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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Schedule 14(a)
of the Securities Exchange Act of 1934
---------------------------
Filed by the Registrant x
Filed by a Party other than Registrant |_|
Check the Appropriate Box:
x Preliminary Proxy Statement
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
THE SEIBELS BRUCE GROUP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
Title of each class of securities to which transaction
applies:
Aggregate number of securities to which transaction applies:
Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
Proposed maximum aggregate value of transaction:
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid:
Form, Schedule or Registration Statement No.:
Filing Party:
Date Filed:
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PRELIMINARY
THE SEIBELS BRUCE GROUP, INC.
1501 LADY STREET
COLUMBIA, SOUTH CAROLINA 29201
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH [20], 1996
TO THE SHAREHOLDERS OF
THE SEIBELS BRUCE GROUP, INC:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Meeting") of
THE SEIBELS BRUCE GROUP, INC. (the "Company") will be held at the offices of the
Company at 1501 Lady Street, Columbia, South Carolina 29201 at 11:00 a.m. on
Wednesday, March 20, 1996 for the following purposes:
(1) To consider and act upon a proposal to increase the authorized
common stock of the Company, par value $1.00 per share (the
"Common Stock") from 25,000,000 to 50,000,000 shares and to
amend the Company's Articles of Incorporation accordingly;
(2) To consider and act upon a proposal to approve the issuance of
6,250,000 shares of Common Stock (the "Purchasers Shares"),
the issuance of options (the "Purchasers Options") to purchase
a further 6,250,000 shares of Common Stock at an exercise
price per share of the greater of $1.50 or the book value per
share at the date of exercise with respect to 3,125,000 shares
and the greater of $2.00 or the book value per share at the
date of exercise with respect to a further 3,125,000 shares,
and the issuance of the shares of Common Stock underlying the
Purchasers Options (the "Option Shares"), as contemplated by
the Stock Purchase Agreement, dated as of January 29, 1996
(the "Purchase Agreement"), between the Company and Charles H.
Powers, Walker S. Powers, Rex Huggins and Jane Huggins
(collectively, the "Purchasers"), which approval is required
by the By-Laws of the National Association of Securities
Dealers, Inc. (the "NASD");
(3) To consider and act upon a proposal to grant full and
unlimited voting rights under the South Carolina Control Share
Acquisitions Act to all 12,500,000 shares of Common Stock
purchased or to be purchased by the Purchasers pursuant to the
Purchase Agreement and the Purchasers Options, in accordance
and in compliance with Title 35, Chapter 2, Article 1, ss.
35-2-109 of the South Carolina Code;
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(4) To consider and act upon a proposal to adopt an option plan
for non-employee directors of the Company, to be known as the
"1995 Stock Option Plan for Non- Employee Directors";
(5) To consider and act upon a proposal to adopt an option plan to
supersede the 1987 Stock Option Plan, for the employees of the
Company, to be known as the "1996 Employee Stock Option Plan";
and
(6) To consider and act upon a proposal to adopt an option plan
for independent agents of the Company, to be known as the
"1995 Stock Option Plan for Independent Agents";
All of the foregoing is more fully set forth in the Proxy Statement
accompanying this Notice.
Shareholders may be entitled to assert dissenters' rights under Chapter
13 of Title 33 of the South Carolina Business Corporation Act of 1988 with
respect to Proposal 3.
The transfer books of the Company will close as of the end of business
on February 8, 1996 (the "Record Date") for purposes of determining shareholders
who are entitled to notice of and to vote at the Meeting, but will not be closed
for any other purpose.
SHAREHOLDERS ARE URGED TO FILL IN AND EXECUTE THE ENCLOSED PROXY AND
MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED WHEN MAILED IN
THE UNITED STATES. YOUR ATTENDANCE AT THE MEETING IS ENCOURAGED. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN AND EXECUTE THE ENCLOSED PROXY.
IF YOU ATTEND THE MEETING AND DECIDE THAT YOU WANT TO VOTE IN PERSON, YOU MAY
REVOKE YOUR PROXY. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF
ALL OF THE PROPOSALS DESCRIBED HEREIN TO BE CONSIDERED AT THE MEETING.
By Order of the Board of Directors
Priscilla C. Brooks
Corporate Secretary
[February 22, 1996]
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THE SEIBELS BRUCE GROUP, INC.
1501 LADY STREET
COLUMBIA, SOUTH CAROLINA 29201
PROXY STATEMENT
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH [20], 1996
INTRODUCTION
General. This Proxy Statement is furnished to the shareholders of the common
stock, par value $1.00 per share (the "Common Stock"), of The Seibels Bruce
Group, Inc. (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company (the "Board of Directors") to be voted at
a Special Meeting of Shareholders (the "Meeting") to be held at the offices of
the Company, 1501 Lady Street, Columbia, South Carolina 29201, at 11:00 a.m. on
[Wednesday, March 20], 1996 and at any adjournments thereof. It is anticipated
that this Proxy Statement will be mailed to shareholders on or about [February
19], 1996.
A proxy card is enclosed. Any shareholder who executes and delivers a proxy may
revoke it prior to its use by (i) giving written notice of such revocation to
the Corporate Secretary of the Company at P.O. Box 1, Columbia, South Carolina
29202, the Company's mailing address; or (ii) executing and delivering to the
Corporate Secretary of the Company (by mail at P.O. Box 1, Columbia, South
Carolina 29202, or by delivery at 1501 Lady Street, Columbia, South Carolina
29201) a proxy bearing a later date; or (iii) appearing at the Meeting and
voting in person. When proxies in the accompanying form are returned properly
executed, the shares represented by proxies which have not been revoked will be
voted in accordance with the instructions noted thereon. Abstentions and "broker
non-votes" are each included in the determination of the number of shares
present and voting, but are not counted as votes for or against proposals
presented to shareholders. (A "broker non-vote" occurs when a nominee holding
shares for a beneficial owner votes on one proposal, but does not vote on
another proposal because the nominee does not have discretionary voting power
and has not received instructions from the beneficial owner.)
Unless otherwise specified, the proxies will be voted in favor of the proposals
set forth below (collectively, the "Proposals")
(1) To consider and act upon a proposal to increase the authorized
common stock of the Company, par value $1.00 per share (the
"Common Stock") from 25,000,000 to 50,000,000 shares and to
amend the Company's Articles of Incorporation accordingly;
(2) To consider and act upon a proposal to approve the issuance of
6,250,000 shares of Common Stock (the "Purchasers Shares"),
the issuance of options (the "Purchasers Options") to purchase
a further 6,250,000 shares of Common Stock at an exercise
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price per share of the greater of $1.50 or the book value per
share at the date of exercise with respect to 3,125,000 shares
and the greater of $2.00 or the book value per share at the
date of exercise with respect to a further 3,125,000 shares,
and the issuance of the shares of Common Stock underlying the
Purchasers Options (the "Option Shares"), as contemplated by
the Stock Purchase Agreement, dated as of January 29, 1996
(the "Purchase Agreement"), between the Company and Charles H.
Powers, Walker S. Powers, Rex Huggins and Jane Huggins
(collectively, the "Purchasers"), which approval is required
by the By-Laws of the National Association of Securities
Dealers, Inc. (the "NASD");
(3) To consider and act upon a proposal to grant full and
unlimited voting rights under the South Carolina Control Share
Acquisitions Act to all 12,500,000 shares of Common Stock
purchased or to be purchased by the Purchasers pursuant to the
Purchase Agreement and the Purchasers Options, in accordance
and in compliance with Title 35, Chapter 2, Article 1, ss.
35-2-109 of the South Carolina Code;
(4) To consider and act upon a proposal to adopt an option plan
for non-employee directors of the Company, to be known as the
"1995 Stock Option Plan for Non- Employee Directors";
(5) To consider and act upon a proposal to adopt an option plan to
supersede the 1987 Stock Option Plan, for the employees of the
Company, to be known as the "1996 Employee Stock Option Plan";
and
(6) To consider and act upon a proposal to adopt an option plan
for independent agents of the Company, to be known as the
"1995 Stock Option Plan for Independent Agents";
The Board of Directors recommends that shareholders vote "FOR" or grant
authority to vote "FOR" each of the Proposals. In accordance with South Carolina
law and the Bylaws of the Company, no other matters may properly come before the
Meeting without additional notice from the Company.
Voting. Only holders of record of outstanding shares of Common Stock as of
February 8, 1996 (the "Record Date"), will be entitled to notice of and to vote
at the Meeting. On the Record Date, there were 16,772,686 shares of Common Stock
outstanding. Each share of Common Stock is entitled to one vote except with
respect to Proposal 3, as described below. Unless otherwise indicated, the proxy
will be voted in favor of all of the Proposals.
Mr. Saad Alissa and his affiliates (the "Alissa Group"), who beneficially own
8,238,200 shares of Common Stock (representing 49.12% of the shares
outstanding), and the directors and executive officers of the Company have
indicated to the Company that they intend to vote for the Proposals at the
Meeting (except to the extent that shares owned by directors and officers are
excluded from voting on Proposal 3, as discussed below.)
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For Proposal 1 to be approved, the affirmative vote of the holders of two-thirds
of the outstanding shares of Common Stock is required. Therefore, abstentions
will have the same effect as a vote against Proposal 1.
For Proposals 2, 4, 5 and 6 to be approved, the affirmative vote of a majority
of the votes cast in person or by proxy at the Meeting is required. All
outstanding shares of Common Stock are eligible to vote on Proposals 2, 4, 5 and
6.
For Proposal 3 to be approved, the affirmative vote of the holders of a majority
of the outstanding shares of the Common Stock (excluding "Interested Shares" as
that term is defined in the South Carolina Control Share Acquisitions Act) is
required. Therefore, abstentions will have the same effect as a vote against
Proposal 3. As more fully discussed under the heading "PROPOSAL 3:
PURCHASE AGREEMENT -- GRANT OF VOTING RIGHTS UNDER THE SOUTH CAROLINA CONTROL
SHARE ACQUISITIONS ACT," a vote is required on Proposal 3 under the provisions
of the South Carolina Control Share Acquisitions Act in order to grant voting
rights to the Purchasers Shares and the Option Shares. "Interested Shares" will
be deemed to include any shares of Common Stock that are owned or the voting of
which may be exercised or directed in the election of directors by the
Purchasers (and any other persons who may constitute a group with any Purchaser
within the meaning of Rule l3d-5 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), as well as all shares of Common Stock that are
owned or the voting of which may be exercised or directed in the election of
directors, by any officer of the Company or any director who is also an employee
of the Company. Based on information provided to the Company by the Purchasers,
the Purchasers (including any person who with the Purchasers would constitute a
group under the Exchange Act), owned an aggregate amount of 364,206 shares of
Common Stock as of the Record Date. An additional 43,246 shares of Common Stock
owned by directors and officers of the Company constituted Interested Shares as
of the Record Date. See "SECURITY OWNDERSHIP OF THE COMPANY." Accordingly, the
remaining 16,365,234 shares of Common Stock will be eligible to vote on Proposal
3.
THE ACCOMPANYING PROXY FORM IS SOLICITED BY THE BOARD OF DIRECTORS AND IS
REVOCABLE AT ANY TIME PRIOR TO BEING EXERCISED. THE PROXY WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS THEREON. IF A CHOICE IS NOT INDICATED,
HOWEVER, THE PROXY WILL BE VOTED IN FAVOR OF THE DESCRIBED PROPOSALS TO BE
CONSIDERED AT THE MEETING, AND IN THE BEST JUDGMENT OF THE PROXIES CONCERNING
ALL OTHER PROPOSALS CONSIDERED AT THE MEETING.
Financial Information. The Company's Report on Form l0-Q for the quarter ended
September 30, 1995 is enclosed with this Proxy Statement. Shareholders may also
obtain copies of this Report without charge upon written request addressed to
the Corporate Secretary, The Seibels Bruce Group, Inc., P.O. Box 1, Columbia,
South Carolina 29202. If the person requesting a copy of the Report is not a
shareholder of record, the request must include representation that he is a
beneficial owner of the Company's Common Stock.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
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BACKGROUND OF STOCK PURCHASE AGREEMENT............................................................................9
Introduction.............................................................................................9
The Purchasers...........................................................................................9
Recommendation of the Board of Directors.................................................................9
Opinion of Financial Advisor............................................................................10
Analysis of Liquidation Value of the Company............................................................11
Use of Proceeds.........................................................................................11
General Effect on Existing Shareholders.................................................................12
Unaudited Pro Forma Financial Data......................................................................13
THE PURCHASE AGREEMENT AND RELATED MATTERS.......................................................................14
The Purchase Agreement..................................................................................14
Purchase and Sale of the Purchasers Shares and Options..................................................14
Representations, Warranties and Covenants...............................................................14
Registration Rights with Respect to Shares..............................................................15
Conditions to the Purchase Agreement....................................................................15
Termination.............................................................................................15
Restrictions on Transfer................................................................................16
Designation of Directors................................................................................16
Indemnification.........................................................................................17
The Purchasers Options..................................................................................17
BACKGROUND OF STOCK OPTION PLANS.................................................................................17
PROPOSAL 1: INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK...................................................................................................18
Vote Required...........................................................................................19
PROPOSAL 2: APPROVAL OF SECURITIES ISSUANCE PURSUANT TO THE
PURCHASE AGREEMENT AND THE PURCHASERS OPTIONS...........................................................19
Vote Required...........................................................................................20
PROPOSAL 3: PURCHASE AGREEMENT -- GRANT OF VOTING RIGHTS UNDER THE
SOUTH CAROLINA CONTROL SHARE ACQUISITIONS ACT...........................................................20
The South Carolina Control Share Acquisitions Act ("CSAA")..............................................20
Acquisition of Shares by the Purchasers.................................................................21
DISSENTERS' RIGHTS WITH RESPECT TO PROPOSAL 3....................................................................21
Written Notice to the Company...........................................................................22
Differing Record and Beneficial Owners..................................................................22
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Voting ...............................................................................................22
Notice to Dissenters....................................................................................22
Payment Demand and Deposit of Stock Certificates........................................................23
Payment by the Company..................................................................................23
Optional Secondary Payment Demand.......................................................................23
Petition for Determination of Value.....................................................................23
Effect on Dividends and Voting Rights...................................................................24
ANTITAKEOVER EFFECTS OF THE SHARE ISSUANCE AND APPROVAL OF
PROPOSALS 1, 2 AND 3....................................................................................24
EXISTING ANTITAKEOVER PROVISIONS.................................................................................24
South Carolina Control Share Acquisitions Act...........................................................24
South Carolina Business Combination Statute.............................................................25
Supermajority Voting Requirements.......................................................................25
Classified Board of Directors; Removal of Directors.....................................................26
SECURITY OWNERSHIP OF THE COMPANY................................................................................26
PROPOSAL 4: APPROVAL OF THE 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION
PLAN....................................................................................................28
Eligibility.............................................................................................28
Administration..........................................................................................29
Award of Options and Shares.............................................................................29
Transferability of Options..............................................................................29
Amendment of the 1995 Directors Plan....................................................................29
Federal Income Tax Consequences.........................................................................29
Vote Required...........................................................................................30
PROPOSAL 5: APPROVAL OF THE 1996 EMPLOYEE STOCK OPTION PLAN......................................................30
Eligibility.............................................................................................31
Administration..........................................................................................31
Stock Options...........................................................................................31
Restricted Stock........................................................................................31
Incentive Stock.........................................................................................32
Transferability of Incentive Awards.....................................................................32
Amendment of the 1996 Plan and Incentive Awards.........................................................32
Federal Income Tax Consequences.........................................................................32
Vote Required...........................................................................................33
PROPOSAL 6: APPROVAL OF THE 1995 STOCK OPTION PLAN FOR INDEPENDENT
AGENTS..................................................................................................33
Eligibility.............................................................................................34
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Administration..........................................................................................34
Award of Options........................................................................................34
Transferability of Options..............................................................................34
Amendment or Termination of the 1995 Agents Plan........................................................34
Federal Income Tax Consequences.........................................................................35
Vote Required...........................................................................................35
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS.................................................................35
Directors' Compensation.................................................................................36
Compensation of Executive Officers......................................................................36
Option Grants...........................................................................................36
Option Exercises and Year-End Holdings..................................................................36
Employment Agreements...................................................................................36
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions......................................................................................36
Stock Performance Chart.................................................................................36
Certain Transactions....................................................................................37
EXPENSES OF SOLICITATION.........................................................................................37
ADDITIONAL INFORMATION...........................................................................................37
INCORPORATION BY REFERENCE.......................................................................................37
EXHIBITS AND APPENDIX:
Exhibit A Stock Purchase Agreement dated as of January 29,
1996 between Charles H. Powers and Walker S. Powers
on the one hand, and The Seibels Bruce Group, Inc.,
(the "Purchase Agreement").
Exhibit B Stock Option Agreement dated as of January 30, 1996
between Charles H. Powers, Walker S. Powers and Rex
and Jane Huggins on the one hand, and The Seibels
Bruce Group, Inc.
Exhibit C Opinion of Advest, Inc. dated February 7, 1996.
Exhibit D Chapter 13 (Dissenters' Rights) of Title 33 of the Code of Laws of South
Carolina.
Exhibit E 1995 Non-employee Directors Stock Option Plan (the "1995 Directors
Plan).
Exhibit F 1996 Employee Stock Option Plan (the "1996 Plan").
Exhibit G 1995 Stock Option Plan for Independent Agents (the "1995 Agents Plan").
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Appendix Report on Form 10-Q for the Quarter Ended September 30, 1995.
</TABLE>
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BACKGROUND OF STOCK PURCHASE AGREEMENT
Introduction. On January 29, 1996, the Company entered into a Stock Purchase
Agreement (the "Purchase Agreement") with Charles H. Powers and Walker S. Powers
(together, the "Powers"); the Purchase Agreement was amended as of January 30,
1996 to include as parties Rex and Jane Huggins (the Powers and Rex and Jane
Huggins are collectively referred to herein as the "Purchasers"). Pursuant to
the Purchase Agreement, the Company agreed to issue 6,250,000 shares of Common
Stock (the "Purchasers Shares") and options to purchase a further 6,250,000
shares of Common Stock at an exercise price per share of the greater of book
value or $1.50 per share with respect to 3,125,000 shares and the greater of
book value or $2.00 per share with respect to a further 3,125,000 shares, to the
Purchasers in consideration for an aggregate purchase price of $6,250,000 (the
"Purchase Price"). In accordance with the Purchase Agreement, the Company
prepared (subject to the conditions to the Purchase Agreement described below)
certificates representing the Purchasers Shares, and such certificates, together
with the Option Agreement referred to below, were delivered to Haigh Porter,
Esq., the Purchasers' attorney (the "Purchasers' Attorney"), and the Purchase
Price was delivered to the Company, on January 30, 1996, to be held in escrow
pending approval of Proposals 1, 2 and 3 by the Company's shareholders as
described herein ("Shareholder Approval") and the receipt of approvals from the
insurance regulatory authorities of South Carolina [and Kentucky] ("Regulatory
Approval"). The Company has agreed under the Purchase Agreement to use its best
efforts to obtain Shareholder Approval.
The Purchasers. Charles H. Powers has lived in Florence, South Carolina, for 40
years. He is the owner and operator of SADISCO(R) Corporation, an automobile
salvage company, based in Florence, South Carolina, with 19 other locations. He
is also Secretary and, with his son Walker, controlling shareholder, of Lull
Industries, Eagan, Minnesota, an equipment manufacturing company. He is also a
Vice President and Treasurer of Holland Grills, in Apex, North Carolina, and
President of PC Inc., in Myrtle Beach, South Carolina, in addition to having
interests in farming and real estate. Mr. Powers was educated at the University
of South Carolina, Georgia Institute of Technology, and Midshipmen's School at
Fort Schuyler, New York. Walker S. Powers is the son, Jane Huggins is the
daughter, and Rex Huggins is the son-in-law, of Mr. Powers.
Walker S. Powers has been a member of the management of SADISCO(R) Corporation
in Florence, South Carolina since 1975, serving as its President, 1993-94. He
attended Francis Marion College.
Charles Powers will receive 5,000,000, Walker Powers will receive 1,000,000, and
Rex and Jane Huggins will receive 250,000 of the Purchasers Shares and the
Purchasers Options. In addition, Charles Powers owned 328,206 and Rex and Jane
Huggins owned 36,000 shares of Common Stock as of January 30, 1996.
Recommendation of the Board of Directors. At its meeting on January 30, 1996,
the Board unanimously approved the proposed transaction with the Purchasers (the
"Proposed Transaction"),
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resolved to submit Proposals 1, 2 and 3 to the shareholders and recommended that
the shareholders vote for Proposals 1, 2 and 3. The Proposed Transaction is the
result of the Company's continuing efforts to strengthen the capital and surplus
of the Company and its subsidiaries. The minimum required capital and surplus
for a multiple lines insurance company in South Carolina is $3,000,000. The
current statutory capital and surplus of the South Carolina Insurance Company
("SCIC"), the Company's principal insurance subsidiary, as of September 30, 1995
was $5,895,603 (unaudited). Moreover, SCIC because of its limited capital and
surplus, may not resume writing any policy of insurance in which SCIC bears any
risk without approval from the South Carolina Department of Insurance. The
Proposed Transaction will double the statutory capital and surplus of SCIC and
decrease the chance that a sudden and/or unexpected loss could render SCIC
unexpectedly below the statutory surplus requirements, thereby causing the South
Carolina Department of Insurance to take over the company for rehabilitation
and/or liquidation. Moreover, by increasing the capital and surplus to more than
$12,000,000 (pro forma as of September 30, 1995), SCIC will be in a much
stronger financial position and management believes that it will be better
placed to seek approval from the South Carolina Department of Insurance to
re-enter the "risk" market on a limited basis.
The Proposed Transaction is the culmination of a process initiated by the Board
of Directors to obtain additional financing for the Company. In late 1994, the
Company identified the desirability of engaging a financial advisor to assist
the Company, including in capital formation. The Board considered several
advisors, and in January 1995, engaged Advest, Inc. ("Advest") to serve as
financial advisor to the Company. Advest was engaged to assist the Company in
the development of a strategic operating and development plan for the Company
and its component entities, and to participate in financial planning and capital
formation projects. As discussed more fully under "BACKGROUND OF THE STOCK
PURCHASE AGREEMENT -- Opinion of Financial Advisor", the Company, with the
assistance of Advest, considered a large number of potential investment and
acquisition options during 1995. After a period of approximately six months, the
Board of Directors determined to pursue the offer from the Purchasers to invest
a substantial sum of cash in the Company in exchange for shares and options. The
Proposed Transaction with the Purchasers was negotiated by management of the
Company under the supervision and authority of the Board over a period of more
than two months, during which the Board considered again the terms of the
transaction, including at two "in person" meetings in December 1994 and January
1995 respectively.
Opinion of Financial Advisor. Advest has delivered a written opinion (the
"Fairness Opinion"), dated January 29, 1996, and revised February 7, 1996, that
in its opinion the financial terms of the investment taken as a whole, are fair
from a financial point of view to the Company and its shareholders. A copy of
the Fairness opinion is attached as Exhibit C.
In arriving at the Fairness Opinion, Advest, among other things: reviewed the
Purchase Agreement; reviewed the Company's audited financial information for the
four years ended December 31, 1994, as well as unaudited financial information
for the quarter and nine months ended September 30, 1995; reviewed the loss and
claims reserves analyses of the Company by independent actuarial consulting
firms; reviewed the Company's securities and investments; reviewed the 1993
Agreement (the "Alissa Agreement") between the Company and Mr. Saad Alissa and
affiliates (the "Alissa
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Group") and the documents relating to the investment of the Alissa Group in the
Company; personally attended several meetings of the Company's Board of
Directors; reviewed summary personal business and financial information of the
Powers; discussed a prospective investment in or purchase of the Company with
some 25 insurance, financial services and investment companies during a six
month period commencing in April 1995; analyzed and reviewed each of the various
offers the Company received from other insurers, financial companies, and
investors to purchase stock, insert assets, or in other manner achieve ownership
in, or acquire, the Company; reviewed comparative financial and operating data
in the insurance industry and other institutions which were deemed to be
reasonably similar to the Company; reviewed certain insurance company mergers
and acquisitions on both a regional and nationwide basis, and compared the
proposed cash investment with the financial terms of certain other mergers and
acquisitions; conducted discussions with senior management of the Company
concerning its business, problems, prospects, and financial needs; independently
analyzed the financial condition and needs of the Company; and reviewed such
other financial information, studies and analyses, and performed such other
investigations and took into account such other matters as Advest deemed
necessary.
In connection with the engagement of Advest to render an opinion with respect to
the fairness of the Proposed Transaction, the Company paid Advest a fee of
$50,000. Since January, 1995, the Company has paid Advest an aggregate of
$60,000 (excluding the fee described in the preceding sentence) in connection
with its financial advisory services. The Company has also reimbursed Advest for
certain of its reasonable out-of-pocket expenses and has agreed to indemnify
Advest against certain liabilities.
Advest is an investment banking and brokerage firm based in New York, and is
frequently involved in the valuation of securities in connection with public
offerings, private placements, mergers, acquisitions, fairness opinions and
other transactions. Advest was selected by the Company to give its opinion with
respect to the fairness of the Proposed Transaction on the basis of its
qualifications, including its expertise in mergers and acquisitions and the
valuation of businesses and securities, and its reputation. Prior to the
engagement of Advest as described herein, there was no material relationship
between Advest or its affiliates and the Company or its affiliates.
Analysis of Liquidation Value of the Company. Neither the Board of Directors nor
Advest has conducted a quantitative liquidation analysis of the Company, and the
Company believes that such an analysis is unnecessary.
Use of Proceeds. The Company will receive gross cash proceeds from the sale of
the Purchasers Shares of $6,250,000, plus an additional $10,937,500 in the event
that the Purchasers Options are all exercised (assuming an exercise price of
$1.50 with respect to 3,125,000 Option Shares and $2.00 with respect to
3,125,000 Option Shares). The Company intends to contribute the entire net
proceeds from the sale of the Purchasers Shares (expected to be approximately
$6,100,000), to SCIC as a capital contribution.
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General Effect on Existing Shareholders. The transactions contemplated by the
Purchase Agreement will result in a substantial increase in the book value of
the Company per share of issued and outstanding Common Stock. As of September
30, 1995, the book value of the Common Stock (unaudited) was $.45 per share.
After giving effect to the sale by the Company of the 6,250,000 Purchasers
Shares to the Purchasers (and attributing the entire Purchase Price to the
Purchasers Shares for purposes of this calculation), the pro forma book value of
the Common Stock at September 30, 1995 would have been $.59 per share. See
"BACKGROUND OF THE STOCK PURCHASE AGREEMENT--Unaudited Pro Forma Financial
Data."
The transactions contemplated by the Purchase Agreement will cause a substantial
reduction in the proportionate equity interest in the Company of the Company's
existing shareholders. The issuance of the Purchasers Shares will add a
significant number of shares (and the potential for a further issuance in the
case of the Purchasers Options), to the shares already issued and outstanding,
which may have an adverse effect on the market price of the Company's shares.
The closing prices of the Company's Common Stock on December 15, 1995 and
December 19, 1995, the business dates immediately prior to and after the date of
the announcement of the Proposed Transaction (as then proposed), were $1.1875
and $1.75, respectively. The market price of the Company's shares of Common
Stock may be adversely affected by the registration of the Purchasers Shares,
the Option Shares and the shares currently owned by the Alissa Group (the
"Alissa Shares").
Assuming no exercise of the Purchasers Options, the consummation of the
transaction will increase the number of issued and outstanding shares from
16,772,686 to 23,022,686, representing an increase of 37.26%. Assuming the
exercise of the Purchasers Options, the number of issued and outstanding shares
would be 29,272,686, an increase of 74.52% over the number of issued and
outstanding shares on January 30, 1996.
The Purchasers, by virtue of owning 28.73% of the Company's Common Stock
(assuming no exercise of the Purchasers Options) or 43.95% (assuming exercise of
all the Purchasers Options), together with a contractual right to nominate two
directors for election to the Board of Directors, will have the ability to
significantly influence the management and affairs of the Company. In addition,
the Purchasers, together with the Alissa Group, will have the right to nominate
a majority of the Board of Directors, and the Purchasers, the Alissa Group and
the executive officers and directors of the Company and their affiliates will
own an aggregate of approximately 16,157,436 shares, representing 70.18% of the
total shares outstanding (assuming no exercise of the Purchasers Options) or
22,407,436 shares, representing 76.54% (assuming such exercise). Such a high
level of ownership in the Purchasers, Alissa Group and management of the Company
may have the effect of preventing, discouraging or delaying a change in control
of the Company and may adversely affect the voting and other rights of other
holders of Common Stock. See "THE PURCHASE AGREEMENT AND RELATED MATTERS",
"ANTITAKEOVER EFFECTS OF THE SHARE ISSUANCE AND APPROVAL OF PROPOSALS 1, 2 AND
3" and "SECURITY OWNERSHIP OF THE COMPANY."
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<PAGE>
Unaudited Pro Forma Financial Data. Set forth below is certain selected
unaudited financial data and unaudited pro forma financial data of the Company
as of September 30, 1995. The selected financial data for the nine months ended
September 30, 1995 are derived from the Company's unaudited financial
statements. The unaudited pro forma consolidated balance sheet data assumes the
proceeds of the issuance of 6,250,000 shares, less estimated expenses of
$150,000, are added to invested assets and cash. No investment income is assumed
for purposes of the unaudited pro forma consolidated statement of loss data.
Accordingly, the pro forma net loss is the same as the actual net loss. Because
the pro forma average number of shares outstanding is higher, the net loss per
share is $0.02 on a pro forma basis compared to $0.03 on an actual basis.
<TABLE>
<CAPTION>
As of September 30, 1995
------------------------
(dollars in thousands, except per share amounts)
Pro Forma Consolidated Actual1 Pro Forma
------ ---------
Balance Sheet Data: as Adjusted2,3
- ------------------- -----------
<S> <C> <C>
Investments and Cash $ 50,826 $ 56,926
Other Assets4 48,886 48,886
Total Assets4 99,712 105,812
------ -------
Losses and claims4 65,121 65,121
Unearned premiums4 4,262 4,262
Balances due other
insurance companies 13,786 13,786
Note payable 2,476 2,476
Other liabilities
and deferred items 6,531 6,531
Common stockholders'
equity 7,536 13,636
Total capitalization 99,712 105,812
------ -------
Common stockholders'
equity per share $ 0.45 $ 0.59
<FN>
1 In the event that Proposal 2 does not receive Shareholder
Approval or Regulatory Approval, or if any other event occurs
which prevents the release of the Purchasers Shares from
escrow to the Purchasers, then the shares will be returned to
the Company and no issuance thereof will be recorded. See "THE
PURCHASE AGREEMENT AND RELATED MATTERS".
