Filed On 3/30/00 ˇ SEC File 5-57181 ˇ Accession Number 950152-0-2556
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
3/30/00 New Aap Ltd SC 13E3 7:207 Amway Asia Pacific Ltd Bowne of Cleveland/FA
Amway Asia Pacific Ltd
Apple Hold Co., L.P.
New Aap Limited
New Aap Ltd
Richard M. DeVos, Jr.
Stephen A. Van Andel
Tender-Offer Statement -- Going-Private Transaction ˇ Schedule 13E-3
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13E3 Amway Asia Pacific Ltd/New Aap Ltd SC 13E3 4 19K
2: EX-99.A.1 Exhibit (A)(1) 60 297K
3: EX-99.A.3 Exhibit (A)(3) 2 8K
4: EX-99.A.4 Exhibit (A)(4) 1 7K
5: EX-99.C.4 Exhibit (C)(4) 66 117K
6: EX-99.I Exhibit (I) 73 349K
7: EX-99.J Exhibit (J) 1 5K
Exhibit (a)(1)
AMWAY LOGO
AMWAY ASIA PACIFIC LTD.
38/F The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong
------------------------------------
NOTICE OF SPECIAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 2000
------------------------------------
March 30, 2000
TO THE SHAREHOLDERS OF AMWAY ASIA PACIFIC LTD.:
The Special General Meeting of Shareholders of Amway Asia Pacific Ltd. will
be held in the Seminar Room at Amway Asia Pacific's offices located at 38/F, The
Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong, on April 27, 2000, at
10:00 a.m. for the following purposes:
- To approve the tender offer and amalgamation agreement, dated November
15, 1999, among Amway Asia Pacific, New AAP Limited, a Bermuda
corporation, and Apple Hold Co., L.P., a Bermuda limited partnership.
Approval of the tender offer and amalgamation agreement will constitute
approval of the amalgamation contemplated thereby, in which Amway Asia
Pacific and New AAP will amalgamate, with Amway Asia Pacific continuing
as the amalgamated company.
- To transact such other business as may properly come before the meeting
or any adjournments thereof.
The board of directors has fixed the close of business on March 15, 2000 as
the record date for determining shareholders entitled to notice of and to vote
at the special meeting or any adjournment thereof.
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE AS
PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU
LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER
DESCRIBED IN THE ATTACHED PROXY STATEMENT.
By Order of the Board of Directors,
/s/ Craig N. Meurlin
Craig N. Meurlin
Vice President, General Counsel
and Assistant Secretary
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE TRANSACTION, PASSED UPON THE
MERITS OR FAIRNESS OF THE TRANSACTION OR PASSED UPON THE ADEQUACY OR ACCURACY OF
THE DISCLOSURE IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
[Download Table]
PAGE NO.
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ENFORCEABILITY OF CIVIL LIABILITIES......................... ii
SOLICITATION AND REVOCATION OF PROXIES...................... 1
SUMMARY OF MATERIAL TERMS AND QUESTIONS AND ANSWERS ABOUT
THE AMALGAMATION.......................................... 2
OUTSTANDING STOCK AND VOTING RIGHTS......................... 4
PROPOSAL: APPROVAL OF TENDER OFFER AND AMALGAMATION
AGREEMENT AND AMALGAMATION................................ 4
SPECIAL FACTORS............................................. 4
Background of and Reasons for the Amalgamation......... 4
Recommendation of the Special Committee and the
Disinterested Directors............................... 8
Reasons for the Recommendation of the Special Committee
and the Disinterested Directors....................... 9
Opinion of Financial Advisor to the Special
Committee............................................. 11
Position of New AAP, Apple Hold Co. and Messrs. Van
Andel and DeVos Regarding Fairness of the
Amalgamation.......................................... 15
Financial Advisors to Purchasers....................... 16
Certain Projections.................................... 19
Approval of Shareholders............................... 20
United States Federal Income Tax Consequences.......... 20
MARKET AND DIVIDEND INFORMATION............................. 21
FINANCIAL INFORMATION....................................... 23
THE COMPANIES............................................... 23
Amway Asia Pacific..................................... 23
New AAP Limited........................................ 24
Directors and Officers................................. 25
THE AMALGAMATION............................................ 28
The Tender Offer and Amalgamation Agreement............ 28
Interests of Certain Persons........................... 28
Transactions and Agreements Concerning the Shares...... 29
Accounting Treatment of the Amalgamation............... 31
Regulatory Approvals................................... 31
Certain Effects of the Amalgamation.................... 32
Fees and Expenses...................................... 32
APPRAISAL RIGHTS IN THE AMALGAMATION........................ 32
OWNERSHIP OF SHARES......................................... 33
OTHER MATTERS............................................... 33
Legal Proceedings...................................... 33
Proxy Solicitations.................................... 34
ANNEX A FAIRNESS OPINION.................................... A-1
ANNEX B TENDER OFFER AND AMALGAMATION AGREEMENT............. B-1
ANNEX C APPRAISAL RIGHTS UNDER BERMUDA LAW.................. C-1
i
ENFORCEABILITY OF CIVIL LIABILITIES
New AAP and Amway Asia Pacific are Bermuda corporations. After the
amalgamation, substantially all the assets and operations of Amway Asia Pacific,
as the continuing amalgamated company, will continue to be located, and
substantially all of its revenues will continue to be derived, outside the
United States. New AAP and Amway Asia Pacific have appointed CT Corporation
System, New York, New York, as their agent to receive service of process with
respect to any action brought against them in any federal or state court in the
United States arising from the amalgamation of Amway Asia Pacific and New AAP.
However, it may not be possible for investors to enforce outside the United
States judgments against New AAP or Amway Asia Pacific obtained in the United
States in any of these actions, including actions predicated upon the civil
liability provisions of the United States federal and state securities laws. In
addition, after the amalgamation several directors and several officers of Amway
Asia Pacific, as the continuing amalgamated company, will not be United States
residents, and all or a substantial portion of the assets of such persons are or
may be located outside the United States. As a result, it may not be possible
for investors to effect service of process within the United States upon these
persons, or to enforce against them judgments obtained in United States courts,
including judgments predicated upon the civil liability provisions of the United
States federal and state securities laws. New AAP and Amway Asia Pacific have
been advised by their Bermuda counsel, Conyers Dill & Pearman, that there is
uncertainty as to whether the courts of Bermuda would
- recognize judgments of United States courts obtained against Amway Asia
Pacific, New AAP or these persons predicated upon the civil liability
provisions of the United States federal or state securities laws; or
- enforce in original actions brought in Bermuda liabilities against Amway
Asia Pacific, New AAP or these persons predicated upon the United States
federal or state securities laws.
ii
------------------------------------
PROXY STATEMENT
------------------------------------
SOLICITATION AND REVOCATION OF PROXIES
The board of directors of Amway Asia Pacific Ltd., a Bermuda corporation,
is soliciting proxies to be used at the Special General Meeting of Shareholders
of Amway Asia Pacific to be held on April 27, 2000 and any adjournments thereof.
Any holder of shares of common stock, par value U.S.$.01 per share, of
Amway Asia Pacific giving a proxy, has the power to revoke it prior to its
exercise by notice of revocation to the secretary of Amway Asia Pacific in
writing, by voting in person at the special meeting or by execution of a
subsequent proxy, provided that action is taken in sufficient time to permit the
necessary examination and tabulation of the subsequent proxy or revocation
before the vote is taken at the special meeting.
The presence at the special meeting, in person or by proxy, of the holders
of a majority of the outstanding shares will constitute a quorum for the
transaction of business at the special meeting. The tender offer and
amalgamation agreement, dated as of November 15, 1999, among Amway Asia Pacific,
New AAP Limited, a Bermuda corporation, and Apple Hold Co., L.P., a Bermuda
limited partnership and the parent of New AAP, and the amalgamation of Amway
Asia Pacific and New AAP, with Amway Asia Pacific continuing as the amalgamated
company as contemplated by the tender offer and amalgamation agreement, must be
approved by the holders of at least three-fourths of the shares represented at a
meeting at which a quorum is present. If any shareholder withholds authority to
vote for the tender offer and amalgamation agreement, then that shareholder's
shares will not be considered in determining the votes cast for the tender offer
and amalgamation agreement.
Employees of Amway Asia Pacific's affiliate, Amway Corporation, a Michigan
corporation, who participate in the Amway Corporation Profit Sharing and 401(k)
Plan, may vote shares of common stock equivalent to the value of the interest
credited to their account in the plan by instructing Fidelity Management Trust
Company, the trustee of the plan, pursuant to the voting direction form being
mailed with this proxy statement to plan participants. The trustee will vote the
shares of common stock in accordance with duly executed instructions received by
April 20, 2000. Each participant may revoke previously given voting instructions
by April 20, 2000 by filing with the trustee a written notice to that effect or
a duly executed voting direction form bearing a date subsequent to the date of
his or her previously delivered voting instruction form. The trustee will not
vote shares of common stock for which it has received no directions from plan
participants.
The expense of preparing, printing and mailing this proxy statement will be
borne by Amway Asia Pacific.
This proxy statement, the attached notice of special meeting and the
accompanying proxy card are being mailed to shareholders on or about March 30,
2000.
SUMMARY OF MATERIAL TERMS AND
QUESTIONS AND ANSWERS ABOUT THE AMALGAMATION
Q: WHAT ARE THE MATERIAL TERMS OF THE AMALGAMATION? (SEE PAGE 28)
A: The following is a summary of the material terms of the amalgamation:
- Pursuant to the tender offer and amalgamation agreement, New AAP and
Amway Asia Pacific will amalgamate, with Amway Asia Pacific
continuing as the amalgamated company. For more information, see
"The Amalgamation."
- At the effective time of the amalgamation, each issued and
outstanding share of common stock of Amway Asia Pacific, other than
common stock held by New AAP, Apple Hold Co., the principal
shareholders or shareholders exercising their appraisal rights, will
be exchanged into the right to receive from the amalgamated company
$18.00 in cash and will automatically be canceled and retired and
will cease to exist.
- Shareholders who vote against the amalgamation and give notice to
the Supreme Court of Bermuda within one month after the date of this
proxy statement will be entitled to receive cash in an amount that
the court determines is the fair value of Amway Asia Pacific common
stock. For more information, see "Appraisal Rights" and Annex C.
- The effective time of the amalgamation is expected to be the end of
April 2000. For more information, see "The Amalgamation."
Q: WHAT IS NEW AAP?
A: New AAP is a Bermuda corporation and wholly owned subsidiary of Apple Hold
Co., L.P. Apple Hold Co. is a Bermuda limited partnership that is controlled by
the principal shareholders of Amway Asia Pacific. (See page 24)
Q: WHY ARE NEW AAP AND AMWAY ASIA PACIFIC PROPOSING TO AMALGAMATE?
A: The principal shareholders have decided to take Amway Asia Pacific private
by acquiring for $18.00 per share in cash all of the Amway Asia Pacific shares
owned by the public shareholders. The amalgamation is the second step in the
going private transaction. The first step was a tender offer by New AAP to
purchase all outstanding shares of Amway Asia Pacific common stock. The tender
offer was completed on December 17, 1999. As a result of the tender offer, the
principal shareholders of Amway Asia Pacific, indirectly through Apple Hold Co.,
beneficially own 97.4% of the shares of Amway Asia Pacific. Because the
principal shareholders, indirectly through Apple Hold Co., beneficially own
97.4% of the shares of Amway Asia Pacific and because Apple Hold Co. owns all of
the shares of New AAP, approval of the tender offer and amalgamation agreement
is assured. (See page 4)
Q: WHAT WILL AMWAY ASIA PACIFIC SHAREHOLDERS RECEIVE?
A: Upon completion of the amalgamation, Amway Asia Pacific shareholders will
receive $18.00 in cash in exchange for each share of Amway Asia Pacific common
stock. (See page 28)
Q: WHEN DO YOU EXPECT THE AMALGAMATION TO BE COMPLETED?
A: Currently, New AAP and Amway Asia Pacific expect to complete the
amalgamation by the end of April 2000. (See page 28)
Q: WHAT ARE THE EFFECTS OF THE AMALGAMATION?
A: Following completion of the amalgamation, the shares of Amway Asia Pacific
common stock will be delisted from the Australian Stock Exchange Limited and the
New York Stock Exchange and will be deregistered under the Securities Exchange
Act of 1934. (See page 32)
2
Q: WHAT ACTION HAS THE BOARD OF DIRECTORS OF AMWAY ASIA PACIFIC TAKEN WITH
RESPECT TO THE AMALGAMATION?
A: On November 15, 1999, the board of directors of Amway Asia Pacific (with
Messrs. Richard M. DeVos, Jr., Douglas L. DeVos and Stephen A. Van Andel not
participating) unanimously (1) determined that the tender offer and amalgamation
are fair to, and in the best interests of, the public shareholders and (2)
approved the tender offer and amalgamation agreement. (See page 8)
Q: WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE
AMALGAMATION?
A: If you are a United States citizen or resident, the conversion of your
shares to cash will generally cause you to recognize a capital gain or loss
equal to the difference between the amount of cash received in the amalgamation
and your adjusted tax basis for the shares exchanged therefore. Under United
States federal income tax backup withholding rules, United States federal income
tax withholding of 31% may apply to you as described in this proxy statement. If
you are not a United States citizen or resident, the conversion of your shares
to cash should generally result in no United States tax consequences. (See page
20)
Q: WHAT WAS THE CLOSING SALES PRICE OF MY SHARES OF COMMON STOCK ON THE NEW
YORK STOCK EXCHANGE PRIOR TO THE ANNOUNCEMENT OF THESE TRANSACTIONS?
A: On November 12, 1999, the last full trading day prior to the public
announcement of the tender offer, the closing sales price of the common stock as
reported on the NYSE was $11.75 per share. On March 27, 2000, a recent
practicable date prior to the date of this proxy statement, the closing sales
price of the common stock as reported on the NYSE was $17.75 per share. (See
page 21)
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. You should continue to hold your stock certificates until Amway Asia
Pacific sends you a letter of transmittal. You will not receive this letter of
transmittal until after the special meeting has occurred. The letter of
transmittal will explain how to exchange your Amway Asia Pacific stock
certificates for cash. (See page 34)
Q: HOW DO I VOTE?
A: After you have carefully read this proxy statement, mail your signed proxy
card or voting instructions, as the case may be, as soon as possible so that
your shares will be represented and voted at the special meeting. You may also
vote in person at the Amway Asia Pacific special meeting. (See page 1)
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you instruct your broker how to
vote. Your broker should mail information to you that will explain how to give
voting instructions to your broker. Please provide instructions to your broker
on how to vote your shares. If you do not instruct your broker how to vote, your
shares will not be voted. If you do not vote or give instructions to your broker
to vote against the tender offer and amalgamation agreement, you may not
exercise your appraisal rights. (See page 1)
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED AND DATED PROXY CARD?
A: Yes. If you hold shares of Amway Asia Pacific common stock, you may revoke
your proxy by delivering a notice of revocation to the secretary of Amway Asia
Pacific before the special meeting or by execution of a subsequent proxy,
provided that action is taken in sufficient time to permit revocation before the
vote is taken. You may also revoke your proxy by voting in person at the special
meeting. (See page 1)
Q: WHOM CAN I CALL WITH QUESTIONS?
A: If you have more questions about the amalgamation, you should contact:
Director of Investor Relations
Amway Asia Pacific Ltd.
1 (616) 787-8688
3
OUTSTANDING STOCK AND VOTING RIGHTS
Shareholders of record as of the close of business on March 15, 2000 will
be entitled to vote at the special meeting. As of March 15, 2000 there were
outstanding 56,441,960 shares of common stock, $0.01 par value per share,
entitled to vote at the special meeting, with each share entitling the holder of
record on that date to one vote.
PROPOSAL: APPROVAL OF TENDER
OFFER AND AMALGAMATION AGREEMENT AND AMALGAMATION
Both the tender offer and the amalgamation are provided for in the tender
offer and amalgamation agreement. Under that agreement, New AAP agreed to
conduct a cash tender offer for all outstanding shares of common stock of Amway
Asia Pacific at $18.00 per share. Following the completion of the tender offer,
New AAP and Amway Asia Pacific agreed to amalgamate, with each public
shareholder of Amway Asia Pacific receiving $18.00 per share in cash. The tender
offer was completed on December 17, 1999. As a result of the tender offer, the
principal shareholders of Amway Asia Pacific, along with certain corporations,
trusts, foundations and other entities established by or for the benefit of the
principal shareholders and their respective families, indirectly through Apple
Hold Co., beneficially own 97.4% of the shares of Amway Asia Pacific common
stock. As a result of the amalgamation, the principal shareholders, indirectly
through Apple Hold Co., will own 100% of the shares of common stock.
A special committee, comprised of Eoghan M. McMillan, Jack C.K. So and John
C.C. Chan, each an independent, non-employee member of the board of directors of
Amway Asia Pacific, was formed for the purpose of evaluating the terms of the
tender offer and the amalgamation. On November 12, 1999, the special committee
unanimously (1) determined that the tender offer and amalgamation are fair to,
and in the best interests of, the holders of shares, other than shares owned by
the principal shareholders, indirectly through Apple Hold Co., and (2)
recommended that the board of directors of Amway Asia Pacific (with Messrs.
Richard M. DeVos, Jr., Douglas L. DeVos and Stephen A. Van Andel not
participating) approve the tender offer and amalgamation agreement.
On November 15, 1999, the disinterested directors of the board unanimously
(1) determined that the tender offer and amalgamation are fair to, and in the
best interests of, the public shareholders and (2) approved the tender offer and
amalgamation agreement.
THE DISINTERESTED DIRECTORS RECOMMEND A VOTE FOR THE APPROVAL OF THE TENDER
OFFER AND AMALGAMATION AGREEMENT AND THE AMALGAMATION CONTEMPLATED THEREBY.
SPECIAL FACTORS
BACKGROUND OF AND REASONS FOR THE AMALGAMATION
Over the last several years, a variety of alternatives have been considered
by the principal shareholders and Amway Asia Pacific management to increase
shareholder value, while at the same time enhance the operations, results and
business prospects of Amway Asia Pacific. Of particular focus was the relatively
illiquid and, at times, volatile market for the common stock. For example,
during the second half of 1996, Amway Asia Pacific considered a possible
secondary offering in an effort to improve liquidity and expand ownership of
shares of common stock by investors. After consideration of this proposal, Amway
Asia Pacific's board of directors, in January 1997, authorized Amway Asia
Pacific to conduct a secondary offering. After submission of a registration
statement to the Securities and Exchange Commission, Amway Asia Pacific's board
of directors decided to delay this secondary offering due to deterioration in
the market conditions. Following the delay of the proposed secondary offering,
Amway Asia Pacific authorized open market repurchases by Amway Asia Pacific of
shares of common stock valued up to $50 million in the hope that this action
would create value for shareholders.
Also considered was a realignment of Amway Asia Pacific with other Amway
Corporation affiliates either by means of the combination of Amway Asia Pacific
with other Amway markets or the acquisition by Amway Asia Pacific of other Amway
affiliates in the region. In particular, beginning in April 1997, Amway Asia
Pacific,
4
representatives of Amway and financial and legal advisors reviewed the
possibility of forming a holding company that would own both Amway Japan
Limited, a Japanese corporation and a publicly held affiliate of Amway, and
Amway Asia Pacific. In January 1998, there was a discussion regarding the
possible creation of a holding company to acquire both Amway Asia Pacific and
Amway Japan at a meeting of Amway Asia Pacific's board of directors. Following a
presentation in April 1998 by financial advisors regarding a proposed holding
company structure, this alternative was rejected as not feasible because of
certain legal, structural and tax issues and accounting concerns.
Starting in June of 1997, the Asian currency crisis impacted a number of
Amway Asia Pacific's markets, particularly Malaysia, Thailand and Taiwan and to
a lesser extent Australia and New Zealand. This crisis exacerbated the concerns
regarding share value, market volatility and lack of liquidity for shareholders.
In March of 1998, representatives of Amway Asia Pacific and Amway, as well as
legal, tax and financial advisors, met to discuss alternatives to address share
value, market volatility, lack of liquidity and Amway Asia Pacific's operating
results. In order to address operating results, Amway Asia Pacific adopted more
stringent cost cutting programs, as well as an expansion of local sourcing
opportunities. Further, compounding the market volatility and adversely
affecting operating results was the ban in China on direct selling in the spring
of 1998. Following the discussions in March of 1998, an alternative that was
considered was whether shareholder value might be best served by taking Amway
Asia Pacific private. As a private company, Amway Asia Pacific would have
greater flexibility to invest in its future, realign the business relationship
with Amway and other Amway affiliates and allow senior management of Amway and
Amway Asia Pacific to focus on the long-term interests of Amway Asia Pacific
without concern for the impact that any action might have on operating results
or share price in the short-term. In addition, a going private transaction would
minimize the impact of the legal, structural and tax issues and accounting
concerns associated with the transactions previously considered as well as
reduce costs through the elimination of public company status.
Throughout 1998, senior executives of Amway Asia Pacific and Amway, along
with their financial, legal, tax and accounting advisors worked on various
aspects of a potential going private transaction focusing, in particular, on
legal, structural, tax, accounting and other regulatory issues. During the
second calendar quarter of 1998, representatives of Amway and Morgan Stanley &
Co. Incorporated had discussions regarding the financing of the transaction.
These earlier efforts did not result in any specific proposal or range of
proposals being made to Amway Asia Pacific by or on behalf of the principal
shareholders, Amway or any other controlled company. From August through October
1998, representatives of Amway on behalf of the principal shareholders and its
legal and financial advisors began to have discussions with J.P. Morgan
Securities Inc. regarding various financing options for a going private
transaction. A decision was made not to proceed at that time.
In July and August of 1999, senior executives of Amway and Morgan Stanley
prepared a strategic and financial analysis of a proposed going private
transaction as a part of a broad based realignment of entities controlled by the
principal shareholders, including Amway, Amway Japan and Amway Asia Pacific. The
proposed transaction was presented to the principal shareholders on August 11
and August 20. Following these meetings, the principal shareholders instructed
senior executives of Amway to continue to analyze going private transactions
involving Amway Japan and Amway Asia Pacific. In addition, Morgan Stanley and
J.P. Morgan were retained following these meetings by the principal shareholders
to advise them on, and to explore opportunities for, a potential transaction and
financing alternatives for this transaction.
