<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
/ / Preliminary information statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/x/ Definitive information statement
MAFCO CONSOLIDATED GROUP INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/x/ Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share
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(2) Aggregate number of securities to which transaction applies:
3,459,588
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
$33.50 per share cash price
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(4) Proposed maximum aggregate value of transaction:
$115,896,198.00
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(5) Total fee paid:
$23,179.24
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/x/ 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 of its filing.
(1) Amount Previously Paid: $23,179.24
(2) Form, Schedule or Registration Statement No.: 14C
(3) Filing Party: Mafco Consolidated Group Inc.
(4) Date Filed: April 1, 1997
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<PAGE>
MAFCO CONSOLIDATED GROUP INC.
35 EAST 62ND STREET
NEW YORK, NEW YORK 10021
(212) 572-8600
June 6, 1997
The attached Information Statement, Notice of Action Taken Without a
Meeting and Notice of Appraisal Rights (collectively, the 'Information
Statement') is being furnished to holders of common stock of Mafco Consolidated
Group Inc. (the 'Company') in connection with the proposed merger (the 'Merger')
of MCG Acquisition Inc. (the 'Purchaser') with and into the Company pursuant to
an Agreement and Plan of Merger, dated as of February 20, 1997, by and among the
Company, Mafco Consolidated Holdings Inc. ('Parent') and the Purchaser, a copy
of which is attached as Annex A to the Information Statement (the 'Merger
Agreement'). The Purchaser is a wholly owned subsidiary of Parent, which owns
approximately 85.0% of the outstanding shares of common stock of the Company. As
a result of the Merger, the Company will become a wholly owned subsidiary of
Parent.
Pursuant to the Merger Agreement, each outstanding share of common stock,
other than shares of common stock as to which dissenters' rights of appraisal
have been duly asserted and perfected under Delaware law and other than shares
of common stock held by the Company, Parent, the Purchaser or any other
subsidiary of Parent (which will be cancelled), will be converted into the right
to receive $33.50 in cash, subject to upward adjustment (the 'Merger
Consideration'), as set forth in the Merger Agreement and more fully described
in the Information Statement. In addition, on February 20, 1997, in connection
with entering into the Merger Agreement, the board of directors of the Company
(the 'Board') declared, and on March 14, 1997 the Company paid, a $10.00 special
cash dividend to holders of record of common stock as of the close of business
on March 10, 1997.
The Board, based upon the unanimous recommendation of a special committee
(the 'Special Committee') of independent directors of the Board, has unanimously
determined that the Merger Agreement and the Merger are fair to stockholders of
the Company (other than Parent and its affiliates). In arriving at its
recommendation, the Special Committee considered a number of factors described
in the Information Statement, including, among other things, the opinion of
Morgan Stanley & Co. Incorporated, financial advisor to the Special Committee,
that the consideration to be received by the holders of shares of common stock
(other than Parent and its affiliates) was fair to such holders from a financial
point of view. The full text of such opinion, which sets forth, among other
things, the opinion expressed, procedures followed, matters considered and
limitations on review undertaken in connection with such opinion, is attached as
Annex B to the Information Statement. Stockholders are urged to read the opinion
in its entirety.
The Company is not seeking the consent, authorization or proxy of its
stockholders to approve the Merger because the Merger has been approved by
Parent acting as a stockholder by written consent without a meeting in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law (the 'DGCL'). The Information Statement also constitutes the
notice of action taken without a meeting required by Section 228(d) of the DGCL
and notice of appraisal rights required by Section 262(d) of the DGCL. A
Certificate of Merger, giving effect to the Merger, will not be filed with the
Secretary of State of the State of Delaware for at least 20 business days after
the date the Information Statement is mailed to stockholders. The Company and
Parent currently anticipate that the effective time (the 'Effective Time') for
the Merger will occur on or about July 9, 1997. No further notice of the
occurrence of the Effective Time will be given to stockholders before the
Effective Time, however, stockholders may call 1-800-290-6429, after July 7,
1997, to find out the Effective Time and the definitive dollar amount of the
Merger Consideration.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
As more fully described in the Information Statement, stockholders must
deliver a demand for appraisal rights within 20 days after the mailing of this
Information Statement. See 'STOCKHOLDERS RIGHTS OF APPRAISAL' in the attached
Information Statement for instructions on how to exercise appraisal rights.
However, the Effective Time cannot occur until 20 business days have elapsed
after the mailing of this Information Statement. Moreover, the Merger
Consideration will be adjusted upward only if the average of the per share
closing prices of the common stock of Consolidated Cigar Holdings Inc. on the
New York Stock Exchange exceeds $33.00 for the ten trading days ending two days
prior to the Effective Time, and there can be no assurance that an upward
adjustment will be made. Consequently, the date for both determining any upward
adjustment in the Merger Consideration and the Effective Time will occur after
the time period by which stockholders must deliver their demand for appraisal
rights to the Company. Therefore, a decision to exercise dissenters' rights
should be based on receiving $33.50 per share. In this regard, at any time
within 60 days after the Effective Time (or at any time thereafter with the
written consent of the Company), any stockholder who has demanded appraisal has
the right to withdraw the demand and to accept payment of the Merger
Consideration.
PLEASE DO NOT SEND US YOUR STOCK CERTIFICATES AT THIS TIME. ONCE THE MERGER
BECOMES EFFECTIVE, YOU WILL BE ADVISED OF THE PROCEDURE FOR SURRENDERING YOUR
CERTIFICATES FOR THE MERGER CONSIDERATION.
<PAGE>
MAFCO CONSOLIDATED GROUP INC.
35 EAST 62ND STREET
NEW YORK, NEW YORK 10021
(212) 572-8600
------------------------
INFORMATION STATEMENT,
NOTICE OF ACTION TAKEN WITHOUT A MEETING
AND
NOTICE OF APPRAISAL RIGHTS
------------------------
INTRODUCTION
This Information Statement, Notice of Action Taken Without a Meeting and
Notice of Appraisal Rights (collectively, this 'Information Statement') is being
furnished to holders of record of the common stock, par value $.01 per share
('Common Stock'), of Mafco Consolidated Group Inc., a Delaware corporation (the
'Company'), as of the close of business on June 6, 1997 (the 'Record Date') in
connection with the proposed merger (the 'Merger') of MCG Acquisition Inc., a
Delaware corporation (the 'Purchaser'), with and into the Company pursuant to
the Agreement and Plan of Merger, dated as of February 20, 1997, by and among
the Company, Mafco Consolidated Holdings Inc., a Delaware corporation
('Parent'), and the Purchaser, a copy of which is attached hereto as Annex A
(the 'Merger Agreement'). The Purchaser is a wholly owned subsidiary of Parent,
which owns approximately 85.0% of the outstanding shares of Common Stock. As a
result of the Merger, the Company will become a wholly owned subsidiary of
Parent. This Information Statement is first being mailed to stockholders on or
about June 10, 1997.
Pursuant to the Merger Agreement, each outstanding share of Common Stock,
other than shares of Common Stock as to which dissenters' rights of appraisal
have been duly asserted and perfected under Delaware law and other than shares
of Common Stock held by the Company, Parent, the Purchaser or any other
subsidiary of Parent (which will be cancelled), will be converted into the right
to receive the Merger Consideration, as described below. In addition, on
February 20, 1997, in connection with entering into the Merger Agreement, the
board of directors of the Company (the 'Board') declared, and on March 14, 1997
the Company paid, a $10.00 special cash dividend (the 'Special Dividend') to
holders of record of Common Stock as of the close of business on March 10, 1997.
The 'Merger Consideration' shall be equal to the sum of (x) $33.50 plus (y)
an amount, if any (the 'Additional Amount'), equal to the Excess (as defined
below) multiplied by 79.7%. The Additional Amount shall be payable only if the
average of the per share closing prices (the 'Average') of the common stock, par
value $.01 per share ('Cigar Common Stock'), of Consolidated Cigar Holdings
Inc., a subsidiary of the Company ('Cigar Holdings'), on the New York Stock
Exchange (the 'NYSE') for the ten trading days ending two trading days prior to
the effectiveness of the Merger, exceeds $33.00 (the amount by which the Average
exceeds $33.00, the 'Excess'). As of the date of this Information Statement, the
closing price of the Cigar Common Stock was $30. See 'SUMMARY--The Merger' for
an example of the operation of the adjustment mechanism. There can be no
assurance that an upward adjustment will be made and stockholders may only
receive $33.50 per share. A decision to exercise dissenters' rights should be
based on receiving $33.50 per share.
------------------------
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
The date of this Information Statement is June 6, 1997.
<PAGE>
Stockholders will be entitled to receive the Merger Consideration in cash,
without interest, upon surrender of the certificate formerly representing shares
of Common Stock. See 'THE MERGER AGREEMENT--Procedure for Payment.'
The Board, based upon the unanimous recommendation of a special committee
(the 'Special Committee') of independent directors of the Board, has unanimously
determined that the Merger Agreement and the Merger are fair to stockholders of
the Company (other than Parent and its affiliates). In arriving at its
recommendation, the Special Committee considered a number of factors described
in this Information Statement, including, among other things, the opinion of
Morgan Stanley & Co. Incorporated ('Morgan Stanley') financial advisor to the
Special Committee, that the consideration to be received by the holders of
shares of Common Stock (other than shares held by Parent and its affiliates) was
fair to such holders from a financial point of view. The full text of such
opinion, which sets forth, among other things, the opinion expressed, procedures
followed, matters considered and limitations on review undertaken in connection
with such opinion, is attached hereto as Annex B. Stockholders are urged to read
the opinion in its entirety.
The Company is not seeking the consent, authorization or proxy of its
stockholders to approve the Merger because the Merger has been approved by
Parent acting as a stockholder by written consent without a meeting in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law (the 'DGCL'). See 'The Merger Agreement--Certain Other
Covenants--Action by Written Consent; Information Statement.' This Information
Statement also constitutes the notice of action taken without a meeting required
by Section 228(d) of the DGCL and notice of appraisal rights required by Section
262(d) of the DGCL. A Certificate of Merger, giving effect to the Merger, will
not be filed with the Secretary of State of the State of Delaware for at least
20 business days after the date of this Information Statement is mailed to
stockholders. The Company and Parent currently anticipate that the effective
time (the 'Effective Time') for the Merger will occur on or about July 9, 1997.
No further notice of the occurrence of the Effective Time will be given to
stockholders before the Effective Time, however, stockholders may call
1-800-290-6429, after July 7, 1997, to find out the Effective Time and the
definitive dollar amount of the Merger Consideration.
As of June 6, 1997, the date of the written consent and the Record Date for
determining stockholders entitled to receive this Information Statement, there
were 23,224,704 shares of Common Stock outstanding, including 19,777,752 shares
owned by Parent, and approximately 4,267 stockholders of record. Each share of
Common Stock entitles the holder thereof to one vote.
PLEASE DO NOT SEND US YOUR STOCK CERTIFICATES AT THIS TIME. ONCE THE MERGER
BECOMES EFFECTIVE, YOU WILL BE ADVISED OF THE PROCEDURE FOR SURRENDERING YOUR
CERTIFICATES FOR THE MERGER CONSIDERATION.
2
<PAGE>
AVAILABLE INFORMATION
The Company, Parent and the Purchaser have filed a Rule 13e-3 Transaction
Statement on Schedule 13e-3 (the 'Schedule 13E-3') with the Securities and
Exchange Commission (the 'Commission' or the 'SEC') with respect to the
transactions described in this Information Statement. As permitted by the rules
and regulations of the Commission, this Information Statement omits certain
exhibits contained in the Schedule 13E-3. The Company is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the 'Exchange Act'), and in accordance therewith files reports, proxy
statements and other information with the Commission. The Schedule 13E-3 and the
exhibits thereto, as well as such reports, proxy statements, and other
information, can be inspected 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
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and 7 World Trade Center, 13th Floor, New York, New York 10048.
Any interested party may obtain copies of such material 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. The
Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC at http://www.sec.gov. In addition, the Common Stock
is listed and traded on the NYSE. Reports, proxy statements and other
information can also be inspected and copied at the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS INFORMATION STATEMENT INCORPORATES BY REFERENCE THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 (THE 'COMPANY 10-K')
AND THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 29,
1997 (THE 'COMPANY 10-Q'), WHICH WERE PREVIOUSLY FILED WITH THE COMMISSION. THE
COMPANY 10-K AND THE COMPANY 10-Q ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH, BUT THEY ARE AVAILABLE (WITHOUT EXHIBITS, UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED HEREIN BY REFERENCE) TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS INFORMATION STATEMENT IS DELIVERED, WITHOUT
CHARGE ON WRITTEN REQUEST DIRECTED TO MAFCO CONSOLIDATED GROUP INC., 35 EAST
62ND STREET, NEW YORK, NEW YORK, 10021, OR BY CALLING (212) 572-8600. COPIES OF
THE COMPANY 10-K AND THE COMPANY 10-Q SO REQUESTED WILL BE SENT BY FIRST CLASS
MAIL, POSTAGE PAID.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Information Statement and prior
to the date of the Effective Time shall be deemed to be incorporated by
reference in this Information Statement and to be a part hereof from the
respective dates of filing of such documents. 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 Information
Statement to the extent that a statement contained in any subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Information Statement.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED, OR INCORPORATED BY REFERENCE, IN
THIS INFORMATION STATEMENT, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OTHER PERSON. ALL INFORMATION CONTAINED IN THIS INFORMATION STATEMENT
RELATING TO THE COMPANY HAS BEEN SUPPLIED BY THE COMPANY, AND ALL INFORMATION
CONTAINED IN THIS INFORMATION STATEMENT RELATING TO PARENT, THE PURCHASER AND
THEIR AFFILIATES HAS BEEN SUPPLIED BY PARENT.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INTRODUCTION................................... 1
AVAILABLE INFORMATION.......................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.................................... 3
SUMMARY........................................ 5
SPECIAL FACTORS................................ 11
Background of the Merger..................... 11
Determinations of the Special Committee and
the Board; Fairness of the
Merger.................................... 16
Financial Advisor; Fairness Opinion.......... 18
Position of Parent and the Purchaser......... 22
Purpose and Structure of the Merger.......... 22
Certain Effects of the Merger................ 23
Certain Federal Income Tax Consequences to
Stockholders.............................. 24
Plans for the Company After the
Merger.................................... 24
Interests of Certain Persons in the
Merger.................................... 25
Accounting Treatment of the Merger........... 25
Litigation................................... 26
SOURCE AND AMOUNT OF FUNDS..................... 26
STOCKHOLDERS' RIGHTS OF APPRAISAL.............. 26
THE MERGER AGREEMENT........................... 28
Effective Time............................... 28
Merger Consideration; Conversion of Shares... 29
Procedure for Payment........................ 29
Dissenter's Rights........................... 29
Payments under Stock Options................. 30
Certain Representations and Warranties....... 30
Conduct of Business Pending the
Closing................................... 30
<CAPTION>
PAGE
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<S> <C>
Certain Other Covenants...................... 30
Conditions to Consummation of the Merger..... 31
Termination.................................. 31
Miscellaneous................................ 32
REGULATORY MATTERS............................. 32
CERTAIN INFORMATION CONCERNING THE COMPANY..... 33
The Company.................................. 33
Directors and Executive Officers............. 34
CERTAIN INFORMATION CONCERNING PARENT AND THE
PURCHASER.................................... 35
Parent and the Purchaser..................... 35
Directors and Executive Officers............. 36
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS................................. 36
Relationship with Mafco Holdings............. 36
Promissory Note.............................. 37
Option Grant................................. 37
Registration Rights Agreement................ 37
FEES AND EXPENSES.............................. 37
MARKET PRICES AND DIVIDENDS.................... 38
Market Prices................................ 38
Dividends.................................... 38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT............................... 39
ANNEXES
Annex A--Agreement and Plan of Merger
Annex B--Opinion of Morgan Stanley & Co.,
Incorporated.
Annex C--Section 262 of the DGCL
</TABLE>
4
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Information Statement and is presented herein solely to furnish limited
introductory information regarding the proposed Merger (as defined herein) and
the parties thereto. This Summary is not intended to be complete and is
qualified in its entirety by the more detailed information contained, or
incorporated by reference, in this Information Statement and the Annexes hereto,
to which reference is made for a complete statement of the matters discussed
below. Stockholders are urged to read this Information Statement, including the
Annexes hereto, and the documents incorporated herein by reference, in their
entirety and to consider them carefully. Unless otherwise defined herein,
capitalized terms used in this summary have the respective meanings ascribed to
them elsewhere in this Information Statement.
THE COMPANY
Mafco Consolidated Group Inc., a Delaware corporation (the 'Company'), is a
holding company with no business operations of its own. The Company's only
material assets are (i) its ownership of 63.9% of the outstanding shares of
common stock, par value $.01 per share ('Cigar Common Stock'), of Consolidated
Cigar Holdings Inc. ('Cigar Holdings') (representing approximately 94.7% of the
combined voting power of Cigar Holdings), which owns 100% of the outstanding
shares of capital stock of Consolidated Cigar Corporation ('Consolidated
Cigar'), (ii) its ownership of 100% of the outstanding shares of convertible
preferred stock of M&F Worldwide Corp. ('M&F Worldwide,' formerly Power Control
Technologies Inc. ('PCT')) and approximately 29% of the outstanding shares of
common stock of M&F Worldwide (together, representing beneficial ownership of
approximately 36% of the outstanding shares of common stock of M&F Worldwide),
(iii) approximately $255.5 million in cash and marketable securities at March
29, 1997, (iv) a non-interest bearing, unsecured, subordinated promissory note
of Cigar Holdings in the original principal amount of $70.0 million and (v) a
pension plan asset with a book value of approximately $64.5 million at March 29,
1997. In addition, the Company has certain assets and certain contingent and
other liabilities, as more fully discussed in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 (the 'Company 10-K') and the
Company's Quarterly Report on Form 10-Q for the period ended March 29, 1997 (the
'Company 10-Q'). See 'AVAILABLE INFORMATION' and 'INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE.' Through Cigar Holdings and Consolidated Cigar, the
Company manufactures and distributes cigars and pipe tobacco products. See
'CERTAIN INFORMATION CONCERNING THE COMPANY.'
PARENT AND THE PURCHASER
Mafco Consolidated Holdings Inc., a Delaware corporation ('Parent'), is a
holding company with no business operations of its own. Parent's only material
asset is its ownership of approximately 85.0% of the outstanding shares of
common stock, par value $.01 per share ('Common Stock'), of the Company. MCG
Acquisition Inc., a Delaware corporation and a wholly owned subsidiary of Parent
(the 'Purchaser'), was recently incorporated and organized for the purpose of
acquiring all the Common Stock pursuant to the merger (the 'Merger') of the
Purchaser with and into the Company. The Purchaser has conducted no business to
date except in conjunction with the transactions contemplated by the Agreement
and Plan of Merger, dated as of February 20, 1997, by and among the Company,
Parent and the Purchaser (the 'Merger Agreement'). See 'CERTAIN INFORMATION
CONCERNING PARENT AND THE PURCHASER.'
THE MERGER
General. Pursuant to the Merger Agreement, the Purchaser will merge with
and into the Company and the separate corporate existence of the Purchaser will
cease. The Company, as the surviving corporation (the 'Surviving Corporation')
in the Merger, will be a wholly owned subsidiary of Parent. See 'SPECIAL
FACTORS--Certain Effects of the Merger.'
As a result of the Merger, each outstanding share of Common Stock, other
than shares of Common Stock as to which dissenters' rights have been duly
asserted and perfected under the DGCL and other than shares held by the Company,
Parent, the Purchaser or any other subsidiary of Parent) (which will be
cancelled), will be converted into the right to receive the Merger
Consideration, as described below. In addition, on February 20,
5
<PAGE>
1997, in connection with entering into the Merger Agreement, the board of
directors of the Company (the 'Board') declared, and on March 14, 1997, the
Company paid a $10.00 special cash dividend (the 'Special Dividend') to holders
of record of Common Stock as of the close of business on March 10, 1997.
The 'Merger Consideration' shall be equal to the sum of (x) $33.50 plus (y)
an amount, if any (the 'Additional Amount'), equal to the Excess (as defined
below) multiplied by 79.7%. The Additional Amount shall be payable only if the
average of the per share closing prices (the 'Average') of Cigar Common Stock on
the New York Stock Exchange (the 'NYSE') for the ten trading days ending two
trading days prior to the effectiveness of the Merger, exceeds $33.00 (the
amount by which the Average exceeds $33.00, the 'Excess'). There can be no
assurance that an upward adjustment will be made and stockholders may only
receive $33.50 per share. A decision to exercise dissenters' rights should be
based on receiving $33.50 per share. Stockholders will be entitled to receive
the Merger Consideration in cash, without interest, upon surrender of the
certificate formerly representing shares of Common Stock. See 'THE MERGER
AGREEMENT--Procedure for Payment.'
If the Effective Time had occurred on February 20, 1997, the date the
Merger Agreement was signed, the Average would have been $23.53, the Excess
would have been $0 ($23.53 minus $33.00), the Additional Amount would have been
$0 ($0 multiplied by 79.7%) and stockholders would have received total Merger
Consideration of $33.50. If the Effective Time had occurred on the date of this
Information Statement, the Average would have been $28.94, the Excess would have
been $0 ($28.94 minus $33.00), the Additional Amount would have been $0 ($0
multiplied by 79.7%) and stockholders would have received total Merger
Consideration of $33.50. If the Cigar Common Stock were to continue to trade
below $33.00 per share, stockholders will receive total Merger Consideration of
$33.50 per share.
If the Cigar Common Stock were to trade at $35.00, $40.00 or $50.00 per
share for each of the ten trading days ending two trading days prior to the
Effective Time, the Average would be $35.00, $40.00 or $50.00, respectively, the
Excess would be $2.00, $7.00 or $17.00 ($35.00 minus $33.00, $40.00 minus $33.00
or $50.00 minus $33.00), respectively, the Additional Amount would be $1.59,
$5.58 or $13.55 ($2.00, $7.00 or $17.00, respectively, multiplied by 79.7%),
respectively, and stockholders would be entitled to receive total Merger
Consideration of $35.09, $39.08 or $47.05, respectively.
Effective Time. The Merger will become effective when a certificate of
merger is filed with the Secretary of State of the State of Delaware or such
later time as is agreed to by the parties and specified in such certificate (the
'Effective Time'). It is currently anticipated that such filing will be made as
promptly as practicable following the closing date under the Merger Agreement,
which will take place only after the satisfaction or waiver of all of the
conditions set forth in the Merger Agreement. Accordingly, there can be no
assurance as to when and if the Merger will be consummated. The Company and
Parent currently anticipate that the Effective Time will occur on or about July
9, 1997. No further notice of the occurrence of the Effective Time will be given
to stockholders before the Effective Time, however, stockholders may call
1-800-290-6429, after July 7, 1997, to find out the Effective Time and the
definitive dollar amount of the Merger Consideration. See 'THE MERGER
AGREEMENT--Effective Time' and '--Conditions to Consummation of the Merger.'
Conditions to Consummation of the Merger. The obligations of the Company,
Parent and the Purchaser to consummate the Merger are subject to a number of
conditions (any or all of which may be waived by the parties thereto to the
extent permitted by applicable law), including: (i) the absence of any statute,
rule, regulation, order, decree or injunction that prohibits consummation of the
Merger; (ii) the receipt of all material authorizations, consents and approvals;
(iii) the receipt of requisite stockholder approval, which has been received;
(iv) the accuracy of the representations and warranties of each of the parties
to the Merger Agreement and (v) the performance by each of the parties to the
Merger Agreement of their respective obligations. See 'THE MERGER
AGREEMENT--Conditions to Consummation of the Merger.'
Background of the Merger. For a description of the events leading to
approval of the Merger Agreement by the Board, see 'SPECIAL FACTORS--Background
of the Merger.'
Determinations of the Special Committee and the Board; Fairness of the
Merger. At its meeting held on February 20, 1997, the Board, based upon the
unanimous recommendation of a special committee of independent directors of the
Board (the 'Special Committee') and the factors relied on by the Special
Committee,
6
<PAGE>
unanimously determined that the Merger Agreement and the Merger are fair to
stockholders of the Company (other than Parent and its affiliates). For a
discussion of the factors that the Special Committee and the Board considered in
arriving at their determinations, see 'SPECIAL FACTORS--Determinations of the
Special Committee and the Board; Fairness of the Merger.' The Board, Parent and
the Purchaser have certain interests in the Merger that may present actual or
potential conflicts of interest with those of unaffiliated stockholders. See
'SPECIAL FACTORS--Interests of Certain Persons in the Merger.'
