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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
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MEDICAL DEFENSE HOLDING CO.
(NAME OF ISSUER)
MEDICAL DEFENSE HOLDING CO.
(NAME OF PERSON(S) FILING STATEMENT)
PREFERRED STOCK, $1.00 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
58455P 30 0
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MS. GERI MORRISON
MEDICAL DEFENSE HOLDING CO.
1311 EAST WOODHURST
SPRINGFIELD, MISSOURI 65804
(417) 887-3120
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
MARY ANNE O'CONNELL
HUSCH & EPPENBERGER
1200 MAIN STREET, SUITE 1700
KANSAS CITY, MISSOURI 64105
(816) 421-4800
SEPTEMBER 12, 1996
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
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$2,000,000 $400
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*Based upon $.40 cash purchase price per share for 5,000,000 shares.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: _____________ Filing Party: _______________________
Form or Registration No.: ___________ Date Filed: _________________________
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ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the securities to which this Schedule 13E-4 relates is
Medical Defense Holding Co., a Missouri corporation (the "Company"), and the
address of its principal executive office is 1311 East Woodhurst, Springfield,
Missouri 65804.
(b) This Schedule 13E-4 relates to the offer by the Company to purchase up
to 5,000,000 shares of its Preferred Stock, $1.00 par value per share
("Preferred Shares") at a price not less than $.30 or in excess of $.40 per
Preferred Share in cash, upon the terms and conditions set forth in the Offer
to Purchase dated September 12, 1996 (the "Offer to Purchase") and in the
related Letter of Transmittal (which together constitute the "Offer"), copies
of which are attached as Exhibits (a)(1) and (a)(2), respectively, and
incorporated herein by reference. As of June 30, 1996, an aggregate of
11,990,189 Preferred Shares were outstanding. Officers and directors of the
Company will not participate in the Offer in their individual capacities. It
is possible that one or more corporations or other entities in which a
director is an equity owner may trade shares. The information set forth in
"Introduction" and Section 1. "Number of Preferred Shares; Proration" of the
Offer to Purchase is incorporated herein by reference.
(c) There is currently no established trading market for the Preferred
Shares.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 7, "Source and Amount of Funds"
of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a)-(j) The information set forth in "Introduction" and Section 7. "Source
and Amount of Funds," Section 9. "Background and Purpose of the Offer; Certain
Effects of the Offer" and Section 10. "Transactions and Arrangements
Concerning Preferred Shares" of the Offer to Purchase is incorporated herein
by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in Section 10. "Transactions and Arrangements
Concerning Preferred Shares" of the Offer to Purchase is incorporated herein
by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth in "Introduction" and Section 7. "Source and
Amount of Funds," Section 9. "Background and Purpose of the Offer; Certain
Effects of the Offer" and Section 10. "Transactions and Arrangements
Concerning Preferred Shares" of the Offer to Purchase is incorporated herein
by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED.
The information set forth in Section 12. "Fees and Expenses" of the Offer to
Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in Section 8. "Certain Information
Concerning the Company" of the Offer to Purchase is incorporated herein by
reference. The audited financial statements of the Company set forth on pages
14 to 34 of the Company's Annual Report on Form 10-K for the Year Ended
December 31, 1995, filed with the Commission on March 28, 1996, are
incorporated herein by reference. The unaudited financial statements of the
Company set forth in the Company's Report on Form 10-Q for the quarterly
period ended June 30, 1996 are incorporated herein by reference.
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ITEM 8. ADDITIONAL INFORMATION.
(a)-(e) Not applicable.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
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<C> <S> <C>
(a)(1) Form of Offer to Purchase dated September 12, 1996.
(2) Form of Letter of Transmittal (including Certification of
Taxpayer Identification Number on Substitute Form W-9).
(3) Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(4) Form of Letter to Preferred Shareholders dated September 12,
1996, from Ronald G. Benson, Chief Executive Officer of the
Company.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
SIGNATURE
After inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
Medical Defense Holding Co.
/s/ Ronald G. Benson
By:__________________________________
Ronald G. Benson,
Chief Executive Officer
September 12, 1996
2
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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(a)(1) Form of Offer to Purchase dated September 12, 1996.
(2) Form of Letter of Transmittal (including Certification of Taxpayer
Identification Number on Substitute Form W-9)
(3) Form of Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(4) Form of Letter to Preferred Shareholders dated September 12, 1996,
from Ronald G. Benson, Chief Executive Officer of the Company.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
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OFFER BY
MEDICAL DEFENSE HOLDING CO.
TO PURCHASE FOR CASH UP TO
5,000,000 SHARES OF ITS PREFERRED STOCK
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M. CENTRAL TIME, ON NOVEMBER 1, 1996, UNLESS THE OFFER IS EXTENDED
Medical Defense Holding Co., a Missouri corporation (the "Company"), invites
the holders of its Preferred Stock, $1.00 par value ("Preferred Shares"), of
the Company to tender up to 5,000,000 Preferred Shares (constituting
approximately 41.7% of the shares currently outstanding) at a price not less
than $.30 or more than $.40 per Preferred Share in cash, specified by holders
tendering their Preferred Shares, subject to the terms and conditions set
forth herein and in the related Letter of Transmittal (which together
constitutes the "Offer"). The Company will determine the purchase price,
between $.30 and $.40 per Preferred Share (the "Purchase Price"), that it will
pay for Preferred Shares properly tendered pursuant to the Offer, taking into
account the number of Preferred Shares tendered and the prices specified by
tendering shareholders. The Company will select the lowest Purchase Price
sufficient to purchase 5,000,000 Preferred Shares (or such lesser number of
Preferred Shares as are properly tendered). All Preferred Shares properly
tendered at prices at or below the Purchase Price and not withdrawn will be
purchased at the Purchase Price, subject to the terms and conditions of the
Offer, including the proration provision.
There is currently no established trading market for the Preferred Shares.
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THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF PREFERRED SHARES BEING
TENDERED, BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MAKING OF
THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER OR NOT TO TENDER PREFERRED
SHARES. EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER PREFERRED
SHARES, AND, IF SO, HOW MANY PREFERRED SHARES AND AT WHAT PRICE. SEE SECTION
3.
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IMPORTANT
Any shareholder wishing to accept the Offer should complete and sign the
enclosed Letter of Transmittal in accordance with the instructions and deliver
it to the Depositary (as hereinafter defined) with (i) any required signature
guarantee; (ii) the stock certificates for tendered Preferred Shares; and
(iii) any other required documents to the Depositary as set forth in Section
3. Any shareholder wishing to accept the Offer who has never received a stock
certificate or has lost a certificate should contact the Depositary. Holders
of Preferred Shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee should contact such person if they desire
to tender any Preferred Shares.
TO PROPERLY TENDER PREFERRED SHARES, SHAREHOLDERS MUST COMPLETE THE SECTION
OF THE LETTER OF TRANSMITTAL RELATING TO THE PRICE AT WHICH THEY ARE TENDERING
PREFERRED SHARES.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the Letter of Transmittal may be directed to Mark Services,
Inc. (the "Information Agent") at its address and telephone number set forth
on the back cover of this Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER OR NOT SHAREHOLDERS SHOULD TENDER PREFERRED SHARES. NO
PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION,
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
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TABLE OF CONTENTS
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PAGE
SECTION ----
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INTRODUCTION............................................................... 1
THE OFFER.................................................................. 2
1. Number of Preferred Shares; Proration................................ 2
2. Extension of Offer; Termination; Amendment........................... 3
3. Procedures for Tendering Preferred Shares............................ 3
4. Withdrawal Rights.................................................... 5
5. Purchase of Preferred Shares and Payment of Purchase Price........... 5
6. Certain Conditions of the Offer...................................... 6
7. Source and Amount of Funds........................................... 7
8. Certain Information Regarding the Company............................ 7
9. Background and Purpose of the Offer; Certain Effects of the Offer.... 10
10. Transactions and Arrangements Concerning Preferred Shares............ 11
11. Certain Federal Income Tax Consequences.............................. 12
12. Fees and Expenses.................................................... 14
13. Miscellaneous........................................................ 14
</TABLE>
<PAGE>
To the Shareholders of Medical Defense Holding Co.
INTRODUCTION
Medical Defense Holding Co., a Missouri corporation (the "Company"), invites
the holders of its Preferred Stock, $1.00 par value ("Preferred Shares") to
tender up to 5,000,000 Preferred Shares (constituting approximately 41.7% of
the Preferred Shares currently outstanding) at a price not less than $.30 or
in excess of $.40 per Preferred Share in cash, subject to the terms and
conditions set forth herein and in the related Letter of Transmittal (which
together constitute the "Offer"). The Company will determine the single
purchase price, not less than $.30 or in excess of $.40 per Preferred Share
(the "Purchase Price"), that it will pay for Preferred Shares properly
tendered pursuant to the Offer, taking into account the number of Preferred
Shares so tendered and the prices specified by tendering shareholders. The
Company will select the lowest Purchase Price sufficient to purchase 5,000,000
Preferred Shares (or such lesser number of Preferred Shares as are properly
tendered). All Preferred Shares acquired in the Offer will be acquired at the
Purchase Price. All Preferred Shares properly tendered at prices at or below
the Purchase Price and not withdrawn will be purchased at the Purchase Price,
subject to the terms and conditions of the Offer, including the proration
provision.
THIS OFFER IS NOT CONDITIONED UPON THE TENDER OF ANY MINIMUM NUMBER OF
PREFERRED SHARES BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
If, before the Expiration Date (as defined in Section 1), more than
5,000,000 Preferred Shares are properly tendered at or below the Purchase
Price and not withdrawn, the Company will buy Preferred Shares on a pro rata
basis from all shareholders who properly tender Preferred Shares at or below
the Purchase Price (with appropriate adjustments to avoid purchases of
fractional Preferred Shares). See Section 1. All Preferred Shares not
purchased pursuant to the Offer, including Preferred Shares tendered at prices
greater than the Purchase Price and not withdrawn and Preferred Shares not
purchased because of proration will be returned at the Company's expense to
the shareholders.