On behalf of the principal shareholders, senior executives of Amway, Morgan
Stanley, J.P. Morgan, Jones Day, Reavis & Pogue as legal advisors, and White &
Case LLP as tax advisors, met in Chicago on September 2, 1999, to discuss
various aspects of a potential transaction, including financing, structures, due
diligence and other issues.
On September 10, 1999, senior executives of Amway met with the independent
members of the board of directors of Amway Asia Pacific to discuss a potential
going private transaction. At this meeting, the participants discussed, among
other things, the rationale for the transaction, the desirability of
establishing a special committee of independent directors of Amway Asia Pacific
to consider the transaction, the need for independent legal and financial
advisors and other business issues.
Senior executives of Amway and their legal and financial advisors,
including Morgan Stanley, J.P. Morgan, Jones Day and White & Case, met in Tokyo
the week of September 13, 1999 to conduct due diligence, to review
5
a broad range of issues involved in a going private transaction, including
legal, tax, accounting, regulatory and financing, and to discuss process issues.
In addition, these representatives had telephone conferences with certain other
senior executives of Amway Asia Pacific. Amway Asia Pacific's five-year
financial projections were shared with the financial advisors at this time.
The principal shareholders met on September 21, 1999, in Ada, Michigan to
review the status of a potential transaction with their financial advisors. At
this meeting, Morgan Stanley and J.P. Morgan reviewed preliminary financial and
strategic conclusions. Based on a discounted cash flow analysis, a review of
comparable companies and precedent transactions, and a trading analysis, Morgan
Stanley and J.P. Morgan discussed with the principal shareholders and senior
executives of Amway possible financial terms of a going private transaction.
Following this meeting, the principal shareholders concluded that a going
private transaction was the best way to enhance shareholder value and to
implement the various changes believed necessary to effect a long term
improvement in the operating results of Amway and all of its affiliates,
including Amway Asia Pacific. As a result, the principal shareholders instructed
senior executives of Amway and their advisors to continue working towards a
potential going private transaction.
On September 29, 1999, a representative of Amway and Eoghan McMillan, a
director of Amway Asia Pacific and proposed chairman of the special committee
(as described below), had a telephone conversation regarding the decision of the
principal shareholders to proceed with the transactions and discussed with Mr.
McMillan the retention of independent legal and financial advisers for the
special committee. Following these discussions, Amway Asia Pacific and New AAP
executed a confidentiality agreement related to the going private transaction.
On October 2, 1999, the board of directors of Amway Asia Pacific formed the
special committee, comprised of Eoghan M. McMillan, Jack C.K. So and John C.C.
Chan, each an independent, non-employee member of the board of directors of
Amway Asia Pacific. The special committee was formed for the purpose of
evaluating the terms of any proposed going private transaction and was empowered
to review, evaluate and, if deemed appropriate, negotiate on behalf of Amway
Asia Pacific the terms of a possible transaction and to report its actions and
conclusions to the board of directors. The special committee further was
authorized to retain independent legal and financial advisors in connection with
the performance of its mandate.
During the week of October 4, 1999, Mr. McMillan contacted Goldman, Sachs &
Co. and Cleary, Gottlieb, Steen & Hamilton to discuss retention of these firms
by Amway Asia Pacific to assist the special committee in analyzing the proposed
transaction. Goldman Sachs met with the special committee, Mr. McMillan and
senior executives of Amway Asia Pacific during the week of October 11 to conduct
financial due diligence.
In September and October 1999, senior executives of Amway, in consultation
with the principal shareholders' tax and legal advisors, addressed structural
issues and the terms of the proposed loans to New AAP to fund a cash tender
offer by New AAP to purchase all the outstanding shares of Amway Asia Pacific's
common stock.
On October 13, 1999, representatives of the principal shareholders
delivered to Mr. McMillan a written proposal informing Amway Asia Pacific that
the principal shareholders were interested in discussing a transaction to
acquire all the publicly traded shares of Amway Asia Pacific. This written
proposal indicated that the principal shareholders would propose to purchase the
shares of Amway Asia Pacific common stock for $15.50 per share.
On October 15, 1999, the special committee met with representatives of
Goldman Sachs, Cleary and Conyers Dill & Pearman, Bermuda counsel to Amway Asia
Pacific, to discuss their duties under applicable law with respect to the
proposal and appropriate procedures for responding to it.
On October 20, 1999, the special committee met, together with
representatives of Goldman Sachs, Cleary and Conyers Dill. At this meeting,
representatives of Goldman Sachs summarized the results of their due diligence
review and presented certain preliminary analyses they had performed with
respect to Amway Asia Pacific and the shares of Amway Asia Pacific common stock.
Later the same day, a representative of Goldman Sachs communicated to a
representative of Morgan Stanley that at that time and based on preliminary
analysis, the special committee was continuing to review the proposal and were
not prepared to provide a response to the proposal. Goldman Sachs reported to
Morgan Stanley that the special committee wanted more time to consider the
proposal in order, among other things, to allow Amway Asia Pacific to review
with the special committee projections of Amway Asia Pacific's future financial
results. Following the discussion with Goldman Sachs,
6
Morgan Stanley consulted with the representatives of the principal shareholders
and their advisors and management of Amway Asia Pacific had discussions with Mr.
McMillan and Goldman Sachs regarding the projections.
On October 22, 1999, the special committee met by teleconference with
representatives of Goldman Sachs and Cleary. Goldman Sachs reported on its
conversation with Morgan Stanley and reviewed certain further preliminary
analyses they had performed taking into account certain information received
during conversations with the special committee and representatives of Amway.
On October 27, 1999, advisers to the principal shareholders, senior
executives of Amway, Jones Day and White & Case met in Washington, D.C. to
address structural, tax, accounting and regulatory issues relating to the
proposed transaction. Among the structural issues discussed during this meeting
and in follow-up discussions was the desirability of a voting and shareholder
agreement among the principal shareholders relating to the amalgamation of Amway
Asia Pacific and New AAP.
On October 27, 1999, the special committee met via teleconference, together
with representatives of Goldman Sachs and Cleary. Goldman Sachs reviewed its
preliminary valuation and financial analyses. After discussing these analyses,
the special committee directed Goldman Sachs to inform the principal
shareholders that the special committee would be prepared to consider a revised
offer price of $18.00 per share.
On October 28, 1999, representatives of Goldman Sachs delivered to
representatives of Morgan Stanley the special committee's response to the
proposal, indicating the special committee was initially willing to consider the
proposal if the principal shareholders would consider a purchase price of $18.00
per share. Morgan Stanley consulted with representatives of the principal
shareholders and their advisers in order to prepare a response to the special
committee's reply.
While negotiations regarding the offer price continued, the representatives
of the principal shareholders and the special committee and their respective
advisors negotiated and finalized the terms of the tender offer and amalgamation
agreement.
On November 11, 1999, the principal shareholders delivered to Mr. McMillan
a written offer meeting the $18.00 per share price proposed by the special
committee on October 28, 1999. The written offer was conditioned upon acceptance
by the disinterested directors of the board of directors of Amway Japan of an
offer proposal made to it by the principal shareholders on the same day.
On November 12, 1999, the special committee met via teleconference to
discuss the revised proposal, together with representatives of Goldman Sachs,
Cleary and Conyers Dill. Based upon the financial and valuation analyses which
Goldman Sachs had performed with respect to the proposal and previously
presented to the special committee, Goldman Sachs expressed an oral opinion as
of the date of the meeting that the $18.00 in cash proposed to be received by
the public shareholders in the tender offer and the amalgamation or an
alternative transaction pursuant to the amalgamation agreement, is fair from a
financial point of view to the holders. See " -- Opinion of Financial Advisor to
the Special Committee." Following discussion, the special committee then adopted
a resolution stating that the special committee had determined that the tender
offer and the amalgamation are fair to and in the best interests of the public
shareholders, and further resolved to recommend to the board of directors that
it approve the tender offer and amalgamation agreement and recommend that the
public shareholders accept the tender offer and tender their shares in response
to the offer. Goldman Sachs delivered its written opinion dated November 15,
1999 confirming its oral opinion.
Immediately following the November 12, 1999 special committee meeting, the
board of directors of Amway Asia Pacific (without the participation of Messrs.
Richard M. DeVos, Jr., Douglas L. DeVos and Stephen A. Van Andel), held a
meeting via teleconference, together with representatives of Goldman Sachs,
Cleary and Conyers Dill. Mr. McMillan described the background of the written
offer to the other disinterested directors and reported on the special
committee's recommendation with regard to the written offer. Following this
report, representatives of Cleary reviewed the terms of the tender offer and
amalgamation agreement submitted with the written offer leading to the proposal,
representatives of Conyers Dill reviewed the legal standards applicable to their
deliberations under Bermuda law and representatives of Goldman Sachs presented
the financial and valuation analyses which they had performed with respect to
the written offer and informed the disinterested directors that
7
it had given its oral fairness opinion to the special committee. The meeting of
the board of directors was then adjourned and reconvened on November 15, 1999.
At the reconvened meeting in Hong Kong on November 15, 1999 at 6:30 a.m.
(Hong Kong time), after further discussion, the disinterested directors
unanimously determined that the tender offer and amalgamation are fair to and,
in the best interest, of the public shareholders, approved the tender offer and
amalgamation agreement and resolved to recommend that the public shareholders
accept the offer and tender their shares in response to the offer. See "--
Recommendation of the Special Committee and the Disinterested Directors and
Reasons for the Recommendation" for a description of certain of the material
factors considered by the disinterested directors in connection with their
recommendation.
On November 15, 1999, Amway Asia Pacific, New AAP and Apple Hold Co.
entered into a tender offer and amalgamation agreement providing for the
proposed cash tender offer, to be followed by the amalgamation or an alternative
transaction in which public shareholders would receive $18.00 per share in cash.
On November 18, 1999, New AAP commenced the tender offer. The purchase
price for each share of common stock purchased in the offer was $18.00 in cash.
The tender offer expired at 12:00 midnight, New York City time, on December 17,
1999.
New AAP purchased in the tender offer an aggregate of 8,181,756 shares of
common stock, including 1,128,580 shares from charitable foundations established
by certain of the principal shareholders. Prior to the consummation of the
tender offer, the principal shareholders, other than the charitable foundations
that tendered their shares pursuant to the tender offer, contributed 46,814,950
shares to Apple Hold Co. As a result of the tender offer, the principal
shareholders, as limited partners of Apple Hold Co. indirectly beneficially own
97.4% of the shares.
The total amount of funds required to purchase all 8,181,756 shares and pay
estimated related fees and expenses was approximately $168,900,000. All of those
funds were borrowed from Morgan Guaranty Trust Company of New York, Tokyo Branch
and other banks and financial institutions under an unsecured term loan credit
agreement dated as of December 10, 1999 among New AAP, certain of New AAP's
affiliates, Morgan Guaranty and other banks and financial institutions.
The tender offer was the first step in the going private transaction by
Amway Asia Pacific. The amalgamation is the second step. In order to approve the
tender offer and amalgamation agreement, the holders of at least three-fourths
of the shares represented at a meeting of shareholders of Amway Asia Pacific at
which a majority of the outstanding shares are present in person or by proxy
must vote in favor of the tender offer and amalgamation agreement. Because the
principal shareholders, indirectly through Apple Hold Co., hold more than
three-fourths of the outstanding shares of Amway Asia Pacific and Apple Hold Co.
owns all of the shares of New AAP, approval of the tender offer and amalgamation
agreement by the shareholders of Amway Asia Pacific and the sole shareholder of
New AAP is assured.
At a meeting on February 21, 2000, the board of directors of Amway Asia
Pacific set the record date for the special general meeting of shareholders.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE DISINTERESTED DIRECTORS
As described below, the special committee unanimously (1) determined that
the tender offer and amalgamation are fair to, and in the best interests of, the
public shareholders and (2) recommended to the disinterested directors that they
approve the tender offer and amalgamation agreement.
The disinterested directors have unanimously (1) determined that the tender
offer and amalgamation are fair to, and in the best interests of, the public
shareholders and (2) approved the tender offer and amalgamation agreement.
8
REASONS FOR THE RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE DISINTERESTED
DIRECTORS
The special committee considered the following material factors, among
others, in connection with making its determinations and recommendations:
- The opinion of Goldman Sachs, the independent financial advisor to the
special committee, that, as of November 15, 1999, the purchase price in
cash to be received by the public shareholders in the tender offer and
the amalgamation or the compulsory purchase of the remaining shares
pursuant to Section 103 of the Bermuda Companies Act of 1981 contemplated
by the tender offer and amalgamation agreement is fair from a financial
point of view to the holders and the financial and valuation analyses
presented by Goldman Sachs to the special committee in connection with
its opinion. The public shareholders are urged to read Goldman Sachs'
opinion in its entirety, which is attached as Annex A to this proxy
statement.
- The then current and historical market prices for the shares and the fact
that the $18.00 per share in cash represented a premium of approximately
53.2% over the per share closing price of the shares on November 12,
1999, the last trading day prior to the public announcement of execution
of the tender offer and amalgamation agreement and approximately 67.2%
over the average price of the shares over the 52-week period prior to
November 12, 1999. The special committee also noted that $18.00 per share
represents a multiple of 39.2x 1999 EBIT and 81.4x 1999 net income.
- The relatively low trading volume of the shares and the fact that the
public float for the shares prior to the tender offer consisted of only
approximately 15% of the outstanding shares. The special committee
considered the uncertainty, in the absence of the tender offer, that the
public shareholders would have the opportunity in the foreseeable future
to sell their shares in the open market for prices equal to or in excess
of $18.00 per share.
- The principal shareholders' stated unwillingness to sell their shares to
a third party, as well as the commercial relationships between Amway Asia
Pacific and Amway, factors effectively precluding a sale of control of
Amway Asia Pacific or another transaction that might be more favorable to
Amway Asia Pacific and the public shareholders. In view of these factors,
the special committee and Goldman Sachs were not authorized to, and did
not, solicit, nor did Amway Asia Pacific receive, third party indications
of interest to acquire Amway Asia Pacific as a whole or any of its
businesses, nor did they give any significant consideration to
theoretical prices which a hypothetical third party purchaser might be
willing to pay to acquire Amway Asia Pacific.
- The commercial relationships between Amway Asia Pacific and Amway and the
value to the principal shareholders of consummating the tender offer and
the amalgamation, including greater flexibility to invest in Amway Asia
Pacific, to realign Amway Asia Pacific's business relationship with Amway
and to allow senior management of Amway and Amway Asia Pacific to focus
on long-term interests without the short-term influence of the equity
markets.
- The recent and historical results of operations and financial condition
and the business strategy and prospects of Amway Asia Pacific and recent
and historical economic, political and other developments in the direct
distribution industry and in the countries in which Amway Asia Pacific
conducts its business. In particular, with respect to Amway Asia
Pacific's business prospects, the special committee considered Amway Asia
Pacific's potential for expansion into new and within existing markets,
especially China, and the opportunities and risks associated with those
markets. The special committee also considered the volatility of Amway
Asia Pacific's financial results in recent periods related to its
dependence on Asian regional markets.
- The fact that consummation of the transaction will preclude the public
shareholders from participating in any future growth of Amway Asia
Pacific. In the view of the special committee, however, this loss of
opportunity is adequately reflected in the purchase price of $18.00 per
share.
- The negotiations between the special committee and its representatives
and the principal shareholders and their representatives, including that
the negotiations that resulted in (1) an increase from the initial
proposed price of $15.50 per share at which New AAP was prepared to
acquire the shares, to $18.00 per share and (2) the special committee's
belief, confirmed by Goldman Sachs in their discussions with
9
Morgan Stanley, that the $18.00 per share price was the highest price that
could likely be obtained from the principal shareholders under the
circumstances.
- The terms and conditions of the tender offer and amalgamation agreement
and the structure of the transaction generally, including that (1) the
transaction includes a first-step cash tender offer, enabling public
shareholders who accepted the tender offer to liquidate their investment
in Amway Asia Pacific without waiting for the amalgamation to be
consummated, (2) public shareholders who did not tender their shares
pursuant to the tender offer will receive in the amalgamation the same
cash price per share paid by New AAP in the tender offer (unless they
elect to exercise appraisal rights under Bermuda law), (3) the tender
offer and the amalgamation are not subject to any significant conditions
and in particular that there is no financing condition attached to either
the tender offer or the amalgamation and (4) without the consent of the
special committee, New AAP may not reduce the $18.00 per share in cash,
impose additional conditions to the tender offer or amend or modify any
other term of the tender offer in a manner adverse to the holders of the
shares.
- The availability of appraisal rights under Bermuda law pursuant to which
public shareholders who did not accept the tender offer and properly
dissent from the amalgamation may have the fair value of their shares
judicially determined.
In reaching their determinations referred to above, the disinterested
directors considered the following factors, each of which, in the view of the
disinterested directors, supported their determinations: (1) the recommendations
of the special committee; (2) the factors referred to above considered by the
special committee; and (3) the fact that the purchase price of $18.00 per share
in cash and the terms and conditions of the tender offer and amalgamation
agreement were the result of negotiations among the special committee and the
principal shareholders and their respective advisors.
The disinterested directors, including the members of the special
committee, also believe that the tender offer and the amalgamation are
procedurally fair because, among other things: (1) the special committee
consisted of three independent directors who are not employees of Amway Asia
Pacific or affiliated with the principal shareholders and were appointed by the
directors to represent the interests of the public shareholders; (2) the special
committee retained and received advice from independent legal counsel; and (3)
the special committee retained an independent financial advisor, Goldman Sachs,
and received financial advice and assistance from Goldman Sachs in evaluating
and negotiating a potential transaction with New AAP, as well as an opinion from
Goldman Sachs.
The disinterested directors and the special committee recognized that
neither the tender offer nor the amalgamation was structured to require the
approval of a majority of the shareholders of Amway Asia Pacific, excluding the
principal shareholders and that the principal shareholders currently have
sufficient voting power to approve the amalgamation without the affirmative vote
of any other shareholders of Amway Asia Pacific.
The foregoing discussion of the information and factors considered by the
special committee and the disinterested directors, respectively, is not meant to
be exhaustive, but includes the material factors considered by each body in
reaching its conclusions and recommendations. In view of the variety of factors
considered in reaching their determinations, neither the special committee nor
the disinterested directors found it practicable to, and did not, quantify or
otherwise assign relative weights to the specific factors considered in reaching
their respective conclusions and recommendations. In addition, individual
members of each body may have given different weights to different factors.
The opinions, views, beliefs and recommendations of the disinterested
directors, including members of the special committee, and of their advisors and
other individuals that made statements to them, do not purport to be the only
possible views on the tender offer and the amalgamation and no one view is
presented here as objectively correct. Except for the recommendation made by the
disinterested directors, no person or entity, including the legal or financial
advisors to the special committee, is making any recommendation to the public
shareholders as to whether they should vote to approve the tender offer and
amalgamation agreement. Although the disinterested directors have made a
recommendation, the adequacy, fairness and acceptability of the tender offer is
for each public shareholder to decide. Consequently, the disinterested directors
strongly urge the public shareholders to consider all available information.
10
The special committee was not asked to consider and did not consider any
matters that may have arisen subsequent to November 12, 1999 in making its
recommendation to the disinterested directors.
OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
Goldman Sachs acted as financial advisor to the special committee. On
November 12, 1999, Goldman Sachs delivered to the special committee its oral
opinion, subsequently confirmed in writing as of November 15, 1999, that as of
those respective dates the purchase price of $18.00 per share in cash to be
received by the public shareholders in the tender offer and the amalgamation or
compulsory purchase of remaining shares under Section 103 of the Bermuda
Companies Act of 1981 as contemplated by the tender offer and amalgamation
agreement is fair from a financial point of view to the holders.
THE FULL TEXT OF THE GOLDMAN SACHS OPINION, DATED AS OF NOVEMBER 15, 1999,
WHICH SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED AND MATTERS
CONSIDERED IN, AND THE LIMITATIONS ON, THE REVIEW UNDERTAKEN IN CONNECTION WITH
ITS OPINION, IS ATTACHED HERETO AS ANNEX A. The Goldman Sachs opinion was
provided for the information and assistance of the special committee in
connection with its consideration of the tender offer and the transactions
contemplated by the tender offer and amalgamation agreement. It is does not
constitute a recommendation to you as to whether or not you should vote in
respect of the tender offer and amalgamation agreement and the amalgamation
contemplated thereby. The summary of the Goldman Sachs opinion below is
qualified by its full text. You should read the Goldman Sachs opinion in its
entirety.
In connection with its opinion, Goldman Sachs reviewed, among other things:
the tender offer and amalgamation agreement; Annual Reports to Shareholders and
Annual Reports on Form 20-F of Amway Asia Pacific for the five fiscal years
ended August 31, 1998; certain interim reports to shareholders and Quarterly
Reports on Form 6-K of Amway Asia Pacific; certain other communications from
Amway Asia Pacific to its shareholders; and certain internal financial analyses
and forecasts for Amway Asia Pacific prepared by its management. Goldman Sachs
also held discussions with members of the senior management of Amway Asia
Pacific regarding its past and current business operations, financial condition
and future prospects. In addition, Goldman Sachs reviewed the reported price and
trading activity for the shares, compared certain financial and stock market
information for Amway Asia Pacific with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations and performed other studies and
analyses as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed accuracy and
completeness for purposes of rendering its opinion. In that regard, Goldman
Sachs assumed with the consent of the special committee that the internal
financial forecasts prepared by the management of Amway Asia Pacific were
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of Amway Asia Pacific. In addition, Goldman Sachs did not make an
independent evaluation or appraisal of the assets and liabilities of Amway Asia
Pacific or any of its subsidiaries and Goldman Sachs was not furnished with any
evaluation or appraisal. Goldman Sachs noted that the principal shareholders own
a majority of the shares, and that the principal shareholders informed Goldman
Sachs and the special committee that the principal shareholders would not sell
their shares to any third party. Accordingly, Goldman Sachs was not requested to
solicit, and did not solicit, interest from other parties with respect to an
acquisition of or other business combination with Amway Asia Pacific. Goldman
Sachs' opinion, as well as its analyses summarized below, reflect only the
financial data and other information that was available to Goldman Sachs as of
November 15, 1999, and have not been updated to reflect any subsequent
developments or data.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its written opinion to the special
committee. Some of the summaries of the financial analyses include information
presented in tabular format. The tables must be read together with the text
accompanying each summary.
