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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
AUGUST 8, 1997
(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
$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 August 8, 1997 (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, 1997, an aggregate of 9,202,038 Preferred
Shares were outstanding. Officers and directors of the Company will not
participate in the Offer. 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, 1996, filed with the Commission on March 27, 1997, 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 and
six month periods ended June 30, 1997 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.
(a)(1)Form of Offer to Purchase dated August 8, 1997.
(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 August 8, 1997, from Ronald
G. Benson, Chief Executive Officer of the Company.
(5)Form of summary notice to Preferred Shareholders regarding tender offer.
(b)Not applicable.
(c)Not applicable.
(d)Not applicable.
(e)Not applicable.
(f)Not applicable.
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.
August 4, 1997
Medical Defense Holding Co.
/s/ Ronald G. Benson
By: _________________________________
Ronald G. Benson,
Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
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<C> <S> <C>
(a)(1) Form of Offer to Purchase dated August 8, 1997.
Form of Letter of Transmittal (including Certification of
(2) Taxpayer Identification Number on Substitute Form W-9)
Form of Guidelines for Certification of Taxpayer
(3) Identification Number on Substitute Form W-9.
Form of Letter to Preferred Shareholders dated August 8,
1997, from Ronald G. Benson, Chief Executive Officer of the
(4) Company.
Form of summary notice to Preferred Shareholders regarding
(5) tender offer.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
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EXHIBIT (A)(1)
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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 OCTOBER 3, 1997, 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 54.3% of the Preferred 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
constitute 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.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF PREFERRED SHARES BEING
TENDERED, BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
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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) as set forth in Section 3 with
(i) any required signature guarantee; (ii) the stock certificates for tendered
Preferred Shares; and (iii) any other required documents. 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
<TABLE>
<CAPTION>
SECTION PAGE
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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..... 11
10.Transactions and Arrangements Concerning Preferred Shares............. 12
11.Certain Federal Income Tax Consequences............................... 12
12.Fees and Expenses..................................................... 15
13.Miscellaneous......................................................... 15
</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 54.3% 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. In response to
shareholder requests, the Company made a tender offer September 12, 1996, with
terms identical to this Offer (the "1996 Offer"). After the closing of the
1996 Offer, several shareholders contacted the Company seeking to participate
in the 1996 Offer. The 1996 Offer had expired and the Company was unable to
accommodate their requests. The Company continues to receive similar requests
from shareholders.
No public trading market has developed for the Preferred Stock and the
Company believes it is highly unlikely 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
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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 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, 1997, the Company had issued and outstanding 9,202,038
Preferred Shares, each of which is convertible into two shares of the
Company's Common Stock. The book value of common shares and share equivalents
at June 30, 1997 was $1.16 per share or share equivalent, significantly above
the proposed Purchase Price range. As noted above, however, there is currently
no established trading market for the Preferred Shares, and none is expected
to develop in the foreseeable future. In fact, the Company is not aware of any
arms-length transactions in 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 54.3% of the total Preferred Shares outstanding as of June 30,
1997), 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 October 3,
1997, 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
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approximately seven 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 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 prior to the
Expiration Date, (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)
subject to compliance with applicable rules or regulations, 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. Subject to compliance with applicable rules
or regulations, including the tender offer rules of the Securities and Exchange
Commission, 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
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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 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
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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 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 October 6, 1997.
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.
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 may
not be able to announce the final results of such proration and commence
payment for Preferred Shares purchased for up to seven 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 prior to the Expiration Date any of
the following events shall 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 reasonable
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 reasonable 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
August 8, 1997, or (ii) any such person or group which, prior to August 8,
1997, had filed such a Schedule with the Commission thereafter has acquired
or proposed to acquire, 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
6
<PAGE>
(e) there shall have occurred any event which, in the reasonable 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 reasonable 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 $1,550,000 and $2,050,000. 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. At June 30, 1997,
the value of the Company's cash and cash equivalents was $3,451,803. In a
similar offer in 1996, the Company purchased 2,781,338 Preferred Shares for
approximately $1,112,500, not including fees and expenses related to such
purchase.