The Purchase Price will be paid in cash. Tendering shareholders will not be
obligated to pay brokerage commissions, solicitation fees or, subject to
Instruction 7 of the Letter of Transmittal, stock transfer taxes. HOWEVER, ANY
TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE, SIGN AND RETURN TO
THE DEPOSITARY THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE LETTER OF
TRANSMITTAL MAY BE SUBJECT TO A REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING
OF 31% OF THE GROSS PROCEEDS PAYABLE PURSUANT TO THE OFFER. SEE SECTION 3. The
Company will pay all fees and expenses of UMB Bank, n.a. (the "Depositary")
and Mark Services Inc. (the "Information Agent") incurred in connection with
the Offer. See Section 12.
Since the issuance of the Preferred Shares, the Company has recognized the
desires of certain of its shareholders for a source to liquidate all or a
portion of their securities holdings in the Company. No public trading market
has developed for the Preferred Stock and the Company can give no assurance
that such a market will develop in the future. The Company believes that the
Offer is an effective use of its current excess cash and cash equivalents as
well as a source of liquidity for those shareholders who wish to sell all or a
part of their securities holdings in the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MAKING OF
THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER ALL OR ANY PORTION OF
THEIR PREFERRED SHARES, OR AS TO THE PRICE AT WHICH THEY SHOULD TENDER. EACH
SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER PREFERRED SHARES AND, IF
SO, HOW MANY PREFERRED SHARES AND AT WHAT PRICE. SHAREHOLDERS SHOULD CONSIDER
THAT THE COMPANY INTENDS
<PAGE>
TO SELECT THE LOWEST PURCHASE PRICE, NOT LESS THAN $.30 NOR IN EXCESS OF $.40
PER PREFERRED SHARE, THAT WILL ENABLE IT TO PURCHASE 5,000,000 PREFERRED
SHARES (OR SUCH LESSER NUMBER OF PREFERRED SHARES AS ARE PROPERLY TENDERED)
PURSUANT TO THE OFFER. SEE SECTION 3.
As of June 30, 1996, the Company had issued and outstanding 11,990,189
Preferred Shares. There is currently no established trading market for the
Preferred Shares.
THE OFFER
1. NUMBER OF PREFERRED SHARES; PRORATION. Upon the terms and subject to the
conditions of the Offer, the Company will purchase 5,000,000 Preferred Shares
(approximately 41.7% of the total Preferred Shares outstanding as of June 30,
1996), or such lesser number of Preferred Shares as are properly tendered,
(and not withdrawn in accordance with Section 4) prior to the Expiration Date
at a price not less than $.30 or in excess of $.40 per Preferred Share in
cash. The term "Expiration Date" means 5:00 p.m., Central Time, on November 1,
1996, unless the Company, in its sole discretion, shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall refer to the latest time and date at which time the
Offer, as so extended by the Company, shall expire. For a description of the
Company's right to extend, delay, terminate or amend the Offer, see Section 2.
In the event of an over-subscription of the Offer as described below,
Preferred Shares tendered at or below the Purchase Price prior to the
Expiration Date will be subject to proration. The proration period also
expires on the Expiration Date.
THE OFFER IS NOT CONDITIONED UPON THE TENDER OF ANY MINIMUM NUMBER OF
PREFERRED SHARES, BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
In accordance with Instruction 5 of the Letter of Transmittal, shareholders
desiring to tender Preferred Shares must specify the price, not less than $.30
or in excess of $.40 per Preferred Share, at which they are willing to sell
their Preferred Shares to the Company. As promptly as practicable following
the Expiration Date, the Company will, in its sole discretion, determine the
Purchase Price taking into account the number of Preferred Shares tendered and
the prices specified by tendering shareholders. The Company intends to select
the lowest Purchase Price, not less than $.30 or in excess of $.40 per
Preferred Share in cash, that will enable it to purchase 5,000,000 Preferred
Shares (or such lesser number of Preferred Shares as are properly tendered)
pursuant to the Offer. Preferred Shares properly tendered pursuant to the
Offer at or below the Purchase Price and not withdrawn will be purchased at
the Purchase Price, subject to the terms and conditions of the Offer,
including the proration provision. All Preferred Shares tendered and not
purchased pursuant to the Offer, including Preferred Shares tendered at prices
in excess of the Purchase Price and Preferred Shares not purchased because of
proration, will be returned at the Company's expense as promptly as
practicable following the Expiration Date.
Subject to the terms and conditions of the Offer, if more than 5,000,000
Preferred Shares have been properly tendered at or below the Purchase Price,
the Company will purchase such Shares not withdrawn prior to the Expiration
Date on a pro rata basis (with appropriate adjustments to avoid purchases of
fractional Preferred Shares).
In the event that proration of tendered Preferred Shares is required,
because of the difficulty in determining the number of Preferred Shares
properly tendered and not withdrawn, the Company does not expect that it will
be able to announce the final proration factor or to commence payment for any
Preferred Shares until approximately ten business days after the Expiration
Date. The preliminary results of any proration will be announced by a notice
sent by the Company to the shareholders as promptly as practicable after the
Expiration Date. Shareholders also may obtain such preliminary information
from the Company.
This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of Preferred Shares and will be furnished to brokers, banks
and similar persons whose names, or the names of whose
2
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nominees, appear on the Company's shareholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Preferred Shares.
2. EXTENSION OF OFFER; TERMINATION; AMENDMENT. The Company expressly
reserves the right, in its sole discretion, at any time and from time to time,
and regardless of whether or not any of the events set forth in Section 6
shall have occurred or been determined by the Company to have occurred, (a) to
extend the period of time during which the Offer is open by giving oral or
written notice of such extension to the Depositary and making a public
announcement thereof no later than 10:00 A.M., Central time, on the next
business day after the previously scheduled Expiration Date, (b) to delay
payment for any Preferred Shares, regardless of whether any Preferred Shares
were theretofore accepted for payment, as the Company may deem necessary to
consummate the Offer and (c) to amend the Offer in any respect (including,
without limitation, by increasing or decreasing the price to be paid for
Preferred Shares or the number of Preferred Shares being sought in the Offer)
by giving oral or written notice of such amendment to the Depositary and, as
promptly as practicable thereafter, making a public announcement thereof. If
the Company increases the number of Preferred Shares being sought in the
Offer, and such increase exceeds two percent of the outstanding Preferred
Shares, the Offer will expire on the later of the scheduled Expiration Date or
the tenth business day from, and including, the date that the notice of such
increase is first published, sent or given in the manner specified in this
Section 2. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or federal holiday and consists of the time period
from 12:01 A.M. through 12:00 Midnight, Central time. The Company also
expressly reserves the right, in its sole and absolute discretion, to
terminate the Offer and not to accept for payment or pay for Preferred Shares
upon the occurrence of any of the conditions specified in Section 6 by giving
oral or written notice of such termination to the Depositary and, as promptly
as practicable thereafter, making a public announcement thereof. Without
limiting the manner in which the Company may choose to make a public
announcement, the Company shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than as required by
applicable law (including Rule 13e-4(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")). The rights reserved by the Company in
this paragraph are in addition to the Company's rights under Section 6.
Payment for Preferred Shares accepted pursuant to the Offer may be delayed in
the event of proration due to the difficulty of determining the number of
properly tendered Preferred Shares. See Sections 1 and 4.
3. PROCEDURES FOR TENDERING PREFERRED SHARES.
Proper Tender of Preferred Shares. For shares to be tendered properly
pursuant to the Offer, the certificates for such Preferred Shares, together
with a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) with any required signature guarantees and any other
documents required by the Letter of Transmittal, must be received prior to
5:00 p.m., Central time, on the Expiration Date by the Depositary at one of
its addresses set forth on the back cover of this Offer to Purchase. Any
shareholder wishing to accept the Offer who has never received a stock
certificate or has lost a certificate should contact the Depositary. IN
ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, SHAREHOLDERS
DESIRING TO TENDER PREFERRED SHARES PURSUANT TO THE OFFER MUST PROPERLY
INDICATE IN THE SECTION CAPTIONED "PRICE PER SHARE AT WHICH PREFERRED SHARES
ARE BEING TENDERED" ON THE LETTER OF TRANSMITTAL THE PRICE (IN INCREMENTS OF
$.01) AT WHICH THEIR PREFERRED SHARES ARE BEING TENDERED. Shareholders who
desire to tender Preferred Shares at more than one price must complete a
separate Letter of Transmittal for each price at which Preferred Shares are
tendered, provided that the same Preferred Shares cannot be tendered at more
than one price. IN ORDER TO PROPERLY TENDER PREFERRED SHARES, ONE AND ONLY ONE
PRICE BOX MUST BE CHECKED IN THE APPROPRIATE SECTION ON EACH LETTER OF
TRANSMITTAL.
Signature Guarantees Method of Delivery. No signature guarantee is required
if the Letter of Transmittal is signed by the registered holder of the
Preferred Shares tendered therewith and payment is to be made directly to such
registered holder, or if Preferred Shares are tendered for the account of a
member firm of a registered
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national securities exchange, a member of the National Association of
Securities Dealers, Inc., a commercial bank or trust company or other
"eligible guarantor institution" as that term is defined in Rule 17Ad-15
promulgated by the Securities and Exchange Commission (the "Commission") under
the Exchange Act (each such entity being hereinafter referred to as an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 1
of the Letter of Transmittal. If a certificate for Preferred Shares is
registered in the name of a person other than the person executing a Letter of
Transmittal, or if payment is to be made, or Preferred Shares not purchased or
tendered are to be issued, to a person other than the registered owner, then
the certificate must be endorsed or accompanied by an appropriate stock power,
in either case, signed exactly as the name of the registered owner appears on
the certificate, with the signature on the certificate or stock power
guaranteed by an Eligible Institution.