Review of Summary Financial Information. Goldman Sachs reviewed certain
historical financial information for Amway Asia Pacific for the years ended
August 31, 1994 through 1999, and estimates prepared by Amway Asia Pacific's
management, in conjunction with the SEC Reporting and Investor Relations Group
of Amway, of Amway Asia Pacific's financial performance for the years ended
August 31, 2000 through 2004.
11
Historical Stock Price Performance. Goldman Sachs reviewed the historical
closing stock prices and trading volume of the shares for the period December
15, 1993 (the date of Amway Asia Pacific's initial public offering) through
October 29, 1999, and for the three-year, one-year and six-month periods ended
October 29, 1999. Goldman Sachs observed that the closing stock prices for
shares have declined gradually from a high of $49.50 on January 21, 1997 to an
historic low of $7.125 on April 22, 1999. Over the one-year period ending
October 29, 1999 the shares traded between a high of $14.375 on July 26, 1999
and a low of $7.125 on April 22, 1999. Goldman Sachs also reviewed the indexed
stock price of the shares against a composite of two selected comparable public
companies in Asia, a composite of six selected comparable public companies in
the United States, and a composite of five selected comparable public companies
in Japan.
Future Trading Range Analysis. Assuming a range of forward price to
earnings ratios (20-30x) in four years' time and Amway Asia Pacific's estimated
2004 earnings per share, Goldman Sachs calculated a range of potential future
stock prices for Amway Asia Pacific in November 2003. Assuming required annual
returns to equity investors of 10% to 14% (assuming 2% in annual dividend yield
with the remainder consisting of annual share price appreciation), Goldman Sachs
calculated the present value of these potential future stock prices. The
analysis indicated a range of $8.40 to $14.57 per share. Goldman Sachs also
observed that, if an investor were to invest in the shares today at $18.00 per
share, and exited the investment in November 2003 at today's forward price to
earnings ratio (25x on Amway Asia Pacific's estimated 2000 earnings per share)
as applied to Amway Asia Pacific's current estimated 2004 earnings per share,
the annual return to the investor would be approximately (0.1)% over the next
four-year period. In addition, Goldman Sachs also observed that if an investor
were to invest in the shares today at $18.00 per share, either Amway Asia
Pacific's forward price earnings ratio or its estimated 2004 earnings per share
at time of exit in November 2003 must be greater by approximately 60% than
current levels for the investor to obtain an annual return of 12% (assuming 2%
annual dividend yield) over the next four-year period.
Historical Public Market Valuation Performance. Based on historical prices
and reported EBIT and net debt, Goldman Sachs observed the market's valuation of
Amway Asia Pacific, as defined by enterprise value as a multiple of last fiscal
year EBIT, to have a mean of 14.8x over the last 5 years. Similarly, Goldman
Sachs observed the historical equity multiple of International Broker Estimate
System's projected one-year forward EPS to have a mean of 23.9x over the same
period. Amway Asia Pacific's historical dividend yield reflected a mean of 3.4%
over the same period.
Transaction Premiums. Goldman Sachs observed that, based on the proposed
price per share of Amway Asia Pacific common stock of $18.00, the following
premiums were applicable as of November 10, 1999:
[Download Table]
PERIOD TRANSACTION PREMIUM
------ -------------------
November 10 market price................................... 55.7%
52-Week Average............................................ 67.2%
52-Week High............................................... 24.7%
52-Week Low................................................ 152.6%
All-Time High.............................................. (63.6)%
Goldman Sachs compared the premium over the November 10, 1999 closing price
with premiums paid in selected tender offers in Japan, Asia and the United
States, and selected minority buyouts in the United States (measured as premium
over closing price one day prior to announcement). Mean premiums paid in recent
Asia tender offers were 23.0% (median 18.2%) for transactions including
Australia and New Zealand, which accounted for 75.6% of total Asia deals, and
8.6% (median 6.1%), excluding Australia and New Zealand. Premiums paid in recent
Japanese transactions ranged from a high of 95.2% to a low of 3.3%, with a mean
of 30.2% and a median of 18.5%. Mean premiums paid in recent United States
tender offers and selected minority buyout transactions were 29.2% (median
33.5%) and 26.0% (median 21.4%), respectively. Additionally, in the case of
minority buyout offers which were increased subsequent to the initial offer, the
mean increase was 10.9% (median 8.5%).
12
Discounted Cash Flow Analysis. Based on estimates provided by Amway Asia
Pacific management, Goldman Sachs performed a discounted cash flow analysis for
the years ended August 31, 2000 to 2004. Using a range of discount rates of 10%
to 14%, based on an estimated cost of capital for Amway Asia Pacific, and a
range of terminal multiples of 2004 EBIT of 10x to 20x, Goldman Sachs calculated
a range of net present values of estimated future cash flows of Amway Asia
Pacific as of November 30, 1999. Based on these parameters, Goldman Sachs
calculated the enterprise value of Amway Asia Pacific to range from $368 million
to $806 million and its equity value per share to range from $8.36 to $16.12.
Comparison of Selected Companies. Goldman Sachs reviewed and compared
certain financial information relating to Amway Asia Pacific to corresponding
financial information, ratios and public market multiples of the fifteen
comparable public companies (eight in the United States, two in Asia and five in
Japan): Amway Japan Limited, Avon Products, Inc., Nu Skin Enterprises, Inc.,
Tupperware Corporation, Thomas Nelson, Inc., Herbalife International, Inc.,
Rexall Sundown, Inc., Nature's Sunshine Products, Inc., USANA, Inc., Cosway
Corporation Berhad, Amway (Malaysia) Holdings Berhad, Avon Products Co., Ivy
Cosmetics Corporation, Noevir and Shaklee Japan. Among other analyses, for each
of the comparison companies, Goldman Sachs calculated the ratio of their
enterprise value as of November 10, 1999 to their respective revenues, EBITDA
and EBIT during the most recent 12-month period and the ratios of their stock
prices as of November 10, 1999 to projected earnings per share for years 2000
and 2001. Results of those analyses are summarized as follows:
ENTERPRISE VALUE MULTIPLES
[Download Table]
REVENUES EBITDA EBIT
-------- ------ ----
Amway Asia Pacific.......................................... 1.1x 13.9x 20.7x
U.S. Comparables:
Low....................................................... 0.2x 1.8x 2.3x
High...................................................... 1.5 11.3 12.7
Mean...................................................... 0.8 5.6 7.1
Median.................................................... 0.8 5.6 6.5
Asia Comparables:
Low....................................................... 1.1x 14.3x 21.0x
High...................................................... 2.9 20.7 21.6
Mean...................................................... 2.0 17.5 21.3
Median.................................................... 2.0 17.5 21.3
Japan Comparables:
Low....................................................... 0.5x 3.0x 3.6x
High...................................................... 1.5 11.5 26.4
Mean...................................................... 0.8 8.1 13.0
Median.................................................... 0.7 10.1 10.7
P/E MULTIPLES*
[Download Table]
2000E 2001E
----- -----
Amway Asia Pacific:......................................... 46.3x 17.8x
U.S. Comparables:
Low....................................................... 6.5x 1.5x
High...................................................... 15.5 12.6
Mean...................................................... 10.1 7.7
Median.................................................... 10.1 8.2
13
[Download Table]
2000E 2001E
----- -----
Asia Comparables:
Low....................................................... 19.2x 15.9x
High...................................................... 19.2 15.9
Mean...................................................... 19.2 15.9
Median.................................................... 19.2 15.9
Japan Comparables:
Low....................................................... 8.7x 15.3x
High...................................................... 32.5 15.3
Mean...................................................... 23.4 15.3
Median.................................................... 29.1 15.3
---------------
* Fiscal year-end except for United States companies, for which data has been
calendarized.
Goldman Sachs' comparative analysis also included a comparison of
International Broker Estimate System's estimated five-year earnings per share
rates, and comparisons of historical annual sales growth, EBIT margins for the
most recent 12-month period and return on common equity. The results of the
analyses are summarized as follows:
- The International Broker Estimate System's estimated five-year projected
earnings per share growth for the comparison companies ranged from 2.0%
to 20.0%, with a median of 13.3% and mean of 11.5%, compared to 17.5% for
Amway Asia Pacific.
- Historical annual sales growth for the comparison companies ranged from
(4.8)% to 99.3%, with a mean of 18.3% and median 9.4%, compared to (3.9)%
for Amway Asia Pacific.
- EBIT margins for the comparison companies ranged from 1.8% to 17.5%, with
a mean of 11.0% and a median of 11.9%, compared to 5.2% for Amway Asia
Pacific, down from a peak of 18.8% in 1993.
- Return on common equity for the comparison companies ranged from (0.3)%
to 55.6%, with a mean of 19.1% and median of 17.8%, compared to 8.5% for
Amway Asia Pacific.
Comparison of Selected Transactions. Goldman Sachs reviewed certain
publicly available information relating to three selected transactions in the
direct sales industry from 1992 to 1999. The premiums over the market price (one
day prior to announcement) in the transactions were 39%, 28% and 19.1%,
respectively, compared to 55.7% for Amway Asia Pacific (premium over November
10, 1999 closing price). Ratio of offer price to the 52-week high ranged from
(41)% to (0)% and to 52-week low from 127% to 60%, compared to 24.7% and 152.6%
for Amway Asia Pacific. Enterprise value as a multiple of last 12-month sales,
EBIT and net income for each transaction, and comparable figures for Amway Asia
Pacific, are as follows:
[Enlarge/Download Table]
AMWAY
TRANSACTION A TRANSACTION B TRANSACTION C ASIA PACIFIC
------------- ------------- ------------- ------------
EV Multiple of Sales.................... 0.2x 1.2x 1.1x 2.1x
EV Multiple of EBIT..................... 5.0 9.6 12.9 39.2
EV Multiple of Net Income............... 10.7 15.8 24.7 81.4
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying the Goldman Sachs opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of each of these analyses in their totality
and did not attribute any particular weight to any analysis or factor considered
by it; rather Goldman Sachs made its determination as to fairness on the basis
of its experience and professional judgment, after considering the results of
all these analyses. No company or transaction used in the above analyses as a
comparison is directly comparable to Amway Asia Pacific, the tender offer by New
AAP or the amalgamation. The analyses were prepared solely for the purpose of
Goldman Sachs' providing its opinion to the
14
special committee as to the fairness from a financial point of view of the
purchase price of $18.00 per share in cash to be received by the public
shareholders in the tender offer and the amalgamation as contemplated by the
tender offer and amalgamation agreement and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may be
sold. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by those analyses. Because the analyses are inherently
subject to uncertainty, being based upon numerous factors or events beyond the
control of the parties or their advisors, neither the special committee nor
Goldman Sachs assumes responsibility if future results are different from those
forecast. Goldman Sachs was not asked to consider and has not independently
considered, any developments that have occurred, or any financial data or other
information that have become available, since November 15, 1999.
As described above, Goldman Sachs' opinion to the special committee was one
of many factors taken into consideration by the special committee in making its
determination to recommend the approval of the tender offer and amalgamation
agreement and by the disinterested directors in their determination to approve
the tender offer and amalgamation agreement. This summary is not a complete
description of the analysis performed by Goldman Sachs. You should read the
entire opinion of Goldman Sachs in Annex A.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes.
Goldman Sachs may from time to time effect transactions and hold
securities, including derivative securities, of Amway Asia Pacific for its own
account and for the accounts of its customers in the course of its normal
trading activity. As of November 11, 1999, which was the last trading day prior
to the rendering of its opinion, Goldman Sachs did not hold any positions in the
securities.
Pursuant to a letter agreement dated October 8, 1999, the special committee
engaged Goldman Sachs to act as its financial advisor. Pursuant to the letter
agreement, Amway Asia Pacific agreed to pay Goldman Sachs a fee totaling
$2,000,000 for its opinion and role as financial advisor to the special
committee, upon delivery of its opinion. In addition, Amway Asia Pacific has
agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses,
including the fees and expenses of Goldman Sachs' attorneys, and to indemnify
Goldman Sachs and certain related persons against various liabilities, including
certain liabilities under the United States federal securities laws, arising out
of its engagement.
POSITION OF NEW AAP, APPLE HOLD CO. AND MESSRS. VAN ANDEL AND DEVOS REGARDING
FAIRNESS OF THE AMALGAMATION
Each of New AAP, Apple Hold Co. and Messrs. Stephen A. Van Andel and
Richard M. DeVos, Jr. believe that the consideration to be received by the
public shareholders pursuant to the amalgamation is fair. New AAP, Apple Hold
Co. and Messrs. Van Andel and DeVos base this belief on the following facts: (i)
the fact that the special committee concluded that the amalgamation is fair to,
and in the best interests of, the public shareholders, (ii) notwithstanding the
fact that Goldman Sachs' opinion was provided solely for the information and
assistance of the special committee and that New AAP and Apple Hold Co. are not
entitled to rely on the opinion, the fact that the special committee received an
opinion from Goldman Sachs the date prior to the announcement of the tender
offer that the $18.00 per share in cash received by the holders of shares
pursuant to the tender offer and in the amalgamation or compulsory purchase was
fair to the public shareholders, (iii) the historical and projected financial
performance of Amway Asia Pacific, (iv) New AAP's and Apple Hold Co.'s
assessment of future economic conditions in the Asia-Pacific region, (v) the
consideration that was paid in the tender offer and to be paid in the
amalgamation represents a premium of 53.2% over the closing price for November
12, 1999, the last full trading day prior to public announcement of the tender
offer, and (vi) the amalgamation will provide consideration to be paid to the
holders of shares entirely in cash.
In addition, New AAP, Apple Hold Co. and Messrs. Van Andel and DeVos
believe that the amalgamation is procedurally fair because, among other things:
(1) the special committee consisted of three independent directors who are not
employees of Amway Asia Pacific or affiliated with the principal shareholders
and were appointed by the directors to represent the interests of the public
shareholders; (2) the special committee retained and received
15
advice from independent legal counsel; and (3) the special committee retained an
independent financial advisor, Goldman Sachs, and received financial advice and
assistance from Goldman Sachs in evaluating and negotiating a potential
transaction with New AAP, as well as an opinion from Goldman Sachs.
New AAP, Apple Hold Co. and Messrs. Van Andel and DeVos did not find it
practicable to assign, nor did it assign, relative weights to the individual
factors considered in reaching these conclusions as to fairness of the
amalgamation.
FINANCIAL ADVISORS TO PURCHASERS
When used in the " - Morgan Stanley" and " - J.P. Morgan" sections, the
term "purchasers" means collectively New AAP, Apple Hold Co. and Messrs. Van
Andel and DeVos.
Morgan Stanley. Pursuant to an engagement letter dated September 1, 1999,
Morgan Stanley was engaged as financial advisor to the purchasers in connection
with the cash tender offer and the amalgamation for the outstanding public
shares of Amway Asia Pacific by New AAP. At a meeting on September 21, 1999,
Morgan Stanley made a presentation to the purchasers regarding certain issues
surrounding the transactions. The purpose of the presentation was to provide
guidance on the process for the cash tender offer and the amalgamation and to
provide financial advice on the equity valuation of Amway Asia Pacific but not
on the fairness of the consideration that might be offered for shares of Amway
Asia Pacific. For the purposes of the presentation, Morgan Stanley:
- reviewed certain publicly available financial statements and other
information of Amway Asia Pacific;
- reviewed certain internal financial statements and other financial and
operating data concerning Amway Asia Pacific prepared by the management
of Amway Asia Pacific;
- analyzed certain financial projections prepared by the management of
Amway Asia Pacific;
- discussed the past and current operations and financial condition and the
prospects of Amway Asia Pacific with senior executives of Amway Asia
Pacific;
- reviewed the reported prices and trading activity for the common stock of
Amway Asia Pacific;
- compared the financial performance of Amway Asia Pacific and the prices
and trading activity of the common stock with that of certain other
comparable publicly-traded companies and their securities; and
- reviewed other transactions (mostly in the United States) in which a
majority shareholder acquired all of the outstanding minority shares.
Morgan Stanley assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by Morgan Stanley. With
respect to the financial projections, Morgan Stanley assumed that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the future financial performance of Amway Asia Pacific. Morgan
Stanley did not make any independent valuation or appraisal of the assets or
liabilities of Amway Asia Pacific. Its analysis was necessarily based on
economic, market and other conditions as in effect on, and the information made
available to it as of, September 20, 1999.
Based on financial analysis including comparable company analysis,
discounted cash flow analysis and analysis of precedent transactions, it
discussed a per share offer of $15.00 for Amway Asia Pacific.
The preparation of the presentation was a complex process and is not
necessarily susceptible to a partial analysis or summary description. In its
presentation, Morgan Stanley considered the results of all of its analyses as a
whole and did not attribute any particular weight to any particular analysis or
factor. Furthermore, Morgan Stanley believes that selecting any portion of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying its presentation. In addition, Morgan Stanley may have
given various analyses and factors more or less weight than other analyses and
factors and may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Morgan Stanley's view of the
actual value of Amway Asia Pacific.
16
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to the industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Amway Asia Pacific.
Any estimates contained in Morgan Stanley's analysis are not necessarily
indicative of future results or actual values, which may be significantly more
or less favorable than suggested by the estimates. The analyses do not purport
to be appraisals or to reflect the prices at which Amway Asia Pacific might
actually trade in a public market or in a private sale or merger transaction.
Morgan Stanley provided advice to the purchasers during negotiations;
however, Morgan Stanley did not recommend any specific consideration to Amway
Asia Pacific or that any specific consideration constituted the only appropriate
consideration for the transaction. In addition, as described above, Morgan
Stanley's presentation to the purchasers was one of the many factors taken into
consideration by the purchasers in making their decision to proceed with the
transaction. The presentation did not contain and Morgan Stanley did not deliver
any opinion relating to the fairness of the consideration offered for the shares
of Amway Asia Pacific.
Consequently, the Morgan Stanley analyses as described above should not be
viewed as determinative of the opinion of the purchasers with respect to the
value of Amway Asia Pacific or the fairness of the consideration offered. The
purchase price for all of the outstanding publicly traded shares of Amway Asia
Pacific was determined through arm's-length negotiations between the purchasers
and Amway Asia Pacific and was approved by the disinterested directors of Amway
Asia Pacific's board of directors.
The purchasers engaged Morgan Stanley to advise them on strategic
alternatives and to provide Morgan Stanley's advice because of its experience
and expertise. Morgan Stanley is an internationally recognized investment
banking and advisory firm. Morgan Stanley, as part of its investment banking
business, is continually engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, negotiated underwriting,
competitive bidding, secondary distributions of listed and unlisted securities,
private placements and valuation for estate, corporate and other purposes.
Pursuant to the engagement letter, Morgan Stanley provided financial
advisory services in connection with the transaction, and the purchasers agreed
to pay Morgan Stanley a customary fee in connection therewith. The purchasers
also agreed to reimburse Morgan Stanley for its expenses incurred in performing
its services. In addition, the purchasers agreed to indemnify Morgan Stanley and
its affiliates, their respective directors, officers, agents and employees, and
each person, if any, controlling Morgan Stanley or any of its affiliates against
certain liabilities and expenses, including certain liabilities under the
federal securities laws related to or arising out of Morgan Stanley's engagement
and any related transactions.
J.P. Morgan. Pursuant to an engagement letter dated September 1, 1999, J.P.
Morgan was also engaged as a financial advisor to the purchasers in connection
with the cash tender offer for the outstanding public shares of Amway Asia
Pacific. At a meeting on September 21, 1999, J.P. Morgan made a presentation to
the purchasers regarding certain issues surrounding the transaction. The purpose
of the presentation was to provide guidance on the process for the cash tender
offer and the amalgamation and to discuss certain ranges of possible values for
the equity valuation of Amway Asia Pacific. The presentation's purpose was not
to discuss and it did not discuss the fairness of the consideration that might
be offered for the shares of Amway Asia Pacific.
For the purposes of the presentation, J.P. Morgan:
- Reviewed certain publicly available financial statements and information
concerning the business of Amway Asia Pacific and of certain other
companies engaged in businesses comparable to Amway Asia Pacific;
- Reviewed certain internal analyses and forecasts concerning Amway Asia
Pacific prepared by the management of Amway Asia Pacific;
- Reviewed the stock price performance and trading activity for the common
stock of Amway Asia Pacific;
- Reviewed publicly available terms of certain transactions involving
companies in which a majority shareholder acquired all of the outstanding
minority shares; and
17
- Held discussions with senior executives of Amway Asia Pacific with
respect to the past and current business operations of Amway Asia
Pacific, the financial condition and future prospects and operations of
Amway Asia Pacific, and certain other matters they believed necessary or
appropriate.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or was
furnished to J.P. Morgan by Amway Asia Pacific or the purchasers or otherwise
reviewed by J.P. Morgan, and does not assume any responsibility or liability
therefor. J.P. Morgan did not conduct any valuation or appraisal of any assets
or liabilities, nor have any such valuations or appraisals been provided to J.P.
Morgan. In relying on financial analyses and forecasts provided to J.P. Morgan,
J.P. Morgan assumed that they have been reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments by management as
to the expected future results of operations and financial condition of Amway
Asia Pacific to which such analyses or forecasts relate. J.P. Morgan's analysis
was necessarily based on economic, market and other conditions in effect on, and
the information made available to, J.P. Morgan as of September 20, 1999.
The preparation of the presentation was a complex process and is not
necessarily susceptible to a partial analysis or summary description. In its
discussions, J.P. Morgan considered the results of all of its analyses as a
whole and did not attribute any particular weight to any particular analysis or
factor. Furthermore, J.P. Morgan believes that selecting any portion of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying its presentation. In addition, J.P. Morgan may have given
various analyses and factors more or less weight than other analyses and factors
and may have deemed various assumptions more or less than other assumptions, so
that the discussions of the ranges of valuations resulting from any particular
analysis described above should not be taken to represent J.P. Morgan's views of
the actual equity values of Amway Asia Pacific.
In performing its analyses, J.P. Morgan made numerous assumptions with
respect to the industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Amway Asia Pacific.