Financial Advisor; Fairness Opinion. The Special Committee engaged Morgan
Stanley & Co. Incorporated ('Morgan Stanley') to act as its financial advisor to
assist in its review of Parent's proposal. At the February 20, 1997 meeting of
the Special Committee at which the Merger Agreement was approved by the Special
Committee, Morgan Stanley delivered its oral opinion (which it subsequently
confirmed in writing) to the effect that the consideration to be received by the
holders of shares of Common Stock (other than Parent and its affiliates) was
fair to such holders from a financial point of view. The full text of the
opinion of Morgan Stanley, which sets forth the assumptions made, matters
considered and limits on review undertaken, is attached hereto as Annex B and is
incorporated herein by reference. STOCKHOLDERS ARE URGED TO READ THE OPINION OF
MORGAN STANLEY CAREFULLY IN ITS ENTIRETY. For a discussion of the factors that
Morgan Stanley considered in reaching its opinion, see 'SPECIAL
FACTORS--Financial Advisor; Fairness Opinion.'
Position of Parent and the Purchaser. Parent and the Purchaser had no
involvement in the Special Committee's evaluation of the fairness of the Merger
Consideration to stockholders of the Company (other than Parent and its
affiliates), and neither has undertaken any formal evaluation of its own as to
the fairness of the Merger Consideration. Although four directors or officers of
Parent and its affiliates serve as directors of the Company, none served on the
Special Committee. Parent and the Purchaser, however, have considered the
factors set forth under 'SPECIAL FACTORS--Determinations of the Special
Committee and the Board; Fairness of the Merger,' and based on such factors,
Parent and the Purchaser have each determined that the Merger Consideration is
fair to and in the best interests of holders of Common Stock (other than Parent
and its affiliates). For a discussion of Parent and the Purchaser's position
regarding the Merger, see 'SPECIAL FACTORS-- Position of Parent and the
Purchaser.'
Purpose and Structure of the Merger. Purchaser and Parent entered into the
Merger Agreement to acquire beneficial ownership of the entire equity interest
in the Company because they believe that, due to the Company's complex corporate
structure, the historic trading prices of a share of Common Stock on the NYSE
prior to Parent's proposal did not adequately reflect the net asset value of the
Company's assets or its future prospects. Moreover, since the Company was
acquired by Mafco Holdings in June 1995, it has continuously, but
unsuccessfully, sought acquisition candidates in order to maximize stockholder
value. As a result, the Company has not been able to effectively utilize its
substantial amount of working capital.
Accordingly, Parent believed that it would be appropriate to offer to
acquire the interest of the public stockholders in the Company at a price that
more closely reflected their interest in the net assets of the Company, which
price would be at a significant premium to the historic trading prices of a
share of Common Stock on the NYSE. Parent recognized that aside from its cash
and marketable securities and pension plan asset, the Company's only significant
assets are its interests in Cigar Holdings and M&F Worldwide, both of which are
public companies, and that those Company stockholders who wished to maintain an
equity interest in either of those companies could do so.
Parent structured the transaction as a merger because it believed a merger
to be the most efficient means of acquiring the entire public interest in the
Company in a single transaction. Prior to determining to proceed with a merger
proposal, Parent also considered the following alternatives: a cash tender offer
(which it rejected because there could be no assurance that it would result in
Parent acquiring the entire equity interest in the Company), an exchange offer
for securities (which it rejected for the same reason it rejected a tender offer
and also because it believed that the Company's public stockholders might find
any securities it might offer difficult to understand and evaluate and,
accordingly, unattractive), a special dividend (the Special Dividend was paid on
March 14, 1997) and a spinoff to the Company's stockholders, including Parent,
of the Company's interests in Cigar Holdings and M&F Worldwide (which was
rejected by Parent because it would not result in Parent acquiring the entire
equity interest in the Company, it would not be tax-free, it would be too
complex and it would not optimize the trading price of the Common Stock).
7
<PAGE>
Parent believes that by acquiring the entire equity interest in the Company
at this time, it will be able to better manage the Company's contingent and
other liabilities, which the public market appears to have been unable to
understand and evaluate, because it will be able to do so without regard to the
short-term consequences to the Company's public stockholders and the short-term
performance of the trading price of the Common Stock. Moreover, the elimination
of the Company's public minority will allow Parent access to the remainder of
the Company's liquid assets, for use by Parent on its behalf and on behalf of
its affiliates, as Parent in its sole discretion determines. See 'SPECIAL
FACTORS--Purpose and Structure of the Merger.'
Plans for the Company After the Merger. It is expected that, following the
Merger, the business and operations of the Company will be continued by the
Surviving Corporation substantially as they have been and are currently being
conducted. After the Merger, the Company will become a wholly owned subsidiary
of Parent and the public will no longer own a minority equity interest in the
Company. Accordingly, Parent will be able to direct and control the policies of
the Company and its subsidiaries, including with respect to any extraordinary
corporate transaction such as a merger, reorganization or liquidation involving
the Company or any of its subsidiaries, a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries, a change in the
capitalization or other changes in the Company's corporate structure or business
or the composition of the Company's Board or management, without taking into
account the current public minority equity interest. Any such extraordinary
transaction may occur with affiliates of the Company, Parent or the Purchaser.
For a more detailed discussion of the plans for the Company following the
Merger, see 'SPECIAL FACTORS--Plans for the Company After the Merger.'
Interests of Certain Persons in the Merger. Certain members of the
Company's management and the Board may be deemed to have certain interests in
the Merger that are in addition to their interests as stockholders of the
Company generally. In particular, (i) a majority of the directors of the Company
are employees and/or directors of Parent and various of its affiliates and (ii)
pursuant to the Merger Agreement, the Company has agreed to take all actions
necessary to provide that each outstanding option to purchase Common Stock
('Stock Option') held by directors and officers of the Company becomes fully
vested and exercisable prior to the Effective Time, to cancel such Stock Option
and to make certain cash payments to the holders of such Stock Option in
consideration for such cancellation. Ronald O. Perelman, James R. Maher, Theo W.
Folz and Will Nesbitt will receive $16,500,000, $19,593,750, $2,150,000 and
$537,500, respectively, in respect of their Stock Options pursuant to the Merger
Agreement. See 'THE MERGER AGREEMENT--Payments Under Stock Options.' For a
discussion of these and other interests of certain persons in the Merger not
shared pro rata by all stockholders of the Company, see 'THE MERGER
AGREEMENT--Payments Under Stock Options' and 'SPECIAL FACTORS--Interests of
Certain Persons in the Merger.' The Special Committee and the Board were aware
of these interests and considered them, among other matters, in approving the
Merger Agreement. See 'SPECIAL FACTORS--Determinations of the Special Committee
and the Board; Fairness of the Merger.'
Federal Income Tax Consequences. The receipt of cash by a stockholder
pursuant to the Merger or pursuant to the exercise of stockholders' rights of
appraisal will be a taxable event to such stockholder for federal income tax
purposes and may also be a taxable event under applicable local, state and
foreign tax laws. For a more complete description of certain federal income tax
consequences of the Merger, see 'SPECIAL FACTORS-- Certain Federal Income Tax
Consequences to Stockholders.'
SOURCE AND AMOUNT OF FUNDS
The total amount of funds required to consummate the transactions
contemplated by the Merger Agreement and to pay related fees and expenses is
estimated to be approximately $389 million. The total amount of funds will be
paid from the Surviving Corporation's available cash and marketable securities.
See 'SOURCE AND AMOUNT OF FUNDS.'
STOCKHOLDERS' RIGHTS OF APPRAISAL
The DGCL provides that, as a result of the Merger, any stockholders who
shall have perfected appraisal rights will be entitled to receive, in lieu of
the Merger Consideration, payment in cash of the 'fair value' of their shares of
Common Stock as determined pursuant to the procedures set forth in Section 262
of the DGCL. For a summary of the procedures applicable to the perfection of
appraisal rights, see 'STOCKHOLDERS' RIGHTS
8
<PAGE>
OF APPRAISAL' and Annex C hereto. Because of the complexity of the procedures
for exercising these rights, stockholders who consider exercising such rights
should seek the advice of counsel. Stockholders electing to exercise their
appraisal rights must comply with Section 262 of the DGCL. Failure to take any
step in connection with the exercise of appraisal rights may result in the
termination or waiver of such rights. See 'STOCKHOLDERS' RIGHTS OF APPRAISAL.'
MARKET PRICES AND DIVIDENDS
The principal market on which the Common Stock and the Cigar Common Stock
are traded is the NYSE under the ticker symbol 'MFO' and 'CIG,' respectively. On
June 6, 1997, the last trading day before the printing of this Information
Statement, (i) the high and low sales prices of the Common Stock were $33 1/8
and $33, respectively and (ii) the high and low sales prices of the Cigar Common
Stock were $30 1/4 and $29 5/8, respectively. The Merger Consideration
represents a premium of 1.1% to the closing price of the Common Stock on June 6,
1997. On January 20, 1997, the last trading day before the public announcement
of Parents' proposal to the Company, the high and low sales prices of the Common
Stock were $27 1/8 and $27, respectively and (ii) the high and low sales prices
of the Cigar Common Stock were $25 and $24 3/4, respectively. For information
relating to market prices of and dividends on the Common Stock during the
current year and the past two years, see 'MARKET PRICES AND DIVIDENDS.'
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE COMMON
STOCK.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
Prior to the merger (the 'C&F Merger') on June 15, 1995, of C&F Merger Inc.
('C&F'), a wholly-owned subsidiary of Mafco Holdings Inc. ('Mafco Holdings'),
with and into Abex Inc. ('Abex'), Mafco Holdings contributed all of the
outstanding capital stock of Flavors Holdings Inc. ('Flavors Holdings') and
Cigar Holdings, the immediate parent companies of Mafco Worldwide Corporation
('Mafco Worldwide') and Consolidated Cigar, respectively, to C&F. C&F and Abex
merged, with Abex as the surviving corporation and renamed Mafco Consolidated
Group Inc. As a result of the C&F Merger and the purchase on July 17, 1995, by
the Company of shares of Common Stock from Libra Invest & Trade Ltd., the
Company owned directly or indirectly 100% of Mafco Worldwide and Consolidated
Cigar, all of the outstanding shares of preferred stock of PCT (now M&F
Worldwide) and a common equity interest in PCT. See 'CERTAIN INFORMATION
CONCERNING THE COMPANY.' In accordance with generally accepted accounting
principles, the C&F Merger was accounted for as a purchase of certain assets and
the assumption of certain liabilities of Abex, with C&F treated as the acquiror
for accounting purposes.
On August 21, 1996, Cigar Holdings completed an initial public offering, in
which it issued and sold 6,075,000 shares of Cigar Common Stock, thereby
reducing the Company's ownership in Cigar Holdings to approximately 80.2%. On
March 26, 1997, the Company completed the Cigar Secondary Offering, thereby
reducing its ownership in Cigar Holdings to approximately 63.9%.
On November 25, 1996, the Company completed the sale (the 'Flavors
Disposition') of all of the outstanding shares of Flavors Holdings common stock
and 23,156,502 Value Support Rights to a subsidiary of M&F Worldwide. See
'CERTAIN INFORMATION CONCERNING THE COMPANY.'
On March 3, 1993, Mafco Holdings completed the acquisition of Consolidated
Cigar. Therefore, the historical financial data for the periods preceding March
3, 1993, are not comparable to the financial data for the periods after March 3,
1993, due to the acquisition of Consolidated Cigar.
The following table sets forth selected consolidated financial data of the
Company and its subsidiaries for each of the five fiscal years ended December
31, 1992 through 1996 and the three months ended March 31, 1996 and March 29,
1997. The year-end data have been derived from, should be read in conjunction
with, and are qualified in their entirety by, the audited consolidated financial
statements of the Company, including the notes thereto, which are included in
the Company 10-K. The interim data have been derived from, should be read in
conjunction with, and are qualified in their entirety by, the unaudited
quarterly consolidated financial statements of the Company, including the notes
thereto, which are included in the Company 10-Q. See 'AVAILABLE INFORMATION' and
'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.'
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, ----------------------
---------------------------------------------------- MARCH 31, MARCH 29,
1992(1) 1993(1)(2) 1994 1995(3) 1996 1996 1997
------- ---------- ------ ------- ------ --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $100.1 $202.6 $226.9 $261.1 $310.7 $ 66.2 $ 55.9
Income from continuing operations...... 8.2 10.0 16.3 23.1 243.6(4) 7.6 77.6(5)
Net Income............................. 8.2 10.0 13.7 24.4 258.6(4) 8.3 77.6(5)
Income from continuing operations per
share................................ 0.41 0.50 0.82 1.06 10.48 .33 3.24
Net income per share................... 0.03 0.50 0.69 1.12 11.13 .36 3.24
OTHER DATA:
Book Value per share................... (3.42 ) (1.28) (0.55) 4.76 15.51 4.81 8.86
Ratio of earnings to fixed
charges(6)........................... 1.7x 1.5x 1.8x 2.1x 13.8x 2.6x 35.5x
BALANCE SHEET DATA (AT PERIOD END):
Total assets........................... $ 82.6 $293.6 $282.9 $560.6 $769.5 566.1 642.3
Long-term debt (including current
portion and short-term borrowings)... 134.2 276.4 250.2 229.6 97.5 221.8 104.1
Total stockholders' equity (deficit)... (67.6 ) (25.4) (10.8) 103.7 360.5(4) 111.7 205.9(5)
</TABLE>
- ------------------
(1) Reflects the results of Flavors Holdings or its predecessor prior to March
3, 1993.
(2) Reflects the combined results of Flavors Holdings and Cigar Holdings since
March 3, 1993 (the first date that Flavors Holdings and Cigar Holdings were
under common control of Mafco Holdings).
(3) Reflects the assets and liabilities of Abex acquired in a merger from June
15, 1995.
(4) Reflects the gains in 1996 on the initial public offering of Cigar Holdings
of $127.8 and the Flavors Disposition of $151.7.
(5) Reflects the gain on the Cigar Secondary Offering of $110.8.
(6) Ratio of earnings to fixed charges is expressed as the ratio of earnings
from continuing operations before income taxes, plus fixed charges to fixed
charges. Fixed charges consist principally of interest on debt, amortization
of deferred charges and interest component of rental expense.
10
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SPECIAL FACTORS
THE DISCUSSION IN THIS INFORMATION STATEMENT OF THE MERGER AND THE
DESCRIPTION OF THE PRINCIPAL TERMS THEREOF ARE SUBJECT TO AND QUALIFIED IN THEIR
ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED AS
ANNEX A TO THIS INFORMATION STATEMENT AND WHICH IS INCORPORATED HEREIN BY
REFERENCE. STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY
AND TO CONSIDER IT CAREFULLY.
BACKGROUND OF THE MERGER
The Company is a holding company with no operating assets of its own. Its
principal assets are its substantial equity interests in two public companies,
Cigar Holdings and M&F Worldwide Corp. ('M&F Worldwide' formerly Power Control
Technologies Inc. ('PCT')). Cigar Holdings, in turn, is the holding company for
Consolidated Cigar Corporation ('Consolidated Cigar') and has no operating
assets of its own. M&F Worldwide, through an indirect wholly owned subsidiary,
now operates the licorice and flavorings business formerly operated by a
subsidiary of the Company. This multi-tiered corporate structure has made it
difficult for the public equity market to evaluate the Company's assets and
future prospects. In Parent's view, this has contributed to the historical
trading prices of a share of Common Stock being substantially below the
Company's net asset value per share. Moreover, since the Company was acquired by
Mafco Holdings Inc. ('Mafco Holdings') in June 1995, it has continuously, but
unsuccessfully, sought acquisition candidates in order to maximize stockholder
value. As a result, the Company has not been able to effectively utilize its
substantial amount of working capital. Parent and the Purchaser believe that
this has also depressed the historical trading prices of a share of Common Stock
on the NYSE.
In mid-December 1996, representatives of Morgan Stanley met with
representatives of Parent to discuss the possibility of Parent acquiring all
publicly held shares of Common Stock and the Company, thereafter proceeding with
an underwritten secondary offering of Cigar Common Stock. During the meeting,
the Morgan Stanley representatives stated that in their view an acquisition of
all publicly held Common Stock would have to be at a price at least equal to the
liquidation value of the Company per share, which Morgan Stanley preliminarily
estimated based upon publicly available financial information to be
approximately $43 per share.
On January 21, 1997, Parent delivered to the Company a proposal to acquire
in a merger all publicly held shares of Common Stock at a price of $38.50 per
share, such price to be adjusted, up or down, to the extent that the proceeds
per share in the underwritten secondary offering by the Company of 5,000,000
shares of Cigar Common Stock (the 'Cigar Secondary Offering') were greater or
less than $24.50, the closing price per share of Cigar Common Stock on the NYSE
on January 20, 1997. Also on January 21, the Company announced its intention to
offer approximately 4 million shares of Cigar Common Stock in the Cigar
Secondary Offering and to make an underwritten offering of $150 million
principal amount of notes exchangeable for other shares of Cigar Common Stock
held by the Company.
Parent structured the transaction as a merger because it believed a merger
to be the most efficient means of acquiring the entire public interest in the
Company in a single transaction. Prior to determining to proceed with a merger
proposal, Parent also considered the following alternatives: a cash tender offer
(which it rejected because there could be no assurance that it would result in
Parent acquiring the entire equity interest in the Company), an exchange offer
for securities (which it rejected for the same reason it rejected a tender offer
and also because it believed that the Company's public stockholders might find
any securities it might offer difficult to understand and evaluate and,
accordingly, unattractive), a special dividend (the Special Dividend was paid on
March 14, 1997) and a spinoff to the Company's stockholders, including Parent,
of the Company's interests in Cigar Holdings and M&F Worldwide (which was
rejected by Parent because it would not result in Parent acquiring the entire
equity interest in the Company, it would not be tax-free, it would be too
complex and it would not optimize the trading price of the Common Stock).
In light of the overlapping equity ownership between Parent and the
Company, Parent suggested that the Company form a special committee of
independent directors to consider its proposal. At a meeting held on January 21,
1997, the Board formed a special committee (the 'Special Committee') comprised
of all the independent directors (i.e., not officers or employees of the
Company, Parent, the Purchaser or their respective affiliates) to consider the
proposal. The Special Committee was comprised of Philip E. Beekman, Jewel S.
Lafontant--Mankarious and Drew Lewis, with Mr. Beekman serving as Chairman.
11
<PAGE>
In January 1997, six purported class-action lawsuits and one purported
derivative and class-action lawsuit were filed in the Delaware Court of Chancery
(the 'Chancery Court'), under the captions Alan R. Kahn v. Ronald O. Perelman,
et al., C.A. No. 15450; Sandy Rywell v. Ronald O. Perelman, et al., C.A. No.
15468; Crandon Capital Partners v. Ronald O. Perelman, et al., C.A. No. 15469;
Harry Voege v. Ronald O. Perelman, et al., C.A. No. 15470, Harry Polikoff v.
Mafco Consolidated Group Inc. et al., C.A. No. 15471; Sal S. Shiry v. Ronald O.
Perelman, et al., C.A. No. 15475; and Jack Fishbaum v. Mafco Consolidated Group
Inc., et al., C.A. No. 15481 (the 'Actions'). The Actions challenge certain acts
allegedly taken or not taken by the Company and the members of the Board in
connection with the proposed transaction that ultimately culminated in the
execution of the Merger Agreement and the price originally proposed to be paid
for the Common Stock and allege that Andrews Group Incorporated and the Board
breached fiduciary obligations to the Company's stockholders by entering into
certain transactions with Marvel Entertainment Group, Inc. and Toy Biz, Inc.
(the 'Marvel and Toy Biz Transactions'), which were allegedly corporate
opportunities of the Company. The Actions seek to enjoin the consummation of the
Merger Agreement and the Marvel and Toy Biz Transactions, as well as damages and
an award of attorneys fees. As discussed below, the parties to all of the
Actions except Fishbaum executed a Memorandum of Understanding setting forth the
terms of their agreement in principle to settle these Actions.
On or about January 22, 1997, Morgan Stanley was retained to act as the
Special Committee's financial advisor, and the Special Committee also retained
independent counsel to assist in its review of and response to Parent's
proposal. In mid-January, representatives of Morgan Stanley had been advised by
representatives of Parent that Parent intended to recommend to the Special
Committee that it consider retaining Morgan Stanley as its financial advisor
because Morgan Stanley was very familiar with the Company as a result of
previous engagements, and, accordingly, was well positioned to evaluate its
assets and liabilities.
During the course of the following month, representatives of the Special
Committee's financial and legal advisors negotiated with representatives of
Parent regarding the terms of the proposed transaction.
On January 23, 1997, Mr. Beekman met with representatives of Morgan Stanley
and counsel to the Special Committee to review the proposal received from
Parent.
On January 27, 1997, counsel to the Special Committee sent a letter to
Parent requesting, among other things, clarification of the terms of Parent's
proposal, confirmation of the official appointment of the Special Committee,
certain due diligence information concerning the Company and the proposed
transaction and the scheduling of a meeting at which due diligence and other
related matters could be addressed with senior representatives of the Company
and Parent. In response, Parent confirmed the appointment of the Special
Committee, provided substantial written due diligence materials for review and
agreed to clarify its proposal during the parties' next scheduled meeting.
On January 29, 1997, representatives from Morgan Stanley and counsel to the
Special Committee met with representatives of the Company, Parent and counsel to
Parent to discuss Parent's proposal. At such meeting, a representative of Parent
stated that Parent was considering a revision of its proposal in order to remove
any downward adjustment in the consideration to be received by the Company's
stockholders based upon the price of a share of Cigar Common Stock to be sold in
the Cigar Secondary Offering, and to clarify that such consideration would be
based upon the gross, and not the net, sales price per share of Cigar Common
Stock. At this meeting, counsel to the Special Committee asked certain questions
with respect to the proposal, including whether Parent's proposal was
conditioned upon the Cigar Secondary Offering, and if so, the anticipated timing
of such transactions. A representative of Parent answered that Parent had not
determined whether to condition its proposal upon the Cigar Secondary Offering.
A representative of Morgan Stanley asked whether Parent had considered any
alternatives to its current proposal, such as paying to the Company's
stockholders a dividend of Cigar Common Stock plus a cash amount, a cash
election merger pursuant to which stockholders of the Company could choose to
receive either cash or a share of Cigar Common Stock plus cash, or the
liquidation of the Company. Parent indicated that because of potential tax
liability that would result to the Company's stockholders from its distribution
of Cigar Common Stock and the fact that such stockholders may not desire to own
shares of Cigar Common Stock, it favored the form of the proposed transaction.
Parent also was concerned that a distribution of Cigar Common Stock to the
Company's stockholders might lead to downward selling pressure on the Cigar
Common Stock, thereby diminishing the value of the consideration to be received
by the Company's stockholders. Moreover, the proposed transaction would provide
cash to the Company's stockholders, thereby enabling them to pay any tax
liability associated with the transaction and providing them the flexibility to
invest
12
<PAGE>
the proceeds as they see fit. Parent indicated, however, that it would be
willing to consider other alternatives that might be proposed by the Special
Committee.
Also at this meeting, Parent distributed a schedule setting forth Parent's
estimates of the various assets and liabilities of the Company (the 'Parent
Estimates'), which were created by individuals who are officers of both the
Company and Parent. The Parent Estimates estimated the value of the Company's
non-Cigar Holdings assets (not counting cash, cash equivalents, marketable
securities and option proceeds, the values of which were readily ascertainable
and did not need to be estimated) to be $142.6 million and the Company's
liabilities (not counting potential tax liability on the sale of shares of Cigar
Common Stock in the Cigar Secondary Offering) to be $188.0 million.
Later in the day on January 29th, the Chairman of the Special Committee met
with the Special Committee's financial and legal advisors to review the
background of the transaction. At this meeting, representatives of Morgan
Stanley stated that, in their view, the transaction was similar to a negotiated
liquidation of the Company because the Company is a holding company with no
business operations of its own and the value of its assets are readily
ascertainable. Therefore, in Morgan Stanley's view, the net equity value of the
Company, based on the items covered by the Parent Estimates, would be key to the
financial and fairness evaluation of the proposed transaction. The parties
reviewed the assets and liabilities covered by the Parent Estimates and noted
those items that could be easily confirmed based on publicly available
information as well as those that would require additional work. Among the more
noteworthy of the liabilities were the Company's future liabilities under
certain tax and employee benefits matters, as to which the Special Committee's
legal advisors were authorized to retain an outside consultant for advice.
Following such authorization, Price Waterhouse LLP ('Price Waterhouse') was
retained to assist in understanding the extent of tax and employee benefit
liabilities and to advise on the reasonableness of the Parent Estimates
regarding such matters.