In all cases, payment for shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of
certificates for such Preferred Shares, a properly completed and duly executed
Letter of Transmittal (or manually signed copy thereof) and any other
documents required by the Letter of Transmittal. The method of delivery of all
documents, including certificates for Preferred Shares, is at the election and
risk of the tendering shareholder. If delivery is by mail, then registered
mail with return receipt requested, properly insured, is recommended.
Backup Federal Income Tax Withholding. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING ON PAYMENTS MADE TO SHAREHOLDERS FOR PREFERRED SHARES PURCHASED
PURSUANT TO THE OFFER, EACH SHAREHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN
EXEMPTION FROM SUCH WITHHOLDING MUST PROVIDE THE DEPOSITARY WITH THE
SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER
INFORMATION BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL. See Instruction 12 of the Letter of Transmittal. For a discussion
of certain federal income tax consequences to tendering shareholders, see
Section 11.
Tendering Shareholder's Representation and Warranty; Company's Acceptance
Constitutes an Agreement. A tender of Preferred Shares pursuant to the
procedures described above will constitute the tendering shareholder's
acceptance of the terms and conditions of the Offer, as well as the tendering
shareholder's representation and warranty to the Company that (a) such
shareholder has a net long position in the Preferred Shares being tendered
within the meaning of Rule 14e-4 promulgated by the Commission under the
Exchange Act and (b) the tender of such Preferred Shares complies with Rule
14e-4. It is a violation of Rule 14e-4 for a person, directly or indirectly,
to tender Preferred Shares for such person's own account unless, at the time
of tender and at the time of the proration period, the person so tendering (i)
has a net long position equal to or greater than the amount of (x) Preferred
Shares tendered or (y) other securities convertible into or exchangeable or
exercisable for the Preferred Shares tendered and will acquire such Preferred
Shares for tender by conversion, exchange or exercise and (ii) will cause such
Preferred Shares to be delivered in accordance with the terms of the Offer.
Rule 14e-4 provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person. The Company's acceptance
for payment of Preferred Shares tendered pursuant to the Offer will constitute
a binding agreement between the tendering shareholders and the Company upon
the terms and conditions of the Offer.
Determination of Validity; Rejection of Preferred Shares; Waiver of Defects;
No Obligation to Give Notice of Defects. All questions as to the number of
Preferred Shares to be accepted, the price to be paid for Preferred Shares to
be accepted and the validity, form, eligibility (including time of receipt)
and acceptance of any tender of Preferred Shares will be determined by the
Company, in its sole discretion, and its determination shall be final and
binding. The Company reserves the absolute right to reject any or all tenders
of any Preferred Shares that it determines are not in appropriate form or the
acceptance for payment of or payment for which would, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right
to waive any of the conditions of the Offer or any defect or irregularity in
any tender with respect to any particular Preferred Shares of any particular
shareholder. No tender of Preferred Shares will be deemed to have been
properly made
4
<PAGE>
until all defects or irregularities have been cured by the tendering
shareholder or waived by the Company. None of the Company, the Depositary, the
Information Agent or any other person shall be obligated to give notice of any
defects or irregularities in tenders, nor shall any of them incur any
liability for failure to give any such notice.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Preferred Shares pursuant to the Offer are irrevocable. Preferred
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by the
Company pursuant to the Offer, may also be withdrawn at any time after 12:00
Midnight, Central Time, on November 1, 1996.
To be effective, a notice of withdrawal must be in written, telegraphic,
telex or facsimile transmission form and must be received in a timely manner
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase. Any such notice of withdrawal must specify the name of the
tendering shareholder, the name of the registered holder, if different, the
number of Preferred Shares tendered and the number of Preferred Shares to be
withdrawn. Prior to the release of such certificates, the tendering
shareholder must also submit the serial numbers shown on the particular
certificates for Preferred Shares to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution (except in
the case of Preferred Shares withdrawn by an Eligible Institution). None of
the Company, the Depositary, the Information Agent or any other person shall
be obligated to give notice of any defects or irregularities in any notice of
withdrawal nor shall any of them incur liability for failure to give any such
notice. All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Company, in its sole
discretion, which determination shall be final and binding.
Withdrawals may not be rescinded and any Preferred Shares withdrawn will be
deemed not properly tendered for purposes of the Offer. However, withdrawn
Preferred Shares may be re-tendered prior to the Expiration Date by again
following one of the procedures described in Section 3.
If the Company is delayed in its purchase of Preferred Shares or is unable
to purchase Preferred Shares pursuant to the Offer for any reason, then,
without prejudice to the Company's rights under the Offer, the Depositary may,
subject to applicable law, retain tendered Preferred Shares on behalf of the
Company for ten business days after the Expiration Date, and such Preferred
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in this Section 4.
5. PURCHASE OF PREFERRED SHARES AND PAYMENT OF PURCHASE PRICE. The Company
intends to select the lowest Purchase Price, not less than $.30 or in excess
of $.40, that will enable it to purchase 5,000,000 Preferred Shares (or such
lesser number of Preferred Shares as are properly tendered) pursuant to the
Offer. For purposes of the Offer, the Company will be deemed to have purchased
Preferred Shares which are tendered at or below the Purchase Price and not
withdrawn (subject to the proration provision of the Offer) when, as and if it
gives oral or written notice to the Depositary of its acceptance of such
Preferred Shares for payment to the Offer. Subject to the terms and conditions
of the Offer, the Company will purchase and pay for 5,000,000 Preferred Shares
(or such lesser number of Preferred Shares as are properly tendered) pursuant
to the Offer and not withdrawn as permitted in Section 4 as soon as
practicable after the Expiration Date. The Company will pay for Preferred
Shares purchased pursuant to the Offer by depositing the aggregate Purchase
Price therefor with the Depositary, which will act as agent for tendering
shareholders for the purpose of receiving payment from the Company and
transmitting payment to the tendering shareholders. In the event of proration,
the Company will determine the proration factor and pay for those tendered
Preferred Shares accepted for payment as soon as practicable after the
Expiration Date, but in any event does not expect to be able to announce the
final results of such proration and commence payment for Preferred Shares
purchased until at least ten business days after the Expiration Date.
Certificates for all Preferred Shares tendered and not purchased, including
all Preferred Shares tendered at prices in excess of the Purchase Price and
Preferred Shares not purchased due to proration, will be returned to the
tendering shareholder at the Company's expense as promptly as practicable
after the Expiration Date. Under no circumstances will interest on the
Purchase Price be paid by the Company by reason of any delay in making
payment.
5
<PAGE>
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Preferred Shares purchased pursuant to the Offer. If,
however, payment of the Purchase Price is to be made to, or (in the
circumstances permitted by the Offer) if unpurchased Preferred Shares are to
be registered in the name of, any person other than the registered holder, or
if tendered certificates are registered in the name of any person other than
the person signing the Letter of Transmittal, the amount of all stock transfer
taxes, if any (whether imposed on the registered holder or such other person),
payable on account of the transfer to such person will be deducted from the
Purchase Price unless satisfactory evidence of the payment of the stock
transfer taxes, or exemption therefrom, is submitted. See Instruction 7 of the
Letter of Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE, SIGN AND
RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING
OF 31% OF THE GROSS PROCEEDS PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT
TO THE OFFER. SEE SECTION 3. ALSO SEE SECTION 11 REGARDING CERTAIN FEDERAL
INCOME TAX CONSEQUENCES.
6. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, the Company shall not be required to accept for payment, purchase
or pay for any Preferred Shares tendered, and may terminate or amend the Offer
and may postpone the acceptance for payment of, the purchase of and the
payment for Preferred Shares tendered, if at any time on or after September
12, 1996 and prior to the time of payment for any such Preferred Shares
(whether or not any Preferred Shares have theretofore been accepted for
payment, purchased or paid for pursuant to the Offer) any of the following
events shall have occurred (or shall have been determined by the Company to
have occurred):
(a) there shall have been proposed (including any proposal or pending
legislation in existence as of the date hereof) or enacted into law
legislation that would materially increase the after-tax cost of the Offer
or the transactions contemplated thereby; or
(b) there shall have been any action threatened, pending or taken, or any
law, statute, rule, regulation, judgment, order or injunction threatened,
proposed, sought, promulgated, enacted, entered, enforced or deemed to be
applicable to the Offer, by any court or any government or governmental
regulatory or administrative agency or authority (federal, state, local or
foreign) or tribunal, domestic or foreign, which, in the sole judgment of
the Company, would or might directly or indirectly (i) make the acceptance
for payment of, or payment for, some or all of the Preferred Shares illegal
or otherwise restrict or prohibit the consummation of the Offer, (ii) delay
or restrict the ability of the Company, or render the Company unable, to
accept for payment or pay for some or all of the Preferred Shares or (iii)
materially impair the contemplated benefits of the Offer to the Company; or
(c) there shall have occurred any of the following events: (i) the
commencement of any state of war, international crisis or national
emergency, (ii) the declaration of any banking moratorium or suspension of
payments by banks in the United States or any limitation on the extension
of credit by lending institutions in the United States, (iii) any general
suspension of trading or limitation of prices for securities on any
securities exchange or in the over-the-counter market in the United States,
or (iv) in the case of any of the foregoing existing at the time of the
commencement of the Offer, in the sole judgment of the Company, a material
acceleration or worsening effect thereof; or
(d) a tender or exchange offer with respect to some or all of the
Preferred Shares (other than the Offer), or a merger or acquisition
proposal for the Company, shall have been proposed, announced or made by
another person or shall have been publicly disclosed, or the Company shall
have learned that (i) any person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire
beneficial ownership of more than 5% of the outstanding Preferred Shares,
other than acquisitions solely for bona fide arbitrage purposes and other
than as disclosed in a Schedule 13D or 13G on file with the Commission on
September 12, 1996, or (ii) any such person or group which, prior to
September 12, 1996, had filed such a Schedule with the Commission
thereafter has acquired or proposed to acquire,
6
<PAGE>
through the acquisition of stock, the formation of a group or otherwise,
beneficial ownership of an additional one percent or more of the Preferred
Shares or shall have been granted any right, option or warrant, conditional
or otherwise, to acquire beneficial ownership of an additional one percent
or more of the Preferred Shares; or
(e) there shall have occurred any event which, in the sole judgment of
the Company, has resulted in an actual or threatened material adverse
change in the business, financial condition, assets, income, operations,
prospects or stock ownership of the Company or which may adversely affect
the value of the Preferred Shares;
and, in the sole judgment of the Company, such event makes it inadvisable to
proceed with the Offer or with acceptance for payment of or payment for any
Preferred Shares.