Any estimates contained in J.P. Morgan's analysis are not necessarily indicative
of future results or actual values, which may be significantly more or less
favorable than suggested by such estimates. The analyses do not purport to be
appraisals or to reflect the prices at which Amway Asia Pacific might actually
trade in a public market or in a private sale or merger transaction.
J.P. Morgan did not provide advice to the purchasers in the negotiations
with Amway Asia Pacific and its advisors. Hence, the analyses performed by J.P.
Morgan as described above should not be viewed as determinative of the opinion
of the purchasers with respect to the value of Amway Asia Pacific or the
fairness of the consideration offered. The purchase price for all of the
outstanding publicly traded shares of Amway Asia Pacific was determined through
arm's length negotiations and was approved by Amway Asia Pacific's disinterested
directors. The presentation did not contain and J.P. Morgan did not render any
opinion relating to the fairness of the consideration to be offered for the
shares of Amway Asia Pacific.
The purchasers engaged J.P. Morgan to advise them on strategic alternatives
and to provide J.P. Morgan's advice because of its experience and expertise.
J.P. Morgan is an internationally renowned investment banking and advisory firm.
J.P. Morgan, as part of its investment banking business, is continually engaged
in the valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwriting, competitive bidding, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
In the ordinary course of their businesses, J.P. Morgan's affiliates may
actively trade the debt and equity securities of Amway Asia Pacific for its own
account or for the accounts of customers and, accordingly, J.P. Morgan may at
any time hold long or short positions in the securities.
Pursuant to the engagement letter with the purchasers, J.P. Morgan provided
financial advisory services in connection with the transaction, and the
purchasers agreed to pay J.P. Morgan a customary fee in connection therewith.
Morgan Guaranty Trust Company of New York, acting through its Tokyo branch, an
affiliate of J.P. Morgan, provided New AAP with financing for the purchase of
the shares of Amway Asia Pacific. Morgan Guaranty also received customary fees
in connection for its services as defined by a separate agreement between Morgan
Guaranty and New AAP. The purchasers also agreed to reimburse J.P. Morgan for
its expenses incurred
18
in performing its services. In addition, the purchasers agreed to indemnify J.P.
Morgan and its affiliates, their respective directors, officers, agents and
employees against certain liabilities and expenses, including certain
liabilities under the federal securities laws related to or arising out of J.P.
Morgan's engagement and any related transactions.
CERTAIN PROJECTIONS
The following is a summary of Amway Asia Pacific financial projections
provided to financial advisors:
Key Assumptions
- The projections were updated in October 1999 to reflect any changes in
the outlook for each region in light of fourth quarter FY1999 results;
- FY 2000 figures have been produced on a bottom-up, product-by-product,
cost item-by-cost item basis by local management of each affiliate
according to the annual budgeting process;
- FY2001-FY2004 figures for each affiliate have been produced in the
ordinary course of business. FY2000 plan is extrapolated, using
year-on-year net sales growth and margin ratios as key drivers. Foreign
exchange rates and effective tax rates are assumed constant post FY2000.
The projections are prepared based on extensive consultations with each
local management as to their operating environments, as well as
reflecting historical experience in other affiliates worldwide;
- FY2000-FY2004 figures (in US$ terms) assume a steady recovery from the
1998 -- 1999 economic downturn with no fundamental changes in distributor
base, product line, cost structure, regulatory environment;
- Australia: 8% recovery in net sales in 2000, steady growth
thereafter (2.2% CAGR), regaining pre-decline 1998 levels in
2004. EBIT margin erodes to 7.6% in 2003 but recovers to 8.8% in
2004.
- New Zealand: 7% recovery in net sales in 2000, steady growth
thereafter (5.0% CAGR) but still 20% down on pre-decline 1997
levels in 2004. EBIT margin increases from 0.6% in 2000 to 2.7%
in 2004.
- Malaysia: 8% recovery in net sales in 2000, steady growth
thereafter (5.0% CAGR) but still 19% down on pre-decline 1997
levels in 2004. EBIT margin declines slightly from 13.6% in 2000
to 13.0% in 2004.
- Thailand: 12% recovery in net sales in 2000, steady growth
thereafter (6.9% CAGR) but still 28% down on pre-decline 1997
levels in 2004. EBIT margin increases slightly from 6.8% in 2000
to 7.9% in 2004.
- Hong Kong: 10% recovery in net sales in 2000, steady growth
thereafter (6.0% CAGR), regaining pre-decline 1997 levels in
2004. EBIT margin improves from -2.0% in 2000 to 1.5% in 2004.
- Taiwan: continuing decline in net sales in 2000, flat in 2001.
Steady recovery thereafter (4.5% CAGR) but still down 21% on
pre-decline 1997 levels in 2004. EBIT margin kept largely
constant around 5.5%.
- China: 115% recovery in net sales in 2000, steady recovery
thereafter (12.5% CAGR). Pre-decline 1997 levels only regained in
2004. EBIT margin declines from 7.3% in 2000 to 6.5% in 2004.
- No significant capital expenditures are assumed beyond China and
recurring maintenance items. Working capital requirement largely flat.
19
Exchange Rate Assumptions
[Enlarge/Download Table]
FY97 FY98 FY99 FY2000-04
------ ------ ------ ---------
Australian Dollar..................................... 1.293 1.519 1.575 1.493
New Zealand Dollar.................................... 1.452 1.751 1.882 1.818
Malaysian Ringgit..................................... 2.531 3.714 3.800 3.800
Thai Baht............................................. 26.463 41.317 37.360 38.000
China Renminbi........................................ 8.296 8.281 8.278 8.300
Hong Kong Dollar...................................... 7.739 7.743 7.751 7.800
Taiwan Dollar......................................... 27.652 32.391 32.655 33.300
---------------
* Source: Amway Asia Pacific Ltd.
AMWAY ASIA PACIFIC HISTORICAL AND PROJECTED
INCOME STATEMENT (US$ IN MILLIONS)
[Enlarge/Download Table]
AUGUST 31, 2000-
---------------------------------------------------------------------------- 2004
1997A 1998A 1999A 2000E 2001E 2002E 2003E 2004E CAGR
------ ------ ------ ------ ------ ------ ------ ------ ---------
Net Sales Australia............. 121.8 124.2 107.4 115.6 119.1 119.1 122.5 126.0 2.2%
New Zealand................... 29.3 22.7 17.9 19.2 20.8 21.6 22.5 23.4 5.0%
China......................... 178.0 68.3 55.5 120.0 138.0 151.8 167.0 192.0 12.5%
Taiwan........................ 164.8 141.9 122.6 114.1 114.1 118.1 124.0 130.2 3.4%
Hong Kong..................... 34.4 31.4 25.5 28.0 29.4 30.8 33.0 35.3 6.0%
Malaysia...................... 135.2 94.7 83.5 90.0 94.5 99.2 104.2 109.4 5.0%
Thailand...................... 181.6 104.3 89.2 100.0 110.0 115.5 121.3 130.4 6.9%
------ ------ ------ ------ ------ ------ ------ ------ ----
Net Sales....................... 845.2 587.6 501.5 586.9 625.8 656.2 694.5 746.6 6.2%
Total Cost of Sales............. (313.3) (257.2) (216.5) (251.0) (265.4) (277.6) (293.0) (313.7) 5.7%
------ ------ ------ ------ ------ ------ ------ ------ ----
Gross Profit.................... 531.9 330.4 285.0 336.0 360.4 378.6 401.4 432.9 6.5%
Total Operating Expenses........ (383.3) (305.1) (258.7) (293.5) (311.8) (331.2) (352.5) (376.9) 6.5%
------ ------ ------ ------ ------ ------ ------ ------ ----
EBIT............................ 148.6 25.3 26.3 42.5 48.6 47.4 48.9 56.1 7.2%
Other Income -- Net........... 24.9 11.0 7.4 3.8 3.5 5.4 5.3 5.6
Interest Expense.............. (0.2) (1.3) (0.9) (0.8) 0.0 0.0 0.0 0.0
Income Before MI & Taxes...... 173.3 35.0 32.8 45.5 52.1 52.8 54.2 61.6 7.9%
------ ------ ------ ------ ------ ------ ------ ------ ----
Income Taxes.................. (54.9) (23.5) (13.3) (14.7) (15.3) (15.8) (16.8) (18.9)
Minority Interest............. (14.3) (10.0) (7.1) (4.8) (5.0) (5.1) (5.2) (5.4)
Net Income.................... 104.0 1.5 12.5 26.1 31.8 31.8 32.2 37.3 9.3%
====== ====== ====== ====== ====== ====== ====== ====== ====
Depreciation.................... 13.0 13.5 12.8 13.3 14.5 16.9 17.9 20.0
Decrease in Working Capital..... 25.9 (6.8) 6.5 13.0 11.7 14.9 16.6 13.6
Capital Expenditures............ (27.8) (33.1) (13.0) (15.6) (20.0) (16.5) (16.9) (15.8)
Net Sales Growth................ (30.5)% (14.6)% 17.0% 6.6% 4.8% 5.8% 7.5%
Gross Margin.................... 62.9% 56.2% 56.8% 57.2% 57.6% 57.7% 57.8% 58.0%
EBIT Margin..................... 17.6% 4.3% 5.2% 7.2% 7.8% 7.2% 7.0% 7.5%
Depreciation / Sales............ 1.5% 2.3% 2.5% 2.3% 2.3% 2.6% 2.6% 2.7%
Capital
Expenditures / Depreciation... 2.1x 2.5x 1.0x 1.2x 1.4x 1.0x 0.9x 0.8x
APPROVAL OF SHAREHOLDERS
The tender offer and amalgamation agreement must be approved by the holders
of at least three-fourths of the shares of common stock represented at a meeting
of shareholders of Amway Asia Pacific at which a majority of the outstanding
shares of common stock are present in person or by proxy. Because the principal
shareholders, indirectly through Apple Hold Co., beneficially own 97.4% of the
outstanding shares of Amway Asia Pacific and because Apple Hold Co. owns all of
the outstanding shares of New AAP, approval of the tender offer and amalgamation
agreement is assured.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General. The following discussion addresses the United States federal
income taxation of public shareholders who are United States persons (i.e.,
United States citizens or residents, United States corporations, United States
estates or trusts subject to United States tax on all of their income regardless
of source) who have shares converted pursuant to the amalgamation. The following
discussion does not address the tax consequences to a person who holds, directly
or indirectly, 10% or more of the shares. Non-United States persons should
generally have no United States tax consequences as a result of the conversion
of shares into cash. Non-United States
20
persons and 10% shareholders are urged to consult their own tax advisors
regarding the tax considerations incident to a sale of shares pursuant to the
tender offer and amalgamation agreement.
In addition, this summary does not address the United States tax treatment
of certain types of United States public shareholders (e.g., individual
retirement and other tax-deferred accounts, life insurance companies and tax-
exempt organizations) or of persons other than United States public
shareholders, all of whom may be subject to tax rules that differ significantly
from those summarized below.
The discussion below, as it relates to United States federal income tax
consequences, is based upon the provisions of the Internal Revenue Code of 1986,
as amended, and regulations, rulings and judicial decisions thereunder as of the
date of this proxy statement, and these authorities may be repealed, revoked or
modified so as to result in United States federal income tax consequences
different from those discussed below. Each United States public shareholder is
advised to consult his or her own tax advisor with respect to federal, state,
local and foreign tax law consequences of the conversion of shares pursuant to
the tender offer and amalgamation agreement.
The conversion of shares into cash pursuant to the tender offer and
amalgamation agreement will generally be taxable transactions to United States
public shareholders for federal income tax purposes under the Internal Revenue
Code, and may also be taxable transactions under applicable state, local and
foreign tax laws.
Tax Treatment of Proceeds from Conversion. The conversion of shares into
cash pursuant to the tender offer and amalgamation agreement or to the exercise
of appraisal rights by a United States public shareholder will be accorded sale
or exchange treatment for federal income tax purposes and gain or loss (rather
than dividend income) will be recognized by a tendering United States public
shareholder. Any gain or loss recognized will be equal to the difference between
the amount of cash received in the exchange and the United States public
shareholder's adjusted tax basis in the shares purchased. Provided that the
shares constitute a capital asset in the hands of the United States public
shareholder and have a holding period of more than one year, this gain or loss
generally will be long-term capital gain or loss.
Backup Withholding. Under United States federal income tax backup
withholding rules, 31% of the gross proceeds payable to a public shareholder
pursuant to the tender offer and amalgamation agreement must be withheld and
remitted to the United States Treasury if the holder or other payee does not
provide its taxpayer identification number, employer identification number or
social security number to the paying agent and certify that the number is
correct, or if the Internal Revenue Service notifies the paying agent that the
identification number is incorrect or that backup withholding should be imposed
with respect to a particular holder. Certain holders (including, among others,
all corporations and certain non-resident alien individuals) are not subject to
these backup withholding and reporting requirements.
Transmittal. In order for a foreign individual to qualify as an exempt
recipient, that individual must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. These statements may be
obtained from the paying agent.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY. EACH PERSON IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE AMALGAMATION, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
MARKET AND DIVIDEND INFORMATION
The principal market for the shares of common stock is the New York Stock
Exchange, these shares having been traded since December 14, 1993. The common
stock is also listed on the Australian Stock Exchange Limited, these shares
having been listed on the ASX since December 23, 1993. The high and low sales
prices of
21
Amway Asia Pacific's shares of common stock on the NYSE and the ASX during each
fiscal quarterly period shown is set forth in the following tables. Amway Asia
Pacific's fiscal year ends August 31 in each year.
[Download Table]
NYSE
-------------
HIGH LOW
---- ---
FY 1998
First Quarter..................................... $34 $19 1/2
Second Quarter.................................... 22 15/16 15 3/4
Third Quarter..................................... 2 11/16 12 15/16
Fourth Quarter.................................... 16 1/2 9 3/6
FY 1999
First Quarter..................................... $13 3/16 $ 8 1/4
Second Quarter.................................... 13 1/2 7
Third Quarter..................................... 14 1/2 6 7/8
Fourth Quarter.................................... 14 15/16 9 15/16
FY 2000
First Quarter (through November 12, 1999, the last
full trading day before public announcement of
the tender offer............................... $13 3/8 $10 7/8
First Quarter (after November 12, 1999)........... 18 17
Second Quarter.................................... 18 17 3/16
Third Quarter (through March 27, 2000)............ 17 7/8 17 5/16
On November 12, 1999, the last full trading day prior to the public
announcement of the tender offer, the closing sales price of the common stock as
reported on the NYSE was $11.75. On December 16, 1999, the last full day of
trading prior to the expiration of the tender offer, the closing sales price of
the common stock on the NYSE was $17.94. On March 27, 2000, a recent practicable
date prior to the date of this proxy statement, the closing sales price of the
common stock as reported on the NYSE was $17.75.
[Download Table]
ASX
--------------------
HIGH LOW
---- ---
FY 1998
First Quarter................................... AU$46.50 AU$36.50
Second Quarter.................................. 36.00 26.00
Third Quarter................................... 32.51 23.00
Fourth Quarter.................................. 28.50 19.50
FY 1999
First Quarter................................... AU$21.00 AU$14.50
Second Quarter.................................. 21.00 12.00
Third Quarter................................... 20.80 11.80
Fourth Quarter.................................. 24.00 15.90
FY 2000
First Quarter (through November 15, 1999, the
last full trading day before public
announcement of the tender offer)............. AU$18.50 AU$17.00
First Quarter (after November 15, 1999)......... 30.00 21.30
Second Quarter.................................. 27.30 25.60
Third Quarter (through March 24, 2000).......... 27.50 26.10
On November 15, 1999, the last full day of trading prior to the public
announcement of the tender offer, the closing sales price of the common stock as
reported on the ASX was AU$17.50. On December 16, 1999, the last full day of
trading prior to the expiration of the tender offer, the closing sales price of
the common stock as reported on the ASX was AU$26.60. On March 24, 2000, a
recent practicable date prior to the date of this proxy statement, the closing
sales price of the common stock as reported on the ASX was AU$27.20. Holders of
common stock are urged to obtain a current market quotation for the common
stock.
22
Amway Asia Pacific's board of directors suspended Amway Asia Pacific's
quarterly dividend on October 14, 1998, because of adverse economic conditions
in Amway Asia Pacific's markets at that time, declining profitability and
uncertainty as to whether either of these two factors would improve. For the
fiscal year ended August 31, 1998, Amway Asia Pacific paid dividends to its
shareholders in the amount of $0.88 per share. The Amway Asia Pacific board of
directors has regularly reviewed Amway Asia Pacific's ability to pay a quarterly
dividend and based on the continuation of weak profitability and the need to use
cash flow in China has not reinstated the dividend. Amway Asia Pacific has no
plans to pay dividends prior to the consummation of the amalgamation. Further,
after the amalgamation, Amway Asia Pacific, as the amalgamated company, will be
subject to the terms of a credit agreement that, among other things, will
indirectly restrict its ability to pay dividends through financial covenants.
FINANCIAL INFORMATION
For financial information regarding Amway Asia Pacific, please refer to
Amway Asia Pacific's Annual Report on Form 20-F for the fiscal year ended August
31, 1999 which is incorporated herein by reference.
The ratio of earnings to fixed charges of Amway Asia Pacific was 12.3 and
10.5 for the fiscal years ended August 31, 1999 and 1998, respectively. This
ratio was computed by dividing income before income taxes and minority interest
plus fixed charges by the fixed charges. Fixed charges consist of interest
expense and that portion of operating lease rental expense that is
representative of the interest factor. The book value per share of Amway Asia
Pacific as of August 31, 1999 was $3.44, which was computed by dividing
shareholders' equity by the number of shares of common stock outstanding at the
balance sheet date.
THE COMPANIES
AMWAY ASIA PACIFIC
Amway Asia Pacific, a Bermuda corporation, was incorporated in September
1993. The principal executive offices of Amway Asia Pacific and of each of its
officers and directors are currently located at 38/F The Lee Gardens, 33 Hysan
Avenue, Causeway Bay, Hong Kong. The business telephone number of Amway Asia
Pacific is (852) 2969-6333. For information regarding Amway Asia Pacific, please
refer to Amway Asia Pacific's Annual Report on Form 20-F for the fiscal year
ended August 31, 1999 which is incorporated herein by reference.
Amway Asia Pacific is subject to the informational filing requirements of
the Securities Exchange Act of 1934 and, in accordance therewith, is required to
file periodic reports and other information with the Securities and Exchange
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning Amway Asia Pacific's directors and
officers, their remuneration, stock options granted to them, the principal
holders of Amway Asia Pacific's securities and any material interest of these
persons in transactions with Amway Asia Pacific is required to be disclosed in
periodic reports filed with the Securities and Exchange Commission. These
reports and other information can be inspected and copied at the public
reference facilities maintained by the Securities and Exchange Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at it's regional
offices located at Seven World Trade Center, Suite 1300, New York, New York
10048 and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Information regarding the public reference facilities may be
obtained from the Securities and Exchange Commission by telephoning
1-800-SEC-0330. Copies of these materials may also be obtained by mail from the
Public Reference Section of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain reports and
other information concerning Amway Asia Pacific may also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
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The following table sets forth the citizenship of each of Amway Asia
Pacific's directors and executive officers as of December 1, 1999:
[Download Table]
NAME POSITION CITIZENSHIP
---- -------- -----------
Stephen A. Van Andel Chairman, Director United States
Richard M. DeVos, Jr. Vice Chairman, Director United States
Douglas L. DeVos President, Director United States
Eoghan M. McMillan Director United Kingdom
Jack C.K. So. Director United Kingdom
John C.C. Chan Director China
L.H. Choong Director Malaysia
Eva Cheng Executive Vice President; Director Hong Kong, China
Lynn Lyall Chief Financial Officer, Vice United States
President and Treasurer
Lawrence M. Call Vice President United States
Craig N. Meurlin Vice President, General Counsel and United States
Assistant Secretary
John C. Brockman Vice President, Distributor United States
Relations
Percy Chin Vice President, General Canada
Manager - East China
Patrick Hau Vice President, General Manager - Australia
National Operations
Audie Wong Vice President, General Canada
Manager - North China
Martin Liou General Manager -- Taiwan Taiwan
Low Han Kee Regional Manager -- Malaysia Malaysia
Preecha Prakobkit General Manager -- Thailand Thailand
Peter Williams General Manager -- Australia New Zealand
Betty Yeung General Manager -- South China Canada
John C.R. Collis Secretary United Kingdom
During the last five years, none of the directors or officers of Amway Asia
Pacific have been convicted in a criminal proceeding, excluding traffic
violations or similar misdemeanors; or a party to any judicial or administrative
proceeding that resulted in a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws, or finding of any violation of federal or state securities laws.
NEW AAP LIMITED
New AAP was incorporated under the laws of Bermuda in October 1999 for the
purpose of acquiring all publicly held shares of Amway Asia Pacific and has no
operating history. New AAP has not engaged in activities other than those
incidental to its formation and capitalization, the preparation and consummation
of the tender offer and the consummation of the amalgamation. The principal
executive offices of New AAP and each of its officers and directors are
currently located at 7575 Fulton Street, East, Ada, Michigan 49355. New AAP's
business telephone number is (616) 787-6000.
In December 1999, New AAP completed its offer to purchase at $18.00 per
share in cash all the outstanding shares of common stock of Amway Asia Pacific.
New AAP acquired 8,181,756 shares of common stock in the tender offer, which
represents 14.5% of the outstanding shares. The shares were purchased with funds
borrowed under a $700,000,000 unsecured term loan credit agreement with Morgan
Guaranty and Trust Company of New York, Tokyo branch, and other banks and
financial institutions, dated December 10, 1999. In December 1999, New AAP
borrowed approximately $168,900,000 under the credit agreement, all of which
remains outstanding. Borrowings under the credit agreement bear interest at the
London Interbank offered rate plus 6.35%. Further, New AAP has guaranteed
approximately $510,000,000 borrowed by N.A.J. Co., Ltd., a Japanese corporation
and an affiliate of New AAP, under the credit agreement and as a result, New AAP
is jointly and severally liable for an aggregate amount of approximately
$678,900,000. New AAP is scheduled to make its first payment of
24
principal and interest under the credit agreement on December 21, 2000. Annual
principal payments are then scheduled to be made on December 21st of 2001, 2002,
2003 and 2004 with the remaining principal to be paid on December 21, 2005.