On January 30, 1997, Parent delivered a revised written proposal to the
Company confirming the removal of the downward adjustment from its proposal and
the clarification of the use of the gross sales price of a share of Cigar Common
Stock to determine the consideration to be received by the Company's public
stockholders. On such date, the Company publicly announced, among other things,
Parent's revised proposal, the filing of a registration statement with the
Securities and Exchange Commission (the 'Commission' or 'SEC') covering the
Cigar Secondary Offering and its determination not to proceed with its proposed
offering of $150 million principal amount of notes exchangeable for other shares
of Cigar Common Stock.
On February 3, 1997, Morgan Stanley held a telephonic meeting with
management of Cigar Holdings and discussed current conditions and future
prospects for Cigar Holdings including Cigar Holdings' financial results for
1996, as subsequently disclosed in Cigar Holdings' public filings, recent unit
volume trends, backlogs and current orders. During the discussion, Morgan
Stanley learned that Cigar Holdings' management's estimated range for 1997
earnings per share was $1.50-$1.60.
Also on February 3, 1997, counsel to the Special Committee met with
representatives of Parent to discuss certain of the Company's contingent
litigation liabilities, such as liabilities relating to asbestos and
environmental matters. At the meeting, Parent's representatives explained that
the Parent Estimates with respect to asbestos and environmental matters were
based on a variety of factors, including the Company's historical experience
with such matters and its knowledge regarding similar claims made against
others, the nature and geographic situs of pending claims, available information
regarding environmental sites and the availability and scope of insurance or
indemnification arrangements with respect to these matters.
On the morning of February 7, 1997, the Special Committee met with its
advisors to discuss Parent's revised proposal. The Special Committee, together
with its advisors, reviewed the background of Parent's proposed transaction,
including the terms of Parent's original proposal and revised proposal, and were
advised by counsel with respect to its fiduciary duties in such a situation.
Specifically, the Special Committee was advised that it was not required to
approve a transaction or to enter into negotiations with respect to a
transaction unless it was felt that it was appropriate to do so. The Special
Committee received preliminary advice from Morgan Stanley that, in its view, the
current market price for shares of Cigar Common Stock was low given Cigar
Holdings' earnings expectations, and that, as a result, Parent's $38.50 proposed
price was too low. However, a formal decision with respect to the revised
proposal was not taken. The Special Committee and its advisors reviewed various
valuation considerations applicable to both the Company and to Cigar Holdings
and discussed the timing and process involved in a response to Parent's
proposals and various issues with respect thereto. The principal valuation
13
<PAGE>
considerations at issue appeared to be the value of the Cigar Common Stock, the
Company's contingent liabilities, especially with respect to employee benefits,
asbestos, environmental and tax matters, and the Company's pension plan asset.
The value of the Company's non-Cigar Holdings assets and other liabilities were
not at issue as they appeared more readily ascertainable because they primarily
consist of marketable fixed income securities and other assets and liabilities,
the amount of which are fixed by contract, and M&F Worldwide common stock, the
value of which is adequately reflected by its trading price.
Later on February 7, 1997, Parent's counsel sent a draft merger agreement
to counsel to the Special Committee and to Morgan Stanley for review and
comment.
Over the course of the following 10 days, the Special Committee and its
advisors continued their due diligence and had numerous discussions with
representatives of Parent concerning due diligence matters to better understand
the basis for the Parent Estimates and to derive other estimated values where
the due diligence investigation showed the Parent Estimates to be challengeable
in the Company's favor. In addition, over the same period, representatives of
Parent and the Special Committee negotiated the terms of the draft merger
agreement. As described below, negotiations focused on price and the Special
Committee's fiduciary duties.
On February 11, 1997, the Special Committee met with its advisors to
continue its evaluation of Parent's revised proposal. The Special Committee
received preliminary advice from Morgan Stanley on valuation considerations as
well as its preliminary view of estimated asset and liability values versus the
Parent Estimates. Morgan Stanley advised the Special Committee that the current
proposal valued Cigar Common Stock at $24.50 per share, which, in Morgan
Stanley's preliminary view, was low and that certain liabilities might be
overstated in the Parent Estimates. The Special Committee discussed with its
advisors various values that might be attributable to the Cigar Common Stock and
the implication of such values in relation to the price for the Common Stock to
be paid in the proposed transaction. A representative of Morgan Stanley
explained that, because the number of outstanding shares of Common Stock was
approximately equal to the number of shares of Cigar Common Stock then
beneficially owned by the Company, the value of each share of Common Stock
should be viewed as including the value of one share of Cigar Common Stock. The
Special Committee also considered various possible counterproposals that might
be made in response to Parent's proposal and agreed to communicate to Parent
that the $38.50 proposed price per share was too low and to request a price of
$46.00 per share, reflecting both the Special Committee's higher estimate
regarding the value of Cigar Holdings and the Special Committee's lower estimate
regarding the Company's liabilities. Morgan Stanley also advised, however, that,
based on its preliminary analysis, any price in excess of $43.00 per share would
be extremely favorable to the holders of Common Stock. Finally, Morgan Stanley
advised the Special Committee that it had inquired as to whether it would be
permitted to approach third parties with respect to an acquisition of the
Company or Cigar Holdings and had been told that it would not be permitted to do
so, and had been informed that Parent would not sell its interest in the Company
or Cigar Holdings. The Special Committee authorized Morgan Stanley to
communicate the proposed $46.00 price, on a preliminary basis and subject to
further due diligence, to representatives of Parent, such communication to be
followed by more in depth discussions between Mr. Beekman, on behalf of the
Special Committee, and a representative of Parent.
In addition, the Special Committee reviewed the principal terms of the
proposed merger agreement and discussed areas of concern. The Special Committee
authorized its counsel to convey its comments and concerns with respect to the
proposed agreement to Parent's counsel. Among the points to be raised in this
regard were the Special Committee's desire that the Merger not be conditioned on
consummation of the Cigar Secondary Offering; that the agreement's 'fiduciary
out,' which, as then proposed by Parent, would only become applicable in the
event a superior proposal were received by the Company (a circumstance not
viewed by the Special Committee and its advisors as likely in light of the
controlling position held by Parent), be revised so as to provide the Special
Committee additional flexibility as to when it could be exercised; that the
agreement address the consequences of a change in the price of Cigar Common
Stock; that the agreement be terminable or subject to amendment by the Company
only by action of the Special Committee; that the scope of the representations
and warranties to be given by the Company to Parent be reduced; that the Merger
not be conditioned on the absence of a material adverse effect as to the
Company; and that the Merger be conditioned on approval by a majority of the
Company's stockholders other than Parent and its affiliates. In subsequent
negotiations, these points were all addressed and, save for the suggestion that
the Merger be conditioned on approval by a majority of the Company's
stockholders other than Parent and its affiliates, which was not acceptable to
Parent, resolved in a manner satisfactory to the Special Committee. After
deliberation on the
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subject, the Special Committee determined that, in light of all of the other
elements of the Merger, and including, not unimportantly, its financial
fairness, it was acceptable that the Merger not be conditioned on approval by a
majority of the Company's stockholders other than Parent and its affiliates.
Later on February 11, Morgan Stanley communicated the proposed $46.00 price
to a representative of Parent, and Mr. Lewis also discussed with a
representative of Parent the Special Committee's preliminary views as to an
appropriate transaction price. Also on February 11 and 12, the Chairman of the
Special Committee and the Special Committee's financial and legal advisors had
conversations with representatives of Parent as to the position of the Special
Committee and the further prosecution of due diligence.
On February 19, 1997, representatives of Morgan Stanley met with a
representative of the Company and further discussed the valuation of the Common
Stock, including particularly the liabilities of the Company and the expected
future value of the Cigar Common Stock. At this meeting, a representative of the
Company conveyed to Morgan Stanley Parent's position that it was unwilling to
offer more than $43.00 per share of Common Stock. Morgan Stanley indicated that
a price of less than $44.00 per share would be difficult for the Special
Committee to accept and that a revised fiduciary out, as described above, was
required. Morgan Stanley reported on the meeting to Mr. Beekman following its
conclusion. There followed a conversation between Mr. Beekman and a
representative of Parent, at which a price of $43.50 per share, subject to
upward adjustment in the event the price of the Cigar Common Stock was in excess
of $33.00, was provisionally negotiated, subject to finalizing the fairness and
due diligence reviews, and subject to approval by the Special Committee,
including the receipt of an appropriate opinion from Morgan Stanley.
On the morning of February 20, 1997, the Special Committee met with its
advisors to discuss the status of the proposed transaction with Parent. Mr.
Beekman explained that a meeting had taken place the prior day between a
representative of Parent and Morgan Stanley, at which Parent offered $43.00 per
share and Morgan Stanley, on behalf of the Special Committee, had requested
$44.00 per share, and that this meeting had been followed by a conversation
between Mr. Beekman and a representative of Parent, at which a price of $43.50
per share had been provisionally negotiated, subject to the matters described in
the prior paragraph. The proposal also contemplated that, in addition to the
$43.50 per share, the merger consideration would be adjusted upward in the event
that the price of Cigar Common Stock was in excess of $33.00 per share at the
time of the Merger, and that the merger agreement fiduciary-out provision would
not be exercisable based upon a change in the trading value of the Cigar Common
Stock. The Special Committee was advised by its counsel that the legal due
diligence process had been substantially completed and revealed no material
issues not already known to the Special Committee and that the merger agreement
had been substantially completed and should be finalized shortly. The Special
Committee was further advised by Morgan Stanley that its due diligence was
substantially completed, that outside consultants had evaluated the liabilities
for certain employee benefits as requested and concluded that these liabilities
were not overstated and that, in its view, the $43.50 per share price, subject
to upward adjustment, was fair from a financial point of view. Morgan Stanley
representatives also reminded the Special Committee that they had been
specifically prohibited from approaching third parties with respect to an
acquisition of the Company or Cigar Holdings and had been informed that Parent
would not sell the Company or Cigar Holdings.
During the afternoon of February 20, 1997, negotiations continued between
representatives of the Special Committee's legal and financial advisors and
representatives of Parent with respect to the remaining open issues in the
merger agreement, i.e., price and the Special Committee's fiduciary out. The
issue regarding price was resolved as described in the following paragraphs and
the issue regarding the Special Committee's fiduciary out was resolved by
permitting the Special Committee to exercise its fiduciary out without reference
to whether a superior proposal had been received.
On the evening of February 20, 1997, the Special Committee was convened to
evaluate the final report on the proposed merger with Parent and to take action
with respect thereto. The Special Committee was advised by its financial advisor
of the various final estimated ranges that applied to the assets and liabilities
of the Company, which implied an estimated net equity value per share of between
$16.44 and $18.94, exclusive of any holdings of Cigar Common Stock, without
taking into account any corporate level liability and transaction costs that
would arise upon the sale of the Company's shares of Cigar Common Stock, and
$14.94 to $17.44 after taking such liability into account. Morgan Stanley
clarified that this analysis implied that, at $43.50 per share, Cigar Holdings
was implicitly valued at approximately $27.00 per share if the tax liability
were not included, and
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between $28.00 and $29.00 per share taking into account the potential tax
liability, in either case well in excess of recent trading prices of Cigar
Common Stock.
The Special Committee was advised by Morgan Stanley that, in Morgan
Stanley's view, the per share amount to be received in the Merger was fair from
a financial point of view to the holders of shares of Common Stock (other than
Parent and its affiliates), at the then current market price for Cigar Common
Stock, as well as at possible higher or lower prices for Cigar Common Stock,
taking into consideration the price adjustment mechanism contained in the Merger
Agreement (but recognizing that the merger consideration would not be adjusted
upward unless the price of Cigar Common Stock was in excess of $33.00 per share
at the time of the Merger), and that the fact that $10.00 per share of the
proposed merger consideration would be paid as a dividend sooner than the
remaining merger consideration represented a slightly greater value on a present
value basis. The Special Committee was advised by its counsel that the language
of the merger agreement had been substantially resolved. After further
discussion and deliberation, a motion determining the Merger and the Merger
Agreement to be fair and in the best interests of the Company's stockholders
(other than Parent and its affiliates) and to approve the Merger and the Merger
Agreement was made and carried unanimously, and the Special Committee resolved
to recommend that similar action be taken by the full Board of Directors of the
Company.
Later in the evening on February 20, 1997, the Boards of Directors of each
of Parent, the Purchaser and the Company unanimously approved the Merger
Agreement, and the Merger Agreement was executed. Ronald Perelman and Howard
Gittis are directors of each of Parent, the Purchaser and the Company. See
'CERTAIN INFORMATION CONCERNING THE COMPANY--Directors and Executive Officers'
and 'CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER--Directors and
Executive Officers.'
Morgan Stanley's oral opinion delivered to the Special Committee was
subsequently confirmed in a written opinion, dated February 20, 1997, stating
that, as of such date and based upon the factors and assumptions set forth in
such opinion, the consideration to be received by holders of shares of the
Company's Common Stock pursuant to the Merger Agreement was fair from a
financial point of view to such holders (other than Parent and its affiliates).
On March 17, 1997, the parties to all of the Actions except Fishbaum
executed a Memorandum of Understanding setting forth the terms of their
agreement in principle to settle these Actions. While the plaintiffs in those
Actions did not have a direct role in the negotiations relating to the Merger
Agreement, the Memorandum of Understanding acknowledges that Parent took into
account the desirability of addressing the claims asserted in the Actions in
agreeing to the enhanced terms for stockholders set forth in the Merger
Agreement. The Memorandum of Understanding also provides that settling
plaintiffs may seek up to $1.25 million in attorney's fees. The Memorandum of
Understanding contemplates the drafting and execution of a Stipulation of
Settlement by the parties and its approval by the Chancery Court, which approval
is expected to occur in the third quarter of 1997.
DETERMINATIONS OF THE SPECIAL COMMITTEE AND THE BOARD; FAIRNESS OF THE MERGER
As discussed under '--Background of the Merger,' the Special Committee
unanimously recommended the Merger Agreement and the Merger to the Board,
determining the Merger Agreement and the Merger to be fair to and in the best
interests of the Company's stockholders (other than Parent and its affiliates).
In reaching this conclusion, the Special Committee considered a number of
factors, including, among other things, the opinion of Morgan Stanley, dated
February 20, 1997, that, as of such date and subject to the assumptions and
limitations therein, the consideration to be received by holders of Common Stock
pursuant to the Merger Agreement is fair from a financial point of view to such
holders (other than Parent and its affiliates). The full text of such opinion,
which sets forth, among other things, the opinion expressed, procedures
followed, matters considered and limitations on review undertaken in connection
with such opinion, is attached as Annex B to this Information Statement.
Stockholders are urged to read the opinion in its entirety.
Reasons for the Special Committee's Determination. In reaching its
recommendation, the Special Committee considered the following material factors:
(a) The terms of the proposed Merger, including, among other things,
the consideration to be paid to holders of Common Stock, including the
potential upward adjustment, the 60% premium to the closing price of the
Common Stock the day prior to the announcement of Parent's proposal and the
circumstances under which the Merger Agreement could be terminated. The
Special Committee determined that these terms,
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which were the product of intensive arms'-length negotiations, provide full
value for stockholders in that not only would stockholders receive a
substantial premium over the current market price and net book value, but
they also would be able to benefit from any substantial upward movement in
the price of Cigar Common Stock prior to the Effective Time through the
upward adjustment mechanism.
(b) The presentation and opinion of Morgan Stanley, which included,
among other things, analyses of the value of the Company and of the value
of the Company in relation to the price of Cigar Common Stock and
comparisons with similar companies and similar transactions, and which
indicated that the consideration to be received by the holders of shares of
Common Stock (other than shares held by Parent and its affiliates) was fair
to such holders from a financial point of view (such opinion of Morgan
Stanley was given subject to certain limitations, qualifications and
assumptions specified therein; see '--Financial Advisor; Fairness
Opinion'). In connection with its consideration of the Morgan Stanley
opinion, as part of its determination with respect to the fairness of the
consideration to be received by holders of Common Stock pursuant to the
Merger Agreement, the Special Committee adopted the conclusion, and the
analyses underlying such conclusion, of Morgan Stanley, based upon its view
as to the reasonableness of such analyses.
(c) That the Special Committee believes that Morgan Stanley's analysis
supports its determination that the consideration to be received by holders
of Common Stock pursuant to the Merger Agreement is fair because the
aggregate value of the Merger Consideration and the Special Dividend falls
at the high end of or exceeds the range of values calculated by Morgan
Stanley in its various analyses and that it is unrealistic to expect such
aggregate value to exceed the high end of every range. In addition, Morgan
Stanley explained to the Special Committee that arriving at a fairness
opinion is a complex process, that its analyses must be considered as a
whole and that selecting portions of its analysis, without considering all
such analyses, could be misleading.
(d) The Company's business, condition and prospects, and the current
and historical trading prices for the Company's and Cigar Holdings' shares.
Based in part on advice from Morgan Stanley, the Special Committee believed
that the Company's stockholders were unlikely to realize the full value of
their shares, particularly their derivative interest in Cigar Holdings,
under the current holding company structure given the historic discount in
the trading price for the Common Stock (as compared to Morgan Stanley's
evaluation of the underlying net asset value).
(e) The risks to stockholders associated with the Common Stock,
including, without limitation, the potential risk involved with Cigar
Holdings and with certain potential legal liabilities, such as ongoing
asbestos litigation. In light of the historic discount in the trading price
for the Common Stock (as compared to Morgan Stanley's evaluation of the
underlying net asset value), the Special Committee believed that the
uncertainty relating to the Company's potential liabilities, and the
market's inability to properly value such liabilities, might be an obstacle
to realizing stockholder value, and the Special Committee recognized that
the substantial risks of these liabilities to stockholders would be
eliminated by the Merger.
The foregoing discussion of the information and factors considered and
given weight by the Special Committee is not intended to be exhaustive. In view
of the wide variety of the factors considered in connection with its evaluation
of the proposed Merger, the Special Committee did not find it practicable to,
and did not, quantify or otherwise attempt to assign relative weights to the
foregoing factors or determine that any factor was of particular importance.
Rather, the Special Committee viewed its position and recommendation as being
based on the totality of the information presented and considered by it.
Reasons for the Board's Determination. In reaching its decision to approve
the Merger Agreement, the Board relied on the Special Committee's recommendation
and the factors relied on by the Special Committee as described above. In view
of the wide variety of factors considered in connection with its evaluation of
the proposed Merger, the Board did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the foregoing
factors or determine that any factor was of particular importance. Rather, the
Board viewed its position as being based on the totality of the information
presented and considered by it. In connection with its consideration of the
determination by the Special Committee, as part of its determination with
respect to the fairness of the consideration to be received by holders of Common
Stock pursuant to the Merger Agreement, the Board adopted the conclusion, and
the analyses underlying such conclusion, of the Special Committee, based upon
its view as to the reasonableness of such analyses.
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Fairness of the Merger to Unaffiliated Stockholders. The Board believes
that the Merger is fair to and in the best interests of unaffiliated
stockholders for all of the reasons set forth above. In addition, in light of
the overlapping equity ownership between Parent and the Company, Parent
suggested that the Company form the Special Committee to consider Parent's
proposal. The Company did form the Special Committee, which was comprised of all
of the independent directors of the Company, none of whom are officers or
employees of the Company, Parent, the Purchaser or their respective affiliates.
The Special Committee engaged independent counsel and Morgan Stanley, each of
whom acted on behalf of, and in the interests of, the Company's stockholders.
The Merger Consideration was the highest price obtained following intensive
arms'-length negotiations between the Special Committee and its financial and
legal advisors and representatives of Parent. Morgan Stanley's fairness opinion
considered the fairness of the consideration to be received by holders of the
Common Stock (other than Parent and its affiliates) pursuant to the Merger
Agreement. Except with respect to options to purchase Common Stock, none of
Parent, the Purchaser nor any of their affiliates will receive the Merger
Consideration. See '--Interests of Certain Persons in the Merger; Stock
Options.' The Special Committee unanimously determined that the Merger Agreement
and the Merger are fair to and in the best interests of Company's stockholders
(other than Parent and its affiliates).
In light of all of the foregoing, neither the Special Committee nor the
Board considered it necessary to, and both the Special Committee and the Board
believe the proposed transaction is fair despite the fact they did not, (i)
retain an unaffiliated representative to act solely on behalf of unaffiliated
stockholders for purposes of negotiating the terms of the Merger and the Merger
Agreement or (ii) structure the Merger to require the approval of a majority of
the unaffiliated stockholders.
FINANCIAL ADVISOR; FAIRNESS OPINION
Morgan Stanley was engaged to act as the Special Committee's financial
advisor on or about January 22, 1997 in connection with the Special Committee's
review of Parent's proposal. This engagement was subsequently confirmed in a
letter dated February 11, 1997. No limitations were imposed by the Company, its
Board of Directors or the Special Committee upon Morgan Stanley with respect to
the investigations made or the procedures followed by it in rendering its
opinion, except that, at Parent's instruction, Morgan Stanley was not authorized
to, and did not, solicit any indications of interest from any potential third
party, either financial or strategic, to acquire all or any part of the Company
or any of its assets. On February 20, 1997, Morgan Stanley rendered its oral
opinion to the Special Committee and to the Board, and subsequently confirmed
such oral opinion in a written opinion (the 'Morgan Stanley Opinion') dated
February 20, 1997, that, as of such date and based upon the assumptions noted
therein, matters considered and limits of review in connection with such
opinion, the consideration to be received by the holders of shares of Common
Stock pursuant to the Merger Agreement was fair from a financial point of view
to such holders (other than Parent and its affiliates).
A COPY OF THE MORGAN STANLEY OPINION, DATED FEBRUARY 20, 1997, WHICH SETS
FORTH THE ASSUMPTIONS NOTED THEREIN, MATTERS CONSIDERED, AND CERTAIN LIMITATIONS
ON THE SCOPE OF REVIEW UNDERTAKEN BY MORGAN STANLEY, IS ATTACHED AS ANNEX B TO
THIS INFORMATION STATEMENT, AND STOCKHOLDERS ARE URGED TO READ THIS OPINION IN
ITS ENTIRETY. THE MORGAN STANLEY OPINION WAS DIRECTED ONLY TO THE FAIRNESS, FROM
A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF
THE SHARES OF COMMON STOCK (OTHER THAN PARENT AND ITS AFFILIATES). THE MORGAN
STANLEY OPINION WAS DELIVERED FOR THE INFORMATION OF THE SPECIAL COMMITTEE AND
THE BOARD AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO
WHETHER ANY STOCKHOLDER SHOULD EXERCISE APPRAISAL RIGHTS IN RESPECT OF THE
MERGER OR OTHERWISE ACT IN RESPECT OF THE MERGER AGREEMENT AND THE MERGER. THIS
SUMMARY OF THE MORGAN STANLEY OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF SUCH OPINION.
In rendering its opinion, Morgan Stanley, among other things, (i) reviewed
certain publicly available financial statements and other information of the
Company and Cigar Holdings; (ii) reviewed certain internal financial statements
and other financial and operating data concerning the Company and Cigar Holdings
prepared by the managements of the Company and Cigar Holdings; (iii) analyzed
certain estimates of assets and liabilities prepared by the managements of the
Company and Cigar Holdings; (iv) discussed past and current operations and the
financial condition and prospects of the Company and Cigar Holdings with senior
executives of the Company and Cigar Holdings; (v) reviewed the reported prices
and trading activity for the Common Stock and Cigar Common Stock; (vi) compared
the financial performance of the Company and Cigar Holdings and the prices and
trading activity of the Common Stock and Cigar Common Stock with that of certain
other comparable publicly
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traded companies and their securities; (vii) reviewed the financial terms, to
the extent publicly available, of certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among representatives of the
Company, Parent and their legal advisors; (ix) reviewed the Merger Agreement and
certain related documents; (x) reviewed and discussed with Price Waterhouse LLC
certain issues regarding the assets and liabilities of the Company; and (xi)
performed such other analyses and considered such other factors as it deemed
appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information it
reviewed. With respect to the financial estimates, Morgan Stanley assumed that
they were reasonably prepared on bases reflecting the best currently available
judgments of the future financial performance of the Company and Cigar Holdings.
Morgan Stanley did not make any independent valuation or appraisal of the assets
or liabilities of the Company or Cigar Holdings, nor were such appraisals
furnished to Morgan Stanley. The Morgan Stanley Opinion was necessarily based
upon economic, market and other conditions as in effect on, and the information
made available to Morgan Stanley as of, the date of the opinion.
