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AYR » Topics » Risks Related to Our Organization and Structure

These excerpts taken from the AYR 10-K filed Mar 2, 2009.
Risks Related to Our Organization and Structure
 
If the ownership of our common shares continues to be highly concentrated, it may prevent you and other minority shareholders from influencing significant corporate decisions and may result in conflicts of interest.
 
As of February 20, 2009, entities affiliated with Fortress funds and an officer of Fortress beneficially own 30,560,877 shares, or approximately 38.6% of our common shares. As a result, Fortress may be able to control fundamental corporate matters and transactions, including: the election of directors; mergers or amalgamations (subject to prior board approval), consolidations or acquisitions; the sale of all or substantially all of our assets; in certain circumstances, the amendment of our bye-laws; and our winding up and dissolution. This concentration of ownership may delay, deter or prevent acts that would be favored by our other shareholders. The interests of the Fortress funds may not always coincide with our interests or the interests of our other shareholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our company. Also, the Fortress funds may seek to cause us to take courses of action that, in their judgment, could enhance their investment in us, but which might involve risks to our other shareholders or adversely affect us or our other shareholders. In addition, under our Shareholders Agreement between us and the Fortress funds, based on the current ownership of our common stock by entities affiliated with Fortress funds, an affiliate of Fortress is entitled to designate three directors for election to our board of directors. Also, a sale of shares by one or more of the Fortress funds could add further downward pressure on the market price of our common shares. As a result of these or other factors, the market price of our common shares could decline or shareholders might not receive a premium over the then-current market price of our common shares upon a change in control. In addition, this concentration of share ownership may adversely affect the trading price of our common shares because investors may perceive disadvantages in owning shares in a company with a significant shareholder.
 
We are a holding company with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations.
 
We are a holding company with no material direct operations. Our principal assets are the equity interests we directly or indirectly hold in our operating subsidiaries. As a result, we are dependent on loans, dividends and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations and to pay dividends on our common shares. Our subsidiaries are legally distinct from us and may be prohibited or restricted from paying dividends or otherwise making funds available to us under certain conditions.
 
We are a Bermuda company and it may be difficult for you to enforce judgments against us or our directors and executive officers.
 
We are a Bermuda exempted company and, as such, the rights of holders of our common shares will be governed by Bermuda law and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions. A substantial portion of our assets are located outside the United States. As a result, it may be difficult for investors to affect service of process on those persons in the United States or to enforce in the United States judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. Uncertainty exists as to whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.
 
Our bye-laws restrict shareholders from bringing legal action against our officers and directors.
 
Our bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action


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taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.
 
We have anti-takeover provisions in our bye-laws that may discourage a change of control.
 
Our bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors. These provisions provide for:
 
  •   a classified board of directors with staggered three-year terms;
 
  •   provisions in our bye-laws regarding the election of directors, classes of directors, the term of office of directors and amalgamations to be rescinded, altered or amended only upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 66% of the votes attaching to all shares in issue entitling the holder to vote on such resolution;
 
  •   provisions in our bye-laws dealing with the removal of directors and corporate opportunity to be rescinded, altered or amended only upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 80% of the votes attaching to all shares in issue entitling the holder to vote on such resolution;
 
  •   the removal of directors by a resolution, including the affirmative votes of at least 80% of all votes attaching to all shares in issue entitling the holder to vote on such resolution;
 
  •   our board of directors to determine the powers, preferences and rights of our preference shares and to issue such preference shares without shareholder approval;
 
  •   advance notice requirements by shareholders for director nominations and actions to be taken at annual meetings; and
 
  •   no provision for cumulative voting in the election of directors; all the directors standing for election may be elected by our shareholders by a plurality of votes cast at a duly convened annual general meeting, the quorum for which is two or more persons present in person or by proxy at the start of the meeting and representing in excess of 50% of all votes attaching to all shares in issue entitling the holder to vote at the meeting.
 
