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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO
SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
AMERICAN INCOME HOLDING, INC.
(NAME OF SUBJECT COMPANY)
----------------
TMK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF TORCHMARK CORPORATION
(BIDDERS)
----------------
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
----------------
(CUSIP NUMBER OF CLASS OF SECURITIES)
026728 10 5
KEITH A. TUCKER
PRESIDENT, TMK ACQUISITION CORPORATION
6300 LAMAR
SHAWNEE MISSION, KANSAS 66201
(913) 236-1915
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPIES TO:
ALAN J. BOGDANOW, ESQ.
HUGHES & LUCE, L.L.P.
1717 MAIN STREET
SUITE 2800
DALLAS, TEXAS 75201
(214) 939-5500
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SEPTEMBER 15, 1994
(DATE OF EVENT WHICH REQUIRES FILING STATEMENT ON SCHEDULE 13D)
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CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
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$561,490,020 $112,298
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</TABLE>
* For purposes of calculating amount of filing fee only. The amount assumes the
purchase of 16,066,168 shares of Common Stock, par value $.01 per share,
which equals all shares outstanding as of September 20, 1994 plus the number
of shares issuable upon the exercise of all vested options, at a price per
share of $35.00 in cash.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: None Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
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<PAGE>
14D-1 AND 13D
CUSIP NO. 026-728-105
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1 NAME OF REPORTING PERSONS: TMK ACQUISITION CORPORATION
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 63-
1126751
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCES OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO [_]
ITEMS 2(e) or 2(f)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION: DELAWARE
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 6,774,508*
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8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES [_]
CERTAIN SHARES
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7):
APPROXIMATELY 43% OF THE SHARES OUTSTANDING AS OF
AUGUST 24, 1994.*
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10 TYPE OF REPORTING PERSON:
CO
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*See footnote on following page.
<PAGE>
14D-1 AND 13D
CUSIP NO. 026-728-105
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1 NAME OF REPORTING PERSONS: TORCHMARK CORPORATION S.S. OR
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 63-078040
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCES OF FUNDS
BK, AF, WC, OO
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO [_]
ITEMS 2(e) or 2(f)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION: DELAWARE
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 6,774,508*
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8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES [_]
CERTAIN SHARES
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7):
APPROXIMATELY 43% OF THE SHARES OUTSTANDING AS OF
AUGUST 24, 1994.*
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10 TYPE OF REPORTING PERSON:
CO
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* On September 15, 1994, Torchmark Corporation ("Parent") entered into a
Shareholder Agreement (collectively, the "Shareholder Agreements") with each
of Bernard Rapoport, Charles B. Cooper, Golder, Thoma, Cressey Fund III
Limited Partnerhip, The Bernard and Audre Rapoport Foundation and Ronald
Rapoport, Trustee for Rebecca Abigail Rapoport and Emily Palmer Rapoport
(collectively, the "Selling Shareholders"), pursuant to which the Selling
Shareholders agreed to grant an option to purchase all 6,774,508 Shares
(including 306,006 Shares under options) beneficially owned by them at a
price per Share equal to the price paid in the Offer plus an adjustment
amount. The Shareholder Agreements are described more fully in Section 12
("Purpose of the Offer; The Merger Agreement and The Shareholder Agreements")
of the Offer to Purchase dated September 21, 1994 (the "Offer to Purchase").
<PAGE>
This Tender Offer Statement relates to a tender offer by TMK Acquisition
Corporation, a Delaware corporation (the "Purchaser") and a wholly owned
subsidiary of Torchmark Corporation, a Delaware corporation ("Parent"), to
purchase all outstanding shares of common stock, par value $.01 per share
(collectively, the "Shares"), of American Income Holding, Inc., a Delaware
corporation (the "Company"), at a purchase price of $35.00 per Share, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated September 21, 1994 (the
"Offer to Purchase"), and the related Letter of Transmittal, copies of which
are filed as Exhibits (a)(1) and (a)(2) hereto, respectively, and which are
incorporated herein by reference.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is American Income Holding, Inc., which
has its principal executive offices at 1100 N. Market Street, Suite 1300, P.O.
Box 8985, Wilmington, Delaware 19899.
(b) This Schedule 14D-1 relates to the offer by the Purchaser to purchase all
outstanding Shares at a price of $35.00 per Share, net to the seller in cash,
without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"). Information concerning the number of
outstanding Shares is set forth in "Introduction" of the Offer to Purchase and
is incorporated herein by reference.
(c) Information concerning the principal market in which the Shares are
traded and the high and low sales prices of the Shares for each quarterly
period during the past two years is set forth in Section 6 ("Price Range of the
Shares; Dividends on the Shares") of the Offer to Purchase and is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Schedule 14D-1 is being filed by the Purchaser, a
Delaware corporation, and Parent, a Delaware corporation. The Purchaser is a
wholly owned subsidiary of Parent. Information concerning the principal
business and the address of the principal offices of the Purchaser and Parent
is set forth in Section 9 ("Certain Information Concerning the Purchaser and
Parent") of the Offer to Purchase and is incorporated herein by reference. The
names, business addresses, present principal occupations or employment,
material occupations, positions, offices or employments during the last five
years and citizenship of the directors and executive officers of the Purchaser
and Parent are set forth in Schedule I of the Offer to Purchase and are
incorporated herein by reference.
(e) and (f) The information set forth in Section 9 ("Certain Information
Concerning the Purchaser and Parent") and Section 15 ("Certain Legal Matters;
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction and Section 11
("Contacts with the Company; Background of the Offer") and Section 9 ("Certain
Information Concerning the Purchaser and Parent") of the Offer to Purchase is
incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement and The Shareholder Agreements") of the Offer to Purchase is
incorporated herein by reference.
(f) and (g) The information set forth in Section 7 ("Effect of the Offer on
the Market for the Shares; Stock Exchange Listing; Registration Under the
Exchange Act") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in "Introduction," Section 9 ("Certain
Information Concerning the Purchaser and Parent") and Section 12 ("Purpose of
the Offer; The Merger Agreement and The Shareholder Agreements") of the Offer
to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in Introduction and in Section 9 ("Certain
Information Concerning the Purchaser and Parent"), Section 11 ("Contacts with
the Company; Background of the Offer") and Section 12 ("Purpose of the Offer;
The Merger Agreement and The Shareholder Agreements") of the Offer to Purchase
is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning the
Purchaser and Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement and The Shareholder Agreements") of the Offer to Purchase is
incorporated herein by reference.
(b) and (c) The information set forth in Section 15 ("Certain Legal Matters;
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 7 ("Effect of the Offer on the
Market for the Shares; Stock Exchange Listing; Registration Under the Exchange
Act") and Section 15 ("Certain Legal Matters; Regulatory Approvals") of the
Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase (Exhibit (a)(1)
hereto), the Letter of Transmittal (Exhibit (a)(2) hereto), the Agreement and
Plan of Merger dated as of September 15, 1994, between the Purchaser, Parent
and the Company (Exhibit (c)(1) hereto), the two forms of Shareholder Agreement
(Exhibits (c)(2) and (c)(3) hereto), the Confidentiality Agreement dated as of
August 29, 1994 between Parent and the Company (Exhibit (c)(4) hereto) and the
memoranda of agreement regarding the employment terms of Bernard Rapoport and
Charles B. Cooper (Exhibits (f)(1) and (f)(2) hereto), is incorporated herein
by reference.
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees.
Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies
(a)(5) and Other Nominees.
Guidelines for Certification of Taxpayer Identification Number on
(a)(6) Substitute Form W-9.
(a)(7) Form of Summary Advertisement dated September 22, 1994.
(a)(8) Text of Press Release dated September 15, 1994, issued by Parent.
(a)(9) Text of Press Release dated September 15, 1994 issued by the Company.
(c)(1) Agreement and Plan of Merger dated as of September 15, 1994, between
the Purchaser, Parent and the Company.
(c)(2) Form of Shareholder Agreement, dated September 15, 1994, between Parent
and (i) Bernard Rapoport and (ii) Charles B. Cooper.
(c)(3) Form of Shareholder Agreement dated September 15, 1994, between Parent
and (i) Golder, Thoma, Cressey Fund III Limited Partnership, (ii) The
Bernard and Audre Rapoport Foundation and (iii) Ronald Rapoport,
Trustee for Rebecca Abigail Rapoport and Emily Palmer Rapoport.
(c)(4) Confidentiality Agreement dated as of August 29, 1994, between Parent
and the Company.
(f)(1) Memorandum with respect to employment terms executed on September 1,
1994 by Bernard Rapoport.
(f)(2) Memorandum with respect to employment terms executed on September 1,
1994 by Charles B. Cooper.
</TABLE>
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: September 21, 1994
TMK ACQUISITION CORPORATION
By: /s/ Keith A. Tucker
----------------------------------
Name: Keith A. Tucker
-----------------------------
Title: President
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TORCHMARK CORPORATION
By: /s/ Keith A. Tucker
----------------------------------
Name: Keith A. Tucker
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Title: Vice Chairman
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EXHIBIT PAGE
NUMBER EXHIBIT NAME NUMBER
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(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
Letter to Brokers, Dealers, Banks, Trust Companies and Other
(a)(4) Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust
Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Form of Summary Advertisement dated September 22, 1994.
Text of Press Release dated September 15, 1994, issued by
(a)(8) Parent.
Text of Press Release dated September 15, 1994 issued by the
(a)(9) Company.
(c)(1) Agreement and Plan of Merger dated as of September 15, 1994,
between the Purchaser, Parent and the Company.
(c)(2) Form of Shareholder Agreement, dated September 15, 1994,
between Parent and (i) Bernard Rapoport and (ii) Charles B.
Cooper.
(c)(3) Form of Shareholder Agreement dated September 15, 1994,
between Parent and (i) Golder, Thoma, Cressey Fund III
Limited Partnership, (ii) The Bernard and Audre Rapoport
Foundation and (iii) Ronald Rapoport, Trustee for Rebecca
Abigail Rapoport and Emily Palmer Rapoport.
(c)(4) Confidentiality Agreement dated as of August 29, 1994,
between Parent and the Company.
(f)(1) Memorandum with respect to employment terms executed on
September 1, 1994 by Bernard Rapoport.
(f)(2) Memorandum with respect to employment terms executed on
September 1, 1994 by Charles B. Cooper.
</TABLE>
<PAGE>
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMERICAN INCOME HOLDING, INC.
AT
$35.00 NET PER SHARE
BY
TMK ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
TORCHMARK CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
WEDNESDAY, OCTOBER 19, 1994, UNLESS EXTENDED.
THE BOARD OF DIRECTORS OF AMERICAN INCOME HOLDING, INC. HAS, BY THE UNANIMOUS
VOTE OF ALL DIRECTORS PRESENT, APPROVED THE OFFER AND THE MERGER REFERRED TO
HEREIN AND DETERMINED THAT THE OFFER AND THE MERGER, TAKEN TOGETHER, ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND
RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR
SHARES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS: (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT WOULD REPRESENT AT LEAST 51% OF ALL OUTSTANDING SHARES ON A FULLY
DILUTED BASIS; AND (2) ALL MATERIAL APPROVALS, CONSENTS, PERMITS OR
AUTHORIZATIONS REQUIRED TO BE OBTAINED FROM STATE INSURANCE REGULATORY OR
GOVERNMENTAL AUTHORITIES HAVING BEEN OBTAINED ON TERMS SATISFACTORY TO THE
PURCHASER IN ITS SOLE DISCRETION.
----------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal or a
facsimile copy thereof in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature thereon guaranteed if required
by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of
Transmittal or such facsimile and any other required documents to the
Depositary and either deliver the certificates for such Shares to the
Depositary along with the Letter of Transmittal or facsimile or deliver such
Shares pursuant to the procedure for book-entry transfer set forth in Section 2
or (2) request such stockholder's broker, dealer, bank, trust company or other
nominee to effect the transaction for such stockholder. A stockholder having
Shares registered in the name of a broker, dealer, bank, trust company or other
nominee must contact such broker, dealer, bank, trust company or other nominee
if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available or who cannot comply in a timely manner
with the procedure for book-entry transfer, or who cannot deliver all required
documents to the Depositary prior to the expiration of the Offer, may tender
such Shares by following the procedure for guaranteed delivery set forth in
Section 2, including the Notice of Guaranteed Delivery.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent at the address and telephone number
set forth on the back cover of this Offer to Purchase.
----------------
September 21, 1994
The Information Agent for the Offer is:
D.F. KING & CO., INC.
<PAGE>
TABLE OF CONTENTS
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PAGE
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Introduction............................................................. 1
1. Terms of the Offer................................................. 2
2. Procedure for Tendering Shares..................................... 4
3. Withdrawal Rights.................................................. 6
4. Acceptance for Payment and Payment................................. 7
5. Certain Federal Income Tax Consequences............................ 8
6. Price Range of the Shares; Dividends on the Shares................. 9
7. Effect of the Offer on the Market for the Shares; Stock Exchange
Listing; Registration Under the Exchange Act...................... 9
8. Certain Information Concerning the Company......................... 10
9. Certain Information Concerning the Purchaser and Parent............ 13
10. Source and Amount of Funds......................................... 15
11. Contacts with the Company; Background of the Offer................. 16
12. Purpose of the Offer; The Merger Agreement and The Shareholder
Agreements........................................................ 16
13. Dividends and Distributions........................................ 25
14. Certain Conditions of the Offer.................................... 26
15. Certain Legal Matters; Regulatory Approvals........................ 27
16. Fees and Expenses.................................................. 31
17. Miscellaneous...................................................... 31
Schedule I--Directors and Executive Officers of Parent and the Purchaser. 32
</TABLE>
i
<PAGE>
To the Holders of Common Stock of American Income Holding, Inc.:
INTRODUCTION
TMK Acquisition Corporation, a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Torchmark Corporation, a Delaware corporation
("Parent"), hereby offers to purchase all outstanding shares of Common Stock,
par value $.01 per share (collectively, the "Shares"), of American Income
Holding, Inc., a Delaware corporation (the "Company"), at $35.00 per Share (the
"Offer Price"), net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
The Purchaser will pay all fees and expenses of Bank of America Illinois, which
is acting as the Depositary (the "Depositary"), and D.F. King & Co., Inc.,
which is acting as Information Agent (the "Information Agent"), incurred in
connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS, BY UNANIMOUS VOTE OF ALL DIRECTORS
PRESENT, APPROVED THE OFFER AND THE MERGER (AS DEFINED BELOW) AND DETERMINED
THAT THE OFFER AND THE MERGER, TAKEN TOGETHER, ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT STOCKHOLDERS
OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES.
Fox-Pitt, Kelton Inc., the Company's financial advisor ("Advisor"), has
delivered to the Board of Directors of the Company its written opinion to the
effect that, as of the date of such opinion, the $35.00 in cash to be offered
to the holders of the Shares in each of the Offer and the Merger is fair to
such holders, from a financial point of view. Such opinion is attached to the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to stockholders of the Company
herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES THAT WOULD REPRESENT AT LEAST 51% OF ALL OUTSTANDING
SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"); AND (2) ALL MATERIAL
APPROVALS, CONSENTS, PERMITS AND AUTHORIZATIONS OF STATE INSURANCE REGULATORY
OR GOVERNMENTAL AUTHORITIES HAVING BEEN OBTAINED ON TERMS SATISFACTORY TO THE
PURCHASER IN ITS SOLE DISCRETION (THE "INSURANCE REGULATORY CONDITION"). SEE
SECTIONS 1, 14 AND 15.
The Offer is being made pursuant to the Agreement and Plan of Merger dated as
of September 15, 1994 (the "Merger Agreement"), between Parent, the Purchaser
and the Company pursuant to which, following the consummation of the Offer and
the satisfaction or waiver of certain conditions, the Purchaser will be merged
with and into the Company, with the Company surviving the merger (as such, the
"Surviving Corporation") as a wholly owned subsidiary of Parent (the "Merger").
In the Merger, each outstanding Share (other than Shares held by (i) Parent,
the Purchaser, the Company or any direct or indirect subsidiary of Parent or
the Company or (ii) stockholders, if any, who are entitled to and who properly
exercise dissenters' rights under Delaware law) will be converted into the
right to receive the per Share price paid in the Offer in cash, without
interest (the "Merger Consideration"). See Section 12.
The Merger is subject to a number of conditions, including approval by
stockholders of the Company, if such approval is required by applicable law. In
the event the Purchaser acquires 90% or more of the
1
<PAGE>
outstanding Shares pursuant to the Offer or otherwise, the Purchaser would be
able to effect the Merger pursuant to the short-form merger provisions of the
Delaware General Corporation Law (the "DGCL"), without prior notice to, or any
action by, any other stockholder of the Company. See Section 12.
In connection with the execution of the Merger Agreement, the Parent entered
into a Shareholder Agreement, dated as of September 15, 1994 (each, a
"Shareholder Agreement"), with each of Bernard Rapoport, Charles B. Cooper,
Golder, Thoma, Cressey Fund III Limited Partnership, The Bernard and Audre
Rapoport Foundation, Ronald Rapoport, Trustee for Rebecca Abigail Rapoport and
Ronald Rapoport, Trustee for Emily Palmer Rapoport (collectively, the "Selling
Shareholders"), pursuant to which each of the Selling Shareholders agreed to
tender such Selling Shareholder's Shares pursuant to the Offer and to grant
Parent options to purchase all Shares beneficially owned or thereafter acquired
by the Selling Shareholders, representing approximately 41% of the outstanding
Shares (42% of the Shares on a fully diluted basis) at a price per Share equal
to the price paid in the Offer, as adjusted. See Section 12. Pursuant to the
Shareholder Agreement, Parent can exercise its option in whole or in part at
any time, subject to certain conditions, prior to December 29, 1994 or, subject
to certain other conditions, prior to March 31, 1995 (such dates to be
extended, if necessary, to allow for proceedings before any court or
governmental instrumentality or to comply with any waiting period or approval
required by law). By entering into a Shareholder Agreement, each of the Selling
Shareholders has also granted a proxy for the benefit of Parent with respect to
the Shares subject to the Shareholder Agreement owned by such Selling
Shareholder to vote such Shares, as more fully described below under Section
12.
The Company has informed the Purchaser that, as of September 15, 1994, there
were 15,736,566 Shares issued and outstanding and 423,986 Shares reserved for
issuance upon the exercise of outstanding stock options. Accordingly, the
Purchaser believes that the Minimum Condition will be satisfied, based on the
foregoing assumptions, if approximately 1,761,346 shares (in addition to the
Shares subject to the Shareholder Agreements), are validly tendered and not
withdrawn prior to the Expiration Date (as defined below). If the Minimum
Condition is satisfied and the Purchaser accepts for payment Shares tendered
pursuant to the Offer, the Purchaser will be able to elect a majority of the
members of the Company's Board of Directors and to effect the Merger without
the affirmative vote of any other stockholder of the Company.
The Merger Agreement and the Shareholder Agreements are more fully described
in Section 12. Certain Federal income tax consequences of the sale of Shares
pursuant to the Offer and the exchange of Shares for the Merger Consideration
pursuant to the Merger are described in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, the Purchaser will
accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 3. The
term "Expiration Date" means 12:00 Midnight, New York City time, on Wednesday,
October 19, 1994, unless and until the Purchaser shall have extended the period
of time during which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended by
the Purchaser, shall expire.
The Offer is subject to certain conditions set forth in Section 14, including
satisfaction of the Minimum Condition, the Insurance Regulatory Condition and
the expiration or termination of the waiting period applicable to the
Purchaser's acquisition of Shares pursuant to the Offer under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). If any
such condition is not satisfied the Purchaser may (1) terminate the Offer and
return all tendered Shares to tendering shareholders, (2) extend the Offer and,
subject to withdrawal rights as set forth in Section 3, retain all such Shares
until the expiration
2
<PAGE>
of the Offer as so extended, (3) waive such condition and, subject to any
requirements to extend the period of time during which the Offer is open,
purchase all Shares validly tendered by the Expiration Date and not withdrawn
or (4) delay acceptance for payment of or payment for Shares, subject to
applicable law, until satisfaction or waiver of the conditions to the Offer and
subject to the right of the Purchaser to extend the Offer as set forth below
and in Section 12; provided, however, that, unless previously approved by the
Company in writing, no change may be made which decreases the price per Share
payable in the Offer, which changes the form of consideration to be paid in the
Offer, which reduces the maximum number of Shares to be purchased in the Offer,
which imposes conditions to the Offer in addition to those set forth in Section
14 hereto or which broadens the scope of such conditions. In the Merger
Agreement, the Purchaser has agreed, subject to the conditions in Section 14
and its rights under the Offer, to accept for payment Shares as soon as
practicable after the latest of (1) the date on which the waiting period under
the HSR Act has expired or been terminated, (2) the date on which the
conditions in Section 14 are fulfilled and there is no right to terminate the
Offer under Section 14 (subject to Purchaser's rights to extend the Offer
described below), (3) the earliest date on which the Offer can expire under
Federal law and (4) any date on or prior to November 15, 1994 until which the
Purchaser has extended the Offer pursuant to its right to extend under the
Merger Agreement. For a description of the Purchaser's right to extend the
period of time during which the Offer is open, and to amend, delay or terminate
the Offer, see Sections 12 and 14. There can be no assurance that the Purchaser
will exercise its right to extend the Offer (other than as required by the
Merger Agreement).
Any extension, waiver, amendment or termination of the Offer will be followed
as promptly as practicable by public announcement. In the case of an extension,
Rule 14e-1(d) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the announcement be issued no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(d) under the Exchange Act. Subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information published, sent or given to
stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change), and without limiting the manner in which the Purchaser may choose to
make any public announcement, the Purchaser will not have any obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If the Purchaser extends the Offer or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its acceptance for
payment of or payment for Shares or it is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 3.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange
Act, which requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after
the termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including a waiver of the Minimum Condition), the Purchaser will disseminate
additional tender offer materials and extend the Offer to the extent required
by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum
period during which an offer must remain open following material changes in the
terms of the Offer or information concerning the Offer, other than a change in
price or a change in the percentage of securities sought, will depend upon the
facts and circumstances then existing, including the relative materiality of
the changed terms or information. With respect to a change in price or a change
in the percentage of securities sought, a minimum period of 10 business days is
generally required to allow for adequate dissemination to stockholders.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related
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<PAGE>
Letter of Transmittal and other relevant materials will be mailed by the
Purchaser to record holders of Shares and will be furnished by the Purchaser to
brokers, dealers, banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the stockholder lists or, if applicable,
who are listed as participants in a clearing agency's security position
listing, for subsequent transmittal to beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES
Valid Tender. For a stockholder validly to tender Shares pursuant to the
Offer, either (1) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees, or an
Agent's Message (as defined below) in connection with a book-entry delivery of
Shares, and any other documents required by the Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase and either certificates for tendered Shares must be
received by the Depositary at one of such addresses or such Shares must be
delivered pursuant to the procedure for book-entry transfer set forth below
(and a Book-Entry Confirmation (as defined below) received by the Depositary),
in each case prior to the Expiration Date, or (2) the tendering stockholder
must comply with the guaranteed delivery procedure set forth below.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company, Midwest Securities Trust Company and Philadelphia
Depository Trust Company (the "Book-Entry Transfer Facilities") for purposes of
the Offer within two business days after the date of this Offer. Any financial
institution that is a participant in any of the Book-Entry Transfer Facilities'
systems may make book-entry delivery of Shares by causing a Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with such Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of Shares may be effected through book-entry transfer into
the Depositary's account at a Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other required documents, must, in any case, be
transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the tendering stockholder must comply with the guaranteed delivery procedure
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at a Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL
BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the Shares that are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Purchaser may enforce such
agreement against such participant.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (1) the Letter of Transmittal is signed by the registered holder
of Shares (which term, for purposes of this Section, includes any participant
in any of the Book-Entry Transfer Facilities' systems whose name appears on a
security
4
<PAGE>
position listing as the owner of the Shares) tendered therewith and such
registered holder has not completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the Letter
of Transmittal or (2) such Shares are tendered for the account of a firm that
is a member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. (the "NASD"), or a commercial bank,
trust company or savings institution having an office or correspondent in the
United States (each, an "Eligible Institution"). In all other cases, all
signatures on the Letters of Transmittal must be guaranteed by an Eligible
Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the
certificates for Shares are registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made or
certificates for Shares not tendered or not accepted for payment are to be
issued to a person other than the registered holder of the certificates
surrendered, the tendered certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered holders or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed as specified above.
See Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Purchaser is received by the
Depositary, as provided below, prior to the Expiration Date; and
(3) the certificates for all tendered Shares, in proper form for transfer
(or a Book-Entry Confirmation with respect to such Shares), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required
by the Letter of Transmittal, are received by the Depositary within five
trading days after the date of execution of such Notice of Guaranteed
Delivery. A "trading day" is any day on which the New York Stock Exchange,
Inc. (the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (1) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (2) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer and (3) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations are actually
received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE FOR THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering stockholder will irrevocably appoint designees of the Purchaser as
such stockholder's attorneys-in-fact and proxies in the
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<PAGE>
manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of such stockholder's rights with respect to
the Shares tendered by such stockholder and accepted for payment by the
Purchaser and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after September 15,
1994. All such proxies shall be considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the
extent that, the Purchaser accepts for payment Shares tendered by such
stockholder as provided herein. Upon such acceptance for payment, all prior
powers of attorney and proxies given by such stockholder with respect to such
Shares or other securities or rights will, without further action, be revoked
and no subsequent powers of attorney and proxies may be given (and, if given,
will not be deemed effective). The designees of the Purchaser will thereby be
empowered to exercise voting and other rights with respect to such Shares or
other securities or rights in respect of any annual, special or adjourned
meeting of the Company's stockholders, or otherwise, as they in their sole
discretion deem proper. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser must be able
to exercise voting and other rights with respect to such Shares and other
securities or rights, including voting at any meeting of stockholders then
scheduled.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in any tender with respect to any particular Shares,
whether or not similar defects or irregularities are waived in the case of
other Shares. No tender of Shares will be deemed to have been validly made
until all defects or irregularities relating thereto have been cured or waived.
None of the Purchaser, Parent, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will
be final and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal income
tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must provide the Depositary with such stockholder's correct
taxpayer identification number ("TIN") on a Substitute Form W-9 and certify
under penalties of perjury that such TIN is correct and that such stockholder
is not subject to backup withholding. Certain stockholders (including, among
others, all corporations and certain foreign individuals and entities) are not
subject to backup withholding. If a stockholder does not provide its correct
TIN or fails to provide the certifications described above, the Internal
Revenue Service ("IRS") may impose a penalty on such stockholder and payment of
cash to such stockholder pursuant to the Offer may be subject to backup
withholding of 31%. All stockholders surrendering Shares pursuant to the Offer
should complete and sign the main signature box and the Substitute Form W-9
included as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Purchaser and
the Depositary). Non-corporate foreign stockholders should complete and sign
the main signature box and a Form W-8, Certificate of Foreign Status, a copy of
which may be obtained from the Depositary, in order to avoid backup
withholding. See Instruction 9 to the Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after November 17, 1994.
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<PAGE>
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. Withdrawals of tenders of Shares may not
be rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for any purposes of the Offer. However, withdrawn Shares may
be retendered by again following one of the procedures described in Section 2
at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not properly withdrawn in
accordance with Section 3 as soon as practicable after the later of (1) the
Expiration Date, (2) the satisfaction or waiver of the conditions set forth in
Section 14 and (3) any date on or prior to November 15, 1994 until which the
Purchaser has extended the Offer pursuant to its right to extend pursuant to
the Merger Agreement. For a description of the Purchaser's right to terminate
the Offer and not accept for payment or pay for Shares or to delay acceptance
for payment or payment for Shares, see Sections 12 and 14.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (1) certificates
for such Shares (or timely Book-Entry Confirmation of a transfer of such Shares
as described in Section 2), (2) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message) and (3) any
other documents required by the Letter of Transmittal. The per Share
consideration paid to any stockholder pursuant to the Offer will be the highest
per Share consideration paid to any other stockholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Payment
for Shares accepted for payment pursuant to the Offer will be made by deposit
of the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE FOR THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return
the tendered securities promptly after the termination or withdrawal of a
tender offer), the Depositary may, nevertheless, on behalf of the Purchaser,
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<PAGE>
retain tendered Shares, and such Shares may not be withdrawn except to the
extent tendering stockholders are entitled to exercise, and duly exercise,
withdrawal rights as described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or otherwise, certificates for any such Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer of such Shares into the Depositary's
account at a Book-Entry Transfer Facility pursuant to the procedure set forth
in Section 2, such Shares will be credited to an account maintained at the
appropriate Book-Entry Transfer Facility), as promptly as practicable after
the expiration or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to Parent, or to one or more direct or indirect wholly
owned subsidiaries of Parent, the right to purchase Shares tendered pursuant
to the Offer, but any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer and will in no way prejudice the
rights of tendering stockholders to receive payment for Shares validly
tendered and accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Sales of Shares pursuant to the Offer (and the receipt of the right to
receive cash by stockholders of the Company pursuant to the Merger) will be
taxable transactions for Federal income tax purposes under the Internal
Revenue Code of 1986, as amended (the "Code"), and may also be taxable
transactions under applicable state, local, foreign and other tax laws. For
Federal income tax purposes, a tendering stockholder will generally recognize
gain or loss equal to the difference between the amount of cash received by
the stockholder pursuant to the Offer (or to be received pursuant to the
Merger) and the aggregate tax basis in the Shares tendered by the stockholder
and purchased pursuant to the Offer (or cancelled pursuant to the Merger).
Gain or loss will be calculated separately for each block of Shares tendered
and purchased pursuant to the Offer (or cancelled pursuant to the Merger).
If tendered Shares are held by a tendering stockholder as capital assets,
gain or loss recognized by the tendering stockholder will be capital gain or
loss, which will be long-term capital gain or loss if the tendering
stockholder's holding period for the Shares exceeds one year. Under present
law, long-term capital gains recognized by a tendering individual stockholder
will generally be taxed at a maximum Federal marginal tax rate of 28%.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals) that tenders Shares
may be subject to 31% backup withholding unless the stockholder provides its
TIN and certifies that such number is correct or properly certifies that it is
awaiting a TIN. A stockholder that does not furnish its TIN may be subject to
a penalty imposed by the IRS. Each stockholder should complete and sign the
Substitute Form W-9 included as part of the Letter of Transmittal so as to
provide the information and certification necessary to avoid backup
withholding.
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not
an additional tax. Rather, the amount of the backup withholding can be
credited against the Federal income tax liability of the person subject to the
backup withholding, provided that the required information is given to the
IRS. If backup withholding results in an overpayment of tax, a refund can be
obtained by the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL
TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT
APPLY TO A HOLDER OF SHARES IN LIGHT OF ITS INDIVIDUAL CIRCUMSTANCES.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
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TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE
APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX
LAWS) OF THE OFFER AND THE MERGER.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are listed and traded on the NYSE under the symbol "AIH." The
following table sets forth, for each of the periods indicated, the high and
low last reported sales prices and dividends paid per Share as published in
financial sources.
<TABLE>
<CAPTION>
SALES PRICE
---------------
HIGH LOW DIVIDENDS
------- ------- ---------
<S> <C> <C> <C>
1992
First Quarter....................................... $25 $18 --
Second Quarter...................................... 22 1/4 17 1/4 --
Third Quarter....................................... 22 1/4 17 1/2 $0.05
Fourth Quarter...................................... 27 21 1/4 0.05
1993
First Quarter....................................... $24 7/8 $21 5/8 $0.05
Second Quarter...................................... 24 3/8 22 1/4 0.05
Third Quarter....................................... 27 6/8 23 1/2 0.05
Fourth Quarter...................................... 27 1/2 24 0.08
1994
First Quarter....................................... $28 $25 1/4 $0.08
Second Quarter...................................... 28 1/4 25 1/8 0.08
Third Quarter (through September 14, 1994).......... 30 3/8 26 1/2 0.08
</TABLE>
On September 15, 1994, the last full day of trading before the public
announcement of the execution of the Merger Agreement, the reported closing
sale price of the Shares was $30 1/8 per Share. On September 20, 1994, the
last full day of trading before the commencement of the Offer, the reported
closing sale price of the Shares on the NYSE was $33 7/8 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
Pursuant to the Merger Agreement, the Company has agreed not to declare, set
aside, make or pay any additional dividend or distribution on the Shares.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE LISTING;
REGISTRATION UNDER THE EXCHANGE ACT
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and may reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by the shareholders other than the Purchaser. The
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on
the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE for continued listing
and may, therefore, be delisted from such exchange. According to the NYSE's
published guidelines, the NYSE could consider delisting the Shares if, among
other things, the number of publicly-held Shares (excluding Shares held by
officers, directors, their immediate families and other concentrated holdings
of 10% or more) were less than 600,000, there were less than 1,200 holders of
at least 100 shares or the aggregate market value of the publicly-held Shares
were less than $5 million. If, as a result of the purchase of Shares pursuant
to the Offer, the Shares no longer meet the
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<PAGE>
requirements of the NYSE for continued listing and the listing of Shares is
discontinued, the market for the Shares could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
trade on another securities exchange or in the over-the-counter market and that
price quotations for the Shares would be reported by such exchange or through
NASDAQ or other sources. The extent of the public market for the Shares and
availability of such quotations would, however, depend upon such factors as the
number of holders and the aggregate market value of the publicly-held Shares at
such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares. Depending upon factors similar to those
described above regarding listing and market quotations, the Shares might no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations and, therefore, could no longer be used as
collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such registration
may be terminated if the Shares are not listed on a national securities
exchange and there are less than 300 holders of record. Termination of the
registration of the Shares under the Exchange Act would substantially reduce
the information required to be furnished by the Company to holders of Shares
and to the Securities and Exchange Commission (the "Commission") and would make
certain of the provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy or
information statement in connection with shareholder action and the related
requirement of an annual report to shareholders and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. Furthermore, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or eligible for listing on a securities exchange or NASDAQ reporting. It is the
current intention of Parent to deregister the Shares after consummation of the
Offer if the requirements for termination of registration are met.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive offices at
1100 N. Market, Suite 1300, P.O. Box 8985, Wilmington, Delaware 19899.
According to the Company's Annual Report on Form 10-K (a "Form 10-K") for the
year ended December 31, 1993, the Company is an insurance holding company
engaged through its subsidiary, American Income Life Insurance Company, an
Indiana stock life insurance company ("American Income Life"), in the
marketing, underwriting and issuing of supplemental life and fixed-benefit
accident and health insurance. Also according to the Company's Form 10-K, the
Company reaches its targeted customers, moderate-income wage earners, through
sponsored marketing programs with labor union locals, credit unions and other
employment related associations. American Income Life is wholly-owned by Trust
Life Insurance Company, a Texas insurance company, which is in turn wholly-
owned by the Company.
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted or derived from the
information contained in the Company's Form 10-K, as well as the Company's
Quarterly Report on Form 10-Q for the six months ended June 30, 1994, which are
incorporated by reference herein. More comprehensive financial information is
included in such reports and other documents filed by the Company with the
Commission, and the following summary is qualified in its entirety by reference
to such reports and such other documents and all the financial information
(including any related notes) contained therein. Such reports and other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information."
10
<PAGE>
AMERICAN INCOME HOLDING, INC.