In arriving at its opinion, Morgan Stanley was not authorized to solicit,
and did not solicit, interest from any party with respect to the acquisition of
the Company or any of its assets or businesses, nor did it negotiate with any
such party, other than Parent, as to the possible acquisition of the Company or
any of its assets or businesses.
The following is a summary of certain financial and comparative analyses
performed by Morgan Stanley in arriving at its opinion dated February 20, 1997,
and reviewed with the Special Committee in connection with such opinion:
Liquidation Value Analysis. Morgan Stanley performed an analysis to
determine a range of valuation for (i) the assets of the Company, excluding the
Company's interest in Cigar Holdings; (ii) the Company's interest in Cigar
Holdings; and (iii) the Company's liabilities. Morgan Stanley estimated the
value of the Company's non-Cigar Holdings assets (not counting cash, cash
equivalents, marketable securities and option proceeds, the values of which were
readily ascertainable and did not need to be estimated) to be between $168.0 and
$189.7 million, as opposed to the estimate proposed by Parent of $142.6 million.
Morgan Stanley estimated the value of the Company's liabilities (not counting
potential tax liability on the sale of shares of Cigar Common Stock in the Cigar
Secondary Offering) to be between $121.0 and $161.7 million, as opposed to the
estimate proposed by Parent of $188.0 million. Using these estimated ranges of
values for such assets and liabilities and adding in the value of cash, cash
equivalents, marketable securities, option proceeds and Cigar Holdings (at a
price per share for Cigar Common Stock of $24.50, the market price as of January
20, 1997 (which was unaffected by the announcement of the proposed
transactions)), this analysis implied a liquidation value per Company share of
$39.14 to $41.65.
Due to the significant proportion of the Company's value represented by its
interest in Cigar Holdings, Morgan Stanley performed the following analysis with
respect to Cigar Holdings:
Value Sensitivity Analysis. Morgan Stanley analyzed the price per share of
Common Stock implied by (i) various stock prices for Cigar Holdings ranging from
$24.50 to $30.00 per share, assuming a one-to-one correlation between Cigar
Holdings shares and Common Stock, and (ii) various ranges for the Company's
non-Cigar Holdings assets and liabilities discussed above. Such analysis showed,
based on a Cigar Common Stock price of $27.00 per share and the Morgan Stanley
estimated ranges discussed above, a value per share of Common Stock of $41.94 to
$44.44, and based on a Cigar Common Stock price of $24.50 per share, a value per
share of Common Stock of $39.44 to $41.94.
Cigar Common Stock Price Analysis. Morgan Stanley analyzed the stock price
and trading volume history for Cigar Common Stock from its initial public
offering on August 16, 1996, through February 19, 1997, taking note of
significant events during the period. Such analysis showed an all-time high
closing price of $32.50 and general stock price decline from September 1996 to
January 1997.
Cigar Holdings Comparable Company Analysis. Using publicly available
information, Morgan Stanley compared certain financial and operating information
for Cigar Holdings with corresponding financial and operating information for a
group of publicly traded companies that Morgan Stanley deemed to be in lines of
business with certain characteristics reasonably similar to the Cigar Holdings',
understanding that no public company is directly comparable to Cigar Holdings.
Morgan Stanley determined that the two other public companies that specialize in
the manufacture of cigars were reasonably comparable to Cigar Holdings and that
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certain specialty luxury goods companies were also comparable to Cigar Holdings
because these companies similarly manufacture high-end, luxury items marketed to
similar consumer groups as cigars. The public companies included in the
comparable company analysis were: Gucci Group N.V., LVMH Moet Hennessy Louis
Vuitton, Oakley, Inc., The Boston Beer Company, Inc., Redhook Ale Brewery,
Incorporated, Pete's Brewing Company, Culbro Corporation and Swisher
International Group Inc. (collectively, the 'Comparables'). Morgan Stanley's
analysis indicated that: (i) Cigar Holdings' current share price as a percentage
of its highest share price was 76.6%, as compared to a range of 24.1% to 98.9%
for Comparables; (ii) Cigar Holdings' estimated five-year earnings-per-share
growth rate, as estimated by Wall Street analysts, was 27.0%, as compared to a
range of 11.0% to 30.0% for Comparables; (iii) Cigar Holdings' equity market
value, defined as current share price multiplied by shares outstanding, was $767
million, as compared to a range of $56 million to $22.174 billion for
Comparables; (iv) Cigar Holdings' aggregate market value, defined as market
equity plus total debt minus cash and equivalents, was $944 million, as compared
to a range of $21 million to $23.463 billion for Comparables; (v) Cigar
Holdings' price-to-earnings ratio estimates for 1996, 1997, and 1998 were 22.5x,
19.1x, and 16.7x, respectively, as compared to ranges of 13.0x to 30.9x, 13.2x
to 27.6x, and 10.2x to 22.7x, respectively, for Comparables; (vi) Cigar
Holdings' aggregate values for the last twelve months for sales, earnings before
interest, taxes, depreciation and amortization ('EBITDA') and earnings before
interest and taxes ('EBIT') were 4.8x, 18.0x and 20.9x, respectively, as
compared to ranges of 0.3x to 7.5x, 6.0x to 28.6x, and 8.3x to 31.1x,
respectively, for Comparables; and (vii) Cigar Holdings' 1996 aggregate value
estimates for sales, EBITDA and EBIT were 4.5x, 16.4x and 18.8x, respectively,
as compared to ranges of 0.3x to 4.2x, 5.5x to 15.4x, and 7.1x to 18.0x,
respectively, for Comparables.
Comparable Transactions Analysis. Morgan Stanley reviewed certain publicly
available information regarding 51 selected minority squeeze-out transactions
since March 1987 (the 'Transaction Comparables'). The Transaction Comparables
were generally completed transactions in which the majority interest position
exceeded 50% of the total number of outstanding shares and over one year elapsed
between the purchase of the majority interest and the purchase of the remaining
shares. The Transaction Comparables and the dates the transactions were
announced were as follows: the acquisition of Systemix, Inc. by Novartis Inc.
(January 1997); the acquisition of Applied Immune Sciences, Inc. by RhonePoulenc
Rorer (October 1995); the acquisition of Bic Corporation by Bic SA (May 1995);
the acquisition of Lin Broadcasting Corporation by AT&T Corp. (March 1995); the
acquisition of Fleet Mortgage Group, Inc. by Fleet Financial Group, Inc.
(December 1994); the acquisition of Pacific Telecom, Inc. by Pacificorp
(November 1994); the acquisition of Ogden Projects Inc. by Ogden Corporation
(September 1994); the acquisition of Contel Cellular Inc. by GTE Corporation
(September 1994); the acquisition of Castle & Cooke, Inc. by Dole Food Company,
Inc. (August 1994); the acquisition of Chemical Waste Management, Inc. by WMX
Technologies, Inc. (July 1994); the acquisition of Enquirer/Star Group, Inc. by
MacFadden Holdings Inc. & Boston Ventures L.P. (April 1994); the acquisition of
Foxmeyer Corporation by National Intergroup, Inc. (March 1994); the acquisition
of Southeastern Public Service Company by Triarc Companies, Inc. (November
1993); the acquisition of Medical Marketing Group, Inc. by Medco Containment
Services, Inc. (October 1993); the acquisition of United Investors Management
Company by Torchmark Corporation (February 1993); the acquisition of PHLCorp
Inc. by Leucadia National Corporation (August 1992); the acquisition of Grace
Energy Corporation by W.R. Grace & Co. (March 1992); the acquisition of Unocal
Exploration Corporation by Unocal Corporation (February 1992); the acquisition
of American Television & Communications Corporation by Time Warner Inc. (October
1991); the acquisition of Arkla Exploration Company by Arkla, Inc. (September
1991); the acquisition of United Artists Entertainment Company by
Tele-Communications, Inc. (May 1991); the acquisition of Bond International
Gold, Inc. by LAC Minerals Ltd. (February 1991); the acquisition of Hamilton Oil
Corp. by The Broken Hill Proprietary Company Limited (February 1991); the
acquisition of Ocean Drilling & Exploration Company by Murphy Oil Corporation
(January 1991); the acquisition of Sizzler Restaurants International, Inc. by
Collins Foods, Inc. (September 1990); the acquisition of Freeport-McMoRan Oil &
Gas Company by Freeport-McMoRan Inc. (July 1990); the acquisition of Caesars New
Jersey, Inc. by Caesars World, Inc. (July 1990); the acquisition of DST Systems,
Inc. by Kansas City Southern Industries, Inc. (May 1990); the acquisition of
American Capital Management & Research, Inc. by The Travelers Inc. (May 1990);
the acquisition of LPL Technologies Inc. by Cheshire Financial Corporation
(March 1990); the acquisition of Titan Group Ltd. by Intermark, Inc. (March
1990); the acquisition of National Mine Service Company by Anderson Group PLC
(February 1990); the acquisition of Copperweld Corporation by Imetal S.A.
(January 1990); the acquisition of PCS, Inc. by McKesson Corporation (December
1989); the
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acquisition of Soo Line Corporation by Canadian Pacific Limited (October 1989);
the acquisition of Erbamont NV by Montedison S.p.A (July 1989); the acquisition
of Himont Incorporated by Montedison SPA (July 1989); the acquisition of Fisher
Scientific Group Inc. by The Henley Group, Inc. (June 1989); the acquisition of
Westmarc Communications, Inc. by Tele-Communications, Inc. (May 1989); the
acquisition of TGI Friday's Inc. by Carlson Companies, Inc. (May 1989); the
acquisition of Ocean Drilling & Exploration Company by Murphy Oil Corporation
(April 1989); the acquisition of Micro D, Inc. by Ingram Industries Inc.
(December 1988); the acquisition of The TJX Companies, Inc. by Zayre Corp.
(December 1988); the acquisition of Malrite Communications Group, Inc. by
private investors and Malrite Communications Group's management (August 1988);
the acquisition of Arthur D. Little Inc. by Memorial Drive Trust (June 1988);
the acquisition of Gruen Marketing Corp. by S.H. Holdings Inc. (June 1988); the
acquisition of Ideal School Supply Corp. by ISSC Holdings Inc. (March 1988); the
acquisition of Certainteed Corporation by Cie De Saint-Gobain SA (March 1988);
the acquisition of Gemnar Industries Inc. by Mistar, Inc. (February 1988); the
acquisition of Camco Inc. by Pearson PLC (June 1987); and the acquisition of
Standard Oil Co. by British Petroleum Company p.l.c. (March 1987). Morgan
Stanley's analysis showed that the premium over unaffected market price was
60.4% for the Company (based on the Company's January 20, 1997 closing price of
$27.125), as compared to a mean of 27% for Transaction Comparables. The premium
over market price the day prior to public announcement was 60.4% for the Company
(based on the Company's January 20, 1997 closing price of $27.125), as compared
to a mean of 21% for Transaction Comparables. Considering only Transaction
Comparables from 1994 to the present, the mean premium over unaffected market
price was only 19%, and the mean premium over market price the day prior to
public announcement was 21%.
The summary set forth above does not purport to be a complete description
of the analyses performed by Morgan Stanley. Arriving at a fairness opinion is a
complex process not necessarily amenable to partial or summary description.
Morgan Stanley believes that its analyses must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without
considering all such factors and analyses, could create a misleading view of the
process underlying the analyses set forth in the Morgan Stanley Opinion. The
matters considered by Morgan Stanley in its analyses are based on numerous
macroeconomic, operating and financial assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the Company's control. Any estimates incorporated in the
analyses performed by Morgan Stanley are not necessarily indicative of actual
past or future results or values, which may be significantly more or less
favorable than such estimates. Estimated values do not purport to be appraisals
and do not necessarily reflect the prices at which businesses or companies may
be sold in the future, and such estimates are inherently subject to uncertainty.
No public company utilized as a comparison is identical to the Company or to
Cigar Holdings, and none of the Transaction Comparables or other business
combinations utilized as a comparison is identical to the proposed Merger.
Accordingly, analyses of publicly traded comparable companies and comparable
business combinations are not mathematical; rather they involve complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies or company to which it is
being compared. In addition, as described above, Morgan Stanley's opinion and
presentation to the Special Committee was one of a number of factors taken into
consideration by the Special Committee in making its determination to approve
the Merger. Consequently, the Morgan Stanley analyses described above should not
be viewed as determinative of the opinion of the Special Committee with respect
to the value of the Company or Cigar Holdings.
Morgan Stanley is a recognized investment banking firm and, as a customary
part of its investment banking activities, is regularly engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, private placements, and valuations for corporate and
other purposes. Morgan Stanley was selected because of its expertise, reputation
and familiarity with the Company and Cigar Holdings and their businesses and
with transactions similar to the Merger.
Pursuant to a letter agreement dated February 11, 1997 (the 'Engagement
Letter'), Morgan Stanley was engaged to provide investment banking advice and
services to the Special Committee in connection with its review and analysis of
the transaction proposal. The Company agreed to pay Morgan Stanley a fee of $1.5
million for its services. In addition, the Company has agreed to reimburse
Morgan Stanley for reasonable expenses incurred by Morgan Stanley and indemnify
Morgan Stanley against certain liabilities in connection with its engagement,
including certain liabilities under the federal securities laws.
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In the ordinary course of its trading and brokerage activities, Morgan
Stanley or its affiliates may at any time hold long or short positions, and may
trade or otherwise effect transactions, for its own account or the accounts of
its customers, in debt or equity securities of the Company or Cigar Holdings.
Morgan Stanley has in the past undertaken, and may in the future undertake, a
variety of advisory and capital market assignments for Parent and various of its
affiliates, with respect to all of which Morgan Stanley has been or would expect
to be compensated, reimbursed and indemnified by Parent or the relevant
affiliate. In addition, Morgan Stanley acted as a co-managing underwriter in
connection with a Cigar Secondary Offering, in respect of which Morgan Stanley
received customary compensation totalling approximately $1.5 million.
POSITION OF PARENT AND THE PURCHASER
Parent and the Purchaser had no involvement in the Special Committee's
evaluation of the fairness of the Merger Consideration to stockholders of the
Company (other than Parent and its affiliates) and neither has undertaken any
formal evaluation of its own as to the fairness of the Merger Consideration.
Parent and the Purchaser, however, have considered the factors set forth above
under '--Determinations of the Special Committee and the Board; Fairness of the
Merger' and '--Financial Advisor; Fairness Opinion' and based on such factors,
Parent and the Purchaser have each determined that the Merger Consideration is
fair to and in the best interests of holders of Common Stock (other than Parent
and its affiliates). In connection with its consideration of the determination
by the Special Committee, as part of its determination with respect to the
fairness of the consideration to be received by holders of Common Stock pursuant
to the Merger Agreement, Parent and the Purchaser adopted the conclusion, and
the analyses underlying such conclusion, of the Special Committee, based upon
its view as to the reasonableness of such analyses.
Although four directors or officers of Parent and its affiliates serve as
directors of the Company, none served on the Special Committee. Ronald Perelman
and Howard Gittis are directors of each of Parent, the Purchaser and the
Company. See 'CERTAIN INFORMATION CONCERNING THE COMPANY--Directors and
Executive Officers' and 'CERTAIN INFORMATION CONCERNING PARENT AND THE
PURCHASER--Directors and Executive Officers.' Because the vote of stockholders
is not being sought by the Company in connection with the approval of the
Merger, none of the directors and executive officers of the Company, Parent or
the Purchaser will vote on the Merger or make any recommendation to stockholders
of the Company regarding the Merger.
In view of the wide variety of factors considered in connection with their
evaluation of the proposed Merger, Parent and the Purchaser did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the factors or determine that any factor was of particular
importance. Rather, Parent and the Purchaser each viewed its position as being
based on the totality of the information presented and considered by it.
PURPOSE AND STRUCTURE OF THE MERGER
Parent and the Purchaser entered into the Merger Agreement in order to
acquire beneficial ownership of the entire equity interest in the Company
because they believe that, due to the Company's complex corporate structure, the
historic trading prices of a share of Common Stock on the NYSE, prior to
Parent's proposal, did not adequately reflect the net asset value of the
Company's assets or its future prospects.
The Company is a holding company with no operating assets of its own. Its
principal assets are its substantial equity interests in two public companies,
Cigar Holdings and M&F Worldwide. Cigar Holdings, in turn, is the holding
company for Consolidated Cigar and has no operating assets of its own. M&F
Worldwide, through an indirect wholly owned subsidiary, now operates the
licorice and flavorings business formerly operated by a subsidiary of the
Company. This multi-tiered corporate structure has made it difficult for the
public equity market to evaluate the Company's assets and future prospects, and,
in Parent's view, contributed to the historical trading prices of a share of
Common Stock being substantially below the Company's net asset value per share.
Moreover, since the Company was acquired by Mafco Holdings in June 1995, it has
continuously, but unsuccessfully, sought acquisition candidates in order to
maximize stockholder value. As a result, the Company has not been able to
effectively utilize its substantial amount of working capital. Parent and the
Purchaser believe that this has also depressed the historical trading prices of
a share of Common Stock on the NYSE. Accordingly, the acquisition of the shares
of Common Stock from holders of such shares has been structured as a cash merger
in order to transfer ownership of the remaining equity interest in the Company
to Parent in one transaction and at
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the same time provide cash (including the Special Dividend) to the holders of
such shares at a premium to historic trading prices. See 'MARKET PRICES AND
DIVIDENDS' and 'SOURCE AND AMOUNT OF FUNDS.'
Accordingly, Parent believed that it would be appropriate to offer to
acquire the interest of the public stockholders in the Company at a price that
more closely reflected their interest in the net assets of the Company, which
price would be at a significant premium to the historic trading prices of a
share of Common Stock on the NYSE. Parent recognized that aside from its cash
and marketable securities and pension plan asset, the Company's only significant
assets are its interests in Cigar Holdings and M&F Worldwide, both of which are
public companies, and that those Company stockholders who wished to maintain an
equity interest in either of those companies could do so.
The Merger has been structured as a merger of the Purchaser with and into
the Company, with the Company being the surviving corporation in the Merger (the
'Surviving Corporation'). Parent structured the transaction as a merger because
it believed a merger to be the most efficient means of acquiring the entire
public interest in the Company in a single transaction and because a merger
provides flexibility with respect to certain financial, operational and tax
planning considerations. Prior to determining to proceed with a merger proposal,
Parent also considered the following alternatives: a cash tender offer (which it
rejected because there could be no assurance that it would result in Parent
acquiring the entire equity interest in the Company), an exchange offer for
securities (which it rejected for the same reason it rejected a tender offer and
also because it believed that the Company's public stockholders might find any
securities it might offer difficult to understand and evaluate and, accordingly,
unattractive), a special dividend (the Special Dividend was paid on March 14,
1997) and a spinoff to the Company's stockholders, including Parent, of the
Company's interests in Cigar Holdings and M&F Worldwide (which was rejected by
Parent because it would not result in Parent acquiring the entire equity
interest in the Company, it would not be tax-free, it would be too complex and
it would not optimize the trading price of the Common Stock).
After the Merger, the Surviving Corporation will be a wholly owned
subsidiary of Parent, and subject to applicable law and contractual limitations,
if any, Parent will be able to distribute, by way of dividend, loan or
otherwise, some or all of the assets of the Company, or otherwise make use of
such assets for investment in affiliates or other transactions as Parent may in
its sole discretion determine. Parent believes that by acquiring the entire
equity interest in the Company at this time, it will be able to better manage
the Company's contingent and other liabilities, which the public market appears
to have been unable to understand and evaluate, because it will be able to do so
without regard to the short-term consequences to the Company's public
stockholders and short-term performance of the trading price of the Common
Stock. Moreover, the elimination of the Company's public minority will allow
Parent access to the remainder of the Company's liquid assets, for use by Parent
on its behalf and on behalf of its affiliates, as Parent in its sole discretion
determines. See '--Plans for the Company After the Merger.'
For additional information concerning the purpose of the Merger, see
'--Background of the Merger,' '--Determinations of the Special Committee and the
Board; Fairness of the Merger.'
CERTAIN EFFECTS OF THE MERGER
The Company, Parent and the Purchaser. At the Effective Time, (i) the
Purchaser will merge with and into the Company and the separate corporate
existence of the Purchaser will cease, (ii) the Surviving Corporation will be a
wholly owned subsidiary of Parent, (iii) all the rights, privileges, immunities,
powers and franchises of the Company and the Purchaser will vest in the
Surviving Corporation and (iv) all obligations, duties, debts and liabilities of
the Company and the Purchaser will be the obligations, duties, debts and
liabilities of the Surviving Corporation. The Certificate of Incorporation of
the Purchaser, as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation of the Surviving Corporation and the By-laws of the
Purchaser, as in effect immediately prior to the Effective Time, will be the
By-laws of the Surviving Corporation. The directors and officers of the
Purchaser immediately prior to the Effective Time will, from and after the
Effective Time, be the directors and officers of the Surviving Corporation.
After the Merger, the Surviving Corporation will be a wholly owned
subsidiary of Parent. Accordingly, subject to applicable law and contractual
limitations, if any, Parent will be able to distribute, by way of dividend, loan
or otherwise, some or all of the assets of the Company, or otherwise make use of
such assets for investment
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in affiliates or other transactions as Parent may in its sole discretion
determine. Moreover, Parent will be able to better manage the Company's
contingent and other liabilities because it will be able to do so without regard
to the short-term consequences to the Company's public stockholders and
short-term performance of the trading price of the Common Stock. In addition,
Parent will acquire the entire interest in the net book value and net earnings
of the Company, which at the end of the 1996 fiscal year were $360.5 million and
$258.6 million, respectively. See 'SUMMARY--Selected Consolidated Financial
Data.'
Stockholders. As a result of the Merger, the Common Stock will no longer
be publicly traded and Parent will become the sole stockholder of the Surviving
Corporation. Following the Merger, persons who were stockholders of the Company
immediately prior to the Merger will no longer have an opportunity to continue
their interests in the Company as an ongoing corporation and therefore will not
share in its future earnings and potential growth. Trading in the shares of
Common Stock on the NYSE will cease immediately following the Effective Time. At
the Effective Time, the shares of Common Stock will be delisted from the NYSE.
Registration of the Common Stock under the Exchange Act also will be terminated,
as will the ongoing disclosure requirements thereunder, except to the extent
that such disclosure is required as a result of the outstanding value support
rights of the Company.
Stockholders who properly perfect their statutory appraisal rights under
and in accordance with Section 262 of the DGCL will have the right to seek
appraisal of their Common Stock. See 'STOCKHOLDERS' RIGHTS OF APPRAISAL.'
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO STOCKHOLDERS
In general, under the Internal Revenue Code of 1986, as amended (the
'Code'), the receipt of cash by a stockholder pursuant to the Merger or pursuant
to the exercise of stockholders' rights of appraisal will be a taxable event for
federal income tax purposes. Generally, a stockholder will recognize capital
gain or loss equal to the difference between (i) the amount of cash received and
(ii) such stockholder's tax basis in the Common Stock surrendered in exchange
therefor. Such capital gain or loss will be a long-term capital gain or loss if
such stockholder has held such Common Stock for more than one year at the
Effective Time. Such gain or loss must be calculated separately for each block
of shares of Common Stock (e.g., shares acquired at the same price in a single
transaction) held by the stockholder. Stockholders will not be entitled to use
the installment method to report any gain with respect to the exchange of the
Common Stock because the Common Stock is publicly traded.
The preceding discussion describes the material federal income tax
consequences of the Merger, and does not address any potentially applicable
local, state or foreign tax laws. The discussion assumes that stockholders hold
their shares of Common Stock as capital assets within the meaning of Section
1221 of the Code. Moreover, it does not discuss all aspects of federal income
taxation that may be relevant to a stockholder and may not apply to (i) Common
Stock acquired upon exercise of incentive stock options, non-qualified stock
options or otherwise as compensation; (ii) certain tax-exempt stockholders;
(iii) stockholders that are subject to special tax provisions, such as banks and
insurance companies; and (iv) certain nonresident aliens and foreign
corporations.
A stockholder may be subject to information reporting and to backup
withholding at a rate of 31% of all amounts paid to the stockholder, unless such
stockholder provides a correct taxpayer identification number or proof of an
applicable exemption to the Company, and otherwise complies with applicable
requirements under the Code. THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES
SET FORTH ABOVE IS FOR GENERAL INFORMATION ONLY AND IS BASED ON EXISTING LAW AS
OF THE DATE OF THIS INFORMATION STATEMENT. EACH STOCKHOLDER IS URGED TO CONSULT
HIS OR HER TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OR
HER OF THE MERGER (INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS).
PLANS FOR THE COMPANY AFTER THE MERGER
It is expected that following the Merger, the business and operations of
the Company will be continued by the Surviving Corporation substantially as they
have been and are currently being conducted. The directors and officers of the
Purchaser immediately prior to the Effective Time will, from and after the
Effective Time, be the directors and officers of the Surviving Corporation.