2 In the event Proposal 2 receives Shareholder Approval and
Regulatory Approval, the Purchasers Shares will be released
from escrow and issued to the Purchasers.
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<PAGE>
3 Assumes proceeds from the issuance of 6,250,000 shares was
deposited as of September 30, 1995. No earnings on the
investment has been anticipated in the pro forma.
4 For purposes of determining the total capitalization,
reinsurance recoverable on unpaid losses and prepaid
reinsurance premiums-ceded business have been subtracted from
the liabilities for losses and claims and unearned premiums,
respectively.
</FN>
</TABLE>
This pro forma information is presented in order to demonstrate applicable
accounting effects relating to these transactions. It is not necessarily
indicative of the actual results that would have been achieved had the
transactions occurred as of the indicated date, and is not necessarily
indicative of future results.
THE PURCHASE AGREEMENT AND RELATED MATTERS
The Purchase Agreement. Certain terms and provisions of the Purchase Agreement
are summarized below. Shareholders are urged to review the Purchase Agreement, a
copy of which is reproduced as Exhibit A, in its entirety.
Purchase and Sale of the Purchasers Shares and Options. Subject to the terms and
conditions contained in the Purchase Agreement the Company will issue the
Purchasers Shares and Purchasers Options in consideration for the Purchase
Price. Following the receipt of Shareholder Approval and Regulatory Approval,
the certificates for the Purchasers Shares and the Purchasers Options will be
delivered from escrow by the Purchasers' Attorney to the Purchasers, and the
Purchase Price will be released to the Company. At such time, the Purchasers
Shares and Options will be considered issued and outstanding, the Purchasers
will obtain full voting power with respect to the Purchasers Shares, and the
Purchasers Options will be exercisable in accordance with their terms.
Representations, Warranties and Covenants. The Purchase Agreement contains
various representations, warranties and covenants by the Company which
management believes are typical of those normally made in such a transaction.
The Company's representations and warranties relate to, among other things, the
corporate organization and qualification of the Company and certain of its
subsidiaries, its authority to enter into the Purchase Agreement, the absence of
any violations of law or defaults by reason of its execution of or performance
under the Purchase Agreement, the approvals and consents necessary to perform
under the Purchase Agreement, its financial statements, the absence of
undisclosed liabilities, the absence of material adverse changes, compliance
with applicable laws and the binding effect of the Purchase Agreement. See also
"THE PURCHASE AGREEMENT AND RELATED MATTERS -- Indemnification."
In addition, the Purchase Agreement contains similarly typical representations,
warranties and covenants made by the Purchasers as to, among other things, their
authority to enter into the Purchase Agreement, the absence of any violations of
law or defaults by reason of their execution of, or performance under, the
Purchase Agreement, required approvals and consents, and the due execution and
binding effect of the Purchase Agreement. Furthermore, the Purchasers have made
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<PAGE>
additional representations and warranties necessary to comply with Section 5 of
the Securities Act of 1933, as amended (the "Securities Act"). Accordingly, the
Purchase Agreement contains representations by the Purchasers that they are
acquiring the Purchasers Shares for their own account and not with a view to the
distribution or resale thereof. In addition, the Purchasers acknowledged that
they are capable of evaluating the merits and risks of purchasing the Purchasers
Shares and Options, that the Company has made available to the Purchasers such
information as the Purchasers deemed necessary or appropriate to make such an
evaluation, and that the Purchasers have the financial resources to bear the
economic risk of owning the Purchasers Shares, the Purchasers Options and the
Option Shares.
Registration Rights with Respect to Shares. The Purchasers Shares and the Option
Shares have not been registered under the Securities Act and were acquired by
the Purchasers in reliance upon certain exemptions which restrict the ability of
the Purchasers to voluntarily sell, transfer or otherwise dispose of the
Purchasers Shares. The Company has agreed to file a registration statement with
respect to the Purchasers Shares and the Options Shares upon demand by the
Purchasers; if such registration statement is declared effective by the
Securities and Exchange Commission (the "SEC"), the Purchasers Shares and the
Option Shares would be freely transferable. At any time after the Company has
filed its annual report on Form 10-K for the year ending December 31, 1995, and
before December 31, 1999, the Purchasers may demand that the Company use its
best efforts to register the Shares. The Purchasers are collectively entitled to
one such demand registration. Subject to certain limitations, the Purchasers may
also request to add all or a portion of the Purchasers Shares and the Option
Shares to any registration of Common Stock the Company may file with the SEC.
The Purchasers are collectively entitled to two such "piggy-back" registrations.
In general, any expenses related to the registration of shares pursuant to these
registration rights will be borne by the Company. The Purchasers' rights to
demand and piggy-back registration will terminate when the Purchasers no longer
hold at least 20% percent of the shares issued pursuant to the Purchase
Agreement (1,250,000 shares).
Conditions to the Purchase Agreement. The respective obligations of the Company
and the Purchasers to complete the purchase and sale of the Purchasers Shares
and Options are subject to (i) obtaining Shareholder Approval and (ii) obtaining
Regulatory Approval. The Purchasers have prepared and submitted to the South
Carolina Insurance Commissioner a draft version of the requisite filings. The
Company has cooperated with the Purchasers in supplying information to permit
the Purchasers to revise and finalize the filings. The Purchasers have informed
the Company that they expect to submit the filings to the South Carolina
Insurance Commissioner by March 1, 1996. It is the Company's understanding that
the Purchasers do not have any experience in the property and casualty insurance
business, but in view of the fact that the current management of the Company
will remain in place, the Company believes that the Purchasers' lack of industry
experience should have no material negative effect on the ability to obtain
Regulatory Approval.
Termination. In the event that either Shareholder Approval or Regulatory
Approval is not obtained, the Purchasers shall have the option to terminate the
Purchase Agreement within ten (10) days after receipt of notice by the Company
of the disapproval of requests for Shareholder Approval or
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<PAGE>
Regulatory Approval by delivering to the Company the duly endorsed Certificates
for the Purchasers Shares and Purchasers Options and upon receipt of same, the
Company shall return the funds held in escrow with accumulated interest to the
Purchasers and the Purchase Agreement shall become null and void.
Restrictions on Transfer. The Purchasers may not sell or transfer any of the
Purchasers Shares, the Purchasers Options or the Option Shares, other than to
certain affiliates of the Purchasers or in the following types of transactions:
a sale (i) to the Company or to a third party approved by a majority of the
Board of Directors of the Company (excluding any director designated by the
Purchasers, as described below); (ii) in an underwritten public offering of
Common Stock upon the exercise of the Purchasers' registration rights; (iii) in
one or more privately-negotiated transactions exempt from registration under the
Securities Act or into the public market pursuant to Rule 144 under the
Securities Act, provided that the Purchasers shall not sell in the aggregate in
such transactions shares of Common Stock representing more than 10% of the total
outstanding voting power of the Company to a single purchaser or sell any shares
of Common Stock to a purchaser then having on file with the SEC a current
Statement on Schedule 13D under the Exchange Act reporting beneficial ownership
of 10% or more of the total outstanding voting power of the Company; (iv) to a
corporation of which the Purchasers own not less than 80% of the voting power
entitled to be cast in the election of directors (a "Controlled Corporation"),
provided that such Controlled Corporation assumes all of the obligations and
restrictions contained in the Purchase Agreement and agrees to transfer such
shares to the Purchasers or another Controlled Corporation of the Purchasers if
it ceases to be Controlled Corporation of the Purchasers; (vi) in a merger or
consolidation in which the Company is acquired, or a plan of liquidation of the
Company; or (vi) in response to a tender or exchange offer made by or on behalf
of the Company or, if made by a third party, an offer which is approved by a
majority of the Board of Directors of the Company (excluding any director
designated by the Purchasers, as described below) by two business days prior to
the expiration of such offer.
Designation of Directors. The Purchasers will be entitled to designate up to two
(2) persons, who are reasonably acceptable to the Board of Directors, to be
included in the slate of nominees recommended by the Board of Directors to the
shareholders for election as directors at a shareholders' meeting. The
Purchasers will have the right to designate two persons to the Board for
election as Directors as long as the Purchasers' percentage of ownership of the
issued and outstanding common stock of the Company is at least 10%. If the
Purchasers' percentage of ownership falls to between 5% and 9.9%, then the
Purchasers shall have the right to designate one (1) person to the Board for
election as a Director. All rights of the Purchasers to designate director
nominees shall terminate if the Purchasers' aggregate percentage of ownership of
issued and outstanding Common Stock shall be less than 5%. In the event that the
Purchasers' percentage falls below any of the minimum requirements set forth
above, the Purchasers shall use their best efforts to cause their designee(s)
then serving as directors to resign. If the Purchasers shall thereafter hold in
excess of the minimum requirements, they shall again have the foregoing right to
designate director nominees.
-15-
<PAGE>
The Purchasers have designated Charles H. Powers and Walker S. Powers as the
directors who may be designated by the Purchasers (the "Purchaser Designees") to
serve on the Board of Directors. Following Shareholder Approval and Regulatory
Approval, the Purchase Agreement contemplates that the Board will appoint them
to the Board to serve until the next meeting of shareholders at which directors
are elected. See "BACKGROUND OF STOCK PURCHASE AGREEMENT--The Purchasers".
Indemnification. The Company has agreed to provide indemnification to the
Purchasers for liability resulting from any material misrepresentation, breach
of warranty or nonfulfillment of any covenant or agreement on the part of the
Company contained in or made in connection with the Purchase Agreement. The
Purchasers have similarly agreed to indemnify the Company from liability
resulting from material misrepresentations, breach of warranty or nonfulfillment
of any covenant or agreement on the part of the Purchasers contained in, or made
in connection with, the Purchase Agreement.
The Purchasers Options. Under the terms of the Purchase Agreement, the Company
is obligated to issue the Purchasers Options to the Purchasers as additional
consideration. The terms and conditions of the Company's issuance of the
Purchasers Options are set forth in a Stock Option Agreement dated as of January
30, 1996 (the "Option Agreement"). Upon approval by the shareholders, the
Company will issue options to purchase 6,250,000 shares of Common Stock to the
Purchasers. With respect to 3,125,000 shares, the exercise price will be the
greater of book value per share at the date of exercise or $1.50 per share, and
the expiration date will be December 31, 1998 (the "1998 Option"). With respect
to the remaining 3,125,000 shares, the exercise price will be the greater of
book value per share at the date of exercise or $2.00 per share, and the
expiration date will be December 31, 2000 (the "2000 Option").
The Purchasers Options will be divided among the Purchasers as follows: (i)
Charles H. Powers will receive an option for 5,000,000 shares, (ii) Walker S.
Powers will receive an option for 1,000,000 shares, and (iii) Rex and Jane
Huggins will receive an option for 250,000 shares. One-half of each Purchasers
Option will be exercisable in accordance with the terms and conditions of the
1998 Option, and one-half of each Purchasers Option will be exercisable in
accordance with the terms and conditions of the 2000 Option. A copy of the
Option Agreement is attached as Exhibit B.
BACKGROUND OF STOCK OPTION PLANS
During 1995, the Board of Directors and its Compensation Committee reviewed the
Company's salary levels and salary administration for employees, and the
Company's compensation practices and policies for non-employee directors,
consultants and independent insurance agents. In connection with that review,
the Board of Directors recognized the desirability of granting stock options
and, in certain cases, shares of stock, to further the long term stability and
financial success of the Company by attracting, retaining and compensating
employees, consultants, directors and independent agents of outstanding quality
through the use of such stock incentives. The Board believes that ownership of
stock will stimulate the efforts of employees, consultants, directors, and
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<PAGE>
agents upon whose efforts the Company is and will be largely dependent for the
successful conduct of its business. It also believes that the stock option plans
proposed by Proposals 4, 5 and 6 (the "Option Plans") will further the growth
and development of the Company by allowing participants to take a proprietary
interest in the Company.
The Option Plans were considered by the Compensation Committee at its meetings
in June and December 1995 and January 1996, and, on the recommendations of the
Compensation Committee, were approved by the Board of Directors at its meetings
in December 1995 and January 1996.
On January 30, 1996, the closing price per share of the Company's Common Stock
was $2-12.
PROPOSAL 1: INCREASE IN NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
The Purchase Agreement contemplates the issuance of a total of 12,500,000 shares
(including the Option Shares). The Company currently has only 8,227,314 shares
available for issuance. Accordingly, an increase in the authorized share capital
of the Company is necessary to enable the Company to consummate the transactions
contemplated by the Purchase Agreement. See "BACKGROUND OF STOCK PURCHASE
AGREEMENT" and "THE PURCHASE AGREEMENT AND RELATED MATTERS".
In addition, the Board of Directors has approved the Option Plans, which
contemplate the issuance of a total of 6,500,000 shares upon exercise of the
options covered thereby or upon the award of shares to employees. See
"BACKGROUND OF STOCK OPTION PLANS", "PROPOSAL 4: APPROVAL OF THE 1995
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN", "PROPOSAL 5: APPROVAL OF THE 1996
EMPLOYEE STOCK OPTION PLAN", and "PROPOSAL 6: APPROVAL OF THE 1995 STOCK OPTION
PLAN FOR INDEPENDENT AGENTS".
The Board of Directors also believes that it is in the best interests of the
Company to increase the number of shares available for issuance beyond what is
necessary for the consummation of the Purchase Agreement and the Option Plans,
in order to provide the Company with flexibility in the future.
If Proposal 1 is approved, then, after giving effect to the issuance of the
Purchasers Shares pursuant to the Purchase Agreement, and reserving shares for
issuance under the Purchasers Options and the Option Plans, the Company would
have 14,277,314 shares of Common Stock and 5,000,000 shares of Special Stock,
without par value, available for future issuance without shareholder approval
(subject to the requirements of Schedule D of the By-Laws of the NASD (the "NASD
Policy"). The remaining shares of capital stock of the Company may be utilized
for a variety of corporate purposes, including future public and private
offerings to raise additional capital or to facilitate corporate
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<PAGE>
acquisitions. The Company does not currently have any plans to issue additional
shares of Common Stock or shares of Special Stock other than shares of Common
Stock reserved for issuance pursuant to the exercise of outstanding options and
warrants in connection with other employee benefit plans or shareholder purchase
plans of the Company.
Shares of Special Stock up to the 5,000,000 authorized shares may be issued from
time to time in one or more series, and the Board of Directors, without further
approval of shareholders (subject to the NASD Policy), is authorized to fix the
dividend rights and terms, any conversion rights, any voting rights, any
redemption rights and terms, liquidation preferences, sinking funds and other
rights, preferences, privileges and restrictions applicable to each such series
of Special Stock. Additional classes or series of shares of Special Stock could
be given voting and conversion rights which would dilute the voting power and
equity of holders of Common Stock and would have preference over the Common
Stock with respect to dividends and liquidation rights.
One of the effects of the existence of authorized but unissued and unreserved
Common Stock and Special Stock of the Company is to enable the Board of
Directors to issue shares to third parties which could render more difficult and
therefore discourage any attempt to obtain control of the Company by means of an
unsolicited merger, tender offer, proxy contest or otherwise. See "ANTITAKEOVER
EFFECTS OF THE SHARE ISSUANCE AND APPROVAL OF PROPOSALS 1, 2 AND 3".
Vote Required. An affirmative vote by the holders of at least two-thirds of the
outstanding shares of Common Stock of the Company is needed for the adoption of
the amendment to the Articles of Incorporation to increase the number of
authorized shares of Common Stock.
PROPOSAL 2: APPROVAL OF SECURITIES
ISSUANCE PURSUANT TO THE PURCHASE
AGREEMENT AND THE PURCHASERS
OPTIONS
One of the matters to be considered at the Meeting is the approval of the
issuance of the 6,250,000 shares of the Company's Common Stock pursuant to the
Purchase Agreement, and the 6,250,000 Option Shares pursuant to the Purchasers
Options, which approval is required by the NASD Policy.
The NASD Policy sets forth certain requirements for issuers of securities
included in the NASDAQ Stock Market, which include a policy requiring
shareholder approval of certain corporate transactions. The Company is subject
to these requirements because its Common Stock is traded on the NASDAQ Stock
Market.
In accordance with the NASD Policy, the issuance of the Purchasers Shares and
the Option Shares requires approval by the holders of a majority of the votes
cast in person or by proxy on Proposal 2
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<PAGE>
at the meeting. Pursuant to the Purchase Agreement, the Company has agreed to
use its best efforts to obtain the approval of the shareholders for the issuance
of the Purchasers shares and the Option Shares, and the Purchasers have agreed
that the consummation of the Proposed Transaction shall be subject to obtaining
such approval.
The Board of Directors has unanimously approved a resolution recommending that
the shareholders vote for Proposal 2 and has directed that it be submitted to a
vote of the shareholders at the Meeting. See "BACKGROUND OF STOCK PURCHASE
AGREEMENT -- Recommendation of the Board of Directors."
Vote Required. The affirmative vote of the holders of a majority of the votes
cast in person or by proxy at the Meeting is required for approval of Proposal
2.
PROPOSAL 3: PURCHASE AGREEMENT --
GRANT OF VOTING RIGHTS UNDER THE
SOUTH CAROLINA CONTROL SHARE
ACQUISITIONS ACT
The third matter relating to the Proposed Transaction to be considered at the
Meeting is the granting of voting rights under the South Carolina Control Share
Acquisitions Act to the 12,500,000 shares of Common Stock to be issued to the
Purchasers pursuant to the Purchase Agreement and the Purchasers Options.
The 12,500,000 shares are not considered issued and outstanding as of the Record
Date, and are not eligible to vote on the Proposals. However, assuming receipt
of Shareholder Approval and Regulatory Approval, following the issuance of the
Purchasers Shares (and assuming the issuance of no other shares by the Company)
the Purchasers will have beneficial ownership of voting securities representing
approximately 28.73% of all of the voting securities of the Company (43.95%
assuming exercise of all the Purchasers Options).
The South Carolina Control Share Acquisitions Act ("CSAA"). The CSAA regulates
"control share acquisitions" of voting stock of certain South Carolina
corporations, including the Company. In general, the CSAA operates to prevent an
acquiror of a substantial block of stock (an "acquiring person") from voting
shares deemed "control shares" unless a majority of the disinterested
shareholders vote to grant voting rights for such shares. The term "control
share acquisition" is defined under the CSAA as the acquisition of that amount
of issued and outstanding shares which, when added to all other shares over
which the acquiring person (and any other person who may constitute a group with
such person within the meaning of Rule l3d-5 of the Exchange Act) may exercise
voting power, would entitle the acquiring person immediately after such
acquisition to exercise or direct the exercise of the voting power of a
corporation in the election of directors within any of the following ranges of
voting power: (i) one-fifth or more but less than one-third; (ii) one-
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<PAGE>
third or more but less than a majority; and (iii) a majority or more. The
acquisition of shares in good faith and not for the purpose of circumventing the
CSAA by or from a person whose voting rights had previously been authorized by
shareholder vote does not constitute a control share acquisition.
"Control shares" acquired in a control share acquisition only have voting rights
to the extent granted, before or after the control share acquisition, by
resolution approved by the holders of a majority of the outstanding voting
securities of the corporation, excluding Interested Shares. All shares acquired
in each control share acquisition, plus any additional shares acquired within a
90 day period or acquired pursuant to a plan to make a control share
acquisition, are "control shares" that are deprived of the right to vote without
obtaining shareholder approval.
Acquisition of Shares by the Purchasers. The acquisition of the shares by the
Purchasers pursuant to the Purchase Agreement constitutes a "control share
acquisition" under the CSAA and to the extent that the Purchasers Shares, Option
Shares and the shares already owned by the Purchasers together equal or exceed
20% of all voting power of the Common Stock, such shares constitute "control
shares."
Vote Required. Approval of the Purchasers' voting rights under the CSAA requires
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock (excluding all Interested Shares) represented in person or by proxy
at the Meeting. Therefore, abstentions will have the same effect as a vote
against Proposal 3. As of the Record Date, 407,452 shares of Common Stock
constituted Interested Shares as defined under the CSAA and will therefore be
precluded from voting on Proposal 3. Accordingly, holders of the remaining
16,365,234 shares of Common Stock are entitled to vote at the Meeting on
Proposal 3, and the affirmative vote of the holders of not less than 8,182,617
of such shares is required to approve Proposal 3. The Company has agreed under
the Purchase Agreement to use its best efforts to obtain shareholder approval of
Proposal 3.
If Proposal 3 is approved by the shareholders, the Purchasers will have full
voting rights for all 12,500,000 shares following the Meeting. If Proposal 3 is
not approved, the Purchasers would not be able to vote the control shares, and
the Purchasers shall have the option to terminate the Purchase Agreement. See
"THE PURCHASE AGREEMENT AND RELATED MATTERS -- Termination."
The Board of Directors has unanimously recommended that the shareholders vote in
favor of Proposal 3 and has directed that it be submitted at the Meeting to a
vote of the shareholders, other than the holders of Interested Shares. See
"BACKGROUND OF STOCK PURCHASE AGREEMENT -- Recommendation of the Board of
Directors."
DISSENTERS' RIGHTS WITH RESPECT TO PROPOSAL 3
Any shareholder of the Company who does not vote in favor of Proposal 3 may
elect to receive payment of the value of his or her shares in the Company in
cash in accordance with Chapter 13 of Title 33 of the South Carolina Business
Corporation Act of 1988 ("Chapter 13").
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<PAGE>
Any shareholder contemplating the exercise of his or her right to dissent is
urged to review carefully the provisions of Chapter 13 reprinted as Exhibit D to
this Proxy Statement. Set forth below, to be read in conjunction with the full
text of Chapter 13, is a summary of the principal steps to be taken if the right
to dissent is to be exercised.
EACH STEP MUST BE TAKEN IN STRICT COMPLIANCE WITH THE APPLICABLE PROVISIONS OF
CHAPTER 13 IN ORDER FOR HOLDERS OF THE COMPANY'S SHARES TO PERFECT DISSENTERS'
RIGHTS.
Written Notice to the Company. Written notice of a shareholder's intent to
demand payment for his or her shares pursuant to Chapter 13 in the event the
shareholders of the Company approve Proposal 3 must be received by the Company
before the shareholders vote on Proposal 3 at the Meeting. Such written notice
should state the number of shares of Common Stock as to which dissenters' rights
are being asserted and should be sent to the attention of the Corporate
Secretary, The Seibels Bruce Group, Inc., P. 0. Box 1, Columbia, S.C. 29202.
DISSENTERS' RIGHTS ARE NOT AVAILABLE UNLESS THIS NOTICE REQUIREMENT IS
FULFILLED.
Differing Record and Beneficial Owners. A shareholder of record may assert
dissenters' rights as to fewer than all shares registered in that shareholder's
name only if the shareholder dissents (in accordance with the provisions of
Chapter 13) with respect to all the shares beneficially owned by any one person
and notifies the Company in writing of the name and address of each person on
whose behalf the record shareholder is asserting dissenters' rights.
A person owning a beneficial interest in the Company's shares (a "Beneficial
Owner") may assert dissenters' rights as to the shares held on such Beneficial
Owner's behalf only if (i) the Beneficial Owner submits to the Company the
record shareholder's written consent to the dissent no later than the time the
Beneficial Owner asserts dissenters' rights, and (ii) the Beneficial Owner
asserts dissenters' rights (in accordance with the provisions of Chapter 13)
with respect to all the Beneficial Owner's shares or all those shares over which
the Beneficial Owner has power to direct the vote.
Voting. Holders of shares who deliver notice of their intent to dissent from
Proposal 3 ("Dissenting Shareholders") must not vote in favor of Proposal 3 but
such shareholders need not vote against it.
Notice to Dissenters. If the shareholders adopt Proposal 3, the Company shall,
within ten days after the granting of voting rights under Proposal 3, deliver
written notice of such action to Dissenting Shareholders (the "Dissenters'
Notice"). The Dissenters' Notice shall (i) state where the payment demand must
be sent and where certificates for certificated shares must be deposited, (ii)
inform holders of uncertificated shares to what extent transfer of the
Dissenting Shareholder's shares is to be restricted after the Company receives
the payment demand, (iii) supply a form for demanding payment that includes the
date of the first announcement to news media or shareholders of the terms of the
proposed corporate action (the "Announcement Date"), (iv) state the date by
which the Company must receive the payment demand, and (v) be accompanied by a
copy of Chapter 13.
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<PAGE>
Payment Demand and Deposit of Stock Certificates. The Dissenting Shareholder
must (i) demand payment, (ii) certify that beneficial ownership of his or her
shares was acquired prior to the date set forth in the Dissenters' Notice, and
(iii) deposit the certificates formerly representing his or her shares, all in
accordance with the terms of the Dissenters' Notice in order to preserve
statutory dissenters' rights. A Dissenting Shareholder who demands payment and
deposits stock certificates in accordance with the terms of the Dissenters'
Notice retains all other rights as a shareholder until the rights are cancelled
or modified. A Dissenting Shareholder who fails to demand payment or deposit
stock certificates as required by the Dissenters' Notice by the respective dates
set forth therein is not entitled to payment for his or her shares.
Payment by the Company. Upon the consummation of the Purchase Agreement, the
Company will be obligated to pay the Dissenting Shareholders who have met all
statutory conditions its estimate of the fair value of the Dissenting
Shareholders' shares plus accrued interest accompanied by certain information
specified in Chapter 13. However, the Company may elect to withhold such payment
from Dissenting Shareholders who acquired beneficial ownership of shares after
the Announcement Date (the "Post Announcement Shareholders"). If the Company
elects to withhold payment from such shareholders, it will send each Post
Announcement Shareholder an offer accompanied by certain information specified
in Chapter 13 to pay the Company's estimate of the fair value of the
shareholder's shares plus accrued interest; provided such holders agree to
accept the payment offered in full satisfaction of their dissenters' demands.
Optional Secondary Payment Demand. Within 30 days after (i) the Company pays the
Dissenting Shareholders the Company's estimate of the fair value of their shares
or (ii) the Company offers to pay the Post Announcement Shareholders its
estimate of the fair value of their shares, each such shareholder may notify the
Company of the shareholder's own estimate of the value of his or her shares (if
it differs from the Company's estimate) and demand payment of the shareholder's
estimate of the fair value of the shares less any payment received from the
Company or reject the offer and demand payment of the shareholder's estimate of
the fair value of the shares as the case may be.
Petition for Determination of Value. If a demand for payment (whether an
original demand or a secondary demand) by a Dissenting Shareholder remains
unsettled 60 days after the receipt of the Company of such demand, the Company
will commence a proceeding in the Circuit Court of Richland County to appraise
the value of the dissenting shares. All Dissenting Shareholders whose claims
remain unsettled at such time will be made parties to those proceedings. A
Dissenting Shareholder will be entitled to judgment for an amount, if any, by
which the court finds the fair value of his or her shares, plus interest,
exceeds any amount paid by the Company. A Post Announcement Shareholder will be
entitled to judgment for the fair value, plus accrued interest, of such holder's
shares.
The court in an appraisal proceeding will determine and assess costs against all
parties in such amounts as the court finds equitable. The court may assess fees
and expenses of counsel and experts against the Company or a Dissenting
Shareholder if the court finds that the party against whom the fees and expenses
are assessed did not comply with the requirements of Chapter 13 or acted
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arbitrarily, vexatiously, or not in good faith. In addition, if the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and that the fees for those services should
not be assessed against the Company, the court may award to such counsel
reasonable fees to be paid out of the amounts awarded the dissenters who were
benefitted.
Effect on Dividends and Voting Rights. A Dissenting Shareholder will retain his
or her rights, if any, to vote and receive dividends until the Proposed
Transaction is consummated. Upon the consummation of the Proposed Transaction,
any shareholder who has given proper notice and made a valid demand will cease
to be a shareholder and will have no rights with respect to his or her shares
except the right to receive payment of the fair value thereof.
ANTITAKEOVER EFFECTS OF THE SHARE
ISSUANCE AND APPROVAL OF
PROPOSALS 1, 2 AND 3
If Proposals 1, 2 and 3 are approved by the shareholders, and the Proposed
Transaction is consummated, the Purchasers and the Alissa Group will
beneficially own approximately 28.73% and 35.78% respectively (assuming no
exercise of the Purchasers Options) of the outstanding voting shares of the
Company. See "SECURITY OWNERSHIP OF THE COMPANY". In addition, current directors
and executive officers of the Company beneficially own 8.43% (assuming exercise
of all options granted them prior to January 30, 1995), and may in the future
receive additional voting shares under the Option Plans. See "PROPOSAL 4:
APPROVAL OF THE 1995 NON- EMPLOYEE DIRECTORS STOCK OPTION PLAN" and "PROPOSAL 5:
APPROVAL OF THE 1996 EMPLOYEE STOCK OPTION PLAN." Although there is no contract,
arrangement, understanding, or other relationship among such persons, the
consummation of the Proposed Transaction could make it more difficult for a
third party to acquire control of the Company without the support of the
incumbent Board of Directors, the Alissa Group, or the Purchasers.
In addition, as a result of the covenants contained in the Purchase Agreement,
it may be difficult for shareholders to remove directors designated by the
Purchasers from the Board of Directors. In the event that one or both of the two
directors designated by the Purchasers is removed from the Board of Directors,
the Company is obligated, subject to applicable legal and fiduciary obligations,
to appoint a replacement director designated by the Purchasers to fill the
vacancy created thereby and to serve until the next annual meeting of
shareholders.
EXISTING ANTITAKEOVER PROVISIONS
South Carolina Control Share Acquisitions Act. The Company is subject to the
CSAA, which is intended to render it more difficult or to discourage an attempt
to obtain control of the Company by merger, tender offer, proxy contest or
otherwise.
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<PAGE>
South Carolina Business Combination Statute. South Carolina law regulates
business combinations such as mergers, consolidations and asset purchases where
the business acquired was, or the assets belonged to, a public corporation, such
as the Company, and where the acquiror became an Interested Shareholder (as
defined below) of the public corporation before a majority of the disinterested
members of the Board of Directors of the public corporation approved either (i)
the purchase resulting in such acquiror becoming an Interested Shareholder or
(ii) the business combination. In the context of this law, an "Interested
Shareholder" is any person who directly or indirectly, alone or in concert with
others, beneficially owns or controls 10% or more of the voting stock of the
public corporation, and a "disinterested" board member is a person who is
neither a present nor a former officer or employee of the corporation. The law
is very broad in its scope and is designed to inhibit unfriendly acquisitions.