SUMMARY HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- ------------------
1991 1992 1993 1993 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATE-
MENT:
Premium.................... $129,922 $138,524 $151,612 $ 73,436 $ 82,928
Net Investment income...... 33,333 35,201 32,107 16,273 17,258
Other revenue.............. 6,163 1,419 2,032 533 1,497
-------- -------- -------- -------- --------
Total revenue.............. 169,418 175,144 185,751 90,242 101,683
Benefits and expenses...... 111,951 118,578 125,235 61,991 66,888
Corporate expense(1)....... 20,279 8,642 4,615 2,395 1,707
-------- -------- -------- -------- --------
Pretax income.............. 37,188 47,924 55,901 25,856 33,088
Federal income tax......... (11,686) (15,394) (21,476) (8,928) (11,672)
Preferred stock dividends.. (842) (187) 0 0 0
Extraordinary charges, net
of tax.................... 0 (4,885) (638) 0 0
Effect of change in ac-
counting principle........ (4,624) 0 0 0 (1,519)
-------- -------- -------- -------- --------
Net income applicable to
common shareholders....... $ 20,036 $ 27,458 $ 33,787 $ 16,928 $ 19,897
======== ======== ======== ======== ========
Per common share:
Earnings before
extraordinary charges
and effect of change in
accounting principle.... $ 2.14 $ 2.12 $ 2.14 $ 1.05 $ 1.33
Extraordinary charges,
net of tax.............. (.32) (.04) (.09)
Effect of change in ac-
counting principle...... (.40)
-------- -------- -------- -------- --------
Net income............... $ 1.74 $ 1.80 $ 2.10 $ 1.05 $ 1.24
======== ======== ======== ======== ========
Average shares outstanding. 11,507 15,220 16,078 16,073 16,088
CONSOLIDATED BALANCE SHEET
(AT END OF PERIOD):
Invested assets............ $388,496 $421,554 $451,899 $417,295 $441,135
Deferred acquisition costs
and cost of insurance ac-
quired.................... 156,509 166,752 181,208 172,860 192,145
Other assets............... 63,393 60,456 58,399 62,689 60,666
-------- -------- -------- -------- --------
Total assets............... $608,398 $648,762 $691,506 $652,844 $693,946
======== ======== ======== ======== ========
Policy liabilities......... $292,410 $316,976 $345,546 $329,740 $362,325
Debt....................... 179,600 100,000 80,000 76,500 58,000
Other liabilities(2)....... 77,536 69,211 73,724 68,612 69,882
Shareholders' equity....... 58,852 162,575 192,236 177,992 203,739
-------- -------- -------- -------- --------
Total liabilities and
shareholders' equity...... $608,398 $648,762 $691,506 $652,844 $693,946
======== ======== ======== ======== ========
</TABLE>
- --------
(1)Corporate interest expense and amortization of goodwill.
(2)Includes $6.3 million in redeemable preferred stock in 1991.
11
<PAGE>
In the course of discussion between representatives of Parent and the Company
(see Section 11), the Company provided Parent with projected financial
information for each fiscal year ending through December 31, 1999. Such
information was a result of the Company's annual budget process, and it was not
prepared with a view to public disclosure or compliance with published
guidelines of the Commission or the guidelines established by the American
Institute of Certified Public Accountants regarding projections. The
information was not prepared with the assistance of, or reviewed by,
independent accountants, and is included in this Offer to Purchase only because
it was provided to Parent. Neither Parent, the Purchaser, the Company, the
Advisor nor the Information Agent assumes any responsibility for the validity,
reasonableness, accuracy or completeness of these projections. While presented
with numerical specificity, these projections are based upon a variety of
assumptions relating to the businesses of the Company that may not be realized
and are subject to significant uncertainties and contingencies, many of which
are beyond the control of the Company and, therefore, these projections are
inherently imprecise, and there can be no assurance that projected financial
results or any valuation assumed therein will be realized. Set forth below is
certain selected consolidated financial information with respect to the Company
and its subsidiaries included in the projected financial information shown to
Parent by the Company.
AMERICAN INCOME HOLDING, INC.
SELECTED PROJECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1994 1995 1996 1997 1998 1999
-------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues.......... $208,411 $252,719 $263,494 $298,187 $338,491 $385,849
Total Benefits and Ex-
penses................. 139,026 155,393 174,272 194,024 217,182 244,958
Net Earnings............ 44,892 50,027 57,760 67,472 78,617 91,345
<CAPTION>
AT YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1994 1995 1996 1997 1998 1999
-------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total Assets............ $748,451 $834,590 $922,583 $1,023,993 $1,138,417 $1,274,072
</TABLE>
Available Information. The Company is subject to the reporting requirements
of the Exchange Act and, in accordance therewith, is required to file reports
and other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning the
Company's directors and officers, their remuneration, the principal holders of
the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company stockholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities of the Commission located at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located in the Northwestern Atrium Center, 500 West Madison Street
(Suite 1400), Chicago, Illinois 6661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies should be obtainable, by mail, upon payment of
the Commission's customary charges, by writing to the Commissions's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material should
also be available for inspection at the library of the NYSE, 20 Broad Street,
New York, New York 10005.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although the Purchaser and Parent do not have any
knowledge that any such information is untrue, neither the Purchaser nor Parent
takes any responsibility for the accuracy or completeness of such information
or for any failure by the Company to disclose events that may have occurred and
may affect the significance or accuracy of any such information.
12
<PAGE>
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT
The Purchaser, a Delaware corporation and a wholly owned subsidiary of
Parent, was organized to acquire the Company and has not conducted any
unrelated activities since its organization. The principal offices of the
Purchaser are located at 6300 Lamar, Shawnee Mission, Kansas 66201. All
outstanding shares of capital stock of the Purchaser are owned by Parent.
Parent is an insurance and diversified financial services holding company
that was incorporated in Delaware on November 19, 1979, as Liberty National
Insurance Holding Company. Through a plan of reorganization effective December
30, 1980, it became the parent company for the businesses operated by Liberty
National Life Insurance Company ("Liberty") and Globe Life And Accident
Insurance Company ("Globe"). United American Insurance Company ("United
American"), Waddell & Reed, Inc. ("W&R") and United Investors Life Insurance
Company ("UILIC") along with their respective subsidiaries were acquired in
1981. The name "Torchmark Corporation" was adopted on July 1, 1982. Family
Service Life Insurance Company ("Familico") was purchased in July, 1990.
The following list itemizes Parent's principal subsidiaries and a description
of the subsidiaries' businesses:
Liberty--offers individual life and health insurance and annuities
through a home service sales force.
Globe--offers individual life and health insurance through direct
response and independent agents.
Famlico--offers life insurance and annuities to fund prearranged
funerals.
W&R--engages in institutional investment management services, and offers
individual financial planning and products, including life insurance,
annuities and mutual funds through an exclusive sales force.
UILIC--offers individual life and annuity products sold by W&R agents.
Torch Energy--provides management services with respect to oil and gas
production and development; and engages in energy property acquisitions and
dispositions, oil and gas product marketing and well operations.
Parent is a Delaware corporation with its principal office located at 2001
Third Avenue South, Birmingham, Alabama 35233.
Set forth below is certain selected consolidated financial information with
respect to Parent and its subsidiaries excerpted or derived from the
information contained in Parent's Form 10-K for the year ended December 31,
1993, as well as the Parent's Quarterly Report on Form 10-Q for the six months
ended June 30, 1994, which are incorporated by reference herein. More
comprehensive financial information is included in such reports and other
documents filed by Parent with the Commission, and the following summary is
qualified in its entirety by reference to such reports and such other documents
and all the financial information (including any related notes) contained
therein. Such reports and other documents should be available for inspection
and copies thereof should be obtainable in the manner set forth below under
"Available Information."
13
<PAGE>
TORCHMARK CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------------ ------------------------
1989 1990 1991 1992 1993 1993 1994
----------- ----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PREMIUM AND POLICY
CHARGES:
Life premium............ $ 432,235 $ 487,991 $ 524,052 $ 544,467 $ 555,859 $ 276,791 $ 288,382
Health premium.......... 682,680 738,431 769,821 797,835 799,855 407,348 391,616
Other premium........... 69,521 64,830 71,940 111,640 137,216 68,937 8,316
Total................... 1,184,436 1,291,252 1,365,813 1,453,962 1,492,910 753,076 688,314
Net investment income... 308,019 348,412 364,318 382,735 372,470 198,110 164,893
Financial services
revenue................ 108,255 108,561 114,326 133,462 137,422 68,825 72,116
Energy operations
revenue................ 22,239 32,218 54,841 74,014 106,013 45,478 33,450
Realized investment
gains (losses)......... 547 4,081 4,195 (948) 8,009 1,486 3,291
Total revenue........... 1,629,326 1,787,148 1,907,441 2,045,810 2,176,835 1,068,559 963,110
Net income.............. 211,308 229,177 246,489 265,477 297,979(5) 151,735(6) 140,475
Preferred stock
distributions.......... 7,667 6,898 6,116 3,453 3,289 1,644 804
Net income available to
common shareholders.... 203,641 222,279 240,373 262,024 294,690(5) 150,091(6) 139,671
Net income per common
share.................. 2.59 2.85 3.13 3.58 4.01(5) 2.04(6) 1.92
Life insurance sales.... 11,024,758 11,257,778 11,222,307 11,067,341 12,240,244 6,167,679 7,130,574
Increase in life
insurance
in force............... 842,605 694,733(1) 1,280,412(2) 2,195,544 3,060,638 2,022,552 2,442,358
ANNUALIZED LIFE AND
HEALTH PREMIUM ISSUED:
Life.................... 119,629 129,233 133,741 131,726 128,433 64,913 71,890
Health.................. 232,336 273,290 216,962 224,905 176,028 99,984 67,845
Total................... 351,965 402,523 350,703 356,631 304,461 164,897 139,735
INCREASE (DECREASE) IN
ANNUALIZED LIFE AND
HEALTH PREMIUM IN FORCE:
Life.................... 28,797 16,849(1) 16,098(2) 25,534 24,572 14,569 22,167
Health.................. 12,228 56,456 11,749 34,346 (9,106) 3,547 (21,261)
Total................... 41,025 73,305 27,847 59,880 15,466 18,116 906
MUTUAL FUND COLLECTIONS:. 744,284 742,142 813,737 1,141,928 1,249,084 619,363 662,503
PER PREFERRED SHARE:
Cash dividends paid..... $ 7.80 $ 7.50 $ 7.66 $ 7.01 $ 7.00 $ 3.50 $ 2.88(7)
PER COMMON SHARE:
Cash dividends paid..... .83 .93 1.00 1.07 1.08 .53 .56
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
----------------------------------- -----------------------
1991 1992 1993 1993 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cash and invested
assets(3).............. $ 4,605,446 $ 4,994,828 $ 5,550,931 $ 5,324,187 $ 5,205,531
Total assets............ 6,160,742 6,770,115 7,646,242 7,230,525 7,453,615
Short-term debt......... 11,499 276,819 107,108 148,405 69,612
Long-term debt.......... 667,125 497,867 792,335 708,750 792,550
Shareholders' equity.... 1,079,251 1,115,660 1,417,255 1,234,198 1,251,378
Per common share(4).... 13.11 14.54 18.80 16.11 17.40
Life insurance in force. 56,110,751 58,306,295 61,366,933 60,328,847 63,809,291
Annualized life and
health premium in
force:
Life................... 562,550 588,084 612,656 602,653 634,823
Health................. 798,142 832,488 823,382 836,035 802,121
Total.................. 1,360,692 1,420,572 1,436,038 1,438,688 1,436,944
Assets under management
at W&R................ 10,692,000 12,144,000 14,455,000 13,085,000 14,165,000
</TABLE>
- --------
(1) The increase in life insurance in force is adjusted by $337 million, and
the increase in life annualized premium in force is adjusted by $28.1
million, representing the business acquired in the Familico acquisition.
(2) The increase in life insurance in force is adjusted by $55 million, and
the increase in life annualized premium in force is adjusted by $2.7
million, representing the business acquired in the Sentinel American Life
Insurance Company acquisition.
14
<PAGE>
(3) Includes accrued investment income.
(4) Computed after deduction of preferred shareholders' equity.
(5) Includes the effects of adoption of Financial Accounting Standards 106 and
109 and one-time addition to a non-operating expense charge relating to
self-insurance for directors' and officers' liability, guaranty fund
assessments and litigation expenses. On an after-tax basis, adoption of FAS
106 resulted in a charge of $7.5 million, adoption of FAS 109 resulted in
an addition to earnings of $25.9 million, and the addition to the non-
operating expense charge relating to self-insurance for directors' and
officers' liability, guaranty fund assessments and litigation expenses
resulted in a charge of $53.3 million. Also includes the effects of tax
legislation which increased the corporate tax rate from 34% to 35%
resulting in a charge to net earnings of $13.7 million, of which $9.4
million related to prior years. Also includes an after-tax gain of $37.2
million from the sale of 73% of Vesta.
(6) Includes the effects of adoption of Financial Accounting Standards 106 and
109 and a one-time addition to a non-operating expense charge relating to
self-insurance for directors' and officers' liability, guaranty fund
assessments and litigation expenses. On an after-tax basis, adoption of FAS
106 resulted in a charge of $7.1 million, adoption of FAS 109 resulted in
an addition to earnings of $29.5 million, and the addition to the non-
operating expense charge relating to self-insurance for directors' and
officers' liability, guaranty fund assessments and litigation expenses
resulted in a charge of $22.8 million.
(7) Includes the $1.13 per share paid at redemption representing the period
February 1, 1994 through March 31, 1994 in addition to the regular
quarterly dividend payment.
Except as described in this Offer to Purchase, neither the Purchaser nor
Parent (together, the "Corporate Entities") or, to the best knowledge of the
Corporate Entities, any of the persons listed in Schedule I or any associate or
majority-owned subsidiary of the Corporate Entities or any of the persons so
listed, beneficially owns any equity security of the Company (except that
trusts for the benefit of the children of C.B. Hudson, a director and executive
officer of the Parent, own 4,000 Shares, of which trusts Mr. Hudson serves as
trustee), and none of the Corporate Entities, any of the other persons referred
to above, or any of the respective directors, executive officers or
subsidiaries of any of the foregoing, has effected any transaction in any
equity security of the Company during the past 60 days.
Except as described in this Offer to Purchase, (1) there have not been any
contracts, transactions or negotiations between the Corporate Entities, any of
their respective subsidiaries or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I, on the one hand, and the
Company or any of its directors, officers or affiliates, on the other hand,
that are required to be disclosed pursuant to the rules and regulations of the
Commission and (2) none of the Corporate Entities or, to the best knowledge of
the Corporate Entities, any of the persons listed in Schedule I has any
contract, arrangement, understanding or relationship with any person with
respect to any securities of the Company.
Except as described in this Offer to Purchase, during the last five years
none of the Corporate Entities or, to the best knowledge of Corporate Entities,
any of the persons listed in Schedule I (a) has been convicted in a criminal
proceeding (excluding traffic violations and similar misdemeanors) or (b) was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, Federal or state securities laws or finding any
violation of such laws. The name, business address, present principal
occupation or employment, five-year employment history and citizenship of each
of the directors and executive officers of the Purchaser and Parent are set
forth in Schedule I.
Available Information. Parent is subject to the reporting requirements of the
Exchange Act and, in accordance therewith, is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning
Parent's directors and officers, their remuneration, the principal holders of
Parent's securities and any material interest of such persons in transactions
with Parent is required to be disclosed in proxy statements distributed to
Parent's stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
Commission, and copies thereof should be obtainable from the Commission, in the
same manner as set forth with respect to information concerning the Company in
Section 8. Such material should also be available for inspection at the library
of the NYSE, 20 Broad Street, New York, New York 10005.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser to purchase all
outstanding Shares pursuant to the Offer and to pay fees and expenses related
to the Offer and the Merger is estimated to be approximately
15
<PAGE>
$565,000,000. The Purchaser plans to obtain all funds needed for the Offer and
the Merger through a capital contribution that will be made by Parent (or by a
subsidiary of Parent) to the Purchaser. Parent plans to use funds generated
from a combination of the following sources: (i) up to $190,000,000 from cash
on hand at various of its subsidiaries; (ii) up to $200,000,000 from the sale
of Monthly Income Preferred Stock ("MIPS") to be issued by Torchmark Capital,
L.L.C., a wholly-owned subsidiary of Parent; and (iii) up to $375,000,000 from
bank financing (to be reduced to $175,000,000 if all $200,000,000 of the MIPS
is issued). The Purchaser has not conditioned the Offer on obtaining financing.
See Section 14. Pursuant to the Merger Agreement, Parent and the Purchaser have
agreed to use their reasonable best efforts to pursue and obtain as soon as
practicable sufficient funds to permit Purchaser to consummate the Offer and
the Merger. Parent has entered into negotiations with its lead bank with
respect to a credit facility, subject to certain conditions, totalling up to
$375,000,000.
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER
In late January 1994, Mr. Bernard Rapoport, Chairman of the Board of
Directors of the Company and Mr. R.K. Richey, Chairman and Chief Executive
Officer of Parent, began discussions regarding whether Parent would have an
interest in a business combination transaction with the Company. In early
February 1984, Mr. Richey and Mr. C.B. Hudson, Chairman -- Insurance Operations
of Parent, met with Mr. and Mrs. Rapoport regarding the possible acquisition of
the Company. On February 16, 1994, Mr. Hudson met with Mr. Charles B. Cooper,
President of the Company, to learn more about the operations of the Company.
There followed a series of telephone conversations between the companies. At a
meeting on March 1, 1994, Parent's board of directors authorized further
investigation into the possible acquisition of the Company and negotiations to
accomplish same, subject to future approval of the transaction terms by the
board of directors. On March 14, 1994, Messrs. Richey and Hudson met with
Messrs. Rapoport and Cooper. Later, on March 22, 1994, Mr. Richey and Mr. Keith
A. Tucker, Vice Chairman of Parent, met with representatives of the Company and
one of the Selling Shareholders, Messrs. Carl D. Thoma and Bryan Cressey.
Messrs. Richey, Tucker and Hudson also met with Messrs. Thoma and Cressey on
June 7, 1994 to explore further the possibility of Parent acquiring all of the
Shares. Subsequently, Mr. Tucker met with Messrs. Thoma and Cressey on July 18,
1994. On July 28, 1994 a presentation concerning the potential acquisition was
made at a meeting of Parent's board of directors. Mr. Hudson met with Mr.
Cooper on August 2, 1994 to review further the Company's operations. The
Company and Parent entered into a Confidentiality Agreement on August 29, 1994,
pursuant to which Parent agreed to keep certain information furnished to Parent
by Company confidential and for a period of two years abide by certain
"standstill" provisions. Parent subsequently obtained various financial and
other information regarding the Company.
Following Parent's review of certain financial and other information
regarding the Company and other due diligence, there were various discussions
by telephone between the Company and Parent and their respective legal
advisors, and representatives of Parent and the Company met on two occasions to
discuss the terms of possible acquisition of the Company by Parent. Following
such discussions and meetings, the parties agreed to instruct their management
and advisors to seek to negotiate a mutually acceptable agreement, subject to
further consideration by their respective boards of directors, regarding the
Shares.
On September 2, 1994, the board of directors of Parent held a meeting and,
after review of the transaction with senior management, approved the Merger
Agreement, the Shareholder Agreements and the transactions contemplated
thereby, all subject to further negotiation by senior management. At a meeting
on September 15, 1994, the Board of Directors of the Company approved the
Merger Agreement, the Shareholder Agreements and the transactions contemplated
thereby. Later in the day of September 15th, the parties thereto executed and
delivered the Merger Agreement and Shareholder Agreements.
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT AND THE SHAREHOLDER AGREEMENTS
The purpose of the Offer is to acquire control of the entire equity interest
in the Company. Following the Offer, the Purchaser and Parent intend to acquire
any remaining equity interest in the Company not acquired in the Offer by
consummating the Merger.
16
<PAGE>
The Merger Agreement
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is filed as an Exhibit to the Schedule 14D-1/13D of the Purchaser
and Parent relating to the Offer (the "Schedule 14D-1/13D"). Such summary is
qualified in its entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to the satisfaction of the Minimum
Condition, the Insurance Regulatory Condition and certain other conditions that
are described in Section 14. The Purchaser has agreed that, without the written
consent of the Company, no change in the Offer may be made which changes the
form of consideration to be paid or decreases the price per Share or the number
of Shares sought in the Offer or which imposes conditions to the Offer in
addition to the Minimum Condition, the Insurance Regulatory Condition and those
conditions described in Section 14 or that broadens the scope of such
conditions. Pursuant to the Merger Agreement, the Purchaser has the right to
extend the Expiration Date, even if all conditions to the Offer have been met,
until November 15, 1994.
The Merger. The Merger Agreement provides that, following the purchase of
Shares pursuant to the Offer, the approval of the Merger Agreement by the
shareholders of the Company, if necessary, and the satisfaction or waiver of
the other conditions to the Merger, the Purchaser will be merged with and into
the Company. The Merger shall become effective at such time as a certificate of
merger or certificate of ownership and merger is filed with the Delaware
Secretary of State or at such later time as is specified in such certificate of
merger (the "Effective Time"). As a result of the Merger, all of the
properties, rights, privileges and franchises of the Company and the Purchaser
shall vest in the Company as the "Surviving Corporation," and all debts,
liabilities and duties of the Company and the Purchaser shall become the debts,
liabilities and duties of the Surviving Corporation.
At the Effective Time, each issued and outstanding Share (other than (i)
Shares held by Parent, the Purchaser, the Company or any direct or indirect
subsidiary of the Parent or the Company and (ii) any Shares that are held by
stockholders that have complied in all respects with the requirements of the
DGCL concerning the right of a stockholder of the Company to dissent from the
Merger and to require an appraisal of such Shares in the manner provided in the
DGCL, if applicable, and that, as of the Effective Time, have not effectively
withdrawn or lost such right to appraisal (the "Dissenting Shares")) will,
without further action by Parent, the Purchaser or the Company, automatically
be cancelled and extinguished and converted into the right to receive in cash
the Merger Consideration, without interest, less any required withholding
taxes, upon surrender of the certificate formerly representing such Share. Each
Share issued and outstanding immediately prior to the Effective Time that is
owned or held by Parent, the Purchaser, the Company or any direct or indirect
subsidiary of Parent or the Company will be cancelled and retired and cease to
exist, without any conversion, and no payment will be made with respect to any
such Share.
The Merger Agreement provides that the certificate of incorporation of the
Company and the bylaws of the Purchaser at the Effective Time will be the
certificate of incorporation and bylaws of the Surviving Corporation. The
Merger Agreement also provides that the directors of the Purchaser at the
Effective Time will be the directors of the Surviving Corporation and the
officers of the Company at the Effective Time will be the officers of the
Surviving Corporation.
Recommendation. The Merger Agreement states that the Board of Directors has
(i) determined that the Offer and the Merger, taken together, are fair to the
holders of the Shares as well as fair to and in the best interests of the
Company and its shareholders, (ii) irrevocably approved the Merger Agreement
and the transactions contemplated thereby for the purposes of Section 203 of
the DGCL, including the Offer and the Merger and (iii) resolved to recommend
acceptance of the Offer and approval and adoption of the Merger Agreement and
the Merger by the Company's shareholders.
Interim Agreements of Parent, Purchaser and the Company. Pursuant to the
Merger Agreement, the Company has covenanted and agreed that, during the period
from the date of the Merger Agreement to the Effective Time, the Company and
its subsidiaries will each conduct its operations solely in accordance with
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the ordinary course of business consistent with past practice; that neither the
Company nor any of its subsidiaries will intentionally take or willfully omit
to take any actions that results in or could reasonably be expected to result
in any adverse change in or effect on the condition (financial or other),
business, properties, assets, liabilities, prospects (excluding changes in
prospects affecting the life insurance industry generally), or results of
operations of Parent or the Company, as the case may be, and their respective
subsidiaries, that is material to Parent or the Company, as the case may be,
and their respective subsidiaries, taken as a whole (a "Material Adverse
Effect"); and that the Company will use its reasonable best efforts to preserve
intact the business organization of the Company and each of its subsidiaries,
to keep available the services of its and their present officers and key
employees and consultants, and to maintain satisfactory relationships with
customers, agents, reinsurers, suppliers and other persons having business
relationships with the Company or its subsidiaries. Pursuant to the Merger
Agreement, without limiting the generality of the foregoing, and except as
otherwise expressly provided in the Merger Agreement, neither the Company nor
any of its subsidiaries will (a) issue, sell or dispose of additional shares of
capital stock of any class (including the Shares) of the Company or any of its
subsidiaries, or securities convertible into or exchangeable for any such
shares or securities, or any rights, warrants or options to acquire any such
shares or securities, other than Shares issued upon exercise of options
disclosed pursuant to the Merger Agreement, in each case in accordance with the
terms so disclosed; (b) redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding capital stock or
other securities of the Company or any of its subsidiaries; (c) split, combine,
subdivide or reclassify any of its capital stock or declare, set aside, make or
pay any dividend or distribution on any shares of its capital stock except for
dividends or distributions to the Company and its subsidiaries from their
respective subsidiaries; (d) sell, pledge, dispose of or encumber any of its
assets, except for sales, pledges, dispositions or encumbrances in the ordinary
course of business consistent with past practices or between the Company and
its subsidiaries; (e) incur or modify any indebtedness or issue or sell any
debt securities, or assume, guarantee, endorse or otherwise as an accommodation
become absolutely or contingently responsible for obligations of any other
person, or make any loans or advances, other than in the ordinary course of
business consistent with past practices; (f) adopt or amend any bonus, profit
sharing, compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other employee benefit
agreements, trusts, plans, funds or other arrangements for the benefit or
welfare of any director, officer or employee, or (except for normal increases
in the ordinary course of business that are consistent with past practices and
that, in the aggregate, do not result in a material increase in benefits or
compensation expense to the Company) increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any existing plan or arrangement (including, without limitation,
the granting or vesting of stock options or stock appreciation rights) or take
any action or grant any benefit not expressly required under the terms of any
existing agreements, trusts, plans, funds or other such arrangements or enter
into any contract, agreement, commitment or arrangement to do any of the
foregoing or make or agree to make any payments to any directors, officers,
agents, contractors or employees relating to a change or potential change in
control of the Company; (g) acquire by merger, consolidation or acquisition of
stock or assets any corporation, partnership or other business organization or
division or make any investment either by purchase of stock or securities
(other than portfolio investments of its insurance subsidiaries), contributions
to capital (other than to wholly-owned subsidiaries), property transfer or
purchase of any material amount of property or assets, in any other person; (h)
adopt any amendments to their respective charters or bylaws or equivalent
organizational documents, except as required by the Merger Agreement; (i) take
any action other than in the ordinary course of business and consistent with
past practices, to pay, discharge, settle or satisfy any obligation (absolute
or contingent, accrued or unaccrued, asserted or unasserted, or otherwise); (j)
change any method of accounting or accounting practice used by the Company or
any of its subsidiaries, except for any change required by reason of a
concurrent change in generally accepted accounting principles; (k) revalue in
any respect any of its assets, including, without limitation, writing down the
value of its portfolio or writing off notes or accounts receivable other than
in the ordinary course of business consistent with past practices; (l)
authorize any new capital expenditure or expenditures that, individually, is in
excess of $100,000 or, in the aggregate, are in excess of $1,000,000; (m) make
any tax election, settle or compromise any federal, state or local tax
liability or consent to the extension of time for the assessment or collection
of any federal, state or local tax; (n) settle
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or compromise any pending or threatened suit, action or claim material to the
Company and its subsidiaries taken as a whole or relevant to the transactions
contemplated by this Agreement; (o) enter into any agreement, arrangement or
understanding to do any of the foregoing actions; (p) voluntarily take any
action or willfully omit to take any action that could make any representation
or warranty of the Company in the Merger Agreement untrue or incorrect in any
material respect at any time, including as of the date of the Merger Agreement
and as of the time of consummation of the Offer and the Effective Time, as if
made as of such time except that the Company will not be obligated to settle
any litigation by shareholders of the Company challenging the Merger Agreement,
the Offer, the Merger or the Shareholder Agreements ("Shareholder Litigation").
Each of the Parent and the Purchaser will hold and will cause its directors,
officers, agents, employees, consultants and advisors to hold in confidence,
unless compelled to disclose by judicial or administrative process or, in the
written opinion of its legal counsel, by other requirements of law, all
documents and information concerning the Company and its subsidiaries furnished
to such persons in connection with the transactions contemplated by the Merger
Agreement (except to the extent that such information can be shown to have been
(i) previously known by such persons from sources other than the Company, or
its directors, officers, representatives or affiliates, (ii) in the public
domain through no fault of such persons or (iii) later lawfully acquired by
such persons on a non-confidential basis from other sources who are not known
by Parent or the Purchaser to be bound by a confidentiality agreement or
otherwise prohibited from transmitting the information to Parent or the
Purchaser by a contractual, legal or fiduciary obligation) and will not release
or disclose such information to any other person, except its directors,
officers, agents, employees, consultants and advisors, in connection with the
Merger Agreement who need to know such information. If the transactions
contemplated by the Merger Agreement are not consummated, such confidence will
be maintained and, if requested by or on behalf of the Company, Parent and the
Purchaser will, and will use all reasonable efforts to cause their auditors,
attorneys, financial advisors and other consultants, agents and representatives
to, return to the Company or destroy all copies of written information
furnished by the Company to Parent and the Purchaser or their agents,
representatives or advisors. Parent and the Purchaser will be deemed to have
satisfied their obligation to hold such information confidential if they
exercise the same care as they take to preserve confidentiality for their own
similar information.
The Merger Agreement provides that the Company, its affiliates, and their
respective officers, directors, employees, representatives and agents will
immediately cease any existing discussions or negotiations, if any, with any
person, entity or group conducted theretofore with respect to any acquisition
of all or any material portion of the assets of, or any equity interest in, the
Company or any of its subsidiaries or any business combination with the Company
or any of its subsidiaries. The Company may, directly or indirectly, furnish
information and access, in each case only in response to unsolicited requests
therefor, to any person, entity or group made after the date of the Merger
Agreement that was not encouraged, solicited or initiated by the Company or any
of its affiliates, or their respective officers, directors, agents or
representatives after the date of the Merger Agreement, pursuant to appropriate
confidentiality agreements, and may participate in discussions and negotiate
with such person, entity or group concerning any merger, sale of assets, sale
of shares of capital stock or similar transaction involving the Company or any
subsidiary of the Company, if such person, entity or group has submitted a
written proposal to the Board of Directors of the Company relating to any such
transaction and failing to take such action would constitute a breach of
fiduciary duty under applicable law. The merger Agreement further provides that
the Board of Directors of the Company will provide a written copy of such
proposal to the Purchaser immediately after receipt and will keep Parent and
the Purchaser promptly advised of any development with respect to such matters
except that the Company may withhold the identity of the other party to the
transaction if in the written opinion of its legal counsel, disclosure of such
information would constitute a breach of fiduciary duties under applicable law.
Except as set forth above, neither the Company nor any of its affiliates, nor
any of its or their respective officers, directors, employees, representatives
or agents, will, directly or indirectly, for the account of the Company or for
their own account, encourage, solicit, participate in or initiate discussions
or negotiations with, or provide any information to, any person, entity or
group (other than Parent and the Purchaser, any
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affiliate of Parent and the Purchaser, or any designees of the Parent and the
Purchaser) concerning any merger, sale of assets, sale of shares of capital
stock or similar transaction involving the Company or any subsidiary except
that nothing in the Merger Agreement will prevent the Board of Directors of the
Company from taking, and disclosing to the stockholders of the Company, a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to any tender offer other than the Offer and except that the
Board of Directors of the Company will not recommend that the stockholders of
the Company tender their Shares in connection with any such tender offer unless
failing to take such action would constitute a breach of fiduciary duty under
applicable law. The Merger Agreement also provides that Company will not waive,
or release any person from, any provision of any confidentiality or standstill
agreement to which the Company is a party.
From the date of the Merger Agreement to the Effective Time, the Company has
agreed that it will, and will cause its subsidiaries, officers, directors,
employees and agents upon reasonable notice to, afford to officers, employees
and agents of Parent, the Purchaser and their affiliates and the banks, other
financial institutions and investment bankers working with Parent or the
Purchaser, and their respective officers, employees and agents, complete access
at all reasonable times to its officers, employees, agents, properties, books,
records and contracts, and will furnish Parent, the Purchaser and their
affiliates and the banks, other financial institutions and investments bankers
working with Parent or the Purchaser, all financial, operating and other data
and information as they reasonably request.
The Merger Agreement provides that effective upon purchase and payment for
any Shares by Purchaser, the Purchaser will be entitled to designate the number
of directors, rounded up to the next whole number, on the Company's Board of
Directors that equals the product of (i) the total number of directors on the
Board of Directors (giving effect to the election of any additional directors
pursuant to this paragraph) and (ii) the percentage that the number of Shares
owned by the Purchaser (including Shares accepted for payment) bears to the
total number of Shares outstanding, and the Company shall take all action
necessary to cause the Purchaser's designees to be elected or appointed to the
Board of Directors, including, without limitation, increasing the number of
directors, and seeking and accepting resignations of its incumbent directors.
Notwithstanding the foregoing, the Company has agreed to ensure that three of
the current members of the Board remain members of the Board until the
Effective Time. Following the election or appointment of the designees of the
Purchaser described above and prior to the Effective Time, any amendment or
termination of the Merger Agreement, extension for the performance of the
obligations or other acts of Parent and the Purchaser, or waiver of the rights
of the Company under the Merger Agreement, will require the approval of a
majority of the then serving directors of the Company who are directors on the
date of the Merger Agreement or their designated successors (if and to the
extent that there are any then serving directors of such type).
In the Merger Agreement, the Company has agreed to take such actions as are
required to provide that each option to purchase Shares outstanding immediately
prior to the consummation of the Offer, whether or not then exerciseable, will
be cancelled immediately prior to the consummation of the Offer in exchange for
an amount in cash payable at the time of such cancellation equal to the product
of the number of Shares subject to such option and unexercised immediately
prior to the consummation of the Offer and the excess of the per Share price to
be paid in the Offer over the per Share exercise price pursuant to such option.
Pursuant to the Merger Agreement, the Company will cause a meeting of its
shareholders (the "Company Shareholder Meeting") to be duly called and held for
the purposes of voting on the approval and adoption of the Merger Agreement and
the Merger. The Merger Agreement provides that the Company and the Parent will
cooperate and use all reasonable efforts to prepare, and the Company and Parent
will file with the Commission, as soon as reasonably practical after completion
of the Offer, a proxy statement relating to the Company Shareholder Meeting.
The Company has agreed to use all reasonable efforts to obtain the necessary
approvals by its shareholders of the Merger Agreement and the transactions
contemplated thereby. Parent has agreed to vote and to cause its affiliates
(including, without limitation, the Purchaser) to vote all Shares owned by them
in favor of adoption of the Merger.
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Parent, the Purchaser and the Company have each agreed that all rights to
indemnification or exculpation now existing in favor of the directors,
officers, employees and agents of the Company and its subsidiaries as provided
in their respective charters or by-laws, contracts disclosed in the Merger
Agreement or otherwise will, to the extent such rights are in accordance with
applicable law, survive the Merger and stay in effect without limit as to time
in accordance with their respective terms.
The Merger Agreement provides that the Company, the Purchaser and Parent will
each use their respective reasonable best efforts to consummate the
transactions contemplated by the Merger Agreement. Parent has agreed to perform
or cause the Purchaser to perform all of the Purchaser's obligations under the
Merger Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations by the Company as to corporate power and
authority to execute, deliver and consummate the Merger Agreement, undisclosed
liabilities, certain changes or events concerning its businesses, compliance
with applicable law, employee benefit plans, litigation and insurance
regulatory matters.
Conditions to the Merger. The obligations of each of Parent, the Purchaser
and the Company to effect the Merger are subject to the satisfaction of certain
conditions, including: (a) the Merger Agreement shall have been adopted by the
affirmative vote of the shareholders of the Company by the requisite vote in
accordance with the charter and bylaws of the Company and with applicable law;
(b) no statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or enforced by any U.S. court or
U.S. governmental authority that prohibits, restrains, enjoins or restricts the
consummation of the Merger or that imposes any material limitation on the
ability of Parent or the Purchaser to exercise all rights of ownership of the
Shares provided that the parties will use their respective reasonable best
efforts to have any such injunction, decree or order lifted; (c) any waiting
period applicable to the Merger under the HSR Act shall have terminated or
expired and all required filings, consents, approvals, permits and
authorizations with or for governmental authorities have been made or obtained
(without what the Purchaser deems to be a materially burdensome condition); and
(d) Purchaser shall have purchased Shares pursuant to the Offer.