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, 1996 and December 31,
1995, has been excerpted or derived from the audited financial statements
contained in the Company's Annual Report on Form 10-K for 1996 (the "1996 10-
K"). The historical financial information at and for the six months ended June
30, 1997 and June 30, 1996, has been excerpted or derived from the Company's
unaudited consolidated financial statements as set forth in the Company's
Quarterly Reports on Form 10-Q for the Period Ended June 30, 1997 (the "10-Q")
and for the Period Ended June 30, 1996. 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, 1997 AND 1996
IS DERIVED FROM UNAUDITED FINANCIAL STATEMENTS.
DATA FOR YEARS ENDED DECEMBER 31, 1996 AND 1995
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)
---------------- ----------------
1996 1995 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total revenues............................. $18,879 $21,212 $ 8,560 $ 9,362
Total expenses............................. 23,585 19,148 7,710 10,870
Provision for income taxes................. 795 248 -- 11
------- ------- ------- -------
Net income (loss).......................... $(5,501) $ 1,816 $ 850 $(1,519)
======= ======= ======= =======
Net income (loss) per common share and
common equivalent share................... $ (0.23) $ 0.05 $ 0.04 $ (0.06)
======= ======= ======= =======
BALANCE SHEET DATA
Total investments.......................... $83,299 $91,748 $83,582 $85,272
Deferred policy acquisition costs.......... -- 121 41 98
Total assets............................... 96,778 108,199 93,889 100,695
Total claims and policy liabilities........ 70,777 73,715 67,591 70,327
Total liabilities.......................... 74,943 78,642 71,302 74,372
Total stockholders' equity/surplus as
regards policyholders..................... 21,835 29,557 22,587 26,323
Book value per common share and common
equivalent share.......................... $ 0.90 $ 1.18 $ 1.16 $ 1.05
STATEMENT OF CASH FLOW DATA
Unpaid losses and loss adjustment expenses. $22,402 $15,780 $ 6,550 $10,526
Net cash (used) provided by operating
activities................................ (7,111) 5,640 298 (5,544)
Net cash provided (used) by investing
activities................................ 6,785 (6,813) (361) 3,862
Net cash (used) provided by financing
activities................................ (1,113) 500 -- --
Net (decrease) in cash and cash
equivalents............................... (1,438) (673) (63) (1,682)
Cash and cash equivalents, beginning of
period.................................... 4,953 5,626 3,515 4,953
Cash and cash equivalents, end of period... $ 3,515 $ 4,953 $ 3,452 $ 3,271
</TABLE>
8
<PAGE>
Summary Unaudited Consolidated Pro Forma Financial Information. The
following summary consolidated pro forma financial information of the Company
for the year ended December 31, 1996 and the period ended June 30, 1997 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 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 1996 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 UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
BALANCE SHEET DATA
DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL ESTIMATED PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
INFORMATION ADJUSTMENTS INFORMATION
----------- ----------- -----------
<S> <C> <C> <C>
Total assets............................... $96,778 $(2,120) $94,658
Total liabilities.......................... 74,943 74,943
Total stockholders' equity/surplus as
regards policyholders..................... 21,835 (2,120) 19,715
Total liabilities, redeemable preferred
stock and stockholders' equity............ 96,778 (2,120) 94,658
Book value per common share and common
equivalent share.......................... $ 0.90 $ 1.38
JUNE 30, 1997
<CAPTION>
HISTORICAL ESTIMATED PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
INFORMATION ADJUSTMENTS INFORMATION
----------- ----------- -----------
<S> <C> <C> <C>
Total assets............................... $93,889 $(2,179) $91,710
Total liabilities.......................... 71,302 71,302
Stockholders' equity....................... 22,587 (2,179) 20,408
Total liabilities, redeemable preferred
stock and stockholders' equity............ 93,889 (2,179) 91,710
Book value per common share and common
equivalent share.......................... $ 1.16 $ 2.16
</TABLE>
9
<PAGE>
SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
INCOME STATEMENT DATA
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL ESTIMATED PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
INFORMATION ADJUSTMENTS INFORMATION
----------- ----------- -----------
<S> <C> <C> <C>
Total revenues............................. $18,879 $(106) $18,773
Total expenses............................. 23,585 50 23,635
Provision for federal income tax........... 795 (36) 759
------- -------
Net (loss)................................. $(5,501) $(5,621)
======= =======
Net (loss) per common share and common
equivalent share.......................... $ (0.23) $ (0.39)
======= =======
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<CAPTION>
HISTORICAL ESTIMATED PRO FORMA
FINANCIAL PRO FORMA FINANCIAL
INFORMATION ADJUSTMENTS INFORMATION
----------- ----------- -----------
<S> <C> <C> <C>
Total revenues............................. $ 8,560 $ (59) $ 8,501
Total expenses............................. 7,710 7,710
Provision for federal income tax........... -- --
------- -------
Net income................................. $ 850 $ 791
======= =======
Net income per common share and common
equivalent share.......................... $ 0.04 $ 0.08
======= =======
</TABLE>
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%.