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After the Merger, the Company will become a wholly owned subsidiary of
Parent and the public will no longer own a minority equity interest in the
Company. Accordingly, Parent will be able to direct and control the policies of
the Company and its subsidiaries, including with respect to any extraordinary
corporate transaction such as a merger, reorganization or liquidation involving
the Company or any of its subsidiaries, a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries, a change in the
capitalization or other changes in the Company's corporate structure or business
or the composition of the Company's Board or management, without taking into
account the current public minority equity interest. Any such extraordinary
transaction may occur with affiliates of the Company, Parent or the Purchaser.
Except as described in this Information Statement, Parent and the Purchaser
do not have any present plans or proposals that relate to or would result in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries, a sale or transfer
of a material amount of assets of the Company or any of its subsidiaries, a
change in the capitalization or other changes in the Company's corporate
structure or business or the composition of its Board or management.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. In considering the Merger Agreement and the transactions
contemplated thereby, stockholders of the Company should be aware that certain
members of the Company's management and the Board have certain interests in the
Merger that may present them with actual or potential conflicts of interests
with respect to the Merger.
The following Board members also are directors and/or officers of Parent
and its affiliates: Ronald O. Perelman, Howard Gittis, Theo Folz and James R.
Maher. In addition, Mr. Perelman is the beneficial owner of all the capital
stock of Parent and the Purchaser. The Special Committee was comprised of Philip
E. Beekman, Jewel S. Lafontant-Mankarious and Drew Lewis, none of whom is an
officer or employee of Parent, the Purchaser or any of their affiliates.
Employment Agreements. The following executive officers are parties to
employment agreements with the Company or Consolidated Cigar: James R. Maher,
Theo W. Folz and Gary R. Ellis. The terms of their employment agreements will
not be affected by the Merger. Messrs. Maher and Folz serve on the Board of the
Company.
Directors' and Officers' Indemnification Insurance. Pursuant to the Merger
Agreement, Parent will cause the Surviving Corporation (or any successor to the
Surviving Corporation) to indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company and its
subsidiaries against all losses, claims, damages, liabilities, fees and expenses
arising out of actions or omissions occurring at or prior to the Effective Time
to the fullest extent permitted under Delaware law as in effect at the date
hereof. Subject to certain limitations, Parent or the Surviving Corporation
shall also maintain the Company's existing officers' and directors' liability
insurance for a period of not less than seven years after the Effective Time.
See 'THE MERGER AGREEMENT--Certain Other Covenants--Directors' and Officers'
Insurance and Indemnification.'
Stock Options. Pursuant to the Merger Agreement, the Company has agreed to
take all actions necessary to provide that each outstanding option to purchase
Common Stock ('Stock Option') becomes fully vested and exercisable prior to the
Effective Time, to cancel such Stock Option and to make certain cash payments to
the holders of such Stock Option in consideration for such cancellation. Ronald
O. Perelman, James R. Maher, Theo W. Folz and Will Nesbitt will receive
$16,500,000, $19,593,750, $2,150,000 and $537,500, respectively, in respect of
their Stock Options pursuant to the Merger Agreement. See 'THE MERGER
AGREEMENT-- Payments Under Stock Options.'
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for under the 'purchase' method of accounting
in accordance with generally accepted accounting principles. Therefore, the
aggregate consideration paid by Parent and the Purchaser in connection with the
Merger will be allocated to the Company's identifiable assets and liabilities
based on their fair market values, with any excess being treated as goodwill.
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LITIGATION
In January 1997, seven Actions were filed in the Chancery Court objecting
to the proposed transaction that ultimately culminated in the execution of the
Merger Agreement and the price originally proposed to be paid for the Common
Stock. See 'SPECIAL FACTORS--Background of the Merger.' On March 17, 1997, the
parties to all of the Actions except Fishbaum executed a Memorandum of
Understanding setting forth the terms of their agreement in principle to settle
these Actions. While the plaintiffs in those Actions did not have a direct role
in the negotiations relating to the Merger Agreement, the Memorandum of
Understanding acknowledges that Parent took into account the desirability of
addressing the claims asserted in the Actions in agreeing to the enhanced terms
for stockholders set forth in the Merger Agreement. The Memorandum of
Understanding also provides that settling plaintiffs may seek up to $1.25
million in attorney's fees. The Memorandum of Understanding contemplates the
drafting and execution of a Stipulation of Settlement by the parties and its
approval by the Chancery Court, which approval is expected to occur in the third
quarter of 1997.
SOURCE AND AMOUNT OF FUNDS
The total amount of funds required to consummate the transactions
contemplated by the Merger Agreement and to pay related fees and expenses is
estimated to be approximately $389 million, which includes (i) approximately
$115.9 million to pay the Merger Consideration (not including the amount, if
any, necessary to pay the Additional Amount), (ii) approximately $38.8 million
to pay amounts owing in respect of Stock Options, (iii) approximately $232.4
million to pay the Special Dividend and (iv) approximately $1.9 million to pay
related fees and expenses. The total amount of funds will be paid from the
Surviving Corporation's available cash and marketable securities.
STOCKHOLDERS' RIGHTS OF APPRAISAL
Pursuant to Section 262 of the DGCL, any holder of Common Stock who does
not wish to accept the consideration to be paid pursuant to the Merger Agreement
may dissent from the Merger and elect to have the fair value of such
stockholder's shares (the 'Dissenting Shares') of Common Stock (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
judicially determined and paid to such stockholder in cash, together with a fair
rate of interest, if any, provided that such stockholder complies with the
provisions of Section 262. The following discussion is not a complete statement
of the law pertaining to appraisal rights under Delaware law, and is qualified
in its entirety by the full text of Section 262, which is provided in its
entirety as Annex C to this Information Statement. All references in Section 262
and in this summary to a 'stockholder' are to the record holder of the shares of
Common Stock as to which appraisal rights are asserted.
Under Section 262, where a proposed merger is approved by written consent
of stockholders, the corporation must notify each of its stockholders that
appraisal rights are available, and must include in such notice a copy of
Section 262. This Information Statement constitutes such notice to stockholders
of the Company. Any stockholder who wishes to exercise such appraisal rights or
who wishes to preserve the right to do so should review carefully Annex C to
this Information Statement because failure to comply with the procedures
specified in Section 262 timely and properly will result in the loss of
appraisal rights. Moreover, because of the complexity of the procedures for
exercising the right to seek appraisal of the Common Stock, the Company believes
that stockholders who consider exercising such rights should seek the advice of
counsel.
Any holder of Common Stock wishing to exercise the right to dissent from
the Merger and demand appraisal under Section 262 of the DGCL must satisfy each
of the following conditions:
(i) Such stockholder must deliver to the Company a written demand for
appraisal of such stockholder's shares within 20 days after the date of
mailing of this notice of appraisal, which demand will be sufficient if it
reasonably informs the Company of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of such holder's
shares; and
(ii) Such stockholder must continuously hold such shares from the date
of making the demand through the Effective Time. Accordingly, a stockholder
who is the record holder of shares of Common Stock on the date the written
demand for appraisal is made but who thereafter transfers such shares prior
to the Effective Time will lose any right to appraisal in respect of such
shares.
A demand for appraisal should be executed by or on behalf of the
stockholder of record, fully and correctly, as such stockholder's name appears
on such stock certificates, should specify the stockholder's name and mailing
address, the number of shares of Common Stock owned and that such stockholder
intends thereby to demand
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appraisal of such stockholder's Common Stock. If the shares are owned of record
in a fiduciary capacity, such as by a trustee, guardian or custodian, execution
of the demand should be made in that capacity, and if the shares are owned of
record by more than one person as in a joint tenancy or tenancy in common, the
demand should be executed by or on behalf of all owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a stockholder; however, the agent must identify the record owner or owners
and expressly disclose the fact that, in executing the demand, the agent is
acting as agent for such owner or owners. A record holder such as a broker who
holds shares as nominee for several beneficial owners may exercise appraisal
rights with respect to the shares held for one or more beneficial owners while
not exercising such rights with respect to the shares held for one or more
beneficial owners; in such case, the written demand should set forth the number
of shares as to which appraisal is sought, and where no number of shares is
expressly mentioned the demand will be presumed to cover all shares held in the
name of the record owner. Stockholders who hold their shares in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such a nominee.
A stockholder who elects to exercise appraisal rights should mail or
deliver a written demand to: Mafco Consolidated Group Inc., 35 East 62nd Street,
New York, New York 10021, Attention: General Counsel.
Within 120 days after the Effective Time, but not thereafter, either the
Surviving Corporation or any Stockholder who has complied with the requirements
of Section 262 may file a petition in the Delaware Chancery Court demanding a
determination of the value of the shares of Common Stock held by all dissenting
stockholders. The Company does not presently intend to file such a petition, and
stockholders seeking to exercise appraisal rights should not assume that the
Surviving Corporation will file such a petition or that the Surviving
Corporation will initiate any negotiations with respect to the fair value of
such shares. Accordingly, stockholders who desire to have their shares appraised
should initiate any petitions necessary for the perfection of their appraisal
rights within the time periods and in the manner prescribed in Section 262.
Inasmuch as the Company has no obligation to file such a petition, the failure
of a stockholder to do so within the period specified could nullify such
stockholder's previous written demand for appraisal. In any event, at any time
within 60 days after the Effective Time (or at any time thereafter with the
written consent of the Company), any stockholder who has demanded appraisal has
the right to withdraw the demand and to accept payment of the consideration
provided in the Merger Agreement.
Pursuant to the Merger Agreement, the Company has agreed to give the
Purchaser prompt notice of any demands for appraisal received by the Company,
and, prior to the Effective Time, (i) the Purchaser shall have the right to
participate in all negotiations and proceedings with respect to such demands and
(ii) the Company will not, except with the prior written consent of the
Purchaser, make any payment with respect to or offer to settle, any such
demands. See 'THE MERGER AGREEMENT--Dissenter's Rights.'
Within 120 days after the Effective Time, any stockholder who has complied
with the provisions of Section 262 to that point in time will be entitled to
receive from the Surviving Corporation, upon written request, a statement
setting forth the aggregate number of shares not voted in favor of the Merger
Agreement and with respect to which demands for appraisal have been received and
the aggregate number of holders of such shares. The Surviving Corporation must
mail such statement to the stockholder within 10 days of receipt of such
request.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine which stockholders are
entitled to appraisal rights and will appraise the 'fair value' of their shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. The costs of the action may be
determined by the Delaware Chancery Court and taxed upon the parties as the
Delaware Chancery Court deems equitable. Upon application of a dissenting
stockholder, the Delaware Chancery Court may also order that all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all of
the shares entitled to appraisal. STOCKHOLDERS CONSIDERING SEEKING APPRAISAL
SHOULD BE AWARE THAT THE FAIR VALUE OF THEIR SHARES AS DETERMINED UNDER SECTION
262 COULD BE MORE THAN, THE SAME AS OR LESS THAN THE CONSIDERATION THEY WOULD
RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY DID NOT SEEK APPRAISAL OF THEIR
SHARES AND THAT INVESTMENT BANKING OPINIONS ARE NOT OPINIONS AS TO FAIR VALUE
UNDER SECTION 262.
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In determining fair value, the Delaware Chancery Court is to take into
account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme
Court discussed the factors that could be considered in determining fair value
in an appraisal proceeding, stating that 'proof of value by any techniques or
methods that are generally considered acceptable in the financial community and
otherwise admissible in court' should be considered, and that 'fair price
obviously requires consideration of all relevant factors involving the value of
a company.' The Delaware Supreme Court stated that, in making this determination
of fair value, the court must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts that could
be ascertained as of the date of the merger that throw any light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
stated that 'elements of future value, including the nature of the enterprise,
that are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered.' Section 262 provides that fair value
is to be 'exclusive of any element of value arising from the accomplishment or
expectation of the merger.'
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
subject to such demand for any purpose or be entitled to the payment of
dividends or other distributions on those shares (except dividends or other
distributions payable to holders of record of shares as of a record date prior
to the Effective Time).
At any time within 60 days after the Effective Time, any stockholder who
has demanded appraisal rights will have the right to withdraw such demand for
appraisal and to accept the terms offered in the Merger; after this period, the
stockholder may withdraw such demand for appraisal only with the consent of the
Surviving Corporation. If no petition for appraisal is filed with the Delaware
Chancery Court within 120 days after the Effective Time, or if such stockholder
has withdrawn such demand for appraisal as discussed in the preceding sentence,
stockholders' rights to appraisal shall cease, and all holders of shares of
Common Stock will be entitled to receive the Merger Consideration. Any
stockholder may withdraw such stockholder's demand for appraisal by delivering
to the Surviving Corporation a written withdrawal of such stockholder's demand
for appraisal and acceptance of the Merger, except that (i) any such attempt to
withdraw made more than 60 days after the Effective Time will require written
approval of the Surviving Corporation and (ii) no appraisal proceeding in the
Delaware Chancery Court shall be dismissed as to any stockholder without the
approval of the Delaware Chancery Court, and such approval may be conditioned
upon such terms as the Delaware Chancery Court deems just. If (i) the Surviving
Corporation does not approve a stockholder's request to withdraw a demand for
appraisal when such approval is required or (ii) the Delaware Chancery Court
does not approve the dismissal of an appraisal proceeding, the stockholder would
be entitled to receive only the appraised value determined in any such appraisal
proceeding, which value could be lower than the value of the Merger
Consideration.
FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN SECTION 262 OF
THE DGCL WILL RESULT IN THE LOSS OF A STOCKHOLDER'S STATUTORY APPRAISAL RIGHTS.
CONSEQUENTLY, ANY STOCKHOLDER WISHING TO EXERCISE APPRAISAL RIGHTS IS URGED TO
CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS.
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE MERGER
AGREEMENT NOT SUMMARIZED ELSEWHERE IN THIS INFORMATION STATEMENT. THE FOLLOWING
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, WHICH
IS ATTACHED AS ANNEX A TO THIS INFORMATION STATEMENT AND IS INCORPORATED HEREIN
BY REFERENCE. STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS
ENTIRETY AND TO CONSIDER IT CAREFULLY.
EFFECTIVE TIME
The Merger will become effective, and the Effective Time will occur, upon
the filing of a Certificate of Merger with the Secretary of State of the State
of Delaware as required by the DGCL or such later time as is agreed to by the
parties and specified in such certificate. Such filing will be made on or as
promptly as practicable following the closing date under the Merger Agreement,
which will take place not later than the second business day after the
satisfaction or waiver of all of the conditions set forth in the Merger
Agreement, or such other time as agreed by the Company, Parent and the Purchaser
(the 'Closing Date'). There can be no assurance as to when and if the Merger
will be consummated. If the Merger has not been consummated on or prior to
September 30, 1997, the Merger Agreement may be terminated by either the Company
or Parent. See '--Conditions to Consummation of the Merger' and '--Termination.'
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MERGER CONSIDERATION; CONVERSION OF SHARES
At the Effective Time, each share of Common Stock (other than shares as to
which dissenters' rights have been duly asserted and perfected under the DGCL
and shares held by the Company, Parent, the Purchaser or any other subsidiary of
Parent) will be converted into the right to receive the Merger Consideration.
Stockholders will be entitled to receive the Merger Consideration in cash,
without interest, upon surrender of the certificates formerly representing such
shares of Common Stock. See '--Procedure for Payment.' All such shares of Common
Stock, when so converted, will no longer be outstanding and will automatically
be cancelled and retired and will cease to exist, and each holder of a
certificate representing any such shares will cease to have any rights with
respect thereto, except the right to receive the Merger Consideration therefor
upon the surrender of such certificate.
All shares of Common Stock that are held by the Company as treasury stock
and any shares of Common Stock owned by Parent, the Purchaser or any other
subsidiary of Parent will be cancelled and retired and will cease to exist and
no Merger Consideration will be delivered in exchange therefor.
PROCEDURE FOR PAYMENT
Prior to the Effective Time, Parent will designate an agent (the 'Paying
Agent') to receive the funds, as needed, to effect the payment of the Merger
Consideration. Promptly after the Effective Time, the Paying Agent will mail to
each record holder of a certificate or certificates, which immediately prior to
the Effective Time represented outstanding shares of Common Stock (the
'Certificates'), whose shares were converted into the right to receive the
Merger Consideration, a letter of transmittal (which will specify that delivery
will be effected, and risk of loss and title to the Certificates will pass, only
upon delivery of the Certificates to the Paying Agent) and instructions for use
in effecting the surrender of the Certificates in exchange for payment of the
Merger Consideration. Upon surrender of a Certificate to the Paying Agent for
cancellation, together with such letter of transmittal, duly executed, the
holder of such Certificate will receive in exchange therefor the Merger
Consideration for each share of Common Stock formerly represented by such
Certificate, to be mailed within three business days of receipt thereof, and the
Certificate so surrendered shall forthwith be cancelled.
STOCKHOLDERS SHOULD NOT FORWARD CERTIFICATES TO THE PAYING AGENT UNTIL THEY
HAVE RECEIVED TRANSMITTAL FORMS.
If payment of the Merger Consideration is to be made to a person other than
the person in whose name the surrendered Certificate is registered, it will be a
condition of payment that the Certificate so surrendered be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered, each Certificate (other than Certificates
representing Common Stock held by Parent or any of its subsidiaries, or those
stockholders who perfect their appraisal rights pursuant to the DGCL) will be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration.
In the event any Certificate has been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed, the Paying Agent will issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration deliverable in
respect thereof, provided that the person to whom the Merger Consideration is
paid shall, as a condition precedent to the payment thereof, give the Surviving
Corporation a bond in such sum as it may direct or otherwise indemnify the
Surviving Corporation in a manner satisfactory to it against any claim that may
be made against the Surviving Corporation with respect to the Certificate
claimed to have been lost, stolen or destroyed.
DISSENTER'S RIGHTS
The Merger Agreement provides that Common Stock outstanding immediately
prior to the Effective Time and held by a stockholder who has delivered a
written demand for appraisal in accordance with Section 262 of the DGCL will not
be converted into the right to receive the Merger Consideration unless and until
such stockholder fails to perfect or effectively withdraws or otherwise loses
the right to appraisal and payment under the DGCL. See 'STOCKHOLDERS' RIGHTS OF
APPRAISAL.' The Merger Agreement further provides that, if after the Effective
Time, any such stockholder fails to perfect or effectively withdraws or loses
the right to appraisal, such Dissenting Shares will be treated as if they had
been converted as of the Effective Time into the
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<PAGE>
right to receive the Merger Consideration to which such stockholder is entitled,
without interest or dividends thereon. The Company has agreed in the Merger
Agreement to give the Purchaser prompt notice of any demands for appraisal
received by the Company, and, prior to the Effective Time, (i) the Purchaser
shall have the right to participate in all negotiations and proceedings with
respect to such demands and (ii) the Company will not, except with the prior
written consent of the Purchaser, make any payment with respect to, or offer to
settle, any such demands.
PAYMENTS UNDER STOCK OPTIONS
Except as Parent or the Purchaser and the holder of any Stock Option
otherwise agree, upon the Effective Time, (i) each outstanding Stock Option
whether or not then exercisable or vested, will become fully exercisable and
vested, (ii) each outstanding Stock Option will be cancelled and (iii) in
consideration of such cancellation, the Company will pay to the holder of each
Stock Option an amount in respect thereof equal to the product of (A) the
Applicable Amount, multiplied by (B) the number of shares subject thereto;
provided that the foregoing shall not require any action that violates any
agreement in effect in respect thereof. The term 'Applicable Amount' shall mean
the excess, if any, of (A) the sum of (x) $10.00 (the amount of the Special
Dividend) and (y) the Merger Consideration over (B) the applicable exercise
price of each such Stock Option.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Company. Pursuant to the Merger Agreement, the Company has made
representations and warranties regarding, among other things, (i) the Company's
organization, existence and qualification to do business and similar corporate
matters, (ii) the Company's capitalization, (iii) the Company's authority to
enter into and perform its obligations under the Merger Agreement, (iv) the
absence of conflict of the Merger Agreement and the transactions contemplated
thereby with the Company's certificate of incorporation, by-laws, certain
agreements and applicable laws, (v) certain regulatory consents and approvals,
(vi) certain filings with the SEC and the financial statements contained
therein, (vii) the accuracy of information contained in this Information
Statement and certain other SEC filings relating to the transactions
contemplated by the Merger Agreement and (viii) opinion of the Special
Committee's financial advisor.
Parent and the Purchaser. Pursuant to the Merger Agreement, Parent and the
Purchaser have made representations and warranties regarding, among other
things, (i) Parent's and the Purchaser's organization, existence and
qualification to do business and similar corporate matters, (ii) Parent's and
the Purchaser's authority to enter into and perform their respective obligations
under the Merger Agreement, (iii) the absence of conflict of the Merger
Agreement and the transactions contemplated thereby with Parent's and the
Purchaser's respective certificates of incorporation, by-laws, certain
agreements and applicable laws, (iv) certain regulatory consents and approvals
and (v) the accuracy of information, supplied by Parent and the Purchaser,
contained in this Information Statement and certain other SEC filings relating
to the transactions contemplated by the Merger Agreement.
CONDUCT OF BUSINESS PENDING THE CLOSING
The Merger Agreement provides that except as expressly contemplated by the
Merger Agreement or as agreed to in writing by Parent and the Purchaser, after
the date of the Merger Agreement and prior to the Effective Time, the business
of the Company and certain of its subsidiaries shall be conducted only in the
ordinary and usual course. In particular, the Company will not, directly or
indirectly, (i) sell, transfer or pledge or agree to sell, transfer or pledge
any of the shares of Common Stock or capital stock of its subsidiaries
beneficially owned by it (other than pursuant to the Cigar Secondary Offering);
(ii) amend its Certificate of Incorporation or By-laws; (iii) split, combine or
reclassify the outstanding shares of Common Stock; (iv) declare, set aside or
pay any dividend or other distribution payable in cash, stock or property with
respect to its capital stock (other than the Special Dividend); or (v) redeem,
purchase or otherwise acquire directly or indirectly any of its capital stock.
CERTAIN OTHER COVENANTS
Further Action; Reasonable Efforts. Pursuant to the Merger Agreement, each
of the parties has also agreed to use its reasonable efforts to take all actions
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement, including using reasonable efforts to satisfy the conditions
precedent to the obligations of any of the parties, to obtain all necessary
authorizations, consents and approvals, and to effect all necessary
registrations and filings. In
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<PAGE>
addition, Parent, the Purchaser and the Company shall use their respective
reasonable efforts to resolve such objections, if any, as may be asserted with
respect to the transactions contemplated hereby under the laws, rules,
guidelines or regulations of any federal, state, local or foreign court,
legislative, executive or regulatory authority or agency (a 'Governmental
Entity').
Action by Written Consent; Information Statement. Parent has agreed to
vote, or cause to be voted, by written consent, all of the shares of Common
Stock owned by it or the Purchaser in favor of the approval and adoption of the
Merger Agreement and to provide the Company with all information concerning
Parent or the Purchaser necessary or reasonably appropriate to be included in
this Information Statement.
Publicity. The Merger Agreement also provides that no party to the Merger
Agreement will issue or cause the publication of any press release or other
announcement with respect to the Merger, the Merger Agreement or the other
transactions contemplated thereby without the prior consultation of the other
parties, except as may be required by law or by any listing agreement with a
national securities exchange if all reasonable efforts have been made to consult
with the other parties.
Directors' and Officers' Insurance and Indemnification. Pursuant to the
Merger Agreement, Parent will cause the Surviving Corporation (or any successor
to the Surviving Corporation) to indemnify, defend and hold harmless the present
and former officers, directors, employees and agents of the Company and its
subsidiaries against all losses, claims, damages, liabilities, fees and expenses
arising out of actions or omissions occurring at or prior to the Effective Time
to the fullest extent permitted under Delaware law as in effect at the date of
the Merger Agreement. Parent or the Surviving Corporation shall also maintain
the Company's existing officers' and directors' liability insurance for a period
of not less than seven years after the Effective Time. Parent may substitute
therefor policies of substantially similar coverage and amounts containing terms
no less favorable to such former directors or officers; provided, that in no
event shall Parent or the Surviving Corporation be required to pay annual
premiums for insurance in excess of that which is commercially reasonable;
provided further, that if the annual premiums for such insurance coverage exceed
that which is commercially reasonable, Parent or the Surviving Corporation shall
be obligated to obtain a policy with the greatest coverage at a cost that is
commercially reasonable.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger Agreement provides that the obligation of each party to the
Merger Agreement to effect the Merger is subject to the satisfaction on or prior
to the Closing Date of the following conditions (any or all of which may be
waived by the parties thereto to the extent permitted by applicable law): (i) no
statute, rule, regulation, order, decree or injunction shall have been enacted,
entered, promulgated or enforced by any Governmental Entity that prohibits the
consummation of the Merger and shall be in effect, and no proceeding that has a
reasonable probability of resulting in such relief shall be pending; (ii) all
material authorizations, consents and approvals required to be obtained prior to
consummation of the Merger shall have been obtained; (iii) the Merger Agreement
shall have been approved and adopted by the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock; (iv) the representations and
warranties of each of the parties to the Merger Agreement shall be true and
correct in all material respects at and as of the Closing Date and (v) each of
the parties to the Merger Agreement shall have performed in all material
respects its obligations under the Merger Agreement required to be performed at
or prior to the Closing Date pursuant to the terms of the Merger Agreement.