Termination. The Merger Agreement may be terminated: (a) by mutual written
consent of Parent, the Purchaser and the Company; (b) by Parent and the
Purchaser or the Company if any court of competent jurisdiction or other
governmental body shall have issued a final order, decree or ruling or taken
any other final action restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable; (c) by Parent and the Purchaser if due to an occurrence or
circumstance that would result in a failure to satisfy any of the conditions
set forth in Section 14, the Purchaser shall have (i) failed to commence the
Offer within five business days following the initial public announcement of
the Offer, (ii) terminated the Offer or (iii) failed to pay for Shares pursuant
to the Offer by December 23, 1994; (d) by the Company if (i) there shall not
have been a breach of any material representation, warranty, covenant or
agreement on the part of the Company and the Purchaser shall have (A) failed to
commence the Offer within five business days following the initial public
announcement of the Offer, (B) terminated the Offer or (C) failed to pay for
the Shares pursuant to the Offer by December 23, 1994 (provided, however, that
any termination pursuant to this clause (C) must be made by irrevocable written
notice delivered to the Purchaser and Parent by noon, Dallas time, on December
23, 1994), or (D) if the Company has not exercised its right to terminate
pursuant to clause (C) above, failed to pay for Shares pursuant to the Offer by
March 31, 1995 or (ii) prior to the purchase of Shares pursuant to the Offer, a
person, entity or group shall have made a bona fide offer (A) that the Board by
a majority vote determines in its good faith judgment and in the exercise of
its fiduciary duties, based as to legal matters on the written opinion of legal
counsel, is more favorable to the Company's shareholders than the Offer and the
Merger and (B) as a result of which the Company's Board of Directors is
obligated by its fiduciary duties under applicable law to terminate the Merger
Agreement, provided that such termination under this clause (ii) shall not be
effective until payment of the Termination Fee (as defined below); (e) by
Parent and Purchaser prior to the purchase
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<PAGE>
of Shares pursuant to the Offer if (i) there shall have been a breach (not
cured or curable within certain time limits) of any representation or warranty
on the part of the Company having a Material Adverse Effect on the Company or
materially adversely affecting (or materially delaying) the consummation of the
Offer, (ii) there shall have been a breach (not cured or curable within certain
time limits) of any covenant or agreement on the part of the Company resulting
in a Material Adverse Effect on the Company or materially adversely affecting
(or materially delaying) the consummation of the Offer (including the financing
of the Offer and the Merger (the "Financing")), (iii) the Company shall engage
in negotiations with any person, entity or group (other than Parent or the
Purchaser) that has proposed a Third Party Acquisition (with certain
exceptions), (iv) the Company enters into an agreement, letter of intent or
arrangement with respect to a Third Party Acquisition, (v) the Board shall have
withdrawn or modified (including by amendment of the Schedule 14D-9 of the
Company) in a manner adverse to the Purchaser its approval or recommendation of
the Offer, the Merger Agreement or the Merger or shall have recommended another
offer, or shall have adopted any resolution to effect any of the foregoing or
(vi) the Minimum Condition shall not have been satisfied by the expiration date
of the Offer and on such date a person, entity or group (other than Parent or
Purchaser) shall have made and not withdrawn a proposal with respect to a Third
Party Acquisition or any person, entity or group (including the Company or any
of its affiliates) other than the Parent or the Purchaser has become the
beneficial owner of 19.9% (except in bona fide arbitrage transactions) or more
of the Shares; or (f) by the Company if (i) there shall have been a breach of
any representation or warranty on the part of the Parent or Purchaser that
materially adversely affects (or materially delays) the consummation of the
Offer or (ii) there shall have been a material breach of any covenant or
agreement on the part of Parent or the Purchaser that materially adversely
affects (or materially delays) the consummation of the Offer.
Termination Fee. Pursuant to the Merger Agreement, in the event Parent and
the Purchaser terminate the Merger Agreement pursuant to clause (e) (i) through
(v) of the preceding paragraph or the Company terminates the Merger Agreement
pursuant to clause (d)(ii) or (d)(i)(C) of the preceding paragraph, then the
Company shall pay to Parent, the Purchaser and their affiliates all out-of-
pocket fees and expenses actually incurred. If, (i) Parent and the Purchaser
terminate the Merger Agreement pursuant to clause (e) (i) through (v) of the
preceding paragraph or if the Company terminates the Merger Agreement pursuant
to clause (d)(i)(C) of the preceding paragraph and, within 9 months thereafter
the Company enters into an agreement, letter of intent or binding arrangement
with respect to a Third Party Acquisition, or a Third Party Acquisition occurs;
or if the Company terminates the Merger Agreement pursuant to clause (d)(ii) of
the preceding paragraph, then the Company shall pay to Parent and Purchaser,
within one business day following the execution and delivery of such agreement
or letter of intent or entering into such arrangement or such occurrence, as
the case may be, or simultaneously with such termination pursuant to clause
(d)(ii) of the preceding paragraph, a fee (the "Termination Fee"), in cash, of
$12,000,000; provided, however, that the Company in no event shall be obligated
to pay more than one such Termination Fee with respect to all such agreements
and occurrences and such terminations.
As used above, "Third Party Acquisition" means the occurrence of any of the
following events (i) the acquisition of the Company by merger or otherwise by
any person (which includes a "person" as such term is defined in Section
13(d)(3) of the Exchange Act) or entity other than Parent, the Purchaser or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
19.9% or more of the total assets of the Company and its subsidiaries, taken as
a whole; (iii) the acquisition by Third Party of 19.9% or more of the
outstanding Shares from the Company or in a transaction or series of related
transactions that results in a change of control of the Company; (iv) the
adoption by the Company of a plan of liquidation or the declaration or payment
of an extraordinary dividend; or (v) the repurchase by the Company or any of
its subsidiaries or more than 19.9% of the outstanding Shares.
Pursuant to the Merger Agreement, in the event of the termination and
abandonment of the Merger Agreement, the Merger Agreement will become void and
have no effect, without any liability on the part of any party or its
affiliates, directors, officers or shareholders, other than certain provisions
of the Merger Agreement relating to the Termination Fee, expenses of the
parties and confidentiality of information, provided, that a party will not be
relieved from liability for any breach of the Merger Agreement.
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Costs and Expenses. Except as discussed above, the Merger Agreement provides
that all costs and expenses incurred in connection with the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
costs and expenses.
Appraisal Rights. Holders of Shares do not have dissenters' rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares
may have certain rights pursuant to the provisions of Section 262 of the DGCL
to dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. If the statutory procedures were complied with, such
rights could lead to a judicial determination of the fair value required to be
paid in cash to such dissenting holders for their shares. Any such judicial
determination of the fair value of Shares could be based upon considerations
other than or in addition to the Offer Price or the market value of the
Shares, including asset values and the investment value of the Shares. The
value so determined could be more or less than the Offer Price or the Merger
Consideration.
If any stockholder of Shares who demands appraisal under Section 262 of the
DGCL fails to perfect, or effectively withdraws or loses the right to
appraisal, as provided in the DGCL, the Shares of such stockholder will be
converted into the Merger Consideration in accordance with the Merger
Agreement. A stockholder may withdraw a demand for appraisal by delivery to
Parent of a written withdrawal of the demand for appraisal and acceptance of
the Merger.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
Going Private Transactions. The Merger would have to comply with any
applicable Federal law operative at the time of its consummation. Rule 13e-3
under the Exchange Act is applicable to certain "going private" transactions.
The Purchaser does not believe that Rule 13e-3 will be applicable to the
Merger unless the Merger is consummated more than one year after the
termination of the Offer. If applicable, Rule 13e-3 would require, among other
things, that certain financial information concerning the Company and certain
information relating to the fairness of the Merger and the consideration
offered to minority shareholders be filed with the Commission and disclosed to
minority shareholders prior to consummation of the Merger.
Other Matters. Parent has publicly announced that it intends to operate the
Company after the effective time as a separate wholly-owned subsidiary and
that the headquarters of the Company will remain in Waco, Texas. Pursuant to
the Shareholder Agreements of Messrs. Rapoport and Cooper, they have agreed to
extend their employment with the Company. See "Shareholder Agreements" below.
Subject to the foregoing, Parent intends to conduct a detailed review of the
Company and its assets, corporate structure, dividend policy, capitalization,
operations, properties, policies, management and personnel and to consider,
subject to the terms of the Merger Agreement, what, if any, changes would be
desirable in light of the circumstances then existing, and reserves the right
to take such actions or effect such changes as it deems desirable. Such
changes could include changes in the Company's business, corporate structure,
capitalization, Board of Directors, management or dividend policy.
Except as otherwise described in this Offer to Purchase, the Purchaser and
Parent have no current plans or proposals that would relate to, or result in,
any extraordinary corporate transaction involving the Company, such as a
merger, reorganization or liquidation involving the Company or any of its
subsidiaries, a sale or transfer of a material amount of assets of the Company
or any of its subsidiaries, any change in the Company's capitalization or
dividend policy or any other material change in the Company's business,
corporate structure or personnel.
The Shareholder Agreements
The following is a summary of certain provisions of the Shareholder
Agreements copies of the two forms of which have been filed as Exhibits to the
Schedule 14D-1/13D. Such summary is qualified in its entirety by reference to
the forms of Shareholder Agreements.
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Terms. Pursuant to the Shareholder Agreements, the Selling Shareholders
agreed to tender all shares owned by the Selling Shareholders pursuant to the
Offer and to grant Parent an option (an "Option") to purchase all Shares
beneficially owned by them or subsequently acquired, representing
approximately 41% of the outstanding Shares (42% of Shares on a fully-diluted
basis) at a price per share equal to the Offer price plus any Adjustment
Amount (as explained below). Parent can exercise its Options in all or in part
at any time prior to the Outside Date (as defined below). Parent has agreed to
use its reasonable efforts to exercise on a pro rata basis among all Selling
Shareholders. The term "Outside Date" means March 31, 1995 unless the Company
terminates the Merger Agreement pursuant to its right to terminate if the
Offer is not closed prior to December 23, 1994, in which case it will mean
December 29, 1994; provided, that any written notice by Parent of its election
to exercise all or part of the Options will extend the Outside Date for all
purposes until such time as any proceedings before any court or governmental
instrumentality necessary for the exercise of the Options are final and
nonappealable and until such time as any waiting period prescribed or approval
required by any applicable law, statute, regulation, order or decree for the
exercise of the Options has passed or been obtained, as the case may be, but
in no case later than March 31, 1995 (unless the proceeding is between the
Selling Shareholder and Parent, in which case such March 31, 1995 date will
not apply). The Options may be exercised upon the occurrence of one or more of
the following events: (i) the Company or any of its subsidiaries enters into a
reorganization agreement, merger agreement or other similar agreement or plan,
including, without limitation, an agreement in principle or letter of intent,
other than with Parent or the Purchaser; (ii) any person or "group" (as
defined in the Exchange Act), other than Parent or the Purchaser or their
affiliates, (A) commences a tender offer or exchange offer for, or other
transaction involving, more than 20% of the outstanding common stock of the
Company or (B) publicly proposes any dissolution, recapitalization, merger,
consolidation, business combination, acquisition or similar transaction
involving the Company or any of its subsidiaries that, in either case, Parent
reasonably and in good faith concludes (after the earlier of a public
announcement by the Board of Directors of the Company of its position with
respect to such occurrence or the expiration of 10 days from the date of such
occurrence) is likely to be consummated; (iii) any person or group, other than
Parent or the Purchaser or their affiliates, acquires more than 10% of the
total assets of the Company and its subsidiaries, taken as a whole; (iv) any
person or group, other than Parent or the Purchaser or their affiliates,
acquires after the date of the Shareholder Agreements more than 20% of the
Shares or any option or similar right to acquire more than 20% of the Shares
(other than for bona fide arbitrage purposes); (v) the Company adopts a plan
of liquidation relating to more than 10% of the total assets of the Company
and its subsidiaries, taken as a whole, or declares a distribution to its
stockholders of more than 10% of the total assets of the Company and its
subsidiaries, taken as a whole; or (vi) any person or group, other than the
Purchaser or the Subsidiary or their affiliates, commences a proxy
solicitation with respect to the common stock of the Company that the Parent
reasonably and in good faith concludes (after the earlier of a public
announcement by the Board of Directors of the Company of its position with
respect to such occurrence or the expiration of 10 days from the date of such
occurrence) is adverse to the Offer, the Merger, the Shareholder Agreements or
the transactions contemplated by the Merger Agreement and is likely to
succeed.
As used in the Shareholder Agreements, the "Adjustment Amount" means the
excess, if any, of (x) the value per share of the consideration actually
received by Parent as a result of any agreement, letter of intent or binding
arrangement entered into within nine months of the exercise of the Option or
any sale or disposition of Shares subject to the Options that occurs within
nine months of the exercise of the Option (an "Adjustment Event") over (y) the
per Share amount of the Offer last in effect prior to the consummation of an
Adjustment Event. In the event that the consideration paid to holders of the
Shares in an Adjustment Event is other than cash, the value of such
consideration will be conclusively determined in a written opinion by an
investment banking firm of recognized national standing selected by Parent
with the consent of the Selling Shareholder, which consent will not be
unreasonably withheld or delayed.
Pursuant to the Shareholder Agreements, each Selling Shareholder has also
executed and delivered a proxy for the benefit of Parent with respect to the
Shares subject to the Shareholder Agreements to vote such Shares to approve
the Merger Agreement, the Offer, the transactions contemplated by the Merger
Agreement
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<PAGE>
and any matters related to or in connection with the Merger and to oppose any
corporate action the consummation of which would violate, frustrate the
purposes of, prevent or delay the consummation of the transactions contemplated
by the Merger Agreement (including, without limitation, any proposal to amend
the certificate of incorporation or bylaws of the Company or approve any
merger, consolidation, sale or purchase of any assets, issuance of Shares or
any other equity security of the Company (or a security convertible into an
equity security of the Company), reorganization, recapitalization, liquidation,
winding up of or by the Company or any similar transaction). Each Selling
Shareholder agrees that its proxy is coupled with an interest. Furthermore,
Parent and each Selling Shareholder agree that the provisions of the proxy will
be subject to the receipt of any necessary approval by or consent of
appropriate insurance regulatory authorities. Each Selling Shareholder
covenants to use best efforts to secure any such approval or consent as
promptly as practicable and, during the time such approval or consent is being
obtained, not to take any action that is inconsistent with, that would violate
the provisions of, or that would hinder or delay the rights of Parent under,
the proxy.
Pursuant to the Shareholder Agreements, the Company has granted Parent
certain registration rights with respect to the Shares acquired on exercise of
the Options. The Company has also agreed to cause a certain number of directors
nominated by the Purchaser to be elected to its Board of Directors if the
Options are exercised (but at all times such directors designated by Parent
pursuant to the Shareholder Agreements will be less than 50% of the members of
the Board).
In addition to the foregoing, the Shareholder Agreements of Messrs. Rapoport
and Cooper contain certain agreements not to compete with the Company for a
period of two years following termination of employment with the Company,
Parent or their affiliates if the Option under their respective Shareholder
Agreements is exercised or the Offer consummated. Messrs. Rapoport and Cooper
have also agreed to hold confidential Company information. Parent also has the
right, upon acquiring control of the Company, to require Messrs. Rapoport and
Cooper to extend their preexisting employment agreements with the Company and
to defer 50% of their annual compensation until January 1, 1997. The deferred
compensation will be forfeited by Messrs. Rapoport or Cooper if they
voluntarily resign or are terminated for good cause prior to such date. The
memoranda evidencing such agreements are attached as Exhibits to the Schedule
14D-1/13D and the foregoing summary is qualified in its entirety by reference
to such memoranda.
13. DIVIDENDS AND DISTRIBUTIONS
If on or after the date of the Merger Agreement, the Company should (i)
split, combine or otherwise change the Shares or its capitalization, (ii) issue
or sell any additional securities of the Company or otherwise cause an increase
in the number of outstanding securities of the Company (except for Shares
issuable upon the exercise of employee stock options outstanding on the date of
the Merger Agreement) or (iii) acquire currently outstanding Shares or
otherwise cause a reduction in the number of outstanding Shares, then, without
prejudice to the Purchaser's rights under Sections 1 and 14, the Purchaser in
its sole discretion, subject to the terms of the Merger Agreement, may make
such adjustments as it deems appropriate in the Offer Price and other terms of
the Offer.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any dividend on the Shares or make any distribution (including, without
limitation, cash dividends, the issuance of additional Shares pursuant to a
stock dividend or stock split, the issuance of other securities or the issuance
of rights for the purchase of any securities) with respect to the Shares that
is payable or distributable to shareholders of record on a date prior to the
transfer to the name of the Purchaser or its nominee or transferee on the
Company's stock transfer records of the Shares purchased pursuant to the Offer,
then, without prejudice to the Purchaser's rights under Sections 1 and 14, any
such dividend, distribution or right to be received by the tendering
shareholders will be received and held by the tendering shareholder and
tendered to the Depositary for the account of the Purchaser, accompanied by
appropriate documentation of transfer. Pending such remittance and subject to
applicable law, the Purchaser will be entitled to all rights and privileges as
owner of any such dividend, distribution or right and may withhold the entire
Offer Price or deduct from the Offer Price the amount or value thereof, as
determined by the Purchaser in its sole discretion.
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<PAGE>
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, the Purchaser will not be
required to accept for payment or (subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
relating to the obligation of the Purchaser to pay for or return tendered
Shares promptly after the termination or withdrawal of the Offer) to pay for
tendered Shares, or may terminate or amend the Offer as provided in the Merger
Agreement, or may postpone the acceptance for payment of, or payment for,
Shares (whether or not any other Shares have been accepted for payment or paid
for pursuant to the Offer) if prior to the Expiration Date (i) the Minimum
Condition has not been satisfied; (ii) the waiting period under the HSR Act has
not expired or been terminated with respect to purchase of the Shares; (iii)
any consent, permit or authorization required to be obtained prior to the
consummation of the Offer from any regulatory or governmental authority
(including, without limitation, the insurance regulatory authorities of the
States of Indiana and Texas) has not been obtained or is subject to any
condition that is materially burdensome; or (iv) if at any time on or after the
date of the Merger Agreement, and at any time before the time of acceptance for
payment of any such Shares, any of the following occurs:
(a) any of the representations or warranties of the Company contained in
the Merger Agreement is not true and correct at and as of any date prior to
the expiration date of the Offer as if made at and as of such time, except
for (i) failures to be true and correct as could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse
Effect on the Company or a material adverse effect on the financing for the
Offer and the Merger (the "Financing") and (ii) failures to comply as are
capable of being and are cured prior to the earlier of (A) 10 days after
written notice from the Purchaser to the Company of such failure or (B) two
business days prior to the Expiration Date;
(b) the Company has failed to comply with any of its obligations under
the Merger Agreement, except for (i) failures to so comply as could not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on the Company or the Financing and (ii) failures
to comply as are capable of being and are cured prior to the earlier of (A)
10 days after written notice from the Purchaser to the Company of such
failure or (B) two business days prior to the Expiration Date;
(c) the Board of Directors of the Company has withdrawn or modified in
any respect adverse to the Purchaser or Parent its recommendation of the
Offer or taken any position inconsistent with such recommendation;
(d) the Merger Agreement has been terminated in accordance with its
terms;
(e) the Company has reached an agreement with the Parent or the Purchaser
that the Offer or the Merger be terminated or amended;
(f) any state, federal foreign government or governmental authority has
taken any action, or proposed, sought, promulgated or enacted, or any
state, federal or foreign government or governmental authority or court has
entered, enforced or deemed applicable to the Offer or the Merger, any
statute, rule, regulation, judgment, order or injunction that is reasonably
likely to (i) make the acceptance for payment of, the payment for or the
purchase of, some or all of the Shares illegal or otherwise restrict,
materially delay, prohibit consummation of or make materially more costly,
the Offer or the Merger, (ii) result in a material delay in or restrict the
ability of the Purchaser, or render the Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares in the Offer or the
Merger, (iii) require the divestiture by Parent, the Purchaser or the
Company or any of their respective subsidiaries or affiliates of all or any
material portion of the business, assets or property of any of them or any
Shares, or impose any material limitation on the ability of any of them to
conduct their business and own such assets, properties, and Shares, (iv)
impose material limitations on the ability of Parent or the Purchaser to
acquire or hold or to exercise effectively all rights of ownership of the
Shares, including the right to vote any Shares acquired by either of them
on all matters properly presented to the shareholders of the Company or (v)
impose any limitations on the ability of Parent, the Purchaser or any of
their respective subsidiaries or affiliates effectively to control in any
material respect the business or operations of the Company, Parent, the
Purchaser or any of their respective subsidiaries or affiliates;
26
<PAGE>
(g) any change, other than Shareholder Litigation, (or any condition,
event or development involving a prospective change) has occurred or been
threatened in the business, properties, assets, liabilities,
capitalization, shareholders' equity, financial condition, operations,
licenses or franchises, results of operations or prospects (excluding
changes in prospects that affect the life insurance industry generally) of
the Company or any of its subsidiaries, that could reasonably be expected
to result in a Material Adverse Effect;
(h) there has occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market or quotations for shares traded thereon as
reported by the NASDAQ or otherwise, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States (except for any such event with
respect to Haiti), (iv) any limitation (whether or not mandatory) by any
governmental authority on the extension of credit by banks or other
financial institutions, (v) after the date of the Merger Agreement, an
aggregate decline of at least 25% in the Dow Jones Industrial Average or
Standard & Poor's 500 Index or a decline in either such index of 12 1/2% in
any 24-hour period, or (vi) in the case of any of the occurrences referred
to in clauses (i) through (iv) existing at the time of the commencement of
the Offer, in the reasonable judgment of the Purchaser, a material
acceleration or worsening thereof;
(i) any person, entity or group other than Parent or the Purchaser and
their affiliates has entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer
for any Shares or a merger, consolidation or other business combination or
acquisition with or involving the Company or any of its subsidiaries; or
(j) any material approval, permit, authorization, consent or waiting
period of any domestic or foreign governmental, administrative or
regulatory entity (federal, state, local, provincial or otherwise) has not
been obtained or satisfied on terms satisfactory to the Purchaser in its
sole discretion;
that, in the good faith judgment of the Purchaser that is not demonstrated to
be unreasonable with respect to each and every matter referred to above and
regardless of the circumstances (including any action or inaction by the
Purchaser, Parent or any of their affiliates) giving rise to any such
condition, makes it inadvisable to proceed with the Offer or with such
acceptance for payment of, or payment for, Shares or to proceed with the
Merger.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to
any such condition or may be waived by the Purchaser in whole or in part at
any time and from time to time in its sole discretion (subject to the terms of
the Merger Agreement). The failure by the Purchaser at any time to exercise
any of the foregoing rights will not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and circumstances
will not be deemed to waiver with respect to any other facts or circumstances,
and each such right will be deemed an ongoing right that may be asserted at
any time and from time to time.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
Based on a review of publicly available filings made by the Company with the
Commission and other publicly available information concerning the Company,
neither the Purchaser nor Parent is aware of any license or regulatory permit
that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, that might be adversely affected by the
Purchaser's acquisition of Shares as contemplated herein or of any approval or
other action, except as otherwise described in this Section 15, by any
governmental entity that would be required for the acquisition or ownership of
Shares by the Purchaser as contemplated herein. Should any such approval or
other action be required, the Purchaser and Parent currently contemplate that
such approval or other action will be sought, except as described below under
"State Insurance Laws." While, except as otherwise expressly described in this
Section 15, the Purchaser does not presently intend to
27
<PAGE>
delay the acceptance for payment of or payment for Shares tendered pursuant to
the Offer pending the outcome of any such matter, there can be no assurance
that any such approval or other action, if needed, would be obtained or would
be obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
Company's business or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or such other
actions were not taken. Because of the failure of such approvals or other
actions or because of conditions to be imposed in connection with such
approvals or other actions, the Purchaser could decline to accept for payment
or pay for any Shares tendered. See Section 14 for certain conditions to the
Offer.
State Insurance Laws. The Company's insurance subsidiaries are subject to
regulation by various state authorities, including regulation dealing with the
acquisition of control of such subsidiaries. Parent believes that no further
action or approvals of insurance authorities in states in which Purchaser's
subsidiaries are incorporated or do business are required to permit to purchase
of the Shares pursuant to the Offer other than Indiana and Texas. Parent and
the Purchaser have no assurance, however, that further approvals or actions
will not be required by states in which the Company's subsidiaries are
incorporated or that the laws of states in which one or more of the insurance
subsidiaries may be licensed to do business will not be deemed applicable to
the Offer, and in either event Parent and the Purchaser may be required to file
certain information with or receive approvals of the relevant state insurance
commissions, and might be unable to purchase or pay for the Shares tendered
pursuant to, or might incur delay in consummating, the Offer. In such case, the
Purchaser may not be obligated to pay for any of the Shares tendered. See
Section 14.
On September 16, 1994, the Purchaser filed a Form A with the Indiana
Insurance Commissioner seeking approval of the acquisition of control of the
Company and its subsidiary, American Income Life, by the Purchaser. The Indiana
Insurance Code provides that no person shall commence a tender offer for, or
enter into any agreement to acquire, or solicit proxies relating to, any voting
security of domestic insurer or any person controlling a domestic insurer, if,
after consummation of the transaction, such person would be in control of the
domestic insurer or any corporation controlling the domestic insurer, unless
that person first files an application on Form A with, and obtains the approval
of, the Indiana Insurance Commission. The Insurance Code provides that a
presumption of control arises from ownership of 10% or more of the voting
securities of any person.
In prior transactions, the Indiana Insurance Commissioner has taken the
position that the Insurance Code should be interpreted to permit the
commencement of a tender offer prior to the Indiana Insurance Commissioner's
approval of the acquisition of control, so long as purchase of shares pursuant
to the tender offer is conditioned on the Commissioner's prior approval before
any shares are purchased. Further, in prior transactions the Indiana Insurance
Commissioner has allowed agreements to acquire control of domestic insurers to
be entered into before obtaining approval of the Indiana Insurance
Commissioner, provided that the consummation of the transaction is conditioned
upon obtaining the Commissioner's approval. On the basis of these precedents,
the Purchaser has commenced the Offer but has conditioned consummation of the
Offer and subsequent Merger on, among other things, the approval of the Indiana
Insurance Commissioner.
Before the Indiana Insurance Commissioner can determine whether to approve
the application for an acquisition of control pursuant to the tender offer, he
or she is required to hold a public hearing upon a minimum of 30 days' written
notice to the acquiring person, the domestic insurer, the corporation
controlling the domestic insurer and such other persons as he or she may
designate. A proposed offer will be approved by the Indiana Insurance
Commissioner only if he or she finds by a preponderance of the evidence, after
a public hearing commenced within 60 days of the filing of an application
(unless such period is extended by the Indiana Insurance Commissioner upon
showing of good cause), that: (i) the acquisition of control would not tend to
adversely affect the contractual obligations of the insurer, or its ability and
tendency to render service in the future to its policyholders and the public;
(ii) the effect of the acquisition of control would not be substantially to
lessen competition in any line of insurance in any section of Indiana or to
tend to create a monopoly therein; (iii) the financial condition of any
acquiring party is not such as might jeopardize the financial stability of the
insurer or the corporation controlling the insurer or prejudice the interests
of
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<PAGE>
policyholders; (iv) the plans or proposals which the acquiring party has to
liquidate the insurer or controlling corporation, to sell its assets or to
consolidate or merge it with any person or to make any other material change in
its investment policy, business, corporate structure or management are fair and
reasonable to policyholders of the insurer and in the public interest; and (v)
the competence, experience and integrity of those persons who would control the
operation of the insurer are such that acquisition of control would not tend to
adversely affect the general capacity or intention of the insurer to transact
the business of insurance in a safe and prudent manner.
The Indiana Insurance Code requires the Form A to be amended to reflect any
material change that may occur in the facts set forth therein. If any amendment
to the Form A is filed, the hearing must be postponed for an additional period
not to exceed 60 days or such longer period as the Indiana Insurance
Commissioner determines upon a showing of good cause therefor. There can be no
assurance that the hearing will commence or be completed by any particular
date. Purchaser's obligation to accept for purchase, purchase or pay for
tendered Shares is conditioned on, among other things, the Indiana Insurance
Commissioner's having approved the consummation of the Offer and the Merger.
See Section 14.
The Texas Insurance Code requires a public hearing before the acquisition of
control of domestic insurers and "commercially domiciled insurers" (and in some
cases a company controlling a domestic insurer or a commercially domiciled
insurer) can be disapproved. One of the Company's subsidiaries, Trust Life
Insurance Company, is a Texas domiciled insurance company. Acquisitions
unopposed by the Texas Department of Insurance may be approved without hearing
upon recommendation of the staff of the Texas Department of Insurance and upon
waiver of hearing by the Texas insurer and by the acquiring party. If the
acquisition is opposed by the staff of the Texas Department of Insurance, a
hearing must be scheduled within 45 days after the filing of all required
statements. The Texas Insurance Code requires that at least 20 days' notice be
given to the Texas insurer and to the Purchaser unless notice is waived by such
parties. The Texas Insurance Code requires the Commissioner of Insurance to
make a final determination within 60 days of the date the record for such
hearing is closed. However, Texas courts have held that a similar 60 day period
for final determination in the Texas Administrative Practice Act is permissive
rather than binding, and action on acquisitions of control opposed by the staff
of the Texas Department of Insurance frequently extends well beyond the time
limits set forth in the Texas Insurance Code. Action on acquisitions of control
recommended for approval by the staff of the Texas Department of Insurance is
generally taken within 45 days of the date the filing of all required
statements. The Purchaser made the requisite filings with the Texas Department
of Insurance on September 21, 1994. There can be no assurance that the
necessary approvals or waivers by the Texas Department of Insurance will be
received by any particular date. The Purchaser's obligation to accept for
purchase, purchase or pay for tendered Shares is conditioned on, among other
things, the Texas Department of Insurance having approved the consummation of
the Offer and the Merger. See Section 14.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in such states.
In Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming
29
<PAGE>
an "interested stockholder." The Company's Board of Directors has irrevocably
approved the Merger Agreement, the Shareholder Agreements and the Purchaser's
acquisition of Shares pursuant to the Offer and/or the Options and, therefore,
Section 203 of DGCL is inapplicable to the Merger.
Based on information supplied by the Company, the Purchaser does not believe
that any state takeover statutes purport to apply to the Offer or the Merger.
Neither the Purchaser nor Parent has currently complied with any state takeover
statute or regulation. The Purchaser reserves the right to challenge the
applicability or validity of any state law purportedly applicable to the Offer
or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger and an appropriate court does not determine that it is inapplicable
or invalid as applied to the Offer or the Merger, the Purchaser might be
required to file certain information with, or to receive approvals from, the
relevant state authorities, and the Purchaser might be unable to accept for
payment or pay for Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer or the Merger. In such case, the Purchaser may not be
obliged to accept payment or pay for any Shares tendered pursuant to the Offer.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares under the Offer may be consummated following the expiration
of a 15-calendar day waiting period following the filing by Parent of a
Notification and Report Form with respect to the Offer, unless Parent receives
a request for additional information or documentary material from the Antitrust
Division of the Department of Justice (the "Antitrust Division) or the Federal
Trade Commission (the "FTC") or unless early termination of the waiting period
is granted. Parent has made such filing. If, within the initial 15-day waiting
period, either the Antitrust Division or the FTC requests additional
information or material from Parent concerning the Offer, the waiting period
will be extended and would expire at 11:59 p.m., New York City time, on the
tenth calendar day after the date of substantial compliance by Parent with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of Parent. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the Antitrust Division or
the FTC raises substantive issues in connection with a proposed transaction,
the parties frequently engage in negotiations with the relevant governmental
agency concerning possible means of addressing those issues and may agree to
delay consummation of the transaction while such negotiations continue.
The provisions of the HSR Act would similarly apply to any purchase of the
Shares subject to the Shareholder Agreements pursuant to the Shareholder
Agreements (other than purchases effected through a tender pursuant to the
Offer), except that the initial waiting period would expire 30 days following
the filing Notification and Report Forms under the HSR Act by Parent and the
Company and a request for additional information or material from Parent or the
Company during the initial 30-day waiting period would extend the waiting
period until 11:59 p.m. New York City time on the 20th day after the date of
substantial compliance by Parent and the Company with such request. Parent and
the Company have filed Notification and Report Forms under the HSR Act with
respect to the Shareholder Agreements. If, as is expected, the purchase of
Shares covered by the Shareholder Agreements is effected through a tender of
such Shares pursuant to the Offer, the HSR Act requirements applicable to the
Offer described in the prior paragraph would apply rather than the requirements
described in this paragraph.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of the transactions such as the Purchaser's proposed
acquisition of the Company. At any time before or after the
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Purchaser's purchase of Shares pursuant to the Offer or the Options, the
Antitrust Division or FTC could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking to
enjoin the purchase of Shares pursuant to the Offer or the Options or the
consummation of the Merger or seeking the divestiture of Shares acquired by the
Purchaser or the divestiture of substantial assets of Parent or its
subsidiaries, or the Company or its subsidiaries. Private parties may also
bring legal action under the antitrust laws under certain circumstances. There
can be no assurance that a challenge to the Offer or the Options on antitrust
grounds will not be made or, if such a challenge is made, of the results
thereof.
16. FEES AND EXPENSES
The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and Bank of America Illinois to act as the Depositary in connection with
the Offer. The Information Agent and the Depositary each will receive
reasonable and customary compensation for their services, be reimbursed for
certain reasonable out-of-pocket expenses and be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
under the federal securities laws.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent) in
connection with the solicitation of tenders of Shares pursuant to the Offer.
Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser
upon request for customary mailing and handling expenses incurred by them in
forwarding material to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. Neither the Purchaser nor Parent is aware of any
jurisdiction in which the making of the Offer or the tender of Shares in
connection therewith would not be in compliance with the laws of such
jurisdiction. To the extent the Purchaser or Parent becomes aware of any state
law that would limit the class of offerees in the Offer, the Purchaser will
amend the Offer and, depending on the timing of such amendment, if any, will
extend the Offer to provide adequate dissemination of such information to
holders of Shares prior to the expiration of the Offer. In any jurisdiction the
securities, blue sky or other laws of which require the Offer to be made by a
licensed broker or dealer, the Offer is being made on behalf of the Purchaser
by one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser or Parent has filed with the Commission the Schedule 14D-1/13D
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer. In addition, the Company has filed with
the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange
Act, setting forth its recommendation with respect to the Offer and the reasons
for such recommendation and furnishing certain additional related information.
Such Schedules and any amendments thereto, including exhibits, should be
available for inspection and copies should be obtainable in the manner set
forth in Sections 8 and 9 (except that they will not be available at the
regional offices of the Commission).
TMK ACQUISITION CORPORATION
September 21, 1994
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The name, business address,
present principal occupation or employment and five-year employment history of
each of the directors and executive officers of Parent are set forth below.
Unless otherwise indicated, the business address of each such director and each
such executive officer is 2001 Third Avenue South, Birmingham, Alabama 35233.
Unless otherwise indicated below, each occupation set forth opposite an
individual's name refers to employment with Parent. Parenthetical years
indicate the year the individual was elected or appointed to the position or
office or his or her tenure therein. All directors and executive officers
listed below are citizens of the United States.
<TABLE>
<CAPTION>
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR
NAME AND EMPLOYMENT;
BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY; OUTSIDE DIRECTORSHIPS
---------------- ------------------------------------------------
<S> <C>
J.P. Bryan (54)......... Director (1994); Chairman and Chief Executive Officer
of Torch Energy Advisors Incorporated, a subsidiary
of Parent (1988), President of Torch Energy
Corporation (1981), Chairman and Chief Executive
Officer of Nuevo Energy Company (1990); Director of
Nuevo Energy Company (1990).
Joseph M. Farley (66)... Director (1980); Of Counsel at Balch & Bingham
Attorneys and Counselors, Birmingham, Alabama (1992);
President and Chief Executive Officer of Southern
Nuclear Operating Company, Birmingham, Alabama (1990-
1992), Executive Vice President and Corporate Counsel
of The Southern Company, Birmingham, Alabama (1991-
1992); Executive Vice President--Nuclear of The
Southern Company (1989-1991); Director of AmSouth
Bancorporation and Advisory Director of The Southern
Company.
Louis T. Hagopian (69).. Director (1988); Owner of Meadowbrook Enterprises,
Darien, Connecticut (1990); Vice Chairman,
Partnership for a Drug-Free America, New York, New
York; Chairman of the Board and Chief Executive
Officer of N. W. Ayer, Inc., New York, New York,
(1976-1989); Director of The Bank of Darien, Darien,
Connecticut.
C.B. Hudson (48)........ Director (1986), Chairman of Insurance Operations
(1993), Chairman of Liberty National Life Insurance
Company ("Liberty"), Globe Life And Accident
Insurance Company ("Globe"), United American
Insurance Company ("United"), subsidiaries of Parent
(1991), Chief Executive Officer of Liberty (1989), of
United (1982) and of Globe (1986), President of
Liberty (1993; 1987-1991), of Globe (1986-1994) and
of United (1982-1991).
Joseph L. Lanier, Jr.
(62)................... Director (1980); Chairman of the Board and Chief
Executive Officer of Dan River Incorporated,
Danville, Virginia (1989); Chairman of the Board and
Chief Executive Officer of West Point-Pepperell,
Inc., West Point, Georgia (1979-1989); Director of
Flowers Industries, Inc., Dibrell Bros., Inc. and
SunTrust Banks, Inc.