10
<PAGE>
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. 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. Copies of many such documents also
are available on the Internet, at the Commission's Web site:
http://www.sec.gov.
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,
and none is expected to develop in the foreseeable future. To the Company's
knowledge, there have been no arms'-length transfers of the Preferred Shares.
The Company has considered a number of possible alternatives to provide
liquidity to the holders of the Preferred Shares. In September of 1996, the
Company made the 1996 Offer, a similar offer to purchase Preferred Shares. The
Company purchased 2,781,338 Preferred Shares in the 1996 Offer, for
approximately $1,112,500. A number of holders of Preferred Shares contacted the
Company after the expiration of the 1996 Offer to inquire about participating
in the 1996 Offer, or otherwise selling their Preferred Shares. Because the
1996 Offer was closed, the Company was unable to accommodate these requests. In
light of its current cash position, the Company decided that this additional
Offer by the Company to purchase the securities would provide some liquidity to
those persons and to other shareholders and be an effective use of excess cash
and cash equivalents in the Company. The Offer also 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. 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 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
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 ($1.00 per share) by the Company
at any time after three years from the date the shares were issued, at the
Company's option. The holder of Preferred Shares may elect to convert each such
share into two shares of Common Stock prior to the effective time of any such
redemption. The earliest date on which Preferred Shares could be redeemed is
June 26, 1998. Book value per common share at June 30, 1997 was $1.16, above
both the redemption price and the Purchase Price range.
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 13e-4
under the Exchange Act prohibits the Company
11
<PAGE>
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. However the Company does
remain open to considering such transactions.
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 comply with certain of the Commission's rules. 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. 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.
12
<PAGE>
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 (e.g.,
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.
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. As of August 5,
1997, the Taxpayer Relief Act of 1997 was enacted into law and provides that
long-term capital gains of individuals, estates and trusts are generally
subject to federal income tax at a maximum statutory rate of 20%, although the
applicable rate may be affected by a complicated set of rules. 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.
13
<PAGE>
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, estates and trusts currently is
subject to federal income tax at the applicable statutory rate. 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 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 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
Offer 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.
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.
14
<PAGE>
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.
August 8, 1997
15
<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) 860-7411
(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 64141-0064 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) 982-6275
<PAGE>
EXHIBIT (A)(2)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF PREFERRED STOCK
MEDICAL DEFENSE HOLDING CO.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 8, 1997
THE OFFER, PRORATION PERIOD AND WITHDRAWAL
RIGHTS WILL EXPIRE AT 5:00 P.M., CENTRAL TIME,
ON OCTOBER 3, 1997 UNLESS THE OFFER IS EXTENDED.
The Depositary:
UMB BANK, N.A.
Telephone Number:
(816) 860-7411
(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 64141-0064 928 Grand Avenue
13th Floor
Kansas City, MO 64106
For Information Call:
Mark Services, Inc.
(800) 982-6275
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 October 3, 1997,
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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
DESCRIPTION OF PREFERRED SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
- ------------------------------------------------------------------------------
NAME(S),
ADDRESS(ES) AND
NUMBER OF
SHARES OF
REGISTERED
HOLDER(S).
