident) and, in either case, who beneficially own Unionamerica ADSs
as capital assets. The term "U.S. Resident" means a Person that is any of the
following: (i) a citizen of the U.S.; (ii) a resident alien for U.S. federal
income tax purposes; (iii) a corporation, partnership or other entity created or
organized in or under the laws of the U.S. or any political subdivision thereof;
or (iv) an estate or trust the income of which is subject to U.S. federal income
taxation regardless of source and that is not resident in the U.K. for tax
purposes. The discussion of U.S. tax consequences is based on laws, regulations,
rulings, and decisions in effect on the date hereof, all of which are subject to
change (possibly with retroactive effect) and differing interpretations. This
discussion is for general information only, and does not address all aspects of
U.S. federal taxation that may be applicable to a Unionamerica Securityholder
subject to special treatment under the IRC, including banks, tax-exempt
organizations, insurance companies, dealers in securities or foreign currency,
and holders who are not U.S. Persons (as defined in Section 7701(a)(30)
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of the IRC). In addition, such discussion does not address the state, local, or
foreign tax consequences of the Proposed Acquisition. Each Unionamerica
Securityholder and Option holder considering the Offer is urged to consult its
tax advisor with respect to the U.S. federal, state, local and foreign tax
consequences of the Proposed Acquisition.
The following summary is based on an opinion of Paul, Weiss, Rifkind,
Wharton & Garrison, special U.S. tax counsel to Unionamerica that is expected to
be delivered at the closing of the Proposed Acquisition, substantially to the
effect that, on the basis of facts, representations and assumptions set forth or
referred to in such opinion, the Proposed Acquisition should be treated as a
"reorganization" within the meaning of section 368(a)(1)(B) of the IRC. The
discussion that follows assumes that the Proposed Acquisition will be so
treated, which entails the following U.S. federal income tax consequences of a
Unionamerica Securityholder that holds its Unionamerica ADSs as a capital asset
(a "Holder").
Taxation of U.S. Residents. A Holder will not recognize any gain or loss
on the exchange of its Unionamerica ADSs for MMI Common Stock except in
respect of cash received in exchange for a fractional share of MMI Common
Stock (as discussed below). The aggregate adjusted tax basis of the
shares of MMI Common Stock received in the exchange will be equal to the
aggregate adjusted tax basis of the Unionamerica ADSs surrendered
therefor, and the holding period of such MMI Common Stock will include
the holding period during which such Unionamerica ADSs where held. If the
Holder has differing bases or holding periods in respect of its
Unionamerica ADSs, it should consult its tax advisor prior to the
exchange with regard to identifying the bases or holding periods of the
particular shares of MMI Common Stock received in the exchange.
Cash received in exchange for a fractional share of MMI Common Stock
will be treated as received in a sale of such fractional share, and gain
or loss will be recognized equal to the difference between the amount of
cash received and the portion of the basis of the Unionamerica ADS
allocable to such fractional interest. Such gain or loss will be capital
gain or loss, and will be long-term capital gain or loss if the holding
period for such Unionamerica ADS was more than one year as of the date of
the exchange.
Further, Section 367(b)(1) of the IRC will apply to an exchange by a
U.S. Holder of securities of Unionamerica (a foreign corporation) for
those of MMI (a domestic corporation). Accordingly, each Holder that
realizes gain or income in the Proposed Acquisition must notify the IRS
on or before the due date for filing a U.S. federal income tax return
(taking extensions into account) for its taxable year in which the income
is realized. The notice is filed with the IRS office with which the
Holder would be required to file a U.S. federal income tax return for the
year. If a return is actually filed, the notice must be attached to the
return. Treasury regulations under Section 367 of the IRC prescribe
detailed information that must be included in the notice.
Distributions, if any, paid with respect to MMI Common Stock to a
former Unionamerica Securityholder will be treated as ordinary dividend
income to the extent of MMI's current or accumulated earnings and
profits, then as a return of capital to the extent of tax basis, and then
as gain from the sale of stock. In the case of corporate holders, such
distributions, to the extent they are treated as ordinary dividend
income, will generally qualify for a dividends-received deduction of 70%
of the amount of the dividend. Unlike distributions on Unionamerica ADSs,
distributions on MMI Common Stock will not be subject to the provisions
of the Treaty that address refunds of U.K. advance corporation tax.
Unless a Holder complies with certain reporting or certification
procedures or is an "exempt recipient" (i.e., in general, corporations
and certain other entities), the Holder may be subject to withholding tax
of 31% with respect to any cash payments received pursuant to the
Proposed Acquisition. A foreign Holder should consult its tax advisor
with respect to the application of
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withholding rules to it with respect to any cash payments received
pursuant to the Proposed Acquisition.
MATERIAL CONTRACTS BETWEEN MMI AND UNIONAMERICA
In each of the past three years, Unionamerica Insurance Company Limited, a
Subsidiary of Unionamerica, has entered into reinsurance contracts with ACIC and
ACLIC, Subsidiaries of MMI. Unionamerica is a participant on the first and
second layers of MMI's Healthcare System Reinsurance Program and Physicians
Excess of Loss Reinsurance Program and MMI's Medical Expense Catastrophe
Reinsurance Agreement.
Premiums ceded to Unionamerica pursuant to these contracts were $2.6 million
in 1996, $2.5 million in 1995 and $2.1 million in 1994. Reinsurance receivables
from Unionamerica on case and incurred but not reported reserves were $5.7
million as of March 31, 1997.
The Acquisition Agreement is the only other material agreement entered into
between MMI and Unionamerica during the past three years.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information for each of
the years in the three year period ended December 31, 1996 and for each of the
three month periods ended March 31, 1996 and 1997 is derived from the historical
financial statements of MMI and Unionamerica incorporated by reference in this
Prospectus. The accompanying unaudited condensed combined balance sheets combine
the audited balance sheets of MMI and Unionamerica as of December 31, 1996 and
1995 as well as the unaudited balance sheets as of March 31, 1997. The unaudited
condensed combined statements of income combine the audited statements of income
for MMI and Unionamerica for each of the years in the three year period ended as
of December 31, 1996 as well as the unaudited statements of income for the three
month periods ended March 31, 1997 and 1996.
The pro forma combined financial information does not purport to represent
what the combined financial position or results of operations actually would
have been if the Proposed Acquisition had been completed at the beginning of the
periods presented or which may be obtained in the future. The information
presented below should be read in conjunction with the historical financial
statements of MMI and Unionamerica incorporated by reference in this Prospectus.
The pro forma financial information has been prepared assuming the Proposed
Acquisition is accounted for as a pooling-of-interests. Under the
pooling-of-interests method of accounting, the historical financial statements
of the combined companies are retroactively combined (after elimination of
intercompany transactions) as if the companies had always operated as a single
entity. The unaudited pro forma condensed combined financial information has
been included as required by the rules of the Commission and is provided for
comparative purposes only.
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MMI COMPANIES, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1997
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
MMI UNIONAMERICA PRO FORMA
COMPANIES, HOLDINGS ADJUSTMENTS & PRO FORMA
INC. PLC ELIMINATIONS COMBINED
------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and investments
Fixed maturities................................... $ 696,567 $ 396,851 $ $ 1,093,418
Equity securities.................................. 27,523 3,351 30,874
Cash and short-term investments.................... 33,478 14,919 48,397
------------ ------------- ------- ------------
757,568 415,121 -- 1,172,689
Other assets
Premiums and fees receivable....................... 100,097 178,750 278,847
Reinsurance recoverable on unpaid losses........... 107,129 159,770 (5,667)(a) 261,232
Accrued investment income.......................... 11,032 6,548 17,580
Deferred income taxes.............................. 50,772 -- 50,772
Other.............................................. 70,463 39,503 (868)(b) 109,098
------------ ------------- ------- ------------
$ 1,097,061 $ 799,692 $ (6,535) $ 1,890,218
------------ ------------- ------- ------------
------------ ------------- ------- ------------
LIABILITIES, MINORITY INTERESTS
AND STOCKHOLDERS' EQUITY
Liabilities
Policy liabilities
Loss and loss adjustment expense reserves........ $ 629,350 $ 516,944 $ (5,667)(a) $ 1,140,627
Unearned premium reserves........................ 96,653 103,150 (868)(b) 198,935
Future life policy benefits...................... 8,605 -- 8,605
------------ ------------- ------- ------------
734,608 620,094 (6,535) 1,348,167
Accrued expenses and other liabilities............. 18,274 13,821 32,095
Insurance balances payable......................... 33,229 24,930 58,159
Long term debt..................................... 58,000 35,000 93,000
------------ ------------- ------- ------------
844,111 693,845 (6,535) 1,531,421
Minority interest.................................... -- 1,277 1,277
Stockholders' equity
Common Stock....................................... 1,169 378 327(c) 1,874
Other.............................................. 251,781 104,192 (327)(c) 355,646
------------ ------------- ------- ------------
252,950 104,570 -- 357,520
------------ ------------- ------- ------------
$ 1,097,061 $ 799,692 $ (6,535) $ 1,890,218
------------ ------------- ------- ------------
------------ ------------- ------- ------------
</TABLE>
See notes to unaudited pro forma condensed financial information.
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MMI COMPANIES, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
MMI UNIONAMERICA PRO FORMA
COMPANIES, HOLDINGS ADJUSTMENTS & PRO FORMA
INC. PLC ELIMINATIONS COMBINED
------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and investments
Fixed maturities................................... $ 727,080 $ 403,517 $ $ 1,130,597
Equity securities.................................. 18,594 3,670 22,264
Cash and short-term investments.................... 43,856 18,106 61,962
------------ ------------- ------- ------------
789,530 425,293 -- 1,214,823
Other assets
Premiums and fees receivable....................... 58,611 131,447 190,058
Reinsurance recoverable on unpaid losses........... 95,408 160,361 (5,808)(a) 249,961
Accrued investment income.......................... 11,116 5,672 16,788
Deferred income taxes.............................. 46,459 -- 46,459
Other.............................................. 56,894 28,017 (442)(b) 84,469
------------ ------------- ------- ------------
$ 1,058,018 $ 750,790 $ (6,250) $ 1,802,558
------------ ------------- ------- ------------
------------ ------------- ------- ------------
LIABILITIES, MINORITY INTERESTS
AND STOCKHOLDERS' EQUITY
Liabilities
Policy liabilities
Loss and loss adjustment expense reserves........ $ 631,573 $ 524,153 $ (5,808)(a) $ 1,149,918
Unearned premium reserves........................ 55,679 51,238 (442)(b) 106,475
Future life policy benefits...................... 8,578 -- 8,578
------------ ------------- ------- ------------
695,830 575,391 (6,250) 1,264,971
Accrued expenses and other liabilities............. 28,051 17,230 45,281
Insurance balances payable......................... 24,171 18,692 42,863
Long term debt..................................... 58,000 35,000 93,000
------------ ------------- ------- ------------
806,052 646,313 (6,250) 1,446,115
Minority interest.................................... -- 1,277 1,277
Stockholders' equity
Common Stock....................................... 1,162 378 328(c) 1,868
Other.............................................. 250,804 102,822 (328)(c) 353,298
------------ ------------- ------- ------------
251,966 103,200 -- 355,166
------------ ------------- ------- ------------
$ 1,058,018 $ 750,790 $ (6,250) $ 1,802,558
------------ ------------- ------- ------------
------------ ------------- ------- ------------
</TABLE>
See notes to unaudited pro forma condensed financial information.
72
<PAGE>
MMI COMPANIES, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
MMI UNIONAMERICA PRO FORMA
COMPANIES, HOLDINGS ADJUSTMENTS & PRO FORMA
INC. PLC ELIMINATIONS COMBINED
------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and investments
Fixed maturities................................... $ 710,072 $ 390,369 $ $ 1,100,441
Equity securities.................................. -- 4,029 4,029
Cash and short-term investments.................... 33,989 28,366 62,355
------------ ------------- ------- ------------
744,061 422,764 -- 1,166,825
Other assets
Premiums and fees receivable....................... 41,544 126,984 168,528
Reinsurance recoverable on unpaid losses........... 99,991 181,265 (5,637)(a) 275,619
Accrued investment income.......................... 11,628 4,528 16,156
Deferred income taxes.............................. 41,203 0 41,203
Other.............................................. 44,251 29,577 (401)(b) 73,427
------------ ------------- ------- ------------
$ 982,678 $ 765,118 $ (6,038) $ 1,741,758
------------ ------------- ------- ------------
------------ ------------- ------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Policy liabilities
Loss and loss adjustment expense reserves........ $ 638,815 $ 561,055 $ (5,637)(a) $ 1,194,233
Unearned premium reserves........................ 52,951 43,330 (401)(b) 95,880
Future life policy benefits...................... 8,982 -- 8,982
------------ ------------- ------- ------------
700,748 604,385 (6,038) 1,299,095
Accrued expenses and other liabilities............. 21,765 20,411 42,176
Insurance balances payable......................... 24,702 14,519 39,221
Long term debt..................................... 49,000 40,000 89,000
------------ ------------- ------- ------------
796,215 679,315 (6,038) 1,469,492
Stockholders' equity
Common Stock....................................... 967 371 323(c) 1,661
Other.............................................. 185,496 85,432 (323)(c) 270,605
------------ ------------- ------- ------------
186,463 85,803 -- 272,266
------------ ------------- ------- ------------
$ 982,678 $ 765,118 $ (6,038) $ 1,741,758
------------ ------------- ------- ------------
------------ ------------- ------- ------------
</TABLE>
See notes to unaudited pro forma condensed financial information.
73
<PAGE>
MMI COMPANIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
MMI UNIONAMERICA PRO FORMA
COMPANIES, HOLDINGS ADJUSTMENTS & PRO FORMA
INC. PLC ELIMINATIONS COMBINED
----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues
Insurance premiums earned.............................. $ 42,276 $ 29,147 $ $ 71,423
Consulting and fee income.............................. 12,067 -- 12,067
Net investment income.................................. 11,297 6,797 18,094
Realized gains (losses) on investments................. 871 (270) 601
----------- ------------- ------- -----------
Total revenues....................................... 66,511 35,674 -- 102,185
Losses and expenses
Losses and loss adjustment expenses.................... 34,783 17,227 52,010
Insurance and administrative expenses.................. 23,472 11,868 35,340
Interest expense....................................... 884 566 1,450
----------- ------------- ------- -----------
Total losses and expenses............................ 59,139 29,661 -- 88,800
----------- ------------- ------- -----------
Income from continuing operations before income
taxes.............................................. 7,372 6,013 -- 13,385
Income taxes............................................. 665 2,095 2,760
----------- ------------- ------- -----------
Income from continuing operations.................... $ 6,707 $ 3,918 $ -- $ 10,625
----------- ------------- ------- -----------
----------- ------------- ------- -----------
Income from continuing operations per common
and common equivalent share............................ $ 0.56 $ 0.45 $ 0.55
----------- ------------- -----------
----------- ------------- -----------
Weighted average number of common and common
equivalent shares outstanding.......................... 12,064 8,761 (1,437) 19,388
----------- ------------- ------- -----------
----------- ------------- ------- -----------
</TABLE>
See notes to unaudited pro forma condensed financial information.
74
<PAGE>
MMI COMPANIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
MMI UNIONAMERICA PRO FORMA
COMPANIES, HOLDINGS ADJUSTMENTS & PRO FORMA
INC. PLC ELIMINATIONS COMBINED
----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues
Insurance premiums earned.............................. $ 42,320 $ 32,891 $ $ 75,211
Consulting and fee income.............................. 6,370 -- 6,370
Net investment income.................................. 10,973 6,793 17,766
Realized gains on investments.......................... 1,548 388 1,936
----------- ------------- ------- -----------
Total revenues....................................... 61,211 40,072 -- 101,283
Losses and expenses
Losses and loss adjustment expenses.................... 35,106 21,281 56,387
Insurance and administrative expenses.................. 16,993 10,841 27,834
Interest expense....................................... 750 721 1,471
----------- ------------- ------- -----------
Total losses and expenses............................ 52,849 32,843 -- 85,692
----------- ------------- ------- -----------
Income from continuing operations before income
taxes.............................................. 8,362 7,229 -- 15,591
Income taxes............................................. 951 2,419 3,370
----------- ------------- ------- -----------
Income from continuing operations.................... $ 7,411 $ 4,810 $ -- $ 12,221
----------- ------------- ------- -----------
----------- ------------- ------- -----------
Income from continuing operations per common
and common equivalent share............................ $ 0.72 $ 0.55 $ 0.70
----------- ------------- -----------
----------- ------------- -----------
Weighted average number of common and common
equivalent shares outstanding.......................... 10,224 8,729 (1,432) 17,521
----------- ------------- ------- -----------
----------- ------------- ------- -----------
</TABLE>
See notes to unaudited pro forma condensed financial information.
75
<PAGE>
MMI COMPANIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
MMI UNIONAMERICA PRO FORMA
COMPANIES, HOLDINGS ADJUSTMENTS & PRO FORMA
INC. PLC ELIMINATIONS COMBINED
----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues
Insurance premiums earned.............................. $ 164,409 $ 116,982 $ $ 281,391
Consulting and fee income.............................. 34,535 -- 34,535
Net investment income.................................. 44,274 29,407 73,681
Realized losses on investments......................... (40) (850) (890)
----------- ------------- ------- -----------
Total revenues....................................... 243,178 145,539 -- 388,717
Losses and expenses
Losses and loss adjustment expenses.................... 135,786 72,990 208,776
Insurance and administrative expenses.................. 77,026 41,383 118,409
Interest expense....................................... 3,397 2,686 6,083
----------- ------------- ------- -----------
Total losses and expenses............................ 216,209 117,059 -- 333,268
----------- ------------- ------- -----------
Income from continuing operations before income
taxes.............................................. 26,969 28,480 -- 55,449
Income taxes............................................. 854 9,375 10,229
----------- ------------- ------- -----------
Income from continuing operations.................... $ 26,115 $ 19,105 $ -- $ 45,220
----------- ------------- ------- -----------
----------- ------------- ------- -----------
Income from continuing operations per common
and common equivalent share............................ $ 2.42 $ 2.18 $ 2.50
----------- ------------- -----------
----------- ------------- -----------
Weighted average number of common and common
equivalent shares outstanding.......................... 10,770 8,754 (1,436) 18,088
----------- ------------- ------- -----------
----------- ------------- ------- -----------
</TABLE>
See notes to unaudited pro forma condensed financial information.
76
<PAGE>
MMI COMPANIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
MMI UNIONAMERICA PRO FORMA
COMPANIES, HOLDINGS ADJUSTMENTS & PRO FORMA
INC. PLC ELIMINATIONS COMBINED
----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues
Insurance premiums earned.............................. $ 155,191 $ 117,712 $ $ 272,903
Consulting and fee income.............................. 22,336 -- 22,336
Net investment income.................................. 39,850 23,086 62,936
Realized gains on investments.......................... 1,367 325 1,692
----------- ------------- ------- -----------
Total revenues....................................... 218,744 141,123 -- 359,867
Losses and expenses
Losses and loss adjustment expenses.................... 130,088 76,220 206,308
Insurance and administrative expenses.................. 61,055 39,402 100,457
Interest expense....................................... 2,767 6,605 9,372
----------- ------------- ------- -----------
Total losses and expenses............................ 193,910 122,227 -- 316,137
----------- ------------- ------- -----------
Income from continuing operations before income
taxes.............................................. 24,834 18,896 -- 43,730
Income taxes............................................. 2,139 5,943 8,082
----------- ------------- ------- -----------
Income from continuing operations.................... $ 22,695 $ 12,953 $ -- $ 35,648
----------- ------------- ------- -----------
----------- ------------- ------- -----------
Income from continuing operations per common
and common equivalent share............................ $ 2.34 $ 2.28 $ 2.46
----------- ------------- ------- -----------
----------- ------------- ------- -----------
Weighted average number of common and common
equivalent shares outstanding.......................... 9,683 5,018 (823) 13,878
----------- ------------- ------- -----------
----------- ------------- ------- -----------
</TABLE>
See notes to unaudited pro forma condensed financial information.
77
<PAGE>
MMI COMPANIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
MMI UNIONAMERICA PRO FORMA
COMPANIES, HOLDINGS ADJUSTMENTS & PRO FORMA
INC. PLC ELIMINATIONS COMBINED
----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues
Insurance premiums earned.............................. $ 132,389 $ 135,587 $ $ 267,976
Consulting and fee income.............................. 18,602 -- 18,602
Net investment income.................................. 29,067 22,083 51,150
Realized losses on investments......................... (2,853) (32,408) (35,261)
----------- ------------- ------- -----------
Total revenues....................................... 177,205 125,262 -- 302,467
Losses and expenses
Losses and loss adjustment expenses.................... 112,711 87,743 200,454
Insurance and administrative expenses.................. 47,286 40,775 88,061
Interest expense....................................... 1,619 7,003 8,622
----------- ------------- ------- -----------
Total losses and expenses............................ 161,616 135,521 -- 297,137
----------- ------------- ------- -----------
Income (loss) from continuing operations
before income taxes................................ 15,589 (10,259) -- 5,330
Income taxes (credit).................................... 538 (3,468) (2,930)
----------- ------------- ------- -----------
Income (loss) from continuing operations............. $ 15,051 $ (6,791) $ -- $ 8,260
----------- ------------- ------- -----------
----------- ------------- ------- -----------
Income (loss) from continuing operations per
common and common equivalent share..................... $ 1.72 $ (1.85) $ 0.54
----------- ------------- -----------
----------- ------------- -----------
Weighted average number of common and common
equivalent shares outstanding.......................... 8,763 4,464 (732) 12,495
----------- ------------- ------- -----------
----------- ------------- ------- -----------
</TABLE>
See notes to unaudited pro forma condensed financial information.
78
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(a) To eliminate loss and loss adjustment expense reserves ceded to Unionamerica
Insurance Company Limited by ACIC.
(b) To eliminate the effect of unearned premium reserves ceded by ACIC to
Unionamerica Insurance Company Limited.
(c) To adjust the pro forma aggregate par value of MMI Common Stock outstanding
to reflect the conversion of Unionamerica ADSs to 0.836 shares of MMI Common
Stock per Unionamerica ADS.
(d) Pro forma adjustments to the income statement to eliminate the effect of
reinsurance of ACIC by Unionamerica are not necessary because the income
statement is presented net of reinsurance.
79
<PAGE>
LEGAL MATTERS
The validity of the shares of MMI Common Stock to be issued in connection
with the Offer will be passed upon for MMI by Wildman, Harrold, Allen & Dixon,
Chicago, Illinois. In addition, certain U.S. income tax matters will be passed
upon by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York, special
U.S. tax counsel to Unionamerica, and certain U.K. income tax matters will be
passed upon by Lovell White Durrant, London, England, U.K. counsel to
Unionamerica.
EXPERTS
The consolidated financial statements and schedules of MMI Companies, Inc.
and Subsidiaries at December 31, 1996 and 1995, and for each of the three years
in the period ended December 31, 1996, incorporated by reference in this
Prospectus and Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon incorporated by
reference herein. Such consolidated financial statements and schedules are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements and schedules of Unionamerica Holdings
plc and Subsidiaries at December 31, 1996, and for the year ended December 31,
1996, incorporated by reference in this Prospectus and Registration Statement
have been audited by KPMG Audit Plc, Chartered Accountants and Registered
Auditors, as set forth in their reports thereon. The consolidated financial
statements and schedules of Unionamerica Holdings plc and Subsidiaries at
December 31, 1995, and for each of the two years in the period ended December
31, 1995, incorporated by reference in this Prospectus and Registration
Statement have been audited by KPMG, Chartered Accountants and Registered
Auditors, as set forth in their reports thereon. Such consolidated financial
statements and schedules are included in reliance upon such reports given upon
the authority of such firms as experts in accounting and auditing.
80
<PAGE>
APPENDIX A
ACQUISITION AGREEMENT
DATED AS OF JUNE 25, 1997
BY AND BETWEEN
MMI COMPANIES, INC.
AND
UNIONAMERICA HOLDINGS PLC
<PAGE>
EXECUTION COPY
ACQUISITION AGREEMENT
DATED AS OF JUNE 25, 1997
BY AND BETWEEN
MMI COMPANIES, INC.
AND
UNIONAMERICA HOLDINGS PLC
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience only.
<TABLE>
<CAPTION>
PAGE NO.
-----------
<S> <C> <C>
ARTICLE I
COMPANY AUTHORIZATIONS AND GOVERNANCE
1.01 Company Actions........................................................................ APP-A-1
1.02 Company Board Representation; Section 14(f)............................................ APP-A-1
ARTICLE II
CLOSING
2.01 Closing................................................................................ APP-A-2
ARTICLE III
EXCHANGE OF SHARES
3.01 Exchange of Company Common Stock....................................................... APP-A-2
3.02 Acquisition of Remaining Company Capital Stock......................................... APP-A-3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.01 Organization and Qualification......................................................... APP-A-4
4.02 Capital Stock.......................................................................... APP-A-4
4.03 Authority Relative to this Agreement................................................... APP-A-5
4.04 Non-Contravention; Approvals and Consents.............................................. APP-A-5
4.05 SEC Reports and Financial Statements................................................... APP-A-6
4.06 Absence of Certain Changes or Events................................................... APP-A-6
4.07 Absence of Undisclosed Liabilities..................................................... APP-A-7
4.08 Legal Proceedings...................................................................... APP-A-7
4.09 Information Supplied................................................................... APP-A-7
4.10 Compliance with Laws and Orders........................................................ APP-A-8
4.11 Compliance with Agreements; Certain Agreements......................................... APP-A-8
4.12 Taxes.................................................................................. APP-A-9
4.13 Employee Benefit Plans................................................................. APP-A-14
4.14 Labor Matters.......................................................................... APP-A-15
4.15 Opinion of Financial Advisor........................................................... APP-A-15
4.16 Related Party Transactions............................................................. APP-A-16
4.17 Assets; Real Property.................................................................. APP-A-16
4.18 Intellectual Property.................................................................. APP-A-16
4.19 Material Contracts and Relationships................................................... APP-A-17
4.20 Absence of Certain Business Practices.................................................. APP-A-18
4.21 Books and Records...................................................................... APP-A-18
4.22 Information Regarding Acquisitions..................................................... APP-A-18
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.01 Organization and Qualification......................................................... APP-A-19
5.02 Capital Stock.......................................................................... APP-A-19
5.03 Authority Relative to this Agreement................................................... APP-A-20
5.04 Non-Contravention; Approvals and Consents.............................................. APP-A-20
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
5.05 SEC Reports and Financial Statements................................................... APP-A-21
5.06 Absence of Certain Changes or Events................................................... APP-A-21
5.07 Absence of Undisclosed Liabilities..................................................... APP-A-21
5.08 Legal Proceedings...................................................................... APP-A-21
5.09 Information Supplied................................................................... APP-A-22
5.10 Compliance with Laws and Orders........................................................ APP-A-22
5.11 Compliance with Agreements; Certain Agreements......................................... APP-A-23
5.12 Taxes.................................................................................. APP-A-23
5.13 Employee Benefit Plans; ERISA.......................................................... APP-A-25
5.14 Labor Matters.......................................................................... APP-A-25
5.15 Vote Required.......................................................................... APP-A-25
5.16 Ownership of Company Common Stock...................................................... APP-A-25
ARTICLE VI
COVENANTS OF THE COMPANY
6.01 Covenants of the Company............................................................... APP-A-26
6.02 No Solicitations....................................................................... APP-A-28
6.03 Tax Covenants of the Company........................................................... APP-A-28
6.04 Approval of Company Stockholders....................................................... APP-A-28
ARTICLE VII
COVENANTS OF BUYER
7.01 Covenants of Buyer..................................................................... APP-A-29
7.02 Tax Covenants of Buyer................................................................. APP-A-30
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 Access to Information; Confidentiality................................................. APP-A-30
8.02 Preparation of Proxy Statement and Registration Statement by Buyer..................... APP-A-30
8.03 Approval of Stockholders............................................................... APP-A-31
8.04 Regulatory and Other Approvals......................................................... APP-A-31
8.05 Employment and Severance Agreement..................................................... APP-A-31
8.06 Directors' and Officers' Indemnification and Insurance................................. APP-A-31
8.07 Fees and Expenses...................................................................... APP-A-32
8.08 Brokers or Finders..................................................................... APP-A-32
8.09 Takeover Statutes...................................................................... APP-A-32
8.10 Conveyance Taxes....................................................................... APP-A-32
8.11 Notice................................................................................. APP-A-33
8.12 Fulfillment of Conditions.............................................................. APP-A-33
8.13 Representation on Buyer's Board of Directors........................................... APP-A-33
8.14 Selling Stockholders Undertaking....................................................... APP-A-33
8.15 Affiliates Agreement................................................................... APP-A-33
ARTICLE IX
CONDITIONS
9.01 Mutual Conditions to Closing........................................................... APP-A-34
9.02 Conditions to Buyer's Obligation....................................................... APP-A-35
9.03 Additional Conditions to Closing....................................................... APP-A-37
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.01 Termination............................................................................ APP-A-37
10.02 Effect of Termination.................................................................. APP-A-38
10.03 Amendment.............................................................................. APP-A-38
10.04 Waiver................................................................................. APP-A-38
ARTICLE XI
THE OFFER
11.01 The Offer.............................................................................. APP-A-39
11.02 Company Actions........................................................................ APP-A-40
ARTICLE XII
GENERAL PROVISIONS
12.01 Non-Survival of Representations, Warranties, Covenants and Agreements.................. APP-A-41
12.02 Notices................................................................................ APP-A-41
12.03 Entire Agreement; Incorporation of Exhibits............................................ APP-A-42
12.04 Public Announcements................................................................... APP-A-43
12.05 No Third Party Beneficiary............................................................. APP-A-43
12.06 No Assignment; Binding Effect.......................................................... APP-A-43
12.07 Headings............................................................................... APP-A-43
12.08 Invalid Provisions..................................................................... APP-A-43
12.09 Governing Law.......................................................................... APP-A-43
12.10 Enforcement of Agreement............................................................... APP-A-43
12.11 Certain Definitions.................................................................... APP-A-43
12.12 Counterparts........................................................................... APP-A-47
Exhibit A Form of Undertaking
Exhibit B Form of Affiliates Agreement
</TABLE>
iii
<PAGE>
ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT dated as of June 25, 1997 (this "Agreement") is
made and entered into by and between MMI COMPANIES, INC., a corporation
organized under the laws of Delaware ("Buyer"), and UNIONAMERICA HOLDINGS PLC, a
corporation organized under the laws of England and Wales (the "Company").