Harold T. McCormick
(65)................... Director (1992); Chairman and Chief Executive Officer
of Bay Point Yacht and Country Club, Panama City,
Florida (1988); Director of Cavendish Services, Ltd.,
Hamilton, Bermuda (1985), of Cavendish S.A.M., Monte
Carlo, Monaco (1990) and of OTC Trading, Inc.,
Tortola, British Virgin Islands (1987).
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR
NAME (AGE AT 3/25/94) EMPLOYMENT;
AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY; OUTSIDE DIRECTORSHIPS
--------------------- ------------------------------------------------
<S> <C>
Joseph W. Morris (72)... Director (1984); Partner of Gable and Gotwals,
Attorneys-at-Law, Tulsa, Oklahoma (1984).
George J. Records (60).. Director (1993); Chairman of Midland Financial Co.,
Oklahoma City, Oklahoma (1982).
R.K. Richey (68)........ Director (1980), Chairman (1986), and Chief Executive
Officer (1984), and Chairman, Chief Executive Officer
and Director of Purchaser (1994); Director of Vesta
Insurance Group, Inc.
Yetta G. Samford, Jr. Director (1980); Partner of Samford, Denson, Horsley,
(71)................... Pettey & Martin, Attorneys-at-Law, Opelika, Alabama.
Keith A. Tucker (49).... Director (1989) and Vice Chairman of Parent (1991);
6300 Lamar Director and President of Purchaser (1994); Senior
Shawnee Mission, Kansas Vice President of Trivest, Inc. (1987-1991),
66201 President of Trivest Securities Corporation (1989-
1991); Director of Southwestern Life Corporation, the
United Group of Mutual Funds, Waddell & Reed Funds,
Inc., and TMK/United Funds, Inc.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, present
principal occupation or employment and five-year employment history of each of
the directors and executive officers of the Purchaser are set forth below. The
business address of each such director and executive officer is set forth in
Item 1 above. Unless otherwise indicated below, each occupation set forth
opposite an individual's name refers to employment with the Purchaser. All such
directors and executive officers listed below are citizens of the United
States.
<TABLE>
<CAPTION>
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR
EMPLOYMENT;
NAME AND AGE 5-YEAR EMPLOYMENT HISTORY
------------ ---------------------------------------------
<S> <C>
R.K. Richey (68)........ Director, Chairman and Chief Executive Officer (1994);
Director (1980), Chairman (1986) and Chief Executive
Officer (1984) of Parent; Director of Vesta Insurance
Group, Inc.
Keith A. Tucker (49).... Director and President (1994); Director and Vice
Chairman of Parent (1991); Senior Vice President of
Trivest, Inc. (1987-1991); President of Trivest
Securities Corporation (1989-1991); Director of
Southwestern Life Corporation, the United Group
of Mutual Funds, Waddell & Reed Funds, Inc. and
TMK/United Funds, Inc.
</TABLE>
33
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
BANK OF AMERICA ILLINOIS
By Hand/Overnight Courier: By Mail:
231 S. LaSalle Street Corporate Trust Depositary
19th Floor Window P.O. Box 805857
(Clark Street Side) Chicago, Illinois 60680-4120
Chicago, Illinois 60697
Facsimile Transmission
(for Eligible Institutions only):
(312) 923-0271
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(800) 962-9324
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent at the telephone numbers and location
listed below. You may also contact your broker, dealer, bank, trust company or
other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
(212) 269-5550 (call collect)
or
Call Toll Free (800) 669-5550
34
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
AMERICAN INCOME HOLDING, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 21, 1994
BY
TMK ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
TORCHMARK CORPORATION
---------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME ON WEDNESDAY, OCTOBER 19, 1994, UNLESS EXTENDED
---------------------------------------------------------------------------
The Depositary:
BANK OF AMERICA ILLINOIS
By Hand/Overnight Courier: By Mail:
231 S. LaSalle Street Corporate Trust Depositary
19th Floor Window P.O. Box 805857
(Clark Street Side) Chicago, Illinois 60680-4120
Chicago, Illinois 60697
By Facsimile Transmission:
(for Eligible Institutions Only)
(312)923-0271
Confirm Fax Only:
(800)962-9324
---------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates are to be
forwarded herewith or, unless an Agent's Message (as defined in Section 2 of
the Offer to Purchase) is utilized, if delivery of Shares (as defined below) is
to be made by book-entry transfer to an account maintained by the Depositary at
The Depository Trust Company, Midwest Securities Trust Company or Philadelphia
Depository Trust Company (each, a "Book-Entry Transfer Facility") pursuant to
the procedures set forth in Section 2 of the Offer to Purchase. Stockholders
who deliver Shares by book-entry transfer are referred to herein as "Book-Entry
Stockholders" and other stockholders are referred to herein as "Certificate
Stockholders." Stockholders whose certificates for Shares are not immediately
available or who cannot deliver either the certificates for, or a Book-Entry
Confirmation (as defined in Section 2 of the Offer to Purchase) with respect
to, their Shares and all other documents required hereby to the Depositary
prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase)
must tender their Shares in accordance with the guaranteed delivery procedures
set forth in Section 2 of the Offer to Purchase. See Instruction 2.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ___________________________________________
<PAGE>
Check Box of Book-Entry Transfer Facility:
[_]The Depository Trust Company
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
Account Number __________________________________________________________
Transaction Code Number _________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s) __________________________________________
Window Ticket Number (if any) ___________________________________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Name of Institution That Guaranteed Delivery ____________________________
If delivered by Book-Entry Transfer check box of Book-Entry Transfer
Facility:
[_]The Depository Trust Company
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
Account Number __________________________________________________________
Transaction Code Number _________________________________________________
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF SHARES TENDERED
REGISTERED HOLDER(S) (PLEASE (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
FILL IN, IF BLANK, EXACTLY AS
NAME(S) APPEAR(S) ON CERTIFICATE(S))
- --------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
----------------------------------------------
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL SHARES
- --------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described
above are being tendered. See Instruction 4.
- --------------------------------------------------------------------------------
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to TMK Acquisition Corporation, a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Torchmark
Corporation, a Delaware corporation ("Parent"), the above-described shares of
common stock, par value $.01 per share (collectively, the "Shares"), of
American Income Holding, Inc., a Delaware corporation (the "Company"), pursuant
to the Purchaser's offer to purchase all outstanding Shares at a price of
$35.00 per Share, net to the seller in cash, without interest, in accordance
with the terms and conditions of the Purchaser's Offer to Purchase dated
September 21, 1994 (the "Offer to Purchase"), and this Letter of Transmittal
(which, together with any amendments or supplements thereto or hereto,
collectively constitute the "Offer"), receipt of which is hereby acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, the Shares tendered herewith in accordance with
the terms of the Offer (including, if the Offer is extended or amended, the
terms or conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Purchaser all right,
title and interest in and to all the Shares that are being tendered hereby (and
any and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after September 15, 1994) and irrevocably
constitutes and appoints the Depositary the true and lawful agent and attorney-
in-fact of the undersigned with respect to such Shares (and any such other
Shares or securities or rights), with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(a) deliver certificates for such Shares (and any such other Shares or
securities or rights) or transfer ownership of such Shares (and any such other
Shares or securities or rights) on the account books maintained by a Book-Entry
Transfer Facility together, in any such case, with all accompanying evidences
of transfer and authenticity to, or upon the order of, the Purchaser, (b)
present such Shares (and any such other Shares or securities or rights) for
transfer on the Company's books and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and any such other
Shares or securities or rights), all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
(and any and all Shares or other securities or rights issued or issuable in
respect of such Shares on or after September 15, 1994), and, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good title
thereto, free and clear of all liens, restrictions, claims and encumbrances.
The undersigned will, upon request, execute any additional documents deemed by
the Depositary or the Purchaser to be necessary or desirable to complete the
sale, assignment and transfer of the tendered Shares (and any such other Shares
or other securities or rights).
All authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
The undersigned hereby irrevocably appoints R.K. Richey and Keith A. Tucker,
in their respective capacities as officers of Parent, and any individual who
shall hereafter succeed to any such office of Parent, and each of them, and any
other designees of the Purchaser, the attorneys-in-fact and proxies of the
undersigned, each with full power of substitution, to vote at any annual,
special or adjourned meeting of the Company's stockholders or otherwise in such
manner as each such attorney and proxy or his substitute shall in his sole
discretion deem proper with respect to, to execute any written consent
concerning any matter as each such attorney and proxy or his substitute shall
in his sole discretion deem proper with respect to, and to otherwise act as
each such attorney and proxy or his substitute shall in his sole discretion
deem proper with respect to, all the Shares tendered hereby that have been
accepted for payment by the Purchaser prior to the time any such action is
taken and with respect to which the undersigned is entitled to vote (and with
respect to any and all other Shares or other securities or rights issued or
issuable in respect of such Shares on or after September 15, 1994). This
appointment is effective when, and only to the extent that, the Purchaser
accepts for payment such Shares as provided in the Offer to Purchase. This
power of attorney and proxy are irrevocable and are granted in consideration of
the acceptance for payment of such Shares in accordance with the terms of the
offer. Such acceptance for payment shall, without further action, revoke all
prior powers of attorney and proxies appointed by the undersigned at any time
with respect to such Shares (and any such other Shares or securities or rights)
and no subsequent powers of attorney or proxies will be appointed by the
undersigned, or be effective, with respect thereto.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 2 of the Offer to Purchase and in
the Instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer.
<PAGE>
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered." In the event that both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or return any certificates for Shares not
tendered or accepted for payment (and any accompanying documents, as
appropriate) in the name of, and deliver such check and/or return such
certificates (and any accompanying documents, as appropriate) to, the person or
persons so indicated. The undersigned recognizes that the Purchaser has no
obligation pursuant to the Special Payment Instructions to transfer any Shares
from the name of the registered holder thereof if the Purchaser does not accept
for payment any of the Shares so tendered.
- ------------------------------------ -----------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cates for Shares not tendered or cates for Shares not tendered or
not accepted for payment and/or not accepted for payment and/or
the check for the purchase price the check for the purchase price
of Shares accepted for payment of Shares accepted for payment
are to be issued in the name of are to be sent to someone other
someone other than the under- than the undersigned or to the
signed, or if Shares delivered by undersigned at an address other
book-entry transfer that are not than that indicated above.
accepted for payment are to be
returned by credit to an account
maintained at a Book-Entry Trans-
fer Facility other than the ac- Issue check and/or certificate(s)
count indicated above. to:
Issue check and/or certificate(s)
to:
Name _____________________________ Name _____________________________
(PLEASE PRINT) (PLEASE PRINT)
Address __________________________ Address __________________________
__________________________________ __________________________________
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
- ------------------------------------ -----------------------------------
<PAGE>
SIGN HERE
SIGN (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) SIGN
HERE ................................................................ HERE
................................................................
(SIGNATURE(S) OF STOCKHOLDER(S))
Dated: .................................................. , 1994
(Must be signed by registered holder(s) as name(s) appear(s)
on the certificate(s) for the Shares or on a security position
listing or by person(s) authorized to become registered
holder(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please
provide the following information and see Instruction 5.)
Name(s).........................................................
.........................................................
(PLEASE PRINT)
Capacity (full title)...........................................
Address.........................................................
.........................................................
(INCLUDE ZIP CODE)
Area Code and Telephone No......................................
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature............................................
Name:...........................................................
(PLEASE PRINT)
Name of Firm....................................................
Address.........................................................
.........................................................
(INCLUDE ZIP CODE)
Area Code and Telephone No......................................
Dated: .................................................. , 1994
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURE. Except as otherwise provided below, all signatures
on this Letter of Transmittal must be guaranteed by a commercial bank or trust
company or savings institution having an office or correspondent in the United
States or by a firm that is a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc. (an "Eligible
Institution"). No signature guarantee is required on this Letter of Transmittal
(a) if this Letter of Transmittal is signed by the registered holder(s) (which
term, for purposes of this document, shall include any participant in a Book-
Entry Transfer Facility whose name appears on a security position listing as
the owner of Shares) of Shares tendered herewith, unless such holder(s) has
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on the reverse hereof, or (b) if such
Shares are tendered for the account of an Eligible Institution. See Instruction
5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or, unless an
Agent's Message is utilized, if delivery of Shares is to be made pursuant to
the procedures for book-entry transfer set forth in Section 2 of the Offer to
Purchase. For a stockholder validly to tender Shares pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees (or an
Agent's Message) and any other required documents, must be received by the
Depositary at one of its addresses set forth herein prior to the Expiration
Date and either (i) certificates for tendered Shares must be received by the
Depositary at one of such addresses prior to the Expiration Date or (ii) Shares
must be delivered pursuant to the procedures for book-entry transfer set forth
herein and a Book-Entry Confirmation must be received by the Depositary prior
to the Expiration Date or (b) the tendering stockholder must comply with the
guaranteed delivery procedures set forth below and in Section 2 of the Offer to
Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. Pursuant to such
procedures, (a) such tender must be made by or through an Eligible Institution,
(b) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Purchaser must be received by the
Depositary prior to the Expiration Date and (c) the certificates for all
physically delivered Shares or a Book-Entry Confirmation with respect to all
tendered Shares, as well as a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees (or,
in the case of a book-entry transfer, an Agent's Message) and any other
documents required by this Letter of Transmittal, must be received by the
Depositary within five New York Stock Exchange, Inc. trading days after the
date of execution of the Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled
"Number of Shares Tendered." In any such case, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificate(s) will be
sent to the registered holder, unless otherwise provided in the appropriate box
on this Letter of Transmittal as soon as practicable after the expiration of
the Offer. All Shares represented by certificates delivered to the Depositary
will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTERS OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
<PAGE>
If any of the Shares tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or accepted for payment are to be issued
to a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered
holder(s) of certificates listed, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes with
respect to the transfer and sale of Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any persons other than the registered holder(s), or
if tendered certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s) or such person)
payable on account of the transfer to such person will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be returned to, a person other than the signer of this Letter of
Transmittal or if a check is to be sent and/or such certificates are to be
returned to a person other than the signer of this Letter of Transmittal or to
an address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed.
8. WAIVER OF CONDITIONS. Subject to the terms of the Offer, the Purchaser
reserves the absolute right in its sole discretion to waive any of the
specified conditions of the Offer, in whole or in part, in the case of any
Shares tendered.
9. 31% BACKUP WITHHOLDING. Under U.S. Federal income tax law, a stockholder
whose tendered Shares are accepted for payment is required to provide the
Depositary with such stockholder's correct taxpayer identification number
("TIN") on Substitute Form W-9 below. If the Depositary is not provided with
the correct TIN, the Internal Revenue Service may subject the stockholder or
other payee to a $50 penalty. In addition, payments that are made to such
stockholder or other payee with respect to Shares purchased pursuant to the
Offer may be subject to a 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the stockholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld, provided that the
required information is given to the Internal Revenue Service. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
<PAGE>
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Even if the box in Part 3 is checked and the Certificate of Awaiting Taxpayer
Identification Number is completed, the Depositary will withhold 31% on all
payments made prior to the time a properly certified TIN is provided to the
Depositary. However, such amounts will be refunded to such stockholder if a TIN
is provided to the Depositary within 60 days.
The stockholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for additional
copies of the Offer to Purchase, this Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 should be directed to the
Information Agent at its address set forth below. Questions or requests for
assistance may also be directed to the Information Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE COPY THEREOF (TOGETHER
WITH CERTIFICATES FOR, OR A BOOK-ENTRY CONFIRMATION WITH RESPECT TO, TENDERED
SHARES WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS)
MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST
BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE.
PAYER'S NAME: BANK OF AMERICA ILLINOIS
- --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR Social Security Number
TIN IN THE BOX AT RIGHT AND OR Employer
CERTIFY BY SIGNING AND Identification Number
DATING BELOW.
------------------------
SUBSTITUTE --------------------------------------------------------
PART 2--CERTIFICATION--Under penalties of perjury, I
certify that:
FORM W-9 (1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued for me) and
DEPARTMENT OF THE (2) I am not subject to backup withholding either
TREASURY INTERNAL because: (a) I am exempt from backup withholding,
REVENUE SERVICE or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
PAYER'S REQUEST FOR report all interest or dividends or (c) the IRS
TAXPAYER IDENTIFICATION has notified me that I am no longer subject to
NUMBER (TIN) backup withholding.
--------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must PART 3 --
cross out item (2) above if you have
been notified by the IRS that you are Awaiting TIN [_]
currently subject to backup withhold-
ing because of underreporting inter-
est or dividends on your tax return.
However, if after being notified by
the IRS that you are subject to
backup withholding, you received an-
other notification from the IRS that
you are no longer subject to backup
withholding, do not cross out such
item (2).
SIGNATURE ______________ DATE _______
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
<PAGE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number by the time of
payment, 31% of all reportable payments made to me will be withheld, but that
such amounts will be refunded to me if I then provide a Taxpayer Identification
Number within sixty (60) days.
Signature ____________________________ Date _________________________________
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent as set forth below.
The Information Agent for this Offer is:
D. F. KING & CO., INC.
77 Water Street
New York, N.Y. 10005
(212) 269-5550 (call collect)
All Others Call Toll Free:
1-800-669-5550
<PAGE>
EXHIBIT (a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
AMERICAN INCOME HOLDING, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
As set forth in Section 2 of the Offer to Purchase (as defined below), this
form or one substantially equivalent hereto must be used to accept the Offer
(as defined below) if certificates representing shares of common stock, par
value $.01 per share (the "Shares"), of American Income Holding, Inc., a
Delaware corporation (the "Company"), are not immediately available or if the
procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase). Such
form may be delivered by hand or transmitted by telegram or facsimile
transmission or mailed to the Depositary and must include a guarantee by an
Eligible Institution (as defined in Section 2 of the Offer to Purchase). See
Section 2 of the Offer to Purchase.
The Depositary:
BANK OF AMERICA ILLINOIS
By Hand/Overnight By Facsimile By Mail:
Courier: Transmission: Corporate Trust
231 S. LaSalle Street (for Eligible Depositary
19th Floor Window Institutions Only) P.O. Box 805857
(Clark Street Side) (312) 923-0271 Chicago, Illinois 60680-
Chicago, Illinois 60697 4120
Confirm Receipt of Notice
of Guaranteed Delivery
by Telephone:
(800) 962-9324
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to TMK Acquisition Corporation, a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Torchmark
Corporation, a Delaware corporation, upon the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase, dated September 21,
1994 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer"), receipt of which is hereby acknowledged, Shares
pursuant to the guaranteed delivery procedures set forth in Section 2 of the
Offer to Purchase.
Number of Shares: ___________________ (Check one box if Shares will be
tendered by book-entry transfer)
Names(s) of Record Holder(s): _______
[_] The Depository Trust Company
_____________________________________ [_] Midwest Securities Trust Company
(Please Print) [_] Philadelphia Depository Trust
Company
Certificate Nos. (if available):
Account Number: _____________________
_____________________________________
Signature(s): _______________________
_____________________________________
_____________________________________
Address(es): ________________________
Dated: ______________________________
_____________________________________
Zip Code
Area Code and Tel. No.: _____________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a commercial bank or trust company or savings institution
having an office or correspondent in the United States or a member firm of a
registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., hereby guarantees to deliver to the
Depositary either the certificates representing the Shares tendered hereby, in
proper form for transfer, or a Book-Entry Confirmation (as defined in Section
2 of the Offer to Purchase) of a transfer of such Shares, in any such case
together with a properly completed and duly executed Letter of Transmittal, or
a manually signed facsimile thereof, with any required signature guarantees or
an Agent's Message, and any other documents required by the Letter of
Transmittal within five New York Stock Exchange, Inc. trading days after the
date hereof.
Name of Firm: _______________________ _____________________________________
(Authorized Signature)
Address: ____________________________
Title: ______________________________
_____________________________________
Zip Code Dated: ______________________________
Area Code and Tel. No.: _____________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
EXHIBIT (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMERICAN INCOME HOLDING, INC.
AT
$35.00 NET PER SHARE
BY
TMK ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
TORCHMARK CORPORATION
-------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
WEDNESDAY, OCTOBER 19, 1994, UNLESS EXTENDED.
-------------------------------------------------
September 21, 1994
To Brokers, Dealers, Banks,
Trust Companies and Other Nominees:
We are enclosing the materials listed below in connection with the offer by
TMK Acquisition Corporation, a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Torchmark Corporation, a Delaware corporation
("Parent"), to purchase all outstanding shares of common stock, par value $.01
per share (the "Shares"), of American Income Holding, Inc., a Delaware
corporation (the "Company"), at $35.00 per Share, net to the Seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated September 21, 1994 (the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with any
supplements or amendments thereto, collectively constitute the "Offer").
Please furnish copies of the enclosed materials to those of your clients for
whom you hold Shares registered in your name or in the name of your nominee.
Enclosed herewith are copies of the following documents:
1. Offer to Purchase;
2. Letter of Transmittal to be used by stockholders of the Company
accepting the Offer;
3. The Letter to Stockholders of the Company from the President and Chief
Executive Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9;
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of a nominee, with
space provided for obtaining such client's instructions with regard to the
Offer;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
WEDNESDAY, OCTOBER 19, 1994, UNLESS EXTENDED.
<PAGE>
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which would represent at least fifty-one percent (51%) of all
outstanding shares on a fully diluted basis.
The Board of Directors of the Company has, by unanimous vote of all directors
present, approved the Offer and the Merger (as defined below) and determined
that the Offer and the Merger, taken together, are fair to, and in the best
interests of, the stockholders of the Company and recommends that stockholders
of the Company accept the Offer and tender their Shares.
The Offer is being made pursuant to the Agreement and Plan of Merger dated as
of September 15, 1994 (the "Merger Agreement"), between Parent, the Purchaser
and the Company pursuant to which, following the consummation of the Offer and
the satisfaction or waiver of certain conditions, the Purchaser will be merged
with and into the Company, with the Company surviving the merger as a wholly
owned subsidiary of Parent (the "Merger"). In the Merger, each outstanding
Share (other than Shares owned by (i) Parent, the Purchaser, the Company or any
direct or indirect subsidiary of Parent or the Company or (ii) stockholders, if
any, who are entitled to and who properly exercise dissenters' rights under
Delaware law) will be converted into the right to receive $35.00 per Share,
without interest, as set forth in the Merger Agreement and described in the
Offer to Purchase.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal with any required signature guarantees, or an Agent's Message
(as defined in the Offer to Purchase) in connection with a book-entry delivery
of shares, and any other required documents should be sent to the Depositary
and either Share certificates representing the tendered Shares should be
delivered to the Depositary, or such Shares should be tendered by book-entry
transfer into the Depositary's account maintained at one of the Book-Entry
Transfer Facilities (as described in Section 2 of the Offer to Purchase), all
in accordance with the instructions set forth in the Letter of Transmittal and
the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share certificates or other required documents on or prior to the
Expiration Date or comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 2 of the Offer to Purchase.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent as described
in the Offer to Purchase) in connection with the solicitation of tenders of
Shares pursuant to the Offer. You will be reimbursed upon request for customary
mailing and handling expenses incurred by you in forwarding the enclosed
offering materials to your customers.
Questions and requests for additional copies of the enclosed material may be
directed to the Information Agent at the addresses and telephone numbers set
forth on the back cover of the enclosed Offer to Purchase.
Very truly yours,
Torchmark Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY
OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEPOSITARY OR THE
INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS
ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
EXHIBIT (a)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMERICAN INCOME HOLDING, INC.
AT
$35.00 NET PER SHARE
BY
TMK ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
TORCHMARK CORPORATION
--------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
WEDNESDAY, OCTOBER 19, 1994, UNLESS EXTENDED.
--------------------------------------------------
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated September 21,
1994 (the "Offer to Purchase"), and a related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute
the "Offer") relating to an offer by TMK Acquisition Corporation, a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Torchmark
Corporation, a Delaware corporation ("Parent"), to purchase shares of Common
Stock, par value $.01 per share (the "Shares") of American Income Holding,
Inc., a Delaware corporation (the "Company"), at $35.00 per Share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Offer. Also enclosed is the Letter to Stockholders of the
Company from the Chairman and Chief Executive Officer of the Company
accompanied by the Company's Solicitation/Recommendation Statement on Schedule
14D-9.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to tender any or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is invited to the following:
1. The tender price is $35.00 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in
the Offer.
2. The Board of Directors of the Company has, by unanimous vote of all
directors present, approved the Offer and the Merger (as defined below) and
determined that the Offer and the Merger, taken together, are fair to, and
in the best interests of, the stockholders of the Company and recommends
that the stockholders of the Company accept the Offer and tender their
Shares.
3. The Offer is being made for all outstanding Shares.
4. The Offer is being made pursuant to the Agreement and Plan of Merger
dated as of September 15, 1994 (the "Merger Agreement"), between Parent,
the Purchaser and the Company pursuant to which, following the consummation
of the Offer and the satisfaction or waiver of certain conditions, the
Purchaser will be merged with and into the Company, with the Company
surviving the merger as a
<PAGE>
wholly owned subsidiary of Parent (the "Merger"). In the Merger, each
outstanding Share (other than Shares owned by (i) Parent, the Purchaser,
the Company or any direct or indirect subsidiary of Parent or the Company
or (ii) stockholders, if any, who are entitled to and who properly exercise
dissenters' rights under Delaware law) will be converted into the right to
receive $35.00 per Share, without interest, as set forth in the Merger
Agreement and described in the Offer to Purchase.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number
of Shares which would represent at least 51% of all outstanding Shares on a
fully diluted basis.
6. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Wednesday, October 19, 1994, unless the Offer is
extended by the Purchaser. In all cases, payment for Shares accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of certificates for such Shares (or timely Book-Entry
Confirmation of a transfer of such Shares as described in Section 2 of the
Offer to Purchase), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry delivery and any other
documents required by the Letter of Transmittal.
7. The Purchaser will pay any stock transfer taxes with respect to the
transfer and sale of Shares to it or its order pursuant to the Offer,
except as otherwise provided in Instruction 6 of the Letter of Transmittal.
If you wish to have us tender any of or all your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
set forth below. An envelope to return your instructions to us is enclosed. If
you authorize tender of your Shares, all such Shares will be tendered unless
otherwise specified below. Your instructions to us should be forwarded promptly
to permit us to submit a tender on your behalf prior to the expiration of the
Offer.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction.
TEAR HEAR TEAR HERE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMERICAN INCOME HOLDING, INC.
The undersigned acknowledges receipt of your letter enclosing the Offer to
Purchase dated September 21, 1994, of TMK Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Torchmark Corporation, a Delaware
corporation, and the related Letter of Transmittal, relating to shares of
Common Stock, par value $.01 per share (the "Shares"), of American Income
Holding, Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below held by
you for the account of the undersigned on the terms and conditions set forth in
such Offer to Purchase and the related Letter of Transmittal.
Dated:______________ , 1994
--------------------------------
NUMBER OF SHARES TO BE TENDERED*
________Shares
--------------------------------
-------------------------------------
-------------------------------------
Signature(s)
-------------------------------------
-------------------------------------
Please print name(s)
-------------------------------------
-------------------------------------
Address (Include Zip Code)
-------------------------------------
-------------------------------------
Area Code and Telephone No.
-------------------------------------
-------------------------------------
Taxpayer Identification or Social
Security No.
- --------
*Unless otherwise indicated, it will be assumed that all your Shares are to
be tendered.
3
<PAGE>
EXHIBIT (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
- --------------------------------------------
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- --------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of
the account or,
if
combined funds,
any
one of the
individuals(1)
3. Husband and wife (joint The actual owner
account) of
the account or,
if
joint funds,
either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the
minor is the
only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent
for a designated ward, person(3)
minor, or incompetent
person
7. a. The usual revocable The grantor-
savings trust trustee(1)
account (grantor is
also trustee)
b. So-called trust The actual
account that is not owner(1)
a legal or valid
trust under State
law
8. Sole proprietorship The owner(4)
account
- ----------------------------------------------
<CAPTION>
- ----------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ----------------------------------------------
<S> <C>
9. A valid trust, estate, The legal entity
or pension trust (Do
not furnish the
identifying
number of the
personal
representative
or
trustee unless
the
legal entity
itself is not
designated in
the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture
in the name of a public
entity (such as a State
or local government,
school district, or
prison) that receives
agricultural program
payments
- ---------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and ap-
ply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
.A corporation.
.A financial institution.
.An organization exempt from tax under section 501(a), or an individual re-
tirement plan.
.The United States or any agency or instrumentality thereof.
.A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
.A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
.An international organization or any agency, or instrumentality thereof.
.A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
.A real estate investment trust.
.A common trust fund operated by a bank under section 584(a).
.An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
.An entity registered at all times under the investment Company Act of 1940.
.A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
.Payments to nonresident aliens subject to withholding under section 1441.
.Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
.Payments of patronage dividends where the amount received is not paid in
money.
.Payments made by certain foreign organizations.
.Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
.Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
.Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
.Payments described in section 6049(b)(5) to non-resident aliens.
.Payments on tax-free covenant bonds under section 1451.
.Payments made by certain foreign organizations.
.Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDEN-
TIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, inter-
est, or other payments to give taxpayer identification numbers to payers who
must report the payments to IRS. IRS uses the numbers for identification pur-
poses. Payers must be given the numbers whether or not recipients are required
to file tax returns. Beginning January 1, 1984, payers must generally withhold
20% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a taxpayer identification number to a payer. Certain penal-
ties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are sub-
ject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or im-
prisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
EXHIBIT (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase dated
September 21, 1994 and the related Letter of Transmittal and is not being made
to (nor will tenders be accepted from or on behalf of) holders of Shares in any
jurisdiction in which the making of the Offer or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. In any jurisdiction
the securities laws of which require the Offer to be made by a licensed broker
or dealer, the Offer shall be deemed made on behalf of the Purchaser by one or
more registered brokers or dealers licensed under the laws of such
jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMERICAN INCOME HOLDING, INC.
AT
$35.00 NET PER SHARE
BY
TMK ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
TORCHMARK CORPORATION
TMK Acquisition Corporation, a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Torchmark Corporation, a Delaware corporation
("Parent"), is offering to purchase all outstanding shares of Common Stock, par
value $.01 per share (the "Shares"), of American Income Holding, Inc., a
Delaware corporation (the "Company"), at $35.00 per Share, net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated September 21, 1994 and in the related Letter of
Transmittal (which together constitute the "Offer").
-------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
WEDNESDAY, OCTOBER 19, 1994, UNLESS EXTENDED.
-------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH WOULD REPRESENT AT LEAST 51% OF ALL OUTSTANDING SHARES ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION") AND (II) ALL MATERIAL APPROVALS,
CONSENTS, PERMITS OR AUTHORIZATIONS REQUIRED TO BE OBTAINED FROM THE STATE
INSURANCE REGULATORY OR GOVERNMENTAL AUTHORITIES HAVING BEEN OBTAINED ON TERMS
SATISFACTORY TO THE PURCHASER IN ITS SOLE DISCRETION.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of September 15, 1994 (the "Merger Agreement"), among Parent, the Purchaser and
the Company pursuant to which, following the consummation of the Offer, the
Purchaser will be merged with and into the Company (the "Merger"). On the
effective date of the Merger, each outstanding Share (other than Shares owned
by (i) Parent, the Purchaser or the Company or any direct or indirect
subsidiary of Parent or the Company or (ii) stockholders, if any, who are
entitled to and who properly exercise dissenters' rights under Delaware law)
will be converted into the right to receive $35.00 in cash, without interest.
The Board of Directors of the Company has, by unanimous vote of all Directors
present, approved the Offer and the Merger and determined that the Offer and
the Merger, taken together, are fair to, and in the best interests of, the
stockholders of the Company, and recommends that stockholders of the Company
accept the Offer and tender their Shares.
<PAGE>
The Parent has also entered into Shareholder Agreements dated as of September
15, 1994 (the "Shareholder Agreements") with certain stockholders of the
Company who beneficially own 6,774,508 Shares in the aggregate (including
306,006 Shares under option). Under the Shareholder Agreements, those
stockholders agreed to tender their shares pursuant to the Offer and to grant
Parent an option to purchase all Shares beneficially owned by such
stockholders.
For purposes of the Offer, the Purchaser shall be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Upon the
terms and subject to the conditions of the Offer, payment for Shares purchased
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payment from the Purchaser and transmitting payment to
tendering stockholders. In all cases, payment for Shares purchased pursuant to
the Offer will be made only after timely receipt by the Depositary of (a)
certificates for such Shares or timely confirmation of book-entry transfer of
such Shares into the Depositary's account at a Book-Entry Transfer Facility (as
defined in the Offer to Purchase) pursuant to the procedures set forth in
Section 2 of the Offer to Purchase, (b) a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) with any required signature
guarantees or, in the case of a book-entry transfer, an Agent's Message (as
defined in the Offer to Purchase) and (c) any other documents required by the
Letter of Transmittal. Under no circumstances will interest be paid by the
Purchaser on the purchase price of the Shares, regardless of any delay in
making such payment.
The term "Expiration Date" means 12:00 Midnight, New York City time on
Wednesday, October 19, 1994, unless and until the Purchaser, in its sole
discretion (but subject to the terms of the Merger Agreement), shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date on which the Offer,
as so extended by the Purchaser, shall expire. The Purchaser expressly reserves
the right, in its sole discretion (but subject to the terms of the Merger
Agreement), at any time or from time to time, and regardless of whether or not
any of the events set forth in Section 14 of the Offer to Purchase shall have
occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any Shares, by
giving oral or written notice of such extension to the Depositary. The
Purchaser shall not have any obligation to pay interest on the purchase price
for tendered Shares in the event the Purchaser exercises its right to extend
the period of time during which the Offer is open. There can be no assurance
that the Purchaser will exercise its right to extend the Offer (other than as
required by the Merger Agreement). Any such extension will be followed by a
public announcement thereof no later than 9:00 A.M., New York City time, on the
next business day after the previously scheduled Expiration Date. During any
such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the right of a tendering stockholder to
withdraw such stockholder's Shares.
Except as otherwise provided below, tenders of Shares are irrevocable. Shares
tendered pursuant to the Offer may be withdrawn at any time prior to 12:00
Midnight, New York City time, on Wednesday, October 19, 1994, (or, if the
Purchaser shall have extended the period of time during which the Offer is
open, the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire) and, unless theretofore accepted for payment, may also
be withdrawn at any time after November 17, 1994. For a withdrawal to be
effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of the Offer to Purchase and must specify the name
of the person having tendered the Shares to be withdrawn, the number of Shares
to be withdrawn, if different from the name of the person who tendered the
Shares. If certificates for Shares have been delivered or otherwise identified
to the Depositary, then, prior to the physical release of such certificates,
the serial numbers shown on such certificates must be submitted to the
Depositary and, unless such Shares have been tendered by an Eligible
Institution (as defined in Section 2 of the Offer to Purchase), the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been delivered pursuant to the procedures for book-entry transfer
as set forth in Section 2 of the Offer to Purchase, any notice of withdrawal
must also specify the name and number of the account at the appropriate Book-
Entry
2
<PAGE>
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
Shares may not be rescinded, and any Shares properly withdrawn will thereafter
be deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be retendered by again following one of the procedures described in
Section 2 of the Offer to Purchase at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and furnished to
brokers, dealers, banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the stockholder lists or, if applicable,
who are listed as participants in a clearing agency's security position
listing, for subsequent transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO
THE OFFER.
Requests for copies of the Offer to Purchase and the Letter of Transmittal
may be directed to the Information Agent as set forth below, and copies will be
furnished promptly at the Purchaser's expense.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800) 669-5550
September 22, 1994
3
<PAGE>
EXHIBIT (a)(8)
Torchmark Corporation
2001 Third Avenue South
Birmingham, Alabama 35233
- --------------------------------------------------------------------------------
NEWS RELEASE [logo of Torchmark Corporation appears here]
- --------------------------------------------------------------------------------
Contact: NYSE Symbol: TMK
Lee Bartlett (205) 325-4204 FOR IMMEDIATE RELEASE
Gary Coleman (214) 320-7232
TORCHMARK TO ACQUIRE AMERICAN INCOME HOLDING, INC.
FOR $35 PER SHARE
BIRMINGHAM, ALABAMA, September 15, 1994....Torchmark Corporation (NYSE:
TMK) and American Income Holding, Inc. (NYSE: AIH) have signed a definitive
merger agreement pursuant to which a Torchmark subsidiary will acquire American
Income for $35 cash per share of common stock. Under the merger agreement,
Torchmark will commence a cash tender offer for all of the outstanding common
stock of American Income. Any shares of common stock not tendered will be
cashed out at $35 per share in a statutory merger. American Income has
approximately 16,100,000 shares outstanding on a fully diluted basis. The offer
and the merger have been unanimously approved by the directors of American
Income, who have received a fairness opinion from Fox-Pitt, Kelton, and are
expected to be consummated as soon as possible in 1994.