The foregoing conditions are for the benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action
or inaction by the Company) giving rise to any such condition, and may be
waived by the Company, in whole or in part, at any time and from time to time
in its sole discretion. Any determination by the Company concerning the events
described above will be final and binding.
7. SOURCE AND AMOUNT OF FUNDS. Assuming that the Company purchases 5,000,000
Preferred Shares pursuant to the Offer at a price not less than $.30 or in
excess of $.40 per Preferred Share, the cost to the Company (including all
fees and expenses relating to the Offer, but excluding interest expense on any
funds borrowed to finance such purchase of the Preferred Shares) is estimated
to be between approximately $1,575,000 and $2,075,000. The Company presently
intends that funds for the purchase of the Preferred Shares pursuant to the
Offer and the payment of related fees and expenses will be provided from the
Company's available cash and cash equivalents and retained earnings.
8. CERTAIN INFORMATION REGARDING THE COMPANY. The Company was incorporated
in Missouri on November 28, 1994, and is the parent holding company of Medical
Defense Associates ("MDA"), a Missouri stock casualty insurance company. MDA
owns all of the issued and outstanding stock of Medical Defense Services Corp.
("MDS"), a Missouri corporation. MDS, in turn, owns all of the issued and
outstanding stock of Medical Defense Insurance Company ("MDIC"), a Missouri
stock casualty insurance company. MDA and MDIC offer medical professional
liability insurance for physicians, surgeons, dentists and others engaged in
the delivery of health care services. The Company and its subsidiaries
comprise an insurance holding company system under Missouri law.
7
<PAGE>
Set forth below is certain selected and summary consolidated financial
information for the Company and its subsidiaries. The historical financial
information at and for the years ended December 31, 1995 and December 31,
1994, has been excerpted or derived from the audited financial statements
contained in the Company's Annual Report on Form 10-K for 1995 (the "1995 10-
K"). The historical financial information at and for the six months ended June
30, 1996 and June 30, 1995, has been excerpted or derived from the Company's
unaudited consolidated financial statements as set forth in the Company's
Quarterly Report on Form 10-Q for the six months ended June 30, 1996 (the "10-
Q"). The following selected and summary historical financial information
should be read in conjunction with, and is qualified in its entirety by
reference to, such audited and unaudited consolidated financial statements and
their related notes. See "Additional Information" below.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
DATA FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 IS DERIVED FROM UNAUDITED
FINANCIAL STATEMENTS.
DATA FOR YEARS ENDED DECEMBER 31, 1995 AND 1994 IS DERIVED FROM AUDITED
FINANCIAL STATEMENTS.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31 (UNAUDITED)
------------------ ------------------
1995 1994 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total revenues....................... $ 21,212 $ 19,338 $ 9,362 $ 10,016
Total expenses....................... 19,148 17,856 10,870 8,886
Provision for income taxes........... 248 586 11 512
-------- -------- -------- --------
Net income (loss).................... $ 1,816 $ 896 $ (1,519) $ 618
======== ======== ======== ========
Net income (loss) per common share
and common equivalent share......... $ 0.05 $ N/A $ (0.06) $ 0.00
======== ======== ======== ========
BALANCE SHEET DATA
Total investments.................... $ 91,748 $ 78,371 $ 85,272 $ 86,604
Deferred policy acquisition costs.... 121 -- 98 17
Total assets......................... 108,199 102,301 100,695 105,507
Total claims and policy liabilities.. 73,715 75,013 70,327 74,231
Total liabilities.................... 78,642 79,369 74,372 78,122
Total stockholders' equity/surplus as
regards policyholders............... 29,557 22,932 26,323 27,385
Book value per common share and
common equivalent share............. $ 1.18 $ N/A $ 1.05 $ 1.10
STATEMENT OF CASH FLOW DATA
Unpaid losses and loss adjustment
expenses............................ $ 15,780 $ 17,137 $ 10,526 $ 7,054
Net cash provided (used) by operating
activities.......................... 5,640 (2,984) (5,544) 3,863
Net cash (used) provided by investing
activities.......................... (6,813) 4,682 3,862 (3,278)
Net cash (used) provided by financing
activities.......................... 500 -- -- 500
Net (decrease) increase in cash and
cash equivalents.................... (674) 1,698 (1,682) 1,085
Cash and cash equivalents, beginning
of period........................... 5,626 3,928 4,953 5,626
Cash and cash equivalents, end of
period.............................. $ 4,953 $ 5,626 $ 3,271 $ 6,711
</TABLE>
Summary Unaudited Consolidated Pro Forma Financial Information. The
following summary consolidated pro forma financial information of the Company
for the year ended December 31, 1995 and the period ended June 30, 1996 shows
the effects of the purchase of 5,000,000 Preferred Shares pursuant to the
Offer on the terms described in Section 1. The income statement data give
effect to the purchase of Preferred Shares pursuant to the Offer as if it had
occurred at the beginning of each period presented. The balance sheet data
give effect to the purchase of Preferred Shares pursuant to the Offer as if it
had occurred as of the date of the respective balance
8
<PAGE>
sheet. The summary unaudited consolidated pro forma financial information
should be read in conjunction with the audited and unaudited financial
statements and related notes contained in the 1995 10-K and the 10-Q. The
summary unaudited consolidated pro forma financial information does not
purport to be indicative of the results that would actually have been attained
had the purchase of the Preferred Shares been completed at the dates indicated
or that may be attained in the future.
SUMMARY CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
BALANCE SHEET DATA
DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL ESTIMATED PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
INFORMATION ADJUSTMENTS INFORMATION
----------- ----------- -----------
<S> <C> <C> <C>
Total assets............................... $108,199 $(2,173) $106,026
Total liabilities.......................... 78,642 -- 78,642
Total stockholders' equity/surplus as
regards policyholders..................... 29,557 (2,173) 27,384
Total liabilities, redeemable preferred
stock and stockholders' equity............ 108,199 (2,173) 106,026
Book value per common share and common
equivalent share.......................... $ 1.18 $ 1.83
JUNE 30, 1996
<CAPTION>
HISTORICAL ESTIMATED PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
INFORMATION ADJUSTMENTS INFORMATION
----------- ----------- -----------
<S> <C> <C> <C>
Total assets............................... $100,695 $(2,229) $ 98,466
Total liabilities.......................... 74,372 -- 74,372
Stockholders' equity....................... 26,323 (2,229) 24,094
Total liabilities, redeemable preferred
stock and stockholders' equity............ 100,695 (2,229) 98,466
Book value per common share and common
equivalent share.......................... $ 1.05 $ 1.61
SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
INCOME STATEMENT DATA
FOR THE YEAR ENDED DECEMBER 31, 1995
<CAPTION>
HISTORICAL ESTIMATED PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
INFORMATION ADJUSTMENTS INFORMATION
----------- ----------- -----------
<S> <C> <C> <C>
Total revenues............................. $ 21,212 $ (149) $ 21,063
Total expenses............................. 19,148 75 19,223
Provision for federal income tax........... 248 (51) 197
-------- --------
Net income................................. $ 1,816 $ 1,643
======== ========
Net income per common share and common
equivalent share.......................... $ 0.05 $ 0.11
======== ========
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<CAPTION>
HISTORICAL ESTIMATED PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
INFORMATION ADJUSTMENTS INFORMATION
----------- ----------- -----------
<S> <C> <C> <C>
Total revenues............................. $ 9,362 $ (56) $ 9,306
Total expenses............................. 10,870 -- 10,870
Provision for federal income tax........... 11 -- 11
-------- --------
Net income (loss).......................... $ (1,519) $ (1,575)
======== ========
Net income per common share and common
equivalent share.......................... $ (0.06) $ (0.11)
======== ========
</TABLE>
9
<PAGE>
NOTES TO SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The following assumptions regarding the Offer were made in determining the
summary unaudited consolidated pro forma financial information:
(a) The Offer is fully subscribed and results in the purchase of
5,000,000 Preferred Shares for cash at the maximum purchase price of $.40
per share.
(b) Investment income is reduced due to the cash outlay for the purchase
of Preferred Shares at the beginning of the period. The interest rate is
assumed to be the yield on a one-year U.S. Treasury bond purchased at the
beginning of the period on the income statements.
(c) The provision for federal income taxes reflects the effect of item
(b) above at a marginal tax rate of 34%.
Additional Information. The Company is subject to the information filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning the Company's directors and officers and their compensation,
the principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is required to be disclosed in
information distributed to the Company's shareholders and filed with the
Commission. Such reports and other information are available for inspection at
the public reference facilities of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; and at the regional offices of the
Commission, located at Seven World Trade Center, Suite 1300, New York, New
York 10007 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may also be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates.
9. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER. The
Preferred Shares were initially issued by the Company to eligible
policyholders of Medical Defense Associates in conversion of their
policyholders' membership rights and surplus interests in Medical Defense
Associates. Through the date of this Offer, no public trading market for the
Preferred Shares has developed. To the Company's knowledge, there have been no
arms'-length transfers of the Preferred Shares. A substantial majority of the
holders of Preferred Shares continue to be policyholders of the Company as
well and the Company has received a number of inquiries from these
policyholders regarding their desire to transfer their securities.