WHEREAS, the Boards of Directors of Buyer and the Company have each
determined that it is advisable and in the best interests of their respective
stockholders to consummate, and have approved, the business combination
transactions provided for herein whereby the Company shall become a wholly owned
subsidiary of Buyer pursuant to the acquisition by Buyer, solely for voting
common stock of Buyer, of all of the American Depository Shares ("ADSs"),
representing all of the ordinary shares, nominal value $0.0448 per share, of the
Company (such ADSs being referred to as "Company Common Stock"), and all of the
deferred stock of the Company, par value L1 per share (the "Company Deferred
Stock"), through (i) the Offer and (ii) the subsequent compulsory acquisition of
any remaining shares of Company Common Stock solely for voting common stock of
Buyer (collectively, the "Transaction");
WHEREAS, the parties intend that the exchange of shares of Company Common
Stock and Company Deferred Stock for shares of common stock, par value $0.10 per
share, of Buyer ("Common Stock") pursuant to the Offer will be treated as a
transaction described in Section 368(a)(1)(B) of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, Buyer and the Company desire to make certain representations,
warranties and agreements in connection with the transactions contemplated by
this Agreement and also to prescribe various conditions to the consummation of
such transactions.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
COMPANY AUTHORIZATIONS AND GOVERNANCE
1.01. COMPANY ACTIONS. The Company hereby approves and consents to the
Offer and the other transactions contemplated by this Agreement and represents
that the Board of Directors of the Company, at a meeting duly called and held,
has unanimously:
(a) determined that this Agreement and the transactions contemplated
hereby, including the Offer, are fair to and in the best interests of the
holders of shares of Company Common Stock; and
(b) agreed to recommend that the stockholders of the Company accept the
Offer, if commenced, and tender their shares of Company Common Stock and
Company Deferred Stock thereunder to Buyer, subject to the conditions and
exceptions set forth herein.
1.02. COMPANY BOARD REPRESENTATION; SECTION 14(F).
(a) Subject to compliance with the laws of England and Wales, the
Company's Memorandum and Articles of Association and other applicable law,
promptly upon the exchange by Buyer of Common Stock for shares of Company
Common Stock and Company Deferred Stock pursuant to the Offer, and from time
to time thereafter, (i) Buyer shall be entitled to designate four persons
("Buyer's Designees") to be included on the Board of Directors of the
Company and (ii) the Company shall, upon request by Buyer, promptly satisfy
the foregoing entitlement by using its best efforts to cause Buyer's
Designees promptly to be so elected or appointed.
(b) The Company's obligations to appoint Buyer's Designees to the Board
of Directors of the Company shall be subject to Section 14(f) of the
Securities Exchange Act of 1934, as amended (such
APP-A-1
<PAGE>
Act and the rules and regulations promulgated thereunder being referred to
herein as the "Exchange Act") and Rule 14f-1 promulgated thereunder, if
applicable. The Company shall promptly take all actions required pursuant to
such Section and Rule in order to fulfill its obligations under this
Section, and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under
such Section and Rule to fulfill such obligations. Buyer shall supply to the
Company and be solely responsible for any information with respect to either
of them and their designees, officers, directors and affiliates required by
such Section 14(f) and Rule 14f-1.
ARTICLE II
CLOSING
2.01 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
10.01, the closing of the Offer, including the prior declaration that the Offer
has become unconditional (the "Closing"), will take place at the offices of
Wildman, Harrold, Allen & Dixon, 225 West Wacker Drive, Chicago, Illinois 60606
on a date to be specified by Buyer, which shall be no later than the fifth
business day following the date on which all the conditions set forth in Article
IX have been satisfied or waived, unless another date, time or place is agreed
to in writing by the parties hereto (the "Closing Date").
ARTICLE III
EXCHANGE OF SHARES
3.01 EXCHANGE OF COMPANY COMMON STOCK.
(a) EXCHANGE AGENT. As of the Closing, Buyer shall deposit with
ChaseMellon Shareholder Services L.L.C. or such other bank or trust company
designated by Buyer (and reasonably acceptable to the Company) (the
"Exchange Agent"), for delivery to the former holders of shares of Company
Common Stock and Company Deferred Stock, for exchange in accordance with
this Article III, through the Exchange Agent, certificates representing the
shares of Common Stock issuable in exchange for outstanding shares of
Company Common Stock and Company Deferred Stock tendered and not properly
withdrawn pursuant to the Offer (such shares of Common Stock being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall
agree to deliver such shares as contemplated by this Section 3.01 and upon
such additional terms as may be agreed upon by the Exchange Agent, the
Company and Buyer. The Exchange Fund shall not be used for any purpose
except as expressly provided in this Agreement.
(b) EXCHANGE PROCEDURES. At the same time as and with the mailing of
Offer Documents pursuant to Section 11.01, the Exchange Agent shall cause to
be mailed to each holder of record of an American Depositary Receipt or
Receipts which represent outstanding shares of Company Common Stock (the
"Company Certificates") whose shares will be exchanged solely for shares of
Common Stock, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Company Certificates
shall pass, only upon receipt of the Company Certificates by the Exchange
Agent and shall be in such form and have such other provisions as Buyer and
the Company may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Company Certificates in exchange for
certificates representing shares of Common Stock. Upon Closing, the holder
of such Company Certificate who has properly tendered shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of Common Stock which such holder has the right to receive pursuant
to this Section 3.01. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the Company
and the Depositary, a certificate representing the proper number of shares
of Common Stock may be issued to a transferee if the Company Certificate
representing such Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer,
in
APP-A-2
<PAGE>
form and substance satisfactory to Buyer, and by evidence that any
applicable stock transfer taxes and fees have been paid.
(c) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional shares of Common
Stock shall be issued upon the surrender for exchange of Company
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Buyer.
(ii) As promptly as practicable following the Closing, the Exchange
Agent shall determine the excess of (x) the number of full shares of
Common Stock delivered to the Exchange Agent by Buyer pursuant to Section
3.01(a) over (y) the aggregate number of full shares of Common Stock to
be distributed to holders of Company Common Stock pursuant to Section
3.01(b) (such excess being herein called the "Excess Shares"). As soon
after the Closing as practicable, the Exchange Agent, as agent for the
former holders of Company Common Stock, shall sell the Excess Shares at
then prevailing prices on the New York Stock Exchange, Inc. (the "NYSE"),
all in the manner provided in paragraph (iii) of this Section 3.01.
(iii) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. Until the net
proceeds of such sale or sales have been distributed to the former
holders of Company Common Stock, the Exchange Agent will hold such
proceeds in trust for the former holders of Company Common Stock (the
"Excess Shares Trust"). All commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation,
of the Exchange Agent incurred in connection with such sale of the Excess
Shares, shall be paid out of the Excess Shares Trust. The Exchange Agent
shall determine the portion of the Excess Shares Trust to which each
former holder of Company Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the
Excess Shares Trust by a fraction the numerator of which is the amount of
the fractional share interest to which such former holder of Company
Common Stock is entitled and the denominator of which is the aggregate
amount of fractional share interests to which all former holders of
Company Common Stock are entitled.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to former holders of Company Common Stock in
respect of any fractional share interests of Common Stock, the Exchange
Agent shall make available such amounts to such former holders of Company
Common Stock.
(d) NO LIABILITY. Neither Buyer nor the Company shall be liable to any
holder of shares of Company Common Stock, Company Deferred Stock or Common
Stock, as the case may be, for such shares (or dividends or distributions
with respect thereto) or cash from the Excess Shares Trust delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
3.02 ACQUISITION OF REMAINING COMPANY CAPITAL STOCK.
(a) COMPANY COMMON STOCK. Following the Closing, if sufficient
acceptances have been received, Buyer shall be entitled to apply the
provisions of Sections 428 to 430F of the United Kingdom Companies Act 1985
to acquire compulsorily any outstanding shares of Company Common Stock.
(b) COMPANY DEFERRED STOCK. At the Closing, the Company shall, in
accordance with Article 5 of the Articles of Association of the Company,
cause all of the issued and outstanding shares of Company Deferred Stock to
be transferred to such Person other than Buyer as Buyer may designate to
hold such shares as nominee for Buyer in exchange for one share of Common
Stock for each 25,000 shares of Company Deferred Stock.
APP-A-3
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer as follows:
4.01 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated and validly existing under the laws of England and Wales. Each of
the Company's Subsidiaries is listed on Schedule 4.01 to this Agreement. Each
such Subsidiary is duly incorporated and validly existing under the laws of
England and Wales and each of the Company and its Subsidiaries has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties, except for such
failures to be so incorporated, created and existing or to have such power and
authority which, individually or in the aggregate, are not having and could not
be reasonably expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole. Each of the Company and its Subsidiaries is duly
qualified, licensed or admitted to do business in each jurisdiction in which the
ownership, use or leasing of its assets and properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary,
except for such failures to be so qualified, licensed or admitted which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole. Except for beneficial interests in the Subsidiaries of the
Company and as disclosed in Schedule 4.01 to this Agreement, the Company and the
Subsidiaries do not directly or indirectly own any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture,
business trust or other business association or Person. The Company has
previously delivered to Buyer correct and complete copies of the memorandum and
articles of association (or other comparable charter documents) of the Company
and each of its Subsidiaries.
4.02 CAPITAL STOCK.
(a) The authorized capital stock of the Company consists solely of
20,000,000 shares of Company Common Stock and 50,000 shares of Company
Deferred Stock. As of the date hereof and as of the Closing (except as
otherwise permitted in Section 6.01(b)(ii)(C)), 8,443,969 shares of Company
Common Stock were, and will be, issued and outstanding, and no shares were
reserved for issuance except as set forth in Schedule 4.02 to this
Agreement. Prior to the Closing, except as set forth in Schedule 4.02 to
this Agreement, there will be no change in the number of issued and
outstanding shares of Company Common Stock or shares of Company Common Stock
reserved for issuance. As of the date hereof and as of the Closing, 50,000
shares of Company Deferred Stock were, and will be, issued and outstanding
and no shares were reserved for issuance. No bonds, debentures, notes or
other instruments or evidence of indebtedness having the right to vote (or
convertible into, or exercisable or exchangeable for, securities having the
right to vote) on any matters on which the Company's stockholders may vote
("Company Voting Debt") are issued or outstanding. All of the issued and
outstanding shares of Company Common Stock and Company Deferred Stock are,
and all shares reserved for issuance will be, upon issuance in accordance
with the terms specified in the instruments or agreements pursuant to which
they are issuable, duly authorized, validly issued, fully paid and
nonassessable. Except pursuant to this Agreement and except as set forth in
Schedule 4.02 to this Agreement, there are no outstanding subscriptions,
options, warrants, calls, rights (including "phantom" stock rights),
preemptive rights or other contracts, commitments, understandings or
arrangements, including any right of conversion or exchange under any
outstanding security, instrument or agreement (together, "Options"),
obligating the Company or any of its Subsidiaries to issue or sell any
Company Voting Debt or shares of capital stock or other securities of the
Company or to grant, extend or enter into any Option with respect thereto.
(b) Except as disclosed in Schedule 4.02 to this Agreement, all of the
outstanding beneficial interests of each Subsidiary of the Company are
owned, beneficially and of record, by the Company or a Subsidiary wholly
owned, directly or indirectly, by the Company, as described on Schedule 4.01
to
APP-A-4
<PAGE>
this Agreement, free and clear of any liens, claims, mortgages,
encumbrances, pledges, security interests, equities and charges of any kind
(each a "Lien"). Except as disclosed in Schedule 4.02 to this Agreement,
there are no (i) outstanding Options obligating the Company or any of its
Subsidiaries to issue or sell any beneficial or other ownership interest of
any Subsidiary of the Company or to grant, extend or enter into any such
Option or (ii) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any Person other than the Company
or a Subsidiary wholly owned, directly or indirectly, by the Company with
respect to the voting of or the right to participate in dividends or other
earnings on any beneficial or other ownership interest of any Subsidiary of
the Company.
(c) Except as disclosed in Schedule 4.02 to this Agreement, there are no
outstanding contractual obligations of the Company or any Subsidiary of the
Company to repurchase, redeem or otherwise acquire any shares of Company
Common Stock, Company Deferred Stock or any beneficial or other ownership
interest of any Subsidiary of the Company or to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise)
in, any Subsidiary of the Company or any other Person.
4.03 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company or its stockholders are necessary to
authorize the execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.04. NON-CONTRAVENTION; APPROVALS AND CONSENTS.
(a) Except as disclosed in Schedule 4.04(a) to this Agreement, the
execution and delivery of this Agreement by the Company do not, and the
performance by the Company of its obligations hereunder and the consummation
of the transactions contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of time
or both) a default under, result in or give to any Person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the loss of a material benefit under, or
result in the creation or imposition of any Lien upon any of the assets or
properties of the Company or any of its Subsidiaries under, any of the
terms, conditions or provisions of (i) the memorandum and articles of
association (or other comparable charter documents) of the Company or any of
its Subsidiaries, or (ii) any statute, law, rule, regulation or ordinance
(together, "laws"), or any judgment, decree, order, writ, permit or license
(together, "orders"), of any court, tribunal, arbitrator, authority, agency,
commission, official or other instrumentality of the United States, the
United Kingdom, or any state, county, city or other political subdivision
thereof, or the NYSE (a "Governmental or Regulatory Authority") applicable
to the Company or any of its Subsidiaries or any of their respective assets
or properties, or (iii) any note, bond, mortgage, security agreement,
indenture, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound
(together, "Contracts"), or (iv) the Disclosed Scheme, excluding from the
foregoing clauses (ii) and (iii) conflicts, violations, breaches, defaults,
terminations, modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, could not be reasonably
expected to have a material adverse effect on the Company and its
APP-A-5
<PAGE>
Subsidiaries taken as a whole, or on the ability of the Company to
consummate the transactions contemplated by this Agreement.
(b) Except (i) for the filing of the Schedule 14D-9 with the Securities
and Exchange Commission (the "SEC") pursuant to the Exchange Act, (ii) the
filing, if applicable, of a premerger notification report by the Company
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations thereunder (the "HSR Act"), (iii) the consents
set forth in Section 9.01(e), and (iv) as disclosed in Schedule 4.04(b) to
this Agreement, no consent, approval or action of, filing with or notice to
any Governmental or Regulatory Authority or other public or private third
party is necessary or required under any of the terms, conditions or
provisions of any law or order of any Governmental or Regulatory Authority
or any Contract to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries or any of their
respective assets or properties is bound for the execution and delivery of
this Agreement by the Company, the performance by the Company of its
obligations hereunder or the consummation of the transactions contemplated
by this Agreement, other than such consents, approvals, actions, filings and
notices which the failure to make or obtain, as the case may be,
individually or in the aggregate, could not be reasonably expected to have a
material adverse effect on the Company and its Subsidiaries taken as a
whole, or on the ability of the Company to consummate the transactions
contemplated by this Agreement.
4.05 SEC REPORTS AND FINANCIAL STATEMENTS. The Company delivered to Buyer
prior to the execution of this Agreement a true and complete copy of each form,
report, schedule, registration statement, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed by
the Company or any of its Subsidiaries with the SEC since January 1, 1995 (as
such documents have since the time of their filing been amended or supplemented,
the "Company SEC Reports"), which are all the documents (other than preliminary
material) that the Company and its Subsidiaries were required to file with the
SEC since such date, and all such filings have been timely made. As of their
respective dates, the Company SEC Reports (i) complied as to form in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"), or the
Exchange Act, as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
Company SEC Reports (the "Company Financial Statements") complied as to form in
all material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto and except
with respect to unaudited statements as permitted by Form 10-Q or the SEC) and
fairly and accurately present (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments (which are
not expected to be, individually or in the aggregate, materially adverse in
amount or effect to the Company and its Subsidiaries taken as a whole)) the
consolidated financial position of the Company and its consolidated subsidiaries
at the respective dates thereof and the consolidated results of their operations
and cash flows for the respective periods then ended. Except as set forth in
Schedule 4.05 to this Agreement, each Subsidiary of the Company is treated as a
consolidated subsidiary of the Company in the Company Financial Statements for
all periods covered thereby.
4.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, (a) other than a
reasonably foreseeable change, event or development affecting the Company
resulting from the execution of this Agreement or the transactions contemplated
hereby, since December 31, 1996 there has not been any change, event or
development having, or that could be reasonably expected to have, individually
or in the aggregate, a material adverse effect on the
APP-A-6
<PAGE>
Company and its Subsidiaries taken as a whole, or on the ability of the Company
to consummate the transactions contemplated by this Agreement, and (b) except as
disclosed in Schedule 4.06 to this Agreement, since such date (i) the Company
and its Subsidiaries have conducted their respective businesses only in the
ordinary course consistent with past practice and (ii) neither the Company nor
any of its Subsidiaries has taken any action which, if taken after the date
hereof, would constitute a breach of any provision of clause (ii) of Section
6.01(b).
4.07 ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters reflected or
reserved against in the balance sheet for the period ended December 31, 1996
included in the Company Financial Statements or as disclosed in Schedule 4.07 to
this Agreement, neither the Company nor any of its Subsidiaries had at such
date, or has incurred since that date, any liabilities or obligations (whether
absolute, accrued, contingent, fixed or otherwise, or whether due or to become
due) of any nature that would be required by United States generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company and its consolidated subsidiaries (including the notes thereto), except
liabilities or obligations (i) which were incurred in the Ordinary Course of
Business and (ii) which have not been, and could not be reasonably expected to
be, individually or in the aggregate, materially adverse to the Company and its
Subsidiaries taken as a whole.
4.08 LEGAL PROCEEDINGS. Except as specifically disclosed in the Company
SEC Reports filed prior to the date of this Agreement or in Schedule 4.08 to
this Agreement, (i) there are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against, relating to or affecting, nor to the knowledge of the
Company or any of its Subsidiaries are there any Governmental or Regulatory
Authority investigations or audits pending or threatened against, relating to or
affecting, the Company or any of its Subsidiaries or any of their respective
assets and properties which, individually or in the aggregate, is having or
could be reasonably expected to have a material adverse effect on the Company
and its Subsidiaries taken as a whole or on the ability of the Company to
consummate the transactions contemplated by this Agreement and (ii) neither the
Company nor any of its Subsidiaries is subject to any order of any Governmental
or Regulatory Authority which, individually or in the aggregate, is having or
could be reasonably expected to have a material adverse effect on the Company
and its Subsidiaries taken as a whole, or on the ability of the Company to
consummate the transactions contemplated by this Agreement.
4.09 INFORMATION SUPPLIED.
(a) The Schedule 14D-9 and any other documents to be filed by the
Company with the SEC or any other Governmental or Regulatory Authority in
connection with the transactions contemplated by this Agreement will not, on
the date of its filing or, with respect to the Schedule 14D-9, at the date
it is filed with the SEC and first published, sent or given to the Company's
stockholders, or, in the case of any document mailed to the Company's
stockholders by the Company, at the date it is mailed to stockholders of the
Company, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading, except that no representation is made by the
Company with respect to information supplied in writing by or on behalf of
Buyer expressly for inclusion therein and information incorporated by
reference therein from documents filed by Buyer or any of its Subsidiaries
with the SEC. The Schedule 14D-9 and any such other documents filed by the
Company with the SEC under the Exchange Act in connection with the
transactions contemplated by this Agreement will comply as to form in all
material respects with the requirements of the Exchange Act.
(b) Neither the information supplied or to be supplied in writing by or
on behalf of the Company or any of its Subsidiaries for inclusion, nor the
information incorporated by reference from documents filed by the Company or
any of its Subsidiaries with the SEC, in the Offer Documents or any other
documents to be filed by Buyer with the SEC or any other Governmental or
Regulatory Authority or
APP-A-7
<PAGE>
delivered to Buyer's stockholders in connection with the transactions
contemplated by this Agreement will on the date of its filing or, with
respect to the Offer Documents or any other documents published and/or
delivered to the Company's stockholders by the Company or the Buyer's
stockholders by the Buyer, on the date they are filed with the SEC and first
published, sent or given to stockholders, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
4.10 COMPLIANCE WITH LAWS AND ORDERS. The Company and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), and all material Company
Permits are listed on Schedule 4.10 to this Agreement, except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole or on the ability of the Company to consummate the transactions
contemplated by this Agreement. The Company and its Subsidiaries are in
compliance with the terms of the Company Permits, except failures so to comply
which, individually or in the aggregate, are not having and could not be
reasonably expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole, or on the ability of the Company to consummate
the transactions contemplated by this Agreement. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, neither the
Company nor any of its Subsidiaries are in violation of or default under any law
or order of any Governmental or Regulatory Authority, except for such violations
or defaults which, individually or in the aggregate, are not having and could
not be reasonably expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole, or on the ability of the Company to
consummate the transactions contemplated by this Agreement. For purposes of this
Section 4.10 and Schedule 4.10 to this Agreement, Company Permits shall not
include the permits, licenses, variances, exemptions, orders and approvals
referred to in Article IX.
4.11 COMPLIANCE WITH AGREEMENTS; CERTAIN AGREEMENTS.
(a) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement, neither the Company nor any of its Subsidiaries nor,
to the knowledge of the Company or any of its Subsidiaries, any other party
thereto is in breach or violation of, or in default in the performance or
observance of any term or provision of, and no event has occurred which,
with notice or lapse of time or both, could be reasonably expected to result
in a default under, (i) the memorandum and articles of association (or other
comparable charter documents) of the Company or any of its Subsidiaries or
(ii) any Contract to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries or any of their
respective assets or properties is bound, except in the case of clause (ii)
for breaches, violations and defaults which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on the Company and its Subsidiaries taken as a
whole.
(b) Except as disclosed in Schedule 4.11 to this Agreement or in the
Company SEC Reports filed prior to the date of this Agreement or as provided
for in this Agreement, as of the date hereof, neither the Company nor any of
its Subsidiaries is a party to any oral or written (i) consulting agreement
not terminable on 30 days' or less notice, (ii) union or collective
bargaining agreement, (iii) agreement with any executive officer or other
key employee of the Company or any of its Subsidiaries the benefits of which
are contingent or vest, or the terms of which are materially altered, upon
the occurrence of a transaction involving the Company or any of its
Subsidiaries of the nature contemplated by this Agreement, (iv) agreement
with respect to any executive officer or other key employee of the Company
or any of its Subsidiaries providing any term of employment or compensation
guarantee, (v) agreement or plan, including any stock option, stock
appreciation right, restricted stock or stock purchase plan, any of the
benefits of which will be increased, or the vesting of the
APP-A-8
<PAGE>
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement or (vi) Contract which is material to any of
their operations taken as a whole or could have a material adverse effect on
the ability of the Company to consummate the transactions contemplated by
this Agreement or could reasonably be expected to result in a material
adverse effect on the Company and its Subsidiaries after the consummation of
the transactions contemplated by this Agreement.
4.12 TAXES. The representations and warranties contained in this Section
4.12 are given subject to the matters disclosed in Schedule 4.12 to this
Agreement.
(a) DEFINITIONS. The following terms shall have the following meanings
for purposes of this Section 4.12 and Schedule 4.12 to this Agreement:
(i) "Balance Sheet Date" means December 31, 1996.
(ii) "Event" means the winding up or dissolution of any Person, and
any act, transaction or omission whatsoever, and any reference to an
event occurring on or before a particular date shall include events which
for Tax purposes are deemed to have, or are treated or regarded as
having, occurred on or before that date.
(iii) "Group Relief" means Relief surrendered or claimed pursuant to
Chapter IV of Part X of the Taxes Act.
(iv) "Relief" means, unless the context otherwise requires, any
allowance, credit, deduction, exemption or set-off in respect of any Tax
or relevant to the computation of any income, profits or gains for the
purposes of any Tax; and (A) any reference to the "use" or "set off" of
Relief shall be construed accordingly and shall include use or set off in
part; and (B) any reference to the "loss" of a Relief shall include the
absence or non-existence of any such Relief, or to such Relief being
available only in a reduced amount.
(v) "Tax" means corporation tax, advance corporation tax, income tax
(including income tax or amounts on account of income tax required to be
deducted or withheld from or accounted for in respect of any payment),
capital gains tax, payroll tax, development land tax, inheritance tax,
VAT, national insurance contributions, capital duty, stamp duty, stamp
duty reserve tax, duties of customs and excise, petroleum revenue tax,
local authority rates and charges, all taxes, duties or charges replaced
by or replacing any of them, and all other taxes or similar impost on
gross or net income, profits or gains, distributions, receipts, sales,
use, occupation, franchise, value added and personal property, taxes on
premiums (whether calculated on the gross or net amount thereof), and all
levies, imposts, duties, charges or withholdings of any nature whatsoever
chargeable by any Tax Authority, and any payment whatsoever which the
Company may be or become bound to make to any Person as a result of the
discharge by that Person of any Tax which the Company has failed to
discharge, together with all penalties, charges and interest relating to
any of the foregoing or to any late or incorrect return (or failure to
file such return or other form or statement) in respect of any of them,
and regardless of whether any such taxes, levies, duties, imposts,
charges, withholdings, penalties and interest are chargeable directly or
primarily against or attributable directly or primarily to the Company or
any other Person and of whether any amount in respect of any of them is
recoverable from any other Person.
(vi) "Tax Authority" means any taxing or other authority (whether
within or outside the United Kingdom, including the United States or any
State) competent to impose any Tax liability.
(vii) "Taxes Act" means the Income and Corporation Taxes Act 1988 of
the United Kingdom.
(viii) "VAT" means value added tax, being the Tax created and
administered by and according to the VAT Legislation.
APP-A-9
<PAGE>
(ix) "VAT Legislation" shall include the Value Added Tax Act 1994
and all other enactments in relation to VAT and all notices, provisions
and conditions made or issued thereunder, including the terms of any
written agreement reached with HM Customs & Excise or any concession
disclosed to Buyer in writing prior to the date of this Agreement.
(x) Any reference to income, profits or gains "earned", "accrued" or
"received" on or before a particular date or in respect of a particular
period shall include income, profits or gains which for Tax purposes are
deemed to have been or are treated or regarded as earned, accrued or
received on or before that date or in respect of that period.
(xi) Any reference to something occurring (including a Tax liability
arising) "in the ordinary course of business" shall, without prejudice to
the generality thereof, be deemed not to include:
(A) anything which results in the Company receiving a valid Tax
claim in respect of any liability to Tax of, or properly attributable
to, another Person (other than the Company);
(B) anything which relates to or involves the acquisition or
disposal of an asset or the supply of services (including the lending
of money, or the hiring or licensing of tangible or intangible
property) in a transaction which is not entered into on arm's length
terms;
(C) anything which relates to or involves the making of a
distribution for Tax purposes, the creation, cancellation or
reorganization of share or loan capital, the creation, cancellation
or repayment of any intra-group debt or any company becoming or
ceasing or being treated as ceasing to be a member of a group of
companies or as becoming or ceasing to be associated or connected
with any other company for any Tax purposes; or
(D) anything which relates to a transaction or arrangement which
includes, or a series of transactions or arrangements which includes,
any step or steps having no commercial or business purpose apart from
the reduction, avoidance or deferral of a Tax liability.
(xii) Persons shall be treated as "connected" for the purposes of
this Section 4.12 if they are connected within the meaning of Section 839
of the Taxes Act.
(xiii) References to any provision of an enactment include any
provision re-enacted by such provision.
(b) GENERAL/COMPLIANCE.
(i) All material liabilities, whether actual, current, deferred,
contingent or disputed, of the Company for Tax measured by reference to
income, profits or gains earned, accrued or received (or premiums earned,
accrued or received) on or before the Balance Sheet Date, or arising in
respect of an Event occurring or deemed to occur on or before the Balance
Sheet Date, are, where required, provided for or (as appropriate)
disclosed or have otherwise been taken into account in (A) the Company
Financials for the year ended December 31, 1996 (the "1996 Company
Financials") in accordance with UK Accounting Standards and the
accounting policies set out in the 1996 Company Financials and (B) the
Company's Annual Report on Form 10-K for the year ended December 31, 1996
in accordance with United States generally accepted accounting principles
and the accounting policies set out in the Company's financial statements
("U.S. Company Financials"). Taxes which may arise from held over gains
from intragroup transactions under Section 171 of the Taxation and
Chargeable Gains Act of 1992 of the United Kingdom (the "Act of 1992"),
which may become due under Section 179 of the Act of 1992 as a result of
the transaction contemplated in this Agreement or otherwise, have either
been provided for or will be provided for in the 1996 Company Financials
or the U.S. Company Financials, or do not exist. All other warranties
relating to specific Tax matters set out in this Section 4.12 are made
without prejudice to the generality of the foregoing.
APP-A-10
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(ii) Since the Balance Sheet Date:
(A) the Company has not been involved in any transaction which
has given or may give rise to a liability to Tax on the Company (or
would have given or might give rise to such a liability but for the
availability of any Relief) other than Tax in respect of transactions
entered into by it in the ordinary course of business; and
(B) no accounting period (as defined in Section 12 of the Taxes
Act) of the Company has ended as referred to in Section 12(3) of the
Taxes Act.
(iii) The Company has duly, and within any appropriate time limits,
made all returns, given all notices and supplied all other forms,
statements and information (each, a "Return") required to be supplied to
all relevant Tax Authorities. All such Returns were and remain, to the
knowledge of the Company, true, complete and correct in all material
respects and were made on a proper basis and do not, and to the knowledge
of the Company are not likely to, reveal any transactions which may be
the subject of any dispute with any Tax Authority. The Company is neither
involved in any current dispute with any Tax Authority nor is it (nor has
it in the last seven (7) years been) the subject of any formal
investigation, formal audit or non-routine visit by any Tax Authority.
The Company has not been informed in writing of any planned formal
investigation, formal audit or non-routine visit by any Tax Authority
and, to the knowledge of the Company, there are no facts which are likely
to cause such an investigation, audit or non-routine visit to be
instituted in respect of the Company. Within the past seven (7) years,
neither the Company nor, to the knowledge of the Company, any director or
officer of the Company (in his/ her capacity as such) has paid or become
liable to pay, and to the knowledge of the Company there are no
circumstances by reason of which it or they may become liable to pay, to
any Tax Authority, any penalty, fine, surcharge or interest in respect of
any Tax (including in respect of any failure to make, give or supply any
Return to any relevant Tax Authority, or any failure to pay Tax on the
due date for payment).
(iv) No Tax Authority has operated or agreed to operate any special
arrangement (being an arrangement which departs from any relevant
legislation or any published practice or concession) in relation to the
Company's affairs.