Interest will be paid semi-annually beginning June 21, 2001. New AAP estimates
that the total amount of funds to pay for the purchase price of the shares of
common stock of Amway Asia Pacific acquired in the amalgamation will be
approximately $26.0 million, all of which will be from funds borrowed under the
credit agreement. Following the amalgamation, the amalgamated company may be
required to dedicate a substantial portion of its cash flows from operations to
pay principal and interest under the credit agreement. Further, after the
amalgamation, Amway Asia Pacific, as the amalgamated company, will be subject to
the terms of the credit agreement that, among other things, will indirectly
restrict its ability to pay dividends through financial covenants.
DIRECTORS AND OFFICERS
The executive officers and directors of New AAP are Craig N. Meurlin and
Lawrence M. Call. Messrs. Meurlin and Call are United States citizens.
Craig N. Meurlin has been a director and Vice President and Assistant
Secretary of New AAP since its formation in October 1999. Mr. Meurlin has
also been Vice President, General Counsel and Assistant Secretary of Amway
Asia Pacific since 1993. Mr. Meurlin is Senior Vice President, General
Counsel and Secretary of Amway and has held these positions since 1993.
Prior to that, Mr. Meurlin was a partner in the law firm of Jones, Day,
Reavis & Pogue. Mr. Meurlin holds a Bachelors of Arts degree from the
University of Vermont and a Juris Doctor from the University of Virginia.
Lawrence M. Call has been a director and President of New AAP since
its formation in October 1999. Mr. Call has also been Vice President of
Amway Asia Pacific since its formation in 1993. Mr. Call served as Chief
Financial Officer and Treasurer of Amway Asia Pacific until July 1, 1999.
He has served as Chief Financial Officer of Amway from 1991 to January
2000. Prior to joining Amway, Mr. Call had been Treasurer of PPG
Industries, a manufacturer of flat glass, fiberglass, coatings, resins
industrial and special chemicals, since 1984. Before becoming Treasurer of
PPG Industries, he had held various other financial control positions with
PPG Industries. Prior to that, Mr. Call spent 15 years in public accounting
with Deloitte, Haskins and Sells (the predecessor to Deloitte and Touche).
He is a Certified Public Accountant and holds a Bachelor's degree from
Loyola University.
Apple Hold Co., a Bermuda limited partnership, was formed in November 1999
for the purpose of facilitating the tender offer and amalgamation by New AAP.
Apple Hold Co. has no operating history. Hold Co. directly owns 46,814,950
shares, representing 82.9% of the outstanding shares of common stock. The
principal executive offices of Apple Hold Co. are currently located at One East
First Street, Suite 1600, Reno, Nevada 89501 and its business telephone number
is (616) 787-6000. The general partner of Apple Hold Co. is AP New Co., LLC and
the limited partners are the principal shareholders of Amway Asia Pacific.
AP New Co., LLC, a Nevada limited liability company, was formed in
September 1999. AP New Co. has no operating history. The principal executive
offices of AP New Co. are currently located at One East First Street, Suite
1600, Reno, Nevada 89501 and its business telephone number is (616) 787-6000. AP
New Co. is managed by Amway.
Amway Corporation, a Michigan corporation, was formed in 1959. Amway sells
and distributes, directly or through its affiliates, consumer products in the
personal care, nutrition and wellness, home care and home tech product lines.
The business address of Amway and of each of the officers and directors of Amway
are located at 7575 Fulton Street East, Ada, Michigan 49355. Amway's business
telephone number is (616) 787-6000. All of the officers and directors of Amway
are United States citizens. Amway is owned by the principal shareholders. The
following persons are officers and directors of Amway:
Stephen A. Van Andel has been Chairman of Amway since 1995 and was a
member of the Policy Board of Amway from 1992 through August 31, 1999. He
has been on the board of directors of Amway since September 1, 1999. Mr.
Van Andel has also been Chairman of Amway Asia Pacific since January 1995
and a Director since 1994. Mr. Van Andel was Vice Chairman of Amway Japan
Limited from November 1994 through November 30, 1999. Mr. Van Andel was
Chairman of the Executive Committee of Amway
25
and Vice President -- Corporate Affairs of Amway from 1993 to 1995. He was
appointed Vice President -- Marketing of Amway in 1988 and in 1991, became
Vice President Americas. Prior to 1988, Mr. Van Andel held various
administrative and management positions with Amway. He holds a Bachelor's
degree from Hillsdale College and a Master's of Business Administration
from Miami University. Mr. Van Andel is also a director of Michigan
National Bank Corp.
Richard M. DeVos, Jr. has been President of Amway since 1993 and was a
member of the Policy Board of Amway from 1992 through August 31, 1999. He
has been on the board of directors of Amway since September 1, 1999. He has
also been Vice Chairman of Amway Asia Pacific since October 1999 and was
President of Amway Asia Pacific from January 1995 to October 1999. He has
been a Director of Amway Asia Pacific since 1994. Mr. DeVos was Chairman of
Amway Japan Limited from November 1994 through November 30, 1999. Mr. DeVos
was President and Chief Executive Officer of the Orlando Magic Ltd. from
1991 to 1993. He is Chairman of the Windquest Group, a multi-company
management group which he founded in 1989. Prior to that, Mr. DeVos was
Vice President -- International of Amway since 1984. Previously, he held
various research and development, manufacturing, distribution, marketing,
finance, public relations and government affairs positions with Amway. Mr.
DeVos holds a Bachelor of Business Administration degree from Northwood
University and has attended the Executive Study Program at the Wharton
School of the University of Pennsylvania. He is also a director of Old Kent
Financial Corporation.
Douglas L. DeVos has been Senior Vice President and Chief Operating
Officer, Classic of Amway since January 2000 and was Senior Vice
President -- Asia Pacific Region, Global Distributor Relations of Amway
from June 1998 to January 2000 and director of Amway since September 1999.
Mr. DeVos has been Chairman of Amway Japan Limited since November 30, 1999.
Mr. DeVos has been President of Amway Asia Pacific since October 1999. Mr.
DeVos has also been a director of Amway Asia Pacific since April 14, 1999.
He was appointed Vice President, North American Sales, of Amway in 1993 and
became Senior Vice President, Managing Director -- Americas of Amway from
1996 to 1998. Prior to 1993, Mr. DeVos held various administrative and
management positions with Amway. He holds a Bachelor of Science degree from
Purdue University Krannert School of Management. Mr. DeVos is a director of
Amway Japan Limited.
Lynn Lyall has served as Vice President and Chief Financial Officer of
Amway since January 2000, and served as Vice President of Finance of Amway
from July 1, 1999 through January 2000. Mr. Lyall has also been Chief
Financial Officer, Vice President and Treasurer of Amway Asia Pacific since
July 1, 1999. Prior to joining Amway, he had been Executive Vice President
and Chief Financial Officer of Blockbuster Entertainment, Inc. since 1997.
Before becoming Chief Financial Officer of Blockbuster, Mr. Lyall held
various financial positions with Cadbury Schweppes, PLC from 1990 until
1997. He also held financial positions with Bordo Citrus Products, Inc.,
Kraft, Inc. and Coca-Cola Company. Prior to that, Mr. Lyall spent six years
in public accounting with Arthur Andersen & Co. He is a certified Public
Accountant and holds a Bachelor's degree and a Master's degree in
management from Northwestern University.
Craig N. Meurlin has been the Senior Vice President, General Counsel
and Secretary of Amway and has held these positions since 1993. Mr. Meurlin
has also been a director and Vice President and Assistant Secretary of New
AAP since its formation in October 1999. Mr. Meurlin has been Vice
President, General Counsel and Assistant Secretary of Amway Asia Pacific
since 1993. Prior to that, Mr. Meurlin was a partner in the law firm of
Jones, Day, Reavis & Pogue. Mr. Meurlin holds a Bachelors of Arts degree
from the University of Vermont and a Juris Doctor from the University of
Virginia.
Pamela L. Linton has been Vice President of Global Human Resources at
Amway since 1997. Prior to joining Amway, she was Vice President of Human
Resources for Lorin Industries. She also spent eleven years with Baxter
Healthcare where she was Director of Human Resources providing support to
the Technology, Global Businesses Groups and Baxter Management Institutes.
Ms. Linton holds a Bachelor of Science degree from Michigan State
University and a Master of Business Administration degree from Lake Forest
College Graduate School of Management.
Al Koop has been the Senior Vice President and Chief Operating
Officer, Supply Chain of Amway since January 2000. Mr. Koop joined Amway in
1965 and has held many positions within Amway including Director of
Regional Distribution Centers, Managing Director of the Americas and Europe
and Vice
26
President of International Distribution and Facilities Planning. Mr. Koop
holds a Bachelor's degree in Marketing and Economics from Ferris State
University in Big Rapids, Michigan.
David Van Andel has been the Senior Vice President and Chief Operating
Officer, Innovations of Amway since January 2000 and was Senior Vice
President -- Americas and Europe at Amway, overseeing business activities
for Amway North America, 22 European and 11 Latin American affiliates,
prior to that time. Mr. Van Andel is also a director of Amway. Mr. Van
Andel has held numerous positions within Amway including Senior Vice
President of Operations, Vice President of Manufacturing and Operations and
Director of Regional Distribution Centers. Mr. Van Andel is also Chairman
of the Van Andel Research Institute and is a member of the Board of the
United States Chamber of Commerce. Mr. Van Andel is a graduate of Hope
College, Holland, Michigan.
Jay Van Andel is a director and the co-founder of Amway. He has also
been the Senior Chairman of Amway since 1995. Prior to that time, Mr. Van
Andel was the Chairman of Amway. He attended Calvin College, Morningside
College, Pratt Business School and Yale University Aviation Cadet School.
Mr. Van Andel is a trustee of the Heritage Foundation and a trustee of the
Citizen's Research Council of Michigan. Mr. Van Andel has also been the
sole trustee of the Jay Van Andel Trust since its inception in August 1978.
Under the trust, Mr. Van Andel has sole voting and dispositive power. The
Jay Van Andel Trust is a member of AP New Co. and has shared voting and
dispositive power with respect to 54,996,706 shares of Amway Asia Pacific
common stock.
Richard M. DeVos, Sr. is a director and the co-founder and former
president of Amway. Amway was founded in 1959 and is one of the world's
largest direct selling companies. In 1991, Mr. DeVos and his family
acquired the Orlando Magic, the National Basketball Association's franchise
in Orlando, Florida. Mr. DeVos currently serves as Chairman for the Orlando
Magic. Mr. DeVos is a graduate of Calvin College in Grand Rapids. He was
also awarded a Doctor of Letters from Hope College in 1982.
Daniel G. DeVos is Vice President -- Corporate Affairs of Amway and he
has been a member of the board of directors of Amway since September 1999.
Mr. DeVos is currently Chairman, President and Chief Executive Officer of
DP/Fox Landquest, which is a multi-company management firm. He serves as
President and Chief Executive Officer as of the following minor league
sports franchises: Grand Rapids Griffins, Grand Rapids Rampage and the
Kansas City Blades. For the Orlando Magic, Mr. DeVos is currently Vice-
Chair of the Governing Board. Mr. DeVos holds a degree from Northwood
University.
Nan Van Andel is Vice President -- Creative Resources, Inc. of Amway
and has been a member of the board of directors of Amway since September
1999. She has been employed at Amway for 24 years in many positions and
departments including finance, warehousing, manufacturing, creative and
selling products as an Amway distributor. Ms. Van Andel is also
Chairwoman -- Amway's Easter Seal Campaign. She is a graduate of Calvin
College and Grand Valley State University.
Barb Van Andel-Gaby is Vice President -- Corporate Affairs of Amway
and has been a member of the board of directors of Amway since September
1999. She previously held the position of Vice President -- Amway
Properties with Amway Asia Pacific. Prior to joining Amway, she was in the
Marketing Department of Marriott Corporation Hotel Division. She is a
member of many professional and charitable organizations including the
National Association of Corporate Directors and the board of directors of
Capital Research Center. Ms. Van Andel-Gaby received her Bachelor's degree
from Hope College and a Master of Business Administration degree from
Indiana University.
Suzanne C. DeVos VanderWeide currently serves as Vice
President -- Corporate Affairs and as a member of the board of directors of
Amway. Previously she served as Director of Health & Beauty Marketing and
the Management Training Program. Ms. VanderWeide is actively involved in
many community organizations in both Orlando and her hometown of Grand
Rapids, including serving on the Board of the Orlando Magic. She is
Chairman of the Orlando Magic Youth Foundation, Chairperson for DeVos
Children's Hospital Committee and Director of the Michigan Chapter of
Operation Smile. Ms. VanderWeide holds a Bachelor of Arts degree in
Business Administration from Hope College.
During the last five years, none of the directors or officers of New AAP or
Amway have been convicted in a criminal proceeding, excluding traffic violations
or similar misdemeanors; or a party to any judicial or
27
administrative proceeding that resulted in a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws, or finding of any violation of federal or state
securities laws.
THE AMALGAMATION
THE TENDER OFFER AND AMALGAMATION AGREEMENT
The tender offer and amalgamation agreement provides for, among other
things, Amway Asia Pacific to amalgamate with New AAP, with Amway Asia Pacific
continuing as the amalgamated company. Following consummation of the
amalgamation, the name of the surviving corporation will be "Amway Asia Pacific
Ltd." The memorandum of association and the bye-laws of the surviving
corporation will be the current versions of the memorandum of association and
bye-laws of Amway Asia Pacific. Further, the officers and directors of the
surviving corporation will be the current officers and directors of Amway Asia
Pacific.
The tender offer and amalgamation agreement provides that at the effective
time of the amalgamation, all shares of Amway Asia Pacific, other than those
held by New AAP, Apple Hold Co. or the principal shareholders, will be canceled
in consideration for payment of $18.00 per share in cash upon surrender of each
certificate formerly representing Amway Asia Pacific shares. There will be
deducted from the amalgamation consideration any United States backup or other
applicable withholding taxes which may be required to be withheld. Except for
shares of Amway Asia Pacific held by New AAP, Apple Hold Co. or the principal
shareholders, all shares of Amway Asia Pacific at the effective time of the
amalgamation will no longer be outstanding and will automatically be canceled
and retired and will cease to exist. The shares of common stock of Amway Asia
Pacific held by New AAP will be canceled. Each holder of a certificate
representing these shares will no longer have any rights with respect to the
shares, except the right to receive the amalgamation consideration upon
surrender of the certificates or, in the case of a dissenting shareholder, the
right to be paid the fair value of his or her shares.
At the effective time of the amalgamation, each issued and outstanding
share of New AAP common stock will be converted into and become one fully paid
and nonassessable share of common stock of the amalgamated company (i.e., Amway
Asia Pacific). Therefore, as a result of the amalgamation, Apple Hold Co. will
directly own 100% of the amalgamated company, Amway Asia Pacific. Currently, New
AAP and Amway Asia Pacific expect to complete the amalgamation by the end of
April 2000.
Pursuant to the tender offer and amalgamation agreement, at the effective
time of the amalgamation, all issued and outstanding warrants, options and other
rights to acquire securities of Amway Asia Pacific will be converted into rights
to receive cash valued in accordance with the Black-Scholes option pricing
method. A copy of the tender offer and amalgamation agreement is attached to
this proxy statement as Annex B.
INTERESTS OF CERTAIN PERSONS
In considering the recommendations of the disinterested directors of Amway
Asia Pacific, based upon the recommendation of the special committee, with
respect to the tender offer and amalgamation agreement, shareholders should know
that certain officers and directors of Amway Asia Pacific have interests in
connection with the tender offer and amalgamation agreement which may present
them with actual or potential conflicts of interest. Craig N. Meurlin, Amway
Asia Pacific's vice president, general counsel and assistant secretary is a
director and vice president and assistant secretary of New AAP and Lawrence M.
Call, Amway Asia Pacific's vice president, is a director and president of New
AAP. Also, the officers and directors of Amway Asia Pacific beneficially own
4,000 shares of Amway Asia Pacific common stock and 245,662 shares of Amway Asia
Pacific common stock pursuant to stock option agreements. The stock option
agreements will be terminated by Amway Asia Pacific prior to consummation of the
amalgamation and these officers and directors will receive cash for these
options valued in accordance with the Black-Scholes option pricing method.
28
As of March 15, 2000, the following individuals have options to acquire
shares or own shares of common stock of Amway Asia Pacific as follows:
[Enlarge/Download Table]
OPTIONS TO COMMON
NAME POSITION ACQUIRE SHARES STOCK
---- -------- -------------- ------
Stephen A. Van Andel........ Chairman, Director 26,666 (1)
Richard M. DeVos, Jr........ Vice Chairman, Director 26,666 (1)
Eoghan M. McMillan.......... Director 11,000 2,000
Jack C.K. So. .............. Director 11,000 2,000
John C.C. Chan.............. Director 8,000
L.H. Choong................. Director 33,000
Eva Cheng................... Executive Vice President; Director 53,333
Lawrence M. Call............ Vice President 23,333
Craig N. Meurlin............ Vice President, General Counsel and 13,333
Assistant Secretary
Percy Chin.................. Vice President, General Manager -- East 5,333
China
Patrick Hau................. Vice President, General Manager -- National 6,333
Operations
Audie Wong.................. Vice President, General Manager -- North 6,667
China
Martin Liou................. General Manager -- Taiwan 2,333
Low Han Kee................. Regional Manager -- Malaysia 5,666
Preecha Prakobkit........... General Manager -- Thailand 6,666
Peter Williams.............. General Manager -- Australia 4,000
Betty Yeung................. General Manager -- South China 2,333
---------------
(1) Messrs. Van Andel and DeVos, as principal shareholders of Amway Asia
Pacific, directly or indirectly, control Apple Hold Co. and New AAP. See
"Ownership of Shares."
The disinterested directors and the special committee were aware of these
interests and considered them, among other matters.
TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES
As of September 30, 1999, the principal shareholders beneficially owned
47,943,530 shares of common stock of Amway Asia Pacific, constituting
approximately 85% of all shares of common stock issued and outstanding on that
date. Pursuant to the tender offer, which commenced on November 18, 1999 and
expired on December 17, 1999, the principal shareholders tendered an aggregate
of 1,128,580 shares of common stock. The tender offer was conducted by New AAP,
which acquired 8,181,756 shares of common stock of Amway Asia Pacific in the
tender offer. Immediately prior to the consummation of the tender offer, the
principal shareholders contributed 46,814,950 shares of common stock to Apple
Hold Co. As a result, Apple Hold Co. owns 97.4% of the Amway Asia Pacific
shares.
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The following table sets forth the number of shares of common stock
beneficially owned by the principal shareholders prior to the commencement of
the tender offer and after giving effect to the tender offer.
[Enlarge/Download Table]
NUMBER OF SHARES NUMBER OF SHARES
OWNED AS OF OWNED AS OF
SEPTEMBER 30, 1999 MARCH 15, 2000
SHAREHOLDER (PRE-TENDER OFFER) (AFTER TENDER OFFER)
----------- ------------------ --------------------
Jay Van Andel Trust....................................... 12,315,145
Subtrust Under Paragraph 3 of JVA Trust................... 11,092,330
Jay and Betty Van Andel Foundation........................ 564,290
Richard & Helen DeVos Foundation.......................... 564,290
Helen J. DeVos Article I Trust............................ 3,835,882
Richard M. DeVos, Jr. Article II Trust.................... 200,528
Daniel G. DeVos Article II Trust.......................... 200,528
Suzanne DeVos-VanderWeide Article II Trust................ 200,528
Douglas L. DeVos Article II Trust......................... 200,528
RDV Capital Management L.P. III........................... 1,000,000
Richard M. DeVos, Jr. 1995 Christmas Trust................ 1,955,184
Daniel G. DeVos 1995 Christmas Trust...................... 1,955,184
Suzanne DeVos-VanderWeide 1995 Christmas Trust............ 1,955,185
Douglas L. DeVos 1995 Christmas Trust..................... 1,955,185
New AAP Limited........................................... 8,181,756
Apple Hold Co., L.P....................................... 46,814,950
TOTAL..................................................... 47,943,530 54,996,706
In response to the tender offer, except for 4,000 shares of common stock
held by two directors, the officers and other directors of Amway Asia Pacific
tendered all of their shares of common stock, representing an aggregate of 9,200
shares. Currently, the officers and directors of Amway Asia Pacific beneficially
own 4,000 shares of common stock and 245,662 shares of common stock pursuant to
stock option agreements. These stock option agreements will be terminated by
Amway Asia Pacific prior to consummation of the amalgamation and these officers
and directors will receive cash for their options valued in accordance with the
Black-Scholes option pricing method.
Apple Hold Co., the parent of New AAP, is governed by a first amended and
restated limited partnership agreement dated as of November 12, 1999. Under the
partnership agreement, all authority for dealing with shares, including the
right to vote the shares and to dispose of the shares is vested in the general
partner, AP New Co, LLC. AP New Co. is governed by an operating agreement dated
as of November 12, 1999. Under the operating agreement, all management rights,
power and authority, including rights to exercise AP New Co.'s authority as
general partner of Apple Hold Co., are vested in the manager or managers of AP
New Co. Amway is the sole manager of AP New Co. Amway can be removed as manager
only with the unanimous approval of the members of AP New Co. which are RDV
Corporation and the Jay Van Andel Trust.
Amway, Apple Hold Co., AP New Co., and several principal shareholders
entered into an agreement that prohibits the parties from taking various actions
without approval of both of the members of AP New Co., including, without
limitation, the sale or transfer or other disposition by Apple Hold Co. or New
AAP of an interest in the common stock. The agreement also covers procedures to
be followed by the parties in connection with Amway Asia Pacific shareholder
meetings, including the placement of items on the agenda of any meeting of
shareholders, and the voting of shares. The agreement also provides an
arrangement under which the members of AP New Co. may have a right to direct how
Amway Asia Pacific shares owned or controlled by Apple Hold Co. are voted if
there is an imbalance in the number of shares owned or controlled by the DeVos
or Van Andel families and their affiliates.
30
In addition, the principal shareholders, Apple Hold Co. and New AAP have
entered into a shareholder and voting agreement, dated November 15, 1999.