In addition, these provisions may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt that is opposed by Fortress, our management and/or our board of directors. Public shareholders who might desire to participate in these types of transactions may not have an opportunity to do so. These anti-takeover provisions could substantially impede the ability of public shareholders to benefit from a change in control or change our management and board of directors and, as a result, may adversely affect the market price of our common shares and your ability to realize any potential change of control premium.
 
There are provisions in our bye-laws that may require certain of our non-U.S. shareholders to sell their shares to us or to a third party.
 
Our bye-laws provide that if our board of directors determines that we or any of our subsidiaries do not meet, or in the absence of repurchases of shares will fail to meet, the ownership requirements of a limitation on benefits article of any bilateral income tax treaty with the U.S. applicable to us, and that such tax treaty would provide material benefits to us or any of our subsidiaries, we generally have the right, but not the obligation, to repurchase, at fair market value (as determined pursuant to the method set forth in our bye-laws), common shares from any shareholder who beneficially owns more than 5% of our issued and outstanding common shares and who fails to demonstrate to our satisfaction that such shareholder is either (i) a U.S. citizen or (ii) a qualified resident of the U.S. or the other


32

Table of Contents

contracting state of any applicable tax treaty with the U.S. (as determined for purposes of the relevant provision of the limitation on benefits article of such treaty).
 
We will have the option, but not the obligation, to purchase all or a part of the shares held by such shareholder (to the extent the board of directors, in the reasonable exercise of its discretion, determines it is necessary to avoid or cure such adverse consequences); provided that the board of directors will use its reasonable efforts to exercise this option equitably among similarly situated shareholders (to the extent feasible under the circumstances).
 
Instead of exercising the repurchase right described above, we will have the right, but not the obligation, to cause the transfer to, and procure the purchase by, any U.S. citizen or a qualified resident of the U.S. or the other contracting state of the applicable tax treaty (as determined for purposes of the relevant provision of the limitation on benefits article of such treaty) of the number of issued and outstanding common shares beneficially owned by any shareholder that are otherwise subject to repurchase under our bye-laws as described above, at fair market value (as determined in the good faith discretion of our board of directors).
 
Risks
Related to Our Organization and Structure


 




If the
ownership of our common shares continues to be highly
concentrated, it may prevent you and other minority shareholders
from influencing significant corporate decisions and may result
in conflicts of interest.


 



As of February 20, 2009, entities affiliated with Fortress
funds and an officer of Fortress beneficially own
30,560,877 shares, or approximately 38.6% of our common
shares. As a result, Fortress may be able to control fundamental
corporate matters and transactions, including: the election of
directors; mergers or amalgamations (subject to prior board
approval), consolidations or acquisitions; the sale of all or
substantially all of our assets; in certain circumstances, the
amendment of our bye-laws; and our winding up and dissolution.
This concentration of ownership may delay, deter or prevent acts
that would be favored by our other shareholders. The interests
of the Fortress funds may not always coincide with our interests
or the interests of our other shareholders. This concentration
of ownership may also have the effect of delaying, preventing or
deterring a change in control of our company. Also, the Fortress
funds may seek to cause us to take courses of action that, in
their judgment, could enhance their investment in us, but which
might involve risks to our other shareholders or adversely
affect us or our other shareholders. In addition, under our
Shareholders Agreement between us and the Fortress funds, based
on the current ownership of our common stock by entities
affiliated with Fortress funds, an affiliate of Fortress is
entitled to designate three directors for election to our board
of directors. Also, a sale of shares by one or more of the
Fortress funds could add further downward pressure on the market
price of our common shares. As a result of these or other
factors, the market price of our common shares could decline or
shareholders might not receive a premium over the then-current
market price of our common shares upon a change in control. In
addition, this concentration of share ownership may adversely
affect the trading price of our common shares because investors
may perceive disadvantages in owning shares in a company with a
significant shareholder.


 




We are
a holding company with no operations and rely on our operating
subsidiaries to provide us with funds necessary to meet our
financial obligations.