(v) The Company has not made, nor is there in effect with respect to
the Company, an election pursuant to sections 953(c)(3)(C) or 953(d) of
the Code. The Company has not been, and has no reason to believe that it
will be, characterized as a "passive foreign investment corporation" (as
defined in Section 1291 et seq. of the Code).
(vi) Prior to the date of this Agreement, the Company has disclosed
to Buyer material details of all computations and Reliefs which were
taken into account in preparing the provisions for Tax or deferred Tax in
the 1996 Company Financials. No Relief has been claimed by and/or
surrendered or given to the Company and/or taken into account in
determining or eliminating any provision for Tax or deferred Tax in the
1996 Company Financials, which, to the knowledge of the Company, is not
validly available to the Company and the Company is not aware of (or, if
it is aware of, has fully disclosed to Buyer) any challenge made by, or
grounds for a challenge available to, a Tax Authority in relation
thereto.
(vii) Except as disclosed in Schedules 4.12(b) and 4.12(c) to this
Agreement, the Company has made all deductions and retentions of or on
account of Tax as it was or is obliged or entitled to make, and all such
payments of or on account of Tax as should have been made to any Tax
Authority in respect of such deductions or retentions have been made.
(viii) Except for payment of dividends and payments of or on account
of Taxes, capital payments, fees paid in connection with the transactions
contemplated by this Agreement and revenue payments made in accordance
with the Company's 1997 Business Plan and recognized as
APP-A-11
<PAGE>
falling into a category which are not so deductible, the Company is not
obliged to make nor has it since the Balance Sheet Date made a payment
which will not be deductible for the purposes of calculating its
liability to corporation tax.
(ix) Except as disclosed on Schedule 4.12(c) to this Agreement, no
event has occurred which could result in the Company becoming liable for
Tax which is primarily or directly chargeable against or attributable to
a person other than the Company or which is charged by reference to the
income, profits or gains of another Person.
(c) EMPLOYEES/PENSIONS. All United Kingdom National Insurance
contributions and sums payable to the Inland Revenue under the P.A.Y.E.
system and any amounts of a corresponding nature payable to any foreign Tax
Authority due and payable by the Company up to the date hereof have been
paid, and, to the knowledge of the Company, the Company has made all such
deductions and retentions as should have been made under section 203 of the
Taxes Act and all regulations made thereunder or under any comparable laws
or regulations of any relevant foreign jurisdiction, including United States
Federal and State wage withholding, Social Security and other similar
systems.
(d) GROUP RELIEF.
(i) The Company has disclosed to Buyer in writing prior to the date
of this Agreement full, accurate and complete details of all arrangements
or agreements to which the Company is a party or which in any way affect
the Company and which relate to Group Relief and of any such arrangements
or agreements under which any claim could be made by any Person either
for the surrender to it or by it to the Company of Group Relief or for
the making or repayment of any payment in relation to Group Relief.
(ii) The Company is not a dual resident investing company within the
meaning of Section 404 of the Taxes Act. The Company is not, and at no
time within the seven (7) years immediately preceding the date of this
Agreement has been, a close company as defined in Section 414 of the
Taxes Act.
(e) CONTROLLED FOREIGN COMPANIES. The Company has not received any
notice of the making of a direction under Section 747 of the Taxes Act and
no circumstances exist which would entitle the Inland Revenue to make such a
direction and to apportion to the Company any profits of a controlled
foreign company pursuant to Section 752 of the Taxes Act.
(f) COMPANY RESIDENCE, TREASURY CONSENTS AND MIGRATION. The Company is
and has at all times in the seven (7) years immediately preceding the date
of this Agreement been accepted by the UK Inland Revenue as resident in the
United Kingdom for Tax purposes and is not and has not been treated for the
purposes of any double taxation arrangements having effect by virtue of
Section 788 of the Taxes Act or for any other Tax purpose as resident in any
other jurisdiction (including the conduct of the affairs of the Company so
as to be engaged in a United States trade or business through a permanent
establishment within the meaning of Article 5 of the Convention Between the
Government of the United States of America and the Government of the United
Kingdom of Great Britain and Northern Ireland for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on
Income and Capital Gains), nor is the Company nor has it been directly
subject to Tax in any other jurisdiction, except for United States Federal
excise taxes imposed under Section 4371 et seq. of the Code in the
circumstances described in Schedule 4.12 to this Agreement. The Company has
not carried out or caused or permitted to be carried out any of the
transactions specified at the relevant time in Section 765(1) of the Taxes
Act otherwise than with the prior consent of HM Treasury (and, in the case
of a special consent, full particulars of which have been disclosed to Buyer
in writing prior to the date hereof; and any conditions subject to which
such consent was given have been complied with in full) or specified at the
relevant time in Section 765A of the Taxes Act without having duly provided
the required information to the Inland Revenue.
APP-A-12
<PAGE>
(g) VALUE ADDED TAX.
(i) This Section 4.12(g) shall apply, with appropriate
modifications, to any equivalent sales or turnover tax in any
jurisdiction other than the United Kingdom to which the Company is
subject.
(ii) The Company:
(A) is registered for the purposes of VAT, has been so registered
at all times that it has been required to be registered by VAT
Legislation, and such registration is not subject to any conditions
imposed by or agreed with HM Customs & Excise; and has complied fully
with and observed in all material respects the terms of VAT
Legislation;
(B) has maintained and obtained all the records, invoices and
other documents (as the case may be) required by the VAT Legislation
and has preserved such records, invoices and other documents in such
form and for such periods as are required by VAT Legislation;
(C) is a member of a group for VAT purposes but is not the
representative member of that group;
(D) is not and has not been subject under VAT Legislation to any
penalty liability notice, written warning of failure to comply,
surcharge liability notice or requirement to give security as a
condition of making taxable supplies.
(iii) In respect of each of the assets of the Company (if any) which
is a capital item for the purpose of Part XV of the Value Added Tax
Regulations 1995, the Company has disclosed to Buyer in writing, prior to
the date of this Agreement, full details of the capital item affected,
the amount of the total input tax (within the meaning of such
Regulations) which is subject to adjustment, the percentage of the total
input tax which was reclaimable on the capital item in the first interval
applicable to it and any adjustments made or to be made having regard to
Events occurred up to the date of this Agreement, the date of acquisition
of the capital item and the number of intervals in the adjustment period
remaining from the date of this Agreement, and full details of all
matters to date relevant in determining any adjustments.
(h) STAMP DUTIES. All documents in the possession or under the control
of the Company or to the production of which the Company is entitled which
establish or are necessary to establish the title of the Company to any
asset have been duly stamped and any applicable stamp duties or charges in
respect of such documents have been duly accounted for and paid, and no such
documents which are outside the United Kingdom would attract stamp duty if
they were brought into the United Kingdom. The Company has no unsatisfied
liability to stamp duty reserve tax or interest or penalties on stamp duty
reserve tax.
(i) REORGANIZATION REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(i) There is no plan or intention by the stockholders of the Company
who own five percent or more of the Company Common Stock, and to the best
of the knowledge of the Company, there is no plan or intention on the
part of the remaining stockholders of the Company to sell, exchange, or
otherwise dispose of a number of shares of Common Stock received in the
Transaction that would reduce the Company stockholders' ownership of
Common Stock to a number of shares having a value, as of the date of the
Closing, of less than 50 percent of the value of all of the formerly
outstanding stock of the Company as of the same date. For purposes of
this representation, shares of Company Common Stock surrendered by
Company stockholders entitled to dissenters rights, if any, or exchanged
for cash in respect of fractional shares of Common Stock will be treated
as outstanding Company Common Stock on the date of the Closing. Moreover,
shares of Company Common Stock and shares of Common Stock held by the
APP-A-13
<PAGE>
Company stockholders and otherwise sold, redeemed, or disposed of prior
or subsequent to the Closing will be considered in making this
representation.
(ii) The Company has no plan or intention to issue additional shares
of its stock that would result in Buyer losing control of the Company
within the meaning of Section 368(c) of the Code.
(iii) At the time of the Closing, the Company will not have
outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock in the
Company that if exercised or converted, would affect Buyer's acquisition
or retention or control of the Company, as defined in Section 368(c) of
the Code.
(iv) The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(v) The Company will pay any of its stockholders, if any, entitled
to dissenters rights the value of their stock out of its own funds. No
funds will be supplied for that purpose, directly or indirectly, by
Buyer, nor will Buyer directly or indirectly reimburse the Company for
any payments to dissenters.
(vi) On the date of the Closing, the fair market value of the assets
of the Company will exceed the sum of its liabilities plus the
liabilities, if any, to which the assets are subject.
(vii) None of the compensation received by any stockholder-employees
of the Company will be separate consideration for, or allocable to, any
of their shares of the Company Common Stock; none of the shares of Common
Stock received by any stockholder-employee will be separate consideration
for, or allocable to, any employment agreement; and the compensation paid
to any stockholder-employees will be for services actually rendered and
will be commensurate with amounts paid to third parties bargaining at
arm's length for similar services.
(viii) The payment of cash in respect of fractional shares of Common
Stock is solely for the purpose of avoiding the expense and inconvenience
to Buyer of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be
paid in the Transaction to the former Company stockholders instead of
issuing fractional shares of Common Stock will not exceed one percent of
the total consideration that will be issued in the Transaction to the
Company stockholders in exchange for their shares of the Company Common
Stock. The fractional share interest of each former Company stockholder
will be aggregated and no former Company stockholder will receive cash in
an amount equal to or greater than the value of one full share of Common
Stock.
4.13 EMPLOYEE BENEFIT PLANS.
(a) For the purposes of Section 4.13:
(i) "Disclosed Schemes" means each of The Unionamerica (1993)
Pension Scheme, The Unionamerica (1993) Death Benefit Scheme and The
Unionamerica (1993) Supplementary Death Benefit Scheme and the Personal
Pension Schemes approved or provisionally approved for the purposes of
either Chapter I or Chapter IV of Part XIV of the UK Income and
Corporation Taxes Act 1988 to which contributions have been made or are
intended to be made in respect of Hugh C. Evans, Philip M. Marcell and
Ian G. Sinclair; and
(ii) "Employee" means a director or employee or former director or
employee of the Company or any of its Subsidiaries.
(b) Complete, accurate and full particulars of each of the Disclosed
Schemes have been given to Buyer. Except as provided for under each of the
Disclosed Schemes, neither the Company nor any of its Subsidiaries has any
obligation (whether legally enforceable or not) to provide or contribute to
the provision of any "relevant benefit" (as defined in Section 612 of the UK
Income and Corporation
APP-A-14
<PAGE>
Taxes Act 1988) or like benefit for or in respect of any Employee or an
Employee's dependants and no such obligation has been announced, nor has the
Company or any of its Subsidiaries any liability (actual or contingent) to
contribute to the Continental Reinsurance London Pension Plan.
(c) No plan, proposal or intention to amend, discontinue (in whole or in
part) or exercise a discretion in relation to any of the Disclosed Schemes
has been communicated to an Employee who is a member of any of the Disclosed
Schemes.
(d) All amounts due in respect of each of the Disclosed Schemes have
been paid.
(e) Each of the Disclosed Schemes has assets sufficient to discharge all
benefits (whether or not yet payable) to its beneficiaries at the date of
this Agreement.
(f) Each of the Disclosed Schemes has at all times been operated in
accordance with its governing documentation and in accordance with all
applicable legal and regulatory requirements.
(g) So far as the Company is aware there are no actions, claims or suits
(other than routine claims for benefits) in progress, outstanding, pending
or threatened against the trustees or administrators of any of the Disclosed
Schemes or against the Company or any of its Subsidiaries in respect of any
act, event or omission or other circumstance or matter arising out of or in
connection with the Disclosed Schemes and so far as the Company is aware
there is no circumstance or matter which may give rise to such a claim or
dispute.
(h) None of the Disclosed Schemes is a contracted-out scheme for the
purposes of the Pension Schemes Act 1993.
(i) None of the assets of the Disclosed Schemes are invested (directly
or indirectly) in or loaned (directly or indirectly) to the Company or any
of its Subsidiaries.
(j) No payment or repayment of an asset of any of the Disclosed Schemes
has been made to the Company or any of its Subsidiaries since the date of
the most recent actuarial valuation.
(k) In relation to each of the Disclosed Schemes, no relevant insolvency
event (as defined for the purposes of the Pension Schemes Act 1993) has
occurred in relation to any employer or former employer which participated
in the relevant scheme on or after 1 July 1992. None of the Disclosed
Schemes are in the process of being wound-up nor have any of the Disclosed
Schemes been closed to new entrants.
(l) No company or other legal entity currently participates in any of
the Disclosed Schemes other than those listed in Schedule 4.13 to this
Agreement.
4.14 LABOR MATTERS. Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement or in Schedule 4.14 to this Agreement, there
are no controversies pending or, to the knowledge of the Company, threatened
between the Company or any of its Subsidiaries and any representatives of its
employees, except as would not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries taken as a whole,
and, to the knowledge of the Company, there are no material organizational
efforts presently being made involving any of the employees of the Company or
any of its Subsidiaries. There has been no work stoppage, strike or other
concerted action by employees of the Company or any of its Subsidiaries in the
ten years prior to the date hereof except as have not, individually or in the
aggregate, had a material adverse effect on the Company and its Subsidiaries
taken as a whole.
4.15 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion of
Donaldson, Lufkin & Jenrette Securities Corporation, dated the date hereof, to
the effect that, as of the date hereof, the Exchange Ratio to be offered to the
stockholders of the Company is fair from a financial point of view to the
stockholders of the Company, a true and complete copy of such opinion has been
delivered to Buyer prior to the execution of this Agreement and such opinion has
not been withdrawn.
APP-A-15
<PAGE>
4.16 RELATED PARTY TRANSACTIONS. Except as set forth on Schedule 4.16 to
this Agreement, there are no transactions, commitments or obligations between
the Company or any of its Subsidiaries and any holder of five percent or more of
the Company's outstanding Company Common Stock or any of such holder's
affiliates which will continue after the Closing. In addition, except as set
forth on Schedule 4.16 to this Agreement, none of the matters listed on Schedule
4.16 to this Agreement will provide to the Company assets, income, financing or
business on a basis significantly more or less favorable than that available
from unaffiliated Persons. Schedule 4.16 to this Agreement also (i) states the
amounts due from the Company or any of its Subsidiaries to any holder of five
percent or more of the Company's outstanding Company Common Stock or any of such
holder's affiliates, (ii) describes the transactions out of which such amounts
due arose and (iii) describes any interest of any holder of five percent or more
of the Company's outstanding Company Common Stock or any of such holder's
affiliates in any supplier or customer of, or any other entity that will have
business dealings with the Company or any of its Subsidiaries after the Closing.
Except as set forth on Schedule 4.16 to this Agreement, to the knowledge of the
Company neither any holder of five percent or more of the Company's outstanding
Company Common Stock or any of such holder's affiliates, nor any officer,
director or key employee (each key employee being listed on Schedule 4.16 to
this Agreement) of the Company or any of its Subsidiaries possesses, directly or
indirectly, any ownership interest in, or is a director, officer, employee or
consultant to, any corporation or other business which is a client, supplier,
customer, lessor or competitor of the Company or any of its Subsidiaries.
4.17 ASSETS; REAL PROPERTY.
(a) Except as set forth on Schedule 4.17 to this Agreement, the Company
and its Subsidiaries own or have rights to use all assets (other than real
property) necessary to permit the Company and its Subsidiaries to conduct
their business as it is currently being conducted except where the failure
to own or have the right to use such assets would not, individually or in
the aggregate, have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
(b) Schedule 4.17 to this Agreement identifies all the real property
owned, leased, licensed or occupied by the Company or its Subsidiaries (the
"Properties"). Except as set forth in Schedule 4.17 to this Agreement, (i)
the Company is, either directly or through its Subsidiaries, the legal and
beneficial owner of the Properties and is in sole and undisputed occupation
of the Properties and the Properties are free from any Lien, sublease,
tenancy or right of occupation, (ii) the Properties are not subject to any
outgoings, other than general rates, water rates and insurance premiums and,
in the case of leasehold properties, rent and service charges, (iii) the
Properties are free from any local land charge, land charge, caution,
inhibition or notice which might be regarded as materially affecting the
value or curtailing the use of the Properties and no matter exists which is
capable of registration against any of the Properties, (iv) the title deeds
of the Company and each of its Subsidiaries are free from Lien and (v) the
Company (or the relevant Subsidiary) has paid the rent and has not been
notified of any breach of the covenants on the part of the tenant and the
conditions contained in any leases (which expression includes underleases)
under which the Properties are held and the Company is not aware of any such
breach of covenant.
(c) Except in relation to the interest in each Property identified in
Schedule 4.17 to this Agreement, the Company and each Subsidiary has no
liability (actual or contingent) arising out of a conveyance, transfer,
lease, tenancy, license, agreement or other document relating to land,
premises or an interest in land or premises.
(d) No other Person has any interest in the Property except in the case
of any leasehold property, any landlord holding a reversionary interest.
4.18 INTELLECTUAL PROPERTY.
(a) All material Intellectual Property owned or licensed by the Company
or any of its Subsidiaries and all material licenses or similar agreements
or arrangements to which the Company or any of its
APP-A-16
<PAGE>
Subsidiaries is a party (either as licensee or licensor) for each such item
of Intellectual Property have been disclosed to Buyer.
(b) Except as set forth on Schedule 4.18(b) to this Agreement:
(i) The Company (or a Subsidiary of the Company as described on
Schedule 4.18(b) to this Agreement) owns or otherwise has the right to
use the Intellectual Property described in Section 4.18(a);
(ii) There have been no actions or other judicial or adversary
proceedings involving the Company or any or its Subsidiaries concerning
any item of Intellectual Property, and no such action or proceeding is
threatened;
(iii) The Company (or a Subsidiary of the Company, as described on
Schedule 4.18(b) to this Agreement) has the right and authority to use
each item of Intellectual Property in connection with the conduct of the
Company's (or such Subsidiary's) business in the manner presently
conducted and such use, to the knowledge of the Company does not conflict
with, infringe upon or violate any Intellectual Property of any other
Person, except for insignificant matters;
(iv) The Company (or such Subsidiary, as applicable) has taken
measures it believes are adequate to protect all Confidential Information
and proprietary information (e.g., trade secrets, including, without
limitation, source and object codes for software); and
(v) The conduct by the Company and its Subsidiaries of their
respective businesses does not conflict, to the knowledge of the Company
and each of its Subsidiaries with the valid patents, trademarks, service
marks, trade secrets or trade names of others, except for insignificant
matters.
4.19 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for this Agreement and agreements specifically identified on
other Schedules hereto, Schedule 4.19 to this Agreement sets forth a
complete and correct list of the following:
(i) All agreements (or groups of agreements with one or more related
entities) between (x) the Company or any of its Subsidiaries and any
customer (or groups of agreements with one or more related entities), and
(y) the Company or any of its Subsidiaries and any supplier (or groups of
agreements with one or more related entities) involving payments in
excess of $250,000 per annum;
(ii) All agreements that relate to the borrowing or lending by the
Company or any of its Subsidiaries of any money in excess of $250,000;
(iii) All agreements to which the Company or any of its Subsidiaries
is a party that extend for a period of 30 days or more and involve
amounts in excess of $250,000;
(iv) All agreements that create or continue any material Security
Interest against, or right of any third party with respect to, any
material asset of the Company or any of its Subsidiaries;
(v) All agreements by which the Company or any of its Subsidiaries
leases or has the right to lease capital equipment and other personal
property involving the Company or any of its Subsidiaries, in all such
cases either as lessee or lessor and which require payments in excess of
$250,000;
(vi) All license agreements, whether as licensor or licensee and
which require payments in excess of $250,000;
(vii) All agreements between the Company or any of its Subsidiaries
and any of their respective subcontractors which require payments in
excess of $250,000; and
APP-A-17
<PAGE>
(viii) All other agreements to which the Company or any of its
Subsidiaries is a party or by which any of them are bound and that
require payment in excess of $250,000 in any twelve-month period or that
are or may be material to the financial condition, results of operations
or business of the Company or any of its Subsidiaries.
As used in this Section 4.19, the word "agreement" includes both oral and
written contracts, leases, understandings, arrangements and all other agreements
but does not include agreements providing insurance or reinsurance coverage,
agreements under which investments or cash are held in trust funds or escrow
accounts to provide collateral for holders of insurance policies or issuers of
letters of credit on behalf of the Company to such holders (as described in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996),
agreements with accounting, financial and legal advisors made in connection with
the transactions contemplated by this Agreement or employee service agreements.
The term "Material Contracts" means the agreements of the Company or any of its
Subsidiaries required to be disclosed on Schedule 4.19 to this Agreement,
including agreements specifically identified in other Schedules hereto.
(b) All of the Material Contracts are in full force and effect, are
valid and binding and are enforceable in accordance with their terms in
favor of the Company or such Subsidiary of the Company, as applicable,
(assuming they have been duly authorized, executed and delivered by the
other parties thereto), except as may be limited by applicable bankruptcy or
insolvency laws. There are no material liabilities of any party to any
Material Contract arising from any breach or default of any provision
thereof and no event has occurred that, with the passage of time or the
giving of notice or both, would constitute a breach or default by any party
thereto.
(c) The Company (or its Subsidiary, as applicable) has fulfilled all
material obligations required pursuant to each Material Contract to have
been performed by the Company or such Subsidiary prior to the date hereof,
and the Company and its Subsidiaries have no reason to believe that the
Company (or its Subsidiary, as applicable) will not be able to fulfill, when
due, all of its obligations under the
Material Contracts that remain to be performed after the date hereof.
4.20 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company nor any of
its Subsidiaries, nor to the knowledge of the Company or any Subsidiary, any
employee or agent of the Company or any of its Subsidiaries or other Person
acting on the Company's or any Subsidiary's behalf, has directly or indirectly,
given or agreed to give any gift or similar benefit to any customer, supplier,
competitor or governmental employee or official (domestic or foreign) (i) that
could reasonably be expected to subject the Company or any of its Subsidiaries
to any damage or penalty in any civil, criminal or governmental litigation or
proceeding or (ii) that, if not given in the past, would have had a material
adverse effect on the Company or any of its Subsidiaries.
4.21 BOOKS AND RECORDS. The books of account, stock record books, minutes
books and other corporate records of the Company and each of its Subsidiaries
are in all material respects complete and correct and have been maintained in
accordance with good business practices.
4.22 INFORMATION REGARDING ACQUISITIONS. The Company has communicated to
Buyer information regarding (i) the acquisition by the Company (directly or
indirectly through an intermediate holding company jointly owned with another
strategic investor) of an interest in the holding company of Jago Managing
Agency Limited, or the reorganization of its interest in the holding company of
Jago Capital Limited to combine it with the interest acquired in the holding
company of Jago Managing Agency Limited and (ii) the acquisition by the Company
of a 49% shareholding in ATD Specialties Management Limited, as such
transactions are described on Schedule 6.01 to this Agreement. Such information
includes, without limitation, all material legal, business, financial and
accounting due diligence obtained by the Company with respect to the
acquisitions set forth in clause (i) and (ii) above (collectively, the
"Acquisition Information"), and, to the knowledge of the Company, the
Acquisition Information is complete and accurate in all material respects. The
Company has also provided to Buyer true and correct copies of the shareholders
agreement and coinsurance agreement with respect to the Polis Direct U.K.
Limited venture formed in 1996.
APP-A-18
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
5.01 ORGANIZATION AND QUALIFICATION. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and has full corporate power and authority to conduct its business as and to the
extent now conducted and to own, use and lease its assets and properties, except
for such failures to be so incorporated, existing and in good standing or to
have such power and authority which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
Buyer and its Subsidiaries taken as a whole. Buyer has previously delivered to
the Company correct and complete copies of its certificate of incorporation and
bylaws (or other comparable charter documents).
5.02 CAPITAL STOCK.
(a) The authorized capital stock of Buyer consists solely of 30,000,000
shares of Common Stock and 5,000,000 shares of preferred stock, par value
$20.00 per share ("Preferred Stock"). As of the opening of trading on the
NYSE on the date hereof, 11,641,977 shares of Common Stock were issued and
outstanding, 120,700 shares were held in treasury and no shares were
reserved for issuance except as set forth in Schedule 5.02 to this
Agreement. Prior to the Closing, except as set forth in Schedule 5.02 to
this Agreement, there will be no change in the number of issued and
outstanding shares of Common Stock or shares of Common Stock held in
treasury or reserved for issuance. As of the date hereof and as of the
Closing, and except as set forth in Schedule 5.02 to this Agreement, no
shares of Preferred Stock were, and will be, issued and outstanding, no
shares were held in treasury and no shares were reserved for issuance. No
bonds, debentures, notes or other instruments or evidence of indebtedness
having the right to vote (or convertible into, or exercisable or
exchangeable for, securities having the right to vote) on any matters on
which Buyer's stockholders may vote ("Voting Debt") are issued or
outstanding. All of the issued and outstanding shares of Common Stock and
Preferred Stock are, and all shares reserved for issuance will be, upon
issuance in accordance with the terms specified in the instruments or
agreements pursuant to which they are issuable, duly authorized, validly
issued, fully paid and nonassessable. Except pursuant to this Agreement and
except as set forth in Schedule 5.02 to this Agreement, there are no
outstanding Options obligating Buyer or any of its Subsidiaries to issue or
sell any Voting Debt or shares of capital stock or other securities of Buyer
or to grant, extend or enter into any Option with respect thereto.
(b) Except as disclosed in Schedule 5.02 to this Agreement, all of the
outstanding beneficial interests of each Subsidiary of Buyer are owned,
beneficially and of record, by Buyer or a Subsidiary wholly owned, directly
or indirectly, by Buyer, free and clear of any Liens. Except as disclosed in
Schedule 5.02 to this Agreement, there are no (i) outstanding Options
obligating Buyer or any of its Subsidiaries to issue or sell any beneficial
or other ownership interest of any Subsidiary of Buyer or to grant, extend
or enter into any such Option or (ii) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in favor of any
Person other than Buyer or a Subsidiary wholly owned, directly or
indirectly, by Buyer with respect to the voting of or the right to
participate in dividends or other earnings on any beneficial or other
ownership interest of any Subsidiary of Buyer.
(c) Except as disclosed in Schedule 5.02 to this Agreement or as
contemplated by this Agreement, there are no outstanding contractual
obligations of Buyer or any Subsidiary of Buyer to repurchase, redeem or
otherwise acquire any shares of Common Stock or any beneficial or other
ownership interest of any Subsidiary of Buyer or to provide funds to, or
make any investment (in the form of a loan, capital contribution or
otherwise) in, any Subsidiary of Buyer or any other Person which would have
a material adverse effect on the Buyer and its Subsidiaries taken as a
whole.
APP-A-19
<PAGE>
(d) All shares of Common Stock to be issued to consummate the
Transaction will, when issued, be duly authorized, validly issued, fully
paid and nonassessable and will rank pari passu in all respects with the
existing issued and outstanding shares of Common Stock, including the right
to participate in Buyer's shareholder's rights plan adopted pursuant to that
certain Rights Agreement dated as of June 14, 1997 and the right to receive
in full all dividends or other distributions to be declared by reference to
a record date on or after the Closing.
5.03 AUTHORITY RELATIVE TO THIS AGREEMENT. Buyer has full corporate power
and authority to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly and validly approved by its
Board of Directors, and except for approval by the stockholders of Buyer, no
other corporate proceedings on the part of Buyer or its stockholders are
necessary to authorize the execution, delivery and performance of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Buyer and
constitutes a legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5.04 NON-CONTRAVENTION; APPROVALS AND CONSENTS.
(a) The execution and delivery of this Agreement by Buyer does not, and
the performance by Buyer of its obligations hereunder and the consummation
of the transactions contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of time
or both) a default under, result in or give to any Person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien upon
any of the assets or properties of Buyer or any of its Subsidiaries under,
any of the terms, conditions or provisions of (i) the certificates or
articles of incorporation or bylaws (or other comparable charter documents)
of Buyer or any of its Subsidiaries, or (ii) subject to the taking of the
actions described in paragraph (b) of this Section, (x) any laws or orders
of any Governmental or Regulatory Authority applicable to Buyer or any of
its Subsidiaries or any of their respective assets or properties, or (y) any
Contracts to which Buyer or any of its Subsidiaries is a party or by which
Buyer or any of its Subsidiaries or any of their respective assets or
properties is bound, excluding from the foregoing clauses (x) and (y)
conflicts, violations, breaches, defaults, terminations, modifications,
accelerations and creations and impositions of Liens which, individually or
in the aggregate, could not be reasonably expected to have a material
adverse effect on the ability of Buyer to consummate the transactions
contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report by
Buyer under the HSR Act, (ii) for the filing of the Offer Documents with the
SEC, (iii) for the filing with the SEC of a Registration Statement on Form
S-4 with respect to the issuance of Common Stock contemplated by this
Agreement (the "Registration Statement"), and such Registration Statement is
declared effective by the SEC and remains effective at the Closing and (iv)
as disclosed in Schedule 5.04 to this Agreement, no consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority
or other public or private third party is necessary or required under any of
the terms, conditions or provisions of any law or order of any Governmental
or Regulatory Authority or any Contract to which Buyer or any of its
Subsidiaries is a party or by which Buyer or any of its Subsidiaries or any
of their respective assets or properties is bound for the execution and
delivery of this Agreement by Buyer, the performance by Buyer of its
obligations hereunder or the consummation of the transactions contemplated
hereby, other than such consents, approvals, actions, filings and notices
which the failure to make or obtain, as the case may be, individually or in
the aggregate, could
APP-A-20
<PAGE>
not be reasonably expected to have a material adverse effect on the ability
of Buyer to consummate the transactions contemplated by this Agreement.
5.05 SEC REPORTS AND FINANCIAL STATEMENTS. Buyer has made available to the
Company prior to the execution of this Agreement a true and complete copy of
each form, report, schedule, registration statement, definitive proxy statement
and other document (together with all amendments thereof and supplements
thereto) filed by Buyer or any of its Subsidiaries with the SEC since January 1,
1995 (as such documents have since the time of their filing been amended or
supplemented, the "Buyer SEC Reports"), which are all the documents (other than
preliminary material) that Buyer and its Subsidiaries were required to file with
the SEC since such date. As of their respective dates, the Buyer SEC Reports (i)
complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the notes, if any,
thereto) included in the Buyer SEC Reports (the "Buyer Financial Statements")
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as permitted by
Form 10-Q or the SEC) and fairly and accurately present (subject, in the case of
the unaudited interim financial statements, to normal, recurring year-end audit
adjustments (which are not expected to be, individually or in the aggregate,
materially adverse to Buyer and its Subsidiaries taken as a whole)) the
consolidated financial position of Buyer and its consolidated subsidiaries at
the respective dates thereof and the consolidated results of their operations
and cash flows for the respective periods then ended. Except as set forth in
Schedule 5.05 to this Agreement, each Subsidiary of Buyer is treated as a
consolidated subsidiary of Buyer in the Buyer Financial Statements for all
periods covered thereby.