The tender offer is subject to a minimum condition that Torchmark acquire
51% of the shares on a fully diluted basis. The tender offer and merger are
also subject to insurance regulatory approval and other customary conditions.
Holders of approximately 41% of the shares, including Bernard Rapoport, the
Chairman of the Board, and Charles B. Cooper, the President of American Income,
and Golder, Thoma, Cressy Fund III Limited Partnership, have agreed to tender
their shares and have granted Torchmark an option to acquire such shares under
certain conditions.
Torchmark intends to finance the acquisition with a combination of bank
and monthly income preferred stock financing as well as internal funds. The
merger agreement provides that if it is terminated because of certain
conditions, American Income will pay Torchmark a fee of approximately
$12,000,000 plus expenses.
R.K. Richey, Torchmark's Chairman, stated that after the merger American
Income will operate as a separate subsidiary of Torchmark, current management of
American Income will continue and American Income headquarters will remain in
Waco, Texas. According to Richey, the acquisition of American Income, which
sells life insurance to union and credit union members through exclusive agents,
complements Torchmark's focus on low cost operations and
<PAGE>
growing life insurance operations in niche markets. Richey further indicated
that American Income should contribute incremental earnings to Torchmark in 1994
and 1995, after taking into account the amortization of goodwill and cost of
money.
Torchmark Corporation is an insurance and diversified financial services
holding company, whose principal operating subsidiaries are Liberty National
Life Insurance Company, United American Insurance Company, Torch Energy Advisors
Incorporated, Waddell & Reed, Inc., United Investors Life Insurance Company and
Family Service Life Insurance Company.
# # # # #
<PAGE>
EXHIBIT (a)(9)
AMERICAN INCOME HOLDING, INC.
1100 N. Market Street, Suite 1300, Wilmington DE 19801
NEWS RELEASE
FOR IMMEDIATE RELEASE:
- ----------------------
Contact: American Income Holding, Inc. September 15, 1994
Mark E. Pape
Executive Vice President and
Chief Financial Officer
(817)751-8650
AMERICAN INCOME HOLDING, INC. TO BE ACQUIRED BY TORCHMARK
FOR $35 PER SHARE
Wilmington, Delaware--Bernard Rapoport, Chairman of the Board, announced today
that American Income Holding, Inc. (NYSE: AIH) and Torchmark Corporation (NYSE:
TMK) have signed a definitive merger agreement pursuant to which a Torchmark
subsidiary will acquire American Income Holding, Inc. for $35 cash per share of
common stock. Under the merger agreement, Torchmark will commence a cash tender
offer for all of the outstanding common stock of American Income. Any shares of
common stock not tendered will be cashed out at $35 per share in a statutory
merger. American Income has approximately 16.1 million shares outstanding on a
fully diluted basis.
The tender offer and the merger, expected to be consummated as soon as possible
in 1994, have been unanimously approved by the directors of American Income, who
have received a fairness opinion from Fox-Pitt, Kelton Inc. The tender offer is
subject to a minimum condition that Torchmark acquire 51% of the shares on a
fully diluted basis. The tender offer and merger are also subject to insurance
regulatory approval and other customary conditions. Holders of approximately 41%
of the shares, including Mr. Rapoport, Charles B. Cooper, President of American
Income, and Golder, Thoma, Cressey Fund III Limited Partnership, have agreed to
tender their shares and have granted Torchmark an option to acquire such shares
under certain conditions.
In announcing the agreement, Mr. Rapoport indicated that: "As the founder of
the Company, I have three special areas of concern: the stockholders, the
employees, and the sales force. In agreeing to a merger for American Income, we
had to be certain that the new partner would have an understanding of our
uniqueness, especially as relates to our dedication to marketing and to our
sales force. The management of Torchmark shares this commitment and understands
the necessity that American Income continues to operate in the future as we have
in the past."
<PAGE>
Mr. Rapoport and R.K. Richey, Torchmark's Chairman, have agreed that after the
merger American Income will operate as a separate subsidiary of Torchmark,
current management of American Income will continue and American Income's
headquarters will remain in Waco, Texas. According to Mr. Richey, the
acquisition of American Income, which sells life insurance to labor union and
credit union members through exclusive agents, complements Torchmark's focus on
low cost operations and growing life insurance operations in niche markets. Mr.
Richey further indicated that American Income should contribute incremental
earnings to Torchmark in 1994 and 1995, after taking into account the
amortization of goodwill and cost of money.
American Income Holding, Inc. is an insurance holding company engaged through
its subsidiary, American Income Life Insurance Company, in the marketing,
writing and issuing of individual life insurance and fixed benefit accident and
health insurance to members of labor and credit unions.
<PAGE>
EXHIBIT (c)(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN
OF MERGER
BETWEEN
TORCHMARK CORPORATION,
TMK ACQUISITION CORPORATION,
AND
AMERICAN INCOME HOLDING, INC.
September 15, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
RECITALS
ARTICLE I The Tender Offer
<C> <S> <C>
1.1. The Tender Offer ..................................... 1
1.2. Company Actions ...................................... 3
1.3. Board of Directors ................................... 4
ARTICLE II The Merger
2.1. The Merger ........................................... 5
2.2. Effective Time ....................................... 6
2.3. Effects of the Merger ................................ 6
2.4. Certificate of Incorporation ......................... 6
2.5. Bylaws ............................................... 6
2.6. Directors ............................................ 6
2.7. Officers ............................................. 7
2.8. Conversion of the Shares ............................. 7
2.9. Dissenting Shares .................................... 7
2.10. Conversion of the Common Stock
of the Purcharser ................................... 8
2.11. Payment for Shares ................................... 8
2.12. Closing .............................................. 10
ARTICLE III Representations and Warranties
of the Company
3.1. Organization and Qualification ....................... 10
3.2. Subsidiaries ......................................... 11
3.3. Authorized Capital ................................... 11
3.4. Corporate Authorization .............................. 12
3.5. Approvals; No Violations ............................. 12
3.6. SEC Filings; Financial Statements .................... 13
3.7. Absence of Undisclosed Liabilities ................... 14
3.8. Compliance with Applicable Law ....................... 15
3.9. Termination, Severance, and
Employment Agreements .............................. 15
3.10. Employee Benefits .................................... 16
3.11. Taxes ................................................ 17
3.12. Litigation ........................................... 18
3.13. Insurance Regulatory Matters ......................... 18
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE IV Representations and Warranties of the Parent
and the Purchaser
<C> <S> <C>
4.1. Organization and Qualification ...................... 19
4.2. Corporate Authorization ............................. 19
4.3. Approvals; No Violations ............................ 19
4.4. No Prior Activities ................................. 20
4.5. Information Supplied ................................ 20
ARTICLE V Covenants
5.1. Conduct of Business of the Company .................. 21
5.2. Proxy Statement ..................................... 24
5.3. Action of Stockholders of the Company;
Voting and Disposition of the Shares .............. 24
5.4. Additional Agreements ............................... 25
5.5. Notification of Certain Matters ..................... 26
5.6. Access to Information ............................... 26
5.7. Public Announcements ................................ 27
5.8. Officers' and Directors' Indemnification ............ 27
5.9. Employee Options .................................... 28
5.10. Other Actions by the Company ........................ 28
5.11. Available Funds ..................................... 28
ARTICLE VI Conditions to Consummation of the Merger
6.1. Stockholder Approval ................................ 29
6.2. No Injunction ....................................... 29
6.3. Offer ............................................... 29
6.4. Governmental Consents ............................... 29
ARTICLE VII Termination; Amendment; Waiver
7.1. Termination ......................................... 29
7.2. Effect of Termination ............................... 31
7.3. Fees and Expenses ................................... 32
7.4. Amendment ........................................... 33
7.5. Waiver .............................................. 33
ARTICLE VIII Miscellaneous
8.1. Survival of Representations, Warranties,
and Agreements .................................... 33
8.2. Brokerage Fees and Commissions ...................... 34
8.3. Entire Agreement; Assignment ........................ 34
8.4. Severability ........................................ 34
8.5. Notices ............................................. 34
8.6. Governing Law ....................................... 35
8.7. Specific Performance ................................ 36
8.8. Other Potential Bidders ............................. 36
8.9. Descriptive Headings; References .................... 37
8.10. Parties in Interest ................................. 37
8.11. Beneficiaries ....................................... 37
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
8.12. Counterparts ........................................ 37
8.13. Obligations ......................................... 38
8.14. Certain Definitions ................................. 38
</TABLE>
Annex A
Annex B-1
Annex B-2
Schedules
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of September 15,
1994, by and between TORCHMARK CORPORATION, a Delaware corporation (the
"Parent"), TMK ACQUISITION CORPORATION, a Delaware corporation and a wholly-
owned subsidiary of the Parent (the "Purchaser"), and AMERICAN INCOME HOLDING,
INC., a Delaware corporation (the "Company").
RECITALS
The Boards of Directors of the Parent and the Company have unanimously
determined that it is in the best interests of the stockholders of their
respective corporations for the Purchaser to acquire all the outstanding common
stock, par value $.01 per share, of the Company (the "Shares").
The parties intend to effect such acquisition through a tender offer on the
terms described below, followed by a merger of the Company with the Purchaser on
the terms described below (the "Merger").
THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which all parties hereby acknowledge, the parties
agree as follows:
ARTICLE I
The Tender Offer
----------------
1.1 The Tender Offer. (a) Provided that this Agreement has not been
----------------
terminated in accordance with Article VII and none of the events referred to in
-----------
Annex A (other than the events referred to in clauses (i) through (iii) of the
- ------- ----------- -----
second paragraph of Annex A and paragraph clause (j) of Annex A) has occurred or
------- ---------- -------
is existing, within five business days of the date of this Agreement, the
Purchaser will commence a tender offer (the "Offer") for all outstanding Shares
at a price of $35 per Share (as such amount may be increased in accordance with
the terms of this Agreement, the "Per Share Amount") net to the seller in cash.
The Purchaser agrees to accept for payment all Shares validly tendered pursuant
to the Offer as soon as legally permissible, and to pay for all such Shares as
promptly as practicable, in each case upon the terms and subject to the
conditions of the Offer, as it may be revised as permitted by this Agreement.
The obligation of the Purchaser to commence the Offer will be subject only to
the conditions set forth in Annex A, and the obligation of the Purchaser to
-------
accept for payment, purchase, and pay for the Shares tendered pursuant to the
Offer will be subject to such conditions and to the further condition that a
number of the Shares representing not less than 51% of the number of Shares then
outstanding and issuable on exercise of then outstanding
1
<PAGE>
options have been validly tendered and not withdrawn prior to the expiration
date of the Offer (the "Minimum Condition"). The Purchaser specifically
reserves the right to increase the price per share payable in the Offer, to
extend the expiration date of the Offer (unless, after November 15, 1994, all
conditions to the Offer listed on Annex A are fulfilled), and to make any other
-------
changes in the terms and conditions of the Offer (provided that, unless
previously approved by the Company in writing, no change may be made that
decreases the price per Share payable in the Offer, that changes the form of
consideration to be paid in the Offer, that reduces the maximum number of Shares
to be purchased in the Offer, that imposes conditions to the Offer in addition
to those set forth in Annex A, or that broadens the scope of such conditions).
-------
The parties agree that the conditions set forth in Annex A are for the sole
-------
benefit of the Purchaser and may be asserted by the Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by the Purchaser or the Parent) or may be waived by the Purchaser, in
whole or in part, at any time and from time to time, in its sole discretion.
The failure by the Purchaser at any time to exercise any of the foregoing rights
will not be deemed a waiver of any such right, the waiver of any such right with
respect to particular facts and circumstances will not be deemed a waiver with
respect to other facts or circumstances, and each such right will be deemed an
ongoing right that may be asserted at any time and from time to time. Any good
faith determination by the Purchaser that is not demonstrated to be unreasonable
with respect to any of the foregoing conditions (including, without limitation,
the satisfaction of such conditions) will be final and binding on all parties.
The Per Share Amount will be paid net to the seller in cash, less any required
withholding taxes, on the terms and subject to the conditions of the Offer. The
Company agrees that no Shares held by the Company or any of its subsidiaries
will be tendered in the Offer. The Company hereby consents to the Offer and
represents that (a) its Board of Directors, at a meeting duly called and held
(i) determined at such time that the Offer and the Merger, taken together, are
fair to the Company and its stockholders and in the best interests of the
holders of the Shares; (ii) resolved at such time to recommend acceptance of the
Offer and approval and adoption of this Agreement, the Merger, and the
transactions contemplated by this Agreement by the stockholders of the Company
prior to such purchase; and (iii) irrevocably approved of the Offer, the Merger,
this Agreement, and the transactions contemplated by this Agreement for the
purposes of (S) 203 of the Delaware General Corporation Law (the "DGCL") and any
other state or federal statute, regulation, or rule that the Purchaser has
identified, or that is known after reasonable inquiry, to the Company requiring
prior approval by the Board of Directors of the Company of this Agreement, the
Merger, the Offer, or the
2
<PAGE>
other transactions contemplated by this Agreement and (b) Fox-Pitt, Kelton Inc.,
the Company's financial advisor (the "Advisor"), has delivered to the Board of
Directors of the Company its opinion that, subject to the limitations and
qualifications set forth in such opinion, the Per Share Amount is fair from a
financial point of view to the holders of the Shares.
(b) As promptly as practicable on the date of the commencement of the
Offer, the Parent and the Purchaser will file with the SEC a Tender Offer
Statement on Schedule 14D-1 with respect to the Offer under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which will (i) reflect
the execution and delivery of this Agreement; (ii) set forth the Offer as
provided for in this Agreement; and (iii) contain or incorporate by reference a
form of letter of transmittal and summary advertisement.
(c) The Purchaser will promptly disseminate the offer to purchase referred
to in Section 1.1(b) (as amended pursuant to this Agreement, the "Offer to
--------------
Purchase" and, collectively with all other schedules and exhibits required to be
filed with the Securities and Exchange Commission ("SEC"), the "Offer
Documents") to the holders of the Shares, reflecting the terms set forth in this
Agreement. The Offer Documents will contain the recommendation of the Board of
Directors of the Company that the holders of the Shares accept the Offer as
described in Section 1.1(a) and may make reference to the opinion of the Advisor
--------------
referred to in Section 1.1(a) and include or incorporate such opinion. The
--------------
Purchaser and the Company, with respect to written information supplied by the
Company specifically for use in the Offer Documents or based upon information
pertaining to the Company in the Company Reports (as defined in Section 3.6),
-----------
agree promptly to correct any information in the Offer Documents that becomes
false or misleading in any material respect. Subject to Section 1.2(b), the
--------------
Purchaser further agrees to take all steps to cause the Offer Documents to be
disseminated to the holders of Shares, as and to the extent required by
applicable law. The Company and its counsel will be given an opportunity to
review and comment on the Offer Documents prior to their being filed with the
SEC. The Parent and the Purchaser will promptly provide to the Company any
written comments they receive from the SEC with respect to the Offer Documents.
1.2 Company Actions. (a) The Company hereby agrees to file with the SEC
---------------
as soon as practicable on the date of commencement of the Offer, and promptly
mail to its stockholders, a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all schedules, amendments, and supplements, the "Schedule
14D-9") containing the recommendations of the Board of Directors of the Company
3
<PAGE>
referred to in Section 1.1 (subject to the right of the Board of Directors of
-----------
the Company to withdraw such recommendations if it is obligated to do so by its
fiduciary obligations under applicable law) and the opinion of the Advisor
referred to in Section 1.1(a). The Purchaser and its counsel will be given an
--------------
opportunity to review and comment on the Schedule 14D-9 prior to its being filed
with the SEC. The Company will promptly provide to the Parent and the Purchaser
any written comments it receives from the SEC with respect to the Schedule 14D-
9. The Company has been advised that the persons named on Annex B-1 have
---------
entered into Shareholder Agreements in the form of Annex B-2 (the "Shareholder
---------
Agreements"). The Schedule 14D-9, at the time it is first published,
disseminated, or mailed to the stockholders of the Company, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading. The Company agrees promptly to take all steps necessary to cause
the Schedule 14D-9 to be corrected to the extent requested by the Parent to
reflect any change in information concerning the Parent, the Purchaser, or the
Offer, and, as corrected, to be filed with the SEC and disseminated to the
stockholders of the Company, as and to the extent required by applicable law.
(b) In connection with the Offer, the Company will promptly furnish the
Purchaser with mailing labels, security position listings, and any available
listing or computer files containing the names and addresses of the record
holders of Shares as of the most recent practicable date and will furnish the
Purchaser with such information and assistance (including updated lists of
security position listings and listing or computer files) as the Purchaser or
its agents may reasonably request in order to communicate the Offer to the
record and beneficial holders of Shares. Subject to applicable law and except
for such steps as are necessary to disseminate the Offer Documents, the
Purchaser and its affiliates will hold in confidence the information contained
in any such labels, listings, and files, will use such information only in
connection with the Offer and the Merger, and, if this Agreement is terminated,
will deliver to the Company all copies of such information in its possession.
1.3 Board of Directors. (a) Effective upon the payment by the Purchaser
------------------
for Shares pursuant to the Offer, the Purchaser will be entitled to designate
that number of directors of the Company, rounded up to the next whole number,
that equals the product of (x) the total number of directors on the Board of
Directors (giving effect to the election or appointment of any additional
directors pursuant to this Section 1.3) and (y) the percentage that the number
-----------
of Shares on a fully diluted basis owned by the Parent and the Purchaser
(including Shares accepted for payment) bears to the total
4
<PAGE>
number of outstanding Shares . The Board of Directors of the Company will at
all relevant times be composed of a sufficient number of directors so that the
right of the Purchaser under this Section 1.3(a) and the right of the Company
--------------
under Section 1.3(b) to have at least 3 Continuing Directors (as defined in
--------------
Section 1.3(b)) will not be impaired. The Company will at such time cause the
- --------------
designees of the Purchaser to be elected to or appointed by the Board of
Directors, including, without limitation, increasing the number of directors,
amending its bylaws, using its reasonable best efforts to obtain resignations of
incumbent directors, and, to the extent necessary, filing with the SEC and
mailing to its stockholders the information required by (S) 14(f) of the
Exchange Act and the rules promulgated thereunder, as promptly as possible. The
Parent and the Purchaser will supply any information with respect to themselves
and their respective nominees, officers, directors, and affiliates required by
(S) 14(f) of the Exchange Act and such rules to the Company. Upon written
request by the Purchaser, the Company will use its reasonable best efforts to
cause the designees of the Purchaser to constitute the same percentage of
representation as is on the Board of Directors after giving effect to this
Section 1.3 on (i) each committee of the Board of Directors; (ii) the board of
- -----------
directors of each subsidiary of the Company; and (iii) each committee of such
subsidiaries' boards of directors.
(b) Following the election or appointment of the designees of the Purchaser
pursuant to this Section 1.3 and prior to the Effective Time, any amendment or
-----------
termination of this Agreement, extension for the performance of the obligations
or other acts of the Parent and the Purchaser, or waiver of the rights of the
Company under this Agreement, will (if and to the extent that there are any then
serving directors of the type specified below) require the approval of a
majority of the then serving directors of the Company who are directors on the
date of this Agreement (the "Continuing Directors"). Prior to the Effective
Time, there will be no fewer than 3 Continuing Directors. If, prior to the
Effective Time, the number of Continuing Directors is two or fewer, the
remaining Continuing Directors or the Continuing Director, as the case may be,
will be entitled to appoint directors to fill the vacancies created and such
appointees will be Continuing Directors for the purposes of this Agreement. The
Continuing Directors may not be removed prior to the Effective Time.
ARTICLE II
The Merger
----------
2.1 The Merger. Upon the terms and subject to the conditions of this
----------
Agreement and in accordance with the DGCL, the Purchaser will be merged with and
into the Company as soon as practicable following the satisfaction or waiver of
the
5
<PAGE>
conditions set forth in Article VI. Following the Merger, the Company will
----------
continue as the surviving corporation (the "Surviving Corporation") and the
separate corporate existence of the Purchaser will cease. At the election of
the Parent or the Purchaser, any one or more direct or indirect wholly-owned
subsidiaries of the Parent incorporated under the laws of the State of Delaware
may be substituted for the Purchaser as a constituent corporation in the Merger.
As used in this Agreement, the term "Purchaser" refers to any such substituted
corporation.
2.2 Effective Time. The Merger will be consummated by filing with the
--------------
Delaware Secretary of State a certificate of merger or certificate of ownership
and merger in accordance with the DGCL (the "Certificate of Merger") in such
form as is required by, and executed in accordance with, the relevant provisions
of the DGCL, and such other documents as may be required by the provisions of
the DGCL. The Merger will be effective at the time of such filing or at such
later time as is specified in the Certificate of Merger in accordance with the
provisions of the DGCL. Such time of effectiveness is referred to as the
"Effective Time."
2.3 Effects of the Merger. The Merger will have the effects set forth in
---------------------
(S) 259 of the DGCL. As of the Effective Time, the Company will be a wholly-
owned direct or indirect subsidiary of the Parent. Without limiting the
foregoing, at the Effective Time, all properties, rights, privileges, powers,
and franchises of the Company and the Purchaser will vest in the Surviving
Corporation and all debts, liabilities, obligations, and duties of the Company
and the Purchaser will become the debts, liabilities, obligations, and duties of
the Surviving Corporation.
2.4 Certificate of Incorporation. The Certificate of Incorporation of the
----------------------------
Company as in effect at the Effective Time will be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law, except that at the election of the Purchaser, the Company will
amend its Certificate of Incorporation immediately prior to the Effective Time
to conform as nearly as possible to the Certificate of Incorporation of the
Purchaser.
2.5 Bylaws. The Bylaws of the Purchaser as in effect immediately prior to
------
the Effective Time will be the Bylaws of the Surviving Corporation until amended
in accordance with applicable law.
2.6 Directors. The directors of the Purchaser at the Effective Time will
---------
be the initial directors of the Surviving Corporation and will hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualified.
6
<PAGE>
2.7 Officers. The officers of the Company at the Effective Time will be
--------
the initial officers of the Surviving Corporation and will hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified.
2.8 Conversion of the Shares. At the Effective Time:
------------------------
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than (i) Shares held by the Parent, the Purchaser, the Company, or
any direct or indirect subsidiary of the Parent or the Company and (ii) any
Dissenting Shares (as defined in Section 2.9)) will, without further action by
-----------
the Parent, the Purchaser, or the Company, automatically be cancelled and
extinguished and converted into the right to receive in cash the Per Share
Amount (the "Merger Consideration") without interest, less any required
withholding taxes, upon surrender of the certificate formerly representing such
Share in accordance with Section 2.11.
------------
(b) Each Share issued and outstanding immediately prior to the Effective
Time that is owned or held by the Parent, the Purchaser, the Company, or any
direct or indirect subsidiary of Parent or the Company will be cancelled and
retired and cease to exist, without any conversion, and no payment will be made
with respect to any such Share.
2.9 Dissenting Shares. (a) Notwithstanding anything in this Agreement to
-----------------
the contrary, Shares that are issued and outstanding immediately prior to the
Effective Time and that are held by stockholders that have complied in all
respects with the requirements of the DGCL concerning the right of a stockholder
of the Company to dissent from the Merger and to require an appraisal of such
Shares in the manner provided in the DGCL, if applicable, and that, as of the
Effective Time, have not effectively withdrawn or lost such right to appraisal
(the "Dissenting Shares") will not be converted into or represent a right to
receive the Merger Consideration pursuant to Section 2.8, but the holders of
-----------
such Dissenting Shares will be entitled only to such rights as are granted under
(S) 262 of the DGCL. Each holder of Dissenting Shares that becomes entitled to
payment for such Shares pursuant to such section of the DGCL will receive
payment for such Dissenting Shares from the Surviving Corporation in accordance
with the DGCL; provided, however, that to the extent that any holder or holders
-------- -------
of Shares have failed to establish the entitlement to appraisal rights as
provided in (S) 262 of the DGCL, such holder or holders (as the case may be)
will forfeit the right to appraisal of such Shares and each such Share will
thereupon be deemed to have been converted, as of the Effective Time, into and
represent the right to receive payment from the Surviving Corporation of the
Merger Consideration, without interest, as provided in Section 2.8.
-----------
7
<PAGE>
(b) The Company will give the Parent and the Purchaser (i) prompt notice of
any written demands for appraisal, withdrawals of demands for appraisal, and any
other instrument served pursuant to (S) 262 of the DGCL received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under (S) 262 of the DGCL. The Company will not,
except with the express written consent of the Parent, voluntarily make any
payment with respect to any demands for appraisal or settle or offer to settle
any such demands.
2.10 Conversion of the Common Stock of the Purchaser. Each share of the
-----------------------------------------------
common stock of the Purchaser issued and outstanding immediately prior to the
Effective Time will, by virtue of the Merger and without any action on the part
of the holder of such stock, be converted into and represent one validly issued,
fully paid, and nonassessable share of common stock, par value $0.01 per share,
of the Surviving Corporation.
2.11 Payment for Shares. (a) Prior to the Effective Time, the Purchaser
------------------
will appoint a bank or trust company reasonably acceptable to the Company as
agent for the holders of Shares (the "Paying Agent") to receive and disburse the
cash to which holders of Shares become entitled pursuant to Section 2.8. At the
-----------
Effective Time, the Purchaser or the Parent will provide the Paying Agent with
sufficient cash to allow the Merger Consideration to be paid by the Paying Agent
for each Share then entitled to receive the Merger Consideration (the "Payment
Fund").
(b) Promptly after the Effective Time, the Purchaser or the Parent will
cause the Paying Agent to mail to each record holder immediately prior to the
Effective Time of an outstanding certificate or certificates representing Shares
that as of the Effective Time represent the right to receive the Merger
Consideration (the "Certificates"), a form of letter of transmittal (which will
specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon proper delivery of the Certificates to the
Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment. Upon surrender to the Paying Agent of a Certificate,
together with such letter of transmittal duly executed and completed in
accordance with its instructions and such other documents as may be requested,
the holder of such Certificate will be entitled to receive in exchange for such
Certificate, subject to any required withholding of taxes, the Merger
Consideration and such Certificate will forthwith be cancelled. No interest
will be paid or accrued on the Merger Consideration upon the surrender of the
Certificates. If payment or delivery is to be made to a person other than the
person in whose name the Certificate
8
<PAGE>
surrendered is registered, it will be a condition of payment or delivery that
the Certificate so surrendered be properly endorsed, with signature properly
guaranteed, or otherwise be in proper form for transfer and that the person
requesting such payment or delivery pay any transfer or other taxes required by
reason of the payment or delivery to a person other than the registered holder
of the Certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 2.11, each Certificate (other
------------
than Certificates held by persons referred to in Section 2.8(a)(i) and (ii))
----------------- ----
will represent for all purposes only the right to receive the Merger
Consideration, without interest and subject to any required withholding of
taxes. Notwithstanding the foregoing, neither the Paying Agent nor any party to
this Agreement will be liable to a holder of Shares for any Merger Consideration
delivered to a public official pursuant to applicable abandoned property,
escheat, or similar laws.
(c) Promptly following the date that is six months after the Effective
Time, the Paying Agent will return to the Surviving Corporation all cash,
certificates, and other property in its possession that constitute any portion
of the Payment Fund, and the duties of the Paying Agent will terminate.
Thereafter, each holder of a Certificate formerly representing a Share may
surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat, and similar laws) receive in exchange
therefor the Merger Consideration without any interest. Neither the Parent, the
Purchaser, nor the Surviving Corporation will be liable to any holder of Shares
for any amount paid to a public official pursuant to applicable abandoned
property, escheat, or similar laws. If Certificates are not surrendered prior
to midnight on the fourth anniversary of the Effective Time, unclaimed amounts
of the Payment Fund will, to the extent permitted under applicable law, become
the property of the Surviving Corporation. Notwithstanding the foregoing, the
Surviving Corporation will be entitled to receive from time to time all interest
or other amounts earned with respect to the Payment Fund as such amounts accrue
or become available.
(d) Any portion of the Payment Fund for which rights to dissent have been
perfected will be returned to the Surviving Corporation upon demand.
(e) After the Effective Time there will be no registration of transfers on
the stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time.
9
<PAGE>
2.12 Closing. Upon the terms and subject to the conditions of this
-------
Agreement, as soon as practicable after all the conditions to the obligations of
the parties to effect the Merger under Article VI have been satisfied or waived,
----------
the Company and the Purchaser will (a) file with the Secretary of State of
Delaware the Certificate of Merger and (b) take all such other and further
actions as may be required by law to make the Merger effective. Contemporaneous
with the filing referred to in this Section 2.12, a closing (the "Closing") will
------------
be held at the offices of Hughes & Luce, L.L.P., 1717 Main Street, Suite 2800,
Dallas, Texas or at such other location as the parties to this Agreement may
establish for the purpose of confirming all the foregoing. The date and the
time of such Closing are referred to as the "Closing Date."
ARTICLE III
Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to the Parent and the Purchaser that:
3.1 Organization and Qualification. The Company is a corporation duly
------------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority and any necessary
governmental authority to own, operate, and lease its properties and assets and
to carry on its business as it is now being conducted, except for failures to
have such power and authority as could not reasonably be expected to result in a
Material Adverse Effect (as defined below). The Company is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of its properties owned or leased or the nature of its activities
makes such qualification or licensing necessary, except for failures to be so
qualified or licensed and in good standing as could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
Copies of the Certificate of Incorporation and Bylaws of the Company, including
all amendments, have been delivered to the Parent and the Purchaser and such
copies are accurate and complete. The Certificate of Incorporation and Bylaws
of the Company are in full force and effect and the Company is not in default of
the performance, observation, or fulfillment of any provision of its Certificate
of Incorporation or Bylaws. For the purposes of this Agreement, "Material
Adverse Effect" means any adverse change in or effect on the condition
(financial or other), business, properties, assets, liabilities, prospects
(excluding changes in prospects affecting the life insurance industry
generally), or results of operations of the Company or the Parent, as the case
may be, and any of their respective subsidiaries, that is material to the
Company or the Parent, as the case may be, and their respective subsidiaries,
taken as a whole.
10
<PAGE>
3.2 Subsidiaries. The Company is, directly or indirectly, the record and
------------
beneficial owner of all the outstanding shares of capital stock of each of its
subsidiaries (other than directors' qualifying shares), there are no proxies or
voting agreements with respect to any such shares, and no equity security of any
of its subsidiaries is or may become required to be issued by reason of any
options, warrants, scrip, rights to subscribe to, calls, or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any capital stock of any subsidiary, and there are
no contracts, commitments, understandings, or arrangements by which any
subsidiary is bound to issue additional shares of its capital stock or
securities convertible into or exchangeable for such shares. All such shares
directly or indirectly owned by the Company are owned by the Company or a wholly
owned subsidiary, free and clear of any claim, lien, encumbrance, or agreement.
Each subsidiary of the Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority and any
necessary governmental authority to own, operate, or lease its properties and
assets and to carry on its business as it is now being conducted, except for
failures as could not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect. Each subsidiary of the Company is duly
qualified or licensed to do business and is in good standing in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities makes such qualification or licensing necessary, except for
failures to be so qualified, licensed, or in good standing as could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. Copies of the charter documents, bylaws, or equivalent
organizational documents of each subsidiary of the Company have been delivered
to the Parent and are accurate and complete. Except for portfolio investments
of its insurance company subsidiaries, neither the Company nor any subsidiary of
the Company (a) beneficially owns any equity interests in any entities that are
not subsidiaries of the Company or (b) is party to any joint venture,
partnership, or similar arrangement.
3.3 Authorized Capital. The authorized capital stock of the Company
------------------
consists solely of 16,070,000 shares of common stock, $.01 par value per share,
of which 15,736,566 shares were outstanding as of August 31, 1994. All of the
outstanding Shares have been duly authorized and are validly issued, fully paid,
nonassessable, and free of preemptive rights. Schedule 3.3 lists each
------------
outstanding stock option of the Company (the "Employee Options"), the number of
shares covered by such Employee Options, the exercise prices, the
11
<PAGE>
exercise dates, and any changes to the terms of such Employee Options since
March 6, 1992. Except as set forth above or on Schedule 3.3, there are no
------------
preemptive rights nor any outstanding subscriptions, options, warrants, rights,
convertible securities, or other agreements or commitments of any character
relating to the issued or unissued capital stock or other securities of the
Company or any of its subsidiaries. There are no voting trusts or other
understandings to which the Company or any of its subsidiaries is a party with
respect to the voting capital stock of the Company or any of its subsidiaries.
3.4 Corporate Authorization. The Company has the full corporate power and
-----------------------
authority to execute and deliver this Agreement and, subject to any necessary
stockholder approval of the Merger, to consummate the transactions contemplated
by this Agreement. The execution, delivery, and performance by the Company of
this Agreement and the consummation by the Company of the Merger and of the
other transactions contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action and, except for any required
approval of the Merger and any adoption of this Agreement by the stockholders of
the Company in connection with the consummation of the Merger, no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement.
This Agreement has been duly and validly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
3.5 Approvals; No Violations. Except for applicable requirements of the
------------------------
Exchange Act and the Hart-Scott-Rodino Anti-trust Improvements Act of 1976 (the
"HSR Act"), the filing of the Certificate of Merger as required by the DGCL, and
approval of insurance regulatory authorities under state insurance holding
company laws and regulations, no filing with, and no permit, authorization,
consent, or approval of, any foreign or domestic public body or authority is
necessary for the consummation by the Company of the transactions contemplated
by this Agreement. Except as set forth on Schedule 3.5, the execution and
------------
delivery of this Agreement by the Company, the consummation by the Company of
the transactions contemplated by this Agreement and the compliance by the
Company with any of the provisions of this Agreement will not (a) conflict with
or result in any breach of any provision of the charters of bylaws or equivalent
organizational documents of the Company or any of its subsidiaries; (b) result
in a violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
or acceleration) under, any of the terms,
12
<PAGE>
conditions, or provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement, or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which any of them or any of
their properties or assets may be bound; or (c) violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to the Company, any
of its subsidiaries or any of their properties or assets; except such
violations, conflicts, breaches, defaults, terminations, or accelerations
referred to in this Section 3.5 as could not, individually or in the aggregate,
-----------
reasonably be expected to result in a Material Adverse Effect or adversely
affect the ability of any party to perform its obligations under this Agreement.
3.6 SEC Filings; Financial Statements. Since December 31, 1991, the
---------------------------------
Company has timely filed with the SEC all forms, reports, statements, and
documents required to be filed by it pursuant to the Securities Act of 1933 and
the rules and regulations promulgated thereunder (the "Securities Act"), and the
Exchange Act, and the rules and regulations promulgated thereunder, together
with all amendments thereto (collectively, and including, when filed, the
Schedule 14d-9, the "Company Reports") and has otherwise complied in all
material respects with the requirements of the Securities Act and the Exchange
Act. The Company has delivered to the Purchaser accurate and complete copies of
all Company Reports and will promptly deliver to the Purchaser any Company
Report filed by the Company after the date of this Agreement. As of their
respective dates, the Company Reports did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were or will be made, not misleading. Each of
the historical consolidated balance sheets included in or incorporated by
reference into the Company Reports as of its date and each of the historical
consolidated statements of income and earnings, stockholders' equity, and cash
flows included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents or will fairly
present the consolidated financial condition, results of operations,
stockholders' equity, and cash flows, as the case may be, of the Company and its
subsidiaries for the periods set forth (subject, in the case of unaudited
statements, to normal year-end audit adjustments), in each case in accordance
with generally accepted accounting principles consistently applied during the
periods involved. The Company maintains a system of internal accounting
controls sufficient to provide that transactions are executed in accordance with
management's general or specific authorization, transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and
13
<PAGE>
to maintain accountability for assets, access to assets is permitted only in
accordance with management's general or specific authorization, and the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
statutory financial statements of the subsidiaries of the Company filed with
respect to the years ended December 31, 1991, 1992, and 1993 (the "Statutory
Financial Statements") fairly present, in light of the statutory basis on which
they were prepared, the statutory financial condition of such subsidiaries at
December 31 of each such year and the statutory results of operations and other
data contained in such Statutory Financial Statements for the periods indicated,
and, in all material respects, have been prepared in accordance with accounting
practices prescribed or permitted by the appropriate state insurance
authorities, applied on a consistent basis. Accurate and complete copies of the
Statutory Financial Statements have been delivered to the Purchaser. The
exhibits and schedules included in the Statutory Financial Statements are all of
the schedules and exhibits required by applicable law, are accurate and
complete, and fairly present, in accordance with applicable regulatory
standards, the data shown by such schedules and exhibits. The insurance
reserving policies and practices of the subsidiaries of the Company are in
compliance in all material respect with applicable laws. The reserves carried
on the books of the subsidiaries of the Company at December 31, 1993 are
adequate, under generally accepted actuarial standards applied on a consistent
basis, to cover all reasonably anticipated unmatured insurance and reinsurance
liabilities of the subsidiaries of the Company as of December 31, 1993, and
since that date no event has occurred that, in accordance with generally
accepted actuarial standards applied on a consistent basis, requires the
addition to, or establishment of, a reserve that could reasonably be expected to
result in a Material Adverse Effect.