The obligations of Parent and the Purchaser to effect the Merger are also
conditioned upon there being no proceeding pending (other than those pending on
the date of the Merger Agreement) that has a reasonable probability of having,
singularly or in the aggregate with all such proceedings, a Material Adverse
Effect (as defined in the Merger Agreement).
The obligation of the Company to effect the Merger was conditioned upon the
payment of the Special Dividend, which was paid on March 14, 1997.
TERMINATION
Subject to the approval of the Special Committee, the Merger Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after stockholder approval thereof:
(a) by the mutual consent of Parent, the Purchaser and the Company; or
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(b) by either the Company, on the one hand, or Parent and the
Purchaser, on the other hand, if: (i) the Merger has not been consummated
on or prior to September 30, 1997; provided, however, such right shall not
be available to any party whose failure to fulfill any obligation has been
the cause of, or resulted in, the failure of the Merger to occur on or
prior to such date, (ii) the stockholders of the Company fail to approve
the Merger Agreement; provided, however, such right shall not be available
to any party whose failure to fulfill any obligation has been the cause of,
or resulted in, the failure of stockholders to approve the Merger
Agreement, (iii) any Governmental Entity has issued a statute, order,
decree or regulation or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the Merger and such
statute, order, decree, regulation or other action shall have become final
and non-appealable or (iv) if the Special Committee withdraws, or modifies
or changes in any manner adverse to Parent or the Purchaser its approval of
the Merger Agreement after having concluded in good faith after
consultation with independent legal counsel that there is a reasonable
probability that the failure to take such action would result in a
violation of fiduciary obligations under applicable law; provided, however,
that the Special Committee shall not be entitled to exercise this right of
termination based upon a change in the trading price per share of Cigar
Common Stock because the effect of such change on the Merger Consideration
has been specifically addressed in the Merger Agreement. See
'--Miscellaneous--Amendment; Waiver; Termination.'
Upon termination, the Merger Agreement will become null and void, without
liability on the part of any party thereto, except as set forth below. See
'--Miscellaneous; Fees and Expenses.' Nothing shall relieve any party, however,
from any liability or obligation with respect to any willful breach of the
Merger Agreement.
MISCELLANEOUS
Fees and Expenses. The Merger Agreement provides that all costs and
expenses incurred in connection with the Merger Agreement and the consummation
of the transactions contemplated thereby will be paid by the party incurring
such expenses.
Amendment; Waiver; Termination. Notwithstanding any provision of the
Merger Agreement to the contrary, without the approval of the Special Committee,
the Company shall not amend, terminate or waive any right under the Merger
Agreement (including the right to terminate or any actual or potential cause of
action).
The Merger Agreement may be amended by the parties thereto at any time
before or after approval by the stockholders of the Company of the matters
presented in connection with the Merger, but after any such approval no
amendment may be made without the approval of such stockholders if such approval
is required by law or if such amendment changes the Merger Consideration or
alters or changes any of the other terms or conditions of the Merger Agreement
if such alteration or change would adversely affect the rights of stockholders
unaffiliated with Parent.
At any time prior to the Effective Time, the parties to the Merger
Agreement may (i) extend the time for the performance of any of the obligations
or other acts of the other parties thereto, (ii) waive any inaccuracies in the
representations and warranties of the other parties contained therein or in any
document, certificate or writing delivered pursuant thereto or (iii) waive
compliance with any of the agreements or conditions of the other parties thereto
contained therein.
REGULATORY MATTERS
The Company, Parent and the Purchaser are not aware of any governmental
consents or approvals that are required prior to the parties' consummation of
the Merger. It is presently contemplated that if such governmental consents and
approvals are required, such consents and approvals will be sought. There can be
no assurance that any such consents and approvals will be obtained.
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CERTAIN INFORMATION CONCERNING THE COMPANY
THE COMPANY
The Company is a holding company with no business operations of its own.
The Company's only material assets are (i) its ownership of 63.9% of the
outstanding shares of Cigar Common Stock (representing approximately 94.7% of
the combined voting power of Cigar Holdings), which owns 100% of the outstanding
shares of capital stock of Consolidated Cigar, (ii) its ownership of 100% of the
outstanding shares of convertible preferred stock of M&F Worldwide and
approximately 29% of the outstanding shares of common stock of M&F Worldwide
(together, representing beneficial ownership of approximately 36% of the
outstanding shares of common stock of M&F Worldwide), (iii) approximately $255.5
million in cash and marketable securities at March 29, 1997, (iv) a non-interest
bearing, unsecured, subordinated promissory note of Cigar Holdings in the
original principal amount of $70.0 million and (v) a pension plan asset with a
book value of approximately $64.5 million at March 29, 1997. In addition, the
Company has certain assets and certain contingent and other liabilities, as more
fully discussed in the Company 10-K. See 'AVAILABLE INFORMATION' and
'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.' Through Cigar Holdings and
Consolidated Cigar, the Company manufactures and distributes cigars and pipe
tobacco products. The principal executive offices of the Company are located at
35 East 62nd Street, New York, New York 10021, and its telephone number is (212)
572-8600.
On June 15, 1995, as part of a series of transactions (collectively, the
'Abex Transactions'), C&F Merger Inc., a wholly owned subsidiary of Mafco
Holdings, which then owned 100% of the outstanding capital stock of Cigar
Holdings and Flavors Holdings Inc. ('Flavors Holdings'), merged with and into
Abex Inc. ('Abex'), with Abex being the surviving corporation in the merger and
being renamed Mafco Consolidated Group Inc. Prior to the Abex Transactions, Abex
was engaged in an aerospace business through its then wholly owned subsidiary,
PCT (now M&F Worldwide). In connection with the Abex Transactions, (i) holders
of Abex common stock and related rights to acquire Abex common stock received in
exchange therefor, among other consideration, 20% of the Common Stock and all of
the outstanding shares of PCT common stock; (ii) Mafco Holdings, through Parent,
its indirect wholly owned subsidiary, received 80% of the Common Stock; and
(iii) the Company retained PCT preferred stock convertible into approximately
11% of the PCT common stock on a fully diluted basis (in each case, such
percentages reflect the outstanding capital stock immediately following
consummation of the Abex Transactions).
Subsequently, and in a separate transaction, on July 17, 1995, the Company
purchased 5,939,400 shares of PCT common stock (thereby increasing its
investment in PCT to approximately 36% of the shares of PCT common stock then
outstanding on a fully diluted basis) and 1,484,850 shares of Common Stock from
Libra Invest & Trade Ltd. for approximately $63.9 million in cash. In connection
with such purchase, the Company entered into an agreement with PCT that, subject
to certain exceptions, limits the Company's ability to dispose of its shares of
PCT capital stock for a period of three years.
On November 25, 1996, pursuant to a Stock and VSR Purchase Agreement, the
Company sold to PCT International Holdings Inc., a wholly owned subsidiary of
M&F Worldwide ('PCT International'), (i) all of the outstanding shares of
Flavors Holdings common stock and (ii) 23,156,502 Value Support Rights ('VSRs')
for aggregate consideration of approximately $297.3 million, consisting of
$180.0 million cash, the assumption of approximately $110.1 million of
indebtedness of Mafco Worldwide Corporation, a subsidiary of Flavors Holdings
('Mafco Worldwide'), and deferred cash payments from PCT International
aggregating $7.2 million, $3.7 million of which will be paid on June 30, 1997
and $3.5 million of which will be paid on December 31, 1997. The VSRs were
subsequently distributed to M&F Worldwide's stockholders in December 1996.
Immediately following the sale of Flavors Holdings common stock, Mafco Worldwide
was, through a series of transactions, merged with and into Pneumo Abex
Corporation, an indirect wholly owned subsidiary of M&F Worldwide ('Pneumo
Abex').
On August 21, 1996, Cigar Holdings completed an initial public offering
(the 'Cigar IPO'), in which it issued and sold 6,075,000 shares of Cigar Common
Stock, thereby reducing the Company's ownership in Cigar Holdings to
approximately 80.2%. On March 26, 1997, the Company completed the Cigar
Secondary Offering, thereby reducing its ownership in Cigar Holdings to
approximately 63.9%.
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Additional information concerning the Company and its subsidiaries is
contained in the Company 10-K and its other public filings. See 'AVAILABLE
INFORMATION' and 'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.'
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the name, age, business address, present principal
occupation or employment and five-year employment history of each director and
executive officer of the Company. All directors serve terms of one year or until
the election of their respective successors. Unless otherwise indicated, the
business address of each person listed below is Mafco Consolidated Group Inc.,
35 East 62nd Street, New York, New York 10021. Each named person is a citizen of
the United States.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Ronald O. Perelman................. 54 Chairman of the Board of Directors and a Director
Howard Gittis...................... 63 Vice Chairman and a Director
James R. Maher..................... 47 President, Chief Executive Officer and a Director
Irwin Engelman..................... 62 Executive Vice President and Chief Financial Officer
Barry F. Schwartz.................. 48 Executive Vice President and General Counsel
Theo W. Folz....................... 53 President and Chief Executive Officer of Tobacco Products Group and a
Director
Gary R. Ellis...................... 43 Senior Vice President and Chief Financial Officer of Tobacco Products
Group
Philip E. Beekman.................. 65 Director
Drew Lewis......................... 65 Director
</TABLE>
Mr. Perelman has been Chairman of the Board of the Company since June 1995.
Mr. Perelman has been Chairman of the Board and Chief Executive Officer of Mafco
Holdings and MacAndrews & Forbes Holdings Inc. (together with Mafco Holdings,
'MacAndrews & Forbes') and various of their affiliates since 1980. Mr. Perelman
also is Chairman of the Board of Andrews Group Incorporated ('Andrews Group'),
Cigar Holdings, Meridian Sports Incorporated ('Meridian Sports') and M&F
Worldwide and is the Chairman of the Executive Committee of the Boards of
Directors of The Coleman Company, Inc. ('Coleman'), Marvel Entertainment Group,
Inc. ('Marvel'), Revlon Consumer Products Corporation ('Revlon Products') and
Revlon, Inc. ('Revlon'). Mr. Perelman is a Director of the following
corporations that file reports pursuant to the Exchange Act: Andrews Group,
Cigar Holdings, Consolidated Cigar, Coleman, Coleman Holdings Inc., Coleman
Worldwide Corporation ('Coleman Worldwide'), California Federal Bank, a Federal
Savings Bank ('CalFed Bank'), First Nationwide Holdings Inc. ('First
Nationwide'), First Nationwide (Parent) Holdings Inc. ('First Nationwide
Parent'), Marvel, Marvel (Parent) Holdings Inc. ('Marvel Parent'), Marvel III
Holdings Inc. ('Marvel III'), Meridian Sports, M&F Worldwide, Pneumo Abex,
Revlon, Inc., Revlon Products, Revlon Worldwide Corporation ('Revlon
Worldwide'), The Cosmetic Center Inc., and Toy Biz, Inc. ('Toy Biz'). On
December 27, 1996, Marvel Holdings Inc. ('Marvel Holdings'), Marvel (Parent),
Marvel III and Marvel and its subsidiaries, other than Toy Biz and Panini
S.p.A., Marvel Restaurant Ventures Corp., a general partner in Marvel's Marvel
Mania restaurant joint venture, and inactive subsidiaries, filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Mr. Gittis has been Vice Chairman and a Director of the Company since June
1995. Mr. Gittis has been Vice Chairman and a Director of MacAndrews & Forbes
and various of its affiliates since 1985. Mr. Gittis is a Director of the
following corporations that file reports pursuant to the Exchange Act: Andrews
Group, Cigar Holdings, Consolidated Cigar, First Nationwide, CalFed Bank, First
Nationwide Parent, Jones Apparel Group, Inc., Loral Space and Communications
Ltd., M&F Worldwide, Pneumo Abex, Revlon Worldwide, Revlon and Revlon Products,
Rutherford-Moran Oil Corporation and The Cosmetic Center Inc.
Mr. Maher has been President, Chief Executive Officer and a Director of the
Company since June 1995. Mr. Maher was Chairman of the Board of Laboratory
Corporation of America Holdings, a clinical laboratory company, from 1995 to
April 1996 and was President and Chief Executive Officer of National Health
Laboratories Holdings Inc., a clinical laboratory company, from 1992 to 1995.
Mr. Maher was Vice Chairman of
34
<PAGE>
The First Boston Corporation, an investment bank, from 1990 to 1992 and Managing
Director of The First Boston Corporation from 1982 to 1990. Mr. Maher is a
Director of First Brands Corporation, which files reports pursuant to the
Exchange Act.
Mr. Engelman has been the Executive Vice President and Chief Financial
Officer of the Company since June 1995 and has been the Executive Vice President
and Chief Financial Officer of MacAndrews & Forbes and various of its affiliates
since February 1992. Mr. Engelman was Executive Vice President and Chief
Financial Officer of GAF Corporation, a specialty chemical and building
materials company, from 1990 to February 1992. Mr. Engelman was President and
Chief Operating Officer of Citytrust Bancorp Inc. from 1988 to 1990; Executive
Vice President of the Blackstone Group LP from 1987 to 1988; and Executive Vice
President of General Foods Corporation for more than five years prior to 1987.
On December 27, 1996, Marvel Holdings, Marvel (Parent) and Marvel III, of which
Mr. Engelman is an executive officer, filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Mr. Schwartz has been Executive Vice President and General Counsel of the
Company since June 1995. He has been Executive Vice President and General
Counsel of MacAndrews & Forbes and various of its affiliates, including Cigar
Holdings, since 1993. Mr. Schwartz was Senior Vice President of MacAndrews &
Forbes from 1989 to 1993. On December 27, 1996, Marvel Holdings, Marvel (Parent)
and Marvel III, of which Mr. Schwartz is an executive officer, filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Mr. Folz has been President and Chief Executive Officer of the Tobacco
Products Group and a Director of the Company since June 1995. Mr. Folz has been
a Director and President and Chief Executive Officer of Cigar Holdings since
June 1996, Consolidated Cigar since August 1984 and Vice Chairman, Director and
Chief Executive Officer of Pneumo Abex (successor by merger to Mafco Worldwide)
since January 1995.
Mr. Ellis has been Senior Vice President and Chief Financial Officer of the
Tobacco Products Group of the Company since June 1995. Mr. Ellis has been Senior
Vice President, Chief Financial Officer and Treasurer of Cigar Holdings since
June 1996 and Consolidated Cigar since November 1988.
Mr. Beekman has been a Director of the Company since June 1995. Mr. Beekman
has been President of Owl Hollow Enterprises, a consulting and investment
company, for more than the past five years. Prior to that time Mr. Beekman was
Chairman of the Board of Directors and Chief Executive Officer of Hook-SuperRx,
Inc. Mr. Beekman also is a Director of Fisher Scientific International Inc.
which files reports pursuant to the Exchange Act.
Mr. Lewis has been a Director of the Company since May 1996. Mr. Lewis has
been Chairman and Chief Executive Officer of Union Pacific Corporation, a
diversified holding company, since 1994 and, for more than five years prior to
such date, was President and Chief Executive Officer of Union Pacific
Corporation ('Union Pacific'). Mr. Lewis also is a Director of the following
corporations that file reports pursuant to the Exchange Act: American Express
Company, Ford Motor Company, FPL Group, Inc., Gannett Co., Inc., Lucent
Technologies Inc, Union Pacific and Union Pacific Resources Group.
Jewel S. LaFontant-Mankarious served as a director since 1995 and a member
of the Special Committee until her death on May 31, 1997.
CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER
PARENT AND THE PURCHASER
Parent, a Delaware corporation, is a holding company with no business
operations of its own. Parent's only material asset is its ownership of
approximately 85.0% of the outstanding shares of Common Stock of the Company.
The Purchaser, a Delaware corporation and a wholly owned subsidiary of Parent,
was recently incorporated and organized for the purpose of acquiring all the
common equity of the Company pursuant to the Merger. The Purchaser has conducted
no business to date except in conjunction with the transactions
35
<PAGE>
contemplated by the Merger Agreement. The principal business address and
telephone number of each of Parent and the Purchaser is 35 East 62nd Street, New
York, New York, 10021 and (212) 572-8600.
DIRECTORS AND EXECUTIVE OFFICERS
Parent
Set forth below are the name, age and business address of each director and
executive officer of Parent. All directors serve terms of one year or until the
election of their respective successors. Unless otherwise indicated, the
business address of each person listed below is Mafco Consolidated Holdings
Inc., 35 East 62nd Street, New York, New York 10021. Each named person is a
citizen of the United States.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Ronald O. Perelman................. 54 Chairman of the Board of Directors and a Director
Howard Gittis...................... 63 Vice Chairman and a Director
Theo W. Folz....................... 53 President
Irwin Engelman..................... 62 Executive Vice President and Chief Financial Officer
Barry F. Schwartz.................. 48 Executive Vice President and General Counsel
</TABLE>
Each of the named individuals has been a director and/or officer of Parent
since June 1995. For additional information concerning the present principal
occupation or employment and five-year employment history of these individuals,
see 'CERTAIN INFORMATION CONCERNING THE COMPANY.'
The Purchaser
Set forth below are the name, age and business address of each director and
executive officer of the Company. All directors serve terms of one year or until
the election of their respective successors. Unless otherwise indicated, the
business address of each person listed below is MCG Acquisition Inc., 35 East
62nd Street, New York, New York 10021. Each named person is a citizen of the
United States. The directors and the officers of the Purchaser immediately prior
to the Merger will be the directors and officers of the Surviving Corporation
immediately after the Effective Time.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Ronald O. Perelman................. 54 Chairman of the Board of Directors and a Director
Howard Gittis...................... 63 Vice Chairman and a Director
James R. Maher..................... 47 President and Chief Executive Officer
Irwin Engelman..................... 62 Executive Vice President and Chief Financial Officer
Barry F. Schwartz.................. 48 Executive Vice President and General Counsel
</TABLE>
Each of the named individuals has been a director and/or officer of the
Purchaser since February 1997. For additional information concerning the present
principal occupation or employment and five-year employment history of these
individuals, see 'CERTAIN INFORMATION CONCERNING THE COMPANY.'
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH MAFCO HOLDINGS
Mafco Holdings, a Delaware corporation, currently indirectly owns
approximately 85.0% of the outstanding shares of Common Stock. Mafco Holdings is
wholly owned by Ronald O. Perelman. As a result of Mafco Holdings' stock
ownership, the Company's Board of Directors is, and is expected to continue to
be, comprised entirely of designees of Mafco Holdings, and Mafco Holdings is,
and is expected to continue to be, able to direct and control the policies of
the Company and its subsidiaries, including with respect to mergers, sales of
assets and similar transactions.
Mafco Holdings is a diversified holding company with interests in several
industries. Through its 83% ownership of Revlon, Mafco Holdings is engaged in
the cosmetics and skin care, fragrance and personal care products business.
Mafco Holdings also owns 83% of Coleman, which is engaged in the manufacture and
marketing of outdoor recreational products, portable generators, air
compressors, smoke alarms and carbon
36
<PAGE>
monoxide detectors and 65% of Meridian Sports, a manufacturer and marketer of
specialized boats and water sports equipment. Marvel, a youth entertainment
company, is approximately 30% beneficially owned by Mafco Holdings. Mafco
Holdings, through its 85% ownership of the Company, is engaged in the
manufacture and distribution of cigars and pipe tobacco. Mafco Holdings also is
in the financial services business through its 80% ownership of CalFed Bank. The
principal executive offices of Mafco Holdings are located at 35 East 62nd
Street, New York, New York 10021.
PROMISSORY NOTE
In connection with the Cigar IPO, Cigar Holdings issued a promissory note
(the 'Promissory Note') in an original principal amount of $70 million to the
Company. The Promissory Note is non-interest bearing, unsecured, subordinated to
senior indebtedness (as defined in the Promissory Note) and repayable in whole
or in part at any time or from time to time without premium or penalty. The
Promissory Note is payable in quarterly installments of $2.5 million beginning
March 31, 1997 with the final installment payable on December 31, 2003.
OPTION GRANT
On July 22, 1996, the Company granted options to acquire 750,000 shares of
Common Stock to Mr. Perelman as compensation for services rendered and to be
rendered to the Company by Mr. Perelman in his capacity as Chairman of the Board
of Directors. Such options have an exercise price of $21.50 per share (market
price on the date of grant) and vest with respect to one third of the shares
subject to the options on the date of grant, and with respect to an additional
one third of such shares on each of July 22, 1997 and July 22, 1998. The options
expire on July 22, 2006.
Pursuant to the Merger Agreement, the Company has agreed to take all
actions necessary to provide that each outstanding Stock Option becomes fully
vested and exercisable prior to the Effective Time, to cancel such Stock Option
and to make certain cash payments to the holders of such Stock Option in
consideration for such cancellation. See 'THE MERGER AGREEMENT--Payments Under
Stock Options' and 'SPECIAL FACTORS--Interests of Certain Persons in the
Merger.'
REGISTRATION RIGHTS AGREEMENTS
Pursuant to a Registration Rights Agreement, Parent has the right to
require the Company to use its best efforts to register under the Securities Act
of 1933, as amended (the 'Securities Act') and the securities or blue sky laws
of any jurisdiction designated by Parent all or a portion of certain shares of
Common Stock acquired by Parent (the 'Registrable Shares'). The Company is not
required to (i) effect a demand registration more than once in any 12 month
period, (ii) effect more than two demand registrations with respect to the
Registrable Shares or (iii) file a registration statement during periods (not to
exceed 60 days) when (a) the Company is contemplating a public offering, (b) the
Company is in possession of certain material non-public information or (c)
audited financial statements are not available and their inclusion in a
registration statement is required. In addition, and subject to certain
conditions described in the Registration Rights Agreement, if at any time the
Company proposes to register under the Securities Act an offering of shares of
Common Stock or any other classes of equity securities, then Parent would have
the right to require the Company to use its best efforts to effect the
registration under the Securities Act and the securities or blue sky laws of any
jurisdiction designated by Parent of all or a portion of the Registrable Shares
as designated by Parent. The Company is responsible for all expenses relating to
the performance of, or compliance with, the Registration Rights Agreement,
except that Parent is responsible for underwriters' discounts and selling
commissions with respect to the Registrable Shares being sold.
FEES AND EXPENSES
Estimated fees and expenses incurred or to be incurred by the Company in
connection with the Merger are approximately as follows:
<TABLE>
<S> <C>
Investment banking fees and expenses......................................... $1,500,000.00
Legal fees and expenses...................................................... $ 200,000.00
SEC filing fee............................................................... $ 23,179.24
Accounting fees.............................................................. $ 25,000.00
Printing and mailing fees.................................................... $ 140,000.00
Miscellaneous expenses....................................................... $ 11,820.76
-------------
Total................................................................... $1,900,000.00
-------------
-------------
</TABLE>
37
<PAGE>
MARKET PRICES AND DIVIDENDS
MARKET PRICES
The principal market on which the Common Stock is traded is the NYSE under
the ticker symbol 'MFO.' From July 17, 1992 through June 15, 1995, the Common
Stock traded on the NYSE under the ticker symbol 'ABE.' On June 6, 1997, the
last trading day before the printing of this Information Statement, the high and
low sales prices of the Common Stock were $33 1/8 and $33, respectively. On
January 20, 1997, the last trading day before the public announcement of
Parent's proposal to the Company, the high and low sales prices of the Common
Stock were $27 1/8 and $27, respectively. STOCKHOLDERS ARE URGED TO OBTAIN A
CURRENT MARKET QUOTATION FOR THE COMMON STOCK.