5.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Buyer SEC Reports filed prior to the date of this Agreement, (a) other than a
reasonably foreseeable change, event or development affecting Buyer resulting
from the execution of this Agreement or the transactions contemplated hereby,
since December 31, 1996 there has not been any change, event or development
having, or that could be reasonably expected to have, individually or in the
aggregate, a material adverse effect on Buyer and its Subsidiaries taken as a
whole or on the ability of Buyer to consummate the transactions contemplated by
this Agreement, and (b) except as disclosed in Schedule 5.06 to this Agreement,
since such date (i) Buyer and its Subsidiaries have conducted their respective
businesses only in the Ordinary Course of Business and (ii) neither Buyer nor
any of its Subsidiaries has taken any action which, if taken after the date
hereof, would constitute a breach of any provision of clause (ii) of Section
7.01(b).
5.07 ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters reflected or
reserved against in the balance sheet for the period ended December 31, 1996
included in the Buyer Financial Statements or as disclosed in Schedule 5.07 to
this Agreement, neither Buyer nor any of its Subsidiaries had at such date, or
has incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent, fixed or otherwise, or whether due or to become due) of any
nature that would be required by United States generally accepted accounting
principles to be reflected on a consolidated balance sheet of Buyer and its
consolidated subsidiaries (including the notes thereto), except liabilities or
obligations (i) which were incurred in the Ordinary Course of Business and (ii)
which have not been, and could not be reasonably expected to be, individually or
in the aggregate, materially adverse to Buyer and its Subsidiaries taken as a
whole.
5.08 LEGAL PROCEEDINGS. There are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of Buyer, threatened against, relating
to or affecting, nor to the knowledge of Buyer are there any Governmental or
Regulatory Authority investigations or audits pending or threatened against,
relating
APP-A-21
<PAGE>
to or affecting, Buyer or any of its Subsidiaries or any of their respective
assets and properties which, individually or in the aggregate, could be
reasonably expected to have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated by this Agreement and (ii) neither
Buyer nor any of its Subsidiaries is subject to any order of any Governmental or
Regulatory Authority which, individually or in the aggregate, could be
reasonably expected to have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated by this Agreement.
5.09 INFORMATION SUPPLIED.
(a) The Offer Documents, any proxy statement or information statement,
as the case may be, relating to the Buyer Stockholders' Meeting, as amended
and supplemented from time to time (as so amended and supplemented, the
"Buyer Proxy Statement"), any registration statement, and any other
documents to be filed by Buyer with the SEC or any other Governmental or
Regulatory Authority in connection with the transactions contemplated hereby
will not, on the date of its filing or, with respect to the Offer Documents
and any registration statement, on the date they are filed with the SEC and,
with respect to the Offer Documents first published, sent or given to
stockholders of the Company, as the case may be, or, in the case of the
Buyer Proxy Statement or any other document mailed to Buyer's stockholders
by Buyer, at the date it is mailed to stockholders of Buyer and (with
respect to the Buyer Proxy Statement) at the date of the Buyer Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading, except that no representation is made by Buyer
with respect to information supplied in writing by or on behalf of the
Company expressly for inclusion therein and information incorporated by
reference therein from documents filed by the Company or any of its
Subsidiaries with the SEC. The Offer Documents, the Buyer Proxy Statement,
any registration statement and any other such documents filed by Buyer with
the SEC under the Exchange Act in connection with the transactions
contemplated by this Agreement will comply as to form in all material
respects with the requirements of the Exchange Act.
(b) Neither the information supplied or to be supplied in writing by or
on behalf of Buyer for inclusion, nor the information incorporated by
reference from documents filed by Buyer or any of its Subsidiaries with the
SEC, in the Schedule 14D-9, the Buyer Proxy Statement or any other documents
to be filed by Buyer or the Company with the SEC or any other Governmental
or Regulatory Authority in connection with the other transactions
contemplated by this Agreement will on the date of its filing or, with
respect to the Schedule 14D-9, on the date it is filed with the SEC and
first published, sent or given to stockholders of the Company, or, in the
case of the Buyer Proxy Statement or any other document mailed to Buyer's
stockholders by Buyer, at the date it is mailed to stockholders of Buyer and
at the date of the Buyer Stockholders' Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
5.10 COMPLIANCE WITH LAWS AND ORDERS. Buyer and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses (the "Buyer Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on Buyer and its Subsidiaries taken
as a whole. Buyer and its Subsidiaries are in compliance with the terms of the
Buyer Permits, except failures so to comply which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on Buyer and its Subsidiaries taken as a whole. Except
as disclosed in the Buyer SEC Reports filed prior to the date of this Agreement,
neither Buyer nor any of its Subsidiaries are in violation of or default under
any law or order of any Governmental or Regulatory Authority, except for such
violations or defaults which, individually or in the aggregate, are not
APP-A-22
<PAGE>
having and could not be reasonably expected to have a material adverse effect on
Buyer and its Subsidiaries taken as a whole.
5.11 COMPLIANCE WITH AGREEMENTS; CERTAIN AGREEMENTS.
(a) Except as disclosed in the Buyer SEC Reports filed prior to the
date of this Agreement, neither Buyer nor any of its Subsidiaries nor, to
the knowledge of Buyer, any other party thereto is in breach or violation
of, or in default in the performance or observance of any term or provision
of, and no event has occurred which, with notice or lapse of time or both,
could be reasonably expected to result in a default under, (i) the
certificate or articles of incorporation (or other comparable charter
documents) of Buyer or any of its Subsidiaries or (ii) any Contract to which
Buyer or any of its Subsidiaries is a party or by which Buyer or any of its
Subsidiaries or any of their respective assets or properties is bound,
except in the case of clause (ii) for breaches, violations and defaults
which, individually or in the aggregate, are not having and could not be
reasonably expected to have a material adverse effect on Buyer and its
Subsidiaries taken as a whole.
(b) Except as disclosed in Schedule 5.11 to this Agreement or in the
Buyer SEC Reports filed prior to the date of this Agreement or as provided
for in this Agreement, as of the date hereof, neither Buyer nor any of its
Subsidiaries is a party to any oral or written (i) agreement or plan,
including any stock option, stock appreciation right, restricted stock or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any
of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement or (ii) Contract which could
have a material adverse effect on the ability of Buyer to consummate the
transactions contemplated by this Agreement or could reasonably be expected
to result in a material adverse effect on Buyer and its Subsidiaries after
the consummation of the transactions contemplated by this Agreement.
5.12 TAXES.
(a) Each of Buyer and its Subsidiaries has filed all material tax
returns and reports required to be filed by it, or requests for extensions
to file such returns or reports have been timely filed or granted and have
not expired, and all such tax returns and reports are complete and accurate
in all respects, except to the extent that such failures to file, have
extensions granted that remain in effect or be complete and accurate in all
respects, as applicable, individually or in the aggregate, would not have a
material adverse effect on Buyer and its Subsidiaries taken as a whole.
Buyer and each of its Subsidiaries has paid (or Buyer has paid on its
behalf) all taxes shown as due for such tax returns and reports. The most
recent financial statements contained in the Buyer SEC Reports filed prior
to the date hereof reflect an adequate reserve for all taxes payable by
Buyer and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements, and no deficiencies
for any taxes have been proposed, asserted or assessed against Buyer or any
of its Subsidiaries that are not adequately reserved for, except for
inadequately reserved taxes and inadequately reserved deficiencies that
would not, individually or in the aggregate, have a material adverse effect
on Buyer and its Subsidiaries taken as a whole. No requests for waivers of
the time to assess any taxes against Buyer or any of its Subsidiaries have
been granted or are pending, except for requests with respect to such taxes
that have been adequately reserved for in the most recent Buyer Financial
Statements contained in the Buyer SEC Reports filed prior to the date
hereof, or, to the extent not adequately reserved, the assessment of which
would not, individually or in the aggregate, have a material adverse effect
on Buyer and its Subsidiaries taken as a whole. There are no material liens
for taxes (other than for current taxes not yet due and payable) on the
assets of Buyer or its Subsidiaries. Buyer has made available to the Company
true and complete copies of its federal income tax returns for the fiscal
year ended December 31, 1995. Except as set forth in Schedule 5.12 to this
Agreement, neither Buyer nor any of its Subsidiaries is a party to or bound
by any agreement providing for the allocation or sharing of taxes with any
entity which is not, either directly or indirectly, a wholly owned
APP-A-23
<PAGE>
Subsidiary of Buyer. Neither Buyer nor any of its Subsidiaries has filed a
consent pursuant to or agreed to the application of Section 341(f) of the
Code. Buyer is not a "United States real property holding corporation" as
defined in Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(b) As used in this Section 5.12, "taxes" shall include all federal,
state, local and foreign income, franchise, property, sales, use, excise and
other taxes, including obligations for withholding taxes from payments due
or made to any other Person and any interest, penalties or additions to tax.
(c) REORGANIZATION REPRESENTATIONS AND WARRANTIES OF BUYER.
(i) Except as set forth on Schedule 5.02 to this Agreement, Buyer
has no plan or intention to liquidate the Company, to merge the Company
into another corporation, to cause the Company to sell or otherwise
dispose of any of its assets, except for dispositions made in the
Ordinary Course of Business, or to sell or otherwise dispose of any of
the Company Common Stock acquired pursuant to the Offer.
(ii) Buyer publicly announced on March 3, 1997 that its Board of
Directors authorized the repurchase of up to $15,000,000 of its Common
Stock through open market purchases (the "Buy Back"). Pursuant to the Buy
Back, (a) the Common Stock repurchases will be made for a valid business
purpose unrelated to the Transaction, (b) the Common Stock to be
repurchased will be widely held, and (c) the Common Stock repurchases
will be made in the open market. Although Buyer is authorized to
repurchase some of its Common Stock from time to time pursuant to the Buy
Back, Buyer has no plan or intention to reacquire any of its Common Stock
issued in the exchange.
(iii) Buyer will acquire Company Common Stock solely in exchange for
Common Stock. For purposes of this representation, Company Common Stock
redeemed for cash or other property furnished by Buyer will be considered
as acquired by Buyer. Further, no liabilities of the Company or the
stockholders of the Company will be assumed by Buyer, nor will any of the
Company Common Stock be subject to any liabilities.
(iv) Buyer does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any stock of the
Company.
(v) Buyer is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(vi) None of the compensation received (or to be received) by any
stockholder-employee of the Company will be separate consideration for,
or allocable to, any of his shares of Company Common Stock. None of the
Common Stock received by any stockholder-employees of the Company in
connection with this Agreement will be separate consideration for, or
allocable to, any employment agreement or arrangement. The compensation
paid to any stockholder-employee of the Company will be commensurate with
amounts that would be paid to a third party bargaining at arm's length of
similar services.
(vii) The payment of cash in respect of fractional shares of Common
Stock is solely for the purpose of avoiding the expense and inconvenience
to Buyer of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be
paid in the Transaction to the former Company stockholders instead of
issuing fractional shares of Common Stock will not exceed one percent of
the total consideration that will be issued in the Transaction to the
Company stockholders in exchange for their shares of the Company Common
Stock. The fractional share interest of each former Company stockholder
will be aggregated and no former Company stockholder will receive cash in
an amount equal to or greater than the value of one full share of Common
Stock.
APP-A-24
<PAGE>
(viii) Buyer has no plan or intention to allow the Company, following
the Closing, to issue additional shares of its stock that would result in
Buyer losing control of the Company within the meaning of Section 368(c)
of the Code.
5.13 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except as described in the Buyer SEC Reports filed prior to the
date of this Agreement or as would not have a material adverse effect on
Buyer and its Subsidiaries taken as a whole, (i) all Buyer Employee Benefit
Plans are in compliance with all applicable requirements of law, including
the Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations thereunder ("ERISA") and the Code, and (ii) neither
Buyer nor any of its Subsidiaries has any liabilities or obligations with
respect to any such Buyer Employee Benefit Plans, whether accrued,
contingent or otherwise, nor to the knowledge of Buyer are any such
liabilities or obligations expected to be incurred. Except as described in
Schedule 5.13 to this Agreement, the execution of, and performance of the
transactions contemplated in, this Agreement will not (either alone or upon
the occurrence of any additional or subsequent events) constitute an event
under any Buyer Employee Benefit Plan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any employee. The only severance agreements or
severance policies applicable to Buyer or any of its Subsidiaries are the
agreements and policies specifically referred to in Schedule 5.13 to this
Agreement.
(b) As used herein:
(i) "Buyer Employee Benefit Plan" means any Plan entered into,
established, maintained, sponsored, contributed to or required to be
contributed to by Buyer or any of its Subsidiaries for the benefit of the
current or former employees or directors of Buyer or any of its
Subsidiaries and existing on the date of this Agreement or at any time
subsequent thereto and on or prior to the Closing and, in the case of a
Plan which is subject to Part 3 of Title I of ERISA, Section 412 of the
Code or Title IV of ERISA, at any time since January 1, 1990.
(ii) "Plan" means any employment, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation rights,
phantom stock, leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, medical, accident, disability,
workmen's compensation or other insurance, severance, separation,
termination, change of control or other benefit plan, agreement,
practice, policy, program or arrangement of any kind, whether written or
oral, including, but not limited to any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
5.14 LABOR MATTERS. Except as disclosed in Buyer SEC Reports filed prior
to the date of this Agreement or in Schedule 5.14 to this Agreement, there are
no controversies pending or, to the knowledge of Buyer, threatened between Buyer
or any of its Subsidiaries and any representatives of its employees, except as
would not, individually or in the aggregate, have a material adverse effect on
Buyer and its Subsidiaries taken as a whole, and, to the knowledge of Buyer,
there are no material organizational efforts presently being made involving any
of the employees of Buyer or any of its Subsidiaries. Since December 31, 1996,
there has been no work stoppage, strike or other concerted action by employees
of Buyer or any of its Subsidiaries except as have not, individually or in the
aggregate, had a material adverse effect on Buyer and its Subsidiaries taken as
a whole.
5.15 VOTE REQUIRED. The affirmative vote of the holders of record of at
least a majority of the shares of Common Stock voting at a duly constituted
meeting of Buyer's stockholders with respect to the adoption of this Agreement,
if required by applicable law, is the only vote of the holders of any class or
series of the capital stock of Buyer required to adopt this Agreement and the
transactions contemplated hereby.
5.16 OWNERSHIP OF COMPANY COMMON STOCK. Except as disclosed in Schedule
5.16 to this Agreement, neither Buyer nor any of its Subsidiaries or other
affiliates beneficially owns any shares of Company Common Stock.
APP-A-25
<PAGE>
ARTICLE VI
COVENANTS OF THE COMPANY
6.01. COVENANTS OF THE COMPANY. At all times from and after the date
hereof until the Closing, the Company covenants and agrees as to itself and its
Subsidiaries that (except as expressly permitted by this Agreement, or to the
extent that Buyer shall otherwise previously consent in writing):
(a) ORDINARY COURSE. Subject to the limitations set forth in Section
6.01(b), the Company and its Subsidiaries shall conduct their respective
businesses only in, and neither the Company nor any such Subsidiary shall
take any action except in, the Ordinary Course of Business.
(b) SPECIFIC ACTIONS. Without limiting the generality of paragraph (a)
of this Section 6.01, (i) the Company and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations and reputation, to keep available the
services of their key officers and employees, to maintain their assets and
properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
such amounts and against such risks and losses as are currently in effect,
to preserve their relationships with significant customers and suppliers and
others having significant business dealings with them and to comply in all
material respects with all contracts and laws and orders of all Governmental
or Regulatory Authorities applicable to them, and (ii) the Company shall
not, nor shall it permit any of its Subsidiaries to, except as otherwise
expressly provided for in this Agreement or in Schedule 6.01 to this
Agreement:
(A) amend or propose to amend its memorandum and articles of
association (or other comparable corporate charter documents);
(B) (w) declare, set aside or pay any dividends on, or make other
distributions in respect of, any of its capital stock, except for the
declaration and payment of dividends by the Company at rates and
times and otherwise consistent with past practice or by a wholly
owned Subsidiary of the Company solely to the Company or another
wholly owned Subsidiary of the Company, (x) split, combine,
reclassify or take similar action with respect to any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock, (y) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (z) directly or
indirectly redeem, repurchase or otherwise acquire any shares of its
capital stock or any Option with respect thereto;
(C) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or other
securities or Company Voting Debt or any Option with respect thereto
(other than (x) the issuance of Company Common Stock upon the
exercise of Company Stock Options and outstanding on the date of this
Agreement and in accordance with their present terms or (y) the
issuance by a wholly owned Subsidiary of its capital stock to its
parent corporation);
(D) directly or indirectly acquire, or agree to acquire, (by
merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any
other manner) any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets in an amount which
exceeds, individually or in the aggregate, $250,000 other than in the
Ordinary Course of Business;
(E) other than in the Ordinary Course of Business, and other than
sales by the Company or any of its Subsidiaries to the Company or any
of its Subsidiaries, sell, lease,
APP-A-26
<PAGE>
grant any Security Interest in or otherwise dispose of or encumber
any of its assets or properties, including the capital stock of its
Subsidiaries;
(F) except to the extent required by applicable law, (x) permit
any material change in (1) any marketing, purchasing, investment,
accounting, financial reporting, inventory, credit, allowance or tax
practice, policy or procedure or (2) any method of calculating any
bad debt, contingency or other reserve for accounting, financial
reporting or tax purposes or (y) make any material tax election or
settle or compromise any material income tax liability with any
Governmental or Regulatory Authority;
(G) except for borrowings under existing credit facilities of up
to $10,000,000 in the aggregate in connection with the acquisition by
the Company of an interest in the holding company of Jago Managing
Agency Limited and the purchase of additional capacity for Jago
Capital Limited (as disclosed in Schedule 6.01 to this Agreement),
(x) assume or incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities or guarantee any
debt securities of others or enter into any lease (whether such lease
is an operating or capital lease) other than in the Ordinary Course
of Business, (y) voluntarily purchase, cancel, prepay or otherwise
provide for a complete or partial discharge in advance of a scheduled
repayment date with respect to, or waive any right under, any
indebtedness for borrowed money other than in the Ordinary Course of
Business, or (z) enter into any "keep well" or other agreement or
arrangement to maintain the financial condition of another Person;
(H) except as disclosed in Schedule 4.04(a), enter into, adopt,
amend in any material respect (except as may be required by
applicable law) or terminate the Disclosed Scheme, or other
agreement, arrangement, plan or policy between the Company or one of
its Subsidiaries and one or more of its directors, officers or
employees, or, except for normal increases in the Ordinary Course of
Business that, in the aggregate, do not result in a material increase
in benefits or compensation expense to either the Company or any of
its Subsidiaries, increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not
required by any plan or arrangement in effect as of December 31,
1996;
(I) except as to insurance and reinsurance Contracts and as to
Contracts or transactions entered or to be entered into in the
Ordinary Course of Business which do not obligate the Company or any
of its Subsidiaries (either in a single Contract or transaction or a
series of related Contracts or transactions) to pay in excess of
$500,000: (x) enter into any Contract; or (y) amend, waive, modify or
terminate any existing Contract, or (z) engage in any new transaction
outside the Ordinary Course of Business or not on an arm's length
basis, with any third party, including but not limited to, any
affiliate of the Company or any of its Subsidiaries;
(J) make any capital expenditures or commitments in excess of
100,000 for additions to plant, property or equipment constituting
capital assets except in the Ordinary Course of Business; or
(K) enter into any Contract, commitment or arrangement to do or
engage in any of the foregoing, except as otherwise permitted in this
Section 6.01(b).
Nothing in this Section 6.01 shall prevent the Company from continuing to
negotiate with respect to or consummating the acquisition by the Company
(directly or indirectly through an intermediate holding company jointly owned
with another strategic investor) of an interest in the holding company of Jago
Managing Agency Limited, or from reorganizing its interest in the holding
company of Jago Capital Limited to combine it in with the interest acquired in
the holding company of Jago Managing Agency Limited or the acquisition by the
Company of a 49% shareholding in ATD Specialties Management
APP-A-27
<PAGE>
Limited, as such transactions are described on Schedule 6.01 to this Agreement;
provided, however, that the Company shall keep Buyer informed of the status of
and all material information with respect to such transactions and shall, from
the date hereof until Closing, obtain the consent of Buyer prior to taking any
action which would materially change the terms of such transactions.
(c) ADVICE. The Company shall confer on a regular and frequent basis
with Buyer with respect to its business and operations and other matters
relevant to the transactions contemplated by this Agreement, and shall
promptly advise Buyer, orally and in writing, of any change or event,
including, without limitation, any complaint, investigation, hearing by or
notice or communication from any Governmental or Regulatory Authority or the
institution or threat of litigation, having, or which, insofar as can be
reasonably foreseen, could have, a material adverse effect on the Company
and its Subsidiaries taken as a whole or on the ability of the Company to
consummate the transactions contemplated by this Agreement or of any notice
or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions
contemplated by this Agreement; provided that the Company shall not be
required to make any disclosure to the extent such disclosure would
constitute a violation of any applicable law.
6.02 NO SOLICITATIONS. Prior to the Closing, the Company agrees (a) that
neither it nor any of its Subsidiaries shall, nor shall it or any of its
Subsidiaries permit their respective Representatives to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to its stockholders) with respect to a merger, consolidation or other business
combination including the Company or any of its Subsidiaries or any acquisition
or similar transaction (including, without limitation, a tender or exchange
offer) involving an Alternative Proposal, or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, or enter into any agreement or understanding with, any Person
or group relating to, an Alternative Proposal (excluding the transactions
contemplated by this Agreement), or otherwise facilitate any effort or attempt
to make or implement an Alternative Proposal; and (b) that it will notify Buyer
immediately if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it or any of such Persons or groups
and will identify the party making such inquiry, proposal, offer or request,
except to the extent such notification would, in the written opinion of the
Company's outside counsel (a copy of which shall be delivered to Buyer), cause
the Company or its Board of Directors to be in violation of any applicable law,
regulation or governmental order; provided, however, that prior to acquisition
of shares of Company Common Stock pursuant to the Offer, nothing contained in
this Section 6.02 shall prohibit the Board of Directors of the Company from, to
the extent applicable, complying with Rule 14e-2 promulgated under the Exchange
Act, or the UK City Code on Takeovers and Mergers (the "City Code"), with regard
to an Alternative Proposal. "Alternative Proposal" shall mean any of the
following (other than the transactions between the Company and Buyer
contemplated hereunder) involving the Company or any of its Subsidiaries: (i)
any merger, consolidation, share exchange, recapitalization, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 10% or more of the assets of
the Company and its Subsidiaries, taken as a whole, in a single transaction or
series of transactions; (iii) any tender offer or exchange offer for or other
purchase of 10% or more of the outstanding shares of capital stock of the
Company or the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing. Nothing in this Section 6.02 shall permit
the Company to terminate this Agreement except as specifically permitted by
Article X of this Agreement.
6.03 TAX COVENANTS OF THE COMPANY. Subject to the provisions of Section
10.02, the Company will pay its own expenses incurred in connection with the
transactions contemplated by this Agreement.
6.04 APPROVAL OF COMPANY STOCKHOLDERS. The Company shall, through its
Board of Directors, duly call, give notice of, convene and hold an extraordinary
general meeting of the Company (the "Company Stockholders' Meeting"), for the
purposes of adopting a special resolution to amend, subject to and
APP-A-28
<PAGE>
conditioned upon the Closing, the Company's Articles of Association by the
deletion of the existing Articles 75, 76 and 87 (and of references thereto), and
by the deletion of the definition of "Designated Shareholders" in Article 2 (the
"Company Amendment").
ARTICLE VII
COVENANTS OF BUYER
7.01 COVENANTS OF BUYER. At all times from and after the date hereof until
the Closing, Buyer covenants and agrees as to itself and its Subsidiaries that
(except as expressly permitted by this Agreement, or to the extent that the
Company shall otherwise previously consent in writing):
(a) ORDINARY COURSE. Subject to the limitations set forth in Section
7.01(b), Buyer and its Subsidiaries shall conduct their respective
businesses only in, and neither Buyer nor any such Subsidiary shall take any
action except in, the Ordinary Course of Business.
(b) SPECIFIC ACTIONS. Without limiting the generality of paragraph (a)
of this Section 7.01, (i) Buyer and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations and reputation, to keep available the
services of their key officers and employees, to maintain their assets and
properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
such amounts and against such risks and losses as are currently in effect,
to preserve their relationships with significant customers and suppliers and
others having significant business dealings with them and to comply in all
material respects with all contracts and laws and orders of all Governmental
or Regulatory Authorities applicable to them, and (ii) Buyer shall not,
except as otherwise expressly provided for in this Agreement or in Schedule
7.01 to this Agreement:
(A) except as set forth on Schedule 5.02 to this Agreement, (w)
declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock, except for the
declaration and payment of dividends by Buyer at rates and times and
otherwise consistent with past practice or by a wholly owned
Subsidiary of Buyer solely to Buyer or another wholly owned
Subsidiary of Buyer, (x) split, combine, reclassify or take similar
action with respect to any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, (y) adopt
a plan of complete or partial liquidation or resolutions providing
for or authorizing such liquidation or a dissolution, merger,
consolidation, sale of all or substantially all of its assets,
restructuring, recapitalization or other reorganization or (z)
directly or indirectly redeem, repurchase or otherwise acquire any
shares of its capital stock or any Option with respect thereto;
(B) enter into any Contract, commitment or arrangement to do or
engage in any of the foregoing, except as otherwise permitted in this
Section 7.01(b).
(c) ADVICE. Buyer shall confer on a regular and frequent basis with
the Company with respect to substantial matters involving its business and
operations and with respect to all matters relevant to the transactions
contemplated by this Agreement, and shall promptly advise the Company,
orally and in writing, of any change or event, including, without
limitation, any complaint, investigation, hearing by or notice or
communication from any Governmental or Regulatory Authority or the
institution or threat of litigation, having, or which, insofar as can be
reasonably foreseen, could have, a material adverse effect on Buyer and its
Subsidiaries taken as a whole or on the ability of Buyer to consummate the
transactions contemplated by this Agreement or of any notice or other
communication from any Person alleging that the consent of such Person is or
may be required in connection with the transactions contemplated by this
Agreement; provided that Buyer shall not be required to make any disclosure
to the extent such disclosure would constitute a violation of any applicable
law.
APP-A-29
<PAGE>
7.02 TAX COVENANTS OF BUYER.
(a) Subject to the provisions of Section 10.02, Buyer will pay its own
expenses incurred in connection with the transactions contemplated by this
Agreement.
(b) Following the Closing, Buyer will cause the Company to continue its
historic business or use a significant portion of its historic business
assets in a business.
(c) Buyer shall use its best efforts to take all steps to ensure that
the Transaction qualifies as a reorganization within the meaning of Section
368(a)(1)(B) of the Code and shall not take (or, to the extent it is able,
permit any other Person to take) any steps that prevent such qualification.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 ACCESS TO INFORMATION; CONFIDENTIALITY. (a) The Company shall, and
shall cause each of its Subsidiaries to, throughout the period from the date
hereof to the Closing, (i) provide Buyer and its Representatives with full
access, upon reasonable prior notice and during normal business hours, to all
officers, employees, agents, attorneys and accountants of the Company and its
Subsidiaries and their respective assets, properties, books and records, but
only to the extent that such access does not unreasonably interfere with the
business and operations of the Company and its Subsidiaries, and (ii) furnish
promptly to such Persons (x) a copy of each report, statement, schedule and
other document filed or received by the Company or any of its Subsidiaries
pursuant to the requirements of federal or state securities laws and each
material report, statement, schedule and other document filed with any other
Governmental or Regulatory Authority, and (y) all other information and data
(including, without limitation, copies of Contracts, the Disclosed Scheme or
other similar arrangement and other books and records) concerning the business
and operations of the Company and its Subsidiaries as Buyer, or any of such
other Persons reasonably may request.
(b) Buyer shall, throughout the period from the date hereof to the
Closing, provide the Company and its Representatives with full access, upon
reasonable prior notice and during normal business hours, to the executive
officers of Buyer, but only to the extent that such access does not
unreasonably interfere with the business and operations of the Buyer and its
Subsidiaries.
8.02 PREPARATION OF PROXY STATEMENT AND REGISTRATION STATEMENT BY
BUYER. Buyer shall prepare and file with the SEC the Registration Statement
containing the Buyer Proxy Statement and the prospectus contained in the
Registration Statement of Buyer and the offer documents required pursuant to the
City Code and the Exchange Act as soon as reasonably practicable after the date
hereof, and shall use their respective best efforts to have the Buyer Proxy
Statement cleared and the Registration Statement declared effective by the SEC.
If at any time prior to the Closing any event shall occur that should be set
forth in an amendment of or a supplement to the Buyer Proxy Statement or the
Registration Statement, Buyer shall prepare and file with the SEC such amendment
or supplement as soon thereafter as is reasonably practicable. Buyer and the
Company shall cooperate with each other in the preparation of the Buyer Proxy
Statement and the Registration Statement, and Buyer shall notify the Company of
the receipt of any comments of the SEC with respect to the Buyer Proxy Statement
or the Registration Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information, and shall provide to the
Company promptly copies of all correspondence between Buyer or any
representative of Buyer and the SEC with respect to the Buyer Proxy Statement or
the Registration Statement. Buyer shall give the Company and its counsel the
opportunity to review the Buyer Proxy Statement and the Registration Statement
and all responses to requests for additional information by and replies to
comments of the SEC before their being filed with, or sent to, the SEC. Each of
the Company and Buyer agrees to use its best efforts, after consultation with
the other party, to respond promptly to all such
APP-A-30
<PAGE>
comments of and requests by the SEC and to cause the Buyer Proxy Statement to be
mailed to the holders of Common Stock entitled to vote at the Buyer
Stockholders' Meeting at the earliest practicable time.