PLEASE SEE PRE-
ADDRESSED LABEL
OR FILL IN
EXACTLY AS
NAME(S)
APPEAR(S) ON TENDERED CERTIFICATES
CERTIFICATE(S). (ATTACH SIGNED LIST IF NECESSARY)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED SHARES
CERTIFICATE NO. OF NO. OF PREFERRED
NO(S). PREFERRED SHARES SHARES TENDERED*
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
[_] $.30 [_] $.31 [_] $.32 [_] $.33 [_] $.34 [_] $.35
<S> <C> <C> <C> <C> <C>
[_] $.36 [_] $.37 [_] $.38 [_] $.39 [_] $.40
</TABLE>
NOTE: SIGNATURE MUST BE PROVIDED BELOW.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
<PAGE>
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 August
8, 1997 (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.
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
<PAGE>
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.
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.
<PAGE>
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: __________________________________________________________________ , 1997
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: __________________________________________________________________ , 1997
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8) (SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if To be completed ONLY if
certificates for Preferred certificates for Preferred
Shares not tendered or not Shares not tendered or not
purchased or the check for the purchased, or any check issued
Purchase Price of Preferred in the name of the undersigned
Shares purchased, are to be for the Purchase Price of
issued in the name of someone Preferred Shares purchased, are
other than the undersigned. to be delivered to someone other
than the undersigned or to the
undersigned at an address other
than that shown above.
Issue [_] check
and/or [_] certificate to:
Name: ___________________________ Mail [_] check
(Please Type or Print) and/or [_] certificate to:
Address: _______________________ Name: ___________________________
--------------------------------- (Please Type or Print)
Zip Code
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
FORM W-9 RIGHT AND CERTIFY BY Number
SIGNING AND DATING BELOW
-------------------------
DEPARTMENT OF -----------------------------------------------------------
THE TREASURY
INTERNAL PART II--For Payees exempt from backup withholding,
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 Share 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.
<PAGE>
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.
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. For an individual, his TIN will generally be his
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) 982-6275
<PAGE>
EXHIBIT (A)(3)
<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>
EXHIBIT (A)(3)
<PAGE>
[Holding Company letterhead]
August 8, 1997
Dear Preferred Shareholder:
I am pleased to inform you that the Board of Directors has unanimously
adopted another 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 in this Offer.
In 1996 we made an offer on similar terms. A number of Shareholders
contacted us after the expiration of that offer to express their interest in
participating. Unfortunately, that offer had already expired and we were not
able to accommodate them at that time. The Company is conducting this Offer to
provide those persons and other 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).
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, within
the range of $.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 OCTOBER 3, 1997, 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) 982-6275.
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,
/s/ Ronald G. Benson
Ronald G. Benson,
Chief Executive Officer
<PAGE>
EXHIBIT (A)(5)
<PAGE>
QUESTIONS & ANSWERS
ABOUT THE TENDER OFFER BY
MEDICAL DEFENSE HOLDING CO.
WHAT IS THE TENDER OFFER?
As described in the Offer to Purchase and the Letter of Transmittal, and
subject to their terms, the tender offer is an opportunity for registered
holders of the Preferred Stock of Medical Defense Holding Co. (the
"Company") to sell their shares back to the Company for purchase at a
price (within a preestablished range of prices) determined by the
shareholder. Shareholders whose Preferred Stock is actually purchased by
the Company will receive a check for the purchase price of such shares.
Neither the Company nor its Board of Directors makes any recommendation to
shareholders as to whether to tender all or any portion of their shares,
or the price at which to tender.
WHY IS THE TENDER OFFER BEING MADE?
Because no established trading market for the preferred shares exists,
the offer represents an opportunity for shareholders to sell to the
Company for cash all, or a portion of, their Preferred Stock holdings. The
Company believes that the Tender Offer is an effective use of its current
excess cash and cash equivalents.
HOW DO SHAREHOLDERS TENDER THE SHARES?
As described in the Offer and the Letter of Transmittal, shareholders
wishing to tender shares must fully complete the Letter of Transmittal,
and such Letter of Transmittal, accompanied by certificates for the
preferred shares tendered, must be received by the Depository, (UMB Bank)
by the expiration date of October 3, 1997.
HOW CAN I RECEIVE MORE INFORMATION?
Be sure to carefully review the Offer to Purchase dated August 8, 1997,
and the Letter of Transmittal. Additional information may be obtained by
contacting the Information Agent, Mark Services, Inc., toll-free at 1-800-
982-6275.