The following table sets forth, for the calendar quarters indicated, the
high and low closing prices per share of the Common Stock as reported by the
NYSE:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995
First Quarter............................................................. $ 8 $7
Second Quarter (through June 15, 1995).................................... 10 1/2 7 5/8
Second Quarter (from June 16, 1995)....................................... 22 3/8 19 3/4
Third Quarter............................................................. 29 1/8 21 1/8
Fourth Quarter............................................................ 26 17 1/4
1996
First Quarter............................................................. $20 1/4 $14
Second Quarter............................................................ 24 7/8 15 5/8
Third Quarter............................................................. 30 5/8 19 7/8
Fourth Quarter............................................................ 30 1/4 23 7/8
1997
First Quarter............................................................. $42 1/2 $25 3/8
Second Quarter (through June 6)........................................... 33 1/4 31 3/4
</TABLE>
DIVIDENDS
On March 14, 1997, the Company paid the Special Dividend. The Board will
review its dividend policy from time to time in light of the Company's results
of operations and financial position and such other business considerations the
Board deems relevant. The terms of the credit agreement and Senior Subordinated
Notes due 2003 of Consolidated Cigar limit the payment of dividends or
distributions by Consolidated Cigar to an amount equal to approximately $9.3
million as of December 31, 1996. Therefore, the Company is limited in its
ability to pay dividends to stockholders.
38
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1997, the total number of
shares of Common Stock beneficially owned, and the percent so owned, by each
director of the Company, by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock, by
each named executive officer and by all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(A) PERCENTAGE OF CLASS
- ------------------------------------------------------------------------ --------------------- -------------------
<S> <C> <C>
Ronald O. Perelman(b) .................................................. 20,027,752 85 %
35 East 62nd Street
New York, New York 10021
James R. Maher(c)....................................................... 500,000 2 %
Philip E. Beekman....................................................... 5,000 *
Howard Gittis........................................................... 5,000 *
Drew Lewis.............................................................. 2,000 *
Theo W. Folz(d)......................................................... 33,334 *
Gary R. Ellis........................................................... 1,000 *
All directors and executive officers as a group ........................ 20,574,086 86 %
(9 persons)(e)(f)
</TABLE>
- ------------------
* Less than 1%
(a) Shares of Common Stock that an individual or group has a right to acquire
within 60 days after March 31, 1997 pursuant to the exercise of options,
warrants or other rights are deemed to be outstanding for the purpose of
computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person shown in the table.
(b) All but 250,000 of such shares of Common Stock are indirectly owned by Mr.
Perelman through Mafco Holdings. The remaining 250,000 shares represent
shares of Common Stock as to which Mr. Perelman has the right to acquire
beneficial ownership upon the exercise of stock options. All of the shares
owned by Mafco Holdings are, and shares of intermediate holding companies
may from time to time be, pledged by Mafco Holdings to secure obligations.
(c) Represents shares of Common Stock as to which Mr. Maher has the right to
acquire beneficial ownership upon the exercise of stock options.
(d) Represents shares of Common Stock as to which Mr. Folz has the right to
acquire beneficial ownership upon the exercise of stock options.
(e) Includes 250,000, 500,000 and 33,334 shares of Common Stock as to which
Messrs. Perelman, Maher and Folz, respectively, have the right to acquire
beneficial ownership upon the exercise of stock options.
(f) Neither Mr. Engelman, who is Executive Vice President and Chief Financial
Officer of the Company, nor Mr. Schwartz, who is Executive Vice President
and General Counsel of the Company, beneficially owns any shares of Common
Stock. On
April 18, 1997, when the closing price for the Common Stock was
$32.50 per share, Mr. Schwartz contributed the 3,000 shares of Common
Stock he owned to charity.
39
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MAFCO CONSOLIDATED GROUP INC.,
MAFCO CONSOLIDATED HOLDINGS INC.
AND
MCG ACQUISITION INC.
DATED AS OF
FEBRUARY 20, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE MERGER
Section 1.1 The Merger................................................................................. A-1
Section 1.2 Effective Time............................................................................. A-1
Section 1.3 Closing.................................................................................... A-1
Section 1.4 Certificate of Incorporation; By-Laws...................................................... A-1
Section 1.5 Directors and Officers of the Surviving Corporation........................................ A-1
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Capital Stock................................................................ A-2
Section 2.2 Exchange of Certificates................................................................... A-2
Section 2.3 Company Stock Options...................................................................... A-3
Section 2.4 Dissenter's Rights......................................................................... A-3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization............................................................................... A-4
Section 3.2 Capitalization............................................................................. A-4
Section 3.3 Authorization; Validity of Agreement....................................................... A-4
Section 3.4 No Violations; Consents and Approvals...................................................... A-5
Section 3.5 SEC Reports and Financial Statements....................................................... A-5
Section 3.6 Information Statement; Schedule 13E-3...................................................... A-6
Section 3.7 Opinion of Financial Advisor............................................................... A-6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND THE PURCHASER
Section 4.1 Organization............................................................................... A-6
Section 4.2 Authorization; Validity of Agreement....................................................... A-6
Section 4.3 Consents and Approvals; No Violations...................................................... A-7
Section 4.4 Information in Information Statement; Schedule 13E-3....................................... A-7
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company.......................................................... A-8
Section 5.2 Further Action; Reasonable Efforts......................................................... A-8
Section 5.3 Action by Written Consent; Information Statement........................................... A-8
Section 5.4 Notification of Certain Matters............................................................ A-9
Section 5.5 Publicity.................................................................................. A-9
Section 5.6 Directors' and Officers' Insurance and Indemnification..................................... A-9
Section 5.7 Brokers or Finders......................................................................... A-9
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger................................. A-10
Section 6.2 Conditions to the Obligation of the Company to Effect the Merger........................... A-10
Section 6.3 Conditions to Obligations of Parent and the Purchaser to Effect the Merger................. A-10
ARTICLE VII
TERMINATION
Section 7.1 Termination................................................................................ A-11
Section 7.2 Effect of Termination...................................................................... A-11
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses.......................................................................... A-11
Section 8.2 Amendment; Waiver; Termination............................................................. A-11
Section 8.3 Nonsurvival of Representations and Warranties.............................................. A-12
Section 8.4 Notices.................................................................................... A-12
Section 8.5 Interpretation............................................................................. A-13
Section 8.6 Headings................................................................................... A-13
Section 8.7 Counterparts............................................................................... A-13
Section 8.8 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership........................ A-13
Section 8.9 Severability............................................................................... A-13
Section 8.10 Governing Law.............................................................................. A-13
Section 8.11 Assignment................................................................................. A-13
</TABLE>
A-ii
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
affiliates................................................................................................ A-13
Applicable Amount......................................................................................... A-3
Average................................................................................................... A-2
beneficial ownership...................................................................................... A-13
Board..................................................................................................... A-4
By-laws................................................................................................... A-1
Certificate of Incorporation.............................................................................. A-1
Certificate of Merger..................................................................................... A-1
Certificates.............................................................................................. A-2
Cigar Common Stock........................................................................................ A-2
Cigar Secondary Offering.................................................................................. A-4
Closing................................................................................................... A-1
Closing Date.............................................................................................. A-1
Company................................................................................................... A-1
Company Common Stock...................................................................................... A-2
Company SEC Documents..................................................................................... A-5
Consolidated Cigar........................................................................................ A-2
DGCL...................................................................................................... A-1
Dissenting Shares......................................................................................... A-3
Effective Time............................................................................................ A-1
Excess.................................................................................................... A-2
Exchange Act.............................................................................................. A-5
GAAP...................................................................................................... A-5
Governmental Entity....................................................................................... A-5
include................................................................................................... A-13
Information Statement..................................................................................... A-8
Laws...................................................................................................... A-5
made available............................................................................................ A-13
Material Adverse Effect................................................................................... A-4
Merger.................................................................................................... A-1
Merger Consideration...................................................................................... A-2
Parent.................................................................................................... A-1
Paying Agent.............................................................................................. A-2
Person.................................................................................................... A-4
Public Subsidiary......................................................................................... A-4
Purchaser................................................................................................. A-1
Purchaser Common Stock.................................................................................... A-2
Preferred Stock........................................................................................... A-4
Schedule 13E-3............................................................................................ A-6
SEC....................................................................................................... A-4
Secretary of State........................................................................................ A-1
Securities Act............................................................................................ A-5
Shares.................................................................................................... A-2
Special Committee......................................................................................... A-1
Stock Option.............................................................................................. A-3
Surviving Corporation..................................................................................... A-1
Subsidiary................................................................................................ A-4
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 20, 1997, by and among
Mafco Consolidated Group Inc., a Delaware corporation (the 'Company'), Mafco
Consolidated Holdings Inc., a Delaware corporation ('Parent'), and MCG
Acquisition Inc., a wholly owned subsidiary of Parent and a Delaware corporation
(the 'Purchaser').
WHEREAS, the Boards of Directors of Parent and the Purchaser and the Board
of Directors of the Company, upon the recommendation of its special committee
(the 'Special Committee'), have each approved, and deem it advisable and in the
best interests of their respective stockholders to consummate, the acquisition
of the Company by Parent upon the terms and subject to the conditions set forth
herein; and
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent, the Purchaser and the Company and Parent as the sole stockholder of the
Purchaser have each approved this Agreement and the merger of the Purchaser with
and into the Company in accordance with the terms, and subject to the
conditions, of this Agreement and in accordance with the General Corporation Law
of the State of Delaware (the 'DGCL');
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.2 hereof), the Purchaser shall be merged with and into the
Company (the 'Merger') and the separate corporate existence of the Purchaser
shall cease. After the Merger, the Company shall continue as the surviving
corporation (sometimes hereinafter referred to as the 'Surviving Corporation').
The Merger shall have the effect as provided in the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, upon the Merger, all the
rights, privileges, immunities, powers and franchises of the Company and the
Purchaser shall vest in the Surviving Corporation and all obligations, duties,
debts and liabilities of the Company and the Purchaser shall be the obligations,
duties, debts and liabilities of the Surviving Corporation.
Section 1.2 Effective Time. On or as promptly as practicable following the
Closing Date (as defined in Section 1.3), the Purchaser and the Company will
cause an appropriate Certificate of Merger (the 'Certificate of Merger') to be
executed and filed with the Secretary of State of the State of Delaware (the
'Secretary of State') in such form and executed as provided in the DGCL. The
Merger shall become effective on the date on which the Certificate of Merger has
been duly filed with the Secretary of State or such time as is agreed upon by
the parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the 'Effective Time.'
Section 1.3 Closing. The closing of the Merger (the 'Closing') will take
place at 10:00 a.m., New York time, on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI hereof (the 'Closing
Date'), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York 10022-3897, unless another date, time or place is
agreed to in writing by the parties hereto.
Section 1.4 Certificate of Incorporation; By-Laws. Pursuant to the Merger,
(x) the certificate of incorporation of the Company, as amended, as in effect
immediately prior to the Effective Time (the 'Certificate of Incorporation'),
shall be amended as set forth in Exhibit A hereto and such Certificate of
Incorporation, as so amended at the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable law and (y) the by-laws of the Purchaser, as in
effect immediately prior to the Effective Time (the 'By-laws'), shall be the
by-laws of the Surviving Corporation until thereafter amended in accordance with
applicable law.
Section 1.5 Directors and Officers of the Surviving Corporation. The
directors and officers of the Purchaser immediately prior to the Effective Time
shall, from and after the Effective Time, be the directors and officers of the
Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's certificate of incorporation and
by-laws.
A-1
<PAGE>
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of common stock, par value $.0l per share, of the Company (referred to
herein as 'Shares' or 'Company Common Stock') or the common stock, par value
$.01 per share, of the Purchaser (the 'Purchaser Common Stock'):
(a) Each issued and outstanding share of Company Common Stock (other
than Shares to be cancelled in accordance with Section 2.1(c) and other
than Dissenting Shares covered by Section 2.4) shall be converted into the
right to receive the sum of:
(x) $33.50; and
(y) if the average of the per share closing prices of the common
stock, par value $.01 per share ('Cigar Common Stock'), of Consolidated
Cigar Holdings Inc., a Delaware corporation and a subsidiary of the
Company ('Consolidated Cigar'), on the New York Stock Exchange for the
ten trading days ending two trading days prior to effectiveness of the
action by written consent contemplated by Section 5.3 hereof (the
'Average') exceeds $33 (the amount by which the Average exceeds $33, the
'Excess'), then
(i) if the Company shall not have sold shares of Cigar Common Stock
in the Cigar Secondary Offering (as defined in Section 3.2 hereof) or
shall have sold shares of Cigar Common Stock in the Cigar Secondary
Offering at a gross sales price per share in excess of $33, an amount
equal to the Excess, or
(ii) if the Company shall have sold shares of Cigar Common Stock in
the Cigar Secondary Offering at a gross sales price per share of $33 or
less, an amount equal to the Excess multiplied by a fraction, the
numerator of which shall be the number of shares of Cigar Common Stock
beneficially owned by the Company immediately following, and the
denominator of which shall be the number of shares of Cigar Common Stock
beneficially owned by the Company immediately prior to, the consummation
of the Offering ((x) and (y), collectively, the 'Merger Consideration').
All such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.2. Any payment made pursuant to this Section 2.1(a) shall be made net
of applicable withholding taxes to the extent such withholding is required by
law.
(b) Each issued and outstanding share of the Purchaser Common Stock
shall be converted into and become one fully paid and nonassessable share
of common stock of the Surviving Corporation.
(c) All shares of Company Common Stock that are held by the Company as
treasury stock and any shares of Company Common Stock owned by Parent, the
Purchaser or any other subsidiary of Parent shall be cancelled and retired
and shall cease to exist and no Merger Consideration shall be delivered in
exchange therefor.
Section 2.2 Exchange of Certificates.
(a) Prior to the Effective Time, Parent shall designate a bank or
trust company to act as agent for the holders of the Shares in connection
with the Merger (the 'Paying Agent') to receive the funds, as needed, to
which holders of the Shares shall become entitled pursuant to Section
2.1(a). Such funds shall be invested by the Paying Agent as directed by
Parent or the Surviving Corporation. All interest earned on such funds
shall be paid to Parent.
(b) At the Effective Time, Parent will instruct the Paying Agent to
promptly, and in any event not later than three business days following the
Effective Time, mail to each holder of record of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the 'Certificates'), whose
Shares were converted pursuant to Section 2.1(a) into the right to receive
the Merger Consideration (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in such form and have such other provisions as
Parent and the Company may
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reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by the
Company, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration for each share of Company Common Stock
formerly represented by such Certificate, to be mailed within three
business days of receipt thereof, and the Certificate so surrendered shall
forthwith be cancelled. If payment of the Merger Consideration is to be
made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise
in proper form for transfer and that the person requesting such payment
shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either has been
paid or is not applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate (other than Certificates representing Company
Common Stock held by Parent or the Purchaser, or any subsidiary of Parent
or the Purchaser, or Dissenting Shares (as defined in Section 2.4)) shall
be deemed at any time after the Effective Time to represent only the right
to receive the Merger Consideration as contemplated by this Section 2.2.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person (as
defined in Section 3.1) claiming such Certificate to be lost, stolen or
destroyed, the Paying Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration deliverable in respect
thereof as determined in accordance with this Article II, provided that the
Person to whom the Merger Consideration is paid shall, as a condition
precedent to the payment thereof, give the Surviving Corporation a bond in
such sum as it may direct or otherwise indemnify the Surviving Corporation
in a manner satisfactory to it against any claim that may be made against
the Surviving Corporation with respect to the Certificate claimed to have
been lost, stolen or destroyed.
(d) After the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no transfers on the stock transfer books
of the Surviving Corporation of Shares which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and
exchanged for the Merger Consideration as provided in this Article II.
Section 2.3 Company Stock Options. Except as Parent or the Purchaser and
the holder of any option ('Stock Option') to purchase Company Common Stock
otherwise agree, the Company shall take all actions necessary to provide that,
upon the Effective Time, (i) each outstanding Stock Option, whether or not then
exercisable or vested, shall become fully exercisable and vested, (ii) each
outstanding Stock Option shall be cancelled and (iii) in consideration of such
cancellation the Company shall pay to the holder of each Stock Option an amount
in respect thereof equal to the product of (A) the Applicable Amount, multiplied
by (B) the number of shares subject thereto; provided that the foregoing shall
not require any action which violates any agreement in effect in respect
thereof. The term 'Applicable Amount' shall mean the excess, if any, of (A) the
sum of (x) the dividend referred to in Section 6.2(c) and (y) the Merger
Consideration over (B) the applicable exercise price of each such Stock Option.
Section 2.4 Dissenter's Rights. Notwithstanding anything in this Agreement
to the contrary, Shares outstanding immediately prior to the Effective Time and
held by a holder who has not voted in favor of the Merger or consented thereto
in writing and who has delivered a written demand for appraisal of such shares
in accordance with Section 262 of the DGCL ('Dissenting Shares'), shall not be
converted into the right to receive the Merger Consideration, as provided in
Section 2.1(a) hereof, unless and until such holder fails to perfect or
effectively withdraws or otherwise loses his right to appraisal and payment
under the DGCL. If, after the Effective Time, any such holder fails to perfect
or effectively withdraws or loses his right to appraisal, such Dissenting Shares
shall thereupon be treated as if they had been converted as of the Effective
Time into the right to receive the Merger Consideration to which such holder is
entitled, without interest or dividends thereon. The Company shall give the
Purchaser prompt notice of any demands received by the Company for appraisal of
Shares, and, prior to the Effective Time, the Purchaser shall have the right to
participate in all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, the Company shall not, except with the prior
written consent of the Purchaser, make any payment with respect to or offer to
settle, any such demands.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser, as of the
date hereof and as of and at the Closing Date, except as disclosed in the
Company SEC Documents (as defined in Section 3.5), as follows:
Section 3.1 Organization.
Each of the Company and its Public Subsidiaries (as defined below) is a
corporation duly organized, validly existing, and in good standing under the
laws of Delaware, and has all requisite corporate power and authority to own,
lease, use and operate its properties and to carry on its business as it is now
being conducted. Each of the Company and its Public Subsidiaries is qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction in which it owns real property or in which the nature of the
business conducted by it makes such qualification or licensing necessary, except
where the failure to be so qualified or licensed individually and in the
aggregate would not have or result in a Material Adverse Effect. The term
'Material Adverse Effect' means a material adverse effect on the business,
assets, liabilities, results of operations or financial condition of the
Company, its Public Subsidiaries and their respective Subsidiaries, taken as a
whole. None of the Company or any of its Public Subsidiaries is in breach or
violation of any of its certificate of incorporation, by-laws or other
organizational documents. The term 'Public Subsidiary' means Consolidated Cigar
and Power Control Technologies, Inc. The term 'Subsidiary' means, with respect
to any Person, any corporation or other entity of which 50% or more of the
securities or other interests having by their terms ordinary voting power for
the election of directors or others performing similar functions with respect to
such entity is directly or indirectly owned by such Person. The term 'Person'
means any natural person, firm, individual, partnership, joint venture, business
trust, trust, association, corporation, company, unincorporated entity or
Governmental Entity (as defined in Section 3.4(b)).
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of 250,000,000
shares of Company Common Stock and 100,000,000 preferred shares, par value $.01
per share (the 'Preferred Stock'). The number of shares of Company Common Stock
issued and outstanding is 23,224,307 shares on the date hereof. There are
1,484,850 shares of Company Common Stock issued and held in the treasury of the
Company, and there are no shares of Preferred Stock issued and outstanding. All
the outstanding shares of the Company's capital stock are duly authorized,
validly issued, fully paid and nonassessable. Except as disclosed in the Company
SEC Documents or pursuant to the Stock Options or the offering by the Company of
shares of Cigar Common Stock (the 'Cigar Secondary Offering') to be made
pursuant to a registration statement on Form S-1 filed by Consolidated Cigar
with the Securities and Exchange Commission (the 'SEC'), there are no existing
(i) options, warrants, calls, preemptive rights, subscriptions or other rights,
convertible securities, agreements or commitments of any character obligating
the Company or any of its Subsidiaries to issue, transfer or sell any shares of
capital stock or other equity interest in, the Company or any of its
Subsidiaries or securities convertible into or exchangeable for such shares or
equity interests, (ii) contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of the
Company or any of its Subsidiaries or (iii) voting trusts or similar agreements
to which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of its Subsidiaries.
Section 3.3 Authorization; Validity of Agreement.
(a) The Company has the requisite corporate power and authority to execute
and deliver this Agreement and, subject to approval of its stockholders as
contemplated by Section 5.3 hereof, to consummate the transactions contemplated
hereby. The execution, delivery and performance by the Company of this Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Company (the 'Board') and,
other than approval and adoption of this Agreement by the holders of a majority
of the outstanding shares of Company Common Stock, no other corporate
proceedings on the part of the Company 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 executed and delivered by the Company and, assuming due authorization,
execution and delivery of this Agreement by Parent and the Purchaser, is a valid
and binding obligation of the Company, enforceable
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against the Company in accordance with its terms, except that such enforcement
may be subject to or limited by (i) bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(b) The provisions of Section 203 of the DGCL are inapplicable to the
transactions contemplated by this Agreement.
Section 3.4 No Violations; Consents and Approvals.
(a) Neither the execution, delivery and performance of this Agreement by
the Company nor the consummation by the Company of the transactions contemplated
hereby will (i) violate any provision of the certificate of incorporation or
By-laws of the Company or its Public Subsidiaries, (ii) conflict with, result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or to the imposition of any lien) under, or result
in the acceleration or trigger of any payment, time of payment, vesting or
increase in the amount of any compensation or benefit payable pursuant to, the
terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee or other evidence of indebtedness, lease, license, contract,
agreement, plan or other instrument or obligation to which the Company or any of
its Public Subsidiaries is a party or by which any of them or any of their
assets may be bound or (iii) conflict with or violate any federal, state, local
or foreign order, writ, injunction, judgment, award, decree, statute, law, rule
or regulation (collectively, 'Laws') applicable to the Company, any of its
Public Subsidiaries or any of their properties or assets; except in the case of
clauses (ii) or (iii) for such conflicts, violations, breaches, defaults or
liens which individually and in the aggregate would not have or result in a
Material Adverse Effect or materially impair or delay the consummation of the
transactions contemplated hereby.
(b) No filing or registration with, declaration or notification to, or
order, authorization, consent or approval of, any federal, state, local or
foreign court, legislative, executive or regulatory authority or agency (a
'Governmental Entity') or any other Person is required in connection with the
execution, delivery and performance of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, except (i)
applicable requirements under the Securities Exchange Act of 1934, as amended
(the 'Exchange Act'), (ii) the filing of the Certificate of Merger with the
Secretary of State and (iii) such other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings the
failure of which to be obtained or made individually and in the aggregate would
not have or result in a Material Adverse Effect or materially impair or delay
the consummation of the transactions contemplated hereby.
Section 3.5 SEC Reports and Financial Statements.
The Company has filed with the SEC, all forms and documents required to be
filed by it since January 1, 1994 under the Exchange Act and has heretofore made
available to Parent (i) its Annual Reports on Form 10-K for the years ended
December 31, 1993, December 31, 1994 and December 31, 1995, respectively, and
(ii) all proxy statements relating to meetings of stockholders of the Company
since January 1, 1994 and (iii) all other forms, reports and registration
statements filed by the Company with the SEC since January 1, 1994. The
documents described in clauses (i)-(iii) above (whether filed before, on or
after the date hereof) are referred to in this Agreement collectively as the
'Company SEC Documents'. As of their respective dates, the Company SEC Documents
(a) 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 and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act of 1933 (the 'Securities
Act'), as the case may be, and the applicable rules and regulations of the SEC
thereunder. The consolidated financial statements included in the Company SEC
Documents have been prepared in accordance with United States generally accepted
accounting principles ('GAAP') applied on a consistent basis during the periods
involved and fairly present the consolidated financial position and the
consolidated results of operations and cash flows of the Company and its
consolidated Subsidiaries as of and at the dates thereof or for the periods
presented therein.
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Section 3.6 Information Statement; Schedule 13E-3.
(a) The Information Statement (as defined in Section 5.3(b)) (and any
amendment thereof or supplement thereto), at the date mailed to stockholders of
the Company and at the Effective Time, (i) will not 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 and (ii) will comply in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder; except that no representation is made by the Company
with respect to statements made in the Information Statement based on
information supplied by Parent or the Purchaser specifically for inclusion
therein.
(b) The information provided by the Company specifically for use in any
Rule 13e-3 Transaction Statement on Schedule 13E-3 required to be filed with the
SEC under the Exchange Act and mailed to the stockholders of the Company in
connection with the Merger (the 'Schedule 13E-3') (and any amendment thereto or
supplement thereof), at the date filed with the SEC and at the time mailed to
the stockholders of the Company, will not 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.
Section 3.7 Opinion of Financial Advisor.