8.03 APPROVAL OF STOCKHOLDERS. Buyer shall, through its Board of
Directors, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Buyer Stockholders' Meeting") for the purpose of approving
the issuance of Common Stock contemplated by this Agreement (the "Stockholders'
Approval") as soon as reasonably practicable after the date hereof.
8.04 REGULATORY AND OTHER APPROVALS. Subject to the terms and conditions
of this Agreement and without limiting the provisions of Sections 8.02 and 8.03,
each of the Company and Buyer will proceed diligently and in good faith to, as
promptly as practicable, (a) obtain all consents, approvals or actions of, make
all filings with and give all notices to Governmental or Regulatory Authorities
or any other public or private third parties required by this Agreement of
Buyer, the Company or any of their respective Subsidiaries to consummate the
transactions and the other matters contemplated hereby, and (b) provide such
other information and communications to such Governmental or Regulatory
Authorities or other public or private third parties as the other party or such
Governmental or Regulatory Authorities or other public or private third parties
may reasonably request in connection therewith. In addition to and not in
limitation of the foregoing, each of the parties will (x) take promptly all
actions necessary to make the filings required of Buyer and the Company or their
affiliates under the HSR Act, (y) comply at the earliest practicable date with
any request for additional information received by such party or its affiliates
from the Federal Trade Commission (the "FTC") or the Antitrust Division of the
Department of Justice (the "Antitrust Division") pursuant to the HSR Act, and
(z) cooperate with the other party in connection with such party's filings under
the HSR Act and in connection with resolving any investigation or other inquiry
concerning the Offer or the other matters contemplated by this Agreement
commenced by either the FTC or the Antitrust Division or state attorneys
general.
8.05 EMPLOYMENT AND SEVERANCE AGREEMENT. From and after the Closing, the
Company will honor without modification and in accordance with their respective
terms each of the employment and severance agreements of the Company and its
Subsidiaries listed in Schedule 4.11 to this Agreement, as such agreements are
in effect on the date hereof except for, and giving effect to, any and all
amendments, modifications, restatements and other changes to the terms of any
such employment and severance agreements which are agreed to by the Company,
Buyer and the other party or parties to such agreements on or after the date
hereof.
8.06 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) Except to the extent required by law, Buyer will not take any
action so as to amend, modify or repeal the provisions for indemnification
of any directors or officers of the Company or any of its Subsidiaries (the
"Indemnified Parties") contained in the memorandum and articles of
association (or other comparable charter documents) of the Company and its
Subsidiaries (which as of the Closing shall be no more favorable to such
individuals than those maintained by the Company and its Subsidiaries on the
date hereof) in such a manner as would adversely affect the rights of any
individual who shall have served as a director or officer of the Company or
any of its Subsidiaries prior to the Closing to be indemnified by such
corporations in respect of their serving in such capacities prior to the
Closing.
(b) Buyer and the Company shall, until the fourth anniversary of the
Closing Date and for so long thereafter as any claim asserted prior to such
date has not been fully adjudicated by a court of competent jurisdiction,
cause to be maintained in effect, to the extent available, the policies of
directors' and officers' liability insurance maintained by the Company and
its Subsidiaries as of the date hereof (or policies of at least the same
coverage and amounts containing terms that are no less advantageous to the
insured parties) with respect to claims arising from facts or events that
occurred on or prior to the Closing; provided, however, that Buyer shall not
be required in order to maintain or procure such coverage to pay an annual
premium in excess of one and one-half times the current
APP-A-31
<PAGE>
annual premium paid by the Company and each of its Subsidiaries for its
existing coverage (the "Cap") (which aggregate current annual premium the
Company represents and warrants to be approximately $251,000); and provided,
further, that if equivalent coverage cannot be obtained, or can be obtained
only by paying an annual premium in excess of the Cap, Buyer shall only be
required to obtain as much coverage as can be obtained by paying an annual
premium equal to the Cap. Nothing in this Section 8.06(b) shall prevent
Buyer, following the Closing, from replacing the policies contemplated by
this Section 8.06(b) with the policies of directors' and officers' liability
insurance maintained by Buyer for the benefit of the officers and directors
of Buyer; provided that such coverage must otherwise satisfy this Section
8.06(b).
(c) The provisions of this Section 8.06 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and each
party entitled to insurance coverage under paragraph (b) above,
respectively, and his or her heirs and legal representatives, and shall be
in addition to any other rights an Indemnified Party may have under the
memorandum and articles of association (or other comparable charter
documents) of the Company or any of its Subsidiaries, under the law of
England and Wales or otherwise, but in relation to the obligations of the
Company shall be subject to, and shall not be more extensive than permitted
under, the law of England and Wales.
8.07 FEES AND EXPENSES. Subject to the provisions of Section 10.02,
whether or not the transactions contemplated by this Agreement are consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such cost
or expense.
8.08 BROKERS OR FINDERS. Each of Buyer and the Company represents, as to
itself and its affiliates, that no agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement except Donaldson, Lufkin &
Jenrette Securities Corporation, whose fees and expenses will be paid by the
Company in accordance with the Company's agreement with such firm (a true and
complete copy of which has been delivered by the Company to Buyer prior to the
execution of this Agreement), and Smith Barney Inc., whose fees and expenses
will be paid by Buyer in accordance with Buyer's agreement with such firm (a
true and complete copy of which has been delivered by Buyer to the Company prior
to the execution of this Agreement), and each of Buyer and the Company shall
indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other such fee or commission or
expenses related thereto asserted by any Person on the basis of any act or
statement alleged to have been made by such party or its affiliate.
8.09 TAKEOVER STATUTES. If any "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated by this Agreement, Buyer and the
Company and the members of the Board of Directors of each of Buyer and the
Company shall grant such approvals and take such actions as are reasonably
necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
on the transactions contemplated by this Agreement. Nothing in this Section 8.09
shall require (i) Buyer to take any action which would materially and adversely
affect the business of the Buyer and its Subsidiaries, taken as a whole, or (ii)
the Company to take any action which would materially and adversely affect the
business of the Company and its Subsidiaries, taken as a whole.
8.10 CONVEYANCE TAXES. The Company and Buyer shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable, if any,
in connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Closing.
APP-A-32
<PAGE>
8.11 NOTICE. Each of Buyer and the Company will notify the other of any
event, transaction or circumstance, as soon as practical after it becomes known
to such party, that causes or will cause any covenant or agreement of Buyer or
the Company under this Agreement to be breached or any of the conditions to the
consummation of the transactions contemplated hereby not to be satisfied or that
renders or will render untrue any representation or warranty of Buyer or the
Company contained in this Agreement. Each of Buyer and the Company also will
notify the others in writing of any violation or breach, as soon as practical
after it becomes known to such party, of any representation, warranty, covenant
or agreement made by Buyer or the Company. No notice given pursuant to this
Section 8.11 shall have any effect on the representations, warranties, covenants
or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
8.12 FULFILLMENT OF CONDITIONS. Subject to the terms and conditions of
this Agreement, each of Buyer and the Company will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to the other's obligations contained in
this Agreement and to consummate and make effective the transactions
contemplated by this Agreement, and neither Buyer nor the Company will, nor will
they permit any of their Subsidiaries to, take or fail to take any action that
could be reasonably expected to result in the nonfulfillment of any such
condition; provided that, neither Buyer nor any of its Subsidiaries shall be
required to take any action, or refrain from taking any action, which by so
doing could reasonably be expected prior to or after the Closing to have a
material adverse effect on either Buyer and its Subsidiaries, taken as a whole,
or the Company and its Subsidiaries, taken as a whole, or otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement to Buyer.
8.13 REPRESENTATION ON BUYER'S BOARD OF DIRECTORS. At or prior to Closing,
Buyer shall increase the size of its Board of Directors by two members to 14
members. At Closing, Buyer shall use its best efforts to nominate the following
individuals to Buyer's Board of Directors: Ian G. Sinclair and Robert A. Spass.
At Buyer's 1998 Annual Meeting of stockholders, Buyer shall use its best efforts
to nominate the aforesaid individuals to Buyer's Board of Directors and cause
them to be elected to one full three-year term.
8.14 SELLING STOCKHOLDERS UNDERTAKING. The Company shall use its best
efforts to cause each of the stockholders listed on Schedules 8.14(a) and (b) to
this Agreement (collectively, the "Selling Stockholders") to execute and deliver
to Buyer an irrevocable undertaking (the "Undertaking") with respect to the
Offer substantially in the form of Exhibit A to this Agreement and, where so
indicated on Schedules 8.14(a) and 8.14(b) to this Agreement, accompanied by
letters of direction and an opinion of counsel with respect to such letters.
Simultaneous with the execution of this Agreement, the stockholders of the
Company listed on Schedule 8.14(a) to this Agreement shall have executed and
delivered to Buyer the Undertaking and any such letters and opinions. The
Company shall continue to use its best efforts to cause each of the Selling
Stockholders listed on Schedule 8.14(b) to this Agreement to execute and deliver
the Undertaking and any such letters and opinions. Notwithstanding the
foregoing, Buyer and the Company agree that the Undertaking to be executed by
J.P. Morgan Capital Corp. shall contain such additional terms as Buyer, the
Company and J.P. Morgan Capital Corp. shall agree upon.
8.15 AFFILIATES AGREEMENT. The Company shall use its best efforts to cause
each of the Persons listed on Schedule 8.15 to this Agreement (collectively, the
"Designated Affiliates") to execute and deliver to Buyer, as soon as possible
but in any event not later than 30 days prior to the Closing, an affiliates
agreement substantially in the form of Exhibit B to this Agreement (the
"Affiliates Agreement").
APP-A-33
<PAGE>
ARTICLE IX
CONDITIONS
9.01 MUTUAL CONDITIONS TO CLOSING. Prior to and as of the Closing, each of
the following conditions shall have been fulfilled (other than conditions which
have been waived or modified upon the written consent of both Buyer and the
Company):
(a) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been adopted by the requisite vote of the
stockholders of Buyer under the General Corporation Law of the State of
Delaware (the "DGCL").
(b) MINIMUM CONDITION. Shares of Company Common Stock representing at
least ninety percent on a fully diluted basis in nominal value of voting
shares of Company Common Stock, and all of the non-voting shares of Company
Common Stock, outstanding and not previously tendered to Buyer by agreement
shall have been validly tendered and not properly withdrawn prior to the
expiration of the Offer (the "Minimum Condition"); provided, however, that
Buyer and the Company hereby agree that any waiver of the terms and
conditions of this subparagraph (b) shall not reduce the ninety percent
threshold of this subparagraph (b) to an amount which is fifty percent or
less.
(c) HSR ACT. Any waiting period (and any extension thereof) applicable
to the consummation of the transactions contemplated by this Agreement under
the HSR Act shall have expired or been terminated.
(d) GOVERNMENTAL AND REGULATORY AND OTHER CONSENTS AND APPROVALS. All
authorizations, orders, grants, recognitions, confirmations, permits,
consents, clearances, permissions, approvals, waivers and actions of,
filings with and notices to, any Governmental or Regulatory Authority or any
other public or private third parties required of Buyer, the Company or any
of their Subsidiaries to consummate the transactions contemplated by this
Agreement, other than those the failure of which to be obtained or taken
could not be reasonably expected to have a material adverse effect on Buyer
and its Subsidiaries or the Company and its Subsidiaries, in each case taken
as a whole, or on the ability of Buyer and the Company to consummate the
transactions contemplated by this Agreement shall have been obtained or
taken; provided that no such permit, consent, approval, waiver or action
shall be subject to any condition which could reasonably be expected prior
to or following the Closing to have a material adverse effect on Buyer and
its Subsidiaries taken as a whole, or on the Company and its Subsidiaries
taken as a whole, or otherwise result in a material diminution of the
benefits of the transactions contemplated by this Agreement to Buyer.
(e) CERTAIN U.K. CONSENTS AND APPROVALS.
(i) the UK Office of Fair Trading shall have indicated, in terms
reasonably satisfactory to Buyer, that the Secretary of State for Trade and
Industry does not intend to refer the proposed acquisition of the Company
Common Stock or any matter relating thereto to the Monopolies and Mergers
Commission;
(ii) the UK Secretary of State for Trade and Industry shall have
confirmed, in terms reasonably satisfactory to Buyer, in accordance with
Section 61 of the UK Insurance Companies Act 1982 that there is no objection
to Buyer and any relevant stockholders or officers of Buyer becoming
controllers of the Company or, in the absence of such confirmation in
relation to any such person, the period during which the Secretary of State
may serve a notice of objection pursuant to Section 61 of the UK Insurance
Companies Act 1982 in relation to such person not having elapsed without the
Secretary of State having served any such notice of objection;
APP-A-34
<PAGE>
(iii) the Council of Lloyd's shall have approved, in terms reasonably
satisfactory to Buyer, Buyer and any relevant stockholders of Buyer as
controllers of Jago Capital Limited (a Lloyd's corporate member) and of Jago
Managing Agency Limited (a Lloyd's managing agency); and
(iv) the UK Inland Revenue shall have issued notification pursuant to
Section 138 of the Taxation of Chargeable Gains Act 1992 that it is
satisfied that the transactions contemplated by this Agreement will be
effected for bona fide commercial reasons and will not form part of any such
scheme or arrangements as are mentioned in Section 137 of the Taxation and
Chargeable Gains Act of 1992.
(f) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have become effective and shall be effective at the Closing,
and no stop order suspending effectiveness of the Registration Statement
shall have been issued, no action, suit, proceeding or investigation by the
SEC to suspend the effectiveness thereof shall have been initiated and be
continuing, or, to the knowledge of Buyer or the Company, threatened, and
all necessary approvals under state securities laws relating to the issuance
or trading of the Common Stock to be issued to the stockholders of the
Company in connection with the Offer shall have been received.
(g) NYSE LISTING. The shares of Common Stock to be issued pursuant to
this Agreement and such other shares required to be reserved for issuance
pursuant to this Agreement, if any, shall have been approved for listing on
the NYSE, subject to official notice of issuance.
(h) COMPANY FAIRNESS OPINION. The Company shall have received the
opinion of Donaldson, Lufkin & Jenrette Securities Corporation, dated the
date hereof, to the effect that, as of the date hereof, the Exchange Ratio
to be offered to the stockholders of the Company is fair from a financial
point of view to the stockholders of the Company, a true and complete copy
of such opinion has been delivered to Buyer prior to the execution of this
Agreement and such opinion has not been withdrawn.
(i) TAX OPINION. The Company shall have received the opinion of Paul,
Weiss, Rifkind, Wharton & Garrison with respect to the qualification of the
Transaction under Section 368(a)(1)(B) of the Code; a true and complete copy
of such opinion will have been provided to Buyer prior to the Closing, and
such opinion shall not have been withdrawn.
9.02 CONDITIONS TO BUYER'S OBLIGATION. The obligation of Buyer to effect
the transactions contemplated by this Agreement is subject to the fulfillment,
or waiver by Buyer, at or prior to the Closing, of each of the following
conditions:
(a) NO INJUNCTIONS OR RESTRAINTS. There shall not have been any law or
order promulgated, entered, enforced, enacted, issued or deemed applicable
to the transactions contemplated by this Agreement by any court of competent
jurisdiction or other competent Governmental or Regulatory Authority which,
directly or indirectly, (1) prohibits, or imposes any material limitations
on, Buyer's ownership or operation (or that of any of its Subsidiaries or
affiliates) of any portion of its or the Company's or any of the Company's
Subsidiaries' businesses or assets which is material to the business of the
Company and its Subsidiaries taken as a whole, or material to the business
of Buyer and its Subsidiaries taken as a whole, or compels Buyer (or its
Subsidiaries or affiliates) to dispose of or hold separate any portion of
its or the Company's or any of the Company's Subsidiaries' business or
assets which is material to the business of the Company and its Subsidiaries
taken as a whole, or material to the business of Buyer and its Subsidiaries
taken as a whole, or otherwise results in a material diminution of the
benefits of the transactions contemplated by this Agreement to Buyer, (2)
prohibits, restrains or makes illegal any of the transactions contemplated
by this Agreement, (3) imposes material limitations on the ability of Buyer
(or any of its Subsidiaries or affiliates) effectively to acquire or to hold
or to exercise full rights of ownership of the shares of Company Common
Stock including, without limitation, the right to vote such shares of
Company Common Stock on all matters properly presented to the Company's
stockholders, (4) imposes limitations on the ability of Buyer (or
APP-A-35
<PAGE>
any of its Subsidiaries or affiliates) effectively to control in any
material respect any material portion of the business or assets of the
Company and its Subsidiaries taken as a whole, or any material portion of
the business or assets of Buyer and its Subsidiaries taken as a whole, or
(5) has the effect of making illegal or otherwise restricting, preventing or
prohibiting consummation of the transactions contemplated by this Agreement.
(b) LITIGATION. There shall be no instituted or pending action or
proceeding (whether civil or criminal) before any Person or Governmental or
Regulatory Authority (or any such action threatened by any Person or
Governmental or Regulatory Authority) which (x) in the case of any such
action or proceeding brought by any Governmental or Regulatory Authority,
seeks any order, decree or injunction having any effect set forth in (a)
above or (y) in the case of any such action or proceeding brought by any
other Person, could reasonably be expected to result in any order, decree or
injunction having any effect set forth in (a) above.
(c) MARKET CONDITIONS. There shall not have occurred and be continuing
(1) any general suspension of trading in, or limitation on prices for,
securities on any United States national securities exchange or in the
over-the-counter market, (2) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or the
United Kingdom (whether or not mandatory), (3) any limitation (whether or
not mandatory) by any Governmental or Regulatory Authority on the extension
of credit by banks or other financial institutions, (4) a commencement of a
war or armed hostilities or other national or international crisis directly
or indirectly involving the United States having a significant adverse
effect on the functionality of the financial markets in the United States or
(5) in the case of any of the foregoing existing on the date of this
Agreement, in the good faith judgment of Buyer a material acceleration or
worsening thereof.
(d) REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Company in this Agreement that are subject to, or qualified by,
"material adverse effect," "material adverse change" or other materiality
qualification shall be true and correct, and the representations and
warranties made by the Company in this Agreement that are not so qualified
shall be true and correct except in any respect which could not reasonably
be expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole, in each case when made and as of the Closing.
(e) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed and complied with in all material respects (without any reference
to any materiality qualification contained therein) all obligations and
covenants required to be performed or complied with by it under this
Agreement on or before the Closing.
(f) BUYER FAIRNESS OPINION. Buyer shall have received the opinion of
Smith Barney Inc., dated the date hereof, to the effect that, as of the date
hereof, the Exchange Ratio offered by Buyer pursuant to the Offer is fair to
Buyer from a financial point of view, a true and complete copy of such
opinion has been delivered to the Company prior to the execution of this
Agreement and such opinion has not been withdrawn.
(g) SELLING STOCKHOLDER UNDERTAKING. Each of the Selling Stockholders
shall have executed and delivered to Buyer an Undertaking along with the
letters of direction and opinions of counsel referred to in Section 8.14,
and all such Undertakings, letters of direction and opinions shall be in
full force and effect and shall not have been withdrawn.
(h) [INTENTIONALLY OMITTED]
(i) POOLING TREATMENT. Neither the Company nor its affiliates shall
have taken any action which has prevented or would prevent Buyer from
treating the acquisition of the Company as a pooling-of-interests in
accordance with United States generally accepted accounting principles.
APP-A-36
<PAGE>
(j) ACQUISITION AGREEMENT. This Agreement shall not have been
terminated in accordance with its terms, and shall remain in full force and
effect.
(k) COMPANY AMENDMENT. The stockholders of the Company shall have
approved and adopted the Company Amendment at the Company Stockholders'
Meeting, and such Company Amendment shall take effect as of the Closing.
(l) AFFILIATES AGREEMENT. Each of the Designated Affiliates shall have
executed and delivered to Buyer an Affiliates Agreement; there shall have
been no breaches of any of the terms of the Affiliates Agreements by any
Designated Affiliate prior to the Closing; and the Affiliates Agreements
shall be in full force and effect.
9.03 ADDITIONAL CONDITIONS TO CLOSING. Prior to and as of the Closing,
each of the following conditions shall have been fulfilled (unless waived by the
Company):
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Buyer in this Agreement that are subject to, or qualified by,
"material adverse effect," "material adverse change" or other materiality
qualification shall be true and correct, and the representations and
warranties made by Buyer in this Agreement that are not so qualified shall
be true and correct except in any respect which could not reasonably be
expected to have a material adverse effect on Buyer and its Subsidiaries
taken as a whole, in each case when made and as of the Closing.
(b) PERFORMANCE OF OBLIGATIONS OF BUYER. Buyer shall have performed
and complied with in all material respects (without any reference to any
materiality qualification contained therein) all obligations and covenants
required to be performed or complied with by it under this Agreement on or
before the Closing.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.01 TERMINATION. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Closing, subject
to obtaining any necessary consent from the Panel on Takeovers and Mergers in
the United Kingdom (the "Takeover Panel"):
(a) By mutual written agreement of the parties hereto duly authorized
by action taken by or on behalf of their respective Boards of Directors;
(b) By either the Company or Buyer upon notification to the
non-terminating party by the terminating party:
(i) at any time after December 31, 1997 if the transactions
contemplated by this Agreement have not been consummated and the failure
to consummate the foregoing is not caused by a breach of this Agreement
by the terminating party;
(ii) if the Offer is commenced and shall have terminated or expired
in accordance with its terms without Buyer having accepted for exchange
and having exchanged any shares of Company Common Stock pursuant to the
Offer; provided, however, that Buyer may not terminate this Agreement
pursuant to this Section 10.01(b)(ii) if Buyer's termination of, or
failure to accept for exchange or to exchange any shares of Company
Common Stock tendered pursuant to, the Offer does not follow the
occurrence, or failure to occur, as the case may be, of any condition set
forth in Sections 9.01 or 9.02 or if Buyer is otherwise in breach of the
terms of the Offer or this Agreement;
(iii) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making
illegal or otherwise restricting, preventing or
APP-A-37
<PAGE>
prohibiting any of the transactions contemplated by this Agreement and
such order shall have become final and nonappealable; or
(iv) if a Higher Competing Offer is made or a firm intention to make
a Higher Competing Offer is publicly announced and Buyer has not
announced a Higher Revised Offer before the Revision Deadline (as such
terms are defined in the Undertaking), and the payment of the $5,000,000
referenced in paragraph 18.4 of the Undertaking has been made to Buyer;
or
(c) By the Company if (i) there has been a material breach of any
representation, warranty, covenant or agreement on the part of Buyer set
forth in this Agreement, which breach is not curable or, if curable, has not
been cured within 30 days following receipt by Buyer of notice of such
breach from the Company; (ii) the Offer has not been timely commenced in
accordance with Section 11.01(a); or (iii) all of the conditions in Article
IX have been satisfied or, if applicable, waived and the Closing has not
occurred substantially in accordance with Section 2.01; or
(d) By Buyer, prior to Closing, if there has been a material breach of
any representation, warranty, covenant or agreement on the part of the
Company set forth in this Agreement which breach is not curable or, if
curable, has not been cured within 30 days following receipt by the Company
of notice of such breach from Buyer.
10.02 EFFECT OF TERMINATION. If this Agreement is validly terminated by
either the Company or Buyer pursuant to Section 10.01, this Agreement will
forthwith become null and void and there will be no liability or obligation on
the part of the Company or Buyer (or any of their respective Representatives or
affiliates), except that the provisions of Sections 8.07, 8.08, this Section
10.02, and paragraphs 7 and 18 of the Undertakings will continue to apply
following any such termination. Notwithstanding the foregoing, if this Agreement
is validly terminated by the Company pursuant to Section 10.01(c) due to a
breach by Buyer of Sections 5.12(c), 7.01(b)(ii)(A) or (B), 7.02(c), 8.03, 8.04,
8.12 or 8.13, Buyer shall be responsible for and shall pay promptly the
Company's Transaction Expenses and any damages it has suffered, and if this
Agreement is validly terminated by Buyer pursuant to Section 10.01(d) due to a
breach by the Company of Sections 8.04 or 8.12, the Company shall be responsible
for and shall pay promptly Buyer's Transaction Expenses and any damages it has
suffered.
10.03 AMENDMENT. This Agreement may be amended, supplemented or modified
by action taken by or on behalf of each of the respective Boards of Directors of
the parties hereto at any time prior to the Closing. No such amendment,
supplement or modification shall be effective unless set forth in a written
instrument duly executed by or on behalf of each party hereto.
10.04 WAIVER. At any time prior to the Closing any party hereto, by action
taken by or on behalf of its Board of Directors, may to the extent permitted by
applicable law and pursuant to this Agreement (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties of the other
parties hereto contained herein or in any document delivered pursuant hereto or
(iii) waive compliance with any of the covenants, agreements or conditions of
the other parties hereto contained herein. No such extension or waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party extending the time of performance or waiving any such inaccuracy or
non-compliance. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
APP-A-38
<PAGE>
ARTICLE XI
THE OFFER
11.01 THE OFFER.
(a) TERMS OF THE OFFER. No later than five business days after the
date of exercise by the Company of the Tender Option (as defined in Section
11.01(c)), Buyer shall commence (within the meaning of Rule 14d-2 under the
Exchange Act), a tender offer (the "Offer") to acquire all of the issued and
outstanding shares of Company Common Stock in exchange for 0.836 shares of
Common Stock per share of Company Common Stock issued and outstanding (the
"Exchange Ratio"); provided, however, that Buyer shall not be obligated to
commence the Offer if, on the date Buyer would otherwise be obligated to
commence the Offer, any of the conditions set forth in Sections 9.01(c), (f)
or (h) or Sections 9.02(a), (b), (c), (d), (e), (f), (g), (h) or (i) are not
then satisfied. If Buyer does not commence the Offer in reliance on the
proviso in the preceding sentence, the Company shall have the right to
reexercise the Tender Option in accordance with Section 11.01(c). The
obligation of Buyer to consummate the Offer once it is commenced and to
accept for exchange and to exchange shares of Company Common Stock tendered
pursuant to the Offer shall be subject only to the conditions set forth in
Article IX. Buyer expressly reserves the right to waive any such condition
(other than the conditions specified in Section 9.01, the waiver of which
must be consented to by the Company, and in Section 9.03, which may only be
waived by the Company), to increase the Exchange Ratio and to make any other
changes in the terms and conditions of the Offer. Notwithstanding the
foregoing, no change may be made which (i) decreases the number of shares of
Common Stock to be given in exchange per share of Company Common Stock, (ii)
changes the form of consideration to be paid in the Offer, (iii) reduces the
number of shares of Company Common Stock sought to be purchased in the
Offer, (iv) imposes conditions to the Offer in addition to those set forth
in Article IX, except those required by the City Code, the Exchange Act, the
NYSE or any other applicable laws, rules or regulations, (v) extends the
expiration date of the Offer or (vi) otherwise alters or amends any term of
the Offer in any manner materially adverse to the holders of shares of
Company Common Stock; provided, however, that subject to the right of the
parties to terminate this Agreement pursuant to Section 10.01, the Offer may
be extended (1) for any period to the extent required by law or by any rule,
regulation, interpretation or position of the SEC or the staff thereof or
the Takeover Panel applicable to the Offer, (2) for one or more periods of
not more than ten business days, but in no event for more than a total of 60
calendar days from the commencement of the Offer and (3) notwithstanding the
limitation in the previous clause (2), if a Higher Competing Offer is made
or a firm intention to make a Higher Competing Offer is publicly announced
as contemplated by paragraph 18 of the Undertaking, for such period or
periods as may be required to extend the Offer to the date such Higher
Competing Offer expires or is terminated; provided, however, that in no
event shall the Offer extend beyond December 31, 1997. Assuming the prior
satisfaction or waiver of the conditions of the Offer and subject to the
foregoing right to extend the Offer, Buyer shall deliver shares of Common
Stock in exchange for shares of Company Common Stock tendered pursuant to
Article III as soon as practicable in accordance therewith and as may be
required by the City Code, the Exchange Act, the NYSE or any other
applicable laws, rules or regulations.
(b) OFFER DOCUMENTS. As soon as practicable on the date of
commencement of the Offer, Buyer shall file with the SEC a Tender Offer
Statement on Schedule 14D-1 promulgated under the Exchange Act (together
with all amendments and supplements thereto, the "Schedule 14D-1") with
respect to the Offer, and take such steps as are reasonably necessary to
cause the Offer to Exchange to be disseminated to the holders of shares of
Company Common Stock as and to the extent required by applicable federal
securities laws. The Schedule 14D-1 shall contain an offer to exchange (the
"Offer to Exchange") and forms of the related letter of transmittal and any
related summary advertisement (the Schedule 14D-1, the Offer to Exchange and
such other documents as may be required by the City Code, the Exchange Act,
the NYSE or any other applicable laws, rules or regulations, together with
all
APP-A-39
<PAGE>
amendments and supplements thereto, the "Offer Documents"). Buyer shall use
its best efforts to distribute such Offer Documents and any other documents
required by law or this Agreement to all holders of shares of Company Common
Stock. Buyer and the Company shall correct promptly any information provided
by any of them for use in the Offer Documents which shall have become false
or misleading, and Buyer shall take all steps necessary to cause the
Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of shares of Company
Common Stock, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given a
reasonable opportunity to review and comment on the Offer Documents prior to
their being filed with the SEC, and Buyer will provide the Company and its
counsel in writing with any comments that Buyer receives from the SEC or its
staff with respect to the Offer Documents promptly after receipt of any such
comments.
(c) TENDER OPTION. At any time after the SEC declares the Registration
Statement effective, and prior to December 31, 1997, the Company shall have
the right to require that Buyer commence (within the meaning of Rule 14d-2
under the Exchange Act) the Offer (the "Tender Option"). The Tender Option
shall be exercised by written notice to Buyer.
(d) STOCK OPTIONS. The Offer will extend to all shares of Company
Common Stock which may be issued as a result of the exercise of outstanding
options with respect to Company Common Stock under the Company's existing
stock option plans ("Company Stock Options"). Except as provided pursuant to
Affiliate Agreements executed and delivered pursuant to Section 9.02(l), any
holder of Company Stock Options who (i) exercises his Company Stock Options
in whole or in part, (ii) receives Company Common Stock in connection with
such exercise, and (iii) receives Common Stock pursuant to the Offer in
exchange for that Company Common Stock shall be under no restriction from
the Buyer as to his ability to sell such Common Stock.