The Company has considered a number of possible alternatives to provide
liquidity to the holders of the Preferred Shares. In light of its current cash
position, the Company decided that an offer by the Company to purchase the
securities would provide some liquidity to the holders and be an effective use
of excess cash and cash equivalents in the Company. The Company determined
that the "dutch auction" method outlined in the Offer is a non-discriminatory
method for it to decide which of the securities should be purchased by the
Company and the price (within a pre-established range) at which the securities
should be purchased. THE COMPANY MAKES NO REPRESENTATION AS TO THE CURRENT
FAIR MARKET VALUE OF THE PREFERRED SHARES OR ITS RELATION TO THE RANGE OF
PRICES IN THE OFFER.
The Company believes that the purchase of the Preferred Shares pursuant to
the Offer provides the Company with the opportunity to use a portion of its
excess cash and cash equivalents in an attractive use of cash. At the same
time, the Offer provides the Company's shareholders with the opportunity to
sell a portion of their Preferred Shares (without the usual transaction costs
associated with market sales), while retaining a continuing equity interest in
the Company if they so desire. Currently, there is no established trading
market for the Preferred Shares. The Company's Board of Directors believes the
Company's current cash position and available credit facilities are adequate
for its short-term needs, including the purchase of Preferred Shares pursuant
to the Offer.
The reduction in the number of outstanding Preferred Shares pursuant to the
Offer will increase the percentage ownership of the Company of holders of the
Company's Common Stock and shareholders whose Preferred Shares are not
tendered or purchased in the Offer, including the Company's directors and
officers. Such
10
<PAGE>
increased percentage ownership will include increased interests in the
Company's earnings. After consummation of the Offer, future increases or
declines in earnings per Preferred Share will be greater because of the
smaller number of Preferred Shares outstanding. In addition, to the extent the
purchase of Preferred Shares pursuant to the Offer results in a reduction in
the number of shareholders of record, the costs to the Company for services to
shareholders will be reduced.
Preferred Shares are redeemable at par value at the Company's option at any
time after three years from issuance, provided however, that the holder of any
Preferred Shares may elect to convert each such share into two shares of Class
B Common Stock rather than redeem.
Although the Company has no present plans to acquire additional Preferred
Shares, the Company may in the future purchase additional Preferred Shares on
the open market, in private transactions, through tender offers or otherwise.
Any such purchases may be on the same terms or on terms which are more or less
favorable to shareholders than the terms of the Offer. However, Rule 13d-4
under the Exchange Act prohibits the Company and its affiliates from
purchasing any Preferred Shares, other than pursuant to the Offer, until at
least 10 business days after the Expiration Date. Any possible future
purchases by the Company will depend on many factors, including the market
price of the Preferred Shares, the Company's business and financial position
and liquidity and general economic and market conditions. Except as disclosed
in this Offer to Purchase, the Company has no current plans or proposals which
relate to or would result in any extraordinary corporate transaction involving
the Company, such as a merger, a reorganization, the sale or transfer of a
material amount of its assets, any change in its present Board of Directors or
management, any change in its policy of paying dividends, any material change
in its indebtedness or capitalization, any material change in its Articles of
Incorporation or By-laws, any other material change in its business or
corporate structure, or any change which would cause the Preferred Shares to
become eligible for termination of registration under the Exchange Act, or any
action similar to any of the foregoing.
Any Preferred Shares acquired by the Company pursuant to the Offer will be
canceled and will be available for issue by the Company without further
shareholder action except as required by applicable law. Such Preferred Shares
could be issued in connection with the acquisition of other businesses, the
raising of additional capital for use in the Company's business, the
distribution of stock dividends and the implementation of employee stock
benefit programs.
The reduction in the Company's cash and cash equivalents following the
consummation of the Offer might lessen the attractiveness of the Company to
persons who would have otherwise considered an acquisition of the Company.
The Preferred Shares are registered under the Exchange Act, which requires
that the Company furnish certain information to its shareholders and the
Commission and comply with the Commission's proxy rules in connection with
meetings of the Company's shareholders. The Company believes that the purchase
of Preferred Shares pursuant to the Offer will not result in the Preferred
Shares becoming eligible for deregistration under the Exchange Act. There is
currently no established trading market for the Preferred Shares.
10. TRANSACTIONS AND ARRANGEMENTS CONCERNING PREFERRED SHARES. Based upon
the Company's records and upon information provided to the Company by its
directors, executive officers and affiliates, neither the Company nor, to the
best of the Company's knowledge, any of the directors or executive officers of
the Company, nor any of their associates have effected any "arms'-length"
transactions in the Preferred Shares prior to the date hereof.
Neither the Company nor, to the best of the Company's knowledge, any of its
directors or executive officers, is a party to any contract, arrangement,
understanding or relationship with any other person relating, directly or
indirectly, to the Offer, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any such securities, joint venture, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies, consents or authorizations.
11
<PAGE>
11. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion
summarizes certain of the material federal income tax consequences of a sale
of Preferred Shares pursuant to the Offer. The discussion does not address all
aspects of federal income taxation that may be relevant to particular
shareholders. The discussion assumes that shareholders hold their Preferred
Shares as a capital asset within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"). Certain shareholders (including
insurance companies, tax-exempt organizations, and foreign persons) may be
subject to special rules not discussed below. The discussion does not address
the effect of any applicable foreign, state, local or other tax laws. The
Company has neither requested nor obtained a written opinion of counsel with
respect to the tax matters discussed below.
IN VIEW OF THE INDIVIDUAL NATURE OF FEDERAL INCOME TAX CONSEQUENCES, EACH
SHAREHOLDER IS STRONGLY URGED TO CONSULT A TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES OF THE OFFER TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION
OF FOREIGN, STATE, LOCAL OR OTHER TAX LAWS.
Preferred Shares. Provided that the receipt of the Purchase Price does not
have the effect of a distribution of a dividend, a shareholder will realize
gain or loss for federal income tax purposes (determined separately as to each
block of Preferred Shares exchanged) in an amount equal to the difference
between the Purchase Price received by such shareholder in exchange for
Preferred Shares, and such shareholder's tax basis for the Preferred Shares
surrendered in exchange therefor. Any such gain or loss will be recognized for
federal income tax purposes, and will be treated as capital gain or loss.
However, if the receipt of the Purchase Price does have the effect of the
distribution of a dividend, the amount of gain recognized will equal the
amount of the Purchase Price received; such gain will be taxable as a
dividend; and no loss (or other recovery of such shareholder's tax basis for
the Preferred Shares surrendered in the exchange) will be recognized by such
shareholder. The determination of whether the receipt of the Purchase Price in
return for Preferred Shares pursuant to the Offer has the effect of the
distribution of a dividend will be made in accordance with the provisions and
limitations of Section 302 of the Code, taking into account the constructive
ownership rules of Section 318 of the Code.
Under Section 302 of the Code, a sale of Preferred Shares pursuant to the
Offer will not be treated as having the effect of a dividend for federal
income tax purposes if such sale (i) results in a "complete redemption" of all
of the shareholder's stock in the Company, or (ii) is "not essentially
equivalent to a dividend" with respect to the shareholder. In determining
whether either of these tests is satisfied, shareholders must take into
account not only Preferred Shares and Common Stock of the Company which they
actually own, but also any Preferred Shares and Common Stock of the Company
which they are deemed to own pursuant to the constructive ownership rules of
Section 318 of the Code. Pursuant to these constructive ownership rules, a
shareholder constructively owns Preferred Shares and Common Stock of the
Company actually owned and in some cases constructively owned, by certain
related individuals or entities and Preferred Shares and Common Stock of the
Company which the shareholder has the right to acquire by exercise of an
option or by conversion or exchange of a security.
A sale of Preferred Shares pursuant to the Offer will result in a "complete
redemption" of the shareholder's stock in the Company if, pursuant to the
Offer, the Company purchases all of the Preferred Shares actually and
constructively owned by the shareholder, and the shareholder neither actually
nor constructively owns any Common Stock of the Company. If the shareholder's
sale of Preferred Shares pursuant to the Offer would satisfy the complete
redemption requirement but for the shareholder's constructive ownership of
Preferred Shares or Common Stock of the Company held by family members (i.e.,
the shareholder actually owns no Common Stock of the Company and sells,
pursuant to the Offer, all Preferred Shares actually owned), such shareholder
may, under certain circumstances, be entitled to waive such constructive
ownership provided the shareholder complies with the provisions of Section
302(c) of the Code.
A sale of Preferred Shares pursuant to the Offer will be "not essentially
equivalent to a dividend" if, as a result of the sale of Preferred Shares
pursuant to the Offer, the shareholder experiences a "meaningful reduction" in
his proportionate interest in the Company, taking into account the
constructive ownership rules. The Internal Revenue Service has indicated in a
published ruling that even a small reduction in the proportionate interest of
a small minority shareholder who does not exercise any control over company
affairs may constitute a "meaningful reduction" in the shareholder's interest
in the company.
12
<PAGE>
If either of the tests described above is satisfied, the tendering
shareholder will recognize capital gain or loss equal to the difference
between the amount of cash received by the shareholder pursuant to the Offer
in exchange for the Preferred Shares and the shareholder's tax basis in the
Preferred Shares sold. Such gain or loss must be determined separately for
each block of Preferred Shares sold and will be long-term capital gain or loss
if the Preferred Shares were held for more than one year. Long-term capital
gains of individuals, estates and trusts currently are subject to federal
income tax at the maximum statutory rate of 28%. The tax treatment of a
redemption will depend upon the particular facts and circumstances pertaining
to each shareholder, and each tendering shareholder should consult a tax
advisor as to the particular tax consequences to such shareholder of the sale
of Preferred Shares pursuant to the Offer.