3.7 Absence of Undisclosed Liabilities. Except as set forth in the
----------------------------------
consolidated balance sheet of the Company as of June 30, 1994, and except as set
forth in the Company Reports, neither the Company nor any of its subsidiaries
has any liabilities or obligations of any nature, whether or not accrued,
contingent, or otherwise, that would be required to be included on a
consolidated balance sheet of the Company and its subsidiaries as of June 30,
1994 (or disclosed in the notes thereto) prepared in accordance with generally
accepted accounting principles, and that could, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect. Since
June 30, 1994, the Company and its subsidiaries have conducted their respective
businesses in a manner consistent with past practices, and neither the Company
nor any of its subsidiaries has become subject to any
14
<PAGE>
liabilities or obligations that would be required to be included on a
consolidated balance sheet of the Company and its subsidiaries (or disclosed in
notes) prepared in accordance with generally accepted accounting principles and
that could, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect, other than liabilities or obligations incurred in
the ordinary course of business consistent with past practices or incurred in
connection with the Offer, this Agreement, or the Merger and disclosed in the
Company Reports or consisting of legal, printing, accounting, and other
customary fees not exceeding $1,500,000 in the aggregate and incurred in
connection with the Offer, this Agreement, or the Merger.
3.8 Compliance with Applicable Law. The Company and each of its
------------------------------
subsidiaries currently hold and are in compliance with the terms of all
licenses, permits, and authorizations necessary for the lawful conduct of their
respective businesses, and have complied with, and neither the Company nor any
of its subsidiaries is in violation of, or in default under, the applicable
statutes, ordinances, rules, regulations, orders, or decrees of any federal,
state, local, or foreign governmental bodies, agencies, or authorities having,
asserting, or claiming jurisdiction over it or over any part of its operations
or assets, except for violations that would not, individually or in the
aggregate, result in a Material Adverse Effect. The businesses of the Company
and its subsidiaries are not being and have not been conducted in violation of
any law, ordinance, or regulation of any governmental authorities and regulatory
agencies except for violations as could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. Except for
routine examinations in the ordinary course of business of the insurance
subsidiaries of the Company, no investigation or review by any governmental
authorities and regulatory agencies with respect to the Company or any of its
subsidiaries is pending or, to the best knowledge of the Company, threatened,
nor, to the best knowledge of the Company, have any governmental authorities and
regulatory agencies indicated an intention to conduct such an investigation or
review, and no fine has been levied against, or order entered with respect to,
the Company or any subsidiary by any insurance regulatory authority.
3.9 Termination, Severance, and Employment Agreements. Set forth on
-------------------------------------------------
Schedule 3.9 is a complete and accurate list of each (a) employment, severance,
- ------------
or collective bargaining agreement not terminable without liability or
obligation on 60 days' or less notice; (b) agreement with any director,
executive officer, or other key employee, agent, or contractor of the Company or
any subsidiary of the Company (i) the benefits of which are contingent, or the
terms of which are
15
<PAGE>
materially altered, on the occurrence of a transaction involving the Company or
any subsidiary of the Company of the nature of any of the transactions
contemplated by this Agreement or relating to an actual or potential change in
control of the Company or any of its subsidiaries or (ii) providing any term of
employment or other compensation guarantee or extending severance benefits or
other benefits after termination not comparable to benefits available to
employees, agents, or contractors generally; (c) agreement, plan, or arrangement
under which any person may receive payments that may be subject to the tax
imposed by (S) 4999 of the Internal Revenue Code of 1986 (the "Code") or
included in the determination of such person's "parachute payment" under (S)
280G of the Code; and (d) agreement or plan, including any stock option plan,
stock appreciation right plan, restricted stock plan, or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement. Except as disclosed on Schedule 3.9, since December 31, 1991,
------------
neither the Company nor any of its subsidiaries has entered into or amended any
employment or severance agreement with any director, officer, or key employee,
agent, or contractor, or, granted any severance or termination pay to any
officer, director, or key employee, agent, or contractor of the Company or any
of its subsidiaries.
3.10 Employee Benefits. Schedule 3.10 lists all "employee pension benefit
----------------- -------------
plans" (as defined in (S) 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (the "Pension Plans"), "employee welfare benefit
plans" (as defined in (S) 3(1) of ERISA), and all other plans, arrangements, or
policies relating to stock options, stock purchases, compensation, deferred
compensation, severance, fringe benefits, and other employee benefits, in each
case maintained, or contributed to, or required to be maintained or contributed
to, by the Company, and of its subsidiaries or any other person that, together
with the Company, is or has been treated as a single employer under (S) 414(b),
(c), (m), or (o) of the Code (each a "Commonly Controlled Entity") for the
benefit of any current or former employees, officers, agents, or directors (or
any beneficiaries of such persons) of the Company or any of its subsidiaries
(collectively, "Benefit Plans"). No Pension Plan is a "multiemployer plan"
(within the meaning of ERISA), nor has any Commonly Controlled Entity ever
contributed or been required to contribute to any multiemployer plan. Each
Pension Plan intended to be qualified under (S) 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service that it is so
qualified and nothing has occurred since the date of
16
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such letter that could reasonably be expected to affect the qualified status of
such Pension Plan. None of the Benefit Plans promises or provides medical
benefits to any person after termination of employment with the Company or any
agency of the Company, except as otherwise required by law in the applicable
jurisdiction. The Company is not a party to any agreement, contract,
arrangement, or plan that has resulted or would result, separately or in the
aggregate, in the payment on or before the Effective Time of any "excess
parachute payments" within the meaning of (S) 280G of the Code. Each individual
who is paid for services in any form by the Company or any Commonly Controlled
Entity and who is treated by the Company or a Commonly Controlled Entity as an
independent contractor for federal income tax purposes (including, without
limitation, Code provisions applicable or relating to employee benefit plans),
state unemployment tax purposes, or any other purpose, is an independent
contractor for such purpose. Except where it could not reasonably be expected
to result in a Material Adverse Effect: (a) Each Benefit Plan has been
administered in accordance with its terms; (b) The Company and all the Benefit
Plans are all in compliance with applicable provisions of ERISA, the Code, and
all other applicable laws; (c) Each Benefit Plan could be amended or terminated
without liability to the Company, any Commonly Controlled Entity, the Purchaser,
or the Parent on or at any time after the Effective Time; (d) Neither the
Company nor any Commonly Controlled Entity has incurred any liability, and no
event has occurred that would result in any liability, to a Pension Plan (other
than for contributions not yet due) or to the Pension Benefit Guaranty
Corporation (other than for payment of premiums not yet due) that has not been
fully paid; (e) Neither the Company nor any Commonly Controlled Entity has
incurred any direct or indirect liability under, arising out of, or by operation
of Title IV of ERISA, in connection with the termination of, or withdrawal from,
any Pension Plan or other requirement plan or arrangement, and no fact or event
exists that could reasonably be expected to give rise to any such liability; and
(f) The aggregate accumulated benefit obligations of each Pension Plan subject
to Title IV of ERISA do not exceed the fair market value of the assets of such
Pension Plan.
3.11 Taxes. The Company and its subsidiaries have timely filed all
-----
federal income tax returns and reports and other material returns and reports
relating to federal, state, local, and foreign taxes required to be filed. Such
reports and returns are true, correct and complete, except for such failures to
be true, correct and complete as could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. The Company and
its subsidiaries have paid or made adequate provision for all taxes owed except
taxes that if not so paid or provided for could not reasonably be expected to
result in a Material
17
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Adverse Effect, and, except as disclosed in Schedule 3.11, no unpaid
-------------
deficiencies in taxes or other governmental charges for any period have been
proposed or assessed by any government taxing authority and, to the knowledge of
the Company, no government tax authority is threatening to propose or assess
against the Company or any of its subsidiaries any such deficiency or charge
that could, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect. The Company and its subsidiaries have withheld or
collected and paid over to the appropriate governmental authorities or are
properly holding for such payment all taxes required by law to be withheld or
collected, except for such failures to have so withheld or collected and paid
over, or to be so holding for payment as could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect. There
are no material liens for taxes upon the assets of the Company or its
subsidiaries, other than liens for current taxes not yet due and payable and
liens for taxes that are being contested in good faith by appropriate
proceedings diligently prosecuted. Neither the Company nor any of its
subsidiaries has agreed to or is required to make any adjustment under (S)
481(a) of the Code. Neither the Company nor any of its subsidiaries has made
any election under (S) 341(f) of the Code.
3.12 Litigation. Except for litigation by Company stockholders
----------
challenging this Agreement, the Offer, the Merger, or the Shareholder
Agreements (the "Shareholder Litigation"), there is no suit, claim, action,
proceeding, or investigation pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries or any of their
respective properties or assets before any court, regulatory agency, or tribunal
as to which an adverse determination could reasonably be considered probable
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. Neither the Company nor any of its subsidiaries
is subject to any outstanding order, writ, injunction, or decree that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect or would prevent or delay the consummation of the
transactions contemplated by this Agreement.
3.13 Insurance Regulatory Matters. Each agent or agency that submits
----------------------------
insurance to the subsidiaries of the Company has been appointed by the
subsidiaries as an agent and is duly licensed to sell insurance in all
jurisdictions in which the failure of such appointment or licensing could
reasonably be expected to result in a Material Adverse Effect. All insurance
policy forms, policy endorsements or amendments, forms of annuity contracts,
application forms, and sales materials used by the subsidiaries of the Company
in any jurisdiction have been approved, to the extent such approval is required,
by the appropriate governmental authority, except where failure to have such
approval could not reasonably be
18
<PAGE>
expected to be result in a Material Adverse Effect. The bonds, stocks, and
securities carried in the investment portfolios of the subsidiaries of the
Company comply in all material respects with all applicable insurance laws and
regulations, are properly valued on the Statutory Financial Statements, and are
eligible investments, duly admitted under applicable law.
ARTICLE IV
Representations and Warranties
------------------------------
of the Parent and the Purchaser
-------------------------------
Each of the Parent and the Purchaser represents and warrants to the Company
as follows:
4.1 Organization and Qualification. Each of the Parent and the Purchaser
------------------------------
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority and any necessary governmental authority to carry on its business as
now conducted. Each of the Parent and the Purchaser is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or leased or the nature of its activities
makes such qualification or licensing necessary, except for failures to be so
duly qualified or licensed and in good standing as could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
4.2 Corporate Authorization. Each of the Parent and the Purchaser has the
-----------------------
full corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution,
delivery, and performance by each of Parent and the Purchaser of this Agreement
and the consummation by the Parent and the Purchaser of the Merger and of the
other transactions necessary for such consummation have been duly and validly
authorized by the Parent as sole stockholder of the Purchaser and by the Board
of Directors of each of the Parent and the Purchaser and no other corporate
proceedings on the part of the Parent or the Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered by
each of the Parent and the Purchaser and constitutes a valid and binding
obligation of each of the Parent and the Purchaser, enforceable in accordance
with its terms.
4.3 Approvals; No Violations. Except for applicable requirements of the
------------------------
Exchange Act and the HSR Act, the filing and recordation of the Certificate of
Merger as required by the DGCL, and approval of insurance regulatory authorities
19
<PAGE>
under state insurance holding company laws and regulations, no filing with, and
no permit, authorization, consent, or approval of any foreign or domestic public
body or authority is necessary for the consummation by the Parent and the
Purchaser of the transactions contemplated by this Agreement. Neither the
execution and delivery of this Agreement by the Parent and the Purchaser nor the
consummation by the Parent and the Purchaser of the transactions contemplated by
this Agreement nor compliance by them with any of the provisions of this
Agreement will (a) conflict with or result in any breach of any provision of the
organizational documents or bylaws of the Parent or the Purchaser; (b) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
or acceleration under), any of the terms, conditions, or provisions of any note,
bond, mortgage, indenture, license, lease, contract, agreement, or other
instrument or obligation to which the Parent or the Purchaser is a party or by
which either of them or any of their respective properties or assets may be
bound; or (c) violate any order, writ, injunction, decree, statute, rule, or
regulation applicable to the Parent or the Purchaser or any of their respective
properties or assets; except such violations, conflicts, breaches, defaults,
terminations, or accelerations referred to in this Section 4.3 as could not,
-----------
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
4.4 No Prior Activities. Except for obligations or liabilities incurred
-------------------
in connection with its incorporation or organization, the Offer, or the
negotiation and consummation of this Agreement and the transactions contemplated
by this Agreement, the Purchaser has not incurred any obligations or
liabilities, nor has it engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
4.5 Information Supplied. None of the information supplied or to be
--------------------
supplied by the Parent or the Purchaser for inclusion or incorporation by
reference in the Offer Documents, the Schedule 14D-9, the information statement
under (S) 14(f) of the Exchange Act, or the Proxy Statement will, in the case of
the Offer Documents and the Schedule 14D-9, at the respective times the Offer
Documents and the Schedule 14D-9 are filed with the SEC or first published,
sent, or given to the stockholders of the Company, or, in the case of the Proxy
Statement, at the date the Proxy Statement is first mailed to the stockholders
of the Company or at the time of the meeting of the stockholders of the Company
held to vote on approval and adoption of this Agreement and the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in
20
<PAGE>
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Offer Documents will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder, except that no representation or
warranty is made by the Parent or the Purchaser with respect to statements made
or incorporated by reference in the Offer Documents based on information
supplied by the Company for inclusion or incorporation by reference in the Offer
Documents.
ARTICLE V
Covenants
---------
5.1 Conduct of Business of the Company.
----------------------------------
(a) Except as expressly contemplated by this Agreement and except in cases
where, at or after such time as the designees of the Parent constitute a
majority of the members of the Board of Directors of the Company and the failure
to comply with the covenants set forth in this Section 5.1 results from actions,
-----------
or omissions to act, taken or authorized by such designees, during the period
from the date of this Agreement to the Effective Time:
(i) Each of the Company and its subsidiaries will conduct its business
solely in the ordinary course consistent with past practices.
(ii) Neither the Company nor any of its subsidiaries will
intentionally take or willfully omit to take any actions that results in or
could reasonably be expected to result in, a Material Adverse Effect.
(iii) The Company will use its reasonable best efforts to preserve
intact the business organization of the Company and each of its subsidiaries, to
keep available the services of its and their present officers and key employees
and consultants, and to maintain satisfactory relationships with customers,
agents, reinsurers, suppliers, and other persons having business relationships
with the Company or its subsidiaries.
(b) Without limiting the provisions of Section 5.1(a) or as otherwise
--------------
expressly provided in this Agreement, neither the Company nor any of its
subsidiaries will:
(i) issue, sell, or dispose of additional shares of capital stock of
any class (including the Shares) of the Company or any of its subsidiaries, or
securities convertible into or exchangeable for any such shares or securities,
or any rights, warrants, or options to acquire any
21
<PAGE>
such shares or securities, other than Shares issued upon exercise of options
disclosed in Schedule 3.3, in each case in accordance with the terms disclosed
------------
on Schedule 3.3;
------------
(ii) redeem, purchase, or otherwise acquire, or propose to redeem,
purchase, or otherwise acquire, any of its outstanding capital stock, or other
securities of the Company or any of its subsidiaries;
(iii) split, combine, subdivide, or reclassify any of its capital
stock or declare, set aside, make, or pay any dividend or distribution on any
shares of its capital stock except for dividends or distributions to the Company
and its subsidiaries from their respective subsidiaries;
(iv) sell, pledge, dispose of, or encumber any of its assets, except
for sales, pledges, dispositions, or encumbrances in the ordinary course of
business consistent with past practices or between the Company and its
subsidiaries;
(v) incur or modify any indebtedness or issue or sell any debt
securities, or assume, guarantee, endorse, or otherwise as an accommodation
become absolutely or contingently responsible for obligations of any other
person, or make any loans or advances, other than in the ordinary course of
business consistent with past practices;
(vi) adopt or amend any bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred compensation,
employment or other employee benefit agreements, trusts, plans, funds, or other
arrangements for the benefit or welfare of any director, officer, or employee,
or (except for normal increases in the ordinary course of business that are
consistent with past practices and that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the Company) increase
in any manner the compensation or fringe benefits of any director, officer, or
employee or pay any benefit not required by any existing plan or arrangement
(including, without limitation, the granting or vesting of stock options or
stock appreciation rights) or take any action or grant any benefit not expressly
required under the terms of any existing agreements, trusts, plans, funds, or
other such arrangements or enter into any contract, agreement, commitment, or
arrangement to do any of the foregoing; or make or agree to make any payments to
any directors, officers, agents, contractors, or employees relating to a change
or potential change in control of the Company;
(vii) acquire by merger, consolidation, or acquisition of stock or
assets any corporation, partnership,
22
<PAGE>
or other business organization or division or make any investment either by
purchase of stock or securities (other than portfolio investments of its
insurance subsidiaries), contributions to capital (other than to wholly-owned
subsidiaries), property transfer, or purchase of any material amount of property
or assets, in any other person;
(viii) except as required by this Agreement, adopt any amendments to
their respective charters or bylaws or equivalent organizational documents;
(ix) take any action other than in the ordinary course of business and
consistent with past practices, to pay, discharge, settle, or satisfy any claim,
liability, or obligation (absolute or contingent, accrued or unaccrued, asserted
or unasserted, or otherwise);
(x) change any method of accounting or accounting practice used by the
Company or any of its subsidiaries, except for any change required by reason of
a concurrent change in generally accepted accounting principles;
(xi) revalue in any respect any of its assets, including, without
limitation, writing down the value of its portfolio or writing off notes or
accounts receivable other than in the ordinary course of business consistent
with past practices;
(xii) authorize any new capital expenditure or expenditures that,
individually, is in excess of $100,000 or, in the aggregate, are in excess of
$1,000,000;
(xiii) make any tax election, settle or compromise any federal, state,
or local tax liability or consent to the extension of time for the assessment or
collection of any federal, state, or local tax;
(xiv) settle or compromise any pending or threatened suit, action, or
claim material to the Company and its subsidiaries taken as a whole or relevant
to the transactions contemplated by this Agreement;
(xv) enter into any agreement, arrangement, or understanding to do
any of the foregoing actions in this Section 5.1, including any agreement,
-----------
arrangement, or understanding resulting in or providing for a sale of any assets
of the Company (other than a sale of assets in the ordinary course of business
and consistent with past practices) or a merger or other liquidation, sale, or
disposition of the Company; or
23
<PAGE>
(xvi) voluntarily take any action or wilfully omit to take any action
that could make any representation or warranty in Article III untrue or
-----------
incorrect in any material respect at any time, including as of the date of this
Agreement and as of the time of consummation of the Offer and the Effective
Time, as if made as of such time, except that the Company will not be obligated
to settle the Shareholder Litgation.
5.2 Proxy Statement. Promptly after the execution of this Agreement, the
---------------
Company and the Parent will cooperate with each other and use all reasonable
efforts to prepare, and the Company and the Parent will file with the SEC, as
soon as is reasonably practicable after completion of the Offer, a proxy
statement, together with a form of proxy, or information statement, with respect
to the Special Meeting (as defined in Section 5.3), if such Special Meeting is
-----------
required to be held pursuant to Section 5.3. For the purposes of this
-----------
Agreement, the term "Proxy Statement" means such proxy or information statement
filed in final form with the SEC at the time it initially is mailed to the
stockholders of the Company and all amendments or supplements thereto, if any,
similarly filed and mailed. The parties will use all reasonable efforts to have
the Proxy Statement cleared by the SEC as promptly as practicable after filing
and, as promptly as practicable after the Proxy Statement has been so cleared,
will mail the Proxy Statement to the stockholders of the Company as of the
record date for the Special Meeting. The Company represents that none of the
information provided or to be provided by it, and the Parent and the Purchaser
represent that none of the information provided or to be provided by them, for
use in the Proxy Statement will, on the date the Proxy Statement is first mailed
to the stockholders of the Company and on the date of the Special Meeting, be
false or misleading with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, and the Parent, the Company, and the Purchaser each agrees to
correct any information provided by it for use in the Proxy Statement that has
become false or misleading in any material respect and file such amendments and
supplements as are necessary. The Proxy Statement will comply as to form in all
material respects with all applicable requirements of federal securities laws
and applicable state laws.
5.3 Action of Stockholders of the Company; Voting and Disposition of the
--------------------------------------------------------------------
Shares.
- ------
(a) Promptly after completion of the Offer and if required by
applicable law in order to consummate the Merger, the Company will take all
action necessary in accordance with the DGCL and the Certificate of
Incorporation and Bylaws of the Company, to call a meeting of its stockholders
(the
24
<PAGE>
"Special Meeting") with a record date as of which the Parent is the record owner
of the Shares purchased pursuant to the Offer at which the stockholders of the
Company will consider and vote upon the Merger and this Agreement. Unless the
fiduciary duties of the Board of Directors under applicable law require
otherwise, the Proxy Statement will contain the unanimous recommendation of the
Board of Directors of the Company that the stockholders of the Company vote to
adopt and approve the Merger and this Agreement. The Company will, at the
request of the Parent, use all reasonable efforts to obtain from its
stockholders proxies in favor of such adoption and approval and to take all
other action necessary, or, in the reasonable judgment of the Company and the
Parent, helpful to secure the vote or consent of stockholders required by the
DGCL to effect the Merger. Notwithstanding the foregoing, in the event that the
Parent determines to effect the Merger without a meeting of the stockholders of
the Company pursuant to (S) 228 or (S) 253 of the DGCL, the parties will take
all necessary or appropriate action to cause the Merger to become effective as
soon as practicable after expiration of the Offer without a meeting of
stockholders, in accordance with either such section of the DGCL.
(b) At the Special Meeting, the Parent, the Purchaser, and their
subsidiaries will vote, or cause to be voted, all of the Shares then owned by
any of them in favor of the Merger.
5.4 Additional Agreements. Subject to the terms and conditions of this
---------------------
Agreement and to the fiduciary obligations of the Board of Directors of the
Company under applicable law, each of the parties agrees to use their respective
reasonable best efforts to take, or cause to be taken, all actions to do, or
cause to be done, all things necessary, proper, or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement (including consummation of the Offer, the Merger, and the Financing)
as defined in Section 5.11) and to cooperate with each other in connection with
------------
the foregoing, including, without limitation, using their respective reasonable
best efforts (a) to obtain all necessary waivers, consents, and approvals from
other parties to loan agreements, leases, and other contracts, (b) to obtain all
necessary consents, approvals, and authorizations as are required to be obtained
under any federal, state, or foreign law or regulations, (c) to lift or rescind
any injunction or restraining order or other order adversely affecting the
ability of the parties to consummate the transactions contemplated by this
Agreement, (d) to prepare and effect all necessary registrations and filings,
and (e) to fulfill all conditions to and covenants contained in this Agreement.
If, after the Effective Time, any action is necessary to effect the purposes of
this
25
<PAGE>
Agreement, the proper officers and directors of each party will take all such
necessary action.
5.5 Notification of Certain Matters. The Company will give prompt notice
-------------------------------
to the Parent and the Purchaser, and the Parent and the Purchaser will give
prompt notice to the Company, of (a) the occurrence, or failure to occur, of any
event, which occurrence or failure could cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time, (b) any material failure of the Company, the Parent, or the
Purchaser, as the case may be, or of any officer, director, employee, or agent
of the Company, the Parent, or the Purchaser, to comply with or satisfy any
covenant, condition, or agreement to be complied with or satisfied by it under
this Agreement, (c) any act, omission to act, event, or occurrence that, with
notice, the passage of time, or otherwise, could result in a Material Adverse
Effect in the Company or Parent, as the case may be, and (d) any contingent
liability of the Company for which it reasonably believes it will, with the
passage of time or otherwise, become liable. No such notification will affect
the representations or warranties of the parties or the conditions to the
obligations of the parties under this Agreement.
5.6 Access to Information.
---------------------
(a) From the date of this Agreement to the Effective Time, the Company
will, and will cause its subsidiaries, officers, directors, employees, and
agents upon reasonable notice to, afford to officers, employees, and agents of
the Parent, the Purchaser and their affiliates and the banks, other financial
institutions, and investment bankers working with the Parent or the Purchaser,
and their respective officers, employees, and agents, complete access at all
reasonable times to its officers, employees, agents, properties, books, records,
and contracts, and will furnish the Parent, the Purchaser and their affiliates
and the banks, other financial institutions, and investments bankers working
with the Parent or the Purchaser, all financial, operating, and other data and
information as they reasonably request.
(b) Each of the Parent and the Purchaser will hold and will cause its
directors, officers, agents, employees, consultants, and advisors to hold in
confidence, unless compelled to disclose by judicial or administrative process
or, in the written opinion of its legal counsel, by other requirements of law,
all documents and information concerning the Company and its subsidiaries
furnished to such persons in connection with the transactions contemplated by
this Agreement (except to the extent that such information can be shown to have
been (i) previously known by such persons from
26
<PAGE>
sources other than the Company, or its directors, officers, representatives, or
affiliates, (ii) in the public domain through no fault of such persons, or (iii)
later lawfully acquired by such persons on a non-confidential basis from other
sources who are not known by the Parent or the Purchaser to be bound by a
confidentiality agreement or otherwise prohibited from transmitting the
information to the Parent or the Purchaser by a contractual, legal, or fiduciary
obligation) and will not release or disclose such information to any other
person, except its directors, officers, agents, employees, consultants, and
advisors, in connection with this Agreement who need to know such information.
If the transactions contemplated by this Agreement are not consummated, such
confidence shall be maintained and, if requested by or on behalf of the Company,
the Parent and the Purchaser will, and will use all reasonable efforts to cause
their auditors, attorneys, financial advisors, and other consultants, agents,
and representatives to, return to the Company or destroy all copies of written
information furnished by the Company to the Parent and the Purchaser or their
agents, representatives, or advisors. It is understood that the Parent and the
Purchaser will be deemed to have satisfied their obligation to hold such
information confidential if they exercise the same care as they take to preserve
confidentiality for their own similar information.
(c) No investigation pursuant to this Section 5.6 will affect any
-----------
representations or warranties of the parties in this Agreement or the conditions
to the obligations of the parties to this Agreement.
5.7 Public Announcements. The Parent and the Purchaser on the one hand
--------------------
and the Company on the other hand will consult with each other before issuing
any press release or otherwise making any public statements with respect to this
Agreement, the Offer, or the other transactions contemplated by this Agreement,
and will not issue any such press release or make any such public statement
prior to such consultation, except as may be required by law or the listing
requirements of any securities exchange.
5.8 Officers' and Directors' Indemnification.
----------------------------------------
(a) The Parent and the Purchaser agree that all rights to
indemnification now existing in favor of the directors or officers of the
Company and its subsidiaries as provided in their respective certificates of
incorporation or bylaws and pursuant to the contracts listed on Schedule 5.8
------------
will, to the extent such rights are in accordance with applicable law, survive
the Merger and stay in effect in accordance with their respective terms.
27
<PAGE>
(b) In the event any action, suit, proceeding, or investigation
relating to this Agreement or to the transactions contemplated by this Agreement
is commenced by a third party, whether before or after the Effective Time, the
parties to this Agreement agree, subject to the fiduciary duties of the
respective Directors of the Company and Parent, to cooperate and use all
reasonable efforts to defend against and respond to such action, suit,
proceeding, or investigation.
(c) The covenants contained in this Section 5.8 will survive the
-----------
Merger and will continue without time limit.
5.9 Employee Options. As soon as practicable following the date of this
----------------
Agreement, the Company will take such actions as are required to provide that
each stock option to purchase Shares outstanding immediately prior to the
consummation of the Offer, whether or not then exerciseable, will be cancelled
immediately prior to the consummation of the Offer in exchange for an amount in
cash payable at the time of such cancellation equal to the product of (x) the
number of Shares subject to such stock option and unexercised immediately prior
to the consummation of the Offer and (y) the excess of the Per Share Price to be
paid in the Offer over the per share exercise price pursuant to such stock
option.
5.10 Other Actions by the Company. If any "fair price," "moratorium,"
----------------------------
"control share acquisition," or other form of antitakeover statute, regulation,
charter provision, or contract is or becomes applicable to the transactions
contemplated by this Agreement, the Company and the members of the Board of
Directors of the Company will use their reasonable efforts to grant such
approvals and take such actions as are necessary under such laws, provisions, or
contracts so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise act to eliminate or minimize the effects of such
statute, regulation, provision or contract on the transactions contemplated by
this Agreement.
5.11 Available Funds. The Purchaser has commenced discussions with
---------------
respect to financing that, together with internally generated funds, the Parent
and the Purchaser believe will be sufficient to permit the Purchaser to
consummate the Offer and the Merger (the "Financing"). The Parent and the
Purchaser will use their reasonable best efforts to pursue and obtain the
Financing as soon as practicable.
28
<PAGE>
ARTICLE VI
Conditions to Consummation of the Merger
----------------------------------------
The respective obligations of each party to effect the Merger are subject
to the satisfaction prior to the Effective Time of the following conditions:
6.1 Stockholder Approval. This Agreement will have been adopted and
--------------------
approved by the affirmative vote of the stockholders of the Company in
accordance with the Certificate of Incorporation and Bylaws of the Company and
with applicable law, unless no stockholder vote is required by law.
6.2 No Injunction. No federal or state statute, rule, regulation,
-------------
injunction, decree, or order will be enacted, promulgated, entered, or enforced
that would (i) prohibit consummation of the Merger or of the other transactions
contemplated by this Agreement or (ii) impose any material limitation on the
ability of the Parent or the Purchaser to exercise all rights of ownership with
respect to the Shares; provided that the parties to this Agreement agree to use
their respective reasonable best efforts to have any such injunction, decree, or
order lifted.
6.3 Offer. The Purchaser will have purchased Shares pursuant to the Offer
-----
(except that the Purchaser or the Parent in their sole discretion may waive
conditions to the Offer).
6.4 Governmental Consents. The waiting period applicable to the
---------------------
consummation of the Merger under the HSR Act will have expired or been
terminated and all filings required to be made prior to the Effective Time with,
and all consents, approvals, permits, and authorizations required to be obtained
prior to the Effective Time from, governmental and regulatory authorities in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement will have been
made or obtained (as the case may be).
ARTICLE VII
Termination; Amendment; Waiver
------------------------------
7.1 Termination. This Agreement may be terminated and the Offer and the
-----------
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any Stockholder approval of the Merger):
(a) by mutual written consent of the Parent, the Purchaser, and the
Company (subject to the provisions of Section 1.3(b));
--------------
29
<PAGE>
(b) by the Parent and the Purchaser or the Company if any court of
competent jurisdiction or other governmental body has issued a final order,
decree, or ruling or taken any other final action restraining, enjoining, or
otherwise prohibiting the Merger and such order, decree, ruling, or other action
is or has become nonappealable;
(c) by the Parent and the Purchaser if due to an occurrence or
circumstance that would result in a failure to satisfy any of the conditions set
forth in Annex A, the Purchaser has (i) failed to commence the Offer within five
-------
business days following the date of the initial public announcement of the
Offer, (ii) terminated the Offer, or (iii) failed to pay for the Shares pursuant
to the Offer by December 23, 1994;
(d) by the Company if (i) there has not been a breach of any material
representation, warranty, covenant, or agreement on the part of the Company, and
the Purchaser has (A) failed to commence the Offer within five business days
following the date of the initial public announcement of the Offer, (B)
terminated the Offer, (C) failed to pay for the Shares pursuant to the Offer by
December 23, 1994; provided, that any termination pursuant to this clause (C)
----------
must be made by written notice irrevocably stating the intent of the Company to
terminate this Agreement under this Section 7.1(d)(i)(C) delivered to the
--------------------
Purchaser and the Parent by 12:00 noon, Dallas time, on December 23, 1994, or
(D) if the Company has not exercised its right to terminate under clause (C),
----------
failed to pay for the Shares pursuant to the Offer by March 31, 1995 or (ii)
prior to the purchase of Shares pursuant to the Offer, a person or group has
made a bona fide offer (A) that the Board of Directors of the Company by a
majority vote determines in its good faith judgment and in the exercise of its
fiduciary duties, based as to legal matters on the written opinion of legal
counsel, is more favorable to the shareholders of the Company than the Offer and
the Merger and (B) as a result of which the Board of Directors of the Company is
obligated by its fiduciary duties under applicable law to terminate this
Agreement, provided that such termination under this clause (ii) will not be
-----------
effective until payment of the fee required by Section 7.3(b);
--------------
(e) by the Parent and the Purchaser prior to the purchase of Shares
pursuant to the Offer, if (i) there has been a breach (which breach is not cured
or not capable of being cured prior to the earlier of (A) 10 days following
notice to the Company by the Purchaser of such breach or (B) two business days
prior to the expiration date of the Offer, as extended from time to time
pursuant to the terms of this Agreement) of any representation or warranty on
the part of the Company having a Material Adverse Effect on the Company or
30
<PAGE>
materially adversely affecting or delaying the ability of the Parent or the
Purchaser to consummate the Offer and the Merger (including the Financing), (ii)
there has been a breach (which breach is not cured or not capable of being cured
prior to the earlier of (A) 10 days following notice to the Company by the
Purchaser of such breach or (B) two business days prior to the expiration date
of the Offer, as extended from time to time pursuant to the terms of this
Agreement) of any covenant or agreement on the part of the Company resulting in
a Material Adverse Effect on the Company or materially adversely affecting or
delaying the ability of the Parent or the Purchaser to consummate the Offer and
the Merger (including the Financing), (iii) the Company engages in negotiations
with any person or group (other than the Parent or the Purchaser) that has
proposed a Third Party Acquisition (as defined in Section 7.3) except to the
-----------
extent permitted by Section 8.8; (iv) the Company enters into an agreement,
-----------
letter of intent, or arrangement with respect to a Third Party Acquisition, (v)
the Board has withdrawn or modified (including by amendment of the Schedule 14D-
9) in a manner adverse to the Purchaser its approval or recommendation of the
Offer, this Agreement, or the Merger or has recommended another offer, or has
adopted any resolution to effect any of the foregoing, or (vi) the Minimum
Condition has not been satisfied by the expiration date of the Offer and on or
prior to such date (A) any person or group (other than the Parent or the
Purchaser) has made and not withdrawn a public announcement with respect to a
Third Party Acquisition or (B) any person or group (including the Company or any
of its affiliates) other than the Parent or the Purchaser has become the
beneficial owner of 19.9% (except in bona fide arbitrage transactions) or more
of the Shares; or
(f) by the Company if (i) there has been a breach of any
representation or warranty on the part of the Parent or the Purchaser that
materially adversely affects (or materially delays) the consummation of the
Offer or (ii) there has been a material breach of any covenant or agreement on
the part of the Parent or the Purchaser that materially adversely affects (or
materially delays) the consummation of the Offer.
7.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 7.1, this Agreement will
-----------
become void and have no effect, without any liability on the part of any party
to this Agreement or its affiliates, directors, officers, or stockholders, other
than the provisions of this Section 7.2 and Sections 5.6(b), 5.8, and 7.3.
----------- --------------------- ---
Nothing contained in this Section 7.2 will relieve any party from liability for
-----------
any breach of this Agreement. No termination of this Agreement will affect any
Shareholder Agreement except as provided in such Shareholder Agreement.
31
<PAGE>
7.3 Fees and Expenses. (a) In the event the Parent and the Purchaser
-----------------
terminate this Agreement pursuant to Sections 7.1(e)(i) through (v) or the
------------------ ---
Company terminates this Agreement pursuant to Section 7.1(d)(ii) or Section
------------------ -------
7.1(d)(i)(C), the Company will reimburse the Parent, the Purchaser, and their
- ------------
affiliates (not later than one business day after submission of statements
together with reasonable documentation therefor) for all out-of-pocket fees and
expenses actually incurred by any of them or on their behalf in connection with
the Offer and the Merger and the consummation of all transactions contemplated
by this Agreement (including, without limitation, costs of advertising, filing
fees and fees payable to legal counsel, financial printers, financing sources,
investment bankers, counsel to any of the foregoing, and accountants).