11.02 COMPANY ACTIONS.
(a) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 promulgated under the Exchange Act (together with all amendments and
supplements thereto, the "Schedule 14D-9") containing the recommendation of
the Board of Directors of the Company described in Section 1.01, except to
the extent the Board of Directors is legally obligated in the opinion of
counsel (which opinion shall be communicated to Buyer), to alter such
recommendation, and shall take such steps as are necessary to cause the
Schedule 14D-9 to be disseminated to the holders of shares of Company Common
Stock as and to the extent required by the City Code, the NYSE or any other
applicable laws, rules and regulations, including, without limitation,
applicable federal securities laws. The Company and Buyer shall amend or
correct promptly any information provided by any of them for use in the
Schedule 14D-9 which shall have become false or misleading, and the Company
shall take all steps necessary to cause the Schedule 14D-9 as so amended or
corrected to be filed with the SEC and disseminated to holders of shares of
Company Common Stock, in each case as and to the extent required by
applicable federal securities laws. Buyer and its counsel shall be given a
reasonable opportunity to review and comment on the Schedule 14D-9 prior to
its being filed with the SEC, and the Company will provide Buyer and its
counsel in writing with any comments that the Company receives from the SEC
or its staff with respect to the Schedule 14D-9 promptly after receipt of
any such comments.
(b) In connection with the Offer, the Company shall cause the
Depositary to furnish Buyer promptly with mailing labels containing the
names and addresses of all record holders of shares of Company Common Stock
and with security position listings of shares of Company Common Stock held
in stock depositories, each as of a recent date, together with all other
available listings and computer files containing names, addresses and
security position listings of record holders and beneficial owners of shares
of Company Common Stock. The Company shall furnish Buyer with such
additional information, including, without limitation, updated listings and
files of stockholders,
APP-A-40
<PAGE>
mailing labels and security position listings and such other assistance as
Buyer or its agents may reasonably request in communicating the Offer to
record and beneficial holders of shares of Company Common Stock. Subject to
the requirements of the City Code, the Securities Act, the Exchange Act, the
NYSE and any other applicable laws, rules or regulations, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the transactions contemplated by this
Agreement, Buyer shall hold in confidence the information contained in such
labels, listings and files, shall use such information only in connection
with the transactions contemplated by this Agreement, and, if this Agreement
shall be terminated in accordance with Section 10.01, shall deliver to the
Company all copies of, and any extracts or summaries from, such information
then in their possession or control.
(c) In connection with the Offer, the Company will furnish Buyer with
such information (which will be treated and held in confidence by Buyer
except to the extent required to be disclosed pursuant to the Offer or this
Agreement) and assistance as Buyer or its Representatives may reasonably
request in connection with the preparation of the Offer and communicating
the Offer to the record and beneficial holders of shares of Company Common
Stock and Company Deferred Stock.
ARTICLE XII
GENERAL PROVISIONS
12.01 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. The representations, warranties, covenants and agreements contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall not survive the consummation of the transactions contemplated hereby but
shall terminate at the Closing, except for the agreements contained in Article
III, Sections 4.12(i), 5.12(c), 6.03, 7.02, 8.06, 8.07 and 8.08 and this Article
XII of this Agreement, and in paragraphs 3, 4.3, 4.4, 15 and 19 of the
Undertakings, which shall survive the Closing.
12.02 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
or delivered by a nationally recognized overnight delivery service to the
parties at the following addresses or facsimile numbers:
If to Buyer, to:
MMI Companies, Inc.
540 Lake Cook Road
Deerfield, Illinois 60015-5290
Facsimile: (847) 940-2372
Attn: Wayne A. Sinclair
with a copy to:
Wildman, Harrold, Allen & Dixon
225 West Wacker Drive
Chicago, Illinois 60606
Facsimile No.: (312) 201-2555
Attn: Jerald P. Esrick
and to:
Clifford Chance
200 Aldersgate Street
London EC1A 4JJ England
Facsimile No.: +44 171 600 5555
Attn: Jeremy Brownlow
APP-A-41
<PAGE>
If to the Company, to:
Unionamerica Holdings plc
London Underwriting Centre
3 Minster Court, Mincing Lane
London EC3R 7DD
Facsimile No.: +44 171 617 5993
Attn: Trevor R. Smith
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Facsimile No.: (212) 424-8500
Attn: Joseph L. Seiler III
and to:
Lovell White Durrant
65 Holborn Viaduct
London, England EC1A 2DY
Facsimile No.: +44 171 248 4212
Attn: John Davidson
and to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Facsimile No.: (212) 757-3990
Attn: David R. Sicular
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 12.02, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section 12.02, be deemed given upon receipt, and
(iii) if delivered by mail or overnight delivery service in the manner described
above to the address as provided in this Section 12.02, be deemed given upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice,
request or other communication is to be delivered pursuant to this Section
12.02). Any party from time to time may change its address, facsimile number or
other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
12.03 ENTIRE AGREEMENT; INCORPORATION OF EXHIBITS. This Agreement
(together with all Exhibits and Schedules hereto which are incorporated herein
by this reference) supersedes all prior discussions and agreements among the
parties hereto with respect to the subject matter hereof and contains the sole
and entire agreement among the parties hereto with respect to the subject matter
hereof.
APP-A-42
<PAGE>
12.04 PUBLIC ANNOUNCEMENTS. Except as otherwise required by law or the
rules of any applicable securities exchange or national market system, so long
as this Agreement is in effect: (i) the Company will not, and will not permit
any of its Representatives to, issue or cause the publication of any press
release or make any other public announcement with respect to the transactions
contemplated by this Agreement without the consent of Buyer, which shall not be
unreasonably withheld or delayed; and (ii) Buyer will not, and will not permit
any of its Representatives to, issue or cause the publication of any press
release or make any other public announcement with respect to the transactions
contemplated by this Agreement without consulting the Company prior thereto.
Buyer and the Company will cooperate with each other in the development and
distribution of all press releases and other public announcements with respect
to this Agreement and the transactions contemplated hereby, and will furnish the
others with drafts of any such releases and announcements as far in advance as
practicable. Buyer and the Company agree that all such announcements shall be
made in compliance, where appropriate, with the City Code, the Securities Act,
the Exchange Act, the rules of the NYSE and any other applicable laws, rules or
regulations.
12.05 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as otherwise expressly
provided for herein, it is not the intention of the parties to confer
third-party beneficiary rights upon any other Person; except that the holders of
Company Common Stock shall be third-party beneficiaries of Sections 4.12(i),
5.12(c), 6.03 and 7.02.
12.06 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so will
be void. Subject to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties hereto and their
respective permitted successors and assigns.
12.07 HEADINGS. The headings used in this Agreement have been inserted for
convenience of reference only and do not define, modify or limit the provisions
hereof.
12.08 INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law or order, and
if the rights or obligations of any party hereto under this Agreement will not
be materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
12.09 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof. Notwithstanding the foregoing, the mandatory provisions
of English law and the provisions of the City Code affecting or defining the
obligations of Buyer, the Company, their stockholders or their directors in
connection with the transactions contemplated by this Agreement shall apply.
12.10 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specified terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
12.11 CERTAIN DEFINITIONS. As used in this Agreement:
"Act of 1992" has the meaning set forth in Section 4.12(b)(i).
APP-A-43
<PAGE>
"Acquisition Information" has the meaning set forth in Section 4.22.
"ADSs" has the meaning set forth in the first recital to this Agreement.
"affiliate" as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person; for purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of
voting securities, by contract or otherwise.
"Affiliates Agreement" has the meaning set forth in Section 8.15.
"Agreement" has the meaning set forth in the preamble to this Agreement.
"Alternative Proposal" has the meaning set forth in Section 6.02.
"Antitrust Division" has the meaning set forth in Section 8.04.
"Balance Sheet Date" has the meaning set forth in Section 4.12(a).
To "beneficially" own securities means such Person would be the
beneficial owner of such securities under Rule 13d-3 under the Exchange Act,
including securities which such Person has the right to acquire (whether
such right is exercisable immediately or only after the passage of time).
"business day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York, the State of Illinois or
London, England are authorized or obligated to close.
"Buy Back" has the meaning set forth in Section 5.12(c)(ii).
"Buyer" has the meaning set forth in the preamble to this Agreement.
"Buyer Employee Benefit Plan" has the meaning set forth in Section
5.13(b)(i).
"Buyer Financial Statements" has the meaning set forth in Section 5.05.
"Buyer Permits" has the meaning set forth in Section 5.10.
"Buyer Proxy Statement" has the meaning set forth in Section 5.09(a).
"Buyer SEC Reports" has the meaning set forth in Section 5.05.
"Buyer Stockholders' Meeting" has the meaning set forth in Section 8.03.
"Buyer's Designees" has the meaning set forth in Section 1.02(a).
"Cap" has the meaning set forth in Section 8.06(b).
"City Code" has the meaning set forth in Section 6.02.
"Closing" has the meaning set forth in Section 2.01.
"Closing Date" has the meaning set forth in Section 2.01.
"Code" has the meaning set forth in the second recital to this
Agreement.
"Common Stock" has the meaning set forth in the second recital to this
Agreement.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company Amendment" has the meaning set forth in Section 6.04.
"Company Certificates" has the meaning set forth in Section 3.01(b).
"Company Common Stock" has the meaning set forth in the first recital to
this Agreement.
APP-A-44
<PAGE>
"Company Deferred Stock" has the meaning set forth in the first recital
to this Agreement.
"Company Financial Statements" has the meaning set forth in Section
4.05.
"Company Permits" has the meaning set forth in Section 4.10.
"Company SEC Reports" has the meaning set forth in Section 4.05.
"Company Stock Options" has the meaning set forth in Section 11.01(d).
"Company Stockholders Meeting" has the meaning set forth in Section
6.04.
"Company Voting Debt" has the meaning set forth in Section 4.02(a).
"Confidential Information" means any information concerning the
businesses and affairs of Buyer, the Company or any of their respective
Subsidiaries, as appropriate, that is not already generally available to the
public.
"Contracts" has the meaning set forth in Section 4.04(a).
"Designated Affiliate" has the meaning set forth in Section 8.15.
"Depositary" means Morgan Guaranty Trust Company of New York, as
Depositary under the Deposit Agreement dated as of December 1, 1995, by and
among the Company, Morgan Guaranty Trust Company of New York, as Depositary,
and holders of American Depositary Receipts (as defined therein), as such
agreement is amended or restated from time to time.
"DGCL" has the meaning set forth in Section 9.01(a).
"Disclosed Schemes" has the meaning set forth in Section 4.13(a).
"Employee" has the meaning set forth in Section 4.13(a).
"ERISA" has the meaning set forth in Section 5.13(a).
"Event" has the meaning set forth in Section 4.12(a).
"Excess Shares" has the meaning set forth in Section 3.01(c).
"Excess Shares Trust" has the meaning set forth in Section 3.01(c).
"Exchange Act" has the meaning set forth in Section 1.02(b).
"Exchange Agent" has the meaning set forth in Section 3.01(a).
"Exchange Fund" has the meaning set forth in Section 3.01(a).
"Exchange Ratio" has the meaning set forth in Section 11.01(a).
"FTC" has the meaning set forth in Section 8.04.
"Governmental or Regulatory Authority" has the meaning set forth in
Section 4.04(a).
"Group Relief" has the meaning set forth in Section 4.12(a).
"HSR Act" has the meaning set forth in Section 4.04(b).
"Indemnified Parties" has the meaning set forth in Section 8.06(a).
"Intellectual Property" means patents, patent applications, trademarks,
trade names, trademark registrations, service marks, service names, logos,
copyrights, copyright registrations and applications therefor, and licenses
or other rights in respect thereof.
"knowledge" means actual knowledge of executive officers of the Company
or Buyer or, where appropriate, certain officers of their respective
Subsidiaries.
APP-A-45
<PAGE>
"laws" has the meaning set forth in Section 4.04(b).
"Lien" has the meaning set forth in Section 4.02(b).
Any reference to any event, change, breach or effect being "material" or
"materially adverse" or having a "material adverse effect" on or with
respect to an entity (or group of entities taken as a whole) means such
event, change or effect is material or materially adverse, as the case may
be, to the business, financial condition or results of operations of such
entity (or of such group of entities taken as a whole).
"Material Contracts" has the meaning set forth in Section 4.19.
"Minimum Condition" has the meaning set forth in Section 9.01(b).
"NYSE" has the meaning set forth in Section 3.01(c).
"Offer" has the meaning set forth in Section 11.01(a).
"Offer Consideration" has the meaning set forth in Section 11.01(a).
"Offer Documents" has the meaning set forth in Section 11.01(b).
"Offer to Exchange" has the meaning set forth in Section 11.01(b).
"Options" has the meaning set forth in Section 4.02(a).
"orders" has the meaning set forth in Section 4.04(a).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Person" means an individual, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated association, or governmental entity (or any department,
agency or political subdivision thereof) or any other entity.
"Plan" has the meaning set forth in Section 5.13(b)(ii).
"Preferred Stock" has the meaning set forth in Section 5.02(a).
"Properties" has the meaning set forth in Section 4.17(b).
"Registration Statement" has the meaning set forth in Section 5.04(b).
"Relief" has the meaning set forth in Section 4.12(a).
"Representatives" of any entity means such entity's directors, officers,
employees, legal, investment banking and financial advisors, accountants and
any other agents and representatives.
"Return" has the meaning set forth in Section 4.12(b).
"Schedule 14D-1" has the meaning set forth in Section 11.01(b).
"Schedule 14D-9" has the meaning set forth in Section 11.02(a).
"SEC" has the meaning set forth in Section 4.04(b).
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge or other security interest, other than (a) mechanic's, materialmen's
and similar liens, (b) liens for taxes not yet due and payable or for taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments
under capital lease arrangements and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of
money.
APP-A-46
<PAGE>
"Securities Act" has the meaning set forth in Section 4.05.
"Selling Stockholders" has the meaning set forth in Section 8.14.
"Stockholders' Approval" has the meaning set forth in Section 8.03.
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which more than
fifty percent (50%) of either the equity interests in, or the voting control
of, such corporation or other organization is, directly or indirectly
through Subsidiaries or otherwise, beneficially owned by such party.
"Takeover Panel" has the meaning set forth in Section 10.01.
"Tax" has the meaning set forth in Section 4.12(a).
"Tax Authority" has the meaning set forth in Section 4.12(a).
"taxes" has the meaning set forth in Section 5.12(b).
"Taxes Act" has the meaning set forth in Section 4.12(a).
"Tender Option" has the meaning set forth in Section 11.01(c).
"Transaction" has the meaning set forth in the first recital to this
Agreement.
"Transaction Expenses" means the total amount actually paid by a Person
for accounting, legal, actuarial, due diligence, financial and other
advisors services, and Governmental or Regulatory Authority filing fees,
each in connection with the transactions contemplated by this Agreement.
"Undertaking" has the meaning set forth in Section 8.14.
"VAT" has the meaning set forth in Section 4.12(a).
"VAT Legislation" has the meaning set forth in Section 4.12(a).
"Voting Debt" has the meaning set forth in Section 5.02(a).
12.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers or other authorized
persons, all as of the date first above written.
MMI COMPANIES, INC.
By: /s/ B. FREDERICK BECKER
-----------------------------------------
Name: B. Frederick Becker
Title: Chairman and Chief Executive
Officer
UNIONAMERICA HOLDINGS PLC
By: /s/ PETER J. COOPER
-----------------------------------------
Name: Peter J. Cooper
Title: Chief Financial Officer
APP-A-47
<PAGE>
APPENDIX B
OPINION OF SMITH BARNEY INC., FINANCIAL ADVISOR TO MMI
CONFIDENTIAL
June 24, 1997
The Board of Directors
MMI Companies, Inc.
540 Lake Cook Road
Deerfield, Illinois 60015
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to MMI Companies, Inc. ("MMI") of the consideration proposed to be paid by
MMI pursuant to the terms and subject to the conditions set forth in an
Acquisition Agreement (the "Acquisition Agreement") to be entered into by and
among MMI and Unionamerica Holdings plc ("Unionamerica"). As more fully
described in the Acquisition Agreement, (i) MMI would acquire all of the
American Depository Shares, representing all of the ordinary shares, nominal
value $0.0448 per share, of Unionamerica (the "Unionamerica Common Stock")
through (x) an offer to purchase all of such shares of Unionamerica Common Stock
(the "Offer") and (y) the subsequent compulsory acquisition of any remaining
shares of Unionamerica Common Stock and (ii) pursuant to the Offer each
outstanding share of Unionamerica Common Stock would be exchanged for the right
to receive 0.836 shares (the "Exchange Ratio") of the common stock, par value
$0.10 per share, of MMI (the "MMI Common Stock")(collectively, the "Proposed
Transaction").
In arriving at our opinion, we reviewed a draft of the Acquisition Agreement and
held discussions with certain senior officers, directors and other
representatives and advisors of MMI and certain senior officers and other
representatives and advisors of Unionamerica concerning the businesses,
operations and prospects of MMI and Unionamerica. We examined certain publicly
available business and financial information relating to MMI and Unionamerica as
well as certain financial forecasts and other information and data for MMI and
Unionamerica which were provided to or otherwise discussed with us by the
respective managements of MMI and Unionamerica, including information relating
to certain strategic implications and operational benefits anticipated to result
from the Proposed Transaction. We reviewed the financial terms of the Proposed
Transaction as set forth in the Acquisition Agreement in relation to, among
other things: current and historical market prices and trading volumes of MMI
Common Stock and Unionamerica Common Stock; the historical and projected
earnings and other operating data of MMI and Unionamerica; and the
capitalization and financial condition of MMI and Unionamerica. We considered,
to the extent publicly available, the financial terms of similar transactions
recently effected which we considered relevant in evaluating the Proposed
Transaction and analyzed certain financial, stock market and other publicly
available information relating to the business of other companies whose
operations we considered relevant in evaluating those of MMI and Unionamerica.
We also evaluated the potential pro forma financial impact of the Proposed
Transaction on MMI. In addition to the foregoing, we conducted such other
analyses and examinations and considered such other financial, economic and
market criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise reviewed by or
discussed with us. We also have assumed, with your consent, that the final terms
of the Acquisition Agreement reviewed by us in draft form will not vary
materially from the draft reviewed by us. With respect to financial forecasts
and other information and data provided to or otherwise reviewed by or discussed
with us, we have been advised by the managements of MMI and Unionamerica that
such forecasts and other information and data were reasonably prepared on bases
reflecting the best currently
APP-B-1
<PAGE>
available estimates and judgments of the respective managements of MMI and
Unionamerica as to the future financial performance of MMI and Unionamerica and
the strategic implications and operational benefits anticipated to result from
the Proposed Transaction. We have assumed, with your consent, that the Proposed
Transaction will be treated as a pooling of interests in accordance with GAAP
and as a tax-free reorganization for federal income tax purposes. Our opinion,
as set forth herein, relates to the relative values of MMI and Unionamerica. We
are not expressing any opinion as to what the value of the MMI Common Stock
actually will be when issued pursuant to the Proposed Transaction or the price
at which the MMI Common Stock will trade subsequent to the Proposed Transaction.
We have not made or, with the exception of certain reserve reports relating to
Unionamerica, been provided with an independent evaluation or appraisal of the
assets, liabilities (contingent or otherwise) or reserves of MMI or Unionamerica
nor have we made any physical inspection of the properties or assets of MMI or
Unionamerica. We have not been asked to consider, and our opinion does not
address, the relative merits of the Proposed Transaction as compared to any
alternative business strategies that might exist for MMI or the effect of any
other transaction in which MMI might engage. Our opinion is necessarily based
upon information available to us, and financial, stock market and other
conditions and circumstances existing and disclosed to us, as of the date
hereof.
Smith Barney has been engaged to render financial advisory services to MMI in
connection with the Proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Proposed Transaction. We also will receive a fee upon the delivery of this
opinion. In the ordinary course of our business, we and our affiliates may
actively trade or hold the securities of MMI and Unionamerica for our own
account or for the account of our customers and, accordingly, may at any time
hold a long or short position in such securities. We have in the past provided
financial advisory and investment banking services to MMI unrelated to the
Proposed Transaction, including serving as a managing underwriter in the initial
public offering of MMI Common Stock in June 1993 and the subsequent public
offering of MMI Common Stock in September 1996, for which services we have
received compensation. In addition, we and our affiliates (including Travelers
Group Inc. and its affiliates) may maintain relationships with MMI and
Unionamerica.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of MMI in its evaluation of the Proposed
Transaction, and our opinion is not intended to be and does not constitute a
recommendation to any shareholder as to how such shareholder should vote on any
matter relating to the Proposed Transaction. Our opinion may not be published or
otherwise used or referred to, nor shall any public reference to Smith Barney be
made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to MMI.
Very truly yours,
SMITH BARNEY INC.
<TABLE>
<S> <C> <C>
By: /s/ SMITH BARNEY INC.
-----------------------------------------
</TABLE>
APP-B-2
<PAGE>
APPENDIX C
OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
FINANCIAL ADVISOR TO UNIONAMERICA
June 25, 1997
Board of Directors
Unionamerica Holdings plc
3 Minster Court
Mincing Lane
London EC3R 7DD
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of view
to the stockholders of Unionamerica Holdings plc (the "Company") of the
consideration to be received by such stockholders pursuant to the terms of the
Acquisition Agreement, dated as of June 25, 1997 (the "Agreement"), by and
between MMI Companies, Inc., a Delaware corporation ("MMI"), and the Company.
Pursuant to the Agreement, MMI will commence a tender offer (the "Offer") to
acquire all of the issued and outstanding American Depositary Shares ("ADSs"),
representing all of the ordinary shares, nominal value $0.0448 per share, of the
Company (such ADSs, "Company Common Stock") for 0.836 shares (the "Exchange
Ratio") of common stock, par value $0.10 per share ("MMI Common Stock") of MMI,
per share of Company Common Stock.
In arriving at our opinion, we have reviewed the Agreement. We also have
reviewed financial and other information that was publicly available or
furnished to us by the Company and MMI including information provided during
discussions with their respective managements. Included in the information
provided during discussions with the respective managements were certain
financial projections of the Company for the years ending December 31, 1997 and
December 31, 1998 prepared by the management of the Company and certain
financial projections of MMI for the years ending December 31, 1997 and December
31, 1998 prepared by the management of MMI. In addition, we have compared
certain financial and securities data of the Company and MMI with various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of the Company Common Stock and MMI Common
Stock, reviewed prices and premiums paid in certain other business combinations
and conducted such other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and MMI or their
respective representatives, or that was otherwise reviewed by us. With respect
to the financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company and MMI as to the
future operating and financial performance of the Company and MMI, respectively.
We have not assumed any responsibility for making an independent evaluation of
the Company's assets or liabilities or for making any independent verification
of any of the information reviewed by us. We have relied as to certain legal
matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the proposed Transaction and the other business strategies being
considered by the Company's Board of Directors, nor does it address
APP-C-1
<PAGE>
the Board's decision to proceed with the proposed Transaction. Our opinion does
not constitute a recommendation to any holder of Company Common Stock as to
whether such holder should tender into the proposed Transaction or as to the
position of any holder who does not tender shares pursuant to the Offer.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. DLJ has performed
investment banking and other services for the Company in the past and has been
compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio to be offered to the holders of Company
Common Stock is fair to such stockholders from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<TABLE>
<S> <C> <C>
By: /s/ MARK K. GORMLEY
-----------------------------------------
Mark K. Gormley
MANAGING DIRECTOR
</TABLE>
APP-C-2
<PAGE>
APPENDIX D
CERTAIN MARKET, DIVIDEND AND EXCHANGE RATE INFORMATION
1. MARKET AND PRICE DATA
The following table sets forth the closing price for a Unionamerica ADS
and a share of MMI Common Stock on the NYSE for the first dealing day
that the NYSE was open for business in each month from January 1997 to
July 1997, and for June 24, 1997 (being the last trading day prior to the
announcement that MMI and Unionamerica had entered into the Acquisition
Agreement), and for July 18, 1997 (being the latest practicable trading
day prior to the filing of this Prospectus with the Commission):
<TABLE>
<CAPTION>
UNIONAMERICA ADSS MMI COMMON STOCK
DATE PRICE ($)(1) PRICE ($)(1)
- ---------------------------------------------------- ------------------- -------------------
<S> <C> <C>
January 2, 1997..................................... 18.25 30.63
February 3, 1997.................................... 16.75 30.50
March 3, 1997....................................... 16.13 23.00
April 1, 1997....................................... 17.25 24.25
May 1, 1997......................................... 16.75 27.88
June 2, 1997........................................ 16.75 23.00
July 1, 1997........................................ 20.75 26.38
June 24, 1997....................................... 19.50 26.50
July 18, 1997....................................... 21.69 26.82
</TABLE>
- ------------------------
(1) Rounded up to the nearest cent.
2. DIVIDEND POLICY
The policy of the MMI Board is to pay regular quarterly cash dividends.
The declaration and payment of dividends is subject to the discretion of
the MMI Board and will depend upon general business conditions, legal and
contractual restrictions on the payment of dividends and other factors
that the MMI Board deems relevant.
As an insurance holding company, MMI depends in large part on dividends
and other payments from its Subsidiaries for the payment of cash
dividends to MMI stockholders. In the case of MMI's insurance
Subsidiaries, such payments are restricted by insurance laws, and
insurance regulators have authority in certain circumstances to prohibit
payments of dividends and other amounts by MMI's insurance Subsidiaries
that would otherwise be permitted without regulatory approval. MMI's bank
credit agreement also restricts the payment of dividends.
3. EXCHANGE RATE INFORMATION
The following table shows, for the periods and dates indicated, certain
information regarding the exchange rate for pounds sterling, expressed in
dollars per L1.00:
<TABLE>
<CAPTION>
DAILY
AVERAGE AVERAGE
FINANCIAL YEAR ENDED DECEMBER 31 PERIOD END RATE* RATE** HIGH LOW
- ---------------------------------------------------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
1992................................................ 1.51 1.77 1.76 2.00 1.51
1993................................................ 1.48 1.50 1.50 1.59 1.42
1994................................................ 1.57 1.53 1.54 1.64 1.46
1995................................................ 1.55 1.58 1.58 1.64 1.53
1996................................................ 1.71 1.56 1.57 1.71 1.49
</TABLE>
- ------------------------
* The daily average of the Noon Buying Rates.
** The average of the Noon Buying Rates on the last day of each month during
the period.
APP-D-1
<PAGE>
APPENDIX E
CERTAIN ADDITIONAL INFORMATION REQUIRED UNDER THE CITY CODE
1. RESPONSIBILITY
(a) MMI
The Directors of MMI (whose names are set forth in paragraph 2(a) below)
accept responsibility for the information contained in this Prospectus,
except for the information in this Prospectus concerning Unionamerica,
the Directors of Unionamerica and their immediate families, for which the
Directors of Unionamerica accept responsibility.
Subject as aforesaid, to the best of the knowledge and belief of the
Directors of MMI (who have taken all reasonable care to ensure that such
is the case), the information contained in this Prospectus for which they
are responsible is in accordance with the facts and does not omit
anything likely to affect the import of such information.
(b) UNIONAMERICA
The Directors of Unionamerica (whose names are set forth in paragraph
2(b) below) accept responsibility for the information contained in this
Prospectus relating to Unionamerica and its Subsidiaries, themselves and
their immediate families. To the best of the knowledge and belief of the
Directors of Unionamerica (who have taken all reasonable care to ensure
that such is the case), the information contained in this Prospectus for
which they are responsible is in accordance with the facts and does not
omit anything likely to affect the import of such information.
The foregoing statements are included solely to comply with the
requirements of Rule 19.2 of the City Code and shall not be deemed to
establish or expand any liability under the Securities Act, under which
the Directors of MMI may have liability for the Registration Statement,
or any other U.S. securities laws, beyond that imposed by the Securities
Act or such other laws, nor shall they be deemed to establish liability
under the laws of any state of the U.S.
2. DIRECTORS
(a) The Directors of MMI and their respective functions are as follows:
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR
B. Frederick Becker
DIRECTORS
Richard R. Barr
George B. Caldwell
K. James Ehlen
F. Laird Facey
William M. Kelley
Andrew D. Kennedy
Timothy R. McCormick
Gerald L. McManis
Scott S. Parker
Edward C. Peddie
Joseph D. Sargent
The business address of all the MMI Directors and the principal head
office of MMI is 540 Lake Cook Road, Deerfield, Illinois 60015-5290 U.S.A.
APP-E-1
<PAGE>
(b) The Directors of Unionamerica and their respective functions are as
follows:
EXECUTIVE DIRECTORS
Ian G. Sinclair
Peter J. Cooper
NON-EXECUTIVE DIRECTORS
Sir Christopher Leaver
Stanislas M. Yassukovich
INVESTOR DIRECTORS
Steven B. Gruber
Robert A. Spass
Paul H. Warren
The business address of all the Unionamerica Directors and the head office
of Unionamerica is 3 Minster Court, Mincing Lane, London EC3R 7DD, England.
3. DISCLOSURES OF INTERESTS AND DEALINGS
(a) The following persons, all being employees of Unionamerica (Ian G.
Sinclair and Peter J. Cooper also being Directors of Unionamerica), have
irrevocably undertaken to accept, or procure the acceptance of, the Offer
in respect of not less than the following Unionamerica ADSs representing
3.7% of the issued share capital of Unionamerica. The irrevocable
Undertakings also provide that the Directors shall accept (i) the Offer
in respect of the following number of Options upon the exercise (if any)
of such Options; or (ii) the proposals being made to Option holders under
the Unionamerica Share Option Schemes in respect of such Options.
<TABLE>
<CAPTION>
UNIONAMERICA ADSS
NAME UNIONAMERICA ADSS UNDER OPTION
- ----------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Ian G. Sinclair...................................... 120,977 215,930
Peter J. Cooper...................................... 59,902 116,926
Hugh B. Jago......................................... 37,200 80,092
Andrew E. Marks...................................... 25,476 38,931
Timothy P. Open...................................... 15,882 43,853
Hugh C. Evans........................................ 15,782 43,853
Howard G. Eyre....................................... 12,750 26,326
Alasdair G. Bishop................................... 11,048 33,743
Anthony B. Withersby................................. 6,313 17,923
Roland J. James...................................... 6,250 14,278
Stuart C. Willoughby................................. 3,995 12,867
Trevor R. Smith...................................... 2,354 5,711
</TABLE>
APP-E-2
<PAGE>
Irrevocable Undertakings have also been given by the following to accept
the offer in respect of not less than the following Unionamerica ADSs
representing 46.9% of the issued share capital of Unionamerica.