The Company has received an opinion of Morgan Stanley & Co. Incorporated to
the effect that, as of the date hereof, the Merger Consideration to be received
by the holders of Shares (other than Parent and its affiliates) in the Merger is
fair, from a financial point of view, to such holders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company, as of the
date hereof and as of and at the Closing Date, as follows:
Section 4.1 Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware. Each of Parent and the Purchaser has all requisite
corporate power and authority to own, lease, use and operate its properties
and to carry on its business as it is now being conducted. Each of Parent
and the Purchaser is qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which it owns
real property or in which the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be
so qualified or licensed individually and in the aggregate would not have
or result in a material adverse effect on the business, assets,
liabilities, results of operations or financial condition of Parent and the
Purchaser, taken as a whole.
Section 4.2 Authorization; Validity of Agreement. Each of Parent and
the Purchaser has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Parent and the Purchaser
of this Agreement and the consummation by Parent and the Purchaser of the
transactions contemplated hereby have been duly authorized by the
respective Boards of Directors of Parent and the Purchaser and by Parent as
the sole stockholder of Purchaser and no other corporate proceedings on the
part of Parent or the Purchaser are necessary to authorize the execution,
delivery and performance of this Agreement by Parent and the Purchaser and
the consummation by Parent and the Purchaser of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and the Purchaser and, assuming due authorization, execution and
delivery of this Agreement by the Company, is a valid and binding
obligation of each of Parent and the Purchaser, enforceable against each of
them in accordance with its terms, except that such enforcement may be
subject to or limited by (i) bankruptcy, insolvency or other similar laws,
now or hereafter in effect, affecting creditors' rights generally, and (ii)
the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity). Parent
is the legal
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and beneficial owner of 19,777,752 Shares, all of which Parent has the
right to vote with respect to the transaction contemplated hereby.
Section 4.3 Consents and Approvals; No Violations.
(a) Neither the execution, delivery and performance of this
Agreement by Parent and the Purchaser nor the consummation by Parent and
the Purchaser of the transactions contemplated hereby will (i) violate
any provision of the respective certificate of incorporation or by-laws
of Parent or the Purchaser, (ii) conflict with, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or to the imposition of any lien) under, or
result in the acceleration or trigger of any payment, time of payment,
vesting or increase in the amount of any compensation or benefit payable
pursuant to, the terms, conditions or provisions of any note, bond,
mortgage, indenture, guarantee or other evidence of indebtedness, lease,
license, contract, agreement, plan or other instrument or obligation to
which Parent or the Purchaser is a party or by which any of them or any
of their assets may be bound or (iii) conflict with or violate any Laws
applicable to Parent, the Purchaser or any of their properties or
assets; except in the case of clauses (ii) and (iii) for such conflicts,
violations, breaches, defaults or liens which individually and in the
aggregate would not have or result in a material adverse effect on the
business, results of operations or financial condition of Parent and the
Purchaser, taken as a whole, or materially impair or delay the
consummation of the transactions contemplated hereby.
(b) No filing or registration with, declaration or notification to,
or order, authorization, consent or approval of, any Governmental Entity
is required in connection with the execution, delivery and performance
of this Agreement by Parent or the Purchaser or the consummation by
Parent or the Purchaser of the transactions contemplated hereby, except
(i) applicable requirements under the Exchange Act, (ii) the filing of
the Certificate of Merger with the Secretary of State and (iii) such
other consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings the failure of which to be
obtained or made individually and in the aggregate would not have a
material adverse effect on the business, results of operations or
financial condition of Parent and the Purchaser, taken as a whole, or
materially impair or delay the consummation of the transactions
contemplated hereby.
Section 4.4 Information in Information Statement; Schedule 13E-3.
(a) The information supplied in writing by Parent or the Purchaser
specifically for inclusion in the Information Statement (and any
amendment thereof or supplement thereto), at the date mailed to
stockholders of the Company and at the Effective Time, will not 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.
(b) The Schedule 13E-3 (and any amendment thereto or supplement
thereof,) at the date filed with the SEC and at the time mailed to
stockholders of the Company, (i) will not 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 were made, not misleading
and (ii) will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder; except that no
representation is made by Parent or the Purchaser with respect to
statements made in the Schedule 13E-3 based on information supplied by
the Company specifically for inclusion therein.
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ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants and
agrees that, except (i) as expressly contemplated by this Agreement or (ii) as
agreed to in writing by Parent and the Purchaser, after the date hereof and
prior to the Effective Time, the business of the Company, its Public
Subsidiaries and their Subsidiaries shall be conducted only in the ordinary and
usual course, and, in particular: the Company will not, directly or indirectly,
(a) sell, transfer or pledge or agree to sell, transfer or pledge any of the
Shares or capital stock of its Subsidiaries beneficially owned by it (other than
pursuant to the Cigar Secondary Offering); (b) amend its Certificate of
Incorporation or By-laws; (c) split, combine or reclassify the outstanding
Shares; (d) declare, set aside or pay any dividend or other distribution payable
in cash, stock or property with respect to its capital stock (other than a
special cash dividend in the amount of $10 per share of Company Common Stock);
or (e) redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock.
Section 5.2 Further Action; Reasonable Efforts.
(a) Upon the terms and subject to the conditions herein provided, each
of the parties hereto shall use its reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including
using reasonable efforts to satisfy the conditions precedent to the
obligations of any of the parties hereto, to obtain all necessary
authorizations, consents and approvals, and to effect all necessary
registrations and filings. Each of the parties hereto shall promptly
consult with the other parties with respect to, provide any necessary
information that is not subject to legal privilege with respect to, and
provide the other parties (or their counsel) copies of, all filings made by
such party with any Governmental Entity or any other information supplied
by such party to a Governmental Entity in connection with this Agreement
and the transactions contemplated hereby. Each of the parties hereto shall
promptly inform the other of any communication from any Governmental Entity
regarding any of the transactions contemplated by this Agreement. If such
party receives a request from any such Governmental Entity with respect to
the transactions contemplated by this Agreement, then such party will
endeavor in good faith to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other parties, an appropriate
response in compliance with such request.
(b) Parent, the Purchaser and the Company shall use their respective
reasonable efforts to resolve such objections, if any, as may be asserted
with respect to the transactions contemplated hereby under the laws, rules,
guidelines or regulations of any Governmental Entity.
Section 5.3 Action by Written Consent; Information Statement.
(a) As promptly as practicable after the date hereof, Parent will (i)
vote, or cause to be voted, by written consent, all of the Shares owned by
it or the Purchaser in favor of the approval and adoption of this Agreement
and the transactions contemplated hereby and (ii) provide the Company with
all information concerning Parent or the Purchaser necessary or reasonably
appropriate to be included in the Information Statement.
(b) As promptly as practicable after the date hereof, the Company
shall prepare and file with the SEC, and Parent and the Purchaser shall
cooperate with the Company in such preparation and filing, a preliminary
information statement relating to this Agreement and the transactions
contemplated hereby and use its best efforts to furnish the information
required to be included by the SEC in the Information Statement and, after
consultation with Parent, to respond promptly to any comments made by the
SEC with respect to the preliminary information statement and cause a
definitive Information Statement (the 'Information Statement') to be mailed
to its stockholders.
(c) The Company, Parent and Purchaser shall cooperate with one another
in the preparation and filing of the Schedule 13E-3 and shall use all
reasonable efforts to promptly obtain and furnish the information required
to be included in the Schedule 13E-3 and to respond promptly to any
comments or requests made by the SEC with respect to the Schedule 13E-3.
Each party hereto shall promptly notify the other parties of the receipt of
comments of, or any requests by, the SEC with respect to the Schedule
13E-3, and shall
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promptly supply the other parties with copies of all correspondence between
such party (or its representatives) and the SEC (or its staff) relating
thereto. The Company, Parent and Purchaser each shall correct any
information provided by it for use in the Schedule 13E-3 which shall have
become, or is, false or misleading.
Section 5.4 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent and Parent shall
give prompt notice to the Company, of (i) the occurrence or nonoccurrence
of any event the occurrence or nonoccurrence of which would cause any
representation or warranty of the Company, or of Parent and the Purchaser,
as the case may be, contained in this Agreement to be untrue or inaccurate
in any material respect at the Effective Time and (ii) any material failure
of the Company, or Parent or the Purchaser, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder.
(b) If at any time prior to the Effective Time any event or
circumstance relating to the Company or any of its Subsidiaries or
affiliates, or their respective officers or directors, should be discovered
by the Company that is required to be set forth in a supplement to the
Information Statement, the Company shall promptly inform Parent and the
Purchaser, so supplement the Information Statement and mail such supplement
to its stockholders. If at any time prior to the Effective Time any event
or circumstance relating to Parent or the Purchaser or their respective
officers or directors, should be discovered by Parent that is required to
be set forth in a supplement to the Information Statement, Parent shall
promptly inform the Company; and upon receipt of such information the
Company shall promptly supplement the Information Statement and mail such
supplement to its stockholders.
Section 5.5 Publicity. Neither the Company, Parent nor any of their
respective affiliates shall issue or cause the publication of any press release
or other announcement with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior consultation of the other
party, except as may be required by law or by any listing agreement with a
national securities exchange if all reasonable efforts have been made to consult
with the other party.
Section 5.6 Directors' and Officers' Insurance and Indemnification. (a)
Parent shall cause the Surviving Corporation (or any successor to the Surviving
Corporation) to indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of the Company and its Subsidiaries
against all losses, claims, damages, liabilities, fees and expenses arising out
of actions or omissions occurring at or prior to the Effective Time to the
fullest extent permitted under Delaware law as in effect at the date hereof.
(b) Parent or the Surviving Corporation shall maintain the Company's
existing officers' and directors' liability insurance for a period of not
less than 7 years after the Effective Time; provided, that the Parent may
substitute therefor policies of substantially similar coverage and amounts
containing terms no less favorable to such former directors or officers;
provided, further, that in no event shall Parent or the Surviving
Corporation be required to pay annual premiums for insurance under this
Section in excess of that which is commercially reasonably; and provided
further, however, that if the annual premiums for such insurance coverage
exceed that which is commercially reasonable, Parent or the Surviving
Corporation shall be obligated to obtain a policy with the greatest
coverage at a cost which is commercially reasonable.
Section 5.7 Brokers or Finders. Each of Parent and the Company represents,
as to itself, its Subsidiaries and its affiliates (other, than in the case of
Parent, the Company and its Subsidiaries, and in the case of the Company, Parent
or any of its affiliates, other than the Company and its Subsidiaries), that no
agent, broker, investment banker, financial advisor or other firm or person is
or will be entitled to any brokers' or finders' fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement and each of Parent 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 fees, commissions or expenses asserted by any person on the
basis of any act or statement alleged to have been made by such party or its
affiliates.
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ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions (any or all of which may be waived by the parties hereto in
writing, in whole or in part, to the extent permitted by applicable law):
(a) No statute, rule, regulation, order, decree or injunction shall
have been enacted, entered, promulgated or enforced by a Governmental
Entity which prohibits the consummation of the Merger and shall be in
effect, and no proceeding which has a reasonable probability of resulting
in such relief shall be pending;
(b) Other than filing the Certificate of Merger in accordance with the
DGCL, all authorizations, consents and approvals required to be obtained
prior to consummation of the Merger shall have been obtained, except for
such authorizations, consents, and approvals the failure of which to be
obtained individually and in the aggregate would not have or result in a
Material Adverse Effect; and
(c) This Agreement shall have been approved and adopted by the
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock.
Section 6.2 Conditions to the Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger is further subject
to the satisfaction or waiver at or prior to the Closing Date of the following
conditions:
(a) The representations and warranties of Parent and the Purchaser
contained in this Agreement shall be true and correct in all material
respects at and as of the date hereof, and true and correct in all material
respects at and as of the Closing Date as if made at and as of such time;
(b) Each of Parent and the Purchaser shall have performed in all
material respects its obligations under this Agreement required to be
performed by it at or prior to the Closing Date pursuant to the terms
hereof; and
(c) A special cash dividend of $10.00 per share of Company Common
Stock shall have been paid; provided, however, if such dividend shall not
have been paid, this condition shall be satisfied if the Merger
Consideration shall have been increased by $10.00 per share in cash.
Section 6.3 Conditions to Obligations of Parent and the Purchaser to Effect
the Merger. The obligations of Parent and the Purchaser to effect the Merger
are further subject to the satisfaction or waiver at or prior to the Closing
Date of the following conditions:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects at and as
of the date hereof, and true and correct in all material respects at and as
of the Closing Date as if made at and as such time; provided, however,
that, for purposes of this Section, such representations and warranties
shall be deemed to be true and correct in all material respects unless the
failure or failures of such representations and warranties to be so true
and correct, individually or in the aggregate, would result in a Material
Adverse Effect;
(b) The Company shall have performed in all material respects each of
its obligations under this Agreement required to be performed by it at or
prior to the Closing Date pursuant to the terms hereof; provided, however,
that, for purposes of this Section, such obligations shall be deemed to
have been performed in all material respects unless the failure or failures
to so perform, individually or in the aggregate, would result in a Material
Adverse Effect; and
(c) No proceeding not pending on the date hereof shall be pending
which has a reasonable probability of having, singularly or in the
aggregate with all such proceedings, a Material Adverse Effect.
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ARTICLE VII
TERMINATION
Section 7.1 Termination. Subject to Section 8.2(c), this Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after stockholder approval thereof:
(a) By the mutual consent of Parent, the Purchaser and the Company.
(b) By either the Company, on the one hand, or Parent and the
Purchaser, on the other hand, if:
(i) the Merger has not been consummated on or prior to September
30, 1997; provided, however, that the right to terminate this Agreement
under this Section 7.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Merger to occur on or prior
to such date;
(ii) the stockholders of the Company fail to approve and adopt this
Agreement and the transactions contemplated hereby; provided, however,
that the right to terminate this Agreement under this Section 7.1(b)(ii)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in,
the failure of the stockholders of the Company to approve and adopt this
Agreement;
(iii) any Governmental Entity shall have issued a statute, order,
decree or regulation or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the Merger and such
statute, order, decree, regulation or other action shall have become
final and nonappealable; or
(iv) if, prior to the consummation of the Merger, the Special
Committee shall have withdrawn, or modified or changed in any manner
adverse to Parent or the Purchaser its approval of this Agreement or the
Merger after having concluded in good faith after consultation with
independent legal counsel that there is a reasonable probability that
the failure to take such action would result in a violation of fiduciary
obligations under applicable law; provided, however, that the Special
Committee shall not be entitled to exercise a right of termination
pursuant to this Section 7.1(b)(iv) based upon a change in the trading
price per share of Cigar Common Stock, it being understood that the
effect of such change on the Merger Consideration has been specifically
addressed in Section 2.1(a) hereof.
Section 7.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 7.1, written notice thereof shall forthwith be
given by the terminating party or parties to the other party or parties
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall forthwith become null and void, and there shall be no
liability on the part of Parent, the Purchaser or the Company (except as set
forth in this Section 7.2 and Section 8.1 hereof; each which shall survive any
termination of this Agreement); provided that nothing herein shall relieve any
party from any liability or obligation with respect to any willful breach of
this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. Except as contemplated by this Agreement,
all costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such expenses.
Section 8.2 Amendment; Waiver; Termination.
(a) Subject to Section 8.2(c), this Agreement may be amended by the
parties hereto at any time before or after approval by the stockholders of
the Company of the matters presented in connection with the Merger, but
after any such approval no amendment shall be made without the approval of
such stockholders if required by law or if such amendment changes the
Merger Consideration or alters or changes any of the other terms or
conditions of this Agreement if such alteration or change would adversely
affect the rights of stockholders unaffiliated with Parent. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
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(b) Subject to Section 8.2(c), at any time prior to the Effective
Time, the parties may (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
contained herein or in any document, certificate or writing delivered
pursuant hereto or (iii) waive compliance with any of the agreements or
conditions of the other parties hereto contained herein. Any agreement on
the part of any party to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
Any such waiver shall constitute a waiver only with respect to the specific
matter described in such writing and shall in no way impair the rights of
the party granting such waiver in any other respect or at any other time.
Neither the waiver by any of the parties hereto of a breach of or a default
under any of the provisions of this Agreement, nor the failure by any of
the parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder, shall be
construed as a waiver of any other breach or default of a similar nature,
or as a waiver of any of such provisions, rights or privileges hereunder.
The rights and remedies herein provided are cumulative and none is
exclusive of any other, or of any rights or remedies that any party may
otherwise have at law or in equity.
(c) Notwithstanding any provision of this Agreement to the contrary,
without the approval of the Special Committee, the Company shall not amend,
terminate or waive any right under this Agreement (including any right to
terminate or any actual or potential cause of action).
Section 8.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time.
Section 8.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand, (c) the expiration of five business
days after the day when mailed in the United States by certified or registered
mail, postage prepaid, or (d) delivery in person, addressed at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to the Company, to:
Mafco Consolidated Group Inc.
35 East 62nd Street
New York, New York 10021
Telephone: (212) 572-8600
Facsimile: (212) 572-5056
Attention: General Counsel
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Telephone: (212) 403-1000
Facsimile: (212) 403-2000
Attention: Adam O. Emmerich, Esq.
(b) if to the Parent or the Purchaser, to:
Mafco Consolidated Holdings Inc.
35 East 62nd Street
New York, New York 10021
Telephone: (212) 572-8600
Facsimile: (212) 572-5056
Attention: General Counsel
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<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Facsimile: (212) 735-2001
Attention: Alan C. Myers, Esq.
Section 8.5 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words 'include', 'includes' or 'including' are
used in this Agreement they shall be deemed to be followed by the words 'without
limitation'. The phrase 'made available' when used in this Agreement shall mean
that the information referred to has been made available to the party to whom
such information is to be made available. The word 'affiliates' when used in
this Agreement shall have the meaning ascribed to it in Rule 12b-2 under the
Exchange Act. The phrase 'beneficial ownership' and words of similar import when
used in this Agreement shall have the meaning ascribed to it in Rule 13d-3 under
the Exchange Act.
Section 8.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
be considered one and the same agreement.
Section 8.8 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (including the documents and the instruments referred
to herein): (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) except as provided in Section 5.6
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
Section 8.9 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 8.10 Governing Law. This Agreement shall be governed, construed
and enforced in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 8.11 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties; provided, however, Parent or the Purchaser may
assign this Agreement to any Subsidiary of Parent or the Purchaser. No such
assignment shall relieve either Parent or the Purchaser of its obligations under
this Agreement. Subject to the first sentence of this Section 8.11, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties hereto and their respective successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
MAFCO CONSOLIDATED GROUP INC.
By: /s/ GLENN P. DICKES
---------------------------------
Name: Glenn P. Dickes
Title: Vice President
MAFCO CONSOLIDATED HOLDINGS INC.
By: /s/ GLENN P. DICKES
---------------------------------
Name: Glenn P. Dickes
Title: Vice President
MCG ACQUISITION INC.
By: /s/ GLENN P. DICKES
---------------------------------
Name: Glenn P. Dickes
Title: Vice President
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<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
MAFCO CONSOLIDATED GROUP INC.
FIRST: The name of the Corporation is Mafco Consolidated Group Inc.
(hereinafter the 'Corporation').
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of its registered agent at that address is The Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
'GCL').
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 1,000 shares of Common Stock, each having a par value
of one dollar ($1.00).
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless the
By-Laws so provide.
(4) No director shall be personally liable to the Corporation or any
of 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 the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or modification of this Article
FIFTH by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time
of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the directors
which would have been valid if such By-Laws had not been adopted.
SIXTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the GCL) outside the State of Delaware at
such place or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation.
SEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
<PAGE>
ANNEX B
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
February 20, 1997
Independent Committee of the Board of Directors
Mafco Consolidated Group Inc.
35 East 62nd Street
New York, NY 10021
Gentlemen and Madam:
We understand that Mafco Consolidated Group Inc. ('Mafco' or the
'Company'), Mafco Consolidated Holdings Inc. ('Holdings') and MCG Acquisition
Inc. ('Acquisition Sub'), a wholly owned subsidiary of Holdings, propose to
enter into an Agreement and Plan of Merger, substantially in the form of the
draft dated February 20, 1997 (the 'Merger Agreement'), which provides, among
other things, for (i) the payment of a $10.00 per share special cash dividend to
each share of common stock, par value $.01 per share (the 'Mafco Common Stock')
of Mafco on or prior to the closing of the transaction (or, in lieu thereof, a
$10 increase in the cash consideration to be paid in the Merger (as defined
herein)), and (ii) the merger (the 'Merger') of Acquisition Sub with and into
Mafco. Pursuant to the Merger, Mafco will become a wholly owned subsidiary of
Holdings and each outstanding share of Mafco Common Stock, other than shares
held in treasury or held by Holdings or any affiliate of Holdings or as to which
dissenters' rights have been perfected, will be converted into the right to
receive $33.50 per share in cash, unless the average of the per share closing
prices of the common stock, par value $.01 per share ('Cigar Common Stock'), of
Consolidated Cigar Holdings Inc., a Delaware corporation and a subsidiary of
Mafco ('Cigar'), on the New York Stock Exchange for the ten trading days ending
two trading days prior to effectiveness of the Merger (the 'Average Cigar
Price'), exceeds $33.00, in which case the consideration to be received by the
holders of shares of Mafco Common Stock pursuant to the Merger Agreement will be
increased as set forth in the Merger Agreement (as adjusted, the
'Consideration'). We further understand that pursuant to the Merger Agreement
the Consideration to be received by the holders of shares of Mafco Common Stock
pursuant to the Merger Agreement will not vary unless the Average Cigar Price
exceeds $33.00, and that the Merger Agreement is not terminable based upon a
change in the trading price per share of Cigar Common Stock. The terms and
conditions of the Merger are more fully set forth in the Merger Agreement. We
further understand that approximately 85% of the outstanding shares of Mafco
Common Stock is owned by Holdings.
You have asked for our opinion as to whether the Consideration to be
received by the holders of shares of Mafco Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders (other than
Holdings and its affiliates).
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and Cigar;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company and Cigar, including
estimates of certain liabilities of Mafco, prepared by the managements of
the Company and Cigar;
(iii) analyzed certain earnings estimates prepared by the management
of Cigar;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company and Cigar with senior executives of the
Company and Cigar;
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MORGAN STANLEY
(v) reviewed the reported prices and trading activity for the Mafco
Common Stock and the Cigar Common Stock;
(vi) compared the financial performance of the Company and Cigar and
the prices and trading activity of the Mafco Common Stock and Cigar Common
Stock with that of certain other comparable publicly traded companies and
their securities;
(vii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among
representatives of the Company, Holdings and their financial and legal
advisors;
(ix) reviewed the Merger Agreement, and certain related documents;
(x) reviewed and discussed with Price Waterhouse LLC certain issues
regarding the assets and liabilities of the Company; and
(xi) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the earnings estimates and estimates of certain
liabilities of Mafco, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of the Company and Cigar. We have not made any
independent valuation or appraisal of the assets or liabilities of the Company
and Cigar nor have we been furnished with any such appraisals. For purposes of
this opinion, we have taken into account the adjustment mechanism set forth in
the Merger Agreement pursuant to which the Consideration to be received by the
holders of shares of Mafco Common Stock is determined including that the
Consideration will not vary unless the Average Cigar Price exceeds $33.00 and
that the Merger Agreement is not terminable based upon a change in the trading
price per share of Cigar Common Stock. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company
or any of its assets, nor did we negotiate with any of the parties, other than
Holdings, which expressed interest to us in the possible acquisition of the
Company or certain of its constituent businesses.
We have acted as financial advisor to the Independent Committee of the
Board of Directors of the Company in connection with this transaction and will
receive a fee for our services. In the past, Morgan Stanley & Co. Incorporated
and its affiliates have provided financial advisory and financing services for
the Company, Holdings and certain of their affiliates and have received fees for
the rendering of these services. In addition, Morgan Stanley has received a
mandate from Cigar to act as a co-managing underwriter in connection with a
proposed secondary offering of Cigar common shares, in respect of which Morgan
Stanley will receive customary compensation.
Based on the foregoing, we are of the opinion on the date hereof that the
Consideration to be received by the holders of shares of Mafco Common Stock
pursuant to the Merger Agreement is fair from a financial point of view to such
holders (other than Holdings and its affiliates).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ WILLIAM R. REID
------------------------------
William R. Reid
Managing Director
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<PAGE>
ANNEX C
EXCERPTS FROM THE GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE RELATING TO THE RIGHTS
OF DISSENTING STOCKHOLDERS
262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
'stockholder' means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words 'stock' and 'share' mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
'depository receipt' mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholder entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise
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entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of
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the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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