It does not apply to corporations whose Articles of Incorporation contain a
provision electing not to be covered by the law. The Company's Articles of
Incorporation do not contain such a provision.
The law prohibits business combinations with an unapproved Interested
Shareholder for a period of two years after the date on which the person became
an Interested Shareholder and requires that any business combination with an
unapproved Interested Shareholder after such two-year period be approved by a
majority vote of outstanding shares held by persons other than the Interested
Shareholder or, alternatively, meet certain requirements that other shareholders
receive at least a specified price for their shares. These requirements are not
applicable to the transactions contemplated by the Purchase Agreement because
the requisite majority of the disinterested members of the Board of Directors
has approved the transactions contemplated thereby. The law would not restrict
future business combinations between the Company and the Purchasers because the
disinterested directors have approved the Purchase Agreement pursuant to which
the Purchasers became Interested Shareholders of the Company prior to the date
on which the Purchasers acquired 10% of the outstanding voting power of the
Company.
Supermajority Voting Requirements. Article 9(k) of the Company's Articles of
Incorporation requires a special vote of the shareholders to approve certain
transactions, including, among other things, a merger or the sale, lease or
exchange of substantially all of the assets (as therein defined) of the Company,
with any shareholder owning at least 10% of the Company's equity securities. The
approval of such transactions requires the affirmative vote of at least 80% of
the holders of each class of equity securities of the Company entitled to vote
thereon. The requirement of an 80% shareholder vote does not apply, however, to
transactions approved by at least 75% of all the members of the Board of
Directors. If such approval by the Board of Directors is obtained, the Proposed
Transaction generally would require approval by the holders of a majority of the
outstanding shares entitled to vote, or as otherwise established by law.
If Proposals 1, 2 and 3 are approved and the issuance of the Purchasers Shares
to the Purchasers is completed, the Purchasers will own more than 10% of the
Common Stock, and, therefore, any future proposed business combinations between
the Company and the Purchasers (or any person, entity or group controlling,
controlled by or under common control with the Purchasers) would require
approval in accordance with Article 9(k) in the percentages set forth above.
Similar approval
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<PAGE>
requirements also apply to such combinations between the Company and the Alissa
Group, who already own more than 10% of the Company stock, and will continue to
do so after the consummation of the Proposed Transaction.
The Company's Articles of Incorporation further provide that Article 9(k) may
not be amended, altered or repealed without the approval of the holders of 80%
of the Company's shareholders unless 75% of the Board of Directors approves such
a change, in which case approval by the holders of 66- 2/3% of the Common Stock
is required.
Classified Board of Directors; Removal of Directors. The Company's Articles of
Incorporation provide for the division of the Board of Directors into three
classes of directors serving staggered three-year terms. As a result,
approximately one-third of the members of the Board of Directors are elected
each year.
Pursuant to the Company's Articles of Incorporation, directors may be removed
without cause by the affirmative vote of the holders of a majority of the shares
entitled to vote in the election of directors at a meeting called for that
purpose at which 80% of the shares entitled to vote are represented. Directors
may be removed for cause by the affirmative vote of the holders of a majority of
the shares entitled to vote in the election of directors at a meeting called for
that purpose at which a majority of the shares issued, outstanding and entitled
to vote are represented. Under South Carolina law, a director of the Company may
not be removed from the Board of Directors if the number of votes sufficient to
elect such director is voted against his removal.
The classified Board and director removal provisions could have the effect of
discouraging a third party from making a tender offer or otherwise attempting to
obtain control of the Company, even though such an attempt might be beneficial
to the Company and its shareholders. In addition, the classified Board and
director removal provisions could delay shareholders who do not agree with the
policies of the Board of Directors from removing a majority of the Board for two
years, unless they can obtain the affirmative vote of the holders of a majority
of the shares at a meeting at which eighty percent (80%) of the shares are
present in person or represented by proxy, or they can show cause and obtain the
affirmative vote of the holders of a majority of the shares at a meeting at
which a majority is present or represented.
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, as of January 30, 1996, information regarding
ownership of the Company's Common Stock by the directors of the Company, each
executive officer named in the Summary Compensation Table that appears under
"COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS," all directors and such
executive officers as a group and each person known to the Company to be the
beneficial owner of 5% or more of the Common Stock.
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<PAGE>
<TABLE>
<CAPTION>
Name of Beneficial Owner (and Amount and Nature of Beneficial Percent of Class Excluding
address, with respect to non- Ownership1 (Including)
directors or officer) Issuance of the Purchasers
Shares2
- --------------------------------------- ------------------------------------- --------------------------------------
<S> <C> <C>
William M. Barilka 140,0003 *
Ernst N. Csiszar 300,0004 1.78% (1.29%)
Albert H. Cox, Jr. 24,2003 *
William B. Danzell 0.00 0.00
Claude E. McCain 10,0643 *
Kenneth W. Pavia 0.00 0.00
John P. Seibels 606,9083,5 3.62% (2.64%)
George R.P. Walker, Jr. 506,8583,6 2.99% (2.18%)
John C. West 312,0007 1.83% (1.34%)
John A. Weitzel 100,0004 *
All directors and officers as a group 2,000,0308 11.44% (8.43)%
- --------------------------------------- ------------------------------------- --------------------------------------
Saad A. Alissa 8,238,2008 49.12% (35.78%)
P. O. Box 192
Alkhobar, Saudi Arabia
The Purchasers 6,614,2069 2.17% (28.73%)
P. O. Box 6525
Florence, SC 29502
- --------------------------------------- ------------------------------------- --------------------------------------
- -----------------------
<FN>
* Less than 1%.
1 Includes shares underlying options authorized for issuance by
the Board of Directors, subject to shareholder approval.
2 Assuming no exercise of the 6,250,000 Purchasers Options.
3 Non-employee director. Includes 5,000 shares underlying
options authorized for issuance under the 1995 Directors Plan,
subject to shareholder approval of that plan.
4 Includes shares underlying options authorized for issuance
under the 1996 Plan, subject to shareholder approval of that
plan, and 100,000 shares underlying options granted under the
Company's 1987 Stock Option Plan.
5 Excludes 9,012 shares held in the names of members of Mr.
Seibels' immediate family as to which he has neither sole nor
shared voting or dispositive power and as to which he
disclaims beneficial ownership.
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<PAGE>
6 Excludes 45,557 shares held in the names of members of Mr.
Walker's immediate family as to which he has neither sole nor
shared voting or dispositive power and as to which he
disclaims beneficial ownership.
7 Includes 280,000 shares underlying options authorized for
issuance under the 1996 Plan, subject to shareholder approval
of that plan.
8 Based on information contained in Schedule 13D dated December
18, 1995: includes 6,200 shares to which Mr. Alissa has sole
voting power, and 8,232,000 shares as to which he has shared
voting power; includes 4,109,000 shares beneficially owned
(shared voting and dispositive power) by Abdullatif Ali Alissa
Est. (the "Establishment"), 4,109,000 shares beneficially
owned (shared voting and dispositive power) by Financial
Investors Limited ("FIL") and 8,232,000 shares beneficially
owned (shared voting and dispositive power) by General
Investors Limited ("GIL"). Mr. Alissa has informed the Company
that he is the President of the Establishment; that FIL is
wholly owned by the Establishment; and that GIL is wholly
owned by Mr. Alissa.
9 Includes 6,250,000 Purchasers Shares and 364,206 shares owned
by the Purchasers as of January 30, 1996. Does not include the
shares underlying the Purchasers Options.
</FN>
</TABLE>
PROPOSAL 4: APPROVAL OF THE 1995
NON-EMPLOYEE DIRECTORS STOCK
OPTION PLAN
On January 30, 1996, the Board of Directors of the Company adopted, subject to
shareholder approval, the 1995 Non-Employee Directors Stock Option Plan (the
"1995 Directors Plan" or the "Plan"). The 1995 Directors Plan had been approved
in principle by the Board on June 15, 1995. The 1995 Directors Plan will be
effective upon the date of approval by the shareholders of the Company. The Plan
will terminate upon the earlier of (a) the adoption of a resolution of the Board
terminating the Plan, or (b) December 31, 2004. The 1995 Directors Plan
authorizes the granting of stock options to purchase an aggregate maximum of
1,000,000 shares of the Company's Common Stock to eligible members of the
Company's Board of Directors (including those who were eligible members of the
Board on June 15, 1995). The Company presently intends to register the 1995
Directors Plan under the Securities Act of 1933 after stockholder approval of
the plan is received. The principal features of the 1995 Directors Plan are
summarized below. The summary is qualified by reference to the complete text of
the Plan, which is attached as Exhibit E.
Eligibility. A Director is eligible to receive an option under the 1995
Directors Plan if the Director is not otherwise an employee of the Company or
any subsidiary or affiliate on the date of a grant. Five members of the Board
(and two former members)presently qualify to receive options under the 1995
Directors Plan.
Administration. The 1995 Directors Plan will be administered by a Committee of
the Board consisting of directors who are not eligible to participate in the
Plan. The committee has certain powers vested in it by the terms of the Plan,
including the authority (within the limitations described
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<PAGE>
therein) to interpret the Plan, to make all determinations necessary for
administration of the Plan, and to adopt and amend rules and regulations
relating to the Plan as it may deem desirable. Any decision of the Committee in
the administration of the 1995 Directors Plan will be conclusive and binding.
The Chairman of the Board and Chief Executive Officer of the Company are
authorized to take ministerial actions with respect to the Plan.
Award of Options and Shares. All option grants under the 1995 Directors Plan are
automatic and are nonstatutory. The exercise price of each option granted under
the Plan will be the fair market value of the Common Stock on the date the
option is granted. Each person who was an eligible Director of the Company on
June 15, 1995 automatically will receive an option to purchase 5,000 shares.
Each eligible Director will automatically receive an option to receive 5,000
shares on June 15 of each subsequent year, beginning in 1996. An option may be
exercised on or after the date of grant, provided, however, that no option may
be exercised (i) before the 1995 Directors Plan is approved by the shareholders
of the Company; (ii) after the expiration of ten years from the date the option
is granted; (iii) after six months after an optionee ceases to be a Director of
the Company other than due to mandatory retirement, permanent disability or
death; or (iv) after five years after an optionee ceases to be a Director of the
Company due to mandatory retirement, permanent disability or death. If the
optionee terminates due to mandatory retirement or permanent disability and dies
within five years, the option may be exercised until the later of (i) two years
after the optionee's death or (ii) five years after the termination (but not
later than ten years from the date of grant).
Transferability of Options. The rights of an optionee under the 1995 Directors
Plan may not be assigned or transferred other than by will or the laws of
descent and distribution.
Amendment of the 1995 Directors Plan. The Board may revise or amend the 1995
Directors Plan in any respect, provided, however, that without approval of the
Company's shareholders no revision or amendment may increase the number of
shares subject to the Plan, increase the number of shares granted to directors
or extend the period during which options may be granted.
Federal Income Tax Consequences of the 1995 Non-Employee Directors Stock Option
Plan. The 1995 Directors Plan provides for the granting of non-statutory options
which do not qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). A Director who receives
an option under the Directors Plan will not be deemed to have received any
income at the time the option is granted; however, the Director will recognize
ordinary income in the year any part of the option is exercised in an amount
equal to the difference between the exercise price of the shares purchased and
the fair market value of such shares on the exercise date. The Company will be
entitled to a tax deduction in an amount equal to the amount of ordinary income
recognized by the Director. Special rules may apply if the Director pays all or
part of the exercise price on a non-statutory option by tendering shares of the
Company's Common Stock. The foregoing discussion of federal income tax aspects
is only a summary and based upon interpretations of the existing laws,
regulations and rulings which could be materially altered with enactment of any
new tax legislation.
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<PAGE>
Vote Required. Approval of the 1995 Directors Plan requires the affirmative vote
of the holders of a majority of the shares of Common Stock voting at the Meeting
(assuming a quorum is present).
PROPOSAL 5: APPROVAL OF THE 1996
EMPLOYEE STOCK OPTION PLAN
On January 30, 1996, the Board of Directors of the Company approved and adopted
the 1996 Employee Stock Option Plan (the "1996 Plan") and directed that it be
submitted to the shareholders for approval. The 1996 Plan became effective
November 1, 1995. Unless sooner terminated by the Board of Directors, the 1996
Plan will terminate on December 31, 2005. No incentive awards may be made under
the 1996 Plan after termination. The 1996 Plan is intended to provide a means
for employees of, and consultants providing services for, the Company to
increase their personal interest in the Company, thereby stimulating their
efforts on behalf of the Company and its stockholders (references to the
"Company" in this section will include any parent and subsidiary corporations).
The 1996 Plan sets a maximum authorization of 5,000,000 shares of Common Stock
that may be issued with respect to options and awards. The principal features of
the 1996 Plan are summarized below. The summary is qualified by reference to the
complete text of the 1996 Plan, which is attached as Exhibit F.
The 1996 Plan authorizes the reservation of 5,000,000 shares of Common Stock for
issuance pursuant to incentive awards. Such incentive awards may be in the form
of stock options, restricted stock or incentive stock (as described below). If
an incentive award is cancelled, terminates or lapses unexercised, any unissued
shares allocable to such incentive award may be subjected again to an incentive
award. Similarly, if shares of restricted stock are reacquired by the Company,
such shares may again be subjected to an incentive award under the 1996 Plan. In
addition, shares subject to options granted under the Company's 1987 Stock
Option Plan which are not issued under that plan because such options are
cancelled, expire or otherwise terminate unexercised may be subjected to an
incentive award and issued under the 1996 Plan. The Committee (see
"Administration") is expressly authorized to make an award to a participant
conditioned upon the surrender for cancellation of an existing incentive award.
Adjustments will be made in the number of shares which may be issued under the
1996 Plan in the event of a future stock dividend, stock split or similar
prorata change in the number of outstanding shares of Common Stock or the future
creation or issuance to shareholders generally of rights, options or warrants
for the purchase of Common Stock. The Company presently intends to register the
1996 Plan under the Securities Act of 1933 after shareholder approval is
received.
Eligibility. All present and future employees of the Company are eligible to
receive incentive awards under the 1996 Plan. As of January 30, 1996, the
Company had approximately 273 employees (7 of whom were officers). Consultants
providing services for the Company will also be eligible to receive incentive
awards.
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<PAGE>
Administration. The 1996 Plan will be administered by a Committee comprised of
at least three Directors of the Company who are not eligible to participate in
the 1996 Plan or any similar plan of the Company (other than the 1995 Directors
Plan). The Committee will be the Compensation Committee of the Board unless
another committee is appointed by the Board. The Committee has the power and
complete discretion to determine when to grant incentive awards, which employees
will receive incentive awards, whether the award will be an option, restricted
stock or incentive stock, and the number of shares to be allocated to each
incentive award. The Committee may impose conditions on the exercise of options
and upon the transfer of restricted stock received under the 1996 Plan, and upon
the right to receive incentive stock under the 1996 Plan, and may impose such
other restrictions and requirements as it may deem appropriate, including
reserving the right for the Company to reacquire shares issued pursuant to an
incentive award.
Stock Options. Options to purchase shares of Common Stock granted under the 1996
Plan may be "incentive stock options" or "nonstatutory stock options". Incentive
stock options qualify for favorable income tax treatment under Section 422 of
the Code, while nonstatutory stock options do not. The option price of Common
Stock covered by an incentive stock option may not be less than 100% (or, in the
case of an incentive stock option granted to a 10% shareholder, 110%) of the
fair market value of the Common Stock on the date of the option grant. The
option price of Common Stock covered by a nonstatutory option may not be less
than 100% of the fair market value of the Common Stock on the date of grant. The
value of incentive stock options, based on the exercise price, that can be
exercisable by a participant for the first time in any calendar year under the
1996 Plan or any other similar plan maintained by the Company is limited to
$100,000. Options may only be exercised at such times as may be specified by the
Committee, provided, however, that incentive stock options may not be exercised
after the first to occur of (i) ten years (or, in the case of an incentive stock
option granted to a 10% shareholder, five years) from the date on which the
incentive stock option was granted, (ii) three months from the optionee's
termination of employment with the Company for reasons other than death or
disability, or (iii) one year from the optionee's termination of employment on
account of death or disability. If the option so provides, an optionee
exercising an option may pay the purchase price in cash, by delivering or
causing to be withheld from the option shares of Common Stock, or by delivering
an exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds from the
sale or loan of option shares to pay the exercise price. The Plan allows the
grant of "reload" options that will allow an optionee exercising an option by
delivering shares of stock to receive a "reload option" to acquire the same
number of shares that were delivered with an exercise price of current market
value.
Restricted Stock. Restricted stock issued pursuant to the 1996 Plan is subject
to the following general restrictions: (i) none of such shares may be sold,
transferred, pledged, or otherwise encumbered or disposed of until the
restrictions on such shares shall have lapsed or been removed under the
provisions of the 1996 Plan, and (ii) if a holder of restricted stock ceases to
be employed by the Company, he will forfeit any shares of restricted stock on
which the restrictions have not lapsed or been otherwise removed. The Committee
will establish as to each share of restricted stock issued under the 1996 Plan
the terms and conditions upon which the restrictions on such shares shall
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<PAGE>
lapse. Such terms and conditions may include, without limitation, the lapsing of
such restrictions at the end of a specified period of time, or as a result of
the disability, death or retirement of the participant. In addition, the
Committee may at any time, in its sole discretion, accelerate the time at which
any or all restrictions will lapse or remove any and all such restrictions.
Incentive Stock. The Committee may establish performance programs with fixed
goals and designate employees as eligible to receive incentive stock if the
goals are achieved. Incentive shares will only be issued in accordance with the
program established by the Committee. More than one performance program may be
established by the Committee and they may operate concurrently or for varied
periods of time and a participant may participate in more than one program at
the same time. A participant who is eligible to receive incentive stock has no
rights as a shareholder until the shares are received.
Transferability of Incentive Awards. No options, or the right to receive
incentive stock, granted under the 1996 Plan, and, during the applicable period
of restriction, no shares of restricted stock, may be sold, transferred,
pledged, or otherwise disposed of, other than by will or by the laws of descent
and distribution. All rights granted to a participant under the 1996 Plan shall
be exercisable during his lifetime only by such participant, or his guardians or
legal representatives. Upon the death of a participant, his personal
representative or beneficiary may exercise his rights under the 1996 Plan.
Amendment of the 1996 Plan and Incentive Awards. The Board of Directors may
amend the 1996 Plan in such respects as it deems advisable, provided that the
shareholders of the Company must approve any amendment that would (i) materially
increase the benefits accruing to participants under the 1996 Plan, (ii)
materially increase the number of shares of Common Stock that may be issued
under the 1996 Plan, or (iii) materially modify the requirements of eligibility
for participation in the 1996 Plan. Incentive awards granted under the 1996 Plan
may be amended with the consent of the recipient so long as the amended award is
consistent with the terms of the 1996 Plan.
Federal Income Tax Consequences of the 1996 Plan. An employee will not incur
federal income tax when he is granted a nonstatutory stock option, an incentive
stock option, or, in most cases and depending on the restrictions imposed,
restricted stock. Upon exercise of a nonstatutory stock option, an employee
generally will recognize ordinary income, which is subject to income tax
withholding by the Company, equal to the difference between the fair market
value of the Common Stock on the date of exercise and the option exercise price.
The Committee has authority under the 1996 Plan to include provisions allowing
the employee to elect to have a portion of the shares he would otherwise acquire
upon exercise of an option withheld to cover his tax liabilities if permissible
under Rule 16b-3 under the Exchange Act. The election will be effective only if
approved by the Committee and made in compliance with other requirements set
forth in the 1996 Plan. When an employee exercises an incentive stock option, he
generally will not recognize income, unless he is subject to the alternative
minimum tax. An employee may deliver shares of Common Stock instead of cash to
acquire shares under an incentive stock option or nonstatutory stock option,
without having to recognize taxable gain (except in some cases with respect to
"incentive stock option
-31-
<PAGE>
stock") on any appreciation in value of the shares delivered. However, if an
employee delivers shares of "incentive stock option stock" in satisfaction of
all, or any part, of the exercise price under an incentive stock option, and if
the applicable holding periods of the "incentive stock option stock" have not
been met, he will be considered to have made a taxable disposition of the
"incentive stock option stock." "Incentive stock option stock" is stock acquired
upon the exercise of incentive stock options. In general, an employee who has
received shares of restricted stock will include in his gross income as
compensation income an amount equal to the fair market value of the shares of
restricted stock at the time the restrictions lapse or are removed. An employee
who receives shares of incentive stock will include in his gross income as
compensation income an amount equal to the fair market value of the shares of
incentive stock on the date of transfer to the employee. Such amounts will be
included in income in the tax year in which such event occurs. The income
recognized will be subject to income tax withholding by the Company. The Company
usually will be entitled to a business expense deduction at the time and in the
amount that the recipient of an incentive award recognizes ordinary compensation
income in connection therewith. As stated above, this usually occurs upon
exercise of nonstatutory options, when the restrictions lapse or are removed
from restricted stock and when incentive stock is issued. Generally, the
Company's deduction is contingent upon the Company's meeting withholding tax
requirements. No deduction is allowed in connection with an incentive stock
option unless the employee disposes of Common Stock received upon exercise in
violation of the holding period requirements. This summary of Federal Income Tax
Consequences of nonstatutory stock options, incentive stock options, restricted
stock and incentive stock does not purport to be complete. There may also be
state and local income taxes applicable to these transactions.
Vote Required. In accordance with the NASD Policy, approval of the 1996 Plan
requires the affirmative vote of the holders of a majority of the shares of
Common Stock voting at the Annual Meeting, assuming a quorum is present.
PROPOSAL 6: APPROVAL OF THE 1995
STOCK OPTION PLAN FOR INDEPENDENT
AGENTS
On January 30, 1996, the Board of Directors of the Company adopted, subject to
shareholder approval, the 1995 Stock Option Plan for Independent Agents (the
"1995 Agents Plan"). The 1995 Agents Plan will be effective upon the date of
approval by the shareholders of the Company. The 1995 Agents Plan authorizes the
granting of stock options to purchase an aggregate maximum of 500,000 shares of
Common Stock to eligible independent agents of the Company. The Company
presently intends to register the 1995 Agents Plan under the Securities Act of
1933 after shareholder approval of the 1995 Agents Plan is received. The
principal features of the 1995 Agents Plan are summarized below. The summary is
qualified by reference to the complete text of the 1995 Agents Plan, which is
attached as Exhibit G.
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<PAGE>
Eligibility. Principals of any independent agencies who have contracted with the
Company or its subsidiaries, but who are not directly or indirectly beneficial
owners of more than 10% of the Common Stock and who are not directors or
officers of the Company, are eligible to receive stock options under the 1995
Agents Plan.
Administration. The 1995 Agents Plan will be administered by a committee from
among the Company's management appointed by the Board of Directors (referred to
in this section as the "Committee"). The Committee has certain powers vested in
it by the terms of the 1995 Agents Plan, including the authority (within the
limitations described therein) to interpret the 1995 Agents Plan, to make all
determinations necessary for administration of the 1995 Agents Plan, and to
adopt and amend rules and regulations relating to the 1995 Agents Plan as it may
deem desirable. Any decision of the Committee in the administration of the 1995
Agents Plan will be conclusive and binding.
Award of Options. Subject to the provisions of the 1995 Agents Plan, the
Committee shall have the authority and sole discretion to designate those
individuals (from among those eligible) to whom options will be awarded, and
determine the manner and condition of exercise as well as the times at which
options will be awarded. In making such determinations the Committee may take
into account the nature of the services rendered by the respective individuals
to whom options may be granted, their present and potential contributions to the
Company's success and such other factors as the Committee, in its sole
discretion, deems relevant.
Options may only be exercised if the Optionee has been performing services for
the Company from the grant of the option until exercise. Options shall be
exercisable at such times as may be specified by the Committee, provided,
however, that options may not be exercised after the first to occur of (i) the
expiration date of the option, (ii) the Optionee's termination of performing
services for the Company for reasons other than disability, retirement or death,
(iii) five years from the Optionee's termination of service on account of
disability or retirement, or (iv) five years from the Optionee's death. An
Optionee exercising an option may pay the purchase price in cash or by
delivering, or causing to be withheld from the option, shares of Common Stock.
Transferability of Options. The rights of an Optionee under the 1995 Agents Plan
may not be assigned or transferred except by transfer to a beneficiary upon the
death of the Optionee, and upon the death of the beneficiary, by will or the
laws of descent and distribution.
Amendment or Termination of the 1995 Agents Plan. The Board of Directors may
amend the 1995 Agents Plan in such respects as it deems advisable or terminate
the Plan at any time. No amendment or termination may adversely affect any
outstanding options.
Federal Income Tax Consequences of the 1995 Agents Plan. The 1995 Agents Plan
provides for the granting of non-statutory options which do not qualify as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). An Optionee who receives an option will not be deemed
to have received any income at the time the option is granted. The
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<PAGE>
Optionee will recognize ordinary income in the year any part of the option is
exercised in an amount equal to the difference between the exercise price of the
shares purchased and the fair market value of such shares on the exercise date.
The Company will be entitled to a tax deduction in an amount equal to the amount
of ordinary income recognized by the Optionee. Special rules may apply if the
Optionee pays all or part of the exercise price on a non-statutory option by
tendering shares of the Company's Common Stock. The foregoing discussion of
federal income tax aspects is only a summary and based upon interpretations of
the existing laws, regulations and rulings which could be materially altered
with enactment of any new tax legislation.
Vote Required. Although, by its terms, the NASD Policy may not apply to the 1995
Agents Plan, the Board believes that it is consistent with the spirit of the
NASD Policy and appropriate in the context of seeking approval of the other
Option Plans, to seek shareholder approval of the 1995 Agents Plan. Approval of
the 1995 Agents Plan requires the affirmative vote of the holders of a majority
of the shares of Common Stock voting at the Meeting (assuming a quorum is
present).
BENEFITS TO BE RECEIVED UPON SHAREHOLDER
APPROVAL OF THE OPTION PLANS CONTEMPLATED BY
PROPOSALS 4, 5 AND 6
The following table sets forth the benefits to be received by the Executive
Group and non-executive officer employee group under the 1996 Plan (Proposal 5)
to the extent determinable, on the basis of option grants and share awards
approved by the Board of Directors, subject to approval of the 1996 Plan. The
table does not include any benefits with respect to option grants under the 1995
Directors Plan, as these are not determinable (but will be automatic, in an
amount of options covering 5,000 shares to each eligible Director each year,
subject to the maximum aggregate amount of 1,000,000 shares authorized under the
Plan). The table does not include any benefits under the 1995 Agents Plan, as,
under the terms of that plan, only agents who are neither employees nor
directors of the Company may participate.
<TABLE>
<CAPTION>
1996 Employee Stock Option Plan
Dollar Value Number of Units
- ---------------------------- ---------------------------- -----------------------------
Name and Position Options ($) Restricted Options (#) Restricted
Stock ($) Stock (#)
- ---------------------------- -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Ernst N. Csiszar (1) (2) 200,000 0
Chief Executive Officer
John C. West (1) (2) 200,000 0
Chairman of the Board
- ---------------------------- -------------- ------------ -------------- --------------
Executive Group (1) (2) 400,000 0
Non-Executive Officer (1) (2) 384,600 59,378
Employee Group
<FN>
(1) All option grants made with an exercise price per share at or above the
closing market price per share on the date of grant.
(2) The employees in this group have agreed to a dollar-for-dollar reduction
in cash compensation on the basis of the market price per share of the
Common Stock, without any discount for restrictions on the stock, on the
grant date (January 3, 1996) multiplied by the number of shares granted.
</FN>
</TABLE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Directors' Compensation. In 1995, the Company paid quarterly to each Director
who was not a full-time employee of the Company (a "Non-Employee Director") a
retainer fee of $175 per month plus $656.25 for each meeting of the Board at
which the Director was present, a fee of $175 for each meeting of a Board
Committee which he attended on the same day and in the same general location as
a Board meeting or by telephone, and a fee of $262.50 for attending a Committee
meeting
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<PAGE>
otherwise. In addition, at its meeting on June 15, 1995, the Board authorized
the issuance of 5,000 shares of Common Stock to each person who was a
Non-Employee Director on that date.
Compensation of Executive Officers. The following table sets forth, for the
years ended December 31, 1995, 1994 and 1993, the cash compensation paid by the
Company and its subsidiaries, as well as certain other compensation paid or
accrued for those years, to each of the executive officers of the Company and
such subsidiaries whose compensation was in excess of $100,000 (the "Executive
Group"), in all capacities in which they serve.
<TABLE>
<CAPTION>
Summary Compensation Table
Other Annual Restricted Securities All Other
Compensation Stock Underlying Compensation
($) Awards Options ($)
Name and Salary Bonus ($) (#)
Principal Position Year ($) ($)
- ---------------------------- -------- ---------- -------- -------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
John C. West 1995(1) 141,785 0 15,625(2) 0 280,000 0
Chairman of the Board
Ernst N. Csiszar, President 1995(1) 119,154 0 0 0 300,000 0
and Chief Executive Officer
John A. Weitzel 1995(1) 33,231(2) 0 0 0 100,000 174
Chief Financial Officer
Former Officers
- -----------------------
Sterling E. Beale 1995 0 0 0 0 0 347,968(4)
Chairman of the Board and 1994 147,813 2,438 0 0 0 359,206(4)
Chief Executive Officer 1993 182,483 0 0 0 0 2,765
W. Thomas Reichard, III 1995 0 0 0 0 0 0
President 1994 102,476 1,813 0 0 0 252,279(5)
1993 135,659 0 0 0 0 2,199
<FN>
(1) Gov. West, Mr. Csiszar, and Mr. Weitzel were appointed officers of the
Company for the first time in 1995.
(2) The amount shown represents the dollar value of the difference between the
price paid by Gov. West for shares upon the exercise of stock options and
the fair market value at the date of exercise.
(3) Mr. Weitzel was employeed by the Company effective September 30, 1995. The
salary amount stated is for the three-month period from the date of
employment through December 31, 1995. Prior to the date of employment, Mr.
Weitzel was a consultant to the Company during 1995. With respect to his
consulting services, the Company paid Mr. Weitzel consulting fees in the
amount of $114,000 during 1995.
(4) The amounts shown for 1995 and 1994 for Mr. Beale include payments of
$193,748 and $355,500, respectively, pursuant to a certain Retirement
Agreement and $150,938 of salary for 1994 which was actually paid in 1995.
(5) The amount shown for 1994 for Mr. Reichard includes payments aggregating
$249,502 pursuant to a certain Separation Agreement and Mutual Release.