Pursuant to the shareholder agreement, the principal shareholders agreed, among
other things, to cause Apple Hold Co. and New AAP, as the case may be, to vote,
and the principal shareholders, Apple Hold Co. and New AAP have agreed to vote
their shares in favor of the amalgamation. Because the principal shareholders,
indirectly through Apple Hold Co., beneficially own 97.4% of the outstanding
shares of Amway Asia Pacific and because Apple Hold Co. owns all of the
outstanding shares of New AAP, approval of the tender offer and amalgamation
agreement and the amalgamation is assured.
The principal shareholders of Amway Corporation and related family members
own 97.4% of the outstanding shares of common stock of Amway Asia Pacific.
Approximately 73% of Amway Asia Pacific's fiscal 1999 net sales were derived
from the distribution of products purchased from Amway. In addition, Amway has
granted each of Amway Asia Pacific's affiliates the exclusive right to use and
market the Amway trademark and individual product trademarks pursuant to various
contracts between Amway and Amway Asia Pacific's affiliates. Amway also provides
a broad range of management, administrative and technical assistance to Amway
Asia Pacific and its affiliates pursuant to various support services agreements
with the Amway Asia Pacific and each of its affiliates. Finally, Amway licensed
to Amway Asia Pacific the right to use the previously existing distributor lists
in Hong Kong and Taiwan. During fiscal 1999, pursuant to agreements between
Amway and Amway Asia Pacific and its affiliates, Amway Asia Pacific and its
affiliates paid Amway a total of $113.6 million for the purchase of products.
Amway, Amway Asia Pacific and each of its affiliates have also entered into
agreements pursuant to which Amway, on the one hand, and Amway Asia Pacific
and/or its affiliates (other than Amway Asia Pacific's Hong Kong branch and
Taiwan affiliate), on the other hand, each agreed to provide certain
indemnification rights to the other. Each agreed to be responsible for those
liabilities, known or unknown, that were incurred by it or originated with it.
For example, any tax liabilities properly attributable to Amway or any of its
subsidiaries (other than Amway Asia Pacific and its affiliates) are the
responsibility of Amway. In addition, in the event Amway Asia Pacific disposes
of stock of its subsidiaries, Amway Asia Pacific has agreed to pay Amway an
indemnity, on an after-tax basis, with respect to any United States federal
income tax liability incurred by Amway resulting from gain recognition
agreements between Amway and the U.S. Internal Revenue Service that were entered
into in connection with a reorganization by Amway Asia Pacific. Amway retained
liabilities associated with Amway Asia Pacific's Hong Kong branch.
No provision has been made by Amway Asia Pacific, New AAP or Apple Hold Co.
to grant unaffiliated shareholders access to their corporate files or to obtain
counsel or appraisal services at their expense.
ACCOUNTING TREATMENT OF THE AMALGAMATION
The amalgamation of Amway Asia Pacific and New AAP will be treated as a
combination of entities under common control and accounted for similar to a
pooling of interests. The acquisition of the minority shares outstanding is
accounted for using the purchase method of accounting in accordance with
generally accepted accounting principles.
REGULATORY APPROVALS
In connection with the amalgamation, Amway Asia Pacific, New AAP, Apple
Hold Co., and Messrs. Richard M. DeVos, Jr. and Stephen A. Van Andel will file a
Schedule 13E-3 transaction statement under Section 13(e) of the Exchange Act
that contains information with respect to the amalgamation. The Schedule 13E-3
may be examined and copies may be obtained from the Securities and Exchange
Commission at the same places and in the same manner as set forth in "The
Companies -- Amway Asia Pacific."
After the amalgamation has been approved by the Amway Asia Pacific
shareholders and the New AAP shareholders, Amway Asia Pacific, as the
amalgamated company, will apply to the Bermuda Registrar of Companies to
register the amalgamation and a certificate of amalgamation will be issued to
Amway Asia Pacific soon thereafter.
Amway Asia Pacific is not aware 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 amalgama-
31
tion or of any license or regulatory permit that appears to be material to its
business that might be adversely affected by the amalgamation.
Should any other approval or other action be required, Amway Asia Pacific
currently contemplates that it will seek the approval or other action. Amway
Asia Pacific cannot predict whether it may determine that it is required to
delay the payment for the shares upon conversion pursuant to the tender offer
and amalgamation agreement pending the outcome of any matter. There can be no
assurance that any approval or action, if needed, would be obtained or would be
obtained without substantial conditions.
CERTAIN EFFECTS OF THE AMALGAMATION
After the consummation of the amalgamation, all shares of Amway Asia
Pacific, other than shares held by Apple Hold Co. or the principal shareholders,
will be canceled and will cease to exist. Following the amalgamation, the
officers and directors of the surviving corporation will be the then current
officers and directors of Amway Asia Pacific.
As of March 15, 2000, Amway Asia Pacific had issued and outstanding
56,441,960 shares of common stock held by approximately 1,737 holders of record.
The principal shareholders hold, indirectly through Apple Hold Co., 54,996,706
shares of common stock, representing 97.4% of the issued and outstanding shares
of common stock.
NYSE and ASX Delisting. After consummation of the amalgamation, the shares
of common stock will be delisted from the NYSE and the ASX.
Exchange Act Deregistration. The shares of common stock of Amway Asia
Pacific are currently registered under the Securities Exchange Act of 1934.
Amway Asia Pacific will terminate registration under the Exchange Act as soon as
possible after consummation of the amalgamation.
FEES AND EXPENSES
The following table sets forth the expenses incurred or estimated to be
incurred in connection with the amalgamation:
[Download Table]
Filing Fees................................................. $ 0
Accounting and Legal Fees and Expenses...................... $67,000
Printing and Mailing........................................ $15,000
Miscellaneous............................................... $ 8,000
-------
Total*...................................................... $90,000
=======
---------------
* In connection with the tender offer, financial advisory fees and related
expenses of approximately $5,925,000 were incurred by Amway Asia Pacific and
New AAP.
APPRAISAL RIGHTS IN THE AMALGAMATION
At the effective time of the amalgamation, other than shares held by Apple
Hold Co. or the principal shareholders, each holder of a certificate will no
longer have any rights with respect to the shares, except the right to receive
the amalgamation consideration upon surrender of the certificates or, in the
case of a dissenting shareholder, the right to be paid the fair value of his or
her shares. Under Bermuda law, a dissenting shareholder is entitled to be paid
the fair value of his or her shares. In order to exercise appraisal rights, a
shareholder must not vote in favor of the amalgamation and must within one month
after the date of this proxy statement, apply to the Supreme Court of Bermuda to
appraise the fair value of his or her shares. There are no statutory rules
prescribing the process of appraisal by the court and it is generally considered
that the court will apply the general common law with a view to determining the
fair market value of the shares. For the complete text of appraisal rights under
Bermuda law, see Annex C to this proxy statement.
32
OWNERSHIP OF SHARES
The following table sets forth certain information, as of December 31,
1999, as to the security ownership of those persons owning of record or known to
Amway Asia Pacific to be the beneficial owner of more than 10% of the common
stock and the common stock ownership of Amway Asia Pacific's officers and
directors as a group. All information with respect to beneficial ownership has
been furnished by the respective 10% beneficial owner, officer or director, as
the case may be. Unless otherwise indicated, the persons named below have sole
voting and investment power with respect to the number of shares of common stock
set forth opposite their names.
[Enlarge/Download Table]
NUMBER OF SHARES OF PERCENTAGE OF SHARES
NAMES AND ADDRESSES COMMON STOCK OF COMMON STOCK
OF BENEFICIAL OWNERS BENEFICIALLY OWNED BENEFICIALLY OWNED
-------------------- ------------------- --------------------
New AAP Limited.......................................... 8,181,756(1) 14.5%
7575 Fulton Street,
East Ada, MI 49355
Apple Hold Co., L.P...................................... 54,996,706(2) 97.4%
7575 Fulton Street,
East Ada, MI 49355
All officers and directors as a group (14 persons)....... 249,662(3) *
---------------
* Less than one percent (1%).
(1) Acquired pursuant to the tender offer by New AAP to purchase all of the
outstanding shares of AAP which commenced on November 18, 1999 and expired
on December 17, 1999. New AAP is wholly owned by Apple Hold Co.
(2) Includes 8,181,756 shares (14.5%) of common stock held by its wholly-owned
subsidiary, New AAP. The limited partners of Apple Hold Co. are corporations
and trusts formed by or for the benefit of the DeVos and Van Andel families.
The general partner is AP New Co., LLC, a Nevada limited liability company,
the sole manager of which is Amway Corporation.
(3) Includes issued and outstanding options to purchase common stock. Pursuant
to the tender offer and amalgamation agreement, all issued and outstanding
options to purchase common stock will be converted into rights to receive
cash in accordance with the Black-Scholes option pricing method and will
require surrender of all options by the holders as of the effective date of
the amalgamation. In addition, Richard M. DeVos, Jr., Stephen A. Van Andel
and Douglas L. DeVos are executive officers of Amway, the sole manager of AP
New Co., the general partner of Apple Hold Co., and therefore beneficially
own 54,966,706 (97.4%) shares of common stock.
OTHER MATTERS
LEGAL PROCEEDINGS
On December 8, 1999, Robert Fisher commenced a purported class action
lawsuit in the Superior Court of the State of California, County of San Mateo,
captioned Fisher, et al. v. Amway Asia Pacific, Ltd., et al., No. 411303. The
complaint, which names as defendants Amway Asia Pacific, its officers and
directors and New AAP, alleges that the purchase price offered to the public
shareholders in connection with the tender offer was unfair and that in pursuing
the tender offer, defendants engaged in various manipulative and deceptive acts
and practices in breach of their fiduciary duties to the public shareholders.
The complaint seeks an injunction prohibiting defendants from proceeding with
the tender offer or, alternatively, rescission of the tender offer to the extent
already completed, unspecified damages, costs and attorneys' fees and other
relief. This action has been removed to the United States District Court,
Northern District of California and was assigned No. C00-00199 MEJ. Plaintiff
has moved to remand the action back to state court, and the parties are
currently briefing the motion.
On December 16, 1999, Robert F. Wardrop, II, commenced a purported class
action lawsuit in the United States District Court for the Southern District of
New York captioned Wardrop, et al. v. Amway Asia Pacific Ltd.,
33
et al., No. 99 Civ. 12093. The complaint, which names as defendants Amway Asia
Pacific, its officers and directors and New AAP, alleges that defendants
violated Section 14(e) of the Exchange Act, and Rules 14D-1 and 14D-9
promulgated pursuant thereto, by misrepresenting in the offer to purchase that
the purchase price offered to the public shareholders was fair. The complaint
seeks an injunction prohibiting the defendants from proceeding with the tender
offer or, alternatively, rescission of the tender offer to the extent already
completed or rescissory damages, costs and attorneys' fees and other relief.
Plaintiff has moved to be appointed lead plaintiff. Defendants have not opposed
this motion.
PROXY SOLICITATIONS
Amway Asia Pacific will bear the costs of soliciting proxies from its
shareholders. In addition to the use of the mails, proxies may be solicited by
the directors, officers and employees of Amway Asia Pacific by personal
interview, telephone or telegram. These directors, officers and employees will
not be additionally compensated for the solicitation, but may be reimbursed for
out-of-pocket expenses incurred. Arrangements will also be made with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of common stock held of record
by these persons, and Amway Asia Pacific will reimburse these brokerage houses,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred.
Amway Asia Pacific is not presently aware of any business to be acted upon
at the special meeting other than as described in the notice of special meeting.
If, however, any other matter properly comes before the special meeting, the
proxy holders will vote proxies in accordance with their discretion.
March 30, 2000
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY; THEREFORE, SHAREHOLDERS
ARE URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY IN THE REPLY ENVELOPE
PROVIDED WHETHER OR NOT THEY PLAN TO ATTEND THE SPECIAL MEETING.
34
ANNEX A
FAIRNESS OPINION
PERSONAL AND CONFIDENTIAL
November 15, 1999
Special Committee of the Board of Directors
Amway Asia Pacific, Ltd.
38/F, The Lee Gardens
33 Hysan Avenue
Causeway Bay, Hong Kong
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders (other than the Controlling Shareholders (as defined below))
of the outstanding shares of Common Stock, par value US$.01 per share (the
"Shares"), of Amway Asia Pacific, Ltd. (the "Company") of the US$18.00 per Share
in cash (the "Acquisition Price") to be received by such holders in the Tender
Offer and the Amalgamation or the Compulsory Acquisition (each as defined below)
pursuant to the Tender Offer and Amalgamation Agreement, dated as of November
15, 1999, among Apple Hold Co., L.P. ("Hold Co."), New AAP Limited ("Buyer") and
the Company (the "Agreement"). The Agreement provides for a tender offer (the
"Tender Offer") for all of the Shares, other than Shares owned by the DeVos and
Van Andel families and their affiliates (the "Controlling Shareholders"),
pursuant to which Buyer will pay the Acquisition Price for each Share accepted.
Buyer is an entity controlled and beneficially owned directly and indirectly by
the Controlling Shareholders of the Company, who currently beneficially own
84.9% of the Shares in the aggregate. The Agreement further provides that
following completion of the Tender Offer, the Company will be amalgamated with
Buyer, with the Company continuing as the amalgamated company (the
"Amalgamation"), and each outstanding Share (other than Shares already owned by
Hold Co. or the Controlling Shareholders) will be converted into the right to
receive the Acquisition Price. The Agreement also provides, however, that if
following Buyer's purchase of Shares pursuant to the Tender Offer Buyer has
purchased in the Tender Offer and/or owns a sufficient number of Shares
compulsorily to acquire the remaining outstanding Shares from the remaining
public holders of Shares pursuant to the Bermuda Companies Act of 1981, as
amended (the "Act"), the Company and Buyer may not consummate the Amalgamation
and instead Buyer will purchase the remaining outstanding Shares from the
remaining public holders of Shares pursuant to the Act for the Acquisition Price
(the "Compulsory Acquisition").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as financial advisor to the Special
Committee of the Board of Directors in connection with, and having participated
in certain of the negotiations leading to, the Agreement. Goldman, Sachs & Co.
also provides a full range of financial advisory and securities services and, in
the course of its normal trading activities, may from time to time effect
transactions and hold securities, including derivative securities, of the
Company for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 20-F of the
Company for the five fiscal years ended August 31, 1998; certain interim reports
to stockholders and Quarterly Reports on Form 6-K of the Company; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management. We
also have held discussions with members of the senior management of the Company
regarding its past and current business operations, financial condition and
future prospects. In addition, we have reviewed the reported price and trading
activity for the Shares, compared certain financial and stock market information
for the Company with similar information for certain other companies the
A-1
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In that regard, we have
assumed with your consent that the internal financial forecasts prepared by the
management of the Company have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the Company. In
addition, we have not made an independent evaluation or appraisal of the assets
and liabilities of the Company or any of its subsidiaries and we have not been
furnished with any such evaluation or appraisal. We note that the Controlling
Shareholders own a majority of the Shares, and that the Controlling Shareholders
have represented to Goldman Sachs and the Special Committee of the Board of
Directors of the Company that the Controlling Shareholders will not sell their
Shares to any third party. Accordingly, we were not requested to solicit, and
did not solicit, interest from other parties with respect to an acquisition of
or other business combination with the Company. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Special Committee of the Board of Directors of the Company in connection with
its consideration of the transactions contemplated by the Agreement and such
opinion does not constitute a recommendation as to whether or not any holder of
Shares should tender such Shares in connection with such transaction or should
vote in respect of the Amalgamation.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
US$18.00 per Share in cash to be received by the holders of Shares (other than
the Controlling Shareholders) in the Tender Offer and the Amalgamation or the
Compulsory Acquisition is fair from a financial point of view to such holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
A-2
ANNEX B
TENDER OFFER AND AMALGAMATION AGREEMENT
TENDER OFFER AND AMALGAMATION AGREEMENT
DATED
NOVEMBER 15, 1999
AMONG
AMWAY ASIA PACIFIC, LTD.,
APPLE HOLD CO., L.P.
AND
NEW AAP LIMITED
B-1
TABLE OF CONTENTS
[Download Table]
ARTICLE PAGE
------- ----
ARTICLE I INTERPRETATION.............................................. B-5
ARTICLE II THE OFFER AND AMALGAMATION.................................. B-5
2.1 The Offer................................................... B-5
2.2 Company Actions............................................. B-6
ARTICLE III THE AMALGAMATION; CONVERSION OF SHARES...................... B-6
3.1 The Amalgamation............................................ B-6
3.2 Conversion of Capital Stock................................. B-7
3.3 Exchange of Certificates.................................... B-7
3.4 Effective Time.............................................. B-8
3.5 Closing..................................................... B-8
3.6 Directors and Officers of the Amalgamated Company........... B-9
3.7 Further Assurances.......................................... B-10
ARTICLE IV SECTION 103 TRANSACTION..................................... B-10
4.1 Section 103 Transaction..................................... B-10
4.2 Option of Purchaser......................................... B-10
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... B-10
5.1 Organization and Qualification.............................. B-10
5.2 Capitalization of the Company............................... B-10
5.3 Power and Authority......................................... B-11
5.4 Recommendations............................................. B-11
5.5 Consents and Approvals; No Violation........................ B-11
5.6 Information Supplied........................................ B-11
5.7 Brokers and Finders......................................... B-12
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER................. B-12
6.1 Organization................................................ B-12
6.2 Power and Authority......................................... B-12
6.3 Consent and Approvals; No Violation......................... B-12
6.4 Information Supplied........................................ B-12
6.5 Purchaser's Operations...................................... B-12
6.6 Capitalization.............................................. B-12
6.7 Financing................................................... B-12
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF HOLD CO................... B-13
7.1 Organization................................................ B-13
7.2 Authority Relative to this Agreement........................ B-13
7.3 Consent and Approvals; No Violation......................... B-13
7.4 Hold Co.'s Operations....................................... B-13
7.5 Capitalization.............................................. B-13
7.6 Financing................................................... B-13
ARTICLE VIII ADDITIONAL COVENANTS........................................ B-13
8.1 Consents and Approvals...................................... B-13
8.2 Additional Actions.......................................... B-13
8.3 Shareholders Approval....................................... B-14
8.4 Indemnification, Exculpation And Insurance.................. B-14
ARTICLE IX CONDITIONS.................................................. B-15
9.1 Conditions to each Party's Obligations...................... B-15
ARTICLE X TERMINATION................................................. B-15
10.1 Termination................................................. B-15
10.2 Effect of Termination....................................... B-16
B-2
[Download Table]
ARTICLE PAGE
------- ----
ARTICLE XI GENERAL PROVISIONS.......................................... B-16
11.1 Amendment and Modification.................................. B-16
11.2 Nonsurvival of Representations and Warranties............... B-16
11.3 Notices..................................................... B-16
11.4 Definitions; Interpretation................................. B-17
11.5 Specific Performance........................................ B-17
11.6 Counterparts................................................ B-17
11.7 Entire Agreement; No Third Party Beneficiaries.............. B-17
11.8 Severability................................................ B-18
11.9 Governing Law............................................... B-18
11.10 Assignment.................................................. B-18
11.11 Extension; Waiver........................................... B-18
11.12 Procedure For Termination, Amendment, Extension Or Waiver... B-18
11.13 Announcements............................................... B-18
B-3
TENDER OFFER AND AMALGAMATION AGREEMENT
This Tender Offer and Amalgamation Agreement (this "Agreement") is made the
15th day of November 1999, by and among Amway Asia Pacific Ltd., a company
incorporated under the laws of Bermuda having its registered office at Clarendon
House, Church Street, Hamilton, Bermuda (the "Company"), Apple Hold Co., L.P., a
Bermuda limited partnership ("Hold Co.") controlled by the Principal
Shareholders (as defined herein), and New AAP Limited, a company incorporated
under the laws of Bermuda having its registered office at Clarendon House,
Church Street, Hamilton, Bermuda ("Purchaser").
RECITALS
WHEREAS, the special committee formed by the Board of Directors of the
Company (the "Special Committee") comprised exclusively of directors of the
Board of Directors not affiliated with the Principal Shareholders (as defined
below) has considered and acted upon a proposal received from Purchaser, which
is a wholly owned subsidiary of Hold Co. and an entity controlled and
beneficially owned, directly and indirectly, by the principal shareholders of
the Company (the "Principal Shareholders"), to acquire from all shareholders of
the Company (the "Shareholders"), all the outstanding shares of Common Stock,
$.01 par value per share (the "Company Common Stock" or the "Shares"), of the
Company (the "Acquisition");
WHEREAS, the Principal Shareholders have advised the Special Committee that
Purchaser intends to commence the Acquisition by first conducting a tender offer
(the "Offer") for all of the outstanding Shares;
WHEREAS, the Principal Shareholders have informed Purchaser that they will
not tender their Shares in response to the Offer, but such Principal
Shareholders will transfer their Shares ("Non-Tendered Shares") to Hold Co.
contemporaneously with the consummation of the Offer;
WHEREAS, in furtherance of the Acquisition, after the consummation of the
Offer and subject to Section 4.1, the Company and Purchaser will amalgamate (the
"Amalgamation"), and the Company will continue as the amalgamated company (the
"Amalgamated Company");
WHEREAS, if at any time after consummation of the Offer, Purchaser and Hold
Co. own, in the aggregate, 95 percent or more of the outstanding shares of the
Company Common Stock, then in such event Purchaser may, if it elects to do so in
lieu of the Amalgamation, compulsorily purchase the remaining Shares from the
remaining Shareholders pursuant to Section 103 of the Bermuda Companies Act of
1981, as amended (the "Act") at a price equal to the Amalgamation Consideration
(as defined below);
WHEREAS, having received the advice of financial and legal advisors, and
following negotiation of the terms of the Offer and this Agreement, the Special
Committee has unanimously determined that the Offer and the Amalgamation are
fair to, and in the best interests of, the holders of Shares, other than
Non-Tendered Shares (the "Public Shareholders"), and has advised the Board of
Directors of the Company that it has made such determination;
WHEREAS, the Board of Directors of the Company other than those who have
any interest in any proceedings of the Board of Directors with respect to the
transactions contemplated by this Agreement, who currently are Messrs. Richard
M. DeVos, Douglas L. DeVos, Jr., and Stephen A. Van Andel (the "Disinterested
Directors") (based upon the recommendation of the Special Committee) has
unanimously approved the Acquisition, upon the terms and subject to the
conditions set forth in this Agreement, and has unanimously adopted resolutions
approving this Agreement and recommending that the Public Shareholders accept
the Offer and tender their Shares in response to the Offer;
WHEREAS, the Board of Directors of Purchaser has approved the Offer and the
Amalgamation, upon the terms and subject to the conditions set forth in this
Agreement and has adopted resolutions approving this Agreement;
WHEREAS, the general partner of Hold Co., the sole shareholder of
Purchaser, has approved this Agreement and the Acquisition, upon the terms and
subject to the conditions hereinafter described; and
WHEREAS, except as otherwise contemplated by this Agreement, the Principal
Shareholders have agreed, and Hold Co. has agreed that after transfer to it of
the Non-Tendered Shares by the Principal Shareholders, not to
B-4
dispose of or otherwise transfer the Non-Tendered Shares, and Purchaser has
agreed not to dispose of or otherwise transfer any Shares purchased by it in the
Offer ("Purchased Shares"), in either case prior to consummation of the
Amalgamation or the transaction described in Article IV, as the case may be, and
the Principal Shareholders have agreed, and the Principal Shareholders have
agreed to cause Hold Co. and Purchaser, as the case may be, to vote, and Hold
Co. and Purchaser, as the case may be, have agreed to vote the Non-Tendered
Shares and Purchased Shares in favor of the Amalgamation or the transaction
described in Article IV, as the case may be, on the terms and subject to the
conditions set forth in the Shareholder and Voting Agreement (the "Shareholder
Agreement") in the form of Exhibit A attached hereto, which Shareholder
Agreement is being executed and delivered simultaneously with the execution and
delivery of this Agreement;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
INTERPRETATION
In this Agreement unless the context otherwise acquires:
(a) references to statutory provisions shall be construed as references to
those provisions as amended or re-enacted or as their application is modified by
other provisions from time to time and shall include references to any
provisions of which they are re-enactments (whether with or without
modification);
(b) references to the singular shall include the plural and vice versa and
references to the masculine shall include the feminine and/or neuter and vice
versa; and
(c) references to persons shall include companies, partnerships,
associations and bodies of persons, whether incorporated or unincorporated.