(b) If (i) (A) the Parent and the Purchaser terminate this Agreement
pursuant to Sections 7.1(e)(i) through (v) or in circumstances that would permit
------------------ ---
the Parent and the Purchaser to terminate this Agreement pursuant to Sections
--------
7.1(e)(i) through (v) had a notice of termination specified such Sections
- --------- --- --------
7.1(e)(i) through (v) or (B) if the Company terminates this Agreement pursuant
- --------- ---
to Section 7.1(d)(i)(C) and, within nine months after a termination pursuant to
--------------------
clause (A) or nine months of a termination pursuant to clause (B), the Company
- ---------- ----------
enters into an agreement, letter of intent, or binding arrangement with respect
to a Third Party Acquisition, or a Third Party Acquisition occurs or (ii) the
Company terminates this Agreement pursuant to Section 7.1(d)(ii), then in either
------------------
case the Company will pay to the Parent and the Purchaser, within one business
day following the execution and delivery of such agreement or letter of intent
or the entering into of such an arrangement or the occurrence of such Third
Party Acquisition, as the case may be, or simultaneously with such termination
pursuant to Section 7.1(d)(ii), a fee, in cash, of $12,000,000, provided,
------------------
however, that the Company in no event will be obligated to pay more than one
such $12,000,000 fee with respect to all such agreements and occurrences and
such termination.
For the purposes of this Agreement, "Third Party Acquisition" means the
occurrence of any of the following events (i) the acquisition of the Company by
merger or otherwise by any person or group other than the Parent, the Purchaser,
or any affiliate of the Parent or the Purchaser (a "Third Party"); (ii) the
acquisition by a Third Party of more than 19.9% of the total assets of the
Company and its subsidiaries, taken as a whole; (iii) the acquisition by a Third
Party of 19.9% or more of the outstanding Shares from the Company or in a
transaction or series of related transactions that results in a change of
control of the Company; (iv) the adoption by the Company of a plan of
32
<PAGE>
liquidation or the declaration or payment of an extraordinary dividend; or (v)
the acquisition by the Company or any of its subsidiaries of more than 19.9% of
the outstanding Shares.
(c) Except as specifically provided in this Section 7.3 each party will
-----------
bear its own expenses in connection with this Agreement and the transactions
contemplated by this Agreement.
7.4 Amendment. This Agreement may not be amended except in an instrument
---------
in writing signed on behalf of all of the parties to this Agreement; provided,
--------
however, that after approval of the Merger by the stockholders of the Company,
- -------
no amendment that would either decrease the Merger Consideration or change any
other term or condition of this Agreement, if any such change, alone or in the
aggregate, would materially and adversely affect the stockholders of the
Company, may be made without the further approval of the stockholders of the
Company; provided, further, that, after purchase of the Shares pursuant to the
-----------------
Offer, no amendment may be made to Section 5.8 without the consent of the
-----------
indemnified persons.
7.5 Waiver. At any time prior to the Effective Time, whether before or
------
after the Special Meeting, any party to this Agreement may (i) subject to the
second proviso in Section 7.4, extend the time for the performance of any of the
-----------
obligations or other acts of any other party or parties to this Agreement, (ii)
subject to the provisos contained in Section 7.4 of this Agreement, waive any
-----------
inaccuracies in the representations and warranties contained in this Agreement
by any other applicable party or in any documents, certificate, or writing
delivered pursuant to this Agreement by any other applicable party, or (iii)
subject to the provisos contained in Section 7.4 of this Agreement, waive
-----------
compliance with any of the agreements of any other party or with any conditions
to its own obligations. Any agreement on the part of a party to this Agreement
to any such extension or waiver will be valid only if set forth in an instrument
in writing signed on behalf of such party by a duly authorized officer.
ARTICLE VIII
Miscellaneous
-------------
8.1 Survival of Representations, Warranties, and Agreements. The
-------------------------------------------------------
representations and warranties made in this Agreement will not survive beyond
the Effective Time or the termination of this Agreement, as the case may be. No
investigation made, or information received by, any party to this Agreement will
affect any representation or warranty made by any other party to this Agreement.
The covenants and agreements of the parties to this Agreement will survive in
accordance with their terms.
33
<PAGE>
8.2 Brokerage Fees and Commissions. The Company hereby represents and
------------------------------
warrants to the Parent with respect to the Company and any of its subsidiaries,
that except as disclosed in the Offer, and the Parent and the Purchaser hereby
represent and warrant to the Company with respect to Parent or any of its
subsidiaries that, no person is entitled to receive from the Company, the
Parent, the Purchaser or any of their subsidiaries, respectively, any investment
banking, brokerage, or finder's fee or fees in connection with this Agreement or
any of the transactions contemplated by this Agreement.
8.3 Entire Agreement; Assignment. This Agreement, together with the
----------------------------
Shareholder Agreements and all the Schedules and Annexes, (a) constitutes the
entire agreement between the parties with respect to the subject matter of this
Agreement and supersedes all other prior written agreements and understandings
and all prior and contemporaneous oral agreements and understandings between the
parties to this Agreement or any of them with respect to the subject matter of
this Agreement and (b) will not be assigned by operation of law or otherwise,
provided that the Parent may assign its rights and obligations under this
Agreement, or those of the Purchaser, including, without limitation, the right
to substitute in place of the Purchaser a subsidiary as one of the constituent
corporations to the Merger as provided in Section 2.1 to any direct or indirect
-----------
subsidiary of the Parent, but no such assignment will relieve the assigning
party of its obligations under this Agreement. Any purported assignment of this
Agreement not made in accordance with this Section 8.3 will be null, void, and
-----------
of no effect. No party to this Agreement has relied upon any representation or
warranty, oral or written, of any other party to this Agreement or any of their
officers, directors, or stockholders except for the representations and
warranties contained in this Agreement and the Shareholder Agreements.
8.4 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal, or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect. Upon any final judicial determination that any
term or other provision is invalid, illegal, or incapable of being enforced, the
parties to this Agreement will negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement be consummated to the extent possible.
8.5 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement will be in writing and will be deemed to
have been duly given when delivered in
34
<PAGE>
person, by cable, telegram or telex, facsimile or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties as
follows:
(a) if to the Parent or the Purchaser, to:
Torchmark Corporation
2001 Third Avenue, South
Birmingham, Alabama 35233-2186
Attention: R. K. Richey
Fax: (205) 325-4198
and
6300 Lamar
Shawnee Mission, Kansas 66201
Attention: Keith A. Tucker
Fax: (913) 236-1939
with a copy to:
Alan J. Bogdanow
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Fax: (214) 939-6100
(b) if to the Company, to:
American Income Holding, Inc.
1100 N. Market Street
Suite 1300
Wilmington, Delaware 19899
Attention: Bernard Rapoport
with a copy to:
Ford Lacy, P.C.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Fax: (214) 969-4343
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address will be effective only upon
receipt).
8.6 Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of
35
<PAGE>
Texas, regardless of the laws that might otherwise govern under applicable
principles of conflict of laws; provided, however, that the consummation and
-------- -------
effectiveness of the Merger will be governed and construed in accordance with
the laws of the State of Delaware.
8.7 Specific Performance. Each of the parties to this Agreement
--------------------
acknowledges and agrees that the other parties to this Agreement would be
irreparably damaged in the event any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. Accordingly, each of the parties to this Agreement agrees that each
of them will be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions of this Agreement in any action instituted in any court
of the United States or any state having subject matter jurisdiction, in
addition to any other remedy to which such party may be entitled, at law or in
equity.
8.8 Other Potential Bidders. The Company, its affiliates, and their
-----------------------
respective officers, directors, employees, representatives, and agents will
immediately cease any existing discussions or negotiations, if any, with any
person or group conducted heretofore with respect to any acquisition of all or
any material portion of the assets of, or any equity interest in, the Company or
any of its subsidiaries or any business combination with the Company or any of
its subsidiaries. The Company may, directly or indirectly, furnish information
and access, in each case only in response to unsolicited requests therefor, to
any person or group made after the date of this Agreement that was not
encouraged, solicited, or initiated by the Company or any of its affiliates, or
their respective officers, directors, agents, or representatives after the date
of this Agreement, pursuant to appropriate confidentiality agreements, and may
participate in discussions and negotiate with such person or group concerning
any merger, sale of assets, sale of shares of capital stock, or similar
transaction involving the Company or any subsidiary of the Company, if such
person or group has submitted a written proposal to the Board of Directors of
the Company relating to any such transaction and failing to take such action
would constitute a breach of fiduciary duty under applicable law. The Board of
Directors of the Company will provide a written copy of such proposal to the
Purchaser immediately after receipt and will keep the Parent and the Purchaser
promptly advised of any development with respect to such matters except that the
Company may withhold the identity of the other party to the transaction if in
the written opinion of its legal counsel, disclosure of such information would
constitute a breach of fiduciary duties under applicable
36
<PAGE>
law. Except as set forth above, neither the Company nor any of its affiliates,
nor any of its or their respective officers, directors, employees,
representatives, or agents, will, directly or indirectly, for the account of the
Company or for their own account, encourage, solicit, participate in, or
initiate discussions or negotiations with, or provide any information to, any
person or group (other than the Parent and the Purchaser, any affiliate of the
Parent and the Purchaser, or any designees of the Parent and the Purchaser)
concerning any merger, sale of assets, sale of shares of capital stock, or
similar transaction involving the Company or any subsidiary; provided, however,
that nothing in this Agreement will prevent the Board of Directors of the
Company from taking, and disclosing to the stockholders of the Company, a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to any tender offer other than the Offer; provided, further,
that the Board of Directors of the Company will not recommend that the
stockholders of the Company tender their Shares in connection with any such
tender offer unless failing to take such action would constitute a breach of
fiduciary duty under applicable law. The Company will not waive, or release any
person from, any provision of any confidentiality or standstill agreement to
which the Company is a party.
8.9 Descriptive Headings; References. The descriptive headings in this
--------------------------------
Agreement are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
References in this Agreement to Sections, Annexes, and Schedules are references
to the Sections, Annexes, and Schedules of this Agreement unless the context
indicates otherwise.
8.10 Parties in Interest. This Agreement will be binding upon and inure
-------------------
solely to the benefit of each party to this Agreement, and, except as provided
in Sections 5.9 and 8.11, nothing in this Agreement, express or implied, is
------------ ----
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
8.11 Beneficiaries. The Parent hereby acknowledges that Section 5.8 is
------------- -----------
intended to benefit the indemnified parties referred to in Section 5.8, any of
-----------
whom will be entitled to enforce Section 5.8 against the Surviving Corporation
-----------
or the Company, as the case may be.
8.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed to be an original, but all of which
will constitute one and the same agreement.
37
<PAGE>
8.13 Obligations. The Parent will perform or cause the Purchaser to
-----------
perform all of the obligations of the Purchaser under this Agreement, including
consummation of the Merger, in accordance with the terms of this Agreement.
8.14 Certain Definitions. For the purposes of this Agreement: (a) the
-------------------
term "subsidiary" means each person in which a person owns or controls, directly
or through one or more subsidiaries, 50 percent or more of the stock or other
interests having general voting power in the election of directors or persons
performing similar functions or more than 50% of the equity interests; (b) the
term "person" will be broadly construed to include any individual, corporation,
company, partnership, trust, joint stock company, association, or other private
or governmental entity; (c) the term "group" has the meaning given in
(S)13(d)(3) of the Exchange Act; (d) the term "affiliate" has the meaning given
in Rule 144(a)(1) under the Securities Act; and (e) the term "business day" has
the meaning given in Rule 14d-1(c)(6) under the Exchange Act.
38
<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement has caused this
Agreement to be executed on its behalf by its duly authorized officers, all as
of the day and year first above written.
TORCHMARK CORPORATION
By
/s/ Keith A. Tucker
-------------------------------
Name: Keith A. Tucker
--------------------------
Title: Vice Chairman
-------------------------
Attest:
/s/ Sharon Jenkins
- -------------------------
Name: Sharon Jenkins
--------------------
Title: Executive Assistant
-------------------
TMK ACQUISITION CORPORATION
By
/s/ Keith A. Tucker
-------------------------------
Name: Keith A. Tucker
--------------------------
Title: President
-------------------------
Attest:
/s/ Sharon Jenkins
- -------------------------
Name: Sharon Jenkins
--------------------
Title: Executive Assistant
-------------------
AMERICAN INCOME HOLDING, INC.
By
/s/ Bernard Rapoport
-------------------------------
Name: Bernard Rapoport
--------------------------
Title: Chairman of the Board
-------------------------
Attest:
/s/ Charles B. Cooper
- -------------------------
Name: Charles B. Cooper
--------------------
Title: President
-------------------
39
<PAGE>
Annex A
Terms used in this Annex A have the meanings ascribed to them in the
-------
Agreement and Plan of Merger dated as of September 15, 1994 (the "Merger
Agreement").
Notwithstanding any other provisions of the Offer, the Purchaser will not
be required to accept for payment or (subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) relating to the obligation of
the Purchaser to pay for or return tendered Shares promptly after the
termination or withdrawal of the Offer) to pay for tendered Shares, or may
terminate or amend the Offer as provided in the Agreement, or may postpone the
acceptance for payment of, or payment for, Shares (whether or not any other
Shares have been accepted for payment or paid for pursuant to the Offer) if
prior to the expiration of the Offer (i) the Minimum Condition has not been
satisfied; (ii) the waiting period under the HSR Act has not expired or been
terminated with respect to purchase of the Shares; (iii) any consent, permit, or
authorization required to be obtained prior to the consummation of the Offer
from any regulatory or governmental authority (including, without limitation,
the insurance regulatory authorities of the States of Indiana and Texas) has not
been obtained or is subject to any condition that is materially burdensome; or
(iv) if at any time on or after the date of the Merger Agreement, and at any
time before the time of acceptance for payment of any such Shares, any of the
following occurs:
(a) any of the representations or warranties of the Company contained
in the Merger Agreement is not true and correct at and as of any date prior
to the expiration date of the Offer as if made at and as of such time,
except for (i) failures to be true and correct as could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect on the Company or a material adverse effect on the Financing and
(ii) failures to comply as are capable of being and are cured prior to the
earlier of (A) 10 days after written notice from the Purchaser to the
Company of such failure or (B) two business days prior to the expiration
date of the Offer;
(b) the Company has failed to comply with any of its obligations under
the Merger Agreement, except for (i) failures to so comply as could not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on the Company or the Financing and (ii) failures
to comply as are capable of being and are cured prior to the earlier of (A)
10 days after written notice from the Purchaser to the Company of such
failure or (B) two business days prior to the expiration date of the Offer;
A - 1
<PAGE>
(c) the Board of Directors of the Company has withdrawn or modified
in any respect adverse to the Purchaser or the Parent its recommendation of
the Offer or taken any position inconsistent with such recommendation;
(d) the Merger Agreement has been terminated in accordance with its
terms;
(e) the Company has reached an agreement with the Parent or the
Purchaser that the Offer or the Merger be terminated or amended;
(f) any state, federal, or foreign government, or governmental
authority has taken any action, or proposed, sought, promulgated, or
enacted, or any state, federal, or foreign government or governmental
authority or court has entered, enforced, or deemed applicable to the Offer
or the Merger, any statute, rule, regulation, judgment, order, or
injunction that is reasonably likely to (i) make the acceptance for payment
of, the payment for, or the purchase of, some or all of the Shares illegal
or otherwise restrict, materially delay, prohibit consummation of, or make
materially more costly, the Offer or the Merger, (ii) result in a material
delay in or restrict the ability of the Purchaser, or render the Purchaser
unable, to accept for payment, pay for or purchase some or all of the
Shares in the Offer or the Merger, (iii) require the divestiture by the
Parent, the Purchaser, or the Company or any of their respective
subsidiaries or affiliates of all or any material portion of the business,
assets, or property of any of them or any Shares, or impose any material
limitation on the ability of any of them to conduct their business and own
such assets, properties, and Shares, (iv) impose material limitations on
the ability of the Parent or the Purchaser to acquire or hold or to
exercise effectively all rights of ownership of the Shares, including the
right to vote any Shares acquired by either of them on all matters properly
presented to the shareholders of the Company, (v) impose any limitations on
the ability of the Parent, the Purchaser, or any of their respective
subsidiaries or affiliates effectively to control in any material respect
the business or operations of the Company, the Parent, the Purchaser, or
any of their respective subsidiaries or affiliates;
(g) any change, other than Shareholder Litigation, (or any condition,
event or development involving a prospective change) has occurred or been
threatened in the business, properties, assets, liabilities,
capitalization, shareholders' equity, financial condition, operations,
licenses or franchises,
A - 2
<PAGE>
results of operations, or prospects (excluding changes in prospects that
affect the life insurance industry generally) of the Company or any of its
subsidiaries, that could reasonably be expected to result in a Material
Adverse Effect;
(h) there has occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market or quotations for shares traded thereon as
reported by the NASDAQ or otherwise, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States (except for any such event with
respect to Haiti), (iv) any limitation (whether or not mandatory) by any
governmental authority on the extension of credit by banks or other
financial institutions, (v) after the date of the Merger Agreement, an
aggregate decline of at least 25% in the Dow Jones Industrial Average or
Standard & Poor's 500 Index or a decline in either such index of 12-1/2% in
any 24-hour period, or (vi) in the case of any of the occurrences referred
to in clauses (i) through (iv) existing at the time of the commencement of
----------- ----
the Offer, in the reasonable judgment of the Purchaser, a material
acceleration or worsening thereof;
(i) any person or group other than the Parent or the Purchaser and
their affiliates has entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer
for any Shares or a merger, consolidation, or other business combination or
acquisition with or involving the Company or any of its subsidiaries; or
(j) any material approval, permit, authorization, consent, or waiting
period of any domestic or foreign governmental, administrative, or
regulatory entity (federal, state, local, provincial or otherwise) has not
been obtained or satisfied on terms satisfactory to the Purchaser in its
sole discretion;
that, in the good faith judgment of the Purchaser that is not demonstrated to be
unreasonable with respect to each and every matter referred to above and
regardless of the circumstances (including any action or inaction by the
Purchaser, the Parent, or any of their affiliates) giving rise to any such
condition, makes it inadvisable to proceed with the Offer or with such
acceptance for payment of, or payment for, Shares or to proceed with the Merger.
A - 3
<PAGE>
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by the Purchaser in whole or in part at any time
and from time to time in its sole discretion (subject to the terms of the
Agreement). The failure by the Purchaser at any time to exercise any of the
foregoing rights will not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances will not be
deemed to waiver with respect to any other facts or circumstances, and each such
right will be deemed an ongoing right that may be asserted at any time and from
time to time.
A - 4
<PAGE>
Annex B-1
Bernard Rapoport
Charles B. Cooper
Golder, Thoma, Cressey Fund III
Limited Partnership
The Bernard and Audre Rapoport Foundation
Ronald Rapoport, Trustee for:
Rebecca Abigail Rapoport
Emily Palmer Rapoport
B - 1
<PAGE>
ANNEX B-2
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (the "Agreement"), dated as of September 15, 1994 by
and between TORCHMARK CORPORATION, a Delaware corporation (the "Parent"),
AMERICAN INCOME HOLDING, INC., a Delaware corporation (the "Company"), and [*]
(the "Shareholder").
RECITALS
Simultaneous with the execution and delivery of this Agreement, the Parent
is entering into an Agreement and Plan of Merger (as amended from time to time,
the "Merger Agreement") with the Company and TMK ACQUISITION CORPORATION, a
Delaware corporation and wholly owned subsidiary of the Parent (together with
any person succeeding to the rights and obligations of the Subsidiary pursuant
to Sections 2.1 and 8.3 of the Merger Agreement, the "Subsidiary").
------------ ---
As an inducement to the Parent and the Subsidiary to enter into and perform
the Merger Agreement, the Shareholder has agreed to grant to the Parent an
option on the terms set forth in this Agreement and to tender all of his or its
shares of Company Stock on the terms set forth below, and the Company has agreed
to join in this Agreement for the purposes of granting certain rights pursuant
to Sections 4 and 8.
---------- -
THEREFORE, in consideration of the foregoing, the mutual covenants and
promises set forth below, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Grant of Option. Subject to the terms and conditions of this
---------------
Agreement, the Shareholder hereby irrevocably grants to the Parent an option
(the "Option") to purchase all shares of common stock, par value $.01 per share
(the "Common Stock"), of the Company now owned or hereafter acquired by the
Shareholder (the "Option Shares") at a price per share (the "Exercise Price")
equal to the sum of (x) the Per Share Amount (as defined in the Merger
Agreement) plus (y) the Adjustment Amount (as defined below). The amount of the
Exercise Price constituting the Adjustment Amount will be paid by the Parent to
the Shareholder within three business days after the later of actual receipt of
the consideration by the Parent from any Adjustment Event (as defined below) or
the receipt of the opinion as to the value of such consideration referred to
below. Attached as Schedule 1 to this Agreement is an accurate and complete
----------
list of all shares of Common Stock beneficially owned by the Shareholder and a
list of each option of the Shareholder to acquire shares of Common Stock. The
Shareholder agrees that all shares currently beneficially
B-2-1
<PAGE>
owned by the Shareholder are Option Shares and that any shares of Common Stock
subsequently acquired by the Shareholder upon exercise of the options listed on
Schedule 1 or otherwise will also be Option Shares subject to the terms of this
- ----------
Agreement, except that the Shareholder will be under no obligation to exercise
such options under this Agreement. The Parent agrees to use reasonable efforts
to exercise the Option granted by this Agreement on a pro rata basis with other
options granted by other stockholders of the Company contemporaneously with this
Agreement. As used in this Agreement, the term "Adjustment Amount" means the
excess, if any, of (x) the value per share of the consideration actually
received by the Parent as a result of any agreement, letter of intent, or
binding arrangement entered into within nine months of the exercise of the
Option or any sale or disposition of Option Shares that occurs within nine
months of the exercise of the Option (an "Adjustment Event") over (y) the Per
Share Amount of the Offer (as defined in the Merger Agreement), including any
increase contemplated by Section 1.1 of the Merger Agreement, last in effect
-----------
prior to the consummation of an Adjustment Event. In the event that the
consideration paid to the Parent in an Adjustment Event is other than cash, the
value of such consideration will be conclusively determined in a written opinion
by an investment banking firm of recognized national standing selected by the
Parent with the consent of the Shareholder, which consent will not be
unreasonably withheld or delayed.
2. Exercise of Option.
------------------
2.1. Exercise. Subject to the conditions set forth in Section 2.3,
-------- -----------
the Option may be exercised in its entirety or in part from time to time by the
Parent at any time prior to the Outside Date (as defined below). As used in
this Agreement, the term "Outside Date" will mean March 31, 1995 unless the
Company terminates the Merger Agreement pursuant to Section 7.1(d)(i)(C) of the
--------------------
Merger Agreement, in which case it will mean December 29, 1994; provided, that
any written notice by the Parent of its election to exercise all or part of the
Option will extend the Outside Date for all purposes under this Agreement until
such time as any proceedings before any court or governmental instrumentality
necessary for the exercise of the Option are final and nonappealable and until
such time as any waiting period prescribed or approval required by any
applicable law, statute, regulation, order, or decree for the exercise of the
Option has passed or been obtained, as the case may be, but in no case later
than March 31, 1995 (unless the proceeding is between the Shareholder and the
Parent, in which case such March 31, 1995 date will not apply). If such
exercise by the Parent is delayed because of such proceedings, waiting period,
or necessity for approval, the Parent will have five business days after such
proceedings become final and nonappealable, such waiting period has passed, or
approval has been obtained to withdraw its exercise of the Option.
B-2-2
<PAGE>
2.2. Closing. In the event that the Parent wishes to exercise some or
-------
all of the Option, the Parent will give a written notice signed by an executive
officer of the Parent to the Shareholder of his or its intention to exercise the
Option, stating that the conditions set forth in Section 2.3 have been
-----------
fulfilled, and specifying the number of Option Shares to be purchased, the place
and date for the closing (the "Closing") of such purchase (which date will not
be later than ten business days from the date that such notice is mailed or
delivered); provided, however, that such date will be extended until such time
as any proceedings before any court or governmental instrumentality necessary
for the consummation of the purchase of the Option Shares is final and
nonappealable and until such time as any waiting period prescribed or approval
required by any applicable law, statute, regulation, order, or decree for the
consummation of the purchase of the Option Shares has passed or been obtained,
as the case may be, but in no event later than March 31, 1995 (unless the
proceeding is between the Shareholder and the Parent, in which case such March
31, 1995 date will not apply).
2.3. Conditions. The Parent will not have the right to exercise the
----------
Option and purchase the Option Shares unless:
(a) no preliminary or permanent injunction or other order issued
by any federal or state court of competent jurisdiction against the delivery of
the Option Shares is in effect;
(b) any applicable waiting period or extension under the Hart-
Scott-Rodino Anti-trust Improvements Act of 1976, as amended (the "HSR Act"),
has expired or been terminated, and all necessary approvals, consents, permits,
and requirements under all applicable laws, regulations, and rules, including,
without limitation, approvals under the insurance holding company statutes and
regulations of the States of Indiana and Texas, have been obtained or fulfilled;
and
(c) one or more of the following events has occurred: (i) the
Company or any of its subsidiaries (as defined in the Merger Agreement) enters
into a reorganization agreement, merger agreement, or other similar agreement or
plan, including, without limitation, an agreement in principle or letter of
intent, other than with the Parent or the Subsidiary or their affiliates; (ii)
any person or "group" (as used in (S) 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), other than the Parent or the Subsidiary
or their affiliates, (A) commences a tender offer or exchange offer for, or
other transaction involving, more than 20% of the outstanding Common Stock or
(B) publicly proposes any dissolution, recapitalization, merger, consolidation,
business combination, acquisition, or similar transaction involving the Company
or any of its subsidiaries
B-2-3
<PAGE>
that, in either case the Parent reasonably and in good faith concludes (after
the earlier of a public announcement by the Board of Directors of the Company of
its position with respect to such occurrence or the expiration of 10 days from
the date of such occurrence) is likely to be consummated; (iii) any person or
group, other than the Parent or the Subsidiary or their affiliates, acquires
more than 10% of the total assets of the Company and its subsidiaries, taken as
a whole; (iv) any person or group, other than the Parent or the Subsidiary or
their affiliates, acquires after the date of this Agreement more than 20% of the
outstanding Common Stock or any option or similar right to acquire more than 20%
of the Common Stock (other than for bona fide arbitrage purposes); (v) the
Company adopts a plan of liquidation relating to more than 10% of the total
assets of the Company and its subsidiaries, taken as a whole, or declares a
distribution to its stockholders of more than 10% of the total assets of the
Company and its subsidiaries, taken as a whole; or (vi) any person or group,
other than the Purchaser or the Subsidiary or their affiliates, commences a
proxy solicitation with respect to the Common Stock that the Parent reasonably
and in good faith concludes (after the earlier of a public announcement by the
Board of Directors of the Company of its position with respect to such
occurrence or the expiration of 10 days from the date of such occurrence) is
adverse to the Offer, the Merger, this Agreement, or the transactions
contemplated by this Agreement and is likely to succeed.
3. Payment and Delivery of Certificate(s). At the Closing, the Parent
--------------------------------------
will pay the aggregate purchase price for the number of Option Shares to be
purchased by delivery of a certified or bank cashier's check payable to the
order of the Shareholder in the amount equal to the product of (x) the Per Share
Amount times (y) the number of Option Shares to be purchased. At the Closing,
the Shareholder will deliver to the Parent a certificate or certificates in the
name of the Parent or its designee representing the Option Shares so purchased
free and clear of any adverse claim. The balance of the Exercise Price, if any,
referred to in clause (y) of Section 1, will be paid in accordance with
---------- ---------
Section 1.
- ------- -
4. Notification of Record Date. At any time from and after the date of
---------------------------
this Agreement until the time that the Purchaser purchases Shares pursuant to
the Offer, the Shareholder and the Company will give the Parent fifteen days'
prior written notice of any record date for determining the holders of record of
the Common Stock entitled to vote on any matter, to receive any dividend or
distribution, or to participate in any rights offering or other matters, or to
receive any other benefit or right with respect to the Common Stock.
B-2-4
<PAGE>
5. Representations and Warranties of the Shareholder. The Shareholder
-------------------------------------------------
hereby represents and warrants to the Parent as follows:
5.1. Binding Agreement. This Agreement constitutes the legal, valid,
-----------------
and binding agreement of the Shareholder, enforceable against the Shareholder in
accordance with its terms.
5.2. Option Shares. The Shareholder has all required authority and
-------------
has taken all necessary action to permit the Shareholder at all times from the
date of this Agreement to the Outside Date to deliver and sell the Option Shares
free and clear of all claims, liens, encumbrances, and security interests
whatsoever.
5.3. No Conflicts. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated by this
Agreement will violate or result in any violation of or be in conflict with, or
constitute a default under, any terms of any statute, regulation, agreement,
instrument, judgment, decree, rule, or order applicable to the Shareholder.
5.4. No Approvals or Notices Required. The execution, delivery, and
--------------------------------
performance of this Agreement by the Shareholder and the consummation by the
Shareholder of the transactions contemplated by this Agreement will not violate
(with or without the giving of notice or the lapse of time or both) or require
any consent, approval, filing, or notice by the Shareholder under any provision
of law applicable to the Shareholder except for filings required by the HSR Act,
filings on Schedule 13D under the Exchange Act, and any approvals required to be
obtained from state insurance regulatory authorities.
5.5. Title. The Option Shares, when delivered by the Shareholder to
-----
the Parent upon exercise of the Option, will be free and clear of any claims,
liens, charges, encumbrances, security interests, and charges of any nature
whatsoever other than restrictions on transfer under applicable federal and
state securities laws. On the date of this Agreement the Shareholder has (and
the Shareholder will have at all times up to the Outside Date or the earlier
purchase by the Parent or the Subsidiary of the Option Shares) good and
marketable title to the Option Shares, free and clear of all claims, liens,
charges, encumbrances, and security interests other than restrictions on
transfer under applicable federal and state securities laws; provided, however,
that notwithstanding the foregoing, the Shareholder will validly tender, and not
withdraw, all the Option Shares pursuant to the Offer.
B-2-5
<PAGE>
6. Representations and Warranties of the Parent. The Parent hereby
--------------------------------------------
represents and warrants to the Shareholder as follows:
6.1. Due Authorization. This Agreement has been duly authorized by
-----------------
all necessary action on the part of the Parent and has been duly executed and
delivered by the Parent.
6.2. Distribution. The shares of Common Stock to be acquired upon
------------
exercise of the Option will not be taken by the Shareholder with a view to
distribution in violation of the Securities Act of 1933, as amended (the
"Securities Act").
6.3. No Conflicts. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated by this
Agreement will violate or result in any violation of or be in conflict with or
constitute a default under any terms of the Certificate of Incorporation or
Bylaws of the Shareholder or any statute, regulation, agreement, instrument,
judgment, decree, rule, or order applicable to the Shareholder.
6.4. No Approvals or Notices Required. The execution, delivery, and
--------------------------------
performance of this Agreement by the Parent and the consummation by the Parent
of the transactions contemplated by this Agreement will not violate (with or
without the giving of notice or the lapse of time or both) or require any
consent, approval, filing or notice by the Shareholder under any provision of
law applicable to the Shareholder except for filings required by the HSR Act,
filings on Schedule 13D under the Exchange Act, and any approvals required to be
obtained from state insurance regulatory authorities.
7. Agreements of the Shareholder.
-----------------------------
7.1. Proxy. The Shareholder hereby irrevocably appoints R.K. Richey
-----
and Keith A. Tucker and each of them, with full power of substitution and
resubstitution (or any other designees of the Parent), as proxies for the
Shareholder to vote, and the Shareholder personally agrees to vote, all shares
of Common Stock that the Shareholder is entitled to vote (together with any
other shares of Common Stock that the Shareholder may become entitled to vote,
other than shares held in trust for the benefit of Company employees), for and
in the name, place, and stead of the Shareholder at any meeting of the holders
of shares of Common Stock or any adjournments or postponements thereof or
pursuant to any consent in lieu of a meeting, or otherwise, with respect only to
the approval of the Merger Agreement, the Offer, the transactions contemplated
by the Merger Agreement, any matters related to or in connection with the
Merger, and any corporate action the consummation of which would violate,
frustrate the purposes of, prevent, or delay the consummation of the
B-2-6
<PAGE>
transactions contemplated by the Merger Agreement (including, without
limitation, any proposal to amend the Certificate of Incorporation or Bylaws of
the Company or approve any merger, consolidation, sale or purchase of any
assets, issuance of Common Stock or any other equity security of the Company (or
a security convertible into an equity security of the Company), reorganization,
recapitalization, liquidation, winding up of or by the Company, or any similar
transaction). The Shareholder agrees that the foregoing proxy is coupled with
an interest. The Shareholder and the Parent agree that the provisions of this
Section 7.1 will be subject to the receipt of any necessary approval by or
- -----------
consent of insurance regulatory authorities having jurisdiction over the subject
matter of this Section 7.1, including, without limitation, the insurance
-----------
regulatory authorities of the States of Indiana and Texas. The Shareholder
covenants to use his or its reasonable best efforts to secure any such approval
or consent as promptly as practicable and, during the time until such approval
or consent is being obtained, not to take any action that is inconsistent with,
that would violate the provisions of, or that would hinder or delay the rights
of the Parent under, this Section 7.1.
-----------
7.2. Exclusivity. Except as permitted by Section 8.8 of the Merger
-----------
Agreement if the Shareholder is a director or officer of the Company and solely
in his capacity as such, from the date of this Agreement, the Shareholder will
negotiate exclusively with the Parent and the Subsidiary with regard to the
acquisition of the Company and will not directly or indirectly: (i) solicit any
other buyers for all or any part of the capital stock or assets of the Company
or any of its subsidiaries; (ii) encourage any third parties to bid for any of
the assets of the Company or any of its subsidiaries or to purchase shares of
its capital stock, or participate in any negotiations or discussions with any
such third parties with respect to such matters; (iii) provide business or
financial information (not otherwise publicly available) concerning the Company
or any of its subsidiaries to any third parties (except as required for the
making of necessary regulatory filings or in any judicial or administrative
proceeding); (iv) purchase or otherwise acquire shares of or any beneficial
interest in any of the capital stock of the Company or any of its subsidiaries
except upon exercise of options listed on Schedule 1; (v) make, or assist or
----------
cooperate with anyone else to make, any proposal to purchase all or any part of
the assets or capital stock of the Company or any of its subsidiaries; or (vi)
enter into any arrangements by himself or itself or with others to directly or
indirectly acquire or obtain control of the Company or any of its subsidiaries.
The Shareholder will immediately notify the Parent if he or it becomes aware of
any efforts by any person or group, directly or indirectly in any manner
whatsoever, to acquire or obtain control of the Company. The Shareholder will
direct his and its financial and other advisers and representatives to comply
with each of the foregoing covenants.
B-2-7
<PAGE>
7.3. Certain Option Adjustments. In the event of any change in the
--------------------------
number of issued and outstanding shares of Common Stock by reason of any stock
dividend, split-up reclassification, recapitalization, merger, or other change
in the corporate or capital structure of the Company, the Parent will receive,
upon exercise of the Option, the stock or other securities, cash, or property to
which the Parent would have been entitled if the Parent had exercised the Option
and had been a holder of record of Option Shares on the record date fixed for
determination of holders of shares of Common Stock entitled to receive such
stock or other securities, cash, or property at the same aggregate price as the
Exercise Price.