</FN>
</TABLE>
Option Grants. During the year ended December 31, 1995, the Company granted
300,000 stock options to members of the Executive Group pursuant to the
Company's 1987 Stock Option Plan. In addition, the Board of Directors approved
the grant of 400,000 stock options to members of the Executive Group pursuant to
the 1996 Plan, subject to shareholder approval of that plan. The following table
sets forth the grants during the year ended December 31, 1995.
<TABLE>
<CAPTION>
Option Grants During the Year Ended December 31, 1995
Potential Realizable value at
assumed rates of stock price
appreciation for option terms ($)
Number of
Securities % of Total
Underlying Options Exercise
Name Options Granted to Price Expiration 0% (2) 5% (3) 10% (3)
Granted (#) Employees ($/Sh) Date
- ------------------------- --------------- ------------- ------------ ------------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ernst N. Calazar 100,000(1) 13% 1.625 12/21/00 0 44,895 99,208
Chief Executive Officer 100,000(1) 13% 2.500 12/21/00 0 (42,605) 11,708
100,000 13% 06/13/00 24,175 53,420
John C. West 100,000(1) 13% 1.625 12/21/00 0 44,895 99,208
100,000(1) 13% 2.500 12/21/00 0 (42,605) 11,708
100,000 13% 0.875 06/13/00 0 24,175 53,420
John A. Wietzel 100,000 13% 0.8125 09/30/00 0 22,428 49,604
<FN>
(1) These grants were authorized by the Board of Directors during 1995 under
the 1996 Plan, subject to shareholder approval of the 1996 Plan.
(2) All grants were made with an exercise price per share at or above the
closing market price per share on the date of grant.
(3) Assumed for illustrative purposes only.
</FN>
</TABLE>
Option Exercises and Year-End Holdings. During the year ended December 31, 1995,
members of the Executive Group exercised a total of 20,000 stock options. The
following table sets forth certain information with respect to option exercises
during the year ended December 31, 1995, and unexercised stock options held by
the Executive Group as of December 31, 1995.
<TABLE>
<CAPTION>
Aggregated Option Exercises During the Year
Ended December 31, 1995 and 1995 Year-End Option Values
Number of
Securities Value of
Underlying Unexercised In-
Unexercised The-Money
Options Options at
Shares Acquired at Year-End (#) Year-End ($)
On Exercise (#) Value Realized ($) Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- ----------------------- ----------------------- ----------------------- --------------------------- ------------------
<S> <C> <C> <C> <C>
Ernst N. Csiszar 0 N/A 200,000/100,000(2) 62,500
Chief Executive
Officer
John C.West 20,000 15,625(1) 180,000/100,000(3) 50,000
John A.Weitzel 0 N/A 100,000/0 68,750
<FN>
(1) The amount shown represents the dollar value of the difference between the
purchase price paid by Gov. West for the shares upon exercise of the stock
options and the fair market value of the shares at the date of purchase.
(2) The amounts shown for Mr. Csiszar include 200,000 option grants authorized
by the Board of Directors during 1995 under the 1996 Plan, subject to
shareholder approval of the 1996 Plan.
(3) The amounts shown for Gov. West include 200,000 option grants authorized
by the Board of Directors during 1995 under the 1996 Plan, subject to
shareholder approval of the 1996 Plan.
</FN>
</TABLE>
Employment Agreements.
The Company has entered into employment agreements (each, an "Agreement") under
which Ernst N. Csiszar will serve as President and Chief Executive Officer, and
John C. West will serve as Chairman (each, an "Employee"), of the Company each
for a term of one (1) year beginning January 1, 1996. The terms of each
Agreement are substantially identical, except with respect to salary. The
following is a summary of the terms of the Agreements.
Salary. As payment for services rendered by the Employee under the Agreement,
the Company shall pay Mr. Csiszar $12,000, and Gov. West $7,200, per month
during the term of the Agreement. The Employee shall not receive additional
compensation for service on the Board of Directors of the Company or any
committee thereof. The Employee shall receive a bonus based on the operating
earnings of the Company for the calendar year 1996 of up to 150% of base salary.
Stock Options. The Employee will receive, effective December 21, 1995, options
to purchase 200,000 shares of the Company's stock. The option for 100,000 shares
vested on December 21, 1995, and shall be valid for a period of five (5) years
from the date of issue and shall expire on December 20, 2000. The exercise price
for these 100,000 shares shall be the closing price of the Company's stock on
December 21, 1995. The remaining 100,000 shares shall vest on the earlier of (1)
Employee's termination of employment with the Company, or (2) December 31, 1996.
The Options shall be valid for a period of five (5) years from the date of
vesting and the exercise price for these Options shall be $2.50 per share. These
Options are awarded under the terms and provisions of the 1996 Plan and subject
to the provisions thereof.
Covenant Not to Compete. The Employee agrees that for a period of one year after
the date of termination of his employment for any reason except a termination
without cause, the Employee shall not solicit any customers or prospective
customers in any state in which the Company (including its subsidiaries) engages
in business, with whom the Employee became acquainted or gained knowledge of
during the course of his employment, and the Employee shall not engage in any
business which is in any way competitive with the business of the Company.
Nondisclosure of Proprietary Information. The Employee further agrees never to
disclose any information deemed proprietary by the Company, including but not
limited to, customer lists and trade secrets, regardless of the Employee's
employment status.
Termination. Each party shall have the right to terminate the Agreement at any
time during the term upon thirty (30) days written notice to the other party.
The Company may terminate the Agreement at any time with cause or upon thirty
(30) days written notice without cause; provided, that if the Company terminates
the Agreement without cause the Company will pay the Employee within ten (10)
days after termination, one year's base salary as severance pay.
In the event that during the term of the Agreement, there is a sale of all or
substantially all of the Company's assets or all or substantially all of the
Company's stock and the new owners express their desire for a change in
management or reassign the Employee to a job with the Company with lesser duties
or responsibilities, then the Employee has the right to give written notice of
his intent to terminate the Agreement and shall receive the remaining balance or
amount due under the Agreement as severance.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions. None of the members of the Compensation Committee is or was formerly
an officer or employee of the Company or any of its subsidiaries.
Stock Performance Chart. The following chart compares the yearly percentage
change in the cumulative total shareholder return on the Company's Common Stock
during the five years through December 1995 with the cumulative total return on
the NASDAQ Stock Market (U.S. companies) Index and the NASDAQ Fire, Marine and
Casualty Insurance Stock Index.
[CHART OMITTED]
<TABLE>
<CAPTION>
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
The Seibels Bruce Group Inc.
12/31/90 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
The Seibels Bruce Group Inc. 100.0 136.3 46.5 62.0 62.0 37.2
Nasdaq Stock Market (US Companies) 100.0 160.6 186.9 214.5 209.7 296.3
NASDAQ Stocks (SIC 6330-6339 US Companies
Fire, Marine, and Casuality Insurance 100.0 142.7 192.3 198.0 190.7 267.4
</TABLE>
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<PAGE>
Certain Transactions. In 1981, Seibels, Bruce & Company, a wholly-owned
subsidiary of the Company, entered into a contract for PMSC, a former Company
subsidiary, to provide data processing services to the Company and its
subsidiaries. By subsequent agreements, the original term of the contract has
been extended through June 30, 1996. Pursuant to the contract, Seibels, Bruce &
Company paid $1,848,533 to PMSC and its subsidiaries in 1995. Mr. John Seibels,
a director of the Company, is also a director of PMSC.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Officers, directors
and employees of the Company may solicit proxies by telephone, telegram or
personal interview.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission") .
Reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: New York Regional Office, 7 World
Trade Center, 13th Floor, New York, New York, 10048; and Chicago Regional
Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400 Chicago,
Illinois 60661. Copies of such material also may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, such reports, proxy statements and
other information concerning the Company may be inspected and copied at the
offices of the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006-1506
INCORPORATION BY REFERENCE
The information contained in the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 1995 (the "10-Q") is incorporated herein by this
reference. A copy of the 10-Q accompanies this Proxy Statement as an Appendix.
February [22], 1996 Priscilla C. Brooks
Corporate Secretary
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<PAGE>
EXHIBIT 1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of January 29th, 1996, is made
jointly and severally between Charles H. Powers and Walker S. Powers on the one
hand (collectively the "Purchasers"), and each individually a ("Purchaser"), and
The Seibels Bruce Group, Inc., a South Carolina corporation (the "Company").
WITNESSETH:
WHEREAS, the Company proposes to issue and sell 6.250 million shares
(the "Shares"), of the common stock par value $1.00 per share of the Company to
the Purchasers at a price of $1.00 per share;
WHEREAS, the Company proposes to issue to the Purchasers as additional
consideration for the purchase of the Shares, options to purchase an additional
6.250 million Shares (the "Additional Shares"), of the Company's common stock
upon the following terms and conditions;
1. Options for 3.125 million Shares exercisable at the greater of
either book value or $1.50 per share. These options shall expire on December 31,
1998.
2. Options for 3.125 million Shares exercisable at the greater of
either book value or $2.00 per share. These options shall expire on December 31,
2000. WHEREAS, the Company desires to sell the Shares and grant the Options to
the Purchasers and the Purchasers desire to purchase the Shares and receive
Options for the Additional Shares from the Company;
1
<PAGE>
NOW, THEREFORE, subject to the terms and conditions hereof and in
consideration of the premises and the promises, representations, warranties and
covenants contained herein, the Purchasers jointly and severally on one hand and
the Company on the other, hereto agree as follows:
SECTION 1
Purchase, Sale of Stock and Granting of Options
1.1 Purchase and Sale of Shares at the Closing. Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Company will
sell to the Purchasers, and the Purchasers will purchase from the Company, the
Shares.
1.2 Granting of Options For the Additional Shares. At the Closing, the
Company will grant to the Purchasers, the Options for the Additional Shares.
1.3 Payment. Purchasers will be deemed to have paid for the Shares and
Options for the Additional Shares by having delivered to the Company,
$6,250,000.00 dollars cash in certified funds.
SECTION 2
Closing
2.1 Closing. The closing for the purchase and sale of the Shares and
the granting of the Options (the "Closing"), will be held at the offices of the
Company, 1501 Lady Street, Columbia, South Carolina 29202, at 10:00 a.m. local
time on January 30, 1996, and shall be completed and effective as of the Closing
date.
2
<PAGE>
2.2 Deliveries at the Closing.
(a) The Purchasers shall deliver $6,250,000.00 dollars in
certified funds, made payable to The Seibels Bruce Group, Inc.
(b) The Company shall deliver to Purchasers' attorney, stock
certificates for 6.250 million shares and options to purchase an additional
6.250 million shares.
(c) The Purchasers and the Company shall deliver to each
other, opinions of counsel, and such other documents as are usual in
transactions of the nature contemplated by this Agreement and as may be
reasonably required by counsel.
2.3 Escrow.
The Company shall hold the funds received at Closing in an
interest-bearing escrow account and Purchasers' attorney shall hold Certificates
and Options in Escrow until completion of the following: (a) Regulatory approval
of the Stock Purchase Agreement by the South Carolina Department of Insurance
and approval by the Department for the Company to resume writing "risk"
business; and (b) Approval by the shareholders at a special shareholders meeting
of a resolution in compliance with Section 35-2-109 of the South Carolina Code
of Laws, 1976 as amended, approving voting rights for all of the shares under
the South Carolina Control Share Acquisition Act; and (c) Approval by the
shareholders at a special shareholders meeting of resolutions required by the
Bylaws of the National Association of Securities Dealers, Inc.
Immediately upon completion of all of the above-named approvals, the
escrow account shall terminate and the Company shall have the right to use the
funds and accumulated interest contained
3
<PAGE>
therein to increase the capital and surplus of South Carolina Insurance Company.
If the South Carolina Department of Insurance fails to grant regulatory
approval of the Stock Purchase Agreement, fails to allow the Company to resume
writing "risk" business or the shareholders fail to approve at a Special
Shareholders Meeting, a resolution in compliance with Section 35-2-109 of the
South Carolina Code of Laws, 1976, as amended, approving voting rights for all
the shares under the South Carolina Control Share Acquisition Act, or the
shareholders fail to approve at a Special Shareholders Meeting, resolutions
required by the By-Laws of the National Association of Securities Dealers, Inc.,
then the Purchasers have the option to terminate this Agreement within ten (10)
days after receipt of notice by the Company of the disapproval of one or more of
the above-referenced matters, by delivering to the Company the duly endorsed
Certificates and Options and upon receipt of same, the Company shall return the
funds held in escrow with the accumulated interest to the Purchasers and this
Agreement shall become null and void.
SECTION 3
Representations, Warranties and Covenants by the Company
The Company represents, warrants and covenants to the Purchasers as follows:
3.1 Authority. The execution and delivery of this Agreement, the
issuance and sale of the Shares by the Company and compliance by the Company
with all of the other provisions of this Agreement: (a) are within the corporate
power and authority of the Company and (b) have been duly authorized by all
requisite proceedings of the Board of Directors of the Company, except that the
Board has only approved the purchase of 5.5 million Shares with corresponding
Options by the Purchasers. Management of the Company shall recommend to the
Board, at the next Board meeting,
4
<PAGE>
that the Board approve the increase in the number of Shares to be purchased from
5.5 million to 6.250 million with a corresponding increase in the number of
Options. However, if the Board fails to agree to said increase, Purchasers agree
to purchase the 5.5 million Shares as previously approved by the Board.
3.2 No Violation of Law or Default by Reason of Execution or
Performance of this Agreement. The execution, delivery and performance of this
Agreement by the Company will not: (a) violate any applicable law, rule or
regulation; or (b) constitute a default or result in a right of acceleration,
termination or similar right (i) by any party to any contract, agreement or
instrument to which the Company or a Subsidiary is a party (or would, but for
the passage of time or the giving of notice, constitute a default or result in
such a right of acceleration, termination or similar right) or (ii) under the
certificate (or articles) of incorporation or bylaws of the Company or its
Subsidiaries except, in each case, (A) with respect to matters requiring the
approvals referred to in subsection 3.4 hereof and (B) where the violation,
default, acceleration, termination or similar right would not have a material
adverse effect on the business, assets, properties or financial condition of the
Company and its Subsidiaries taken as a whole.
3.3 Approvals and Consents. Except as set forth on Schedule 3.3, the
Schedule of the Company's Required Approvals and Consents, no approval, consent
or authorization of, or declaration or filing with, any governmental or judicial
authority, or any third party is required in connection with the execution and
delivery of this Agreement by the Company or the performance of this Agreement
by the Company or the performance of this Agreement by the Company.
3.4 SEC Reports. The Company has furnished to the Purchasers copies of
its (a) Form 10-K filed with the Securities and Exchange Commission the (the
"SEC"), for the fiscal year ended
5
<PAGE>
on December 31, 1994, (b) its Quarterly Report on Form 10-Q filed with the SEC
for each quarter ended on or after September 30, 1995, and (c) its proxy
statement and Annual Report relating to the Company's 1995 Annual Meeting of
Shareholders (collectively, the "SEC Documents").
(a) Each of the SEC Documents has been filed, and when filed
the Company was in compliance in all material aspects with the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the SEC thereunder applicable to each
such SEC Document. Each of the SEC Documents was complete and correct in all
material respects as of its date and, as of its date, did not contain any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
(b) After the Closing, for so long as the Purchasers own at
least 20% of the issued and outstanding shares of the Company, the Company will
promptly provide to the Purchasers each document filed with the SEC (except
preliminary materials, pre-effective registration statements or registration
statements relating to employee stock option or compensation plans), along with
all documents, reports and other information provided to its Shareholders
generally.
3.5 Financial Statements. The financial statements of the Company
included in the SEC Documents: (a) comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, (b) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis for the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by applicable SEC rules and
regulations and at the time of their filing, based on information then known to
the Company), (c) are presented fairly in all material respects (subject,
6
<PAGE>
in the case of the unaudited statements, to normal recurring interim audit
adjustments) and present (i) the consolidated financial position of the Company
and its consolidated Subsidiaries at the date thereof, (ii) the consolidated
results of their operations and (iii) their cash flows for the periods then
ended.
3.6 No Undisclosed Liabilities. As of the date of the latest financial
statement of the Company and its Subsidiaries contained in the most recent SEC
Document containing financial statements, neither the Company nor its
Subsidiaries had any liability or obligation of any nature, including contingent
liabilities or obligations, required to be disclosed by generally accepted
accounting principles or the rules and regulations of the SEC, including
liabilities for taxes (including any interest or penalties relating thereto), in
respect of or measured by the income of any such corporation for any period
prior to the date thereof, except (a) to the extent reflected or recorded in the
SEC Documents, (b) as disclosed in this Agreement or any Schedule hereto, or (c)
if such liability or obligation would not have a material adverse effect on the
business, assets, properties or financial condition of the Company and its
Subsidiaries taken as a whole.
3.7 No Material Adverse Changes. Since the date of the most recent SEC
Document, there has not been; (a) any material adverse change in the financial
or other condition, assets, liabilities or business of the Company and its
Subsidiaries, taken as a whole, except for (i) the establishment of additional
reserves for losses and claims on policies of insurance written or reinsured by
any of the Company's insurance company Subsidiaries, (ii) the increase of
existing reserves for losses and claims on policies of insurance written or
reinsured by any of the Company's insurance company Subsidiaries, and (iii)
changes occurring in the ordinary course of business, including, but not limited
to, claims made and losses paid or payable by the Company with regard
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to the rights of insureds under policies of insurance written or reinsured by
the Company or any of its Subsidiaries (b) any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting the
business, properties, assets or financial condition of the Company or its
Subsidiaries taken as a whole; (c) any declaration, setting aside or payment of
a dividend or other distribution in respect of any of the capital stock of the
Company or any direct or indirect redemption, purchase or other acquisition of
any of such stock; (d) any strike, lockout, organized labor trouble, or any
similar organized labor event or condition of any character involving employees
of the Company or its Subsidiaries materially adversely affecting the business,
assets, properties or financial condition of the Company and its Subsidiaries
taken as a whole; (e) a sale or transfer by the Company of any of its
Subsidiaries whether or not material in the aggregate as to which a contract for
the sale of substantially all its assets has been executed).
3.8 Compliance with Laws and Regulations. To the best knowledge of the
Chairman of the Board, the President and the Chief Financial Officer of the
Company (the "Management"), neither the Company nor any of its Subsidiaries has
been in violation of any law, ordinance, regulation, order or decree (including,
without limitation, any regulations of governmental agencies having jurisdiction
or supervision over its business or properties), the violation of which may have
a material adverse effect on the business, assets, properties or financial
condition of the Company and its Subsidiaries taken as a whole.
3.9 Cooperation with Filings. The Company covenants to provide the
Purchasers with information concerning the Company necessary to enable it to
make all required SEC, insurance regulatory and other filings as required in
connection with this Agreement.
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3.10 Due Execution; Binding Effect. This Agreement has been duly
executed by the Company and is a valid and binding obligation enforceable
against the Company in accordance with its terms, except as enforceability
therefor may be limited by the exercise of judicial discretion, the laws of
bankruptcy, insolvency, reorganization, moratorium, or other similar laws from
time to time in effect relating to or affecting generally the enforcement of
creditors' rights, and except as enforcement of remedies may be limited by
general principles of equity (regardless of whether which enforceability is
considered in a proceeding in equity or at law).
SECTION 4
Compliance with Laws
The Company and each of the Purchasers will use their best efforts to
duly comply with all applicable laws requiring compliance by them, respectively,
to complete validly the transactions provided for in this Agreement.
SECTION 5
Representation, Warranties and Covenants of the
Purchasers Each Purchaser jointly and severally represents, warrants
and covenants as follows:
5.1 Authority of and Actions by the Purchasers.
(a) Charles H. Powers and Walker L. Powers are citizens and
residents of the State of South Carolina. The execution and delivery of this
Agreement, the purchase of the Shares from the Company, the receipt of the
Options and compliance by the Purchasers with all of the other
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provisions of this Agreement are within the powers and capacity of each
Purchaser as an individual citizen and resident.
(b) Each Purchaser has entered into this Agreement on a joint
and several basis with the other. Each Purchaser is purchasing a portion of the
Shares in his own capacity. In each case in this Agreement where a right,
obligation to act or to forebear from acting, or any other provision is ascribed
to the Purchasers collectively, the Purchasers shall act collectively to
determine among themselves their relative rights and obligations and the
applicability to them of other provisions and advise the Company accordingly in
a timely manner. In the absence of such a determination, the Company may, within
a reasonable time after it has made a written request that such a determination
be made, ascribe such rights and obligations to the Purchasers on the basis of
their relative record ownership from time-to-time of the Shares.
(c) Each Purchaser acknowledges: (i) receipt of the SEC
Documents, (ii) that the Company has made available to the Purchasers or to the
Purchasers' counsel, accountants and other representatives such information and
documents as the Purchasers have requested and (iii) that he or his
representatives have had full opportunity to discuss the financial and other
conditions of the Company and its Subsidiaries with the management of the
Company and its Subsidiaries.
5.2 No Violation of Law or Default by Reason of Execution or
Performance of this Agreement. The execution, delivery and performance of this
Agreement by the Purchasers will not: (a) violate any applicable law of the
United States of America or any other applicable or relevant jurisdiction; or
(b) constitute a default or result in a right of acceleration, termination or
similar right (i) by any party to any contract, agreement or instrument to which
either of the Purchasers is a party (or would, but for the passage of time or
the giving of notice, constitute a default or result in such
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a right of acceleration, termination or similar right) or (ii) under any
contract, agreement or instrument to which either Purchaser is a party, except
where the violation, default, acceleration, termination or similar right would
not have a material adverse effect on the business, assets, properties or
financial condition of such Purchaser.
5.3 Approvals and Consents. Except as provided in Schedule 5.3, the
Schedule of Purchasers' Required Approvals and Consents, no approval, consent or
authorization of, or declaration or filing with, any governmental or judicial
authority is required in connection with the execution and delivery of this
Agreement by either Purchaser or the performance by either Purchaser hereunder.
5.4 Securities Act of 1933.
5.4.1 Unregistered Securities. The Purchasers understand that
the Shares acquired pursuant to this Agreement have not been registered under
the Securities Act of 1933 ("Securities Act") or under applicable state
securities laws, in reliance upon exemptions thereunder from such registration
requirements afforded by Section 4(2) of the Securities Act and Regulation D,
governing the offer and sale of securities to accredited investors, and other
applicable exemptions. The Purchasers agree that there shall be imprinted on the
face of the certificates of the Shares delivered under this Agreement a
restrictive legend substantially in the form set forth in Section 5.4.2 below.
5.4.2 Restrictive Legend. The Purchasers understand and agree
that any disposition of the Shares in violation of this Agreement, shall be null
and void, and that no transfer of the Shares shall be made by the Company's
transfer agent upon the Company's stock transfer books unless there has been
compliance with the terms of this Agreement. The Purchasers understand and agree
that
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there shall be imprinted on the certificates for the Shares a legend
substantially in the form as the following:
The shares of common stock represented by this certificate
have not been registered under the Securities Act of 1933, as
amended and may not be offered or sold unless the shares are
registered under the Securities Act of 1933 as amended, or an
exemption from the registration requirements under the
Securities Act of 1933, as amended, is available.
5.3 The Shares. The Purchasers acknowledge that the Shares have not
been registered under the Securities Act. The Purchasers are acquiring
beneficial ownership of the Shares for their own account for investment, and not
with a view to a distribution. Each Purchaser agrees not to transfer or
otherwise dispose of any of the Shares unless such transfer or other disposition
is registered under the Securities Act or is exempt from such registration. By
reason of the Purchasers' knowledge and experience in financial and business
matters, the Purchasers are capable of evaluating the merits and risks of their
acquisition hereunder of beneficial ownership of the Shares. The Purchasers have
had available such information with respect to Company as deemed necessary or
appropriate to make such evaluation. The Purchasers have the financial resources
to bear the risk of ownership of the Shares.
5.4 Cooperation With Filings. The Purchasers covenant to provide the
Company with all information concerning the Purchasers necessary to enable it to
make all required SEC, insurance regulatory, and other filings required in
connection with this Agreement.
5.5 Due Execution: Binding Effect. This Agreement has been duly
executed by or on behalf of each of the Purchasers and is a valid and binding
obligation enforceable against the
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Purchasers and each of them in accordance with its terms, except as
enforceability thereof may be limited by the exercise of judicial discretion,
the laws of bankruptcy, insolvency, reorganization, moratorium, or other similar
laws from time to time in effect relating to or affecting generally the
enforcement of creditors' rights, and except as enforcement of remedies may be
limited by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 6
Additional Covenants of the Company and the Purchasers
6.1 Appointments to the Board; Voting. Subject to the fiduciary duties
of the directors of the Company: The Purchasers will be entitled to designate up
to two persons for election to the Company's Board of Directors (the "Board").
(a) Prior to the filing by the Company of its preliminary
proxy materials for the Annual Meeting, the Purchasers shall notify the Company
in writing of the names of the persons they wish to have elected as directors
and shall provide to the Company sufficient biographical and other information
about such persons and their affiliates to allow the members of the Board to
determine, in the exercise of their fiduciary duties, whether such persons
should be elected to the Board. If any such persons are not reasonably
acceptable to the Board, the Purchasers may continue to name persons until a
complete slate of acceptable persons has been designated (the "Purchaser
Designees"). After Shareholder Approval and Regulatory Approval, the Board shall
promptly elect the Purchaser Designees to the Board to serve until the next
meeting of Shareholders of the Company (the "Shareholders") at which directors
are elected. Subject to the continuing fiduciary
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duties of the directors, from time-to-time thereafter, the Board shall nominate
Purchaser Designees determined in this fashion to the Shareholders for election
by the Shareholders. Purchaser Designees, once elected to the Board, shall
remain Purchaser Designee Directors for the entire term of their election, until
resignation or until their successor Purchaser Designee(s) have been duly
elected.
(b) The Purchasers shall have the right to designate two (2)
persons to the Board for election as Directors as long as the Purchasers'
percentage of ownership of the issued and outstanding common stock of the
Company is at least 10%. If the percentage falls to between 5% and 9.9%, then
the Purchasers shall have the right to designate one (1) person to the Board for
election as a Director. All rights to designate persons to the Board for
election as Directors shall terminate if the percentage of the ownership of the
Purchasers of the issued and outstanding common stock of the Company is less
than 5%. In the event that Purchasers' percentage falls below any of the minimum
requirements set forth in this section, Purchasers shall use their best efforts
to cause the appropriate designee(s) sitting on the Board to resign. In the
event the Purchasers' percentage of ownership of issued and outstanding common
stock declines below one or more of the minimum percentages, causing the
resignation of one or more of the Purchaser designee Directors, and subsequently
increases to above one or more of the minimum percentages, the Purchasers shall
again have the right to designate directors as set forth in this subsection.
6.2 Approvals of Certain State Insurance Regulators. The Purchasers and
the Company will use their best efforts to prepare and file such applications
and take all such other actions as may be reasonable and appropriate, from time
to time, to obtain the approvals and consents listed on Schedules 3.3 and 5.3
("Regulatory Approvals").
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6.3 Shareholders Approval; Shares Redemption. The Company shall: (a) at
the special meeting of the Shareholders (the "Special Meeting"), to be duly
called and held as soon as practicable, for the purpose of voting on (i)
resolutions, adopted pursuant to and in compliance with ss.35-2-109 of the Code
of Laws of South Carolina 1976 (the "SC Code"), granting to the Shares such full
and unlimited voting rights to which the holders of the Shares would be entitled
if such shares were not, upon their acquisition, "control shares" as
contemplated by in ss.35-2-101 and ss.35-2-102 of the SC Code, and (ii) such
other resolutions as are necessary or desirable in connection with the
transactions contemplated by this Agreement, including but not limited to,
resolutions required by the by-laws of the National Association of Securities
Dealers, Inc. (the "NASD"); (b) subject to the fiduciary duties of its Board,
recommend approval of such resolutions to the Company's shareholders' and (c)
subject to the fiduciary duties of its Board, use its best efforts to obtain
approval of such resolutions by the holders of at least a majority of the shares
of Common Stock entitled to vote at such meeting ("Shareholder Approval").
6.4 Restrictions on Resale. The Purchasers shall not sell, transfer,
assign or otherwise dispose of any Shares (including Shares purchased by
exercising Options granted by this Agreement or the Options themselves), other
than to a Controlled Corporation (as hereinafter defined) except as set forth
below. The Purchasers shall not sell, transfer, assign or otherwise dispose of
their beneficial interest in any Shares, except:
(1) to the Company or to any Person or Group approved in
a resolution adopted by a majority of the Board of
Directors of the Company (excluding for such purpose
any directors designated by the Purchasers pursuant
to Section 6.1);
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(2) subject to Section 7, pursuant to an underwritten
public offering of Shares managed by an investment
banking firm reasonably acceptable to the Company and
registered under the Securities Act;
(3) in one or more privately negotiated transactions
exempt from registration under the Securities Act;
provided that prior to making a transfer pursuant to
this clause (C), the Purchasers shall obtain a
representation from its transferee addressed to the
Purchasers and the Company that such Shares are being
acquired for investment only;
(4) pursuant to Rule 144 under the Securities Act;
(5) to a corporation of which the Purchasers own not less
than 80% of the voting power entitled to be cast in
the election of directors (a "Controlled
Corporation"); provided that such Controlled
Corporation shall expressly assume in a writing duly
executed by it and delivered to the Company all of
the obligations and restrictions contained in this
Agreement pertaining to the Purchasers and shall
agree to transfer such Shares to the Purchasers or
another Controlled Corporation of the Purchasers if
it ceases to be a Controlled Corporation of the
Purchasers;
(6) in a merger or consolidation in which the Company is
acquired, or a plan of liquidation of the Company; or
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(7) in response to an offer to purchase or exchange for
cash or other consideration any Shares (A) which is
made by or on behalf of the Company or (B) which is
made by or on behalf of any Person or Group and which
is approved by the Board of Directors of the Company
(excluding for such purpose any director designated
by the Purchasers pursuant to Section 6.1) by two
business days prior to the expiration of such offer.
Notwithstanding the foregoing, the Purchasers shall not sell in the aggregate
pursuant to clause (3) or (4) Shares representing more than 10% of the
Outstanding Voting Power of the Company to any Person or Group or sell any
Shares to any such Person or Group who shall have on file with the SEC a current
statement on Schedule 13D under the Exchange Act reporting its beneficial
ownership of 10% or more of the Outstanding Voting Power of the Company.
INTENTIONALLY LEFT BLANK
SECTION 7
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Registration of Shares
7.1 Certain Definitions. The following terms as used in this Section
shall have the meanings indicated therefor:
7.1.1 "Demand Registration" means a Registration of all or a portion of
the Shares pursuant to subsection
7.2, whether or not the registration statement becomes effective.