 



We are a holding company with no material direct operations. Our
principal assets are the equity interests we directly or
indirectly hold in our operating subsidiaries. As a result, we
are dependent on loans, dividends and other payments from our
subsidiaries to generate the funds necessary to meet our
financial obligations and to pay dividends on our common shares.
Our subsidiaries are legally distinct from us and may be
prohibited or restricted from paying dividends or otherwise
making funds available to us under certain conditions.


 




We are
a Bermuda company and it may be difficult for you to enforce
judgments against us or our directors and executive
officers.


 



We are a Bermuda exempted company and, as such, the rights of
holders of our common shares will be governed by Bermuda law and
our memorandum of association and bye-laws. The rights of
shareholders under Bermuda law may differ from the rights of
shareholders of companies incorporated in other jurisdictions. A
substantial portion of our assets are located outside the United
States. As a result, it may be difficult for investors to affect
service of process on those persons in the United States or to
enforce in the United States judgments obtained in
U.S. courts against us or those persons based on the civil
liability provisions of the U.S. securities laws.
Uncertainty exists as to whether courts in Bermuda will enforce
judgments obtained in other jurisdictions, including the United
States, against us or our directors or officers under the
securities laws of those jurisdictions or entertain actions in
Bermuda against us or our directors or officers under the
securities laws of other jurisdictions.


 




Our
bye-laws restrict shareholders from bringing legal action
against our officers and directors.


 



Our bye-laws contain a broad waiver by our shareholders of any
claim or right of action, both individually and on our behalf,
against any of our officers or directors. The waiver applies to
any action





31




Table of Contents






taken by an officer or director, or the failure of an officer or
director to take any action, in the performance of his or her
duties, except with respect to any matter involving any fraud or
dishonesty on the part of the officer or director. This waiver
limits the right of shareholders to assert claims against our
officers and directors unless the act or failure to act involves
fraud or dishonesty.


 




We
have anti-takeover provisions in our bye-laws that may
discourage a change of control.


 



Our bye-laws contain provisions that could make it more
difficult for a third party to acquire us without the consent of
our board of directors. These provisions provide for:


 












































































  •  
a classified board of directors with staggered three-year terms;
 
  •  
provisions in our bye-laws regarding the election of directors,
classes of directors, the term of office of directors and
amalgamations to be rescinded, altered or amended only upon
approval by a resolution of the directors and by a resolution of
our shareholders, including the affirmative votes of at least
66% of the votes attaching to all shares in issue entitling the
holder to vote on such resolution;
 
  •  
provisions in our bye-laws dealing with the removal of directors
and corporate opportunity to be rescinded, altered or amended
only upon approval by a resolution of the directors and by a
resolution of our shareholders, including the affirmative votes
of at least 80% of the votes attaching to all shares in issue
entitling the holder to vote on such resolution;
 
  •  
the removal of directors by a resolution, including the
affirmative votes of at least 80% of all votes attaching to all
shares in issue entitling the holder to vote on such resolution;
 
  •  
our board of directors to determine the powers, preferences and
rights of our preference shares and to issue such preference
shares without shareholder approval;
 
  •  
advance notice requirements by shareholders for director
nominations and actions to be taken at annual meetings; and
 
  •  
no provision for cumulative voting in the election of directors;
all the directors standing for election may be elected by our
shareholders by a plurality of votes cast at a duly convened
annual general meeting, the quorum for which is two or more
persons present in person or by proxy at the start of the
meeting and representing in excess of 50% of all votes attaching
to all shares in issue entitling the holder to vote at the
meeting.


 



In addition, these provisions may make it difficult and
expensive for a third party to pursue a tender offer, change in
control or takeover attempt that is opposed by Fortress, our
management
and/or our
board of directors. Public shareholders who might desire to
participate in these types of transactions may not have an
opportunity to do so. These anti-takeover provisions could
substantially impede the ability of public shareholders to
benefit from a change in control or change our management and
board of directors and, as a result, may adversely affect the
market price of our common shares and your ability to realize
any potential change of control premium.


 




There
are provisions in our bye-laws that may require certain of our
non-U.S.
shareholders to sell their shares to us or to a third
party.