If neither of the tests described above is satisfied, the tendering
shareholder generally will be treated as having received a dividend in an
amount equal to the Purchase Price of the Preferred Shares, if the Company has
sufficient earnings and profits. The Company presently anticipates that its
current and accumulated earnings and profits will be sufficient to cover the
amount of all distributions pursuant to the Offer, if any, that are taxable as
dividends. Dividend income of individuals, estate and trusts currently is
subject to federal income tax at the maximum statutory rate of 39.6% To the
extent that the purchase of Preferred Shares from any shareholder pursuant to
the Offer is treated as a dividend, such shareholder's tax basis in any
Preferred Shares which the shareholder retains after consummation of the Offer
will be increased by the shareholder's tax basis in the Preferred Shares
purchased pursuant to the Offer.
In the case of a corporate shareholder, if the cash paid pursuant to the
Offer is treated as a dividend, the dividend income may be eligible for the
70% dividends-received deduction. The dividends-received deduction is subject
to certain limitations and may not be available if the corporate shareholder
does not satisfy certain holding period requirements with respect to the
Preferred Shares or if the Preferred Shares are treated as "debt-financed
portfolio stock." If a dividends-received deduction is available, the dividend
may be treated as an "extraordinary dividend," as defined by Section 1059 of
the Code, in which case the corporate shareholder's tax basis in the Preferred
Shares would be reduced (but not below zero) by the amount of any
"extraordinary dividend," which is not taxed because of the dividends-received
deduction. Any amount in excess of the corporate shareholder's tax basis for
the Preferred Shares generally will be subject to tax on the sale or
disposition of those Preferred Shares. Corporate shareholders should consult
their tax advisors as to the availability of the dividends-received deduction
and the application of Section 1059 of the Code to the Offer.
Each shareholder should be aware that his of her ability to satisfy the
requirements of Code Section 302 may be affected by any proration pursuant to
the Offer. Therefore, a shareholder can be given no assurance, even if he
tenders all of his Preferred Shares, that the Company will purchase a
sufficient number of such Preferred Shares to permit him to satisfy such
requirements.
Each shareholder also should be aware that an acquisition or disposition of
Preferred Shares or Common Stock of the Company (either by such shareholder
under Section 318 of the Code) after the Offer may be taken into account in
determining whether the requirements of Code Section 302 are satisfied.
The foregoing discussion assumes that Preferred Shares are not described in
Code Section 306. Accordingly, such discussion may be inapplicable to any
shareholder that owned, either actually or constructively under Code Section
318, any Common Stock of the Company at the time of the tender, and such
discussion may also be inapplicable to any shareholder that owned, either
actually or constructively under Code Section 318, any Common Stock of the
Company that was acquired in a transaction that may be integrated with the
tender for federal income tax purposes.
BECAUSE THE DETERMINATION OF WHETHER A PAYMENT WILL BE TREATED AS HAVING THE
EFFECT OF THE DISTRIBUTION OF A DIVIDEND WILL GENERALLY DEPEND UPON THE FACTS
AND CIRCUMSTANCES OF EACH SHAREHOLDER, SHAREHOLDERS ARE STRONGLY ADVISED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE OFFER.
SEE SECTION 3 WITH RESPECT TO THE APPLICATION OF BACKUP FEDERAL INCOME TAX
WITHHOLDING.
13
<PAGE>
THE FOREGOING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS INCLUDED HEREIN
FOR GENERAL INFORMATION ONLY AND IS BASED UPON CURRENT LAW. SUCH SUMMARY DOES
NOT ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO ALL SHAREHOLDERS OF THE
COMPANY. EACH SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES OF THE OFFER TO SUCH SHAREHOLDER, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
12. FEES AND EXPENSES. The Company has retained Mark Services Inc. to act as
Information Agent and UMB Bank, n.a. to act as Depositary in connection with
the Offer. The Information Agent may contact holders of Preferred Shares by
mail, telephone, telex, telegraph and personal interviews and may request
brokers, dealers and other nominee shareholders to forward materials relating
to the Offer to beneficial owners. Mark Services Inc. and UMB Bank, n.a. will
each receive reasonable and customary compensation for their services, will be
reimbursed by the Company for their reasonable out-of-pocket expenses,
including attorneys' fees, and will be indemnified against certain liabilities
in connection with the Offer, including certain liabilities under the federal
securities laws.
No fees or commissions will be payable to brokers, dealers or other persons
(other than fees to the Information Agent or the Depositary as described
above) for soliciting holders of Preferred Shares pursuant to the Offer. No
broker, dealer, commercial bank or trust company has been authorized to act as
the agent of the Company, the Information Agent or the Depositary for purposes
of the Offer. The Company will pay or cause to be paid all stock transfer
taxes, if any, on its purchase of Preferred Shares except as otherwise
provided in Instruction 7 in the Letter of Transmittal.
13. MISCELLANEOUS. The Company is not aware of any license or regulatory
permit that appears to be material to the Company's business that might be
adversely affected by the Company's acquisition of Preferred Shares as
contemplated herein or of any approval or other action by any government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, that would be required for the acquisition or ownership of Preferred
Shares by the Company as contemplated herein. Should any such approval or
other action be required, the Company currently contemplates that such
approval or other action will be sought. The Company is unable to predict
whether it may determine that it is required to delay the acceptance for
payment of or payment for Preferred Shares tendered pursuant to the Offer
pending the outcome of any such matter. There can be no assurance that any
such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that the failure to obtain any such
approval or other action might not result in adverse consequences to the
Company's business. The Company's obligations under the Offer to accept for
payment and pay for Preferred Shares are subject to certain conditions. See
Section 6.
Pursuant to Rule 13e-4 of the regulations under the Exchange Act, the
Company has filed with the Commission an Issuer Tender Offer Statement on
Schedule 13E-4 which contains additional information with respect to the
Offer. Such Schedule 13E-4, including the exhibits and any amendments thereto,
may be examined, and copies may be obtained, at the same places and in the
same manner as is set forth in Section 8 with respect to information
concerning the Company.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
Medical Defense Holding Co.
September 12, 1996
14
<PAGE>
Manually signed photocopies of the Letter of Transmittal will be accepted.
The Letter of Transmittal and certificates for Preferred Shares should be sent
or delivered by each shareholder or his broker, dealer, commercial bank, trust
company or nominee to the Depositary at one of its addresses set forth below.
Any shareholder wishing to accept the Offer who has never received a stock
certificate or has lost a certificate should contact the Depositary.
The Depositary:
UMB BANK, N.A.
Telephone Number:
(816) 860-7786
(call collect)
By Mail: By Hand or
UMB Bank, n.a. Overnight Courier:
Securities Transfer Division UMB Bank, n.a.
P.O. Box 410064 Securities Transfer Division
Kansas City, MO 64141 928 Grand Avenue
13th Floor
Kansas City, MO 64106
----------------
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES OF THIS OFFER
TO PURCHASE AND THE LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE INFORMATION
AGENT AT THE TELEPHONE NUMBER AND LOCATION LISTED BELOW.
The Information Agent for the Offer is:
MARK SERVICES, INC.
7155 S.W. 47TH STREET
SUITE 311
MIAMI, FLORIDA 33155
For Information Call:
(800) 638-4880
15
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF PREFERRED STOCK
MEDICAL DEFENSE HOLDING CO.
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 12, 1996
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., CENTRAL TIME, ON NOVEMBER 1, 1996 UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY:
UMB Bank, n.a.
Telephone Number:
(816) 860-7786
(call collect)
By Mail: By Hand or
UMB Bank, n.a. Overnight Courier:
Securities Transfer Division UMB Bank, n.a.
P.O. Box 410064 Securities Transfer Division
Kansas City, MO 64141 928 Grand Avenue
13th Floor
Kansas City, MO 64106
For Information Call:
Mark Services, Inc.
800-638-4880
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, DOES
NOT CONSTITUTE A VALID DELIVERY.
The Instructions accompanying this Letter of Transmittal should be read
carefully before the Letter of Transmittal is completed.
This Letter of Transmittal is to be completed and delivered prior to the
Expiration Date by shareholders whose certificates are forwarded herewith
pursuant to the procedures set forth in Section 3 of the Offer to Purchase. The
term "Expiration Date" means 5:00 p.m., Central Time on November 1, 1996,
unless the Company, in its sole discretion, shall have extended the period
during which time the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Company, shall expire.
DESCRIPTION OF PREFERRED SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
- --------------------------------------------------------------------------------
NAME(S), ADDRESS(ES) AND NUMBER OF SHARES TENDERED CERTIFICATES
OF REGISTERED HOLDER(S). PLEASE SEE PRE- (ATTACH SIGNED LIST IF
ADDRESSED LABEL OR FILL IN EXACTLY AS NECESSARY)
NAME(S) APPEAR(S) ON CERTIFICATE(S).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREFERRED NO. OF
SHARES PREFERRED
CERTIFICATE NO. OF SHARES
NO(S). PREFERRED SHARES TENDERED*
<S> <C> <C> <C>
----------------------------------
----------------------------------
----------------------------------
----------------------------------
----------------------------------
TOTAL PREFERRED SHARES TENDERED
- --------------------------------------------------------------------------------
</TABLE>
*If you wish to tender fewer than all Preferred Shares evidenced by any
certificate listed above, please indicate in this column the number you wish
to tender; otherwise, all Preferred Shares evidenced by such certificate will
be deemed to have been tendered.
<PAGE>
PRICE PER PREFERRED SHARE AT WHICH
PREFERRED SHARES ARE BEING TENDERED
(SEE INSTRUCTION 5)
- -------------------------------------------------------------------------------
CHECK ONLY ONE BOX
IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF PREFERRED SHARES
- -------------------------------------------------------------------------------
[_] $.30 [_] $.31 [_] $.32 [_] $.33 [_] $.34 [_] $.35
[_] $.36 [_] $.37 [_] $.38 [_] $.39 [_] $.40
NOTE: SIGNATURE MUST BE PROVIDED BELOW.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
UMB Bank, n.a., as Depositary:
The undersigned tenders to Medical Defense Holding Co. (the "Company") the
certificates described above representing shares of its Preferred Stock, $1.00
par value per share ("Preferred Shares") at the price per Preferred Share
indicated in this Letter of Transmittal, to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated
September 12, 1996 (the "Offer to Purchase"), receipt of which is
acknowledged, and in this Letter of Transmittal (which together constitute the
"Offer").