7.1.2 "Effective Date" means the date on which a Registration becomes
or is declared "effective" by the SEC.
7.1.3 "Piggy-back Registration" means a Registration of all or a
portion of the Shares pursuant to subsection 7.3, whether or not the
registration statement becomes effective.
7.1.4 "Registration" means preparing a registration statement under the
Securities Act and the taking of such other action as shall be reasonable and
appropriate to cause the registration provided for in such registration
statement to be filed and become effective under the Securities Act, such
registration to be filed on any registration statement form for which the
Company is eligible and which it elects to utilize.
7.1.5 "Registration Expenses" means all expenses, other than Selling
Expenses, incurred by the Company in effecting a Demand Registration or
Piggy-back Registration requested pursuant to and otherwise complying with the
Company's obligations under this Section, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company and of independent public accountants engaged by the
Company to conduct any special audits incident to or required to be included in
any such Registration.
7.1.6 "Selling Expenses" means all stock transfer taxes and
underwriters' discounts
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and commissions applicable to the sale of all or certain of the Shares by the
Purchasers.
7.2 Demand Registration.
7.2.1 Demand for Registration. Subject to the terms and
conditions of this Section and subsection 6.7, at any time after the filing with
the SEC of the Company's Form 10-K for the year ended December 31, 1995, and
before December 31, 1999 (the "Registration Period"), the Purchasers may demand
that the Company use its best efforts diligently to effect the Registration of
Shares requested by the Purchasers. Such demand shall specify the number of
Shares to be offered and by whom they will be offered, and shall describe the
method of offering and selling such Shares. The Purchasers will collectively be
entitled to one Demand Registration. The Company shall be entitled to include in
any Demand Registration (a) equity securities to be offered, issued, and sold by
the Company and (b) equity securities to be offered and sold by other
shareholders.
7.2.2 Limitations on Obligation to Effect Demand Registrations.
The Company will not be obligated to file a Demand Registration demanded by
Purchasers within 18 months after the Effective Date of a previous Piggy-Back
Registration by Purchasers.
7.2.3 The Company's Right to Postpone Registration. If any
Demand Registration shall be demanded on a date which is after the last day of
the fiscal year of the Company and prior to the date on which the Company's
auditor's shall certify the Company's financial statements for such year, the
Company may postpone the filing of a registration statement pursuant to such
request until such certified financial statements shall be available. In
addition, the Company may postpone the commencement of the preparation of such
registration statement for a Demand Registration if the Board of Directors of
the Company determines in good faith that such Demand
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Registration (a) might have a material adverse effect on (i) any proposal or
plan to engage in any acquisition or disposition of assets (other than in the
ordinary course of business) or any purchase of stock, merger, tender offer or
similar transaction or (ii) any proposed, contemplated or pending offering of
securities by the Company or any of its Subsidiaries or (b) might result in
disclosure of non-public information that would not be in the best interests of
the Company or its shareholders to disclose at that time. Provided that if the
Demand Registration is so postponed, it will not be counted as the Demand
Registration permitted by subsection 7.2.1.
7.3 Piggy-Back Registration.
7.3.1 Notice of Possible Registration of Shares. Each time
during the Registration Period that the Company proposes to effect a
Registration of any shares of the same class as the Shares, other than a
registration on Form S-4 or S-8, or other similar registration form hereafter
authorized or prescribed by the SEC, it will give written notice at least 30
days before the proposed filing date therefor to the Purchasers and, upon the
written request of the Purchasers given within 10 Business Days after the date
of such notice, the Company will, subject to the limitations set forth elsewhere
in this section, include in such Registration the Shares which the Purchasers
have so requested to be registered. The Purchasers shall collectively be
entitled to two Piggy-back Registrations.
7.4 Termination of Registration Rights. The rights of Purchasers to a
Demand Registration or a Piggy-back Registration will terminate when the
Purchasers no longer hold at least 20% of the Shares issued pursuant hereto,
adjusted to give effect to stock dividends, stock splits and other similar
changes to the capital structure of the Company.
7.5 Registration Procedure. Subject to the limitations set
forth elsewhere in this Section,
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if the Company receives a demand or request to register any Shares pursuant to
subsections 7.2 or 7.3 which complies with the terms of this Section, the
Company will use its best efforts to:
(a) in the case of a Demand Registration, as promptly as possible,
and in any event within 90 days after receipt of such demand or
request, prepare and file with the SEC a registration statement
providing for the registration of the Shares which are the
subject of such request;
(b) keep any effective registration statement effective and current
until the earlier of (i) the completion of the distribution of
the Shares so registered or (ii) expiration of 90 days after
the Effective Date;
(c) furnish to the Purchaser such number of copies of a summary
prospectus, if any, or other prospectus, including a
preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents in such numbers as
the Purchasers may reasonably request in order to facilitate
the public sale or other disposition of the Shares registered;
(d) cooperate with the Purchasers and the Purchasers' counsel to
register or qualify the Shares covered by such Registration
under the securities or 'blue sky" laws of such states of the
United States as the Purchasers shall reasonably request not to
exceed five (5) states and, in any event, at the Purchasers'
expense;
(e) promptly advise the Purchasers as to the following: (i) the
time at which the registration statement or any post-effective
amendment thereto shall have become effective, the time at
which any amendment or supplement to the prospectus is filed
with the SEC and the time at which the offering and sale may
commence, (ii) any
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request by the SEC for any amendment to such registration
statement or the prospectus or for additional information, and
the nature and substance thereof, and (iii) the issuance by the
SEC or any other federal or state governmental authority or
court of any order or similar process suspending the
effectiveness of such registration statement or the suspension
of the qualification of Shares for sale in any jurisdiction, or
the initiation (or threat thereof in writing) of any
proceedings for that purpose, and the Company will use its best
efforts to prevent the issuance of such order or process and,
if any such order or process shall be issued, to obtain the
withdrawal thereof at the earliest possible time.
7.6 Underwriting.
7.6.1 Underwritten Distribution May be Requested. If (a) the Purchasers make a
request for a Demand Registration by means of an underwriting, or (b) if the
Company proposes to offer, issue and sell securities of the same class as the
Shares in an underwritten distribution by the Company in a Registration covering
Shares (whether a Demand Registration or a Piggy-Back Registration) then, in
either case, the right of the Purchasers to Registration of the Purchasers'
Shares shall be conditioned, subject to the further terms and conditions hereof,
on the Company's best effort to effect the inclusion of the Shares of the
Purchasers requested to be so registered in such underwriting; provided,
however, that (i) if none of such Shares can be included in such underwriting,
the Demand Registration shall not count as the Purchasers' Demand Registration,
and (ii) if only a part of such Shares can be included, the Purchasers may
promptly withdraw their request for a Demand Registration and the Demand
Registration shall not count as the Purchasers'
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Demand Registration.
7.6.2 Selection of Underwriters. The Company shall have the
sole right to select the managing underwriter to effect any underwritten
distribution of the Shares.
7.6.3 Underwriting Agreement. In the case of an underwritten
Registration, the Company and the Purchasers shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected in
accordance with this Section and shall agree not to effect any public sale or
distribution of securities of the same class as the Shares other than as part of
such underwriting within 90 days (or such other period as may be negotiated)
after the Effective Date of such registration statement.
7.6.4 Limitation on Shares to be Included in an Underwritten
Registration. If the managing underwriter advises the Company in writing that
marketing factors require a limitation of the number of Shares to be
underwritten, then the Company will provide a copy of such writing to the
Purchasers and the Purchasers shall be entitled to consult with the underwriters
concerning such advice. As to either a Demand Registration or a Piggy-back
Registration, the Purchasers shall be entitled to sell only the maximum number
of Shares that may, in the opinion of such underwriters after such consultation
with the Purchasers, be sold by the Purchasers.
7.7 Expenses.
7.7.1 Registration Expenses. Except as otherwise expressly
provided in this subsection, the Company will bear Registration Expenses for a
Registration commenced or completed pursuant to this Section; provided that the
Company shall not be required to pay Registration Expenses incurred in
connection with a Demand Registration which demand was subsequently withdrawn by
the Purchaser, except in the case of a withdrawal made (a) less than 20
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Business Days after the submission of such demand for a Demand Registration, (b)
subsequent to a postponement pursuant to subsection 7.2.3, where such withdrawal
is made within 20 Business Days after notice of such postponement has been given
to the Purchasers, by the Company or the managing underwriter, (c) subsequent to
a failure to include Shares in an underwritten offering as provided in
subsection 7.6.1 where such withdrawal is made by the Purchasers within 20
business days after notice of such failure has been given to the Purchasers or
(d) subsequent to a limitation on the number of Shares to be underwritten
pursuant to subsection 7.6.4, where such withdrawal is made by the Purchasers
within 20 Business Days after notice of such limitations has been given to the
Purchaser by the Company or the managing underwriter. Such Registration Expenses
not to be borne by the Company pursuant to this subsection 7.7.1 will be borne
by the Purchasers; provided, however, that the Purchasers shall not bear such
expenses if, after withdrawal by the Purchasers, the Company shall continue the
Registration as to securities to be issued by it or to be sold by other existing
shareholders of the Company.
7.7.2 Selling Expenses. All Selling Expenses in connection with
any Registration commenced or completed pursuant to this Section will be borne
by the Purchaser.
7.7.3 Mitigation of Company's Obligations. (a) The Company
shall have no obligation to bear Registration Expenses if the Company is
informed by the South Carolina Insurance Department that it will not allow any
direct or indirect Subsidiary of the Company to pay a dividend or make a
distribution to the Company to provide funds for the payment of Registration
Expenses. The Company agrees to use its best efforts to cause such Department to
give its approval of such a dividend or distribution.
(b) If the Company is relieved from bearing any Registration
Expenses pursuant
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to this subsection, the Purchasers may assume the obligation to pay such
Registration Expenses and the Company will proceed with the Registration.
(c) If, within three years of the Effective Date of a
Registration for which the Purchasers bore the Registration Expenses which
otherwise would have been borne by the Company, the Company has funds available
to it, it will upon request reimburse the Purchasers for such Registration
Expenses borne by them.
7.8 Indemnification.
7.8.1 Indemnification by the Company. In each case of a
Registration of Shares pursuant to the registration rights granted hereby, the
Company will indemnify, save and hold harmless the Purchasers, each underwriter
thereof, and each officer and director of any such underwriter from and against
any claim, damage, loss, settlement, or liability, arising out of or based on
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement, any summary prospectus, prospectus or preliminary
prospectus contained therein or any amendment or supplement thereto (including,
in each case, documents incorporated therein by reference) or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made, and
will reimburse each such person for all legal or other expenses reasonably
incurred in connection with the investigation or defense of any such claim,
damage, loss or liability; provided, however, that the Company will not be
liable in any such case to the extent that such claim, damage, loss or liability
arises out of or is based upon any untrue statement, alleged untrue statement,
omission or alleged omission, made in or omitted from such materials in reliance
upon and in conformity with written information in regard to the
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person or entity seeking indemnification which information was furnished to the
Company specifically for use in the preparation of such registration statement,
summary prospectus, prospectus or preliminary prospectus or any amendment or
supplement thereto by the Purchasers, any underwriter or other person, or their
respective agents; and provided further that the foregoing indemnification with
respect to a preliminary prospectus shall not inure to the benefit of any
underwriter from whom the person asserting any such claim, damage, loss or
liability purchased any of Shares if a copy of the final prospectus had not been
sent or given to such person at or prior to written confirmation of the sale of
such Shares to such person and the untrue statement or omission of a material
fact contained in such preliminary prospectus was corrected in the final
prospectus.
7.8.2 Indemnification by the Purchasers. The Purchasers will
indemnify, save and hold harmless the Company, each officer and director of the
Company and each person who controls the Company within the meaning of the
Securities Act to the same extent (and subject to the same limitations) as the
foregoing indemnity from the Company to the Purchasers, but only with respect to
information relating to the Purchasers and furnished to the Company by the
Purchasers or their agents specifically for use in any registration statement,
any summary prospectus, prospectus, or preliminary prospectus contained therein
or any amendment or supplement thereto including, in each case, the documents
incorporated therein by reference.
7.8.3 Counsel Fees and Expenses: Settlements. In case any
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnification may be sought pursuant
to this Section (the "Indemnified Party"), such Indemnified Party shall promptly
notify the person from whom such indemnity may be sought (the "Indemnifying
Party") in writing and the Indemnifying Party, at its election, may retain
counsel reasonably
26
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satisfactory to the Indemnified Party to represent both the Indemnifying Party
and the Indemnified Party in such proceeding. In any such proceeding, the
Indemnified Party shall have the right to retain counsel in addition to counsel
provided pursuant to the preceding sentence, but the fees and expenses of such
additional counsel shall be at the expense of such Indemnified Party unless (a)
the Indemnifying Party has agreed to the retention of such additional counsel at
its expense or (b) the named parties (including any impleaded parties) to any
such proceeding include both the Indemnifying Party and the Indemnified Party
(or another person), the Indemnifying Party proposes that the same additional
counsel represent both the Indemnifying Party and the Indemnified Party (or such
other person), and representation of both such persons by the same counsel would
be inappropriate due to actual or potential differing interests between them.
Except as provided in the preceding sentence, the Indemnifying Party will not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one firm
qualified in such jurisdiction to act as counsel for all such Indemnified
Parties. Such firm shall be approved as satisfactory in writing by the
Purchasers in the case of Indemnified Parties indemnified pursuant to subsection
7.8.1 and by the Company in the case of Indemnified Parties indemnified pursuant
to subsection 7.8.2. The Indemnifying Party shall not be liable for any
settlement of any litigation or proceeding effected without the Indemnifying
Party's written consent. The Indemnifying Party will not, without the
Indemnified Party's written consent, settle or compromise any proceeding or
consent to entry of any judgment which would impose an injunction or other
equitable relief upon such Indemnified Party or which does not include as an
unconditional term thereof the release of such Indemnified Party from all
liability in respect to such proceeding.
In the event that the Indemnifying Party, within a reasonable time
after notice of any such
27
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proceeding, fails to provide counsel, the Indemnified Party shall have the right
(upon further notice to the Indemnifying Party) to retain counsel and undertake
the defense, compromise or settlement of such proceeding for the account of the
Indemnifying Party, subject to the right of the Indemnifying Party to assume the
defense of such proceeding at any time prior to settlement, compromise or final
determination thereof. The cost and expense of counsel so retained by the
Indemnified Party shall be borne by the Indemnifying Party, and the Indemnifying
Party shall be bound by, and shall pay the amount of, any settlement,
compromise, final determination, or judgment reached while the Indemnified Party
was represented by counsel retained by the Indemnified Party pursuant to this
Section.
7.8.4 Other Terms Required by Underwriters. The indemnification
pursuant to the foregoing provisions of this Section shall be on such other
terms and conditions as are at the time customary and reasonably required by
underwriters in public offerings, including providing for contribution in the
event indemnification provided for in this Section is unavailable or
insufficient, all as shall be set forth in an underwriting agreement between the
Company, the Purchasers and the underwriter.
7.9 Provision of Information by Purchasers. In connection with any
Registration to be effected pursuant to this Agreement, the Purchasers shall
furnish the Company such written information regarding the Purchasers as the
Company may request in writing, which information shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement for inclusion in the registration statement (and the prospectus
included therein).
7.10 Agreements of the Purchasers. If requested by the Company, the
Purchasers will
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execute and deliver to the Company an agreement, in form reasonably satisfactory
to the Company, that the Purchasers will comply with all applicable prospectus
delivery requirements of the Securities Act and all anti-stabilization,
manipulation and similar provisions of the Securities Exchange Act and any rules
promulgated thereunder, and will furnish to the Company information about sales
made in such public offering. The Company's obligations to effect the
Registration of Shares of the Purchasers under this Agreement shall be
conditioned upon the Purchasers' complying with the foregoing provisions.
7.11 Market Standstill Agreement. In addition to the provisions of
subsection 7.6.3, if requested by the Company or by the managing underwriter in
respect of any Registration provided for in this Section, the Purchasers will
agree not to sell or otherwise transfer or dispose of any Shares (or other
securities of the Company) held by them during the ninety (90) day period
following the effective date of any registration statement filed in respect of
any Registration or such other period as may be negotiated with the underwriter.
Such agreement shall be in writing and in form reasonably satisfactory to the
Company and such managing underwriter. The Company may impose stop-transfer
instructions with respect to the Shares (or other securities) subject to the
foregoing restrictions until the end of such ninety (90) day or other period
SECTION 8
Indemnification by the Company
8.1 Indemnification. In addition to the provisions for indemnity by the
Company pursuant to subsection 7.8.1 and 7.8.3 and 7.8.4, the Company will
indemnify, save and hold the Purchasers harmless against any claim, damage,
loss, settlement, or liability resulting from any
29
<PAGE>
material misrepresentation, breach of warranty or nonfulfillment of any covenant
or agreement on the part of the Company contained in this Agreement or in any
statement or certificate furnished or to be furnished to the Purchasers pursuant
hereto or in connection with the transactions contemplated hereby and any
actions, judgments, costs and expenses incident to the foregoing. The parties
agree that indemnification as set forth in this Section 8 shall be the exclusive
remedy for any such misrepresentation, breach of warranty or nonfulfillment of
any covenant or agreement on the part of the Company.
SECTION 9
Indemnification By The Purchasers
9.1 Indemnification. In addition to the provisions for indemnity by the
Purchasers pursuant to subsection 7.8.2, the Purchasers will indemnify, save and
hold the Company harmless against any damage resulting from any material
misrepresentation, breach of warranty or nonfulfillment of any covenant or
agreement on the part of the Purchasers contained in this Agreement or in any
statement or certificate furnished or to be furnished to the Company pursuant
hereto or in connection with the transactions contemplated hereby and any
actions, judgments, costs and expenses incident to the foregoing. The parties
agree that indemnification as set forth in this Section 9 shall be the exclusive
remedy for any such misrepresentation, breach of warranty or nonfulfillment of
any covenant or agreement on the part of the Company.
9.2 Payment of Indemnification Claim. The Purchasers shall indemnify
the Company
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within 90 days of the final determination of the damage or sum subject to such
indemnification.
SECTION 10
Nature and Survival of Representations
All representations, warranties and covenants made by the Company or the
Purchasers, except covenants which by their terms extend beyond such date, will
survive the Closing hereunder until termination of the escrow account.
SECTION 11
Governing Law; Jurisdiction; Venue; Service of Process
(a) This Agreement will be construed in accordance with and governed by
the laws of the State of South Carolina. Both parties agree to submit to the
jurisdiction of the Court of Common Pleas for Richland County, Columbia, South
Carolina in settlement of any dispute or controversy arising under or in
connection with this Agreement.
SECTION 12
Parties in Interest; Assignment
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and to each of their respective successors or permitted assigns,
but this Agreement and the rights and obligations under this Agreement shall not
be assignable by either the Company or any of the Purchasers without written
consent of the other party.
31
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SECTION 13
Entire Agreement
This Agreement contains the entire agreement between the parties hereto
with respect to the purchase and sale of the Shares and the granting of Options
for the Additional Shares provided for herein and supersedes any prior
agreements or understandings between or among any of the parties hereto relating
to the subject matter hereof.
SECTION 14
Notices
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given when received, and shall be given (i) in
person, (ii) by United States Certified Mail, Return Receipt Requested or (iii)
by an independent messenger service which obtains a receipt upon delivery to a
party at the following addresses or to such other address as a party may
hereafter specify by notice:
if to the Company:
The Seibels Bruce Group, Inc.
1501 Lady Street
Columbia, South Carolina 29201
Attn: Ernst N. Csiszar, President and Chief Executive Officer
Fax#: 803-748-2309
with copies to:
John C. West, Jr., Esquire
P.O. Box 661
Camden, South Carolina 29020
Fax#: 803-432-0550
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if to the Purchasers:
Charles H. Powers
Walker S. Powers
P.O. Box 6525
Florence, SC 29502
Fax#: 803-651-0956
SECTION 15
Modification
No amendment or modification of or supplement to this Agreement will be
effective unless it is in writing and duly executed by each party to be charged
thereunder.
SECTION 16
Counterparts
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above- written.
THE SEIBELS BRUCE GROUP, INC.
By:_________________________________
33
<PAGE>
Ernst N. Csiszar
President and Chief Executive Officer
THE PURCHASERS
By:___________________________________
Charles H. Powers
By:_________________________________
Walker L. Powers
34
<PAGE>
SCHEDULE 3.3
SCHEDULE OF THE SEIBELS BRUCE GROUP, INC'S
REQUIRED APPROVALS AND CONSENTS
1. Approval of the Stock Purchase Agreement by the South Carolina
Department of Insurance.
2. Approval by the South Carolina Department of Insurance for the Company
to resume writing "risk" business.
3. Approval by the shareholders of a resolution in compliance with Section
35-2-109 of the South Carolina Code of Laws, 1976, as amended, approving
voting rights for all of the shares under the South Carolina Control
Share Acquisition Act.
4. Approval by the shareholders of resolutions required by the By-Laws of
the National Association of Security Dealers, Inc.
35
<PAGE>
SCHEDULE 5.3
SCHEDULE OF PURCHASERS REQUIRED
APPROVALS AND CONSENTS
1. Approval of the Stock Purchase Agreement by the South Carolina
Department of Insurance.
36
<PAGE>
AMENDMENT TO STOCK PURCHASE AGREEMENT
This Amendment to the Stock Purchase Agreement of January 29, 1996, is
entered into as of January 30, 1996.
WHEREAS, on January 29, 1996, The Seibels Bruce Group, Inc., a
corporation organized and existing under the laws of South Carolina and
hereinafter referred to as (Company") and Charles H. Powers and Walker S.
Powers, citizens and residents of the State of South Carolina and hereinafter
referred to as ("Purchasers"), entered into a Stock Purchase Agreement dated
January 29, 1996, for the purchase of shares of stock in the Company; and
WHEREAS, the Purchasers wish to amend the Stock Purchase Agreement.
NOW, THEREFORE, the parties do hereby agree as follows:
1. That the Agreement be amended to add Rex W. and Jane P.
Huggins as Purchasers.
2. All other provisions of the Stock Purchase Agreement dated
January 29, 1996, are to remain in full force and effect.
THE COMPANY:
The Seibels Bruce Group, Inc.
By: ______________________________
Ernst N. Csiszar
President
THE PURCHASERS:
By: _______________________________
Charles H. Powers
By: ________________________________
Walker S. Powers
By: ________________________________
Rex W. Huggins
By:________________________________
Jane P. Huggins
37
<PAGE>
EXHIBIT 2
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Option Agreement"), dated as of
January 30, 1996, is made jointly and severally between Charles H. Powers,
Walker S. Powers and Rex and Jane Huggins on the one hand (collectively the
"Purchasers", and each individually a "Purchaser") and The Seibels Bruce Group,
Inc., a South Carolina corporation (the "Company"). Reference is made to the
Stock Purchase Agreement, dated as of January 29, 1996, between the Purchasers
and the Company (the "Stock Purchase Agreement"). Capitalized terms used herein
without definition shall have the definitions assigned to them in the Stock
Purchase Agreement.
WITNESSETH:
WHEREAS, under the Stock Purchase Agreement, the Company is obligated
to issue options to the Purchasers as additional consideration for the purchase
of the Shares.
NOW, THEREFORE, subject to the terms and conditions hereof and in
consideration of the premises and the promises contained herein, the Purchasers
jointly and severally on one hand and the Company on the other, hereto agree as
follows:
SECTION 1
Option Terms
1.1 Amount of Option. The Company hereby grants the Purchasers an
irrevocable option (the "Option"), to purchase from the Company, 6,250,000
shares of common stock, par value $1.00 ("Common Stock") per share, of the
Company (the "Additional Shares"), upon the terms and conditions set forth below
and in Section 1.2:
(a) The Option for 3,125,000 of the Additional Shares shall
have an exercise price of the greater of (i) Book Value (as defined in Section
1.1(c)), per share on the date of exercise or (ii) $1.50 per share. This portion
of the Option for 3,125,000 of the Additional Shares shall terminate on December
31, 1998.
(b) The Option for the remaining 3,125,000 of the Additional
Shares shall have an exercise price of the greater of (i) Book Value (as defined
in Section 1.1(c)), per share on the date of exercise or (ii) $2.00 per share.
This portion of the Option for 3,125,000 of the Additional Shares shall
terminate on December 31, 2000.
(c) For purposes of this Option Agreement, "Book Value" shall
be the total shareholders equity of the Company divided by the shares issued and
outstanding, determined under the standard practices of the Company and reported
on SEC Form 10-Q, as of the end of the previous calendar quarter.
(d) The Option for the Shares shall be divided among the
Purchasers as follows:
- 1-
<PAGE>
1. Charles H. Powers - An Option for 5 million
shares.
2. Walker S. Powers - An Option for 1 million
shares.
3. Rex and Jane Huggins - An Option for 250,000
shares.
One-half of each Purchaser[s] Option shall be
exercisable in accordance with the terms and
conditions as set forth in paragraph 1.1(a) above and
one-half of each Purchaser[s] Option shall be
exercisable in accordance with the terms and
conditions as set forth in paragraph 1.1(b) above.
1.2 Additional Terms and Conditions. In addition to the terms and
conditions in Section 1.1, the Option shall be subject to the following terms
and conditions:
(a) The Option may not be exercised before the approval of the
shareholders of the Company of an increase in the authorized capital of the
Company of an additional 25,000,000 shares of Common Stock and, if deemed
necessary by the Company's Board of Directors on the advice of counsel, the
reduction of the par value of the shares of Company Stock. Each exercise of the
Option must be made in an amount equal to at least 500 shares.
(b) Full payment of the exercise price must be made to the
Company upon exercise of the Option by certified or cashiers check or wire
transfer.
(c) The Option is not transferable by the Purchasers, except
as provided in Section 6.4 of the Stock Purchase Agreement.
(d) The Option is irrevocable until termination under Section
1.1(a) or (b).
SECTION 2
Exercise and Additional Shares
2.1 Exercise of Option. To exercise the Option, the Purchasers,
individually or jointly, must deliver to the Company written notice, signed by
the Purchaser[s], stating the number of Shares the Purchaser[s] elect to be
purchased, and stating that payment to the Company is made as described in
Section 1.2(d).
2.2 Issuance of Additional Shares. Upon exercise of all or part of the
Option, the Company shall issue the Additional Shares to the Purchasers within
30 days or such later time as may be deemed necessary by the Company's Board of
Directors on the advice of counsel, to comply with applicable federal or state
securities laws or state insurance laws.
2.3 Securities Act of 1933. The provisions of Section 5.4 of the Stock
Purchase Agreement shall apply to the Option and the Additional Shares as if the
Option and Additional
- 2 -
<PAGE>
Shares were Shares. The Purchasers understand and agree that there shall be
imprinted on the certificates for the Shares a legend substantially in the form
as the following:
The options under which the shares of common stock represented by this
certificate were acquired and the shares acquired under exercise of
that option have not been registered under the Securities Act of 1933,
as amended and may not be offered or sold unless the shares are
registered under the Securities Act of 1933, as amended, or an
exemption from the registration requirements under the Securities Act
of 1933, as amended, is available.
2.4 Registration of Shares. The provisions of Section 7 of the Stock
Purchase Agreement shall apply to any of the Additional Shares, after exercise
of the Option as to those Additional Shares, as if the Additional Shares were
Shares.
2.5 Change in Capital Stock Structure. In the event of a stock
dividend, stock split or combination of shares, recapitalization or merger in
which the Company is the surviving corporation or other change in the Company's
capital stock (including, but not limited to, the creation or issuance to
shareholders generally of rights, options or warrants for the purchase of common
stock or preferred stock of the Company), the number and kind of shares of stock
or securities of the Company to be subject to the Option then remaining
outstanding, the number of Additional Shares with respect to which the Option is
unexercised, and the exercise price shall be appropriately adjusted by the
Company.
2.6 Additional Matters. The following provisions of the Stock Purchase
Agreement shall apply to any Additional Shares, after exercise of the Option as
to those Additional Shares, as if the Additional Shares were Shares: Section
5.4, Section 6.4, and Section 6.5.
SECTION 3
Miscellaneous
3.1 Governing Law. This Option Agreement shall be deemed to be a
contract under the laws of the State of South Carolina and will be construed in
accordance with and governed by the laws of said State. Both parties agree to
submit to the jurisdiction of the Court of Common Pleas for Richland County,
Columbia, South Carolina in settlement of any dispute or controversy arising
under or in connection with this Option Agreement.
3.2 Parties in Interest; Assignment. This Option Agreement shall be
binding upon and inure to the benefit of the parties hereto and to each of their
respective successors or permitted assigns, but this Option Agreement and the
rights and obligations under this Option Agreement shall not be assignable by
either the Company or any of the Purchasers without written consent of the other
party.
3.3 Agreement. This Option Agreement and the Stock Purchase Agreement
contain the entire agreement between the parties hereto with respect to the
Option for the Additional
- 3 -
<PAGE>
Shares and supersedes any prior agreements or understandings between or among
any of the parties hereto relating to the Option.
3.4 Notices. The provisions of Section 14 of the Stock Purchase
Agreement with respect to notices and other communications shall apply to this
Option Agreement.
3.5 Modification No amendment or modification of or supplement to this
Option Agreement will be effective unless it is in writing and duly executed by
each party to be charged thereunder.
IN WITNESS WHEREOF, the parties have executed this Option Agreement on
the date first above-written
THE COMPANY:
THE SEIBELS BRUCE GROUP, INC.
By:____________________________
Ernst N. Csiszar
President and Chief Executive Officer
THE PURCHASERS:
By:____________________________
Charles H. Powers
By:____________________________
Walker S. Powers
By:____________________________
Rex Huggins
By:____________________________
Jane Huggins
- 4 -
<PAGE>
EXHIBIT 3
[LETTERHEAD OF
ADVEST, INC.]
February 7, 1996
Confidential
Board of Directors
The Seibels Bruce Group, Inc.
1501 Lady Street
Columbia, South Carolina 29201
Members of the Board:
The Seibels Bruce Group, Inc. ("Seibels" or the Company") and Charles H. Powers,
and his son, Walker S. Powers ("the Powers"), entered into an agreement dated as
of January 30, 1996 ("the Agreement"), under which the Powers will invest
$6,250,000 in Seibels through the purchase of 6,250,000 shares of newly issued
registered Common Stock at a price of $1.00 per share.