 



Our bye-laws provide that if our board of directors determines
that we or any of our subsidiaries do not meet, or in the
absence of repurchases of shares will fail to meet, the
ownership requirements of a limitation on benefits article of
any bilateral income tax treaty with the U.S. applicable to
us, and that such tax treaty would provide material benefits to
us or any of our subsidiaries, we generally have the right, but
not the obligation, to repurchase, at fair market value (as
determined pursuant to the method set forth in our bye-laws),
common shares from any shareholder who beneficially owns more
than 5% of our issued and outstanding common shares and who
fails to demonstrate to our satisfaction that such shareholder
is either (i) a U.S. citizen or (ii) a qualified
resident of the U.S. or the other





32




Table of Contents






contracting state of any applicable tax treaty with the
U.S. (as determined for purposes of the relevant provision
of the limitation on benefits article of such treaty).


 



We will have the option, but not the obligation, to purchase all
or a part of the shares held by such shareholder (to the extent
the board of directors, in the reasonable exercise of its
discretion, determines it is necessary to avoid or cure such
adverse consequences); provided that the board of directors will
use its reasonable efforts to exercise this option equitably
among similarly situated shareholders (to the extent feasible
under the circumstances).


 



Instead of exercising the repurchase right described above, we
will have the right, but not the obligation, to cause the
transfer to, and procure the purchase by, any U.S. citizen
or a qualified resident of the U.S. or the other
contracting state of the applicable tax treaty (as determined
for purposes of the relevant provision of the limitation on
benefits article of such treaty) of the number of issued and
outstanding common shares beneficially owned by any shareholder
that are otherwise subject to repurchase under our bye-laws as
described above, at fair market value (as determined in the good
faith discretion of our board of directors).


 




This excerpt taken from the AYR 10-Q filed Nov 17, 2008.
Risks Related to Our Organization and Structure
 
If the ownership of our common shares continues to be highly concentrated, it may prevent you and other minority shareholders from influencing significant corporate decisions and may result in conflicts of interest.
 
As of September 30, 2008, entities affiliated with Fortress funds and an officer of Fortress beneficially own 30,560,875 shares, or approximately 38.9% of our common shares. As a result, Fortress may be able to control fundamental corporate matters and transactions, including: the election of


73

Table of Contents

directors; mergers or amalgamations (subject to prior board approval), consolidations or acquisitions; the sale of all or substantially all of our assets; in certain circumstances, the amendment of our bye-laws; and our winding up and dissolution. This concentration of ownership may delay, deter or prevent acts that would be favored by our other shareholders. The interests of the Fortress funds may not always coincide with our interests or the interests of our other shareholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our company. Also, the Fortress funds may seek to cause us to take courses of action that, in their judgment, could enhance their investment in us, but which might involve risks to our other shareholders or adversely affect us or our other shareholders. In addition, under our Shareholders Agreement between us and the Fortress funds, based on the current ownership of our common stock by entities affiliated with Fortress funds, an affiliate of Fortress is entitled to designate three directors for election to our board of directors. Also, a sale of shares by one or more of the Fortress funds could add further downward pressure on the market price of our common shares. As a result of these or other factors, the market price of our common shares could decline or shareholders might not receive a premium over the then-current market price of our common shares upon a change in control. In addition, this concentration of share ownership may adversely affect the trading price of our common shares because investors may perceive disadvantages in owning shares in a company with a significant shareholder.
 
We are a holding company with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations.
 
We are a holding company with no material direct operations. Our principal assets are the equity interests we directly or indirectly hold in our operating subsidiaries. As a result, we are dependent on loans, dividends and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations and to pay dividends on our common shares. Our subsidiaries are legally distinct from us and may be prohibited or restricted from paying dividends or otherwise making funds available to us under certain conditions.
 
We are a Bermuda company and it may be difficult for you to enforce judgments against us or our directors and executive officers.
 