ARTICLE II
THE OFFER AND AMALGAMATION
2.1 THE OFFER.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article X, then (i) on or after the date of execution of this
Agreement, but in any event not later than November 15, 1999, Purchaser and the
Company shall publicly announce the Offer and (ii) Purchaser shall, as promptly
as possible, but in no event later than five Business Days (for purposes of this
Agreement, such term having the meaning given the Rule 14d-1 under the
Securities Exchange Act of 1934 (the "Exchange Act")) after the date of such
public announcement, commence (within the meaning of Rule 14d-2 under the
Exchange Act), the Offer to purchase all of the issued and outstanding Shares at
a price per share of U.S. $18.00, in cash (the "Offer Price"). Purchaser may
withhold and deduct amounts from such payments in accordance with Section
2.1(c). The Offer shall be made pursuant to an Offer to Purchase (the "Offer to
Purchase") and related Letter of Transmittal (the "Letter of Transmittal")
containing terms and conditions consistent with this Agreement. The obligation
of Purchaser to commence the Offer, conduct and consummate the Offer and accept
for payment, and pay for, any Shares properly tendered and not withdrawn
pursuant to the Offer shall not be subject to any conditions other than changes
in applicable laws that have the effect of making the Offer unlawful. Purchaser
expressly reserves the right, subject to compliance with the Exchange Act, to
modify the terms of the Offer except that, without the express written consent
of the Company, as authorized by the Special Committee, Purchaser shall not (i)
reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price,
(iii) change the form of consideration payable in the Offer or (iv) amend,
alter, add or waive any term of the Offer in any manner adverse to the holders
of the Shares. Purchaser shall as soon as practicable after the expiration date
of the Offer, accept for payment, and pay for all Shares validly tendered and
not properly withdrawn pursuant to the Offer.
(b) On the date of commencement of the Offer, Purchaser shall file with the
Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1, as supplemented or amended from time to time (the "Schedule
14D-1"), and Schedule 13E-3, as supplemented or amended from time to time (the
B-5
"Schedule 13E-3"), with respect to the Offer, which shall contain the Offer to
Purchase and the Letter of Transmittal, summary advertisement and any other
ancillary documents and instruments pursuant to which the Offer will be made
(such Schedule 14D-1, the Schedule 13E-3 and the documents included therein
pursuant to which the Offer will be made, together with any supplements or
amendments thereto, the "Offer Documents"). Purchaser agrees to take all
necessary steps to cause the Schedule 14D-1 and Schedule 13E-3 to be filed with
the SEC and the Offer Documents to be disseminated to holders of Shares, in each
case, as and to the extent required by applicable U.S. Federal securities laws.
Purchaser shall make all filings necessary in accordance with the laws of
Australia. The Company and its counsel, as well as the Special Committee and
their counsel, shall be given reasonable opportunity to review and comment upon
the Offer Documents prior to their filing with the SEC and prior to
dissemination to the Shareholders. Purchaser shall consider all comments in good
faith. Purchaser agrees to provide the Company, the Special Committee and their
counsel any comments Purchaser may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such comments.
(c) Purchaser shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to the Offer such amounts as may be
required to be deducted and withheld with respect to the payment of such
consideration under the Internal Revenue Code of 1986, as amended, or any other
tax under any provision of state, local or foreign tax law; provided, however,
that Purchaser shall promptly pay any amounts deducted and withheld hereunder to
the applicable governmental authority, shall promptly file all tax returns and
reports required to be filed in respect of such deductions and withholding, and
shall promptly provide to the Company proof of such payment and a copy of all
such tax returns and reports.
2.2 COMPANY ACTIONS.
(a) The Company hereby consents to the Offer.
(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer, as supplemented or amended from time to time
(the "Schedule 14D-9"), containing the recommendation of the Board of Directors
consisting of the Disinterested Directors described in Section 5.4(b) and shall
mail the Schedule 14D-9 to the Shareholders. The Company agrees to take all
steps necessary to cause the Schedule 14D-9 to be filed with the SEC and
disseminated to the Shareholders simultaneously with the Offer Documents, in
each case, as and to the extent required by applicable U.S. Federal securities
laws. Purchaser shall be given reasonable opportunity to review and comment upon
the Schedule 14D-9 prior to its filing with the SEC or dissemination to the
Shareholders, and the Company shall consider such comments in good faith. The
Company agrees to provide Purchaser any comments the Company or its counsel may
receive from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments.
(c) In connection with the Offer and the Amalgamation, the Company shall
cause its transfer agent and its depositary to furnish Purchaser promptly with
mailing labels containing the names and addresses of the record holders of
Shares as of a recent date and of those persons becoming record holders
subsequent to such date, together with copies of all lists of Shareholders,
security position listings and computer files and all other information in the
Company's possession or control regarding the beneficial owners of Shares, and
shall furnish to Purchaser such information and assistance, including updated
lists of shareholders, security position listings and computer files, as
Purchaser may reasonably request in communicating the Offer to the Shareholders.
Purchaser shall use such labels and other information solely to effect the
Amalgamation and the Acquisition.
ARTICLE III
THE AMALGAMATION;
CONVERSION OF SHARES
3.1 THE AMALGAMATION.
(a) At the time the Amalgamation becomes effective pursuant to the Act (the
"Effective Time") Purchaser and the Company shall amalgamate on the terms and
subject to the conditions hereof and in accordance with Part VII of the Act. The
Company and Purchaser shall consummate the Amalgamation pursuant to which (i)
Purchaser and the Company shall amalgamate with the Company continuing as the
Amalgamated Company and (ii) all the
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rights, privileges, immunities, powers and franchises of Purchaser and the
Company shall be those of the Amalgamated Company.
(b) Following the consummation of the Amalgamation, (i) the name of the
Amalgamated Company shall be "Amway Asia Pacific Ltd.", (ii) the Memorandum of
Association of the Amalgamated Company shall be that of the Company and (iii)
the Bye-laws of the Amalgamated Company shall be those of the Company.
3.2 CONVERSION OF CAPITAL STOCK. At the Effective Time, by virtue of the
Amalgamation and without any action on the part of Purchaser, the Company or the
holders of any shares of Company Common Stock or Purchaser's common stock, U.S.
$.01 par value per share ("Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and outstanding share of Purchaser
Common Stock shall be converted into and become one (1) fully paid and
nonassessable share of common stock of the Amalgamated Company.
(b) Conversion of Shares. Each issued and outstanding share of Company
Common Stock (excluding shares of Company Common Stock owned by Hold Co. or the
Principal Shareholders, which shall remain outstanding) shall be canceled in
consideration for a payment in cash to the holder thereof of an amount equal to
the Offer Price, or if the Offer Price is increased, such increased price,
without interest (the "Amalgamation Consideration"), upon surrender of the
certificate formerly representing such shares of Company Common Stock in the
manner provided in Section 3.3 provided, that shares of Company Common Stock
owned by Purchaser shall not receive the Amalgamation Consideration. There will
be deducted from the Amalgamation Consideration paid to each holder any U.S.
backup or other applicable withholding taxes which may be required to be
withheld. Except for shares of Company Common Stock owned by Hold Co., all
shares of Company Common Stock (excluding shares issued pursuant to subsection
(a) of this Section 3.2), at the Effective Time, shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the Amalgamation
Consideration therefor upon the surrender of such certificate in the manner
prescribed in Section 3.3, without interest.
(c) Stock Options. At the Effective Time and pursuant to the terms
governing warrants, options and other rights to acquire Company Securities (as
defined in Section 5.2(a)), all issued and outstanding warrants, options and
other rights to acquire Company Securities (as defined in Section 5.2(a)) shall
be converted into rights to receive cash in accordance with the Black-Scholes
Option Pricing Model and will require in connection therewith the surrender of
all awards to acquire Company Securities as of the Effective Time. No holder of
any such warrant, option or other right shall be entitled to receive
consideration in the form of Company Securities from the Company by virtue of
the Acquisition.
(d) Shares of Dissenting Shareholders. Notwithstanding anything in this
Agreement to the contrary, in connection with the Amalgamation (if it becomes
effective), holders of shares of Company Common Stock shall have rights pursuant
to Section 106 of the Act, provided such holders comply with the provisions of
such Section. For purposes of applying the foregoing provisions of the Act, the
date of the corporate action triggering the obligation to provide notice of
dissenters rights to the holders of shares of Company Common Stock shall be the
date on which notice of the shareholder's meeting to approve the Amalgamation is
deemed to be received by such holders.
3.3 EXCHANGE OF CERTIFICATES.
(a) Paying Agent. Purchaser shall designate a bank or trust company to act
as agent for the holders of shares of Company Common Stock in connection with
the Amalgamation (the "Paying Agent") to receive the funds to which holders of
shares of Company Common Stock shall become entitled pursuant to Section 3.2(b).
Purchaser shall deposit with the Paying Agent cash in an amount equal to the
product of (i) the number of shares of Company Common Stock required to be
converted pursuant to Section 3.2(b), multiplied by (ii) the Amalgamation
Consideration. The deposit made by Purchaser pursuant to the preceding sentence
is hereinafter referred to as the "Payment Fund." The Paying Agent shall cause
the Payment Fund to be (i) held for the benefit of the holders of shares of
Company Common Stock, and (ii) promptly applied to making the payments provided
for in Section 3.2(b). The Payment Fund shall not be used for any purpose that
is not provided for herein. Such funds shall be invested by the Paying Agent as
directed by Purchaser.
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(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose shares of Company Common Stock will have been converted pursuant to
Section 3.2 into the right to receive the Amalgamation Consideration (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
provisions as Purchaser and the Company may reasonably specify) and related
materials, including, without limitation, a Substitute Form W-9 and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Amalgamation Consideration. Upon surrender of a Certificate
for cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Purchaser, together with such letter of transmittal and related
materials, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor the Amalgamation Consideration for each share of
Company Common Stock formerly represented by such Certificate and the
Certificate so surrendered shall forthwith be canceled. If payment of the
Amalgamation Consideration is to be made to a person other than the person in
whose name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Amalgamation Consideration to a person other than the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of Amalgamated Company that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 3.3, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Amalgamation Consideration in cash, without
interest, as contemplated by this Section 3.3.
(c) Termination of Fund; No Liability. At any time following twelve months
after the Effective Time, the Amalgamated Company shall be entitled to require
the Paying Agent to deliver to it any funds, including any interest received
with respect thereto, which had been made available to the Paying Agent and
which have not been disbursed to holders of Certificates, and thereafter such
holders shall be entitled to look to the Amalgamated Company, subject to
abandoned property, escheat or other similar laws, only as general creditors
thereof with respect to the Amalgamation Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, neither the Amalgamated Company nor the Paying Agent shall be
liable to any holder of a Certificate for Amalgamation Consideration delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(d) Lost Certificates. In the event any Certificates shall have been lost,
stolen or destroyed, the Paying Agent shall pay in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, the Amalgamation Consideration, if any, as may be
required pursuant to Section 3.2(b); provided, however, that Purchaser may, in
its discretion and as a condition precedent to the payment thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct against any claim that may be made against
Purchaser, the Amalgamated Company or the Paying Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
(e) Investment of Payment Fund. The Paying Agent will invest the cash in
the Payment Fund, as directed by Purchaser, on a daily basis. Any interest and
other income resulting from investments will be paid to Purchaser.
3.4 EFFECTIVE TIME. On the date of Closing (as defined in Section 3.5),
the parties will cause appropriate documents as required under the Act to be
filed with the Registrar of Companies (the "Registrar of Companies"). The
Amalgamation will become effective when the certificate of amalgamation is
issued by the Registrar of Companies. The time the Amalgamation becomes
effective shall be referred to as the "Effective Time".
3.5 CLOSING. The Closing of the Amalgamation (the "Closing") will take
place at 9:00 a.m., Cleveland time, on a date to be specified by the parties,
which shall be as soon as practicable following the satisfaction or waiver of
the conditions set forth in Article IX (or on such other date as Purchaser and
the Company may agree), but in any event no later than the second Business Day
after satisfaction or waiver of all of the conditions set forth in Article IX
hereof (the "Closing Date"), at the offices of Jones, Day, Reavis & Pogue, North
Point, 901
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Lakeside Avenue, Cleveland, Ohio 44114-1190, unless another date or place is
agreed to in writing by the parties hereto.
3.6 DIRECTORS AND OFFICERS OF THE AMALGAMATED COMPANY. The names and
addresses of the persons proposed to be directors and officers of the
Amalgamated Company are as follows:
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NAME POSITION ADDRESS CITY, STATE
---- -------- ------- -----------
Stephen A. Van Andel Chairman, Director 7685 Leonard, N.E. Ada, Michigan 49301
Richard M. DeVos, Jr. President, Director 2003 Hillsboro, S.E. Grand Rapids, Michigan 49546
Douglas L. DeVos Director 2020 Devonwood, SE Grand Rapids, Michigan 49546
Eoghan M. McMillan Director C-58 Repulse Bay Apartments, Repulse Bay, Hong Kong
101 Repulse Bay Road
Jack C.K. So Director 402A Villa Verde, Hong Kong
16 Guildford Road
John C.C. Chan Director Flat A, 7th Floor, Hong Kong
Glory Heights,
52 Lyttelton Road
Lai-Huat Choong Director 7, Jalan Turi, 59100 Kuala Lumpur, Malaysia
Bukit Bandaraya
Eva Cheng Executive Vice Block 1-A, 33rd Floor, Hong Kong
President; Director Clovelly Court;
12 May Road,
Mid-levels
Lynn Lyall Chief Financial 1755 Park Trail, NE Grand Rapids, MI 49525
Officer, Vice
President and
Treasurer
Lawrence M. Call Vice President 38 Campau Circle, NW Grand Rapids, Michigan 49503
Craig N. Meurlin Vice President, 6525 Donnegal Lane, SE Grand Rapids, Michigan 49546
General Counsel and
Assistant Secretary
John C. Brockman Vice President, 7425 Kenrob, SE Grand Rapids, Michigan 49546
Distributor Relations
Percy Chin Vice President, Suite 1103, Shangai, PRC; 200030
General Chun Lan Apartment,
Manager -- East China Magnolia Garden,
50 Pu Hui Tang Road
Patrick Hau Vice President, Flat 7B, Dynasty Court, Hong Kong
General Tower 5,
Manager -- National 23 Old Peak Road
Operations
Audie Wong Vice President, Villa 418 Beijing, PRC 100103
General Manager -- Beijing Riviera, No. 1,
North China Xiang Jiang Bei Road,
Chaoyang District
Martin Liou General Manager -- No. 5, Lane 3, Taoyuan, Taipei R.O.C.
Taiwan Chun-Pou 5th St.
Low Han-Kee Regional Manger -- 16, Jalan SS26/3; 47301, Selangor, Malaysia
Malaysia Petaling Jaya
Preecha Prakobkit General Manager -- 335 Lad Prao 101 Bangkapi, Bangkok 10240
Thailand Thailand
Peter Williams General Manager -- 25 Cadwells Road, Sydney, Australia 2156
Australia Kenthurst
Betty Yeung General Manager -- 923 King's Road, Quarry Bay, Hong Kong
South China 9/Floor,
Ritz Mansion
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NAME POSITION ADDRESS CITY, STATE
---- -------- ------- -----------
John C.R. Collis Secretary "Saltcoats," Warwick WK06, Bermuda
10 Keith Hall Road
3.7 FURTHER ASSURANCES. If, at any time after the Effective Time, any
further action is necessary or desirable to consummate the Amalgamation, to
carry out the purposes of this Agreement or to vest the Amalgamated Company with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Purchaser, the officers and directors
of the Company and Purchaser are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
ARTICLE IV
SECTION 103 TRANSACTION
4.1 SECTION 103 TRANSACTION. Notwithstanding anything stated or
contemplated in this Agreement to the contrary and in particular notwithstanding
Article III, the Company and Purchaser need not amalgamate if at any time after
consummation of the Offer, Purchaser and Hold Co. own, in the aggregate, 95
percent or more of the outstanding shares of the Company Common Stock. In such
event, Purchaser may, if it elects to do so in lieu of the Amalgamation,
compulsorily purchase the remaining outstanding Shares from the remaining Public
Shareholders pursuant to Section 103 of the Act for a per share consideration
equal to the Amalgamation Consideration. In the event the Shares of the
remaining Shareholders are purchased pursuant to Section 103 of the Act, such
remaining Public Shareholders will have the rights granted to them in accordance
with Section 103 of the Act, including dissenters' rights.
4.2 OPTION OF PURCHASER. If, as a result of or following the Offer,
Purchaser is able to effect the transaction set forth in Sections 4.1, Purchaser
shall elect, in its sole discretion, whether to implement such transaction or to
effect the Amalgamation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser and Hold Co. as follows:
5.1 ORGANIZATION AND QUALIFICATION. The Company has been duly incorporated
and is validly existing as a corporation under the laws of Bermuda.
5.2 CAPITALIZATION OF THE COMPANY.
(a) As of the date hereof, the authorized capital stock of the Company
consists of 110,000,000 shares of Common Stock. All outstanding shares of
capital stock of the Company have been validly issued, and are fully paid and
nonassessable. As of the date hereof, there are 448,500 shares of Common Stock
subject to issuance upon exercise of outstanding options, warrants, or other
rights to purchase capital stock of the Company from the Company. Except as set
forth above, there are outstanding (A) no shares of capital stock or other
securities of the Company, (B) no securities of the Company convertible into or
exchangeable for shares of capital stock or securities of the Company, (C) no
options, subscriptions, warrants, convertible securities, calls or other rights
to acquire from the Company, and no obligation of the Company to issue, deliver
or sell, any capital stock, securities or securities convertible into or
exchangeable for capital stock or securities of the Company, and (D) no equity
equivalents, performance shares, interests in the ownership or earnings of the
Company or other similar rights issued by the Company (the items referred to in
clauses (A)-(D) are referred to herein as "Company Securities"). As of the date
hereof, (i) there are no outstanding obligations of the Company to repurchase,
redeem or otherwise acquire any Company Securities, (ii) no agreement, other
document or other obligation that grants or imposes on any Company Securities
any right, preference, privilege or restriction with respect to the transactions
contemplated hereby, including, without limitation, any rights of first refusal,
(iii) there are no bonds, debentures, notes or other indebtedness having general
voting rights (or convertible into securities having such rights) of the Company
issued and outstanding and (iv) the Company is not a party or bound to, and to
the Company's
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knowledge there are no other, voting agreements, lock-up agreements or similar
agreements or arrangements restricting or affecting outstanding Company
Securities.
(b) All issued and outstanding warrants, options and other rights to
acquire Company Securities will, as of or prior to the Effective Time, be
substituted for such alternative consideration as the Board of Directors of the
Company may in good faith determine to be equitable under the circumstances
surrounding the Acquisition and will require in connection therewith the
surrender of all awards to acquire Company Securities as of the Effective Time.
No holder of any such warrant, option or other right shall be entitled to
receive consideration in the form of Company Securities from the Company by
virtue of the Acquisition.
5.3 POWER AND AUTHORITY. The Company has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company.
5.4 RECOMMENDATIONS.
(a) On November 15, 1999, the Special Committee received an opinion from
its financial advisor, Goldman, Sachs & Co. ("Goldman") to the effect that the
Offer Price to be received by the Public Shareholders in the Offer and the
Amalgamation Consideration or the consideration to be received in the compulsory
acquisition pursuant to Section 103 of the Act pursuant to this Agreement is
fair from a financial point of view to the Public Shareholders. A complete and
correct signed copy of such opinion will be delivered to Purchaser for purposes
of inclusion in the Offer Documents. At a meeting duly called and held on
November 15, 1999, the Special Committee duly, validly and unanimously (i)
determined that the Offer and the Amalgamation are fair to, and in the best
interests of, the Public Shareholders, (ii) recommended to the Board of
Directors that the Board of Directors approve, authorize and adopt this
Agreement, the Amalgamation and the other transactions contemplated hereby, and
(iii) resolved to recommend that the Public Shareholders accept the Offer and
tender their Shares in response to the Offer.