Subject to and effective upon acceptance for payment of the tendered
Preferred Shares, in accordance with the terms and subject to the conditions
of the Offer, the undersigned hereby sells, assigns and transfers to the
Company all right, title and interest in and to the tendered Preferred Shares
that are accepted for payment pursuant to the Offer and irrevocably
constitutes and appoints the Depositary as attorney-in-fact for the
undersigned with respect to such Preferred Shares, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Preferred
Stock, together with all accompanying evidences of transfer and authenticity,
to or upon the order of the Company upon receipt by the Depositary, as the
undersigned's agent, of the Purchase Price (as defined below), (b) present
such certificates for transfer or cancellation of such Preferred Shares on the
Company's books and (c) receive all benefits and otherwise exercise all rights
of beneficial ownership of such Preferred Shares, all in accordance with the
terms and subject to the conditions of the Offer. The undersigned represents
and warrants that (a) the undersigned has a net long position in the Preferred
Shares within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and (b) the tender of
such Preferred Shares complies with Rule 14e-4.
The undersigned understands that the Company will determine the single
purchase price, not less than $.30 nor in excess of $.40 per Preferred Share
(the "Purchase Price"), that will enable it to purchase 5,000,000 Preferred
Shares (or such lesser number of Preferred Shares as are properly tendered)
pursuant to the Offer, taking into account the number of Preferred Shares so
tendered and the prices specified by tendering shareholders. The undersigned
understands that the Company expressly reserves the right, in its sole
discretion, and regardless of whether any of the events set forth in Section 6
of the Offer to Purchase shall have occurred or been determined by the Company
to have occurred, to amend the Offer in any respect (including without
limitation, by increasing or decreasing the range of prices which may be paid
for the Preferred Shares or the number of Preferred Shares being sought in the
Offer). See Section 2 of the Offer to Purchase. The undersigned understands
that all Preferred Shares properly tendered at prices at or below the Purchase
Price and not withdrawn will be purchased at the Purchase Price, upon the
terms and subject to the conditions of the Offer, including the proration
provision of the Offer to Purchase. The Purchase Price will be paid to the
tendering shareholder in cash for all Preferred Shares purchased. The
undersigned understands that all Preferred Shares tendered and not purchased
pursuant to the Offer, including Preferred Shares tendered at prices in excess
of the Purchase Price and Preferred Shares not purchased because of proration,
will be returned to the undersigned at the Company's expense as promptly as
practicable following the Expiration Date.
<PAGE>
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Company may not be required to purchase any of the
Preferred Shares tendered hereby or may purchase, pro rata with Preferred
Shares tendered by other shareholders, fewer than all of the Preferred Shares
tendered hereby. In either event, the undersigned understands that the
certificates for any Preferred Shares tendered and not purchased by the Company
will be returned to the undersigned at the address indicated above unless
otherwise indicated under the "Special Payment Instructions" or the "Special
Delivery Instructions" below.
The undersigned understands that tenders of Preferred Shares pursuant to any
of the procedures described in Section 3 of the Offer to Purchase or in the
accompanying Instructions will constitute an agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Offer.
The check for the Purchase Price for tendered Preferred Shares that are
purchased will be issued to the order of the undersigned as the registered
holder of such Preferred Shares and mailed to the address on the previous page
unless otherwise indicated under the "Special Payment Instruction" or the
"Special Delivery Instructions," below. Similarly, unless otherwise indicated
under "Special Payment Instructions" any certificates for Preferred Shares not
tendered or accepted for payment (and any accompanying documents, as
appropriate) will be returned to the undersigned at the address shown above. In
the event that both the "Special Delivery Instructions" and the "Special
Payment Instructions" are completed, the check for the Purchase Price and/or
any Preferred Shares not tendered or accepted for payment will be issued and
delivered to the person or persons so indicated. The undersigned recognizes
that the Company has no obligation pursuant to the "Special Payment
Instructions" to transfer any Preferred Shares from the name of the registered
holder thereof if the Company purchases none of the Preferred Shares so
tendered.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligations of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MAKING OF
THE OFFER. HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKE ANY
RECOMMENDATION TO SHAREHOLDERS AS TO WHETHER TO TENDER ALL OR ANY PORTION OF
THEIR PREFERRED SHARES, OR AS TO THE PRICE AT WHICH THEY SHOULD TENDER.
SHAREHOLDERS SHOULD CONSIDER THAT THE COMPANY INTENDS TO SELECT THE LOWEST
PURCHASE PRICE NOT LESS THAN $.30 NOR IN EXCESS OF $.40 PER PREFERRED SHARE
THAT WILL ENABLE IT TO PURCHASE 5,000,000 PREFERRED SHARES (OR SUCH LESSER
NUMBER OF PREFERRED SHARES AS ARE PROPERLY TENDERED) PURSUANT TO THE OFFER. SEE
SECTION 5 OF THE OFFER TO PURCHASE.
SIGN HERE
(SEE INSTRUCTIONS 1 AND 6
IMPORTANT: COMPLETE SUBSTITUTE FORM W-9 BELOW)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by officers of a corporation,
trustees, executors, administrators, guardians, attorneys-in-fact or other
acting in a fiduciary or representative capacity, please set forth full
title and provide proper evidence of such person's authority to sign.
Holder Name(s): ____________________________________________________________
(Please Type or Print)
X __________________________________________________________________________
X __________________________________________________________________________
(Signature(s) of Owner(s) or Representative(s))
Capacity (Full Title): _____________________________________________________
Dated: ______________________________________________________________, 1996
Address: ___________________________________________________________________
----------------------------------------------------------------------------
Zip Code
Area Code and Tel. No.: ____________________________________________________
GUARANTEE OF SIGNATURE(S)
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
(NOT REQUIRED FOR OFFICERS OF CORPORATIONS SIGNING IN SUCH CAPACITY)
(SEE INSTRUCTIONS 1 AND 6)
Authorized Signature: ______________________________________________________
Name: ______________________________________________________________________
(Please Type or Print)
Title: _____________________________________________________________________
Name of Firm: ______________________________________________________________
Address: ___________________________________________________________________
----------------------------------------------------------------------------
Zip Code
Area Code and Tel. No.: ____________________________________________________
Dated: ______________________________________________________________, 1996
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if
certificates for Preferred Shares
not tendered or not purchased or
the check for the Purchase Price of
Preferred Shares purchased, are to
be issued in the name of someone
other than the undersigned.
Issue [_] check
and/or [_] certificate to:
Name: ______________________________
(Please Type or Print)
Address: ___________________________
------------------------------------
Zip Code
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if
certificates for Preferred Shares
not tendered or not purchased, or
any check issued in the name of the
undersigned for the Purchase Price
of Preferred Shares purchased, are
to be delivered to someone other
than the undersigned or to
undersigned at an address other
than that shown above.
Mail [_] check
and/or [_] certificate to:
Name: ______________________________
(Please Type or Print)
Address: ___________________________
------------------------------------
Zip Code
PAYER'S NAME: UMB BANK, N.A.
Part I--PLEASE PROVIDE Social Security No. OR
SUBSTITUTE YOUR TIN IN THE BOX AT Employer Identification
RIGHT AND CERTIFY BY Number
SIGNING AND DATING BELOW
FORM W-9
--------------------------
DEPARTMENT OF THE ---------------------------------------------------------
TREASURY Part II--For Payees exempt from backup withholding,
INTERNAL REVENUE see the enclosed Guidelines for Certification of
SERVICE Taxpayer Identification Number on Substitute Form W-9
PAYER'S REQUEST FOR
TAXPAYER
IDENTIFICATION NUMBER
(TIN)
- --------------------------------------------------------------------------------
Certification--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number, and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to
backup withholding as a result of failure to report all interest and
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
Certification Instructions--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2).
SIGNATURE ______________________________________________________________ DATE
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) of the Preferred Shares tendered herewith, and neither
the box entitled "Special Payment Instructions" nor the box entitled "Special
Delivery Instructions" is completed, or (ii) if Preferred Shares are tendered
for the account of a member firm of a registered national securities exchange,
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company or other "eligible guarantor institution" as
that term is defined in Rule 17Ad-5 of the Exchange Act (each an "Eligible
Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by shareholders if certificates are forwarded
herewith. Certificates for all tendered Preferred Shares, together with a
properly completed and duly executed Letter of Transmittal (or a manually
signed copy thereof) with any required signature guarantee and any other
documents required by this Letter of Transmittal, should be mailed or
delivered to the Depositary at its address set forth herein and must be
received by the Depositary prior to the Expiration Date (as defined in the
Offer).
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES FOR
PREFERRED SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF
THE TENDERING SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Preferred Shares will be purchased. All tendering shareholders, by
executing this Letter of Transmittal, waive any right to receive any notice of
the acceptance of their Preferred Shares for payment.
Any shareholder wishing to tender Preferred Shares for which the
certificate(s) have been lost, stolen or mutilated should contact the
Depositary for instructions for obtaining replacement certificate(s).
3. INADEQUATE SPACE. If the space provided in the box captioned "Description
of Tendered Preferred Shares" is inadequate, the certificate numbers, the
number of Preferred Shares represented by each certificate and the number of
the Preferred Shares tendered from each certificate (for partial tenders only)
should be listed on a separate signed schedule and attached to this Letter of
Transmittal.
4. PARTIAL TENDERS. If fewer than all of the Preferred Shares evidenced by
any certificate submitted are to be tendered, fill in the number of Preferred
Shares that are to be tendered in the column entitled "No. of Preferred Shares
Tendered" in the box captioned "Description of Preferred Shares Tendered." In
such case, if some or all of the tendered Preferred Shares are purchased, new
certificates for the remainder of the Preferred Shares evidenced by your old
certificates will be sent to you, unless otherwise specified in the "Special
Payment Instructions" or "Special Delivery Instructions" boxes on this Letter
of Transmittal, as soon as practicable after the Expiration Date of the Offer.