<TABLE>
<CAPTION>
NAME UNIONAMERICA ADSS
- -------------------------------------------------------------------------- ------------------
<S> <C>
International Insurance Investors, L.P.................................... 1,806,920
IIA Management............................................................ 133,929
UA Partners, L.P.......................................................... 1,147,355
UA Partners II, L.P....................................................... 498,850
Acadia Partners, L.P...................................................... 375,000
</TABLE>
All of the irrevocable Undertakings referred to above cease to be binding
in the event that a third party makes, or publicly announces a firm
intention to make, a higher competing offer for Unionamerica and MMI does
not prior to midnight on the tenth business day after the day on which
such higher competing offer is made or, if earlier, publicly announced,
announce a revised offer on terms which provide, in the reasonable
opinion of DLJ, a substantially equivalent or greater consideration than
the higher competing offer, and a $5,000,000 fee is paid to MMI.
(b) The interests of the Directors of Unionamerica and their immediate
families, all of which are beneficial, in Unionamerica ADSs as shown on
July 18, 1997 (the latest practicable date prior to the filing of this
Prospectus with the Commission), in the register of Unionamerica
Directors' interests maintained under the provisions of Sections 324 to
328 of the Companies Act were as follows:
<TABLE>
<CAPTION>
OPTIONS OVER UNIONAMERICA ADSS
-------------------------------
EXERCISE EXERCISE
--------- --------------------
NAME UNIONAMERICA ADSS NUMBER PERIOD PRICE
- ------------------------------------------ ------------------ --------- --------- ---------
<S> <C> <C> <C> <C>
Ian G. Sinclair........................... 120,977 100,840 9/ 9/03 $ 4.48
115,090 7/23/06 15.50
Peter J. Cooper........................... 52,902 54,622 9/ 9/03 4.48
62,304 7/23/06 15.50
Robert A. Spass........................... 46,189 -- -- --
Steven B. Gruber.......................... -- -- -- --
Paul H. Warren............................ 27,234 -- -- --
Sir Christopher Leaver.................... -- -- -- --
Stanislas M. Yassukovich.................. -- -- -- --
</TABLE>
As at July 18, 1997, none of the Directors of Unionamerica had any
non-beneficial interests in the share capital of Unionamerica, other than
Stanislas M. Yassukovich who had a non-beneficial interest in 2,000 Unionamerica
ADSs held in a trust for which he serves as the executor.
(c) There have been no dealings for value by current Directors of
Unionamerica in Unionamerica ADSs during the disclosure period. Philip
Marcell, a former Director of Unionamerica, sold 67,131 Unionamerica ADSs
on June 27, 1997.
APP-E-3
<PAGE>
(d) The interests of Directors of MMI and their immediate families, all of
which are beneficial (save where indicated), in MMI Common Stock as shown
on July 18, 1997 (the latest practicable trading day prior to the filing
of this Prospectus with the Commission) were as follows:
<TABLE>
<CAPTION>
OPTIONS OVER MMI COMMON STOCK
-------------------------------------------------
END OF
MMI COMMON EXERCISE
NAME STOCK DATE OF GRANT NUMBER PERIOD PRICE ($)
- ---------------------------------------------- ---------------- ------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
B. Frederick Becker........................... 100,874.16 06/24/93 106,875 6/23/03 13.50
04/21/94 143,000 4/20/04 13.125
02/26/97 25,000 2/25/07 29.25
Richard R. Barr............................... -- 06/24/93 4,125 6/23/03 13.50
04/21/94 1,375 4/20/04 13.13
04/19/95 1,375 4/18/05 18.625
04/18/96 1,375 4/17/06 27.44
04/17/97 1,375 4/16/07 22.75
George B. Caldwell............................ 18,557 06/24/93 4,125 6/23/03 13.50
04/21/94 1,375 4/20/04 13.125
04/19/95 1,375 4/18/05 18.625
04/18/96 1,375 4/17/06 27.44
04/17/97 1,375 4/16/07 22.75
K. James Ehlen................................ -- 01/01/97 4,125 12/31/06 32.25
F. Laird Facey................................ 24,592 06/24/93 4,125 6/23/03 13.50
04/21/94 1,375 4/20/04 13.125
04/19/95 1,375 4/18/05 18.625
04/18/96 1,375 4/17/06 27.44
04/17/97 1,375 4/16/07 22.75
William M. Kelley............................. 300 01/07/94 4,125 1/06/04 13.50
04/21/94 1,375 4/20/04 13.125
04/19/95 1,375 4/18/05 18.625
04/18/96 1,375 4/17/06 27.44
04/17/97 1,375 4/16/07 22.75
Andrew D. Kennedy............................. 459 04/18/96 4,125 4/17/06 27.75
04/17/97 1,375 4/16/07 22.75
Timothy R. McCormick.......................... 2,076 06/24/93 4,125 6/23/03 13.50
04/21/94 1,375 4/20/04 13.125
04/19/95 1,375 4/18/05 18.625
04/18/96 1,375 4/17/06 27.44
04/17/97 1,375 4/16/07 22.75
Gerald L. McManis............................. 189,278.42(1) 02/22/95 5,000 2/21/05 15.50
02/28/96 8,000 2/27/06 24.25
02/26/97 2,000 2/25/07 22.75
</TABLE>
APP-E-4
<PAGE>
<TABLE>
<CAPTION>
OPTIONS OVER MMI COMMON STOCK
-------------------------------------------------
END OF
MMI COMMON EXERCISE
NAME STOCK DATE OF GRANT NUMBER PERIOD PRICE ($)
- ---------------------------------------------- ---------------- ------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Scott S. Parker............................... -- 06/24/93 4,125 6/23/03 13.50
04/21/94 1,375 4/20/04 13.13
04/19/95 1,375 4/18/05 18.625
04/18/96 1,375 4/17/06 27.44
04/17/97 1,375 4/16/07 22.75
Edward C. Peddie.............................. 2,310 06/24/93 4,125 6/23/03 13.50
04/21/94 1,375 4/20/04 13.125
04/19/95 1,375 4/18/05 18.625
04/18/96 1,375 4/17/06 27.44
04/17/97 1,375 4/16/07 22.75
Joseph D. Sargent............................. 4,420 06/24/93 4,125 6/23/03 13.50
04/21/94 1,375 4/20/04 13.13
04/19/95 1,375 4/18/05 18.625
04/18/96 1,375 4/17/06 27.44
04/17/97 1,375 4/16/07 22.75
</TABLE>
Note 1: This shareholding includes 3,500 shares held by a closely-held
corporation to which Gerald L. McManis disclaims beneficial
ownership.
Other than as set out above, as at July 18, 1997, none of the
Directors of MMI had any non-beneficial interests in the share
capital of MMI.
(e) There have been no dealings for value by Directors of MMI in MMI Common
Stock during the disclosure period save as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF MMI
COMMON
DIRECTOR STOCK PRICE DATE
- ----------------------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
B. Frederick Becker.......... Purchase 100 30.75 10/18/96
Option Grant 25,000 29.25 2/26/97
Purchase 1,000 22.625 5/15/97
Disposition(1) 50,000 -- 6/5/97
Purchase(2) 759.94 -- as of 12/31/96
Disposition(3) 884.49 -- as of 12/31/96
Richard R. Barr.............. Option Grant 1,375 22.75 4/17/97
George B. Caldwell........... Purchase 3,000 24.625 3/11/97
Option Grant 1,375 22.75 4/17/97
K. James Ehlen............... Option Grant 4,125 32.25 1/1/97
F. Laird Facey............... Option Grant 1,375 22.75 4/17/97
Purchase 1,000 25.00 3/7/97
Purchase 1,000 22.00 5/9/97
William M. Kelley............ Option Grant 1,375 22.75 4/17/97
</TABLE>
APP-E-5
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF MMI
COMMON
DIRECTOR STOCK PRICE DATE
- ----------------------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Andrew D. Kennedy............ Purchase 390 30.875 10/9/96
Purchase 36 31.125 12/17/96
Purchase 33 32.125 1/17/97
Option Grant 1,375 22.75 4/17/97
Timothy R. McCormick......... Option Grant 1,375 22.75 4/17/97
Gerald L. McManis............ Option Grant 2,000 22.75 2/26/97
Purchase(2) 12.51 -- as of 12/31/96
Purchase(3) 391.99 -- as of 12/1/96
Scott S. Parker.............. Option Grant 1,375 22.75 4/17/97
Edward C. Peddie............. Option Grant 1,375 22.75 4/17/97
Joseph D. Sargent............ Option Grant 1,375 22.75 4/17/97
</TABLE>
- ------------------------
(1) Non-taxable transfer for estate planning purposes.
(2) Aggregate acquisitions of MMI Common Stock during calendar year 1996 under
MMI's Employee Stock Investment Plan.
(3) Aggregate of acquisitions and/or dispositions of MMI Common Stock during
calendar year 1996 under the MMI Companies, Inc. Savings and Profit Sharing
Plan (401(k)).
(f) Save as otherwise disclosed in this Appendix E:
(i) MMI owns no Unionamerica Securities;
(ii) no Director of MMI or Unionamerica is interested (as defined in
Parts VI and X of the Companies Act) in relevant securities (as defined
below);
(iii) no Person acting in concert with MMI or Unionamerica (as
defined in the City Code) owns or controls any relevant securities;
(iv) no Person who has irrevocably committed himself to accept the
Offer owns or controls any relevant securities;
(v) Unionamerica owns no shares of MMI Common Stock;
(vi) save as disclosed below, no Subsidiary of Unionamerica, nor any
pension fund of Unionamerica or of any of its Subsidiaries, nor any bank,
stockbroker, financial or other professional advisor (excluding exempt
market-makers) to Unionamerica or its Subsidiaries or any Persons
controlling, controlled by, or under the same control as, any such bank,
stockbroker, financial or other professional advisor, owns or controls
relevant securities; and
(vii) no Person mentioned in subparagraphs (i) to (v) above has dealt
for value in relevant securities during the disclosure period and no
Person mentioned in subparagraph (vi) has dealt for value in relevant
securities between June 25, 1996 and July 18, 1997 (the latest
practicable trading day prior to the filing of this Prospectus with the
Commission).
(g) For the purposes of the above:
(i) "relevant securities" include:
(A) Unionamerica Securities;
APP-E-6
<PAGE>
(B) securities convertible into Unionamerica Securities, rights
to subscribe for Unionamerica Securities and options for Unionamerica
Securities;
(C) equity share capital of MMI;
(D) securities of MMI which carry substantially the same rights
as those to be issued under the Offer;
(E) securities convertible into the securities referred to in
clauses (C) or (D) above, rights to subscribe for securities referred
to in clauses (C) or (D) above and options (including traded options)
in respect of the securities referred to in clauses (C) or (D) above;
and
(F) derivatives in respect of any of the forgoing.
(ii) "bank" means any bank whose relationship to any relevant party
is not solely the provision of normal commercial banking services or such
services in connection with the Offer as handling acceptances and other
registration work; and
(iii) "disclosure period" means the period commencing on June 25,
1996 and ending on July 18, 1997 being respectively the date 12 months
preceding the announcement that MMI and Unionamerica had entered into the
Acquisition Agreement and the latest practicable trading day prior to the
filing of this Prospectus with the Commission.
(iv) "derivatives" include any financial product whose value in
whole or in part is determined directly or indirectly by reference to the
price of an underlying security but which does not include the
possibility of delivery of such underlying security.
(h) In the ordinary course of business, Smith Barney actively trades the
equity securities of Unionamerica and MMI for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long
or short position in such securities.
(i) Wellington Management Company, LLP has a beneficial interest in
1,185,940 shares of MMI Common Stock, representing 10.10% of the issued
share capital of MMI.
4. Service Contracts of Unionamerica Directors
(a) Details of the service contracts of Unionamerica Executive Directors
with Unionamerica are as follows:
UA Management Company, a Subsidiary of Unionamerica which manages the
operations of Unionamerica, has entered into a separate service contract
(each, a "Service Contract" and collectively, the "Service Contracts") with
each of Peter J. Cooper and Ian G. Sinclair, pursuant to which Mr. Cooper is
employed as Managing Director--Finance and Administration and Mr. Sinclair
as Chief Executive Officer. UA Management Company has agreed to employ each
of Mr. Cooper and Mr. Sinclair until the earlier to occur (i) of the
termination of his employment by UA Management Company upon not less than
three months' written notice or (ii) the day upon which he attains the age
of 65 years or such other age as may be determined by the Unionamerica Board
as his retirement age.
The base salaries of Messrs. Cooper and Sinclair for the years ended
March 31, 1997 and March 31, 1998 are set forth in the table below. Messrs.
Cooper and Sinclair are also entitled to participate in Unionamerica's
pension, health insurance, profit sharing and incentive plans from time to
time, to be reimbursed for out of pocket expenses incurred in the course of
their employment, and to receive the use of company automobiles. Bonuses
paid to Messrs. Cooper and Sinclair under Unionamerica's profit sharing and
incentive plans for the year ended March 31, 1997 are set forth in the table
below.
APP-E-7
<PAGE>
Each of Mr. Cooper and Mr. Sinclair can terminate his employment upon
not less than two months' written notice to UA Management Company. UA
Management Company can terminate his employment at any time with or without
cause. If UA Management Company terminates his employment with cause, he is
entitled to receive only accrued but unpaid salary as of the date of
termination. If UA Management Company terminates his employment without
cause, he is entitled to receive a payment in lieu of salary and other
benefits for three months. In addition, each of Mr. Sinclair and Mr. Cooper
has agreed (i) for the period of six months after termination of his
employment, not to entice certain employees of Unionamerica away from
Unionamerica and not to solicit certain clients of Unionamerica and (ii) for
the period of four months after termination of employment, not to engage in
any competing business in the London market.
<TABLE>
<CAPTION>
PRESENT PREVIOUS
ANNUAL ANNUAL BONUS FOR
REMUNERATION REMUNERATION FISCAL 1996
(YEAR TO (YEAR TO (YEAR TO
DATE OF MARCH 31, MARCH 31, MARCH 31,
DIRECTOR CONTRACT 1998) 1997) 1997)
- --------------------------------------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Peter J. Cooper.............................. 09/10/93 L119,300 L114,700 L172,970
Ian G. Sinclair.............................. 09/10/93 L257,920 L248,000 L298,600
</TABLE>
(b) The non-Executive Directors, Sir Christopher Leaver and Stanislas
Yassukovich, have no special arrangements with Unionamerica.
(c) Peter J. Cooper and Ian G. Sinclair, in common with all other employees
of Unionamerica, are employed by UA Management Company, a wholly-owned
subsidiary of Unionamerica. No Director of Unionamerica has any other
service contract or other arrangement with any Subsidiary of
Unionamerica.
(d) Save as disclosed above or in paragraph (e) below, there are no
contracts of service between any Director of Unionamerica and
Unionamerica or any of its Subsidiaries having more than 12 months to
run, and no such contract has been entered into or amended or replaced
within the six months preceding the date of this Prospectus.
(e) The current Non-Executive Directors of Unionamerica (Stanislas
Yassukovich and Sir Christopher Leaver) intend to resign their
directorships as soon as practicable following successful completion of
the Offer. In addition, the Investor Directors (Robert A. Spass and Paul
H. Warren) will upon completion of the Offer cease automatically to be
directors of Unionamerica as a result of the operation of the provisions
of Article 87 of the Unionamerica Articles, and Steven B. Gruber intends
to resign his directorship as soon as practicable following successful
completion of the offer.
5. MANAGEMENT AND EMPLOYEES
It is MMI's present intention to continue the existing management and
business plans of Unionamerica after the Proposed Acquisition, and to continue
to operate Unionamerica as a distinct business entity at its present location in
London. MMI intends to honor the laws of the U.K. with respect to employment
rights.
6. MATERIAL CONTRACTS
(a) The following contracts (not being entered into in the ordinary course
of business) have been entered into by Unionamerica or its Subsidiaries
within the two years prior to execution of the Acquisition Agreement and
are or may be material:
The following contracts (not being contracts entered into in the ordinary
course of business) have been entered into by Unionamerica or its Subsidiaries
within the two years immediately preceding June 25, 1997, and since June 25,
1997, up to the date hereof and are or may be material:
APP-E-8
<PAGE>
(i) The Acquisition Agreement.
(ii) Agreement for the sale and purchase of shares in JMA Holdings
Limited ("JMAHL") dated July 23, 1997, between various individuals named
in the Agreement, UA Combined Investment Company Limited ("UACIC"') and
Unionamerica Acquisition Company Limited ("UAC")(the "Share Purchase
Agreement."). UACIC is a joint venture vehicle of which 80% of its share
capital (conferring 80% economic interest and 67% voting rights) is owned
by UAC and 20% share capital (representing 20% economic interest and 33%
of the voting rights) is owned by Aon Specialty Group Limited, a
subsidiary of Aon Holdings Limited, itself a subsidiary of Aon
Corporation, a Delaware corporation. UACIC has agreed to acquire 49% of
the economic interest and 33% of the voting interest in JMAHL. UAC has
also agreed to acquire 16% of the voting interest in JMAHL. JMAHL is the
holding company of Jago Managing Agency Limited ("JMAL"), a Lloyd's
managing agency. The consideration was L6,250,000 of which L3,789,945 was
paid in cash; L1,060,055 by the issue of Series "A" Loan Notes and
L1,400,000 by the issue of Series "B" Loan Notes to be issued by UACIC.
(iii) Shareholders and Subscription Agreement dated July 23, 1997,
between UACIC, Aon Specialty Group Limited and UAC which contains
provisions regulating their participation in UACIC.
(iv) Shareholders' Agreement dated July 23, 1997, between UACIC,
Jago Group Limited, the shareholders of Jago Group Limited and JMAHL
which contains provisions regulating their participation in JMAHL.
(v) Shareholders Agreement dated July 23, 1997, between UACIC, Jago
Holdings Limited and the various individuals listed in the agreement
which contains provisions regulating their participation in Jago
Dedicated Limited.
(vi) Loan Agreement dated April 29, 1997, between UAC as borrower,
(1) UA Management Company as original guarantor, (2) Chase Investment
Bank Limited as arranger, (3) the financial institutions named therein as
banks, (4) Chase Manhattan International Limited as facility agent (5)
and as security agent (6) pursuant to which the banks agreed to make
available to the borrower a term loan facility in the principal amount of
US$35,000,000 in one drawdown to refinance existing bank facilities and a
revolving loan of up to US$20,000,000 for general standby financing
requirements. The revolving facility may be drawn in minimum amounts of
US$5,000,000 and integral multiples of US$1,000,000. The margin payable
in respect of each facility is 9/16ths per annum and the borrower pays a
commitment of 28 basis points per annum on the undrawn amount of the
revolving facility from time to time. The borrower paid an arrangement
fee of US$350,000 in respect of the facilities and pays an annual agency
fee to the facility agent of US$15,000. The facilities are secured by a
guarantee from UA Management Company of the borrower's obligations under
the Loan Agreement and by debentures executed by each of the borrower and
the original guarantor in favor of the security agent on behalf of the
banks creating fixed and floating charges over their respective assets.
The facilities are subject to representations, covenants (including
financial condition covenants) and events of default usual in the market
for facilities of this nature.
(vii) On December 31, 1996, UAC acquired a 51% shareholding in Jago
Dedicated Limited. UAC paid L1,119,909 for such shares.
(viii) Subscription and Shareholders Agreement dated July 16, 1996,
between Unionamerica Holdings plc and Minova Enterprises Limited. The
agreement governs the joint venture between the two parties in relation
to each party's 50% interest in Polis UK Direct Limited which in turn
holds shares in Polis Direct B.V., a company registered in the
Netherlands. The agreement
APP-E-9
<PAGE>
determines the terms under which he business of Polis UK is conducted and
which imposes certain joint restrictions and obligations on Unionamerica
and Minova.
(ix) Underwriting Agreement between Unionamerica, DLJ, Merrill Lynch
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and other
underwriters named in the Agreement ("Underwriters") dated December 5,
1995, whereby Unionamerica agreed to issue and sell to the Underwriters a
specified number of Unionamerica ADSs to be represented by American
Depository Receipts ("ADRs"') on the basis that the Underwriters would
undertake an initial public offering of those shares. The price was
$15.84 per ADS. The Agreement contained various warranties and
indemnities given by Unionamerica and the Underwriters.
(x) A Deposit Agreement dated December 1, 1995, between
Unionamerica, Morgan Guaranty Trust Company of New York, as depository
and the owners from time to time of ADRs issued pursuant to the terms of
the Agreement. The Agreement governs the terms and conditions under which
ADSs are deposited and ADRs are issued by the depository.
(xi) Shareholders Agreement dated December 4, 1995, between
Unionamerica, International Insurance Advisers, Inc. ("IIA") and other
individuals named in the Agreement. The Agreement replaced an earlier
Shareholders Agreement and contains certain restrictions on the transfer
of Unionamerica Securities by the parties thereto, as well as certain
voting agreement provisions.
(b) The following contracts (not being entered into in the ordinary course
of business) have been entered into by MMI within the two years prior to
execution of the Acquisition Agreement and are or may be material:
(i) Rights Agreement dated as of June 14, 1997 by and between the
Registrant and ChaseMellon Shareholder Services L.L.C., as Rights Agent.
(ii) Amended and Restated Credit Agreement dated as of January 18,
1996 among the Registrant, Various Lenders and Bank of America National
Trust and Savings Association, as Agent for the Lenders.
(iii) Waiver of Right to Elect Director dated October 21, 1996,
between the Registrant and each of Conning Insurance Capital Limited
Partnership, Conning Insurance Capital International Partnership, Conning
Insurance Capital Limited Partnership II and Conning Insurance Capital
International Partnership II.
(iv) Third Amendment to Lease, effective February 1, 1996 between
the Registrant and MATAS Corporation.
(v) Fourth and Fifth Amendments to Lease, effective July 1996
between the Registrant and MATAS Corporation.
(vi) Sixth Amendment to Lease, effective as of the 1st day of March,
1997 between the Registrant and American National Bank and Trust Company
of Chicago, not individually, but solely as Trustee under a certain Trust
Agreement dated the 30th day of July, 1985, and known as Trust Number
65110.
(vii) Seventh Amendment to Lease, effective as of the 12th day of
June, 1997 between the Registrant and MATAS Corporation.
7. THE COMPULSORY ACQUISITION
If, on or before, [ ], 1997 as a result of the Offer or
otherwise, MMI acquires or contracts to acquire shares of Unionamerica
Common Stock (including those represented by Unionamerica ADSs) representing
at least 90% of the outstanding Unionamerica ADSs to which the Offer
APP-E-10
<PAGE>
relates, then (i) MMI will be entitled and intends to effect a compulsory
acquisition to compel the purchase of the remainder of the outstanding
Unionamerica Common Stock (including those represented by Unionamerica ADSs)
on the same terms as those offered in the Offer in accordance with Sections
428 to 430F of the Companies Act; and/or (ii) a holder of Unionamerica
Common Stock (including those represented by Unionamerica ADSs) may require
MMI to purchase his Unionamerica Common Stock (including those represented
by Unionamerica ADSs) on the same terms as those offered in the Offer in
accordance with Sections 430A and 430B of the Companies Act. See Appendix F
to this Prospectus-- "Certain Provisions of the Companies Act".
8. CERTAIN LEGAL AND REGULATORY MATTERS
Except as set out herein and other than in compliance with the Panel's
requirements in relation to the City Code and with U.S. securities laws, MMI
is not aware of (i) any license or regulatory permit that appears to be
material to the business of Unionamerica and its Subsidiaries taken as a
whole which might be adversely affected by MMI's acquisition of Unionamerica
as contemplated herein or (ii) any approval or other action by any domestic
or foreign governmental, administrative or regulatory agency or authority
that appears to be material to Unionamerica and its Subsidiaries taken as a
whole and required for the acquisition or ownership of Unionamerica ADSs by
MMI as contemplated herein. Should any such approval or other action be
required, MMI currently contemplates that such approval or other action will
be sought. There can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial
conditions attached thereto or that failure to obtain any such approval or
other action might not result in consequences adverse to the business of
Unionamerica.
U.K. ANTITRUST LAWS. The Offer will lapse it if is referred to the MMC
before 2:30 p.m. (London time) 9:30 a.m. (New York City time) on the Initial
Closing Date or prior to the date on which the Offer becomes unconditional,
whichever is the later. In such a case, the Offer shall cease to be capable
of acceptance and MMI and Unionamerica Securityholders shall cease to be
bound by prior tenders.
U.S. ANTITRUST LAWS. The Offer will lapse, on or prior to the date on which
the Offer becomes unconditional, if either (i) the Federal Trade Commission
has not granted the request of MMI for early termination of the waiting
period under the HSR Act, or (ii) any such waiting period (and any extension
thereof) applicable to the consummation of the transactions contemplated by
the Acquisition Agreement under the HSR Act has not expired or been
terminated.
U.K. INSURANCE LAWS
U.K. DEPARTMENT OF TRADE AND INDUSTRY
One of Unionamerica's Subsidiaries, Unionamerica Insurance Company Limited,
is a U.K. authorized insurance company. In the U.K. the DTI is responsible
for the authorization and for the ongoing supervision of U.K. insurance
companies and under U.K. law consent is required from the DTI prior to any
Person becoming a controller (as defined in the Insurance Companies Act
1982) of such a company. The definition of controller will include MMI, any
managing directors of MMI and any Persons holding an interest of more than
ten percent in MMI. It is the intention of MMI to apply for such consents
from the DTI and the Offer is conditional upon the obtaining of DTI consent
to the proposed new controllers on terms acceptable to MMI.
LLOYD'S OF LONDON
Unionamerica also holds an interest through its Subsidiaries in a corporate
capital vehicle at Lloyd's, Jago Capital Limited. The consent of Lloyd's is
required to any Person becoming a controller of a
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Lloyd's corporate member, which will include MMI and any other Person who
will hold 10% or more of the economic or voting rights in the corporate
member whether directly or indirectly. It is the intention of MMI to apply
for such consents and the Offer is conditional on these being obtained on
terms acceptable to MMI.
Unionamerica also holds, through its Subsidiaries, an effective equity
interest of approximately 39% in Jago Managing Agency Limited, a Lloyd's
managing agency. The consent of Lloyd's is also required to a Person
becoming a controller of a managing agency. A controller in this context
means a Person who has a voting or economic interest equal to or greater
than 10% in the managing agency whether held directly or indirectly. The
Offer is therefore conditional on the obtaining of these consents from
Lloyd's on terms acceptable to MMI.
U.S. INSURANCE LAWS.
MMI's insurance Subsidiaries (ACIC, HPIC and ACLIC), are subject to
supervision and regulation of their businesses and financial condition by
the jurisdictions in which they transact business. Such supervision and
regulation generally derives from statutes which delegate broad regulatory,
supervisory and administrative authority to insurance departments and other
governmental entities.
In addition to state-imposed insurance laws and regulations, MMI is subject
to statutory accounting practices and the reporting format of the NAIC. The
NAIC and many states have adopted risk-based capital formulas to establish
minimum capital and surplus requirements for insurance companies and a model
act for regulation of such companies. The risk-based capital formula
measures a company's asset risk, insurance risk, interest rate risk and
business risk. As of December 31, 1996, the surplus of each of MMI's U.S.
insurance Subsidiaries exceeded the minimum requirements under the NAIC
formula.
It is the intention of MMI to comply with all insurance regulations imposed
on it and its insurance Subsidiaries as a result of the Proposed
Acquisition.
U.S. STATE TAKEOVER LAWS
A number of states of the U.S. have adopted takeover laws and regulations
which purport, in varying degrees, to be applicable to attempts to acquire
securities of corporations which have substantial assets, security holders,
principal executive offices or principal places of business in such states.
MMI believes that no state takeover statutes apply to the Offer and MMI has
not attempted to comply with any state takeover statutes in connection with
the Offer.
U.S. STATE BLUE SKY LAWS
The Offer is being made to all Unionamerica Securityholders; provided,
however, that Unionamerica Securityholders in any jurisdiction in the U.S.
in which the making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction should not accept or purport
to accept the Offer. MMI is not presently aware of any jurisdiction in the
U.S. that prohibits the making of the Offer. MMI will take all necessary or
appropriate action for the purpose of making the Offer available to all
Unionamerica Securityholders. In any jurisdiction the securities laws or
blue sky laws of which require the Offer to be made by a registered broker
or dealer, the Offer is being made on behalf of MMI by one or more
registered broker or dealers that are licensed under the laws of such
jurisdiction.
9. EXPERTS
The consolidated financial statements and schedules of MMI Companies, Inc.
and Subsidiaries at December 31, 1996 and 1995, and for each of the three
years in the period ended December 31, 1996, incorporated by reference in
this Prospectus and Registration Statement, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon
incorporated by reference
APP-E-12
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herein. Such consolidated financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
The consolidated financial statements and schedules of Unionamerica Holdings
plc and Subsidiaries at December 31, 1996, and for the year ended December
31, 1996, incorporated by reference in this Prospectus and Registration
Statement have been audited by KPMG Audit Plc, Chartered Accountants and
Registered Auditors, as set forth in their reports thereon. The consolidated
financial statements and schedules of Unionamerica Holdings plc and
Subsidiaries at December 31, 1995, and for each of the two years in the
period ended December 31, 1995, incorporated by reference in this Prospectus
and Registration Statement have been audited by KPMG, Chartered Accountants
and Registered Auditors, as set forth in their reports thereon. Such
consolidated financial statements are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
10. GENERAL
(a) KPMG Audit Plc, KPMG and Ernst & Young LLP have given and not withdrawn
their written consents to the inclusion of their respective reports.
Wildman, Harrold, Allen & Dixon, Paul, Weiss, Rifkind, Wharton & Garrison
and Lovell White Durrant have given and have not withdrawn their consent
to the inclusion of their respective opinions, and DLJ has given and not
withdrawn its consent to the inclusion of its recommendations and
opinion, each in the form and context in which they are included. Smith
Barney has given and not withdrawn its written consent to the issuance of
this Prospectus with the references to its name, and has not withdrawn
its consent to the inclusion of its opinion, in the form and context in
which it is included.
(b) Except as disclosed in this Appendix E, no agreement, arrangement or
understanding (including any compensation arrangements) exists between
MMI or any party acting in concert with MMI for the purposes of the Offer
and any of the Directors or recent Directors, Unionamerica
Securityholders or recent stockholders of Unionamerica, having any
connection with or dependence on the Offer.
(c) There is no agreement, arrangement or understanding whereby the
beneficial ownership of any of the Unionamerica Securities to be acquired
by MMI pursuant to the Offer will be transferred to any other Person,
except that MMI reserves the right to transfer any Unionamerica
Securities to any of its Subsidiaries.