The transaction will be completed pursuant to the following structure: the
Powers will purchase 6,250,000 shares of newly issued Common Stock of Seibels
for $1.00 per share for a total consideration of $6,250,000. The cash
consideration will be contributed by Seibels directly to its subsidiary South
Carolina Insurance Company ("SCIC"), to increase SCIC's statutory surplus from
$5,895,603 as of September 30, 1995 to $12,145,603. The transaction will
increase the GAAP accounting basis surplus of Seibels from $7,536,134, or $ 0.45
per currently outstanding common share, at September 30, 1995 to $13,786,134 or
$ 0.60 per share, based on the pro-forma number of shares outstanding.
These shares purchased by the Powers will represent a 27.15% ownership interest
in the Company.
The Powers, at closing, will also be issued options to purchase additional
shares on the following basis.
(i) 2,500,000 shares at a price of the greater of per share common book
value, or $1.50 per share, at any time until December 31, 1998, and;
(ii) 2,500,000 shares at a price of the greater per share common book value
or $2.00 per share, at any time until December 31, 2000.
For the issuance in (ii) an increase in the number of authorized shares of
common stock issuable by Seibels would need approval from the appropriate
constituencies.
<PAGE>
The rights and privileges of shares issuable to the Powers, currently and
ultimately, under the transaction would not be constrained in any way by the
Stock Purchase Agreement, or any other accord, except that the transfer or
resale of the shares would be limited by Rule 144 of the Securities and Exchange
Act. In consideration for their investment The Powers would be given permission
to appoint two nominees to the Seibels Board of Directors, of a total of twelve
members to be seated.
The Powers proposal comes after a period of six months during which the Company
received a number of investment and acquisition offers, and has been accepted by
the Seibels Board of Directors as being preferable to each and all of these
other proposals.
You have asked us whether, in our opinion, the financial terms of the
transaction, taken as a whole, are fair from a financial point of view to the
Company and its shareholders.
In arriving at the opinion set forth below, we have, among other things:
reviewed the Agreement; reviewed audited financial information for the four
years ended December 31, 1994, as well as unaudited financial information for
the quarter and nine months ended September 30, 1995 for Seibels; reviewed the
loss and claims reserves analyses of Seibels by independent actuarial consulting
firms; reviewed Seibels' securities and investments; reviewed the Stock Purchase
Agreement and the documents relating to the investment of Abdullatif Ali Alissa
Est. and Saad A. Alissa in Seibels; personally attended several meetings of the
Seibels Board of Directors; reviewed summary personal business and financial
information of the Powers; discussed a prospective investment in or purchase of
Seibels with some 25 insurance, financial services and investment companies
during a six month period commencing in April, 1995; analyzed and reviewed each
of the various offers Seibels received from other insurers, financial companies,
and investors to purchase stock, insert assets, or in other manner achieve
ownership in, or acquire, Seibels; reviewed comparative financial and operating
data in the insurance industry and other institutions which were deemed to be
reasonably similar to the Company; reviewed certain insurance company mergers
and acquisitions on both a regional and nationwide basis, and compared the
proposed cash investment with the financial terms of certain other mergers and
acquisitions; conducted discussions with senior management of the company
concerning its business, problems, prospects, and financial needs; independently
analyzed the financial condition and needs of the company; and reviewed such
other financial information, studies and analyses, and performed such other
investigations and took into account such other matters as we deemed necessary.
In preparing this opinion we have relied on the accuracy and completeness of all
information supplied or otherwise made available to us by the Company and
others, and we have not independently verified such information nor have we
undertaken an independent appraisal of the assets or liabilities of the Company
as part of our engagement. The Company has agreed to pay Advest a fee for
delivery of this opinion letter. This opinion is necessarily based upon
circumstances and conditions as they exist and can be evaluated by us as of the
date of this letter. We have assumed for purposes of this opinion that there has
been no material changes in the financial condition of the Company from that
existing on September 30, 1995.
In reliance upon and subject to the foregoing it is our opinion that, as of the
date hereof the financial terms of the investment, taken as a whole, are fair
from a financial point of view to the Company and its shareholders.
Very truly yours,
Alexander M. Clark
Managing Director
<PAGE>
EXHIBIT 4
CHAPTER 13 (DISSENTERS' RIGHTS) OF TITLE 33
OF THE CODE OF LAWS OF SOUTH CAROLINA
s 33-13-101. Definitions.
In this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 33-13-102 and who exercises that right when and
in the manner required by Sections 33-13-200 through 33-13-280.
(3) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. The value of the shares is to be determined by
techniques that are accepted generally in the financial community.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
s 33-13-102. Right to dissent.
A shareholder is entitled to dissent from, and obtain payment of the
fair value of, his shares in the event of any of the following corporate
actions:
(1) consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by Section
33-11-103 or the articles of incorporation and the shareholder is entitled to
vote on the merger or (ii) if the corporation is a subsidiary that is merged
with its parent under Section 33-11-104 or 33-11-108 or if the corporation is a
parent that is merged with its subsidiary under Section 33-11-108;
(2) consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares are to be acquired, if the
shareholder is entitled to vote on the plan;
(3) consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale must be distributed to the shareholders within one
year after the date of sale;
<PAGE>
(4) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights; or
(v) reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for cash under
Section 33-6-104; or (5) the approval of a control share acquisition under
Article 1 of Chapter 2 of Title 35; (6) any corporate action to the extent the
articles of incorporation, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
s 33-13-103. Dissent by nominees and beneficial owners.
(a) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if he dissents with respect to all shares of which he is
the beneficial shareholder or over which he has power to direct the vote. A
beneficial shareholder asserting dissenters' rights to shares held on his behalf
shall notify the corporation in writing of the name and address of the record
shareholder of the shares, if known to him. .
s 33-13-200. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under
Section 33- 13-102 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this chapter and be accompanied by a copy of this
chapter.
(b) If corporate action creating dissenters' rights under Section
33-13-102 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Section
33-13-220.
s 33-13-210. Notice of intent to demand payment.
<PAGE>
(a) If proposed corporate action creating dissenters' rights under
Section 33- 13-102 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights (1) must give to the
corporation before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated and (2) must not
vote his shares in favor of the proposed action. A vote in favor of the proposed
action cast by the holder of a proxy solicited by the corporation shall not
disqualify a shareholder from demanding payment for his shares under this
chapter.
(b) A shareholder who does not satisfy the requirements of subsection
(a) is not entitled to payment for his shares under this chapter.
s 33-13-220. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under
Section 33- 13-102 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 33-13-210(a).
(b) The dissenters' notice must be delivered no later than ten days
after the corporate action was taken and must:
(1) state where the payment demand must be sent and where certificates
for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent transfer of
the shares is to be restricted after the payment demand is received;
(3) supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he or, if he is a nominee asserting dissenters' rights on
behalf of a beneficial shareholder, the beneficial shareholder acquired
beneficial ownership of the shares before that date;
(4) set a date by which the corporation must receive the payment
demand, which may not be fewer than thirty nor more than sixty days after the
date the subsection (a) notice is delivered and set a date by which certificates
for certificated shares must be deposited, which may not be earlier than twenty
days after the demand date; and
(5) be accompanied by a copy of this chapter.
s 33-13-230. Shareholders' payment demand.
(a) A shareholder sent a dissenters' notice described in Section
33-13-220 must demand payment, certify whether he (or the beneficial shareholder
on whose behalf he is asserting dissenters' rights) acquired beneficial
ownership of the shares before the date set forth in the dissenters' notice
pursuant to Section 33-13-220(b)(3), and deposit his certificates in accordance
with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not comply substantially with the
requirements that he demand payment and deposit his share certificates where
required, each by the date set in the
<PAGE>
dissenters' notice, is not entitled to payment for his shares under this
chapter.
s 33-13-240. Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for payment for them is received until the proposed
corporate action is taken or the restrictions are released under Section 33-13-
260.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
s 33-13-250. Payment.
(a) Except as provided in Section 33-13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who substantially complied with Section 33-13-230 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any;
(2) a statement of the corporation's estimate of the fair value of the
shares and an explanation of how the fair value was calculated;
(3) an explanation of how the interest was calculated;
(4) a statement of the dissenter's right to demand additional payment
under Section 33-13-280; and
(5) a copy of this chapter.
s 33-13-260. Failure to take action.
(a) If the corporation does not take the proposed action within sixty
days after the date set for demanding payment and depositing share certificates,
the corporation, within the same sixty-day period, shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 33-13-220 and repeat the payment demand
procedure.
s 33-13-270. After-acquired shares.
(a) A corporation may elect to withhold payment required by section
33-13-250 from a
<PAGE>
dissenter as to any shares of which he (or the beneficial owner on whose behalf
he is asserting dissenters' rights) was not the beneficial owner on the date set
forth in the dissenters' notice as the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action, unless
the beneficial ownership of the shares devolved upon him by operation of law
from a person who was the beneficial owner on the date of the first
announcement.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the fair value and interest were
calculated, and a statement of the dissenter's right to demand additional
payment under Section 33-13-280.
s 33-13-280. Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due and demand
payment of his estimate (less any payment under Section 33-13-250) or reject the
corporation's offer under Section 33-13-270 and demand payment of the fair value
of his shares and interest due, if the:
(1) dissenter believes that the amount paid under Section 33-13-250 or
offered under Section 33-13-270 is less than the fair value of his shares or
that the interest due is calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or to
offer payment under Section 33-13-270 within sixty days after the date set for
demanding payment; or
(3) corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within sixty days after the date set for demanding
payment.
(b) A dissenter waives his right to demand additional payment under
this section unless he notifies the corporation of his demand in writing under
subsection (a) within thirty days after the corporation made or offered payment
for his shares.
s 33-13-300. Court action.
(a) If a demand for additional payment under Section 33-13-280 remains
unsettled, the corporation shall commence a proceeding within sixty days after
receiving the demand for additional payment and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court
of the county where the corporation's principal office (or, if none in this
State, its registered office) is located. If the corporation is a foreign
corporation without a registered office in this State, it shall commence the
proceeding in the county in this State where the principal office (or, if none
in this State, the registered office) of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents
of this State)
<PAGE>
whose demands remain unsettled parties to the proceeding as in an action against
their shares and all parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication, as
provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint persons as
appraisers to receive evidence and recommend decisions on the question of fair
value. The appraisers have the powers described in the order appointing them or
in any amendment to it. The dissenters are entitled to the same discovery rights
as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation.
s 33-13-310. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Section
33-13-300 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under Section 33-13-280.
(b) The court also may assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters if
the court finds the corporation did not comply substantially with the
requirements of Sections 33-13-200 through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
(d) In a proceeding commenced by dissenters to enforce the liability
under Section 33-13-300(a) of a corporation that has failed to commence an
appraisal proceeding within the sixty-day period, the court shall assess the
costs of the proceeding and the fees and expenses of dissenters' counsel against
the corporation and in favor of the dissenters.
<PAGE>
EXHIBIT 5
THE SEIBELS BRUCE GROUP, INC.
1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purposes.
The 1995 Stock Option Plan for Non-Employee Directors (the "Plan"), is
established to attract, retain and compensate highly qualified individuals who
are not employees of The Seibels Bruce Group, Inc. (the "Company"), for service
as members of the Board of Directors ("Non- Employee Directors"), and to provide
them with an ownership interest in the Company's common stock. The Plan will be
beneficial to the Company and its stockholders by allowing these Non- Employee
Directors to have a personal financial stake in the Company through an ownership
interest in the Company's common stock, in addition to underscoring their common
interest with stockholders in increasing the value of the Company's stock over
the long term.
2. Effective Date.
The Plan shall be effective as of June 15, 1995, subject to the
approval of the Plan by the holders of at least a majority of the outstanding
shares of Company common stock present, or represented, and entitled to vote at
the next meeting of Stockholders. Grants of options may be made under the Plan
on and after its effective date, subject to stockholder approval of the Plan as
provided above. In the event such approval is not obtained, any options granted
under the Plan shall be null and void.
3. Administration of the Plan.
The Plan shall be administered by a committee appointed by the Board of
Directors and consisting of Directors who are not eligible to participate in the
Plan (the "Committee"). Subject to the provisions of the Plan, the Committee
shall be authorized to interpret the Plan, to establish, amend and rescind any
rules and regulations relating to the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan; provided, however,
that the Committee shall have no discretion with respect to the eligibility or
selection of Non-Employee Directors to receive options under the Plan, the
number of shares of stock subject to any such options or the Plan, or the
purchase price thereunder; and provided further, that the Committee shall not
have the authority to take any action or make any determination that would
materially increase the benefits accruing to participants under the Plan. The
Committee's interpretation of the Plan, and all actions taken and determinations
made by the Committee pursuant to the powers vested in it hereunder, shall be
conclusive and binding upon all parties concerned including the Company, its
stockholders and persons granted options under the Plan. The Chairman of the
Board and Chief Executive Officer of the Company shall be authorized to
implement the Plan in accordance with its terms and to take or cause to be taken
such actions of a ministerial nature as shall be necessary to effectuate the
intent and purposes thereof.
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<PAGE>
4. Participation in the Plan.
All active members of the Company's Board of Directors who are not as
of the date of any option grant employees of the Company or any of its
subsidiaries or affiliates shall be eligible to participate in the Plan.
Directors emeritus shall not be eligible to participate.
5. Non-Qualified Stock Options.
Only non-qualified stock options ("options"), may be granted under this
Plan.
6. Terms, Conditions and Form of Options.
(a) Option Grant Dates. Options to purchase 5,000 shares of Stock (as
adjusted pursuant to Section 8), shall be automatically granted on an annual
basis to each eligible Non- Employee Director on June 15th (or the first
succeeding business day thereafter on which the Company's common stock is traded
on the principal securities exchange on which it is listed) of each year,
commencing June 15, 1995.
(b) Exercise Price. The exercise price per share of stock for which
each option is exercisable shall be 100% of the fair market value per share of
common stock on the date the option is granted, which shall be the closing price
of the stock based upon its consolidated trading as generally reported for the
principal securities exchange on which the Company's common stock is listed.
(c) Exercisability and Term of Options. Each option granted under the
Plan shall become exercisable immediately. Each option granted under the Plan
shall expire ten years from the date of grant, and shall be subject to earlier
termination as hereinafter provided.
(d) Termination of Service. In the event of the termination of service
on the Board by the holder of any option, other than by reason of mandatory
retirement, permanent disability or death as set forth in paragraph (e) hereof,
the then outstanding options of such holder shall be exercisable only to the
extent that they were exercisable on the date of such termination and shall
expire six months after such termination, or on their stated expiration date,
whichever occurs first.
(e) Retirement, Disability or Death. In the event of termination of
service by reason of mandatory retirement pursuant to Board policy or permanent
disability of the holder of any option, each of the then outstanding options of
such holder will continue to become exercisable in accordance with Section 6(c)
above, but the holder shall be entitled to exercise such options, within five
years of such termination, but in no event after the expiration date of the
option. In the event of the death of the holder of any option, each of the then
outstanding options of such holder shall become immediately exercisable in full,
and shall be exercisable by the holder's legal representative at any time within
a period of five years after death, but in no event after the expiration date of
the option. However, if the holder dies within five years following termination
of service on the Board by reason of mandatory retirement or permanent
disability, such option shall be exercisable only until the later of (i) two
years after the holder's death or (ii) five years after such termination, or the
expiration date of the option, if earlier.
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<PAGE>
(f) Payment. The option price shall be paid in cash or by the surrender
of shares of common stock of the Company, valued at their fair market value on
the date of exercise, or by any combination of cash and such shares.
7. Shares of Stock Subject to the Plan.
The shares that may be purchased pursuant to options under the Plan
shall not exceed an aggregate of 1,000,000 shares of Company common stock (as
adjusted pursuant to Section 8). Any shares subject to an option grant which for
any reason expires or is terminated unexercised as to such shares shall again be
available for issuance under the Plan.
8. Dilution and Other Adjustment.
In the event of any change in the outstanding shares of Company stock
by reason of any stock split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, such equitable adjustments shall be made in the Plan and the grants
thereunder, including the exercise price of outstanding options, as the
Committee determines are necessary or appropriate, including, if necessary, any
adjustments in the maximum number of shares referred to in Section 7 of the
Plan. Such adjustment shall be conclusive and binding for all purposes of the
Plan.
9. Miscellaneous Provisions.
(a) Rights as Stockholder. A participant under the Plan shall have no
rights as a holder of Company common stock with respect to option grants
hereunder, unless and until certificates for shares of such stock are issued to
the participant.
(b) Assignment or Transfer. No options granted under the Plan or any
rights or interests therein shall be assignable or transferable by a participant
except by will or the laws of descent and distribution. During the lifetime of a
participant, options granted hereunder are exercisable only by, and payable only
to, the participant.
(c) Agreements. All options granted under the Plan shall be evidenced
by agreements in such form and containing such terms and conditions (not
inconsistent with the Plan) as the Committee shall adopt.
(d) Compliance with Legal Regulations. During the term of the Plan and
term of any options granted under the Plan, the Company shall at all times
reserve and keep available such number of shares as may be issuable under the
Plan, and shall seek to obtain from any regulatory body having jurisdiction,
including the Secretary of State of the State of South Carolina, any requisite
authority required in the opinion of counsel for the Company in order to grant
options to
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<PAGE>
purchase shares of Company common stock or to issue such stock pursuant thereto.
If in the opinion of counsel for the Company the transfer, issue or sale of any
shares of its stock under the Plan shall not be lawful for any reason, including
the inability of the Company to obtain from any regulatory body have
jurisdiction authority deemed by such counsel to be necessary to such transfer,
issuance or sale, the Company shall not be obligated to transfer, issue or sell
any such shares. In any event, the Company shall not be obligated to transfer,
issue or sell any shares to any participant unless a registration statement
which complies with the provisions of the Securities Act of 1933, as amended
(the "Securities Act"), is in effect at the time with respect to such shares or
other appropriate action has been taken under and pursuant to the terms and
provisions of the Securities Act, or the Company receives evidence satisfactory
to the Committee that the transfer, issuance or sale of such shares, in the
absence of an effective registration statement or other appropriate action,
would not constitute a violation of the terms and provisions of the Securities
Act. The Company's obligation to issue shares upon the exercise of any option
granted under the Plan shall in any case be subject to the Company being
satisfied that the shares purchased are being purchased for investment and not
with a view to the distribution thereof, if at the time of such exercise a
resale of such shares would otherwise violate the Securities Act in the absence
of an effective registration statement relating to such shares.
(e) Costs and Expenses. The costs and expenses of administering the
Plan shall be borne by the Company and not charged to any option or to any
Non-Employee Director receiving an option.
10. Amendment and Termination of the Plan.
(a) Amendments. The Committee may from time to time amend the Plan in
whole or in part; provided, that no such action shall adversely affect any
rights or obligations with respect to any options theretofore granted under the
Plan, and provided further, that the provisions of Sections 4 and 6 hereof may
not be amended more than once every six months, other than to comport with
change in the Internal Revenue Code or regulations thereunder.
Unless the holders of at least a majority of the outstanding shares of
Company common stock present, or represented, and entitled to vote at a meeting
of stockholders shall have first approved thereof, no amendment of the Plan
shall be effective which would (i) increase the maximum number of shares
referred to in Section 7 of the Plan or the number of shares subject to options
that may be granted pursuant to section 6(a) of the Plan to any one Non-Employee
Director or (ii) extend the maximum period during which options may be granted
under the Plan.
With the consent of the Non-Employee Director affected, the Committee
may amend outstanding agreements evidencing options under the Plan in a manner
not inconsistent with the terms of the Plan.
(b) Termination. The Committee may terminate the Plan (but not any
options theretofore granted under the Plan) at any time. The Plan (but not any
options theretofore granted under the Plan) shall in any event terminate on, and
no options shall be granted after, December 31, 2004.
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<PAGE>
11. Compliance with SEC Regulations.
It is the Company's intent that the Plan comply in all respects with
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any related regulations. If any provision of this Plan is later found
not to be in compliance with such Rule and regulations, the provision shall be
deemed null and void. All grants and exercises of options under this Plan shall
be executed in accordance with the requirements of Section 16 of the Exchange
Act and regulations promulgated thereunder.
12. Governing Law.
The validity and construction of the Plan and any agreements entered
into thereunder shall be governed by the laws of the State of South Carolina.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this ___ day of _____, 1996.
THE SEIBELS BRUCE GROUP, INC.
By:________________________________
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EXHIBIT 6
THE SEIBELS BRUCE GROUP, INC.
1996 STOCK OPTION PLAN FOR EMPLOYEES
1. Purpose. The purpose of The Seibels Bruce Group, Inc. 1996 Stock
Option Plan For Employees (the "Plan"), is to further the long term stability
and financial success of The Seibels Bruce Group, Inc. (the "Company"), by
attracting and retaining employees through the use of stock incentives. It is
also believed that ownership of Company Stock will stimulate the efforts of all
employees upon whose efforts the Company is and will be largely dependent for
the successful conduct of its business. It is also believed that Incentive
Awards granted to such employees under this Plan will strengthen their desire to
remain with the Company and will further the identification of those employees'
interests with those of the Company's shareholders. The Plan is intended to
conform to the provisions of Securities and Exchange Commission Rule 16b-3.
2. Definitions. As used in the Plan, the following terms have the
meanings indicated:
(a) "Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Applicable Withholding Taxes" means the aggregate
amount of federal, state and local income and payroll
taxes that the Company is required to withhold in
connection with any exercise of a Nonstatutory Stock
Option, any lapse of restrictions on Restricted
Stock, or any grant of Incentive Stock.
(c) "Board" means the board of directors of the Company.
(d) "Change of Control" means an event described in (i),
(ii), (iii), or (iv):
(i) The acquisition by a Group of Beneficial
Ownership of 45% or more of the Stock or the Voting
Power of the Company, but excluding for this purpose:
(A) any acquisition by the Company (or a subsidiary),
or an employee benefit plan of the Company; (B) any
acquisition of Common Stock of the Company by
management employees of the Company; or (C) any
acquisition by a Group that owns 10% or more of the
Stock or Voting Power of the Company on the date of
approval of the Plan by shareholders. "Group" means
any individual, entity or group within the meaning of
Section 13(d)(3) or 14(d)(2) of the Act, "Beneficial
Ownership" has the meaning in Rule 13d-3 promulgated
under the Act, "Stock" means the then outstanding
shares of common stock, and "Voting Power" means the
combined voting power of the outstanding voting
securities entitled to vote generally in the election
of directors.
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(ii) Individuals who constitute the Board on the day
after the meeting at which the Plan is approved (the
"Incumbent Board"), cease to constitute at least a
majority of the Board, provided that any director
whose nomination was approved by a majority of the
Incumbent Board shall be considered a member of the
Incumbent Board unless such individual's initial
assumption of office is in connection with an actual
or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated
under the Act).
(iii) Approval by the shareholders of the Company of
a reorganization, merger or consolidation, in each
case, in which the owners of more than 50% of the
Stock or Voting Power of the Company do not,
following such reorganization, merger or
consolidation, beneficially own, directly or
indirectly, more than 50% of the Stock or Voting
Power of the corporation resulting from such
reorganization, merger or consolidation.
(iv) A complete liquidation or dissolution of the
Company or of its sale or other disposition of all or
substantially all of the assets of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means the committee appointed by the
Board as described under Section 14.
(g) "Company" means The Seibels Bruce Group, Inc., a
South Carolina corporation.
(h) "Company Stock" means Common Stock, $1.00 par value,
of the Company. If the par value of the Company Stock
is changed, or in the event of a change in the
capital structure of the Company (as provided in
Section 13), the shares resulting from such a change
shall be deemed to be Company Stock within the
meaning of the Plan.
(i) "Covered Employee" means the Chief Executive Officer
of the Company (or an individual acting in such
capacity), as of the close of the Taxable Year or an
employee whose total compensation is required to be
reported for the Taxable Year under the disclosure
rules promulgated by the Securities and Exchange
Commission under the Act.
(j) "Date of Grant" means the date on which an Incentive
Award is granted by the Committee.
(k) "Disability" or "Disabled" means, as to an Incentive
Stock Option, a Disability within the meaning of Code
section 22(e)(3). As to all other
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Incentive Awards, the Committee shall determine
whether a Disability exists and such determination
shall be conclusive.
(l) "Fair Market Value" means as of the Date of Grant
(or, if there were no trades on the Date of Grant,
the last preceding day on which Company Stock is
traded), (i) if the Company Stock is traded on an
exchange, the average of the highest and lowest
registered sales prices of the Company Stock at which
it is traded on such day on the exchange on which it
generally has the greatest trading volume, or (ii) if
the Company Stock is traded on the over-the-counter
market, the closing price as reported by NASDAQ.
(m) "Incentive Award" means, collectively, the award of
an Option, Incentive Stock, or Restricted Stock under
the Plan.
(n) "Incentive Stock" means Company Stock awarded when
performance goals are achieved pursuant to an
incentive program as provided in Section 7.
(o) "Incentive Stock Option" means an Option intended to
meet the requirements of and qualify for favorable
federal income tax treatment under Code section 422.
(p) "Insider" means a person subject to Section 16(b) of
the Act.
(q) "Nonstatutory Stock Option" means an Option that does
not meet the requirements of Code section 422, or,
even if meeting the requirements of Code section 422,
is not intended to be an Incentive Stock Option and
is so designated.
(r) "Option" means a right to purchase Company Stock
granted under the Plan, at a price determined in
accordance with the Plan and may be a Nonstatutory
Stock Option or Incentive Stock Option.
(s) "Parent" means, with respect to any corporation, a
parent of that corporation within the meaning of Code
section 424(e).
(t) "Participant" means any employee who receives an
Incentive Award under the Plan.
(u) "Performance Plan" means a plan established by the
Committee that precludes discretion and is based on
an objective performance standard that may be applied
to the Participant, a business unit (e.g., a division
or a line of business), or the Company as a whole,
and may include goals based on increases in the price
of Company Stock, market share, sales or earnings per
share [add other criteria].
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(v) "Reload Feature" means a feature of an Option
described in an employee's stock option agreement
that provides for the automatic grant of a Reload
Option in accordance with the provisions described in
Section 8(d).
(w) "Reload Option" means an Option granted to an
employee equal to the number of shares of already
owned Company Stock delivered by the employee to
exercise an Option described in Section 9(e).
(x) "Restricted Stock" means Company Stock awarded upon
the terms and subject to the restrictions set forth
in Section 6.
(y) "Rule 16b-3" means Rule 16b-3 of the Securities and
Exchange Commission promulgated under the Act. A
reference in the Plan to Rule 16b-3 shall include a
reference to any corresponding rule (or number
redesignation), of any amendments to Rule 16b-3
enacted after the effective date of the Plan's
adoption.
(z) "Subsidiary" means, with respect to any corporation,
a subsidiary of that corporation within the meaning
of Code section 424(f).
(aa) "Taxable Year" means the fiscal period used by the
Company for reporting taxes on income under the Code.
(bb) "10% Shareholder" means a person who owns, directly
or indirectly, stock possessing more than 10% of the
total combined voting power of all classes of stock
of the Company or any Parent or Subsidiary of the
Company. Indirect ownership of stock shall be
determined in accordance with Code section 424(d).
3. General. The following types of Incentive Awards may be granted
under the Plan: Options, Incentive Stock and Restricted Stock. Options granted
under the Plan may be Incentive Stock Options or Nonstatutory Stock Options.
4. Stock. Subject to Section 13 of the Plan, there shall be reserved
for issuance under the Plan, an aggregate of 5,000,000 shares of Company Stock,
which shall be authorized, but unissued shares. Shares allocable to Options or
portions thereof granted under the Plan that expire or otherwise terminate
unexercised, may again be subjected to an Incentive Award under the Plan. The
Committee is expressly authorized to make an Incentive Award to a Participant
conditioned upon the surrender for cancellation of an Option granted under an
existing Incentive Award. For purposes of determining the number of shares that
are available for Incentive Awards under the Plan, such number shall, to the
extent permissible under Rule 16b-3, include the number of shares surrendered by
an optionee or retained by the Company in payment of Applicable Withholding
Taxes.
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5. Eligibility.
(a) All present and future employees of the Company (or any
Parent or Subsidiary of the Company, whether now existing or hereafter created
or acquired), and any consultant to the Company shall be eligible to receive
Incentive Awards under the Plan. The Committee shall have the power and complete
discretion, as provided in Section 14, to select eligible employees to receive
Incentive Awards and to determine for each employee the terms and conditions,
the nature of the award and the number of shares to be allocated to each
employee as part of each Incentive Award.
(b) The grant of an Incentive Award shall not obligate the
Company or any Parent or Subsidiary of the Company to pay an employee any
particular amount of remuneration, to continue the employment of the employee
after the grant or to make further grants to the employee at any time
thereafter.
6. Restricted Stock Award.
(a) Whenever the Committee deems it appropriate to grant
Restricted Stock, notice shall be given to the Participant stating the number of
shares of Restricted Stock granted and the terms and conditions to which the
Restricted Stock is subject. This notice, when accepted in writing by the
Participant, shall become an award agreement between the Company and the
Participant and certificates representing the shares shall be issued and
delivered to the Participant. Restricted Stock may be awarded by the Committee
in its discretion without cash consideration.
(b) Restricted Stock issued, pursuant to the Plan, shall be
subject to the following restrictions:
(i) No shares of Restricted Stock may be sold,
assigned, transferred or disposed of by an Insider
within a six-month period beginning on the Date of
Grant, and Restricted Stock may not be pledged,
hypothecated or otherwise encumbered within a
six-month period beginning on the Date of Grant if
such action would be treated as a sale or disposition
under Rule 16b- 3.
(ii) No shares of Restricted Stock may be sold,
assigned, transferred, pledged, hypothecated, or
otherwise encumbered or disposed of until the
restrictions on such shares as set forth in the
Participant's award agreement have lapsed or been
removed pursuant to paragraph (d) or (e) below.
(iii) If a Participant ceases to be employed by the
Company or a Parent or Subsidiary of the Company, the
Participant shall forfeit to the Company any shares
of Restricted Stock on which the restrictions have
not lapsed or been
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<PAGE>
removed pursuant to paragraph (d) or (e) below on the
date such Participant shall cease to be so employed.
(c) Upon the acceptance by a Participant of an award of
Restricted Stock, such Participant shall, subject to the restrictions set forth
in paragraph (b) above, have all the rights of a shareholder with respect to
such shares of Restricted Stock, including, but not limited to, the right to
vote such shares of Restricted Stock and the right to receive all dividends and
other distributions paid thereon. Certificates representing Restricted Stock
shall bear a legend referring to the restrictions set forth in the Plan and the
Participant's award agreement.