All Preferred Shares represented by certificates listed are deemed to have
been tendered unless otherwise indicated.
5. INDICATION OF PRICE FOR TENDERED PREFERRED SHARES. For Preferred Shares
to be tendered properly, shareholders must check the appropriate box
indicating that the price per Preferred Shares at which they are tendering
Preferred Shares under "Price Per Preferred Share At Which Preferred Shares
Are Being Tendered" on this Letter of Transmittal. Shareholders must check one
and only one box. If more than one box is checked or if no box is checked, the
tender of the Preferred Shares will be improper. Shareholders who desire to
tender portions of their Preferred Shares at different prices must complete a
separate Letter of Transmittal for each price at which they wish to tender
each such portion of their Preferred Shares.
<PAGE>
6. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered holder(s)
of the certificates tendered hereby, the signature(s) must correspond with
the name(s) as written on the face of the certificates without any change
whatsoever.
(b) If any of the Preferred Shares tendered hereby are held of record by
two or more joint holders, all such holders must sign this Letter of
Transmittal.
(c) If any tendered Preferred Shares are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or manually signed facsimiles
thereof) as there are different registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered holder(s)
of the certificates listed and tendered hereby, no endorsements of
certificates or separate stock powers are required. If, however, payment is
to be made or the certificates for unpurchased Preferred Shares are to be
issued to a person other than the registered holder(s), then the
certificates transmitted hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of
the registered holder(s) appear(s) on the certificates. Signature(s) on
such certificates or stock powers must be guaranteed by an Eligible
Institution. See also Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact
or others acting in a fiduciary or representative capacity, such persons
should so indicate when signing and must submit proper evidence
satisfactory to the Depositary of their authority so to act.
(f) If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificates listed and tendered hereby, the
certificates must be endorsed or accompanied by appropriate stock powers,
in either case signed exactly as the name(s) of the registered holder(s)
appear on the certificates. Signatures on such certificates or stock powers
must be guaranteed by an Eligible Institution. See also Instruction 1.
7. STOCK TRANSFER TAXES. The Company will pay all stock transfer taxes, if
any, payable on the transfer to it of Preferred Shares purchased pursuant to
the Offer. If, however, payment of the Purchase Price is to be made to, or (in
the circumstances permitted by the Offer) if unpurchased Preferred Shares are
to be registered in the name of, any person other than the registered holder,
or if tendered certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s) or such other
person(s)) payable on account of the transfer to such person(s) will be
deducted from the Purchase Price unless satisfactory evidence of the payment of
such taxes, or exemption therefrom, is submitted to the Company.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If checks are to be issued in
the name of, and/or certificates for unpurchased Preferred Shares are to be
issued to, a person other than the signer of the Letter of Transmittal, or if
checks are to be sent and/or such certificates are to be returned to someone
other than the signer of the Letter of Transmittal or to an address other than
the one shown above in the box captioned "Description of Preferred Shares
Tendered," then the boxes captioned "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal should be
completed and the signature(s) must be guaranteed by an Eligible Institution.
See Instruction 1.
9. IRREGULARITIES. All questions as to the number of Preferred Shares to be
accepted, the Purchase Price and the validity, form, eligibility (including
time of receipt) and acceptance of any tender of Preferred Shares will be
determined by the Company, in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any or all
tenders determined by it not to be in appropriate form or the acceptance for
payment of or payment for which would, in the opinion of the Company's counsel,
be unlawful. The Company also reserves the absolute right to waive any of the
conditions set forth in the Offer or any defect or irregularity in any tender
with respect to any particular Preferred Shares or any particular shareholder.
Neither the Company, the Depositary, the Information Agent nor any other
person will be obligated to give notice of defects or irregularities in
tenders, nor shall any of them incur any liability for failure to give any
notice. Tenders will not be deemed to have been made until all defects and
irregularities have been cured by the tendering shareholder or waived by the
Company.
10. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and additional copies of the Offer to Purchase and this
Letter of Transmittal may be directed to the Information Agent at its address
set forth below.
<PAGE>
11. SUBSTITUTE FORM W-9. Shareholders other than corporations and certain
foreign individuals may be subject to backup federal income tax withholding.
Each such tendering shareholder or other payee who does not otherwise establish
to the satisfaction of the Depositary an exemption from backup federal income
tax withholding is required to provide the Depositary with a correct taxpayer
identification number ("TIN") on Substitute Form W-9, which is provided as a
part of this Letter of Transmittal, and to indicate that the shareholder or
other payee is not subject to backup withholding by certifying the information
in part 2 of the Form W-9. An individual's TIN will generally be his or her
social security number. Failure to complete and return the Form W-9 may subject
the tendering shareholder or other payee to 31% backup federal income tax
withholding on the payments made to the shareholder or other payee with respect
to Preferred Shares purchased pursuant to the Offer and to a monetary penalty
imposed by the Internal Revenue Service. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained. For additional
information concerning Substitute Form W-9, see the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9."
---------------
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED COPY), TOGETHER
WITH CERTIFICATES AND OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE OF THE OFFER.
THE INFORMATION AGENT FOR THE OFFER IS:
MARK SERVICES INC.
7155 S.W. 47TH STREET
SUITE 311
MIAMI, FLORIDA 33155
For Information Call:
800-638-4880
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens,
i.e., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen, i.e., 00-0000000. The table below will help determine the
number to give the payer.
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only
contributor, the
minor(1)
6. Account in the name of The ward, minor
guardian or committee or incompetent
for a designated ward, person(3)
minor or incompetent
person
7.a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner(1)
valid trust under State
law
8. Sole proprietorship The owner(4)
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
---
<S> <C>
9. A valid trust, estate The legal
or pension trust entity(5)
10. Corporate The corporation
11. Religious, charitable The organization
or educational
organization
12. Partnership account The partnership
held in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a State or
local government,
school district or
prison) that receives
agricultural program
payments
---
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) The name of the owner must be shown.
(5) List first and circle the name of the legal trust, estate or pension
trust. Do not furnish the identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), at the local office of the Social
Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees generally exempted from backup withholding on payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States or
any political subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government or
any agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A dealer in securities or commodities required to register in the United
States or a possession thereof.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a) of the Code.
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends generally not subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under Section 1441
of the Code.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
NOTE: Payees may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or business and the
payee has not provided his or her correct taxpayer identification number to
the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
Section 852 of the Code).
. Payments described in Section 6049(b)(5) of the Code to nonresident
aliens.
. Payments on tax-free covenant bonds under Section 1451 of the Code.
. Payments made by certain foreign organizations.
Exempt payees described above must still complete the Substitute Form W-9
enclosed herewith to avoid possible erroneous backup withholding. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON THE FORM AND WRITE "EXEMPT" ON THE FACE OF THE FORM.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under Sections 6041,
6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N of the Code.
PRIVACY ACT NOTICE--Section 6109 of the Code requires most recipients of
dividend, interest or other payments to give taxpayer identification numbers
to payers who must report the payments to the IRS. The IRS uses the numbers
for identification purposes and to help verify the accuracy of the recipient's
tax return. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no
imposition of backup imposition of withholding, you are subject to a
penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
[HOLDING COMPANY LETTERHEAD]
September 12, 1996
Dear Preferred Shareholder:
I am pleased to inform you that the Board of Directors has unanimously
adopted a plan to purchase up to 5,000,000 shares of the Company's Preferred
Stock, $1.00 par value ("Preferred Shares"). The purchase price will not be
less than $.30 per Preferred Share in cash. The Company is making the offer
pursuant to the enclosed Offer to Purchase which, together with the
accompanying Letter of Transmittal, is called the "Offer." The Company is
conducting the Offer through a procedure commonly referred to as a "Dutch
Auction." This allows you to select a price, within the range of $.30 and $.40
per share, at which you are willing to sell your Preferred Shares. The Company
intends to select the lowest purchase price within that range that will allow
the Company to purchase 5,000,000 Preferred Shares (or such lesser number of
Preferred Shares as are properly tendered). The same price will be paid for
all Preferred Shares that the Company purchases.
The Company is conducting the Offer to provide holders of the Preferred
Shares, for which there is no established trading market, the opportunity to
sell all or a portion of their Preferred Shares (without the usual transaction
costs associated with market sales). In addition, the Company believes the
Offer represents an effective use of its current excess cash.
While neither the Company nor its Board of Directors makes any
recommendation to you as to whether to tender all or any portion of your
Preferred Shares or as to the price at which you should tender, you should
consider that the Company intends to select the lowest purchase price, between
$.30 and $.40 per share, that will enable it to purchase 5,000,000 Preferred
Shares (or such lesser number of Preferred Shares as are properly tendered).
THE OFFER EXPIRES AT 5:00 P.M., CENTRAL TIME, ON NOVEMBER 1, 1996, UNLESS
THE OFFER IS EXTENDED BY THE COMPANY (THE "EXPIRATION DATE"). IN ORDER TO
PROPERLY ACCEPT THE OFFER, SHAREHOLDERS MUST COMPLETE AND SIGN THE ENCLOSED
GREEN LETTER OF TRANSMITTAL PURSUANT TO ITS INSTRUCTIONS, AND THE LETTER OF
TRANSMITTAL AND THE PREFERRED STOCK CERTIFICATES MUST BE RECEIVED BY UMB BANK,
N.A., THE DEPOSITARY FOR THE OFFER, PRIOR TO THE EXPIRATION DATE.
If you have any questions regarding the Offer, please contact Mark Services,
Inc., the Information Agent, at (800) 638-4880.
Details of the Offer are contained in the enclosed Offer to Purchase and
related Letter of Transmittal. You are urged to review them carefully before
making any decision as to whether to tender your Preferred Shares and the
price at which you wish to tender.
Very truly yours,
Signature of Ronald G. Benson
Ronald G. Benson,
Chief Executive Officer