(b) The Board of Directors consisting of the Disinterested Directors, at a
meeting duly called and held on November 15, 1999, based, among other things, on
the recommendation of the Special Committee, unanimously (i) determined that the
Offer and the Amalgamation are fair to, and in the best interests of, the Public
Shareholders, (ii) approved, authorized and adopted this Agreement, the
Amalgamation and the other transactions contemplated hereby, (iii) resolved to
recommend that the Public Shareholders accept the Offer and tender their Shares
in response to the Offer, and (iv) took the action required to cause all issued
and outstanding warrants, options and other rights to acquire Company Securities
to be substituted for rights to acquire consideration other than Company
Securities, as of or prior to the Effective Time.
5.5 CONSENTS AND APPROVALS; NO VIOLATION. The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby and the performance by the Company of its obligations hereunder will not:
(a) conflict with or violate any provision of the Company's Memorandum of
Association or Bye-laws; or
(b) require on the part of the Company any consent, approval, order,
authorization or permit of, or registration, filing or notification to, any
Governmental Authority (as hereinafter defined), except for (i) the filing with
the SEC of such reports under the Exchange Act as may be required in connection
with this Agreement (including, without limitation, the Schedule 14D-9), and the
transactions contemplated hereby, (ii) the filing of the Articles of
Amalgamation with the Registrar of Companies, and (iii) such additional actions
or filings which, if not taken or made, would not, singly or in the aggregate,
have a material adverse effect on the condition, financial or otherwise, the
earnings, business affairs or business prospects of the Company or the
consummation of the transactions contemplated by this Agreement.
5.6 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company specifically for use in the Offer Documents will, at the
time filed with the SEC or as of the date mailed to the Shareholders, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
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5.7 BROKERS AND FINDERS. Except for payments required to be made to
Goldman, the Company will not or has not, directly or indirectly, become
obligated to pay any person or entity any brokerage fee, finder's fee,
investment banking fee or agent's fee as a result of the entering into of this
Agreement or any of the transactions contemplated hereby.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company and Hold Co. as follows:
6.1 ORGANIZATION. Purchaser is a company duly incorporated and is validly
existing as a corporation under the laws of Bermuda. Purchaser is a wholly owned
subsidiary of Hold Co.
6.2 POWER AND AUTHORITY. Purchaser has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby on the part of Purchaser
have been duly and validly authorized by its board of directors and its sole
shareholder and no other corporate proceedings on the part of Purchaser are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Purchaser.
6.3 CONSENT AND APPROVALS; NO VIOLATION. The execution and delivery by
Purchaser of this Agreement do not, and the consummation of the transactions
contemplated hereby and the performance by Purchaser of its obligations
hereunder will not:
(a) conflict with or violate any provision of Purchaser's Memorandum of
Association or Bye-laws; or
(b) require on the part of Purchaser any consent, approval, order,
authorization or permit of, or registration, filing or notification to, any
Governmental Authority (as hereinafter defined), except for (i) the filing by
Purchaser with the SEC of such reports under the Exchange Act as may be required
in connection with this Agreement (including, without limitation, the Schedule
14D-1 and the Schedule 13E-3), and the transactions contemplated hereby and (ii)
such additional actions or filings which, if not taken or made, would not,
singly or in the aggregate, have a material adverse effect on the condition,
financial or otherwise, the earnings, business affairs or business prospects of
Purchaser or the consummation of the transactions contemplated by this
Agreement.
6.4 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Purchaser or the Principal Shareholders specifically for use in the
Schedule 14D-9 will, at the time filed with the SEC or as of the date mailed to
the Shareholders, contain any untrue statement of a material fact or will omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances in which they
are made, not misleading.
6.5 PURCHASER'S OPERATIONS. Purchaser was incorporated solely for the
purpose of engaging in the transactions contemplated hereby and has not engaged
in any business activities or conducted any operations other than to facilitate
the transactions contemplated hereby.
6.6 CAPITALIZATION. All of the capital stock of Purchaser has been duly
and validly issued and is held of record and owned beneficially solely by Hold
Co.
6.7 FINANCING. Purchaser has, or will have as of the date of consummation
of the Offer, all funds necessary to purchase all Shares accepted for payment in
the Offer. Purchaser has, or will have as of the date of
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consummation of the Amalgamation or the transaction contemplated by Section 4.1,
all funds necessary to consummate the applicable transaction.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF HOLD CO.
Hold Co. represents and warrants to the Company and Purchaser as follows:
7.1 ORGANIZATION. Hold Co. is a limited partnership duly organized,
validly existing and in good standing under the laws of Bermuda.
7.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Hold Co. has all requisite
limited partnership power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby on the part of Hold Co. have been duly and validly authorized by the
general partner of Hold Co. and no other limited partnership proceedings on the
part of Hold Co. are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Hold Co.
7.3 CONSENT AND APPROVALS; NO VIOLATION. The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
hereby and the performance by Hold Co. of its obligations hereunder will not:
(a) conflict with any provision of the certificate of formation of Hold
Co.; or
(b) require on the part of Hold Co. any consent, approval, order,
authorization or permit of, or registration, filing or notification to, any
Governmental Authority (as hereinafter defined) or any third party.
7.4 HOLD CO.'S OPERATIONS. Hold Co. was formed solely for the purpose of
engaging in the transactions contemplated hereby and has not engaged in any
business activities or conducted any operations other than to facilitate the
transactions contemplated hereby.
7.5 CAPITALIZATION. All of the partnership interests of Hold Co. have been
duly and validly issued and are held of record and owned beneficially solely by
the Principal Shareholders.
7.6 FINANCING. Purchaser has, or will have as of the date of consummation
of the Offer, all funds necessary to purchase all Shares accepted for payment in
the Offer. Purchaser has, or will have as of the date of consummation of the
Amalgamation or the transaction contemplated by Section 4.1, all funds necessary
to consummate the applicable transaction.
ARTICLE VIII
ADDITIONAL COVENANTS
The parties hereto further agree as follows:
8.1 CONSENTS AND APPROVALS. The parties hereto shall cooperate with each
other and use commercially reasonable efforts to promptly prepare and file all
necessary documentation, to effect all applications, notices, petitions and
filings, to obtain as promptly as practicable all permits, consents, approvals
and authorizations of all third parties ("Third Party Approvals") and Bermuda,
U.S. Federal, state and local governmental and any foreign governmental agencies
and authorities ("Governmental Authority") which are necessary or advisable to
consummate the transactions contemplated by this Agreement ("Governmental
Approvals" and, together with Third Party Approvals, "Approvals"), and to comply
with the terms and conditions of all such Approvals.
8.2 ADDITIONAL ACTIONS. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, to consummate and make
effective the Offer, the Amalgamation and the other transactions contemplated by
this Agreement.
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8.3 SHAREHOLDERS APPROVAL. The Company shall, as soon as practicable after
the consummation of the Offer, take all steps necessary (a) to duly call, give
notice of, convene and hold a meeting of the Shareholders (the "Shareholder
Meeting") for the purpose of securing the approval by the Shareholders
("Shareholder Approval") of the Amalgamation or (b) to the extent Purchaser
elects under Section 4.2 to pursue the transaction described in Sections 4.1, to
effect such transaction as has been so elected.
8.4 INDEMNIFICATION, EXCULPATION AND INSURANCE.
(a) The Company agrees that all rights to indemnification and exculpation
(including the advancement of expenses) from liabilities for acts or omissions
occurring at or prior to the Effective Time (including with respect to the
transactions contemplated by this Agreement) existing now or at the Effective
Time in favor of the current or former directors or officers of the Company (the
"Indemnified Parties") as provided in the Company Memorandum of Association, the
Company Bye-Laws and any indemnification agreements (each as in effect on the
date hereof) shall be assumed by the Amalgamated Company in the Amalgamation,
without further action, as of the Effective Time and shall survive the
Amalgamation and shall continue in full force and effect without amendment,
modification or repeal for a period not less than the statute of limitations
applicable to such matters; provided, however, that if any claims are asserted
or made during the continuance of such period, all rights to indemnification
(and to advancement of expenses) hereunder in respect of any such claims shall
continue, without diminution, until disposition of any and all such claims.
(b) To the extent paragraph (a) shall not serve to indemnify and hold
harmless an Indemnified Party, for a period of six years from and after the
Effective Time, the Amalgamated Company shall indemnify, defend and hold
harmless the Indemnified Parties against all losses, claims, damages, costs,
expenses (including reasonable attorneys' fees and expenses), liabilities or
judgments of or in connection with any threatened or actual claim, action, suit,
proceeding or investigation (an "Action") arising out of or pertaining to such
individuals' services, prior to the Effective Time, as directors, officers or
employees of the Company, including, without limitation, matters based in whole
or in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the full
extent permitted by applicable law.
(c) The Amalgamated Company shall (i) maintain for a period of not less
than six years from the Effective Time the Company's current directors' and
officers' insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time (the "D&O Insurance"),
for all persons who are directors or officers of the Company on the date of this
Agreement (the "Insured Parties") or (ii) cause to be provided coverage no less
advantageous to the Insured Parties than the D&O Insurance, in each case so long
as the annual premium therefor would not be in excess of 150% of the last annual
premium paid for the D&O Insurance prior to the date of this Agreement (such
150% amount, the "Maximum Premium"). If the existing D&O Insurance expires, is
terminated or canceled during such six-year period, the Amalgamated Company will
use all reasonable efforts to cause to be obtained as much D&O Insurance as can
be obtained for the remainder of such period for an annualized premium not in
excess of the Maximum Premium.
(d) The provisions of this Section 8.4 shall survive the consummation of
the Acquisition and are intended to be for the benefit of, and will be
enforceable by, each indemnified or insured party, his or her heirs and his or
her representatives and (ii) are in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such person may
have by contract or otherwise. The Company or the Amalgamated Company, as
applicable, shall pay the reasonable expenses, including reasonable attorneys'
fees, that may be incurred by any Indemnified Parties in enforcing rights to
which such Indemnified Parties are entitled under the provisions of this Section
8.4.
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ARTICLE IX
CONDITIONS
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
the parties to effect the Amalgamation or the transaction contemplated by
Article IV, as the case may be, shall be subject to the satisfaction or waiver,
on or prior to the Closing Date, of the following conditions:
(a) Shareholder Approval. Unless the transaction contemplated by Article IV
is consummated in lieu of the Amalgamation, prior to consummation of the
Amalgamation, this Agreement and the Amalgamation shall have been approved by
the Shareholders required by and in accordance with applicable law.
(b) Governmental Approvals. Other than the filing of the Articles of
Amalgamation in accordance with the Act, all Governmental Approvals required to
be obtained and all material filings, notices or declarations with or to
Governmental Authorities required to be made by the parties and their
Subsidiaries, officers, directors and affiliates in order to consummate the
Amalgamation or the transaction contemplated by Article IV, as the case may be,
shall have been obtained or made, and no such approval shall contain any
conditions, limitations or restrictions, other than any deviation from the
foregoing that does not have and may not reasonably be expected to have a
material adverse effect on the ability of each of the Company or Purchaser, as
the case may be, to perform its obligations under this Agreement or to
consummate the Amalgamation or the transaction contemplated by Article IV, as
the case may be.
(c) Legal Action; Statutes. No governmental entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order which is in effect and has the effect of making the
Amalgamation or the transaction contemplated by Article IV, as the case may be,
illegal or prohibits the Company or Purchaser from consummating the Amalgamation
or the transaction contemplated by Article IV.
(d) Closing of Tender Offer. Purchaser shall have (i) commenced the Offer
pursuant to Article II hereof and (ii) purchased, pursuant to the terms and
conditions of such Offer, all Shares duly tendered and not withdrawn; provided,
however, that Purchaser shall not be entitled to rely on the condition in this
Section 9.1(d) if Purchaser shall have failed to commence the Offer or purchase
Shares pursuant to the Offer in breach of its obligations under this Agreement.
ARTICLE X
TERMINATION
10.1 TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement and the Offer may be terminated and the
Amalgamation or transaction contemplated by Article IV may be abandoned at any
time prior to the Effective Time, whether before or after Shareholder Approval
thereof:
(a) By Mutual Consent. By mutual consent of Purchaser or Hold Co. on the
one hand and the Company acting through the Board of Directors consisting of the
Disinterested Directors on the other.
(b) By Purchaser or the Company. By Purchaser or the Company, if any
governmental entity enacts, issues, promulgates, enforces or enters any statute,
rule, regulation, injunction or other order which is in effect and has the
effect of making the Offer, the Amalgamation or the transaction contemplated by
Article IV, as the case may be, illegal or prohibits Purchaser from buying
Shares in the Offer or prohibits the Company or Purchaser from consummating the
Amalgamation or otherwise prohibits, directly or indirectly, consummation of the
transactions contemplated by this Agreement, including the transaction
contemplated by Article IV or if the conditions to consummation of the Offer or
the Amalgamation cannot be satisfied; provided, however, that the right to
terminate this Agreement under this Section 10.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of , or resulted directly or indirectly in, the failure of such
condition to occur on or before the Effective Time.
(c) By the Company: By the Company (acting through the Board of Directors
consisting of the Disinterested Directors), if Purchaser (A) fails to commence
the Offer within five Business Days of the public announcement by Purchaser and
the Company of the Offer, or (B) fails to pay for Shares pursuant to the Offer
in accordance with Section 2.1(a) hereof.
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10.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 10.1 above, written notice thereof shall forthwith be
given to the other parties specifying the provision hereof pursuant to which
such termination is made, and this Agreement (except as to those portions of the
Acquisition which, at the date of termination, have been consummated) shall
forthwith become null and void and there shall be no liability or obligation on
the part of the parties hereto or their respective officers, directors or
employees, except to the extent arising under applicable law and for willful
breach hereof.
ARTICLE XI
GENERAL PROVISIONS
11.1 AMENDMENT AND MODIFICATION. Subject to applicable law and subject to
Section 11.12, this Agreement may be amended, modified and supplemented in any
and all respects by written agreement of the parties hereto; provided, however,
that after approval of this Agreement by the Shareholders, no such amendment,
modification or supplement shall reduce or change the form of the Amalgamation
Consideration.
11.2 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement shall survive, in the case of
the Offer, the date upon which the Offer is consummated, in the case of the
Amalgamation, the Effective Time, and, in the case of the transaction described
in Article IV, the date upon which such transaction is consummated. This Section
11.2 shall not limit any covenant or agreement of the parties hereto which by
its terms contemplates performance after (a) the date of consummation of the
Offer, (b) the Effective Time or (c) the date of consummation of the transaction
described in Article IV.
11.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given upon personal delivery, facsimile transmission
(which is confirmed), telex or delivery by an overnight express courier service
(delivery, postage or freight charges prepaid), or on the fourth day following
deposit in the mail (if sent by registered or certified mail, return receipt
requested, delivery, postage or freight charges prepaid), addressed to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to the Company:
Special Committee
c/o Amway Asia Pacific, Ltd.
38/F The Lee Gardens
33 Hysan Avenue
Causeway Bay
Hong Kong
Attention: Eoghan McMillan
Telephone: 852/2506-1806
Facsimile: 852/2524-9902
E-mail: Eoghan.McMillan@RoProperty.com
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006-1470
Attention: Daniel S. Sternberg, Esq.
Telephone: 212/225-2630
Facsimile: 212/225-3999
E-mail: dsternberg@cgsh.com
(b) If to Hold Co.:
Apple Hold Co., L.P.
7575 Fulton Street East
Ada, Michigan 49355
B-16
Attention: Craig N. Meurlin, Esq.
Telephone: 616/787-8305
Facsimile: 616/787-5623
E-mail: craigmeurlin@amway.com
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Thomas C. Daniels, Esq.
Telephone: 216/586-3939
Facsimile: 216/579-0212
E-mail: tcdaniels@jonesday.com
(c) If to Purchaser:
New AAP Limited
7575 Fulton Street East
Ada, Michigan 49355
Attention: Craig N. Meurlin, Esq.
Telephone: 616/787-8305
Facsimile: 616/787-5623
E-mail: craigmeurlin@amway.com
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Thomas C. Daniels, Esq.
Telephone: 216/586-3939
Facsimile: 216/579-0212
E-mail: tcdaniels@jonesday.com
11.4 DEFINITIONS; INTERPRETATION. When a reference is made in this
Agreement to an Article or Section, such reference shall be to an Article or
Section in this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
11.5 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of Bermuda having jurisdiction,
this being in addition to any other remedy to which they are entitled at law or
in equity.
11.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
11.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. Except for that
certain Confidentiality Agreement, dated as of September 29, 1999, between the
Company and ALAP Hold Co., Ltd., a Nevada limited partnership, which shall apply
to the Purchaser as if it were a party thereto, this Agreement (including the
documents and the instruments referred to herein and therein) (a) constitutes
the entire agreement and supersedes all prior
B-17
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) with the exception of Section
8.4(d) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
11.8 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
11.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of Bermuda and with respect to the transactions
contemplated hereby the parties hereby irrevocably submit to the non-exclusive
jurisdiction of the courts of Bermuda.
11.10 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns.
11.11 EXTENSION; WAIVER. Subject to Section 11.12, at any time prior to the
Effective Time, the parties hereto, by action taken or authorized by, in the
case of the Company, the Board of Directors consisting of its Disinterested
Directors, in the case of Purchaser, its board of directors or, in the case of
Hold Co., a partner, member or authorized officer, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties of the other parties hereto contained herein or
in any document delivered pursuant hereto or (iii) subject to Section 11.1,
waive compliance with any of the agreements or conditions of the other parties
hereto contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of those rights.
11.12 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 10.1, an amendment of this
Agreement pursuant to Section 11.1 or an extension or waiver pursuant to Section
11.11 or other action required or permitted to be taken pursuant to this
Agreement shall, in order to be effective, require in the case of Purchaser,
action by its board of directors or a duly authorized designee thereof, require
in the case of the Company, action by its Board of Directors consisting of its
Disinterested Directors or a duly authorized designee thereof, or require in the
case of Hold Co., action by a partner, member or authorized officer; provided,
however, the affirmative vote of a majority of the Board of Directors consisting
of the Disinterested Directors shall be required in order for the Company or the
Board of Directors to act to (i) amend or terminate this Agreement, (ii)
exercise or waive any of Company's rights or remedies under this Agreement,
(iii) extend the time for performance of Hold Co.'s or Purchaser's respective
obligations under this Agreement or (iv) take any action to amend or otherwise
modify the Company's Articles of Association or Bye-Laws (each as in effect on
the date hereof).
11.13 ANNOUNCEMENTS. None of the Company, Hold Co. or Purchaser shall make
any public announcement of the terms or existence of this Agreement without the
consent of the other parties hereto, unless required by law.
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IN WITNESS WHEREOF, Hold Co., Purchaser, and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
[Download Table]
AMWAY ASIA PACIFIC, LTD.: APPLE HOLD CO., L.P.:
By: AP New Co., LLC,
as general partner
By: /s/ Eva Cheng By: /s/ Craig N. Meurlin
Name: Eva Cheng Name: Craig N. Meurlin
Title: Director and Executive Title: Manager
Vice President
NEW AAP LIMITED
By: /s/ Lawrence M. Call
Name: Lawrence M. Call
Title: President
B-19
ANNEX C
APPRAISAL RIGHTS UNDER BERMUDA LAW
106. SHAREHOLDER APPROVAL
(1) The directors of each amalgamating company shall submit the
amalgamation agreement for approval to a meeting of the holders of shares of the
amalgamating company of which they are directors and, subject to subsection (4),
to the holders of each class of such shares.
(2) A notice of a meeting of shareholders complying with section 75 shall
be sent in accordance with that section to each shareholder of each amalgamating
company, and shall
(a) include or be accompanied by a copy or summary of the amalgamation
agreement; and
(b) subject to subsection 2A, state --
(i) the fair value of the shares as determined by each amalgamating
company; and
(ii) that a dissenting shareholder is entitled to be paid the fair
value of his shares.
(2A) Notwithstanding subsection 2(b)(ii), failure to state the matter
referred to in that subsection does not invalidate an amalgamation.
(3) Each share of an amalgamating company carries the right to vote in
respect of an amalgamation whether or not it otherwise carries the right to
vote.
(4) The holders of shares of a class of shares of an amalgamating company
are entitled to vote separately as a class in respect of an amalgamation if the
amalgamation agreement contains a provision which would constitute a variation
of the rights attaching to any such class of shares for the purposes of section
47.
(4A) The provisions of the bye-laws of the company relating to the holding
of general meetings shall apply to general meetings and class meetings required
by this section provided that, unless the bye-laws otherwise provide, the
resolution of the shareholders or class must be approved by a majority vote of
three-fourths of those voting at such meeting and the quorum necessary for such
meeting shall be two persons at least holding or representing by proxy more than
one-third of the issued shares of the company or the class, as the case may be,
and that any holder of shares present in person or by proxy may demand a poll.
(5) An amalgamation agreement shall be deemed to have been adopted when it
has been approved by the shareholders as provided in this section.
(6) Any shareholder who did not vote in favour of the amalgamation and who
is not satisfied that he has been offered fair value for his shares may within
one month of the giving of the notice referred to in subsection (2) apply to the
Court to appraise the fair value of his shares.
(6A) Subject to subsection (6B), within one month of the Court appraising
the fair value of any shares under subsection (6) the company shall be entitled
either--
(a) to pay to the dissenting shareholder an amount equal to the value
of his shares as appraised by the Court; or
(b) to terminate the amalgamation in accordance with subsection (7).
(6B) Where the Court has appraised any shares under subsection (6) and the
amalgamation has proceeded prior to the appraisal then, within one month of the
Court appraising the value of the shares, if the amount paid to the dissenting
shareholder for his shares is less than that appraised by the Court the
amalgamated company shall pay to such shareholder the difference between the
amount paid to him and the value appraised by the Court.
(6C) No appeal shall lie from an appraisal by the Court under this section.
(6D) The costs of any application to the Court under this section shall be
in the discretion of the Court.
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(7) An amalgamation agreement may provide that at any time before the issue
of a certificate of amalgamation the agreement may be terminated by the
directors of an amalgamating company, notwithstanding approval of the agreement
by the shareholders of all or any of the amalgamating companies.
C-2
Dates Referenced Herein and Documents Incorporated By Reference
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