(d) The Committee shall establish, as to each award of
Restricted Stock, the terms and conditions upon which the restrictions set forth
in paragraph (b) above shall lapse. Such terms and conditions may include,
without limitation, the lapsing of such restrictions as a result of the
Disability death or retirement of the Participant or the occurrence of a Change
of Control.
(e) Notwithstanding the provisions of paragraphs (b)(ii) and
(iii) above, the Committee may at any time, in its sole discretion, accelerate
the time at which any or all restrictions will lapse or remove any and all such
restrictions.
(f) Each Participant shall agree at the time his or her
Restricted Stock is granted, and as a condition thereof, to pay to the Company,
or make arrangements satisfactory to the Company regarding the payment to the
Company, of Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Company have been made, no stock certificate
free of a legend reflecting the restrictions set forth in paragraph (b) above
shall be issued to such Participant.
7. Incentive Stock Awards.
(a) Incentive Stock may be issued pursuant to the Plan in
connection with Performance Plans established from time to time by the Committee
when performance criteria established by the Committee have been achieved and
certified by the Committee.
(b) Whenever the Committee deems it appropriate, the Committee
may establish a Performance Plan and notify Participants of their participation
in and the terms of the Performance Plan. More than one Performance Plan may be
established by the Committee and they may operate concurrently or for varied
periods of time. A Participant may be permitted to participate in more than one
Performance Plan at the same time. Incentive Stock will be issued only subject
to the Performance Plan and the Plan and consistent with meeting the goal or
goals set by the Committee in the Performance Plan. A Participant in a
Performance Plan shall have no rights as a shareholder until the committee has
certified that the performance objectives of the Performance Plan have been met
and Incentive Stock is issued. Incentive Stock may be issued without cash
consideration.
(c) A Participant's interest in a Performance Plan may not be
sold, assigned, transferred, pledged, hypothecated, or otherwise encumbered.
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(d) Each Participant shall agree, as a condition of his or her
participation in a Performance Plan and the receipt of Incentive Stock, to pay
to the Company, or make arrangements satisfactory to the Company, regarding the
payment to the Company of Applicable Withholding Taxes. Until such amount has
been paid or arrangements satisfactory to the Company have been made, no stock
certificate shall be issued to such Participant.
8. Stock Options.
(a) Whenever the Committee deems it appropriate to grant
Options, notice shall be given to the Participant stating the number of shares
for which Options are granted, the Option price per share, whether the Options
are Incentive Stock Options or Nonstatutory Stock Options, and the conditions to
which the grant and exercise of the Options are subject. This notice, when duly
accepted in writing by the Participant, shall become a stock option agreement
between the Company and the Participant.
(b) The Committee shall not grant to a Covered Employee
Nonstatutory Stock Options (i) covering more than 200,000 shares in one Taxable
Year, or (ii) that have an exercise price of less than 100% of the Fair Market
Value of such shares on the Date of Grant.
(c) The exercise price of shares of Company Stock covered by
an Incentive Stock Option shall be not less than 100% of the Fair Market Value
of such shares on the Date of Grant; provided that if an Incentive Stock Option
is granted to a Participant who, at the time of the grant, is a 10% Shareholder,
then the exercise price of the shares covered by the Incentive Stock Option
shall be not less than 110% of the Fair Market Value of such shares on the Date
of Grant.
(d) The exercise price of shares covered by a Nonstatutory
Stock Option shall be not less than 100% of the Fair Market Value of such shares
on the Date of Grant.
(e) Options may be exercised in whole or in part at such times
as may be specified by the Committee in the Participant's stock option
agreement; provided that, the exercise provisions for Incentive Stock Options
shall, in all events, not be more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after
the first to occur of (x) ten years (or, in the case
of an Incentive Stock Option granted to a 10%
Shareholder, five years), from the Date of Grant, (y)
three months following the date of the Participant's
retirement or termination of employment with the
Company and its Parent and Subsidiary corporations
for reasons other than Disability or death, or (z)
one year following the date of the Participant's
termination of employment on account of Disability or
death.
(ii) Except as otherwise provided in this paragraph,
no Incentive Stock Option may be exercised unless the
Participant is employed by the Company or a Parent or
Subsidiary of the Company at the time of the exercise
and has
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<PAGE>
been employed by the Company or a Parent or
Subsidiary of the Company at all times since the Date
of Grant. If a Participant's employment is terminated
other than by reason of his or her Disability or
death at a time when the Participant holds an
Incentive Stock Option that is exercisable (in whole
or in part), the Participant may exercise any or all
of the exercisable portion of the Incentive Stock
Option (to the extent exercisable on the date of
termination), within three months after the
Participant's termination of employment if his or her
option agreement so provides. If a Participant's
employment is terminated by reason of his or her
Disability at a time when the Participant holds an
Incentive Stock Option that is exercisable (in whole
or in part), the Participant may exercise any or all
of the exercisable portion of the Incentive Stock
Option (to the extent exercisable on the date of
Disability), within one year after the Participant's
termination of employment if his or her option
agreement so provides. If a Participant's employment
is terminated by reason of his or her death at a time
when the Participant holds an Incentive Stock Option
that is exercisable (in whole or in part), the
Incentive Stock Option may be exercised (to the
extent exercisable on the date of death), within one
year after the Participant's death, if his or her
option agreement so provides, by the person to whom
the Participant's rights under the Incentive Stock
Option shall have passed by will or by the laws of
descent and distribution.
(iii) An Incentive Stock Option by its terms, shall
be exercisable in any calendar year only to the
extent that the aggregate Fair Market Value
(determined at the Date of Grant), of the Company
Stock with respect to which Incentive Stock Options
are exercisable for the first time during the
calendar year does not exceed $100,000 (the
"Limitation Amount"). Incentive Stock Options granted
under the Plan and all other plans of the Company and
any Parent or Subsidiary of the Company shall be
aggregated for purposes of determining whether the
Limitation Amount has been exceeded. The Board may
impose such conditions as it deems appropriate on an
Incentive Stock Option to ensure that the foregoing
requirement is met. If Incentive Stock Options that
first become exercisable in a calendar year exceed
the Limitation Amount, the excess Options will be
treated as Nonstatutory Stock Options to the extent
permitted by law.
(f) Notwithstanding the foregoing, no Option granted to an
Insider shall be exercisable within the first six months after it is granted;
provided, however, that this restriction shall not apply if the Participant
becomes disabled or dies during the six-month period.
(g) The Committee may, in its discretion, grant Options that
by their terms become fully exercisable upon a Change of Control,
notwithstanding other conditions on Exercisability in the Stock Option
Agreement. The Committee may at any time, in its sole discretion, accelerate the
time at which any or all Options shall be fully vested.
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<PAGE>
9. Method of Exercise of Options.
(a) Options may be exercised by the Participant giving written
notice of the exercise to the Company, stating the number of shares the
Participant has elected to purchase under the Option. In the case of the
purchase of shares under an Option, such notice shall be effective only if
accompanied by the exercise price in full in cash; provided, however, that if
the terms of an Option so permit, the Participant may; (i) deliver, or cause to
be withheld from the Option shares, shares of Company Stock (valued at their
Fair Market Value on the date of exercise), in satisfaction of all or any part
of the exercise price, (ii) deliver a properly executed exercise notice together
with irrevocable instructions to a broker to deliver promptly to the Company,
from the sale or loan proceeds with respect to the sale of Company Stock or a
loan secured by Company Stock, the amount necessary to pay the exercise price
and, if required by the Committee, Applicable Withholding Taxes, or (iii)
deliver an interest bearing promissory note, payable to the Company, in payment
of all or part of the exercise price together with such collateral as may be
required by the Committee at the time of exercise. The interest rate under any
such promissory note shall be established by the Committee and shall be at least
equal to the minimum interest rate required at the time to avoid imputed
interest under the Code.
(b) The Company may place on any certificate representing
Company Stock issued upon the exercise of an Option, any legend deemed desirable
by the Company's counsel to comply with federal or state securities laws and the
Company may require a customary written indication of the Participant's
investment intent. Until the Participant has made any required payment,
including any Applicable Withholding Taxes, and has had issued a certificate for
the shares of Company Stock acquired, he or she shall possess no shareholder
rights with respect to the shares.
(c) Each Participant shall agree, as a condition of the
exercise of an Option, to pay to the Company, or make arrangements satisfactory
to the Company regarding the payment to the Company, of Applicable Withholding
Taxes. Until such amount has been paid or arrangements satisfactory to the
Company have been made, no stock certificate shall be issued upon the exercise
of an Option.
(d) As an alternative to making a cash payment to the Company
to satisfy Applicable Withholding Taxes, if the Option agreement so provides,
the Participant may, subject to the provisions set forth below, elect to, (i)
deliver shares of already owned Company Stock, or (ii) have the Company retain
that number of shares of Company Stock that would satisfy all or a specified
portion of the Applicable Withholding Taxes. The Committee shall have sole
discretion to approve or disapprove any such election. If the Participant is an
Insider, the election to use Company Stock
to satisfy Applicable Withholding Taxes must be made in compliance with the
requirements of Rule 16b-3, to make the election exempt from Section 16(b) of
the Act.
(e) If an employee exercises an Option that has a Reload
Feature by delivering already owned shares of Company Stock, the employee shall
automatically be granted a Reload Option. The Reload Option shall be subject to
the following provisions:
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<PAGE>
(i) The Reload Option shall cover the number of
shares of Company Stock delivered by the employee to
the Company to exercise the Option with the Reload
Feature;
(ii) The Reload Option will not have a Reload Feature
unless the Committee directs otherwise;
(iii) The exercise price of shares of Company Stock
covered by a Reload Option shall be not less than
100% of the Fair Market Value of such shares on the
date the employee delivers shares of Company Stock to
the Company to exercise the Option that has a Reload
Feature (as specified by the Committee at the time
the Option with a Reload Feature is granted);
(iv) The Reload Option shall not be exercisable
within the first six months after it is granted;
provided, however, that this restriction shall not
apply if the employee becomes disabled or dies during
the six-month period;
(v) The Reload Option shall be subject to the same
restrictions on exercisability as those imposed on
the underlying Option (possessing the Reload
Feature);
(vi) The Reload Option shall not be exercisable until
the expiration of any retention holding period
imposed on the disposition of any shares of Company
Stock covered by the underlying Option (possessing
the Reload Feature).
The Committee may, in its discretion, cause the Company to place on any
certificate representing Company Stock issued to a Participant upon the exercise
of an underlying Option (possessing a Reload Feature as evidenced by the stock
option agreement for such Option), delivered pursuant to this subsection, a
legend restricting the sale or other disposition of such Company Stock.
(f) Notwithstanding anything herein to the contrary, Options
shall always be granted and exercised in such a manner as to conform to the
provisions of Rule 16b-3.
10. Nontransferability of Options. Options, by their terms, shall not
be transferable except by will or by the laws of descent and distribution or, if
permitted by Rule 16b-3, pursuant to a qualified domestic relations order (as
defined in Code section 414(p)) ("QDRO"), and shall be exercisable, during the
Participant's lifetime, only by the Participant or, if permitted by Rule 16b-3,
an alternative payee under a QDRO, or by his or her guardian, duly authorized
attorney-in-fact or other legal representative.
11. Effective Date of the Plan. The effective date of the Plan is
November 1, 1995. The Plan shall be submitted to the shareholders of the Company
for approval. Until, (i) the Plan has been approved by the Company's
shareholders, and (ii) the requirements of any applicable Federal or
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<PAGE>
State securities laws have been met, no Restricted Stock shall become
unrestricted, no Incentive Stock shall be issued and no Option shall be
exercisable.
12. Termination, Modification, Change. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on December 31, 2005.
No Incentive Awards shall be made under the Plan after its termination. The
Board may terminate the Plan or may amend the Plan in such respects as it shall
deem advisable; provided that, if and to the extent required by the Code or Rule
16b-3, no change shall be made that increases the total number of shares of
Company Stock reserved for issuance pursuant to Incentive Awards granted under
the Plan (except pursuant to Section 13), materially modifies the requirements
as to eligibility for participation in the Plan, or materially increases the
benefits accruing to Participants under the Plan, unless such change is
authorized by the shareholders of the Company. Notwithstanding the foregoing,
the Board may unilaterally amend the Plan and Incentive Awards as it deems
appropriate to ensure compliance with Rule 16b-3 and to cause Incentive Stock
Options to meet the requirements of the Code and regulations thereunder. Except
as provided in the preceding sentence, a termination or amendment of the Plan
shall not, without the consent of the Participant, adversely affect a
Participant's rights under an Incentive Award previously granted to him or her.
13. Change in Capital Structure.
(a) In the event of a stock dividend, stock split or
combination of shares, recapitalization or merger in which the Company is the
surviving corporation or other change in the Company's capital stock (including,
but not limited to, the creation or issuance to shareholders generally of
rights, options or warrants for the purchase of common stock or preferred stock
of the Company), the number and kind of shares of stock or securities of the
Company to be subject to the Plan and to Options then outstanding or to be
granted thereunder, the maximum number of shares or securities which may be
delivered under the Plan, the exercise price and other relevant provisions shall
be appropriately adjusted by the Committee, whose determination shall be binding
on all persons. If the adjustment would produce fractional shares with respect
to any unexercised Option, the Committee may adjust appropriately the number of
shares covered by the Option so as to eliminate the fractional shares.
(b) If the Company is a party to a consolidation or a merger
in which the Company is not the surviving corporation, a transaction that
results in the acquisition of substantially all of the Company's outstanding
stock by a single person or entity, or a sale or transfer of substantially all
of the Company's assets, the Committee may take such actions with respect to
outstanding Incentive Awards as the Committee deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of any Participant,
and the Committee's determination shall be conclusive and binding on all persons
for all purposes.
14. Administration of the Plan. The Plan shall be administered by the
Committee, which shall consist of not less than three members of the Board, who
shall be appointed by the
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<PAGE>
Board. Subject to paragraph (d) below, the Committee shall be the Compensation
Committee unless the Board shall appoint another Committee to administer the
Plan. The Committee shall have general authority to impose any limitation or
condition upon an Incentive Award the Committee deems appropriate to achieve the
objectives of the Incentive Award and the Plan and, without limitation and in
addition to powers set forth elsewhere in the Plan, shall have the following
specific authority:
(a) The Committee shall have the power and complete discretion
to determine, (i) which eligible employees shall receive Incentive Awards and
the nature of each Incentive Award, (ii) the number of shares of Company Stock
to be covered by each Incentive Award, (iii) whether Options shall be Incentive
Stock Options or Nonstatutory Stock Options, (iv) whether to include a Reload
Feature in an Option and to impose limitations on the use of shares acquired
through the exercise of a Reload Option to exercise Options, (v) the Fair Market
Value of Company Stock, (vi) the time or times when an Incentive Award shall be
granted, (vii) whether an Incentive Award shall become vested over a period of
time and when it shall be fully vested, (viii) when Options may be exercised,
(ix) whether a Disability exists, (x) the manner in which payment will be made
upon the exercise of Options, (xi) conditions relating to the length of time
before disposition of Company Stock received upon the exercise of Options is
permitted, (xii) whether to approve a Participant's election, (A) to deliver
shares of already owned Company Stock to satisfy Applicable Withholding Taxes,
or (B) to have the Company withhold from the shares to be issued upon the
exercise of a Nonstatutory Stock Option the number of shares necessary to
satisfy Applicable Withholding Taxes, (xiii) the terms and conditions applicable
to Restricted Stock Awards, (xiv) the terms and conditions on which restrictions
upon Restricted Stock shall lapse, (xv) whether to accelerate the time at which
any or all restrictions with respect to Restricted Stock will lapse or be
removed, (xvi) notice provisions relating to the sale of Company Stock acquired
under the Plan, (xvii) the terms of Performance Plans, performance criteria and
other factors relevant to the issuance of Incentive Stock, and (xviii) any
additional requirements relating to Incentive Awards that the Committee deems
appropriate. Notwithstanding the foregoing, no "tandem stock options" (where two
stock options are issued together and the exercise of one Option affects the
right to exercise the other Option), may be issued in connection with Incentive
Stock Options. The Committee shall have the power to amend the terms of
previously granted Incentive Awards so long as the terms as amended are
consistent with the terms of the Plan and provided that the consent of the
Participant is obtained with respect to any amendment that would be detrimental
to him or her, except that such consent will not be required if such amendment
is for the purpose of complying with Rule 16b-3 or any requirement of the Code
applicable to the Incentive Award.
(b) The Committee may adopt rules and regulations for carrying
out the Plan. The interpretation and construction of any provision of the Plan
by the Committee shall be final and conclusive. The Committee may consult with
counsel, who may be counsel to the Company and shall not incur any liability for
any action taken in good faith in reliance upon the advice of counsel.
(c) A majority of the members of the Committee shall
constitute a quorum and all actions of the Committee shall be taken by a
majority of the members present. Any action may be taken by a written instrument
signed by all of the members and any action so taken shall be fully effective as
if it had been taken at a meeting.
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<PAGE>
(d) The Board, from time to time, may appoint members
previously appointed and may fill vacancies, however caused, in the Committee.
Insofar as it is necessary to satisfy the requirements of Section 16(b) of the
Act, no member of the Committee shall be eligible to participate in the Plan or
in any other plan of the Company or any Parent or Subsidiary of the Company that
entitles participants to acquire stock, stock options or stock appreciation
rights of the Company or any Parent or Subsidiary of the Company, and no person
shall become a member of the Committee if, within the preceding one-year period,
the person shall have been eligible to participate in such a plan (other than a
"safe harbor plan" permitted under Rule 16b-3(C)(2)(i) and (ii)).
15. Notice. All notices and other communications required or permitted
to be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows; (a) if to the Company - at its principal business address to the
attention of the Treasurer; (b) if to any Participant - at the last address of
the Participant known to the sender at the time the notice or other
communication is sent.
16. Interpretation. The terms of this Plan are subject to all present
and future regulations and rulings of the Secretary of the Treasury or his or
her delegate relating to the qualification of Incentive Stock Options under the
Code. If any provision of the Plan conflicts with any such regulation or ruling,
then that provision of the Plan shall be void and of no effect. The terms of
this Plan shall be governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this ______ day of __________, 1996.
THE SEIBELS BRUCE GROUP, INC.
By:_____________________________________
13
EXHIBIT 7
THE SEIBELS BRUCE GROUP, INC.
1995 STOCK OPTION PLAN FOR INDEPENDENT AGENTS
ARTICLE 1
Purpose
1.1 General Purpose. The purpose of this Plan is to further the growth
and development of the Company by encouraging independent agents to obtain a
proprietary interest in the Company by owning its stock. The Company intends
that the Plan will provide such persons with an added incentive to place
profitable insurance policies with subsidiaries of the Company, and will
stimulate their efforts in promoting the growth, efficiency and profitability of
the Company. The Company also intends that the Plan will afford the Company a
means of attracting, retaining and compensating independent agents of
outstanding quality.
1.2 Intended Tax Effects of Options. It is intended that the tax
effects of any NQSO (as hereinafter defined) granted hereunder should be
determined under Code '83.
ARTICLE 2
Definitions
The following words and phrases as used in this Plan shall have the
meanings set forth in this Article unless a different meaning is clearly
required by the context:
2.1 1933 Act shall mean the Securities Act of 1933, as amended.
2.2 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
2.3 Beneficiary shall mean, with respect to an Optionee, the individual
or individuals to whom the Optionee's option shall be transferred upon the
Optionee's death (i.e., the Optionee's Beneficiary).
(a) Designation of Beneficiary. An Optionee's Beneficiary
shall be the individual who is last designated in writing by the
Optionee as such Optionee's Beneficiary hereunder. An optionee shall
designate his or her original Beneficiary in writing on his or her
Option Agreement. Any subsequent modification of the Optionee's
Beneficiary shall be in a written executed and notarized letter
addressed to the Company and shall be effective when it is received and
accepted by the Committee, determined in the Committee's sole
discretion.
(b) No Designated Beneficiary. If, at any time, no Beneficiary
has been validly designated by an Optionee, or the Beneficiary
designated by the Optionee is no longer living
<PAGE>
at the time of the Optionee's death, then the Optionee's Beneficiary
shall be deemed to be the individual or individuals in the first of the
following classes of individuals with one or members of such class
surviving or in existence as of the Optionee's death, and in the
absence thereof, the Optionee's estate: (A) the Optionee's surviving
spouse; or (B) the Optionee's then living lineal descendants, per
stirpes.
(c) Designation of Multiple Beneficiaries. An optionee may not
designate more than one individual as a Beneficiary. To the extent that
a designation purports to designate more than one individual as a
Beneficiary, the designation shall be null and void.
(d) Contingent Beneficiaries. An Optionee may designate a
contingent Beneficiary to receive the Optionee's option in the event
that the Optionee's original Beneficiary should predecease the
Optionee; otherwise, in the event a Beneficiary predeceases the
optionee, then the individual or individuals specified in subsection
(b) above shall be the Optionee's Beneficiary.
2.4 Board shall mean the Board of Directors of the Company.
2.5 Code shall mean the Internal Revenue Code of 1986, as amended.
2.6 Committee shall mean the committee appointed by the Board to
administer and interpret the Plan in accordance with Article 3 below.
2.7 Common Stock shall mean the common stock, par value $1.00 per
share, of the Company.
2.8 Company shall mean The Seibels Bruce Group, Inc., and shall
also mean any parent or subsidiary corporation of The Seibels Bruce Group, Inc.
unless the context clearly indicates otherwise.
2.9 Director shall mean an individual who is serving as a member
of the Board (i.e., a director of the Company).
2.10 Disability shall mean, with respect to an individual, the
total and permanent disability of such individual as determined by the Committee
in its sole discretion.
2.11 Effective Date shall mean the date on which this Plan is
adopted by the Board. See Article 9 herein.
2.12 Fair Market Value of the Common Stock as of a date of
determination shall mean the following:
(a) Stock Listed and Shares Traded. If the Common Stock is
listed and traded on a national securities exchange (as such term is
defined by the 1934 Act) or on the NASDAQ National Market System on the
date of determination, the Fair Market Value per share shall be the
closing price of a share of the Common Stock on said national
securities
<PAGE>
exchange or National Market System on the date of determination. If the
Common Stock is traded in the over-the-counter market, the Fair Market
Value per share shall be the average of the closing bid and asked
prices on the date of determination.
(b) Stock Listed But No Shares Traded. If the Common Stock is
listed on a national securities exchange or on the National Market
System but no shares of the Common Stock are traded on the date of
determination but there were shares traded on dates within a reasonable
period before the date of determination, the Fair Market Value shall be
the closing price of the Common Stock on the most recent date before
the date of determination. If the Common Stock is regularly traded in
the over-the-counter market but no shares of the Common Stock are
traded on the date of determination (or if records of such trades are
unavailable or burdensome to obtain) but there were shares traded on
dates within a reasonable period before the date of determination, the
Fair Market Value shall be the average of the closing bid and asked
prices of the Common Stock on the most recent date before the date of
determination.
(c) Stock Not Listed. If the Common Stock is not listed on a
national securities exchange or on the National Market System and is
not regularly traded in the over-the-counter market, then the Committee
shall determine the Fair Market Value of the Common Stock from all
relevant available facts, which may include the average of the closing
bid and ask prices reflected in the over-the-counter market on a date
within a reasonable period either before or after the date of
determination or opinions of independent experts as to value and may
take into account any recent sales and purchases of such Common Stock
to the extent they are representative.
The Committee's determination of Fair Market Value, which shall be made pursuant
to the foregoing provisions, shall be final and binding for all purposes of this
Plan.
2.13 NQSO shall mean an option to which Code '421 (relating generally
to certain incentive stock options) does not apply.
2.14 Option shall mean NQSO's granted to individuals pursuant to the
terms and provisions of this Plan.
2.15 Option Agreement shall mean a written agreement, executed and
dated by the Company and an Optionee, evidencing an Option granted under the
terms and provisions of this Plan, setting forth the terms and conditions of
such Option, and specifying the name of the Optionee and the number of shares of
stock subject to such Option.
2.16 Option Price shall mean the purchase price of the shares of Common
Stock underlying an option.
2.17 Optionee shall mean an individual who is granted an Option
pursuant to the terms and provisions of this Plan.
2.18 Person shall mean any individual, organization, corporation,
partnership or other entity.
<PAGE>
2.19 Plan shall mean this The Seibels Bruce Group, Inc. 1995 Stock
option Plan for Independent Agents.
2.20 Retirement shall mean, with respect to an Optionee, the earliest
of:
(a) the date on which the optionee attains age 65;
(b) the date on which the Optionee attains age 60 and
completes 20 Years of Vesting Service; or
(c) the date on which the Optionee completes 25 Years of
Vesting service.
For purposes of this Section, the term Years of Vesting Service shall have the
meaning given such term in the Seibels, Bruce & Company Employees Profit Sharing
and Savings Plan, as executed on June 30th, 1992.
ARTICLE 3
Administration
3.1 General Administration. The Plan shall be administered and
interpreted by the Committee. Subject to the express provisions of the Plan, the
Committee shall have authority to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the Option Agreements by which Options shall be evidenced (which
shall not be inconsistent with the terms of the Plan), and to make all other
determinations necessary or advisable for the administration of thc Plan, all of
which determinations shall be final, binding and conclusive.
3.2 Appointment. The Board shall appoint the Committee from among the
company's management staff to serve at the pleasure of the Board. The Board from
time to time may remove members from, or add members to, the Committee and shall
fill all vacancies thereon. The Committee at all times shall be composed of
two~or more members.
3.3 Organization. The Committee may select one of its members as its
chairman and shall hold its meetings at such times and at such places as it
shall deem advisable. A majority of the Committee shall constitute a quorum, and
such majority shall determine its actions. The Committee shall keep minutes of
its proceedings and shall report the same to the Board at the meeting next
succeeding.
3.4 Indemnification. In addition to such other rights of
indemnification as they have as officers or employees or as members of the
Committee, the members of the Committee, to the extent permitted by applicable
law, shall be indemnified by the Company against reasonable expenses (including,
without limitation, attorneys' fees) actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal, to which they or any
<PAGE>
of them may be a party by reason of any action taken or failure to act under or
in connection with the Plan or any Options granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
to the extent required by and in the manner provided by the articles or
certificate of incorporation or the bylaws of the Company relating to
indemnification of officers or employees) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member or members did not act in good faith and in a manner he or they
reasonably believed to be in or not opposed to the best interest of the Company.
ARTICLE 4
Stock
The stock subject to the Options and other provisions of the Plan shall
be authorized but unissued or reacquired shares of Common Stock. Subject to
readjustment in accordance with the provisions of Article 7, the total number of
shares of Common Stock for which Options may be granted to persons participating
in the Plan shall not exceed in the aggregate 500,000 shares of Common Stock.
Notwithstanding the foregoing, shares of Common Stock allocable to the
unexercised portion of any expired or terminated Option again may become subject
to options under the Plan.
ARTICLE 5
Eligibility to Receive and Grant of Options
5.1 Individuals Eligible for Grants of Options. The individuals
eligible to receive options hereunder shall be principles of any independent
agencies who have contracted with the Company or its subsidiaries, including
such individuals who are also members of the board of directors of any parent or
subsidiary corporation of the Company; provided, however, no grants of options
hereunder shall be made to any Person who is directly or indirectly the
beneficial owner of more than 10% of any class of any equity security of the
Company, who is a Director or who is an officer of the Company. The preceding
sentence shall be interpreted so that no grant of any Options hereunder shall
result in the application of Section 16 of the 1934 Act to such grant.
5.2 Grants of Options. Subject to the provisions of the Plan, the
Committee shall have the authority and sole discretion to determine and
designate, from time to time, those individuals (from among the individuals
eligible for a grant of Options under the Plan pursuant to Section 5.1 above) to
whom Options will actually be granted, the manner in and conditions under which
Options are exercisable (including, without limitation, any limitations or
restrictions thereon), and the time or times at which Options shall be granted.
In making such determinations, the Committee may take into account the nature of
the services rendered by the respective individuals to whom Options may be
granted, their present and potential contributions to the Company's success and
such other factors as the Committee, in its sole discretion, shall deem
relevant. In its authorization of the granting of an Option hereunder, the
Committee shall specify the name of the Optionee and the number of shares of
stock subject to such Option. The Committee may grant, at any time, new options
to an
<PAGE>
Optionee who previously has received Options, whether such options include prior
options that still are outstanding, previously have been exercised in whole or
in part, have expired or are canceled in connection with the issuance of new
Options. No individual shall have any claim or right to be granted Options under
the Plan.
ARTICLE 6
Terms and Conditions of Options
Options granted hereunder and Option Agreements shall comply with and
be subject to the following terms and conditions:
6.1 Requirement of Option Agreement. Upon the grant of an Option
hereunder, the Committee shall prepare (or cause to be prepared) an Option
Agreement. The Committee shall present such Option Agreement to the Optionee.
Upon execution of such Option Agreement by the Optionee, such Option shall be
deemed to have been granted effective as of the date of grant. The failure of
the Optionee to execute the Option Agreement within 30 days after the date of
the receipt of same shall render the Option Agreement and the underlying Option
null and void ab initio.
6.2 Optionee and Number of Shares. Each Option Agreement shall state
the name of the Optionee and the total number of shares of the Common Stock to
which it pertains, the Option Price, the Beneficiary of the Optionee and the
date as of which the Option was granted under this Plan.
6.3 Vesting. Each Option shall first become exercisable (i.e., vested)
with respect to such portions of the shares subject to such Option as are
specified in the Optionee's Option Agreement, and the Committee shall have the
authority in its sole discretion to prescribe the extent to which the Option
shall become exercisable in such Option Agreement. If an Optionee ceases to
perform any services under an agency contract with the Company or the Optionee's
agency contract with the Company terminates, and any non-vested options exist at
such time of cessation or termination, his rights with regard to all such
non-vested options shall cease immediately, and his rights with regard to all
vested Options shall be governed by Section 6.9 below. If an optionee dies while
engaged in performing services for the Company, then any Options previously
granted to optionee shall become immediately vested and exercisable for 100% of
the shares subject to the options.
6.4 Option Price. The Option Price of the shares of Common Stock
underlying each Option shall be the Fair Market Value of the Common Stock on the
date the option is granted. Upon execution of an Option Agreement by both the
Company and optionee, the date as of which the Committee granted the Option as
specified in the Option Agreement shall be considered the date on which such
Option is granted.
6.5 Terms of Options. Terms of Options granted under the Plan shall
commence on the date of grant and shall expire on such date as the Committee may
determine for each Option; provided, in no event shall any Option be exetoisable
after ten years from the date the Option is granted. No Option shall be granted
hereunder after ten years from the date the Plan is adopted by the Board.