We are a Bermuda exempted company and, as such, the rights of holders of our common shares will be governed by Bermuda law and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions. A substantial portion of our assets are located outside the United States. As a result, it may be difficult for investors to affect service of process on those persons in the United States or to enforce in the United States judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. Uncertainty exists as to whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.
 
Our bye-laws restrict shareholders from bringing legal action against our officers and directors.
 
Our bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.


74

Table of Contents

We have anti-takeover provisions in our bye-laws that may discourage a change of control.
 
Our bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors. These provisions provide for:
 
  •   a classified board of directors with staggered three-year terms;
 
  •   provisions in our bye-laws regarding the election of directors, classes of directors, the term of office of directors and amalgamations to be rescinded, altered or amended only upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 66% of the votes attaching to all shares in issue entitling the holder to vote on such resolution;
 
  •   provisions in our bye-laws dealing with the removal of directors and corporate opportunity to be rescinded, altered or amended only upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 80% of the votes attaching to all shares in issue entitling the holder to vote on such resolution;
 
  •   the removal of directors by a resolution, including the affirmative votes of at least 80% of all votes attaching to all shares in issue entitling the holder to vote on such resolution;
 
  •   our board of directors to determine the powers, preferences and rights of our preference shares and to issue such preference shares without shareholder approval;
 
  •   advance notice requirements by shareholders for director nominations and actions to be taken at annual meetings; and
 
  •   no provision for cumulative voting in the election of directors; all the directors standing for election may be elected by our shareholders by a plurality of votes cast at a duly convened annual general meeting, the quorum for which is two or more persons present in person or by proxy at the start of the meeting and representing in excess of 50% of all votes attaching to all shares in issue entitling the holder to vote at the meeting.
 
In addition, these provisions may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt that is opposed by Fortress, our management and/or our board of directors. Public shareholders who might desire to participate in these types of transactions may not have an opportunity to do so. These anti-takeover provisions could substantially impede the ability of public shareholders to benefit from a change in control or change our management and board of directors and, as a result, may adversely affect the market price of our common shares and your ability to realize any potential change of control premium.
 
There are provisions in our bye-laws that may require certain of our non-U.S. shareholders to sell their shares to us or to a third party.
 
Our bye-laws provide that if our board of directors determines that we or any of our subsidiaries do not meet, or in the absence of repurchases of shares will fail to meet, the ownership requirements of a limitation on benefits article of any bilateral income tax treaty with the U.S. applicable to us, and that such tax treaty would provide material benefits to us or any of our subsidiaries, we generally have the right, but not the obligation, to repurchase, at fair market value (as determined pursuant to the method set forth in our bye-laws), common shares from any shareholder who beneficially owns more than 5% of our issued and outstanding common shares and who fails to demonstrate to our satisfaction that such shareholder is either (i) a U.S. citizen or (ii) a qualified resident of the U.S. or the other contracting state of any applicable tax treaty with the U.S. (as determined for purposes of the relevant provision of the limitation on benefits article of such treaty).
 
We will have the option, but not the obligation, to purchase all or a part of the shares held by such shareholder (to the extent the board of directors, in the reasonable exercise of its discretion, determines it is necessary to avoid or cure such adverse consequences); provided that the board of


75

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directors will use its reasonable efforts to exercise this option equitably among similarly situated shareholders (to the extent feasible under the circumstances).
 
Instead of exercising the repurchase right described above, we will have the right, but not the obligation, to cause the transfer to, and procure the purchase by, any U.S. citizen or a qualified resident of the U.S. or the other contracting state of the applicable tax treaty (as determined for purposes of the relevant provision of the limitation on benefits article of such treaty) of the number of issued and outstanding common shares beneficially owned by any shareholder that are otherwise subject to repurchase under our bye-laws as described above, at fair market value (as determined in the good faith discretion of our board of directors).
 

EXCERPTS ON THIS PAGE:

10-K (2 sections)
Mar 2, 2009
10-Q
Nov 17, 2008

RELATED TOPICS for AYR:

"Risks Related to Our Organization and Structure" elsewhere:

KKR Financial (KFN)
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