(d) Save as disclosed in paragraph 3(a) above, neither MMI nor any Person
acting in concert with MMI nor Unionamerica nor any associate (as defined
in the City Code) of Unionamerica has any arrangement (including
indemnity or option arrangement, agreement or understanding (formal or
informal)) of whatever nature relating to relevant securities (as defined
in paragraph 3(g) above), which may be an inducement to deal or refrain
from dealing.
In this subparagraph (d):
(i) references to an "associate" are to:
(A) Subsidiaries and associated companies of MMI and Unionamerica
respectively and companies of which any such Subsidiaries or
associated companies are associated companies;
(B) banks, financial and other professional advisors (including
stockbrokers) to MMI and Unionamerica respectively or a company
covered in clause (A) above, including Persons controlling,
controlled by or under the same control as such banks, financial or
other professional advisors;
(C) the Directors (together with their close relatives and
related trusts) of MMI or Unionamerica respectively or a company
covered in clause (A) above; and
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(D) the pension funds of MMI or Unionamerica respectively or a
company covered in clause (A) above;
(ii) references to a "bank" do not apply to a bank whose sole
relationship with MMI or Unionamerica respectively or a company covered
in clause (A) above is the provision of normal commercial banking
services or such activities in connection with the Offer as handling
acceptances and other registration work; and
(iii) ownership or control of 20% or more of the equity share capital
of a company is regarded as the test of associated status and "control"
means a holding, or aggregate holdings, of shares carrying 30% or more of
the voting rights attributable to the share capital of a company which
are currently exercisable at a general meeting, irrespective of whether
the holding or aggregate holding gives DE FACTO control.
(e) No proposal exists in connection with the Offer that any payment or
other benefit shall be made or given to any Director of Unionamerica as
compensation for loss of office or as consideration for or in connection
with his retirement from office.
(f) The total emoluments receivable by the Directors of MMI will not be
varied as a result of the Proposed Acquisition or by any other associated
transactions.
(g) (i) So far as the directors of MMI are aware, and save as disclosed in
this Prospectus, there have been no material changes in the financial or
trading position of MMI since [DECEMBER 31, 1996]; and
(ii) So far as the Directors of Unionamerica are aware, and save as
disclosed in this Prospectus, there have been no material changes in the
financial or trading position of Unionamerica since [December 31, 1996].
(h) Smith Barney, which is regulated by The Securities and Futures Authority
Limited in the U.K., has approved the contents of this Prospectus solely
for the purposes of Section 57 of the Financial Services Act 1986.
(i) DLJ, which is regulated in the U.K. by The Securities and Futures
Authority Limited, is acting on behalf of Unionamerica and no one else in
connection with the matters described herein and will not be responsible
to anyone other than Unionamerica for providing the protections afforded
to customers of DLJ or for providing advice in relation to the matters
described herein.
11. AVAILABILITY OF CERTAIN DOCUMENTS
MMI and Unionamerica are subject to the informational requirements of the
Exchange Act, and in accordance therewith, file annual and quarterly
reports, proxy statements (in the case of MMI) and other information with
the Commission. Such reports, proxy statements, other information and the
Registration Statement, including all exhibits thereto and all exhibits to
prior registration statements filed by MMI and Unionamerica (including the
service contracts and the material contracts referred to in paragraph 6 of
this Appendix E) may be inspected without charge and copied at the public
reference facilities of the Commission at its principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington DC 20549, and at its
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New
York, NY 10048. Any interested party may obtain copies of all or any portion
of the Registration Statement and its exhibits at prescribed rates from the
Public Reference Section of the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W. Room 1024, Washington DC, 20549. In
addition, reports, proxy statements, other information, this Registration
Statement and prior registration statements of MMI and Unionamerica may be
inspected at the offices of the New York Stock Exchange Inc., 20 Broad
Street, New York, NY 10005. The Commission maintains a World Wide Web site
on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants, such as
MMI, that file electronically with the Commission.
APP-E-14
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APPENDIX F
CERTAIN PROVISIONS OF THE COMPANIES ACT 1985
PART XIIIA
TAKEOVER OFFERS
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428. TAKEOVER OFFERS
(1) In this Part of this Act "a takeover offer" means an offer to acquire all the
shares, or all the shares of any class or classes, in a company (other than shares
which at the date of the offer are already held by the offeror), being an offer on
terms which are the same in relation to all the shares to which the offer relates
or, where those shares include shares of different classes, in relation to all the
shares of each class.
(2) In subsection (1) "shares" means shares which have been allotted on the date of the
offer but a takeover offer may include among the shares to which it relates all or
any shares that are subsequently allotted before a date specified in or determined
in accordance with the terms of the offer.
(3) The terms offered in relation to any shares shall for the purposes of this section
be treated as being the same in relation to all the shares or, as the case may be,
all the shares of a class to which the offer relates notwithstanding any variation
permitted by subsection (4).
(4) A variation is permitted by this subsection where:
(a) the law of a country or territory outside the United Kingdom precludes an
offer of consideration in the form or any of the forms specified in the terms in
question or precludes it except after compliance by the offeror with
conditions with which he is unable to comply or which he regards as unduly
onerous; and
(b) the variation is such that the persons to whom an offer of consideration in
that form is precluded are able to receive consideration otherwise than in that
form but of substantially equivalent value.
(5) The reference in subsection (1) to shares already held by the offeror includes a
reference to shares which he has contracted to acquire but that shall not be
construed as including shares which are the subject of a contract binding the
holder to accept the offer when it made, being a contract entered into by the
holder either for no consideration and under seal or for no consideration other
than a promise by the offeror to make the offer.
(6) In the application of subsection (5) to Scotland, the words "and under seal" shall
be omitted.
(7) Where the terms of an offer make provision for their revision and for acceptance on
the previous terms to be treated as acceptances on the revised terms, the revision
shall not be regarded for the purposes of this Part of this Act as the making of a
fresh offer and references in this Part of this act to the date of the offer shall
accordingly be construed as references to the date on which the original offer was
made.
(8) In this Part of this Act "the offeror" means, subject to section 430D, the person
making a takeover offer and "the company" means the company whose shares are the
subject of the offer.
429. RIGHT OF OFFEROR TO BUY OUT MINORITY SHAREHOLDERS
(1) If, in a case in which a takeover offer does not relate to shares of different
classes, the offeror has by virtue of acceptance of the offer acquired or
contracted to acquire not less than nine-tenths in value of the shares to which the
offer relates he may give notice to the holder of any
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APP-F-1
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shares to which the offer relates which the offeror has not acquired or contracted
to acquire that he desires to acquire those shares.
(2) If, in a case in which a takeover offer relates to shares of different classes, the
offeror has by virtue of acceptances of the offer acquired or contracted to acquire
not less than nine-tenths in value of the shares of any class to which the offer
relates, he may give notice to the holder of any shares of that class which the
offeror has not acquired or contracted to acquire that he desires to acquire those
shares.
(3) No notice shall be given under subsection (1) or (2) unless the offeror has
acquired or contracted to acquire the shares necessary to satisfy the minimum
specified in that subsection before the end of the period of four months beginning
with the date of the offer; and no such notice shall be given after the end of the
period of two months beginning with the date on which he has acquired or contracted
to acquire shares which satisfy that minimum.
(4) Any notice under this section shall be given in the prescribed manner, and when the
offeror gives the first notice in relation to an offer he shall send a copy of it
to the company together with a statutory declaration by him in the prescribed form
stating that the conditions for the giving of the notice are satisfied.
(5) Where the offeror is a company (whether or not a company within the meaning of this
Act) the statutory declaration shall be signed by a director.
(6) Any person who fails to send a copy of a notice or statutory declaration as
required by subsection (4) or makes such a declaration for the purposes of that
subsection knowing it to be false or without having reasonable grounds for
believing it to be true shall be liable to imprisonment or a fine, or both, and for
continued failure to send the copy of declaration, to a daily default fine.
(7) If any person is charged with an offence for failing to send a copy of a notice as
required by subsection (4) it is a defence for him to prove that he took reasonable
steps for securing compliance with that subsection.
(8) When during the period within which a takeover offer can be accepted the offeror
acquires or contracts to acquire any of the shares to which the offer relates but
otherwise than by virtue of acceptance of the offer, then, if:
(a) the value of the consideration for which they are acquired or contracted to be
acquired ("the acquisition consideration") does not at that time exceed the value
of the consideration specified in the terms of the offer; or
(b) those terms are subsequently revised so that when the revision is announced
the value of the acquisition consideration, at the time mentioned in paragraph (a)
above, no longer exceeds the value of the consideration specified in those
terms,
the offeror shall be treated for the purposes of this section as having acquired or
contracted to acquire those shares by virtue of acceptances of the offer; but in
any other case those shares shall be treated as excluded from those to which the
offer relates.
430. EFFECT OF NOTICE UNDER SECTION 429
(1) The following provisions shall, subject to section 430C, have effect where a notice
is given in respect to any shares under section 429.
(2) The offeror shall be entitled and bound to acquire those shares on the terms of the
offer.
(3) Where the terms of an offer are such as to give the holder of any shares a choice
of consideration the notice shall give particulars of the choice and state:
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APP-F-2
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(a) that the holder of the shares may within six weeks from the date of the notice
indicate his choice by a written communication sent to the offeror at an address
specified in the notice; and
(b) which consideration specified in the offer is to be taken as applying in
default of his indicating a choice as aforesaid;
and the terms of the offer mentioned in subsection (2) shall be determined
accordingly.
(4) Subsection (3) applies whether or not any time limit or the other conditions
applicable to the choice under the terms of the offer can still be complied with,
and if the consideration chosen by the holders of the shares:
(a) is not cash and the offeror is no longer able to provide it; or
(b) was to have been provided by a third party who is no longer bound or able to
provide it, the consideration shall be taken to consist of an amount of cash
payable by the offeror which at the date of the notice is equivalent to the
chosen consideration.
(5) At the end of six weeks from the date of the notice the offeror shall forthwith:
(a) send a copy of the notice to the company; and
(b) pay or transfer to the company the consideration for the shares to which the
notice relates.
(6) If the shares to which the notice relates are registered, the copy of the notice
sent to the company under subsection (5)(a) shall be accompanied by an instrument
of transfer executed on behalf of the shareholder by a person appointed by the
offeror; and on receipt of that instrument the company shall register the offeror
as the holder of those shares.
(7) If the shares to which the notice relates are transferable by the delivery of
warrants or other instruments the copy of the notice sent to the company under
subsection (5)(a) shall be accompanied by a statement to that effect; and the
company shall on receipt of the statement issue the offeror with warrants or other
instruments in respect of the shares and those already in issue in respect of the
shares shall become void.
(8) Where the consideration referred to in paragraph (b) of subsection (5) consists of
shares or securities to be allotted by the offeror the reference in that paragraph
to the transfer of the consideration shall be construed as a reference to the
allotment of the shares or securities to the company.
(9) Any sum received by a company under paragraph (b) of subsection (5) and any other
consideration received under that paragraph shall be held by the company on trust
for the person entitled to the shares in respect of which the sum or other
consideration was received.
(10) Any sum received by a company under paragraph (b) of subsection (5), and any
dividend or other sum accruing from any other consideration received by a company
under that paragraph, shall be paid into a separate bank account, being an account
the balance on which bears interest an appropriate rate and can be withdrawn by
such notice (if any) as is appropriate.
(11) Where after reasonable enquiry made at such intervals as are reasonable the person
entitled to any consideration held on trust by virtue of subsection (9) cannot be
found and twelve years have elapsed since the consideration was received or the
company is wound up the consideration (together with any interest, dividend or
other benefit that has accrued from it) shall be paid into court.
(12) In relation to a company registered in Scotland, subsections (13) and (14) shall
apply in place of subsection (11).
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APP-F-3
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(13) Where after reasonable inquiry made at such intervals as are reasonable the person
entitled to any consideration held on trust by virtue of subsection (9) cannot be
found and twelve years have elapsed since the consideration was received or the
company is wound up:
(a) the trust shall terminate;
(b) the company or, as the case may be, the liquidator shall sell any
consideration other than cash and any benefit other than cash that has accrued from
the consideration; and
(c) a sum representing:
(i) the consideration so far as it is cash;
(ii) the proceeds of any sale under paragraph (b) above; and
(iii) any interest, dividend or other benefit that has accrued from the
consideration,
shall be deposited in the name of the Accountant of Court in a bank account such as
is referred to in subsection (10) and the receipt for the deposit shall be
transmitted to the Accountant of Court.
(14) Section 58 of the Bankruptcy (Scotland) Act 1985 (so far as consistent with this
Act) shall apply with any necessary modifications to sums deposited under
subsection (13) as that section applies to sums deposited under section 57(1)(a) of
that Act.
(15) The expenses of any such inquiry as is mentioned in subsection (11) or (13) may be
defrayed out of the money or other property held on trust for the person or persons
to whom the inquiry relates.
430A. RIGHT OF MINORITY SHAREHOLDER TO BE BOUGHT OUT BY OFFEROR
(1) If a takeover offer relates to all the shares in a company and at any time before
the end of the period within which the offer can be accepted:
(a) the offeror has by virtue of acceptances of the offer acquired or contracted
to acquire some (but not all) of the shares to which the offer relates; and
(b) those shares, with or without any other shares in the company which he has
acquired or contracted to acquire, amount to not less than nine-tenths in value of
all of the shares in the company,
the holder of any shares to which the offer relates who has not accepted the offer
may by a written communication addressed to the offeror require him to acquire
those shares.
(2) If takeover offer relates to shares of any class or classes and at any time before
the end of the period within which the offer can be accepted:
(a) the offeror has by virtue of acceptances of the offer acquired or contracted
to acquire some (but not all) of the shares of any class to which the offer
relates; and
(b) those shares, with or without any other shares of that class which he has
acquired or contracted to acquire, amount to not less than nine-tenths in value of
all the shares of that class,
the holder of any shares of that class who has not accepted the offer may by a
written communication addressed to the offeror require him to acquire those shares.
(3) Within one month of the time specified in subsection (1) or, as the case may be,
subsection (2) the offeror shall give any shareholder who has not accepted the
offer notice in the prescribed manner of the rights that are exercisable by him
under that subsection; and if the notice is given
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APP-F-4
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before the end of the period mentioned in that subsection it shall state that the
offer is still open for acceptance.
(4) A notice under subsection (3) may specify a period for the exercise of the rights
conferred by this section and in that event the rights shall not be exercisable
after the end of that period; but no such period shall end less than three months
after the end of the period within which the offer can be accepted.
(5) Subsection (3) does not apply if the offeror has given the shareholder a notice in
respect of the shares in question under section 429.
(6) If the offeror fails to comply with subsection (3) he and, if the offeror is a
company, every officer of the company who is in default or to whose neglect the
failure is attributable, shall be liable to a fine and, for continued
contravention, to a daily default fine.
(7) If an offeror other than a company is charged with an offence for failing to comply
with subsection (3) it is a defence for him to prove that he took all reasonable
steps for securing compliance with that subsection.
430B. EFFECT OF REQUIREMENT UNDER SECTION 430A
(1) The following provisions shall, subject to section 430C, have effect where a
shareholder exercises his rights in respect of any shares under section 430A.
(2) The offeror shall be entitled and bound to acquire those shares on the terms of the
offer or on such other terms as may be agreed.
(3) Where the terms of an offer are such as to give the holder of shares a choice of
consideration the holder of the shares may indicate his choice when requiring the
offeror to acquire them and the notice given to the holder under section 430A(3):
(a) shall give particulars of the choice and the rights conferred by this
subsection; and
(b) may state which consideration specified in the offer is to be taken as
applying in default of his indicating a choice;
and the terms of the offer mentioned in subsection (2) shall be determined
accordingly.
(4) Subsection (3) applies whether or not any time limit or other conditions applicable
to the choice under the terms of the offer can still be complied with; and if the
consideration chosen by the holder of the shares:
(a) is not cash and the offeror is no longer able to provide it; or
(b) was to have been provided by a third party who is no longer bound or able to
provide it,
the consideration shall be taken to consist of an amount of cash payable by the
offeror which at the date when the holder of the shares requires the offeror to
acquire them is equivalent to the chosen consideration.
430C. APPLICATIONS TO THE COURT
(1) Where a notice is given under section 429 to the holder of any shares the court
may, on an application made by him within six weeks from the date on which the
notice was given:
(a) order that the offeror shall not be entitled and bound to acquire the shares;
or
(b) specify terms of acquisition different from those of the offer.
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APP-F-5
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(2) If an application to the court under subsection (1) is pending at the end of the
period mentioned in subsection (5) of section 430 that subsection shall not have
effect until the application has been disposed of.
(3) Where the holder of any shares exercises his rights under section 430A the court
may, on an application made by him or the offeror, order that the terms on which
the offeror is entitled and bound to acquire the shares shall be such as the court
thinks fit.
(4) No order for costs or expenses shall be made against a shareholder making an
application under subsection (1) or (3) unless the court considers:
(a) that the application was unnecessary, improper or vexatious; or
(b) that there has been unreasonable delay in making the application or
unreasonable conduct on his part in conducting the proceedings on the application.
(5) Where a takeover offer has not been accepted to the extent necessary for entitling
the offeror to give notices under subsection (1) or (2) of section 429 the court
may, on the application of the offeror, make an order authorizing him to give
notices under that subsection if satisfied:
(a) that the offeror has after reasonable enquiry been unable to trace one or more
of the persons holding shares to which the offer relates;
(b) that the shares which the offeror has acquired or contracted to acquire by
virtue of acceptances of the offer, together with the shares held by the person or
persons mentioned in paragraph (a), amount to not less than the minimum
specified in that subsection; and
(c) that the consideration offered is fair and reasonable;
but the court shall not make an order under this subsection unless it considers
that it is just and equitable to do so having regard, in particular, to the number
of shareholders who have been traced but who have not accepted the offer.
430D. JOINT OFFERS
(1) A takeover offer may be made by two or more persons jointly and in that event this
Part of this Act has effect with the following modifications.
(2) The conditions for the exercise of the rights conferred by sections 429 and 430A
shall be satisfied by the joint offerors acquiring or contracting to acquire the
necessary shares jointly (as respects acquisitions by virtue of acceptances of the
offer) and either jointly or separately (in other cases); and subject to the
following provisions, the rights and obligations of the offeror under those
sections and sections 430 and 430B shall be respectively joint rights and joint and
several obligations of the joint offerors.
(3) It shall be a sufficient compliance with any provision of those sections requiring
or authorizing a notice or other document to be given or sent by or to the joint
offerors that it is given or sent by or to any of them; but the statutory
declaration required by section 429(4) shall be made by all of them and, in the
case of a joint offeror being a company, signed by a director of that company.
(4) In sections 428, 430(8) and 430E references to the offeror shall be construed as
references to the joint offerors or any of them.
(5) In section 430(6) and (7) references to the offeror shall be construed as
references to the joint offerors or such of them as they may determine.
(6) In sections 430(4)(a) and 430B(4)(a) references to the offeror being no longer able
to provide the relevant consideration shall be construed as references to none of
the joint offerors being able to do so.
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APP-F-6
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(7) In section 430C references to the offeror shall be construed as references to the
joint offerors except that any application under subsection (3) or (5) may be made
by any of them and the reference in subsection (5)(a) to the offeror having been
unable to trace one or more of the persons holding shares shall be construed as a
reference to none of the offerors having been able to do so.
430E. ASSOCIATES
(1) The requirement in section 428(1) that a takeover offer must extend to all the
shares, or all the shares of any class or classes, in a company shall be regarded
as satisfied notwithstanding that the offer does not extend to shares which
associates of the offeror hold or have contracted to acquire but, subject to
subsection (2), shares which any such associate holds or has contracted to acquire,
whether at the time when the offer is made or subsequently, shall be disregarded
for the purposes of any references in this Part of this Act to the shares to which
a takeover offer relates.
(2) Where during the period within which a takeover offer can be accepted any associate
of the offeror acquires or contracts to acquire any of the shares to which the
offer relates, then, if the condition specified in subsection (8)(a) or (b) of
section 429 is satisfied as respects those shares they shall be treated for the
purposes of that section as shares to which the offer relates.
(3) In section 430A(1)(b) and (2)(b) the reference to shares which the offeror has
acquired or contracted to acquire shall include a reference to shares which any
associate of his has acquired or contracted to acquire.
(4) In this section "associate," in relation to an offeror, means:
(a) a nominee of the offeror;
(b) a holding company, subsidiary or fellow subsidiary of the offeror or a nominee
of such a holding company, subsidiary or fellow subsidiary;
(c) a body corporate in which the offeror is substantially interested; or
(d) any person who is, or is a nominee of, a party to an agreement with the
offeror for the acquisition of, or of an interest in, the shares which are the
subject of the takeover offer, being an agreement which includes provisions
imposing obligations or restrictions such as are mentioned in section
204(2)(a).
(5) For the purposes of subsection (4)(b) a company is a fellow subsidiary of another
body corporate if both are subsidiaries of the same body corporate but neither is a
subsidiary of the other.
(6) For the purposes of subsection (4)(c) an offeror has a substantial interest in a
body corporate if:
(a) that body or its directors are accustomed to act in accordance with his
directions or instructions; or
(b) he is entitled to exercise or control the exercise of one-third or more of the
voting power at general meetings of that body.
(7) Subsections (5) and (6) of section 204 shall apply to subsection (4)(d) above as
they apply to that section and subsections (3) and (4) of section 203 shall apply
for the purposes of subsection (6) above as they apply for the purposes of
subsection (2)(b) of that section.
(8) Where the offeror is an individual his associates shall also include his spouse and
any minor child or stepchild of his.
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APP-F-7
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430F. CONVERTIBLE SECURITIES
(1) For the purposes of this Part of this Act securities of a company shall be treated
as shares in the company if they are convertible into or entitle the holder to
subscribe for such shares; and references to the holder of shares or a shareholder
shall be construed accordingly.
(2) Subsection (1) shall not be construed as requiring any securities to be treated:
(a) as shares of the same class as those into which they are convertible or for
which the holder is entitled to subscribe; or
(b) as shares of the same class as other securities by reason only that the shares
into which they are convertible or for which the holder is entitled to subscribe
are of the same class.
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APP-F-8
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APPENDIX G
KEY DEFINITIONS
In this Prospectus and the accompanying Letter of Transmittal the following
definitions apply, unless the context requires otherwise:
Acquisition The Acquisition Agreement dated as of June 25, 1997
Agreement entered into between MMI and Unionamerica.
City Code The City Code on Takeovers and Mergers of the U.K.
Commission The U.S. Securities and Exchange Commission.
Companies Act The Companies Act 1985 of the U.K., as amended.
Compulsory A compulsory exchange, pursuant to Sections 428 to 430F of
Acquisition the Companies Act on the same terms as the Offer, of all
outstanding shares of Unionamerica Common Stock (including
those represented by Unionamerica ADSs) to which the Offer
relates.
Conditions The conditions to the Offer set out in "The Offer--Terms
of the Offer and Proposed Acquisition--Conditions of the
Offer".
Designated UA Partners, L.P., Peter J. Cooper, Ian G. Sinclair,
Affiliates Robert A. Spass, Steven B. Gruber, Paul H. Warren, Hugh B.
Jago, Timothy P. Open, Andrew E. Marks and Alisdair G.
Bishop.
DGCL The General Corporation Law of the State of Delaware, as
amended.
Dollars or $ U.S. dollars.
Exchange Act The U.S. Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
Exchange Agent ChaseMellon Shareholder Services L.L.C., in its capacity
as the Exchange Agent.
Exchange Ratio The 0.836 shares of MMI Common Stock to be exchanged for
each Unionamerica ADS pursuant to the terms of the Offer.
Governmental or Any court, tribunal, arbitrator, authority, agency,
Regulatory commission, official or other instrumentality of the U.S.,
Authority the U.K., or any state, county, city or other political
subdivision thereof, or the NYSE.
HSR Act The Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated
thereunder.
Initial Closing Date 2:30 p.m. (London Time), 9:30 a.m. (New York City time) on
[ ], 1997, unless and until MMI shall have
extended the Initial Offer Period in accordance with the
terms of the Acquisition Agreement, in which event, the
term Initial Closing Date shall mean the latest time and
date on which the Initial Offer Period, as so extended by
MMI, shall be terminated or expire.
Initial Offer Period The period from and including 5:00 p.m. (London time),
12:00 p.m. (New York City time) on [ ],
1997 to, and including, the Initial Closing Date.
APP-G-1
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IRC The U.S. Internal Revenue Code of 1986, as amended.
Letter of The Letter of Transmittal relating to the Offer to be sent
Transmittal to Unionamerica Securityholders along with this
Prospectus.
Minimum Acceptance The Condition to Offer relating to the minimum number of
Condition acceptances set out in "The Offer--Terms of the Offer and
Proposed Acquisition--Conditions of the Offer".
MMC The Monopolies and Mergers Commission of the U.K.
MMI MMI Companies, Inc., a Delaware corporation, including, if
the context requires, its Subsidiaries.
MMI Board The Board of Directors of MMI.
MMI Bylaws The Amended and Restated Bylaws of MMI.
MMI Certificate The Restated Certificate of Incorporation of MMI.
MMI Common Stock The $0.10 par value common stock of MMI.
MMI stockholders Holders of MMI Common Stock.
Noon Buying Rate The exchange rate of pounds sterling, based on the noon
buying rate in New York City for cable transfers in pounds
sterling as certified for customs purposes by the Federal
Reserve Bank of New York, expressed in dollars per L1.
NYSE The New York Stock Exchange, Inc.
Office of Fair The Office of Fair Trading of the U.K.
Trading
Offer The recommended offer by MMI to acquire the Unionamerica
Common Stock (including any stock represented by
Unionamerica ADSs) on the terms and subject to the
conditions set out in this Prospectus and the Letter of
Transmittal including, where the context so permits, any
subsequent revision, variation, extension or renewal of
such offer.
Option holders Holders of options under the Unionamerica Share Option
Schemes.
Panel The Panel on Takeovers and Mergers of the U.K.
Person An individual, partnership, corporation, limited liability
company, association, joint stock company, trust, joint
venture, unincorporated association or governmental entity
(or any department, agency or political subdivision
thereof) and any other entity.
Pounds sterling or L U.K. pounds sterling.
Prospectus This document, including the Appendices hereto, as it may
from time to time be amended or supplemented and the
Letter of Transmittal.
Securities Act The U.S. Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
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APP-G-2
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Selling Stockholders Those Persons who have executed irrevocable Undertakings
to accept the Offer as detailed in paragraph 3(a) of
Appendix E-- "Certain Additional Information Required
Under the City Code".
Subsequent Offer The period following the Initial Offer Period during which
Period the Offer remains open for acceptance.
Subsidiary With respect to either Unionamerica or MMI, any
corporation or other organization, whether incorporated or
unincorporated, of which more than 50% of either the
equity interests in, or the voting control of, such
corporation or other organization is, directly or
indirectly through subsidiaries or otherwise, beneficially
owned by it.
Unionamerica Unionamerica Holdings plc, a public limited company
registered in England and Wales with registered number
2822469, including, if the context requires, its
Subsidiaries.
Unionamerica ADSs The American Depositary Shares of Unionamerica
representing shares of Unionamerica Common Stock now in
issue and any further such securities which are issued
after the date of this Prospectus and while the Offer
remains open (or such earlier date as MMI may determine,
subject to the City Code and the terms of the Acquisition
Agreement) and including the underlying shares of
Unionamerica Common Stock represented by such American
Depository Shares.
Unionamerica The Articles of Association of Unionamerica.
Articles
Unionamerica Board The Board of Directors of Unionamerica.
Unionamerica Common The ordinary shares of $0.0448 each of Unionamerica now in
Stock issue and any further such shares which are
unconditionally allotted or issued fully paid after the
date of this Prospectus and while the Offer remains open
for acceptance (or such earlier date as MMI may, subject
to the City Code and the terms of the Acquisition
Agreement, determine), whether pursuant to the exercise of
options under the Unionamerica Share Option Schemes or
otherwise.
Unionamerica Unionamerica Common Stock together with Unionamerica ADSs.
Securities
Unionamerica A holder of Unionamerica ADSs.
Securityholder
Unionamerica Share The Unionamerica Holdings plc Unapproved Executive Share
Option Schemes Option Scheme and The Unionamerica Holdings plc 1996
Executive Share Option Scheme.
U.K. United Kingdom of Great Britain and Northern Ireland.
U.S. United States of America, its territories and possessions,
any State of the United States and the District of
Columbia.
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APP-G-3
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Questions and requests for assistance and additional copies of this
Prospectus, the Letter of Transmittal, and other enclosures may be directed to:
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The Exchange Agent: ChaseMellon Shareholder Services L.L.C.
P.O. Box 3300
South Hackensack, NJ 07606
1-800-777-3674
or to
The Dealer Manager: Smith Barney Inc.
388 Greenwich Street
New York, NY 10013
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<PAGE>
PROXY PROXY
MMI COMPANIES, INC.
DEERFIELD, ILLINOIS, U.S.A.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints B. Frederick Becker and _____________, or
any one of them, with power of substitution, attorneys and proxies to
represent the undersigned at the special meeting of the stockholders of MMI
Companies, Inc. (the "Company") to be held on __________ ____, 1997, and at
any adjournments or postponements thereof, with all powers which the
undersigned would possess if personally present, and to vote, as and to the
extent indicated below, all shares of stock which the undersigned may be
entitled to vote at said meeting or any adjournments or postponements
thereof, upon all matters that may properly come before the meeting,
including the matter listed on the reverse side of this card which is more
fully described in the Notice of Special Stockholders Meeting and Proxy
Statement relating to said meeting. THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED AS AND TO THE EXTENT DIRECTED ON THE REVERSE SIDE HEREOF.
IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE: (A) IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATION ON THE MATTER LISTED ON THE REVERSE
SIDE OF THIS CARD AND (B) AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING.
IF YOU DO NOT SIGN AND RETURN A PROXY CARD, OR ATTEND THE MEETING, YOUR SHARES
CANNOT BE VOTED.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1.
ITEM 1. APPROVAL OF THE SHARE ISSUANCE AND PLAN AMENDMENT PROPOSAL:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<PAGE>
I PLAN TO ATTEND THE MEETING [ ]
Please sign this proxy and return it promptly whether or not you plan to attend
the meeting. If signing for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are signing. If you do attend
the meeting and decide to vote by ballot, such vote will supersede this proxy.
Dated: _______________________, 1997
______________________________________
Signature
______________________________________
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