<PAGE>
6.6 Terms of Exercise. The exercise of an Option may be for less than
the full number of shares of Common Stock subject to such Option, but such
exercise shall not be made for less than (i) 25 shares or (ii) the total
remaining shares subject to the Option, if such total is less than 25 shares.
Subject to the other restrictions on exercise set forth herein, the unexercised
portion of an Option may be exercised at a later date by the Optionee.
6.7 Method of Exercise. All Options granted hereunder shall be
exercised by written notice directed to the Secretary of the Company at its
principal place of business or to such other person as the Committee may direct.
Each notice of exercise shall identify the Option which the optionee is
exercising (in whole or in part) and shall be accompanied by payment of the
Option Price for the number of shares specified in such notice and by any
documents required by Section 8.1. The Company shall make delivery of such
shares within a reasonable period of time; provided, if any law or regulation
requires the Company to take any action (including, but not limited to, the
filing of a registration statement under the 1933 Act and causing such
registration statement to become effective) with respect to the shares specified
in such notice before the issuance thereof, then the date of delivery of such
shares shall be extended for the period necessary to take such action.
6.8 Medium and Time of Payment.
(a) The Option Price shall be payable upon the exercise of the
Option in an amount equal to the number of shares then being purchased
times the per share Option Price. Payment, at the election of the
Optionee (or his Beneficiary as provided in subsection (c) of Section
6.9), shall be (A) in cash; (B) by delivery to the Company of a
certificate or certificates for shares of the Common Stock duly
endorsed for transfer to the Company with signature guaranteed by a
member firm of a national stock exchange or by a national or state bank
or a federally chartered thrift institution (or guaranteed or notarized
in such other manner as the Committee may require) or by instructing
the Company to retain shares of Common Stock upon the exercise of the
Option with a Fair Market Value equal to the exercise price as payment;
or (C) by a combination of (A) and (B).
(b) If all or part of the Option Price is paid by delivery~9f
shares of the Common Stock, on the date of such payment, the value of
such Common Stock (which shall be the Fair Market Value of such Coinmon
Stock on the date of exercise) shall be less than or equal to the total
Option Price payment. If the Optionee delivers Common Stock with a
value that is less than the total Option Price, then such Optionee
shall pay the balance of the total Option Price in cash as provided in
subsection (a) above.
6.9 Effect of Termination of Service, Disability or Death. Except as
provided in subsections (a), (b) and (c) below, no Option shall be exercisable
unless the Optionee thereof shall have been performing services for the Company
from the date of the granting of the Option until the date of exercise.
(a) Termination of Service. In the event an Optionee ceases to
be perform services for the Company for any reason other than death or
Disability or Retirement, any option or unexercised portion thereof
granted to him shall terminate on and shall not be
<PAGE>
exercisable after the earliest to occur of (i) the expiration date of
the Option, or (ii) the date of termination of service. Prior to the
earlier of the dates specified in the preceding sentence of this
subsection (a), the Option shall be exercisable only in accordance with
its terms and only for the number of shares exercisable on the date of
exercise. The question of whether an authorized leave of absence or
absence for military or government service or for any other reason
shall constitute a termination of service for purposes of the Plan
shall be determined by the Committee, which determination shall be
final and conclusive.
(b) Disability or Retirement. Upon the termination of an
Optionee's service due to Disability or Retirement, any Option or
unexercised portion thereof granted to him which is otherwise
exercisable shall terminate on and shall not be exercisable after the
earlier to occur of (i) the expiration date of such Option, or (ii)
five years after the date on which such Optionee ceases to be
performing services for the Company due to Disability or Retirement;
provided, the Committee may provide in the Option Agreement that such
Option or any unexercised portion thereof shall terminate sooner. Prior
to the earlier of such date, such Option shall be exercisable only in
accordance with its terms and only for the number of shares exercisable
on the date such Optionee's service ceases due to Disability or
Retirement.
(c) Death. In the event of the death of the Optionee while he
is performing services for the Company, any Option or unexercised
portion thereof granted to him which is otherwise exercisable may be
exercised by his Beneficiary at any time prior to the expiration of
five years from the date of death of such Optionee, but in no event
later than the date of expiration of the option period. In the event of
the death of the Optionee within five years after the date on which
such Optionee ceased performing services for the Company due to his
Disability or Retirement as provided in subsection (b), any Option or
unexercised portion thereof granted to him which is otherwise
exercisable may be exercised by his Beneficiary at any time prior to
the expiration of two years from the date of death of such Optionee,
but in no event later than the date of expiration of the option period;
provided, the Committee may provide in the Option Agreement that such
Option or any unexercised portion thereof shall terminate sooner. Such
exercise shall be effected pursuant to the terms of this Section as if
such Beneficiary is the named Optionee.
6.10 Restrictions on Transfer and Exercise of Options. No Option shall
be assignable or transferable by the Optionee except by transfer to a
Beneficiary upon the death of the Optionee, and any purported transfer (other
than as excepted above) shall be null and void. After the death of an Optionee
and upon the death of the optionee's Beneficiary, an Option shall be transferred
only by will or by the laws of descent and distribution. During the lifetime of
an Optionee, the Option shall be exercisable only by him; provided, however,
that in the event the optionee is incapacitated and unable to exercise Options,
such Options may be exercised by such Optionee's legal guardian, legal
representative, fiduciary or other representative whom the Committee deems
appropriate based on applicable facts and circumstances.
6.11 Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to shares covered by his Option until date of the
issuance of the shares to him and only after the Option Price of such shares is
fully paid. Unless specified in Article 7, no adjustment will be made for
dividends or other rights for which the record date is prior to the date of such
issuance.
<PAGE>
6.12 No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon the Optionee to exercise such Option.
6.13 Acceleration. The Committee shall at all times have the power to
accelerate the vesting date of Options previously granted under this Plan.
ARTICLE 7
Adjustments Upon Changes in Capitalization
7.1 Recapitalization. In the event that the outstanding shares of the
Common Stock of the Company are hereafter increased or decreased or changed into
or exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, reclassification, stock split,
combination of shares or dividend payable in shares of the Common Stock, the
following rules shall apply:
(a) The Committee shall make an appropriate adjustment in the
number and kind of shares available for the granting of Options under
the Plan.
(b) The Committee also shall make an appropriate adjustment in
the number and kind of shares as to which outstanding Options, or
portions thereof then unexercised, shall be exercisable; any such
adjustment in any outstanding Options shall be made without change in
the total price applicable to the unexercised portion of such Option
and with a corresponding adjustment in the Option Price per share. No
fractional shares shall be issued or optioned in making the foregoing
adjustments, and the number of shares available under the Plan or the
number of shares subject to any outstanding Options shall be the next
lower number of shares, rounding all fractions downward.
(c) If any rights or warrants to subscribe for additional
shares are given pro rata to holders of outstanding shares of the class
or classes of stock then set aside for the Plan, each Optionee shall be
entitled to the same rights or warrants on the same basis as holders of
the outstanding shares with respect to such portion of his Option as is
exercised on or prior to the record date for determining shareholders
entitled to receive or exercise such rights or warrants.
7.2 Reorganization. Subject to any required action by the shareholders,
if the Company shall be a party to any reorganization involving merger,
consolidation, acquisition of the stock or acquisition of the assets of the
Company, the Committee, in its discretion, may declare that:
(a) any Option granted but not yet exercised shall pertain to
and apply, with appropriate adjustment as determined by the Committee,
to the securities of the resulting corporation to which a holder of the
number of shares of the Common Stock subject to such Option would have
been entitled;
(b) any or all outstanding Options granted hereunder shall
becOme immediately nonforfeitable and fully exercisable or vested (to
the extent permitted under federal or state securities laws); and/or
<PAGE>
(c) any or all Options granted hereunder shall become
immediately nonforfeitable and fully exercisable or vested (to the
extent permitted under federal or state securities laws) and are to be
terminated after giving at least 30 days notice to the Optionees to
whom such Options have been granted.
7.3 Dissolution and Liquidation. If the Board adopts a plan of
dissolution and liquidation that is approved by the shareholders of the Company,
the Committee shall give each Optionee written notice of such event at least ten
days prior to its effective date, and the rights of all Optionees shall become
immediately nonforfeitable and fully exercisable or vested (to the extent
permitted under federal or state securities laws).
7.4 Limits on Adjustments. Any issuance by the Company of stock of any
class, or securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of the Common Stock subject to any Option, except as
specifically provided otherwise in this Article. The grant of Options pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, consolidate or dissolve, or to liquidate,
sell or transfer all or any part of its business or assets. All adjustments the
Committee makes under this Article shall be conclusive.
ARTICLE 8
Agreement by Optionee and Securities Registration
8.1 Agreement. If, in the opinion of counsel to the Company, such
action is necessary or desirable, no Options shall be granted to any Optionee,
and no Option shall be exercisable, unless, at the time of grant or exercise, as
applicable, such Optionee (i) represents and warrants that he will acquire the
Common Stock for investment only and not for purposes of resale or distribution,
and (ii) makes such further representations and warranties as are deemed
necessary or desirable by counsel to the Company with regard to holding and
resale of the Common Stock. The Optionee shall, upon the request of the
Committee, execute and deliver to the Company an agreement or affidavit to such
effect. Should the Committee have reasonable cause to believe that such Optionee
did not execute such agreement or affidavit in good faith, the Company shall not
be bound by the grant of the Option or by the exercise of the Option. All
certificates representing shares of Common Stock issued pursuant to the Plan
shall be marked with the following restrictive legend or similar legend, if such
marking, in the opinion of counsel to the Company, is necessary or desirable:
The shares represented by this certificate [have not been
registered under the Securities Act of 1933, as amended, or
the securities laws of any state] [and] [are held by an
"affiliate" (as such term is defined in Rule 144 promulgated
by the Securities and Exchange Commission under the Securities
Act of 1933, as amended) of the Corporation]. Accordingly,
these shares may not be sold, hypothecated, pledged or
otherwise transferred except (i) pursuant to an effective
registration statement under the Securities Act of 1933, as
amended, and any applicable
<PAGE>
securities laws or regulations of any state with respect to
such shares, (ii) in accordance with Securities and Exchange
Commission Rule 144, or (iii) upon the issuance to the
Corporation of a favorable opinion of counsel or the
submission to the Corporation of such other evidence as may be
satisfactory to the Corporation that such proposed sale,
assignment, encumbrance or other transfer 'will not be in
violation of the Securities Act of 1933, as amended, or any
applicable securities laws of any state or any rules or
regulations thereunder. Any aflempted transfer of this
certificate or the shares represented hereby which is in
violation of the preceding restrictions will not be recognized
by the Corporation, nor will any transferee be recognized as
the owner thereof by the Corporation.
If the Common Stock is (A) held by an Optionee who is not an "affihate," as that
terrn is defined in Rule 144 of the 1933 Act, or who ceases to be an
"affiliate," or (B) registered under the 1933 Act and all applicable state
securities laws and regulations as provided in Section 8.2, the Commiflee, in
its discretion and with the advice of counsel, may dispense with or authorize
the removal of the restrictive legend set forth above or the portion thereof
which is inapplicable.
8.2 Registration. In the event that the Company in its sole discretion
shall deem it necessary or advisable to register, under the 1933 Act or any
state securities laws or regulations, any shares with respect to which Options
have been granted herernder, then the Company shall take such action at its own
expense before delivery of the certificates representing such shares to an
Optionee. In such event, and if the shares of Common Stock of the Company shall
be listed on any national securities exchange or on NASDAQ at the time of the
exercise of any Option, the Company shall make prompt application at its own
expense for the listing on such stock exchange or NASDAQ of the shares of Common
Stock to be issued.
ARTICLE 9
Effective Date
The Plan shall be effective as of the Effective Date, and no Options
shall be granted hereunder prior to said date.
ARTICLE 10
Amendment and Termination
10.1 Amendment and Termination By the Board. Subject to Section 10.2
below, the Board shall have the power at any time to add to, amend, modify or
repeal any of the provisions of the Plan, to suspend the operation of the entire
Plan or any of its provisions for any period or periods or to termrnate the Plan
in whole or in part. In the event of any such action, the Committee shall
prepare written procedures which, when approved by the Board, shall govern the
administration of the Plan resulting from such addition, amendment,
modification, repeal, suspension or termination.
10.2 Restrictions on Amendment and Termination. Notwithstanding the
provisions of Section 10.1 above, no addition, amendment, modification, repeal,
suspension or termination shall
<PAGE>
adversely affect, in any way, the rights of the Optionees who have outstanding
Options without the consent of such Optionees.
ARTICLE 11
Miscellaneous Provisions
11.1 Application of Funds. The proceeds received by the Company from
the sale of the Common Stock subject to the Options granted hereunder will be
issued for general corporate purposes.
11.2 Notices. All notices or other communications by an Optionee to the
Committee pursuant to or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Committee at the
location, or by the person, designated by the Committee for the receipt thereof.
11.3 Term of Plan. Subject to the terms of Article 10, the Plan shall
terminate upon the later of(i) the complete exercise or lapse of the last
outstanding Stock Right, or (ii) the last date upon which Options may be granted
hereunder.
11.4 Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of South Carolina.
11.5 Additional Provisions By Committee. The Option Agreements
authorized under the Plan may contain such other provisions, including, without
limitation, restrictions upon the exercise of an Option, as the Committee shall
deem advisable.
11.6 Plan Document Controls. In the event of any conflict between the
provisions of an Option Agreement and the Plan, the Plan shall control.
11.7 Gender and Number. Wherever applicable, the masculine pronoun
shall include the definine pronoun, and the singular shall include the plural.
11.8 Headings. The titles in this Plan are inserted for convenience of
reference; they constitute no part of the Plan and are not to be considered in
the construction hereof.
11.9 Legal References. Any references in this Plan to a provision of
law which is, subsequent to the Effective Date of this Plan, revised, modified,
finalized or redesignated, shall automatically be deemed a reference to such
revised, modified, finalized or redesignated provision of law.
11.10 No Rights to Continued Service. Nothing contained in the Plan, or
any modification thereof, shall be construed to give any individual any rights
to perform services with the Companyor any parent or subsidiary corporation of
the Company.
11.11 Unfunded Arrangement. The Plan shall not be funded, and except
for reserving a
<PAGE>
sufficient number of authorized shares to the extent required by law to meet the
requirements of the Plan, the Company shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure
the payment of any grant under the Plan.
ADOPTED BY BOARD OF DIRECTORS ON JANUARY 30, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period of ____________ to ____________________
Commission file number 0-8804
THE SEIBELS BRUCE GROUP, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-0672136
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1501 Lady Street (PO Box 1), Columbia, SC 29201(2)
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code (803) 748-2000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 16, 752,686 shares of Common
Stock, $1 par value, at November 13, 1995.
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, at market (cost of $34,668,805
at 1995 and $41,321,214 at 1994) $ 34,083,591 $ 38,940,939
Equity securities available-for-sale, at market
(cost of $221,561 at 1995 and $540,655 at 1994) 346,618 458,492
Short-term investments, including temporary cash
investments of $15,975,496 ($20,243,331 at 1994) 16,101,412 20,457,513
Mortgage loan on real estate, at estimated
realizable value (cost of $2,949,080 at 1994) - 1,965,000
Other long-term investments 45,342 46,092
----------- ----------
Total investments 50,576,963 61,868,036
Cash, other than invested cash 249,393 -
Accrued investment income 292,442 808,774
Premiums and agents' balances receivable, net 8,712,014 13,027,605
Reinsurance recoverable on paid losses and loss
adjustment expenses 29,622,305 30,277,569
Reinsurance recoverable on unpaid losses and loss
adjustment expenses 78,558,734 88,730,898
Property and equipment, net 5,598,037 6,270,334
Prepaid reinsurance premiums - ceded business 47,153,066 48,482,673
Deferred policy acquisition costs 673,042 899,053
Other assets 3,988,005 5,569,630
----------- -----------
Total assets $ 225,424,001 $ 255,934,572
=========== ===========
LIABILITIES
Losses and claims:
Reported and estimated losses and claims - retained $ 51,374,713 $ 64,220,902
66,616,228 74,140,671
Adjustment expenses - retained business 13,745,921 14,893,169
- ceded business 11,942,506 14,590,227
Unearned premiums:
Property and casualty - retained business 3,339,556 6,945,280
- ceded business 47,153,066 48,482,673
Credit life 922,344 1,570,468
Balances due other insurance companies 13,785,645 17,264,627
Notes payable 2,476,496 439,167
Current income taxes payable 74,012 148,966
Other liabilities and deferred items 6,457,380 12,588,570
----------- -----------
Total liabilities 217,887,867 255,284,720
----------- -----------
</TABLE>
<TABLE>
COMMITMENTS AND CONTINGENCIES
<S> <C> <C>
SHAREHOLDERS' EQUITY
Special stock, no par value, authorized 5,000,000
shares, none issued and outstanding -
Common stock, $1 par value, authorized 25,000,000 shares,
issued & outstanding 16,752,686 shares (14,500,534 at 16,752,686 14,500,534
Additional paid-in capital 34,091,983 30,983,592
Unrealized loss on securities (614,688) (2,615,004)
Retained deficit (42,693,847) (42,219,270)
----------- -----------
Total shareholders' equity 7,536,134 649,852
----------- -----------
Total liabilities and shareholders' equity $ 225,424,001 $ 255,934,572
=========== ===========
</TABLE>
<PAGE>
<TABLE>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Nine Months Ended
September 30, Third Quarter
----------------------- -------------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Premiums:
Property and casualty:
Net premiums written $ 5,466,293 11,109,648 $ 408,763 $3,717,610
Change in unearned premiums 3,043,558 792,033 2,588,320 (230,085)
----------- ---------- ---------- -----------
Premiums earned 8,509,851 11,901,681 2,997,083 3,487,525
Credit life premiums earned 160,140 1,851,671 47,985 829,925
Commission and service income, net 17,396,916 20,670,538 6,311,986 7,105,541
Net investment income 2,502,080 5,053,415 924,959 1,857,907
Other interest income 985,999 525,259 212,189 102,445
Realized gains (losses) on investments 34,933 (2,174,646) (142) (3,404,825)
Other income 815,530 2,259,710 8,651 329,063
----------- ---------- ---------- -----------
Total revenue 30,405,449 40,087,628 10,502,711 10,307,581
----------- ---------- ---------- -----------
Expenses:
Property and casualty:
Losses and loss adjustment expenses 10,322,594 11,153,492 3,159,056 (3,423,275)
Policy acquisition costs 1,854,966 3,889,725 (258,339) 1,342,889
Credit life benefits 347,429 533,181 81,264 165,417
Interest expense 194,069 288,807 91,104 37,122
Other operating costs and expenses 18,088,516 20,148,209 6,084,487 8,999,046
----------- ---------- ---------- -----------
Total expenses 30,807,574 36,013,414 9,157,572 7,121,199
----------- ---------- ---------- -----------
Income (loss) from operations, before income
taxes (402,125) 4,074,214 1,345,139 3,186,382
----------- ---------- ---------- -----------
Provision (benefit) for income taxes 72,452 22,794 60,892 (84,599)
----------- ---------- ---------- -----------
Net income (loss) $ (474,577) $ 4,051,420 $ 1,284,247 $ 3,270,981
=========== ========== ========== ===========
Per share:
Net income (loss) $ (0.03) $ 0.41 $ 0.08 $ 0.23
Average number of shares outstanding 16,491,653 9,910,789 16,749,262 14,500,534
Change in value of marketable securities
credited (charged) directly to equity $ 2,000,316 $(7,897,328) $ 95,532 $ 1,496,773
</TABLE>
<TABLE>
<CAPTION>
THE SEIBELS BRUCE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Temporary Cash Investments
(Unaudited)
Nine Months Ended
September 30,
1995 1994
-----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (474,577) $ 4,051,420
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation 603,686 359,996
Realized losses (gains) on investments (34,933) 2,174,646
Net change in assets and liabilities affecting
cash flows from operating activities (18,638,753) (35,752,906)
----------- -----------
Net cash used in operating activities (18,544,577) (29,166,844)
----------- -----------
Cash flows from investing activities:
Proceeds from investments sold 8,164,930 118,845,800
Proceeds from investments matured 2,030,000 242,350
Cost of investments acquired (3,184,169) (80,921,673)
Net change in short-term investments 88,266 717,400
Proceeds from property and equipment sold 106,164 943,894
Purchases of property and equipment (37,553) (2,222,362)
----------- -----------
Net cash provided by investing activities 7,167,638 37,605,409
----------- -----------
Cash flows from financing activities:
Proceeds from stock rights offering 5,321,168 -
Increase in notes payable 2,037,329 439,167
Repayment of notes payable - (1,749,161)
----------- -----------
Net cash provided by (used in) financing activities 7,358,497 (1,309,994)
----------- -----------
Net increase (decrease) in cash and temporary
cash investments (4,018,442) 7,128,571
Cash and temporary cash investments, January 1 20,243,331 12,218,893
----------- -----------
Cash and temporary cash investments, September 30 $ 16,224,889 $ 19,347,464
=========== ===========
Supplemental cash flow information:
Cash paid for - interest $ 53,827 $ 187,184
- income taxes paid 147,405 601,307
Non-cash financing activities:
Notes payable exchanged for common stock $ - $ 10,000,000
Notes payable exchanged for accrued interest 439,167 -
Issuance of common stock 39,375 -
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE SEIBELS BRUCE GROUP, INC.
-----------------------------
(Registrant)
Date: November 14, 1995 /s/John A. Weitzel
----------------- ------------------------------
John A. Weitzel
Chief Financial Officer and Board
of Directors
Date: November 14, 1995 /s/Ernst N. Csiszar
----------------- ------------------------------
Ernst N. Csiszar
President and Board of Directors
Date: November 14, 1995 /s/Mary M. Gardner
----------------- ------------------------------
Mary M. Gardner
Controller (Principal Accounting
Officer)
<PAGE>
APPENDIX
THE SIEBELS BRUCE GROUP, INC.
REPORT ON FORM 10-Q FOR
QUARTER ENDED SEPTEMBER 30, 1995
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The interim financial statements in Item 1 are unaudited, but in the opinion of
management, reflect all adjustments necessary for fair presentation of results
for such periods. All such adjustments are of a normal recurring nature. The
results of operations for any interim period are not necessarily indicative of
results for the full year. These financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Company's annual report Form 10-K for the year ended December 31, 1994.
The following table indicates the more significant financial comparisons with
the applicable prior periods (dollars shown in thousands, except per share
amounts):
September 30, December 31,
FINANCIAL CONDITION 1995 1994
---------------- -----------
Total investments $ 50,577 $ 61,868
Total assets 225,424 255,935
Total liabilities 217,888 255,285
Shareholders' equity 7,536 650
Per Share 0.45 0.05
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Third Quarter
RESULTS OF OPERATIONS 1995 1994 1995 1994
------- -------- -------- ------
<S> <C> <C> <C> <C>
Operating revenues
Insurance
Commission and service income $ 17,397 $ 20,671 $ 6,312 $ 7,106
Premiums earned 8,670 13,753 3,045 4,318
Net investment and other interest income 3,488 5,579 1,137 1,960
Realized gains (losses) on investments 35 (2,175) -- (3,405)
Other income 815 2,260 9 329
Total operating revenues $ 30,405 $ 40,088 $ 10,503 $ 10,308
Net income (loss) $ (475) $ 4,051 $ 1,284 $ 3,271
Per share $ (0.03) $ 0.41 $ 0.08 $ 0.23
</TABLE>
Results of Operations
The Company had net income during the third quarter of 1995 of $1.3 million
compared to $3.3 million for the third quarter of 1994. While revenues
(excluding realized losses on investments) have decreased 23.4%, expenses
(policy acquisition and other operating costs and expenses, combined) have
decreased 43.1%. The decrease in revenues is related to the Company ceasing to
write any voluntary business that would be retained by the Company.
Additionally, the Company has seen commission and service income decrease as its
participation in the South Carolina Reinsurance Facility decreased effective
October 1, 1994. The Company has seen expenses decrease steadily during 1995 and
expects this trend to continue as all expenses are reviewed to find ways to
implement further reductions. The third quarter of 1994 includes a non-recurring
reduction to losses and loss adjustment expenses ("LAE") in the amount of $6.1
million. On September 30, 1994, the Company satisfied its obligation with
respect to all outstanding and future claims estimated at $22.2 million
associated with the Company's participation in the National Workers'
Compensation Reinsurance Pool ("NCCI") for a cash payment of $16.2 million. The
settlement reduced losses and LAE incurred.
The nine months ended September 30, 1995 reflect a net loss of $.5 million
compared to net income of $4.1 million in 1994. As discussed above, the Company
continues to see expenses drop at a faster rate than revenues. However, the
effects of these reductions have only begun to help reduce losses during the
second and third quarters. The Company expects the continued efforts of
management and all employees to result in additional expense reductions in
future quarters. The nine months ended September 30, 1994 includes reductions to
losses and LAE incurred with a net effect of $3.3 million increase to net
income. The NCCI commutation, discussed above, decreased losses and LAE by $6.1
million. In the second quarter of 1994, the Company settled pending arbitration
related to certain reserves that resulted in an increase to losses and LAE
incurred in the amount of $2.9 million. Net realized investment losses of $3.4
million were recognized in the third quarter of 1994. The nine months ended
September 30, 1994 reflected net realized losses of $2.2 million. The losses are
due to sales of securities in the second and third quarter to provide operating
cash, commute the workers' compensation reserves and to settle the arbitration
dispute.
<PAGE>
At December 31, 1994, three groups of independant actuaries reviewed the
Company's reserves at the request of management. The result of this was
additional reserve strengthening recorded in the fourth quarter of 1994. Since
then, management has been monitoring the development on these reserves and
believes that reserves remain adequate at this time. This belief was confirmed
by an independant review of reserves at June 30, 1995. In an area that
historically had proven troublesome in the past, the Company's West Coast
business terminated in 1986, the Company is seeing favorable development. The
trends for the past eighteen months have shown decreased legal expenses,
decreases in new claims reported and lower severity in these claims than in the
past.
Net investment income for the third quarter of 1995 was $1.1 million, compared
to $2.0 million for the same quarter in 1994. The nine months ended September
30, 1995 also reflects a decrease of $2.1 million when compared to 1994. These
decreases are related to the decrease in the investment portfolio as a result of
large bond sales in the third and fourth quarter of 1994.
Other income for the nine months ended September 30, 1995 includes a settlement
received on litigation the Company was involved in for several years. Also
included in other income is a gain on the sale of certain assets of Forest Lake
Travel Service, Inc. This subsidiary has been dissolved as it is no longer a
part of the Company's operating plans. In addition to the revenues of operations
discontinued in 1995, other income in 1994 includes a $.6 million gain in
connection with the sale of the assets of the Company's premium financing
subsidiary.
The 1995 provision for taxes on income from operations was $72,000 for the nine
months and $61,000 for the quarter. These charges resulted from the tax
limitations on offsetting the Company's net operating loss carryforwards against
state income taxes and certain life insurance taxable income. The Company's tax
net operating loss carryforward at September 30, 1995 is approximately $93
million and a capital loss carryforward of approximately $5 million.
Capital Resources and Liquidity
The investment portfolio at September 30, 1995 was $50.6 million, compared to
$61.9 million at the end of 1994. Shareholders' equity at September 30, 1995 was
$7.5 million ($0.45 per share), compared to $.6 million ($.05 per share) at
December 31, 1994. This increase is due to proceeds received from a rights
offering in the first quarter of 1995 and increases in the market value of the
Company's investment portfolio. The increase in the market value of the
Company's bond and stock portfolio resulted in an unrealized gain of $.1 million
in the third quarter and $2.0 million for the nine months.
Cash used in operations during the first nine months of 1995 was $18.5 million,
compared to $29.2 million in 1994. The outflows in both periods were due to
reduced premium volume and the payment of claims for the three months. The 1994
outflow also includes large cash payments resulting from the two settlements
discussed previously. While additional cash drain is anticipated in 1995, the
expected amount is less than the $16.4 million of cash and short-term
investments held at September 30, 1995. Hence, no unplanned sales of securities
from the investment portfolio are anticipated during 1995.
<PAGE>
Cash provided from financing activities includes the proceeds from the rights
offering and $2 million of debt incurred by the Company in the form of a
promissory note executed in the favor of the investors currently holding
approximately 49% of the Company's stock. The proceeds of this note were
contributed directly to the capital of South Carolina Insurance Company.
PART I. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
On July 18, 1995, Form 8-K was filed reporting projected second quarter results
at the request of the National Association of Security Dealers.
On July 25, 1995, Form 8-K was filed reporting a projected balance sheet for the
period ended June 30 ,1995 at the request of the National Association of
Security Dealers.
<PAGE>
PROXY CARD
THE SEIBELS BRUCE GROUP, INC.
P. O. Box One
Columbia, South Carolina 29201
Proxy Solicitation on Behalf of the Board of Directors of the
Company for the Special Annual Meeting of Shareholders on March 20, 1996
The undersigned hereby appoints Ernst N. Csiszar and John A. Weitzel and each or
either of them, as proxies, with full power of substitution, to vote all shares
of the Common Stock of The Seibels Bruce Group, Inc. which the undersigned is
entitled to vote at the Special Meeting of Shareholders to be held on March 20,
1996 and at any adjournment thereof, upon the items described in the Proxy
Statement. The undersigned acknowledges receipt of notice of the Meeting and of
the Proxy Statement.
[PROXY CARD FRONT]
X Please mark for your votes as in this example.
FOR
AGAINST
ABSTAIN
1. To increase the
authorized Common Stock
from 25,000,000 to
50,000,000 and to amend
the Articles of
Incorporation
accordingly.
____
_____
____
2. To approve the issuance
of 6,250,000 Purchasers
Shares and 6,250,000
Option Shares
____
____
____
3. To grant full and
unlimited voting rights
to all 12,500,000 shares
to be purchased by the
Purchasers.
____
____
____
4. To adopt the 1995 Stock
Option Plan for Non-
Employee Directors.
____
____
____
5. To adopt the 1996
Employee Stock Option
Plan.
____
____
____
6. To adopt the 1995 stock
Option Plan for
Independent Agents.
____
____
____
Proxies will be voted in accordance with any instructions indicated above. If no
specification is made the Proxy will be voted FOR the Proposals. This Proxy is
revocable any time prior to its use. The Board of Directors recommends a vote
FOR all proposals.
SIGNATURE__________________________________DATE_____________
NOTE: Signatures should agree with name on stock, as shown hereon. Officers,
fiduciaries, etc. should so indicate. When shares are held in the names of more
than one person, each person should sign the proxy.
SIGNATURE________________________________DATE_____________
(PROXY CARD REVERSE SIDE)
<PAGE>