7.4 Noncompetition; Confidentiality; Employment. [ONLY IN
-------------------------------------------
SHAREHOLDER AGREEMENTS OF MESSRS. RAPAPORT AND COOPER] From the date of this
Agreement, the Shareholder covenants and agrees as follows:
(a) In consideration of the prospective payment to the Shareholder of
the Exercise Price under this Agreement or the Per Share Amount under the Merger
Agreement, as the case may be, and in consideration for entering into the Merger
Agreement, the Shareholder agrees that, for a period of two years after the
Applicable Date (as defined below) he will not engage in the life or health
insurance business utilizing the union sales procedures of the Company (the
"Business") in the area consisting of Canada and the United States (the "Non-
Compete Area"). As used above, "union sales procedures" means contacting or
receiving the approval of a union for the solicitation of its members for the
sale of insurance products, the mailing to union member of invitations inviting
inquiry for the purpose of soliciting such members for the sale of insurance
products, and placing group insurance with unions for the purpose of soliciting
the members for sale of insurance. The Shareholder further agrees that: (i)
for a period of one year after the Applicable Date he will not, directly or
indirectly, solicit or accept the services of any agent or representative of the
Company or any person who within the previous one year period had been an agent
or representative of the Company; (ii) he will never, directly or indirectly,
induce or attempt to induce any agent or representative of the Company to
violate any provision of a contract with the Company; and (iii) he will never,
directly or indirectly, induce or attempt to induce any policyholder with the
Company to terminate a policy with the Company or otherwise injure the business
reputation of the Company. As used in this Agreement, the term "Applicable
Date" means the date on which the employment or consulting relationship of the
Shareholder with the Parent or the Company or their respective affiliates is
terminated if the Offer is consummated or if the Option is exercised. The
Shareholder acknowledges that this Section 7.4(a) is necessary to protect the
--------------
interests of the Parent and that the restrictions contained in this Section
--------
B-2-8
<PAGE>
7.4(a) are reasonable in light of the consideration and other value the
- ------
Shareholder has accepted pursuant to this Agreement and the Merger Agreement.
(b) After the Applicable Date the Shareholder will never use
policyholder records, union membership records, or other business records
concerning the business of the Company, no matter how or when obtained, for the
purpose of soliciting the sale of insurance. All such records will be returned
to the Company. The Shareholder further acknowledges that this covenant to
maintain such information is necessary to protect the goodwill and proprietary
interests of the Company and the Parent, and that the restriction against the
disclosure of such information is reasonable in light of the consideration and
other value the Shareholder has accepted pursuant to this Agreement.
(c) The Shareholder has entered into an employment agreement with the
Company for the benefit of the Parent in form and substance satisfactory to the
Parent.
(d) The Shareholder will have the right to terminate the covenants and
agreements set forth in Sections 7.4(a), (b), and (c) if both (i) the Outside
--------------- --- ---
Date occurs without the Option having been exercised or the Offer having been
consummated pursuant to the Merger Agreement and (ii) the Merger Agreement has
been terminated by the Company in accordance with the provisions of Article VII
-----------
of the Merger Agreement.
7.5 Agreement to Tender. The Shareholder hereby agrees validly to tender,
-------------------
and not withdraw, all the Option Shares pursuant to the Offer.
8. Obligations of the Company.
--------------------------
8.1. Demand Registration. In the event that within five years after
-------------------
the date of the Closing the Parent so requests in writing, the Company agrees to
use its reasonable best efforts to effect as soon as practicable up to two
registrations under the Securities Act and any applicable state securities laws
covering any part or all of the Option Shares owned by the Parent or its
permitted assigns pursuant to the terms of this Agreement (the "Registrable
Securities"). Notwithstanding the foregoing, the Company may delay complying
with any registration request by the Parent (a) if such registration would
require a special audit of the Company (unless the Parent bears the cost of such
audit) or (b) for not more than ninety days if the Company determines in good
faith that such registration would materially interfere with any material
financing, acquisition, corporate reorganization, or other similar transaction
proposed by the Company. Any registration effected under this Section 8 will be
---------
effected at the expense of the Company except for any
B-2-9
<PAGE>
underwriting or brokerage commissions or fees applicable to the sale of the
Registrable Securities and the fees, expenses, and disbursements of the counsel
for the Parent and its permitted assigns.
8.2. Offering by the Company. If at any time within five years after
-----------------------
the date of the Closing under Section 2.2 the Company proposes to register for
-----------
sale for cash in an offering to the public any of its equity securities under
the Securities Act on Form S-1, S-2, or S-3 (or any successor forms) under which
the Registrable Securities could be registered for sale, it will at such time
give written notice to the Parent of the intention of the Company to do so.
Upon written request of the Parent or its permitted assigns, given within
fifteen days after the giving of any such notice by the Company (which request
will state the intended method of disposition of such Registrable Securities by
the prospective seller), the Company will use its reasonable best efforts to
cause the Registrable Securities as to which the holders have so requested
registration to be registered under the Securities Act and any applicable state
securities laws as part of the offering being registered by the Company and
under the same registration statement proposed to be filed by the Company, all
to the extent necessary to permit the sale or other disposition (in accordance
with the written request of the prospective sellers) by the prospective seller
or sellers of the Registrable Securities so registered, except to the extent, in
the case of an underwritten offering, the proposed managing underwriter of the
securities covered by the registration statement advises the Parent or its
assigns, as the case may be, in writing that the inclusion of such shares on the
basis requested by the Parent would, in the opinion of such underwriter,
materially adversely affect the marketing of the securities to be sold by the
Company pursuant to the proposed offering. Any reduction in the number of
Registrable Securities as a result of such opinion will be pro rata with all
other persons other than the Company proposing to register shares in such
offering based on the number of shares that such persons in good faith intended
to have registered for sale.
8.3. Representations of the Company. The Company represents and
------------------------------
warrants to the Parent that: (a) the execution, delivery, and performance by the
Company of this Agreement has been duly authorized by all requisite corporate
actions; (b) this Agreement constitutes the legal, valid, and binding obligation
of the Company, enforceable in accordance with its terms; (c) neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement will violate or result in any
violation of, or be in conflict with, or constitute a default under, any terms
of any statute, regulation, agreement, instrument, judgment, decree, rule, or
order applicable to the Company; (d) the execution, delivery, and performance of
this
B-2-10
<PAGE>
Agreement by the Company and the consummation of the transactions contemplated
by this Agreement will not violate (with or without the giving of notice or
lapse of time or both) or require any consent, approval, filing, or notice by
the Company under any provision of law applicable to the Company and; (e) the
Board of Directors of the Company has irrevocably approved this Agreement and
the Option for the purposes of (S) 203 of the Delaware General Corporation Law
and any other applicable state or federal law that the Parent has identified, or
that is known after reasonable inquiry, to the Company requiring prior approval
of this Agreement or the consummation of any transaction contemplated by this
Agreement.
8.4. Board of Directors. Effective upon any exercise of the Option, the
------------------
Parent will be entitled to designate that number of directors of the Company
rounded up to the next whole number (but not 50% or more by virtue of this
Section 8.4 or any other similar section in any other shareholder agreement
- -----------
executed on the date of this Agreement), that equals the product of (x) the
total number of directors on the Board of Directors (giving effect to the
election or appointment of any additional directors pursuant to this Section
-------
8.4) and (y) the percentage that the number of Option Shares as to which the
- ---
Option is then being exercised on a fully diluted basis bears to the total
number of outstanding shares of Common Stock. The Company will at such time
cause the designees of the Parent to be elected to or appointed by the Board of
Directors, including, without limitation, increasing the number of directors,
amending its bylaws, using its reasonable best efforts to obtain resignations of
incumbent directors, and, to the extent necessary, filing with the Securities
and Exchange Commission and mailing to its stockholders the information required
by (S) 14(f) of the Exchange Act and the rules promulgated thereunder, as
promptly as possible. The Parent and the Subsidiary will supply any information
with respect to themselves and their respective nominees, officers, directors,
and affiliates required by (S) 14(f) of the Exchange Act and such rules to the
Company. Upon written request by the Parent, the Company will use its best
efforts to cause the designees of the Parent to constitute the same percentage
of representation as is on the Board of Directors after giving effect to this
Section 8.4 on (a) each committee of the Board of Directors (other than the
- -----------
special committee of the Board of Directors charged with oversight of the
transactions contemplated by the Merger Agreement); (b) the board of directors
of each subsidiary of the Company; and (c) each committee of such subsidiaries'
boards of directors.
9. Indemnification. In connection with any registration under Section 8,
--------------- ---------
each holder of Registrable Securities will enter into an agreement to indemnify
the seller of the Registrable Securities and, if any underwriter is involved in
such offering, into an underwriting agreement
B-2-11
<PAGE>
providing for indemnification of the seller of such Registrable Securities and
such underwriters, and the Parent agrees to enter into an agreement to indemnify
the Company and such underwriters, if any, all in the manner and to the extent
as is customary in underwritten secondary offerings (whether such offering is
underwritten or not).
10. Transfer of Registration Rights. The rights under Section 8 may be
------------------------------- ---------
assigned by the Parent to a transferee or assignee (other than a transferee or
assignee in open market transactions) of any of the Registrable Securities or to
an assignee of part or all of the Option. The Parent will give written notice
of any such assignment. To the extent the Parent transfers a portion, but not
all, of the Registrable Securities and its rights pursuant to this Section 10,
----------
the Parent will cause all transferees of the Registrable Securities and any
rights transferred under this Agreement to execute a participation or other
agreement that will require the Parent and all such direct or indirect
transferees to act as a single unit in exercising any and all rights granted
under this Agreement. Any notice provided to the Company shareholders by the
Parent or its assigns will be signed by the Parent, or a person designated by
the Parent in a notification delivered pursuant to Section 10.1 (or any
------------
subsequent designee), and the Shareholder will be entitled to rely upon such
notice.
11. Legal Remedies Inadequate. The parties to this Agreement acknowledges
-------------------------
that irreparable harm would occur and that money damages would be inadequate in
the event that any of the covenants or agreements, including, without
limitation, those set forth in Sections 7.4, 7.5, 8.1, and 8.2 in this Agreement
------------ --- --- ---
were not performed in accordance with the terms of this Agreement and therefore
the Shareholder and the Company agree that the Parent will be entitled to
specific enforcement of such covenants or agreements and to injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
12. Miscellaneous.
-------------
12.1. Assignment. This Agreement is not assignable, by operation of
----------
law or otherwise, by any party except pursuant to the laws of descent and
distribution (except that any such transferee will be bound by the terms of this
Agreement) and except that the Parent may assign this Agreement and its rights
under this Agreement to a subsidiary of the Parent as provided in this
Agreement.
12.2. Amendments; Termination. This Agreement may not be modified,
-----------------------
amended, altered, or supplemented, except upon the execution and delivery of a
written agreement executed by each party. The rights and obligations of the
parties under Sections 1, 2, 3, 4, 7.1, 7.2, 7.3, 7.4, and 7.5
--------------------------------------- ---
B-2-12
<PAGE>
of this Agreement will immediately cease and be without further force and effect
on the earlier of the Outside Date and termination of the Merger Agreement
pursuant to Section 7.1(f) of the Merger Agreement except, if the Option has
--------------
been exercised, with respect to the obligations of the Purchaser to pay the
Exercise Price and the Adjustment Amount and of the Shareholder to deliver the
Option Shares at the Closing and except for the obligations of the Shareholder
under Section 7.4.
-----------
12.3. Notices. All notices, requests, claims, demands, and other
-------
communications under this Agreement will be in writing and will be given (and
will be deemed to have been duly received when so given) by delivery, by cable,
facsimile, telegram or telex, or by registered mail, postage prepaid, return
receipt requested, to the respective parties as follows:
If to the Company:
American Income Holding, Inc.
1100 N. Market Street
Suite 1300
Wilmington, Delaware 19899
Attention: Bernard Rapoport
With copies to:
Ford Lacy, P.C.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Fax: (214) 969-4343
If to the Parent:
Torchmark Corporation
2001 Third Avenue, South
Birmingham, Alabama 35233-2186
Attention: R.K. Richey
Fax: (205) 325-4198
and
6300 Lamar
Shawnee Mission, Kansas 66201
Attention: Keith A. Tucker
Fax: (913) 236-1939
B-2-13
<PAGE>
With copies to:
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: Alan Bogdanow
Fax: (214) 939-6100
If to the Shareholder:
----------------------------
----------------------------
----------------------------
----------------------------
With copies to:
----------------------------
----------------------------
----------------------------
----------------------------
12.4. Governing Law. This Agreement will be governed by and
-------------
construed in accordance with the substantive law of the State of Delaware
without giving effect to the principles of conflicts of law.
12.5. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
12.6. Effect of Headings. The section headings in this Agreement are
------------------
for convenience only and will not affect the construction of this Agreement.
12.7. Parties in Interest. This Agreement will inure to the benefit
-------------------
of and be binding upon the parties to this Agreement and their respective
permitted successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties to this
Agreement, and their respective permitted successors and assigns, any rights or
remedies under or by reason of this Agreement.
12.8. Severability. If any term, provision, covenant, or
------------
restriction, or any portion thereof, contained in this Agreement, including,
without limitation, the provisions of Section 7.4, is held by a court of
-----------
competent jurisdiction to be invalid, void, voidable, or unenforceable, such
term, provision, covenant, restriction, or portion will be curtailed whether as
to time, area, or otherwise, to the minimum extent
B-2-14
<PAGE>
required by applicable law and the remaining terms, provisions, covenants, and
restrictions will remain in full force and effect and will in no way be
affected, impaired, or invalidated.
12.9. Section References. References in this Agreement to Sections
------------------
are references to Sections of this Agreement unless otherwise stated.
12.10. Certain Definitions; Interpretation. The word "person" when
-----------------------------------
used in this Agreement will be broadly construed to include any individual,
company, corporation, partnership, joint venture, trust, firm, or other entity,
and the word "affiliate" has the meaning given in Rule 144(a)(1) under the
Securities Act.
12.11 Expenses. Except as provided in Section 8.1, each party to
-------- -----------
this Agreement will pay all of its expenses in connection with the transactions
contemplated by this Agreement, including, without limitations, the fees and
expenses of its counsel and other advisers.
B-2-15
<PAGE>
IN WITNESS WHEREOF, each party to this Agreement has caused this Agreement
to be duly executed as of the date first above written.
SHAREHOLDER:
-------------------------------
(Name)
PARENT:
By:
--------------------------
Its:
--------------------------
COMPANY:
By:
--------------------------
Its:
--------------------------
B-2-16
<PAGE>
Schedule 1
to Shareholder Agreement
Common Stock Beneficially Owned
- -------------------------------
Options
- -------
B-2-17
<PAGE>
EXHIBIT (c)(2)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (the "Agreement"), dated as of September 15, 1994 by
and between TORCHMARK CORPORATION, a Delaware corporation (the "Parent"),
AMERICAN INCOME HOLDING, INC., a Delaware corporation (the "Company"), and [*]
(the "Shareholder").
RECITALS
Simultaneous with the execution and delivery of this Agreement, the Parent
is entering into an Agreement and Plan of Merger (as amended from time to time,
the "Merger Agreement") with the Company and TMK ACQUISITION CORPORATION, a
Delaware corporation and wholly owned subsidiary of the Parent (together with
any person succeeding to the rights and obligations of the Subsidiary pursuant
to Sections 2.1 and 8.3 of the Merger Agreement, the "Subsidiary").
------------ ---
As an inducement to the Parent and the Subsidiary to enter into and perform
the Merger Agreement, the Shareholder has agreed to grant to the Parent an
option on the terms set forth in this Agreement and to tender all of his or its
shares of Company Stock on the terms set forth below, and the Company has agreed
to join in this Agreement for the purposes of granting certain rights pursuant
to Sections 4 and 8.
---------- -
THEREFORE, in consideration of the foregoing, the mutual covenants and
promises set forth below, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Grant of Option. Subject to the terms and conditions of this
---------------
Agreement, the Shareholder hereby irrevocably grants to the Parent an option
(the "Option") to purchase all shares of common stock, par value $.01 per share
(the "Common Stock"), of the Company now owned or hereafter acquired by the
Shareholder (the "Option Shares") at a price per share (the "Exercise Price")
equal to the sum of (x) the Per Share Amount (as defined in the Merger
Agreement) plus (y) the Adjustment Amount (as defined below). The amount of the
Exercise Price constituting the Adjustment Amount will be paid by the Parent to
the Shareholder within three business days after the later of actual receipt of
the consideration by the Parent from any Adjustment Event (as defined below) or
the receipt of the opinion as to the value of such consideration referred to
below. Attached as Schedule 1 to this Agreement is an accurate and complete
----------
list of all shares of Common Stock beneficially owned by the Shareholder and a
list of each option of the Shareholder to acquire shares of Common Stock. The
Shareholder agrees that all shares currently beneficially
1
<PAGE>
owned by the Shareholder are Option Shares and that any shares of Common Stock
subsequently acquired by the Shareholder upon exercise of the options listed on
Schedule 1 or otherwise will also be Option Shares subject to the terms of this
- ----------
Agreement, except that the Shareholder will be under no obligation to exercise
such options under this Agreement. The Parent agrees to use reasonable efforts
to exercise the Option granted by this Agreement on a pro rata basis with other
options granted by other stockholders of the Company contemporaneously with this
Agreement. As used in this Agreement, the term "Adjustment Amount" means the
excess, if any, of (x) the value per share of the consideration actually
received by the Parent as a result of any agreement, letter of intent, or
binding arrangement entered into within nine months of the exercise of the
Option or any sale or disposition of Option Shares that occurs within nine
months of the exercise of the Option (an "Adjustment Event") over (y) the Per
Share Amount of the Offer (as defined in the Merger Agreement), including any
increase contemplated by Section 1.1 of the Merger Agreement, last in effect
-----------
prior to the consummation of an Adjustment Event. In the event that the
consideration paid to the Parent in an Adjustment Event is other than cash, the
value of such consideration will be conclusively determined in a written opinion
by an investment banking firm of recognized national standing selected by the
Parent with the consent of the Shareholder, which consent will not be
unreasonably withheld or delayed.
2. Exercise of Option.
------------------
2.1. Exercise. Subject to the conditions set forth in Section 2.3,
-------- -----------
the Option may be exercised in its entirety or in part from time to time by the
Parent at any time prior to the Outside Date (as defined below). As used in
this Agreement, the term "Outside Date" will mean March 31, 1995 unless the
Company terminates the Merger Agreement pursuant to Section 7.1(d)(i)(C) of the
--------------------
Merger Agreement, in which case it will mean December 29, 1994; provided, that
any written notice by the Parent of its election to exercise all or part of the
Option will extend the Outside Date for all purposes under this Agreement until
such time as any proceedings before any court or governmental instrumentality
necessary for the exercise of the Option are final and nonappealable and until
such time as any waiting period prescribed or approval required by any
applicable law, statute, regulation, order, or decree for the exercise of the
Option has passed or been obtained, as the case may be, but in no case later
than March 31, 1995 (unless the proceeding is between the Shareholder and the
Parent, in which case such March 31, 1995 date will not apply). If such
exercise by the Parent is delayed because of such proceedings, waiting period,
or necessity for approval, the Parent will have five business days after such
proceedings become final and nonappealable, such waiting period has passed, or
approval has been obtained to withdraw its exercise of the Option.
2
<PAGE>
2.2. Closing. In the event that the Parent wishes to exercise some or
-------
all of the Option, the Parent will give a written notice signed by an executive
officer of the Parent to the Shareholder of his or its intention to exercise the
Option, stating that the conditions set forth in Section 2.3 have been
-----------
fulfilled, and specifying the number of Option Shares to be purchased, the place
and date for the closing (the "Closing") of such purchase (which date will not
be later than ten business days from the date that such notice is mailed or
delivered); provided, however, that such date will be extended until such time
as any proceedings before any court or governmental instrumentality necessary
for the consummation of the purchase of the Option Shares is final and
nonappealable and until such time as any waiting period prescribed or approval
required by any applicable law, statute, regulation, order, or decree for the
consummation of the purchase of the Option Shares has passed or been obtained,
as the case may be, but in no event later than March 31, 1995 (unless the
proceeding is between the Shareholder and the Parent, in which case such March
31, 1995 date will not apply).
2.3. Conditions. The Parent will not have the right to exercise the
----------
Option and purchase the Option Shares unless:
(a) no preliminary or permanent injunction or other order issued
by any federal or state court of competent jurisdiction against the delivery of
the Option Shares is in effect;
(b) any applicable waiting period or extension under the Hart-
Scott-Rodino Anti-trust Improvements Act of 1976, as amended (the "HSR Act"),
has expired or been terminated, and all necessary approvals, consents, permits,
and requirements under all applicable laws, regulations, and rules, including,
without limitation, approvals under the insurance holding company statutes and
regulations of the States of Indiana and Texas, have been obtained or fulfilled;
and
(c) one or more of the following events has occurred: (i) the
Company or any of its subsidiaries (as defined in the Merger Agreement) enters
into a reorganization agreement, merger agreement, or other similar agreement or
plan, including, without limitation, an agreement in principle or letter of
intent, other than with the Parent or the Subsidiary or their affiliates; (ii)
any person or "group" (as used in (S) 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), other than the Parent or the Subsidiary
or their affiliates, (A) commences a tender offer or exchange offer for, or
other transaction involving, more than 20% of the outstanding Common Stock or
(B) publicly proposes any dissolution, recapitalization, merger, consolidation,
business combination, acquisition, or similar transaction involving the Company
or any of its subsidiaries
3
<PAGE>
that, in either case the Parent reasonably and in good faith concludes (after
the earlier of a public announcement by the Board of Directors of the Company of
its position with respect to such occurrence or the expiration of 10 days from
the date of such occurrence) is likely to be consummated; (iii) any person or
group, other than the Parent or the Subsidiary or their affiliates, acquires
more than 10% of the total assets of the Company and its subsidiaries, taken as
a whole; (iv) any person or group, other than the Parent or the Subsidiary or
their affiliates, acquires after the date of this Agreement more than 20% of the
outstanding Common Stock or any option or similar right to acquire more than 20%
of the Common Stock (other than for bona fide arbitrage purposes); (v) the
Company adopts a plan of liquidation relating to more than 10% of the total
assets of the Company and its subsidiaries, taken as a whole, or declares a
distribution to its stockholders of more than 10% of the total assets of the
Company and its subsidiaries, taken as a whole; or (vi) any person or group,
other than the Purchaser or the Subsidiary or their affiliates, commences a
proxy solicitation with respect to the Common Stock that the Parent reasonably
and in good faith concludes (after the earlier of a public announcement by the
Board of Directors of the Company of its position with respect to such
occurrence or the expiration of 10 days from the date of such occurrence) is
adverse to the Offer, the Merger, this Agreement, or the transactions
contemplated by this Agreement and is likely to succeed.
3. Payment and Delivery of Certificate(s). At the Closing, the Parent
--------------------------------------
will pay the aggregate purchase price for the number of Option Shares to be
purchased by delivery of a certified or bank cashier's check payable to the
order of the Shareholder in the amount equal to the product of (x) the Per Share
Amount times (y) the number of Option Shares to be purchased. At the Closing,
the Shareholder will deliver to the Parent a certificate or certificates in the
name of the Parent or its designee representing the Option Shares so purchased
free and clear of any adverse claim. The balance of the Exercise Price, if any,
referred to in clause (y) of Section 1, will be paid in accordance with
---------- ---------
Section 1.
- ------- -
4. Notification of Record Date. At any time from and after the date of
---------------------------
this Agreement until the time that the Purchaser purchases Shares pursuant to
the Offer, the Shareholder and the Company will give the Parent fifteen days'
prior written notice of any record date for determining the holders of record of
the Common Stock entitled to vote on any matter, to receive any dividend or
distribution, or to participate in any rights offering or other matters, or to
receive any other benefit or right with respect to the Common Stock.
4
<PAGE>
5. Representations and Warranties of the Shareholder. The Shareholder
-------------------------------------------------
hereby represents and warrants to the Parent as follows:
5.1. Binding Agreement. This Agreement constitutes the legal, valid,
-----------------
and binding agreement of the Shareholder, enforceable against the Shareholder in
accordance with its terms.
5.2. Option Shares. The Shareholder has all required authority and
-------------
has taken all necessary action to permit the Shareholder at all times from the
date of this Agreement to the Outside Date to deliver and sell the Option Shares
free and clear of all claims, liens, encumbrances, and security interests
whatsoever.
5.3. No Conflicts. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated by this
Agreement will violate or result in any violation of or be in conflict with, or
constitute a default under, any terms of any statute, regulation, agreement,
instrument, judgment, decree, rule, or order applicable to the Shareholder.
5.4. No Approvals or Notices Required. The execution, delivery, and
--------------------------------
performance of this Agreement by the Shareholder and the consummation by the
Shareholder of the transactions contemplated by this Agreement will not violate
(with or without the giving of notice or the lapse of time or both) or require
any consent, approval, filing, or notice by the Shareholder under any provision
of law applicable to the Shareholder except for filings required by the HSR Act,
filings on Schedule 13D under the Exchange Act, and any approvals required to be
obtained from state insurance regulatory authorities.
5.5. Title. The Option Shares, when delivered by the Shareholder to
-----
the Parent upon exercise of the Option, will be free and clear of any claims,
liens, charges, encumbrances, security interests, and charges of any nature
whatsoever other than restrictions on transfer under applicable federal and
state securities laws. On the date of this Agreement the Shareholder has (and
the Shareholder will have at all times up to the Outside Date or the earlier
purchase by the Parent or the Subsidiary of the Option Shares) good and
marketable title to the Option Shares, free and clear of all claims, liens,
charges, encumbrances, and security interests other than restrictions on
transfer under applicable federal and state securities laws; provided, however,
that notwithstanding the foregoing, the Shareholder will validly tender, and not
withdraw, all the Option Shares pursuant to the Offer.
5
<PAGE>
6. Representations and Warranties of the Parent. The Parent hereby
--------------------------------------------
represents and warrants to the Shareholder as follows:
6.1. Due Authorization. This Agreement has been duly authorized by
-----------------
all necessary action on the part of the Parent and has been duly executed and
delivered by the Parent.
6.2. Distribution. The shares of Common Stock to be acquired upon
------------
exercise of the Option will not be taken by the Shareholder with a view to
distribution in violation of the Securities Act of 1933, as amended (the
"Securities Act").
6.3. No Conflicts. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated by this
Agreement will violate or result in any violation of or be in conflict with or
constitute a default under any terms of the Certificate of Incorporation or
Bylaws of the Shareholder or any statute, regulation, agreement, instrument,
judgment, decree, rule, or order applicable to the Shareholder.
6.4. No Approvals or Notices Required. The execution, delivery, and
--------------------------------
performance of this Agreement by the Parent and the consummation by the Parent
of the transactions contemplated by this Agreement will not violate (with or
without the giving of notice or the lapse of time or both) or require any
consent, approval, filing or notice by the Shareholder under any provision of
law applicable to the Shareholder except for filings required by the HSR Act,
filings on Schedule 13D under the Exchange Act, and any approvals required to be
obtained from state insurance regulatory authorities.
7. Agreements of the Shareholder.
-----------------------------
7.1. Proxy. The Shareholder hereby irrevocably appoints R.K. Richey
-----
and Keith A. Tucker and each of them, with full power of substitution and
resubstitution (or any other designees of the Parent), as proxies for the
Shareholder to vote, and the Shareholder personally agrees to vote, all shares
of Common Stock that the Shareholder is entitled to vote (together with any
other shares of Common Stock that the Shareholder may become entitled to vote,
other than shares held in trust for the benefit of Company employees), for and
in the name, place, and stead of the Shareholder at any meeting of the holders
of shares of Common Stock or any adjournments or postponements thereof or
pursuant to any consent in lieu of a meeting, or otherwise, with respect only to
the approval of the Merger Agreement, the Offer, the transactions contemplated
by the Merger Agreement, any matters related to or in connection with the
Merger, and any corporate action the consummation of which would violate,
frustrate the purposes of, prevent, or delay the consummation of the
6
<PAGE>
transactions contemplated by the Merger Agreement (including, without
limitation, any proposal to amend the Certificate of Incorporation or Bylaws of
the Company or approve any merger, consolidation, sale or purchase of any
assets, issuance of Common Stock or any other equity security of the Company (or
a security convertible into an equity security of the Company), reorganization,
recapitalization, liquidation, winding up of or by the Company, or any similar
transaction). The Shareholder agrees that the foregoing proxy is coupled with
an interest. The Shareholder and the Parent agree that the provisions of this
Section 7.1 will be subject to the receipt of any necessary approval by or
- -----------
consent of insurance regulatory authorities having jurisdiction over the subject
matter of this Section 7.1, including, without limitation, the insurance
-----------
regulatory authorities of the States of Indiana and Texas. The Shareholder
covenants to use his or its reasonable best efforts to secure any such approval
or consent as promptly as practicable and, during the time until such approval
or consent is being obtained, not to take any action that is inconsistent with,
that would violate the provisions of, or that would hinder or delay the rights
of the Parent under, this Section 7.1.
-----------
7.2. Exclusivity. Except as permitted by Section 8.8 of the Merger
-----------
Agreement if the Shareholder is a director or officer of the Company and solely
in his capacity as such, from the date of this Agreement, the Shareholder will
negotiate exclusively with the Parent and the Subsidiary with regard to the
acquisition of the Company and will not directly or indirectly: (i) solicit any
other buyers for all or any part of the capital stock or assets of the Company
or any of its subsidiaries; (ii) encourage any third parties to bid for any of
the assets of the Company or any of its subsidiaries or to purchase shares of
its capital stock, or participate in any negotiations or discussions with any
such third parties with respect to such matters; (iii) provide business or
financial information (not otherwise publicly available) concerning the Company
or any of its subsidiaries to any third parties (except as required for the
making of necessary regulatory filings or in any judicial or administrative
proceeding); (iv) purchase or otherwise acquire shares of or any beneficial
interest in any of the capital stock of the Company or any of its subsidiaries
except upon exercise of options listed on Schedule 1; (v) make, or assist or
----------
cooperate with anyone else to make, any proposal to purchase all or any part of
the assets or capital stock of the Company or any of its subsidiaries; or (vi)
enter into any arrangements by himself or itself or with others to directly or
indirectly acquire or obtain control of the Company or any of its subsidiaries.
The Shareholder will immediately notify the Parent if he or it becomes aware of
any efforts by any person or group, directly or indirectly in any manner
whatsoever, to acquire or obtain control of the Company. The Shareholder will
direct his and its financial and other advisers and representatives to comply
with each of the foregoing covenants.
7
<PAGE>
7.3. Certain Option Adjustments. In the event of any change in the
--------------------------
number of issued and outstanding shares of Common Stock by reason of any stock
dividend, split-up reclassification, recapitalization, merger, or other change
in the corporate or capital structure of the Company, the Parent will receive,
upon exercise of the Option, the stock or other securities, cash, or property to
which the Parent would have been entitled if the Parent had exercised the Option
and had been a holder of record of Option Shares on the record date fixed for
determination of holders of shares of Common Stock entitled to receive such
stock or other securities, cash, or property at the same aggregate price as the
Exercise Price.
7.4 Noncompetition; Confidentiality; Employment. From the date of
-------------------------------------------
this Agreement, the Shareholder covenants and agrees as follows:
(a) In consideration of the prospective payment to the Shareholder of
the Exercise Price under this Agreement or the Per Share Amount under the Merger
Agreement, as the case may be, and in consideration for entering into the Merger
Agreement, the Shareholder agrees that, for a period of two years after the
Applicable Date (as defined below) he will not engage in the life or health
insurance business utilizing the union sales procedures of the Company (the
"Business") in the area consisting of Canada and the United States (the "Non-
Compete Area"). As used above, "union sales procedures" means contacting or
receiving the approval of a union for the solicitation of its members for the
sale of insurance products, the mailing to union member of invitations inviting
inquiry for the purpose of soliciting such members for the sale of insurance
products, and placing group insurance with unions for the purpose of soliciting
the members for sale of insurance. The Shareholder further agrees that: (i)
for a period of one year after the Applicable Date he will not, directly or
indirectly, solicit or accept the services of any agent or representative of the
Company or any person who within the previous one year period had been an agent
or representative of the Company; (ii) he will never, directly or indirectly,
induce or attempt to induce any agent or representative of the Company to
violate any provision of a contract with the Company; and (iii) he will never,
directly or indirectly, induce or attempt to induce any policyholder with the
Company to terminate a policy with the Company or otherwise injure the business
reputation of the Company. As used in this Agreement, the term "Applicable
Date" means the date on which the employment or consulting relationship of the
Shareholder with the Parent or the Company or their respective affiliates is
terminated if the Offer is consummated or if the Option is exercised. The
Shareholder acknowledges that this Section 7.4(a) is necessary to protect the
--------------
interests of the Parent and that the restrictions contained in this Section
--------
8
<PAGE>
7.4(a) are reasonable in light of the consideration and other value the
- ------
Shareholder has accepted pursuant to this Agreement and the Merger Agreement.
(b) After the Applicable Date the Shareholder will never use
policyholder records, union membership records, or other business records
concerning the business of the Company, no matter how or when obtained, for the
purpose of soliciting the sale of insurance. All such records will be returned
to the Company. The Shareholder further acknowledges that this covenant to
maintain such information is necessary to protect the goodwill and proprietary
interests of the Company and the Parent, and that the restriction against the
disclosure of such information is reasonable in light of the consideration and
other value the Shareholder has accepted pursuant to this Agreement.
(c) The Shareholder has entered into an employment agreement with the
Company for the benefit of the Parent in form and substance satisfactory to the
Parent.
(d) The Shareholder will have the right to terminate the covenants and
agreements set forth in Sections 7.4(a), (b), and (c) if both (i) the Outside
--------------- --- ---
Date occurs without the Option having been exercised or the Offer having been
consummated pursuant to the Merger Agreement and (ii) the Merger Agreement has
been terminated by the Company in accordance with the provisions of Article VII
-----------
of the Merger Agreement.
7.5 Agreement to Tender. The Shareholder hereby agrees validly to tender,
-------------------
and not withdraw, all the Option Shares pursuant to the Offer.
8. Obligations of the Company.
--------------------------
8.1. Demand Registration. In the event that within five years after
-------------------
the date of the Closing the Parent so requests in writing, the Company agrees to
use its reasonable best efforts to effect as soon as practicable up to two
registrations under the Securities Act and any applicable state securities laws
covering any part or all of the Option Shares owned by the Parent or its
permitted assigns pursuant to the terms of this Agreement (the "Registrable
Securities"). Notwithstanding the foregoing, the Company may delay complying
with any registration request by the Parent (a) if such registration would
require a special audit of the Company (unless the Parent bears the cost of such
audit) or (b) for not more than ninety days if the Company determines in good
faith that such registration would materially interfere with any material
financing, acquisition, corporate reorganization, or other similar transaction
proposed by the Company. Any registration effected under this Section 8 will be
---------
effected at the expense of the Company except for any
9
<PAGE>
underwriting or brokerage commissions or fees applicable to the sale of the
Registrable Securities and the fees, expenses, and disbursements of the counsel
for the Parent and its permitted assigns.
8.2. Offering by the Company. If at any time within five years after
-----------------------
the date of the Closing under Section 2.2 the Company proposes to register for
-----------
sale for cash in an offering to the public any of its equity securities under
the Securities Act on Form S-1, S-2, or S-3 (or any successor forms) under which
the Registrable Securities could be registered for sale, it will at such time
give written notice to the Parent of the intention of the Company to do so.
Upon written request of the Parent or its permitted assigns, given within
fifteen days after the giving of any such notice by the Company (which request
will state the intended method of disposition of such Registrable Securities by
the prospective seller), the Company will use its reasonable best efforts to
cause the Registrable Securities as to which the holders have so requested
registration to be registered under the Securities Act and any applicable state
securities laws as part of the offering being registered by the Company and
under the same registration statement proposed to be filed by the Company, all
to the extent necessary to permit the sale or other disposition (in accordance
with the written request of the prospective sellers) by the prospective seller
or sellers of the Registrable Securities so registered, except to the extent, in
the case of an underwritten offering, the proposed managing underwriter of the
securities covered by the registration statement advises the Parent or its
assigns, as the case may be, in writing that the inclusion of such shares on the
basis requested by the Parent would, in the opinion of such underwriter,
materially adversely affect the marketing of the securities to be sold by the
Company pursuant to the proposed offering. Any reduction in the number of
Registrable Securities as a result of such opinion will be pro rata with all
other persons other than the Company proposing to register shares in such
offering based on the number of shares that such persons in good faith intended
to have registered for sale.
8.3. Representations of the Company. The Company represents and
------------------------------
warrants to the Parent that: (a) the execution, delivery, and performance by the
Company of this Agreement has been duly authorized by all requisite corporate
actions; (b) this Agreement constitutes the legal, valid, and binding obligation
of the Company, enforceable in accordance with its terms; (c) neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement will violate or result in any
violation of, or be in conflict with, or constitute a default under, any terms
of any statute, regulation, agreement, instrument, judgment, decree, rule, or
order applicable to the Company; (d) the execution, delivery, and performance of
this
10
<PAGE>
Agreement by the Company and the consummation of the transactions contemplated
by this Agreement will not violate (with or without the giving of notice or
lapse of time or both) or require any consent, approval, filing, or notice by
the Company under any provision of law applicable to the Company and; (e) the
Board of Directors of the Company has irrevocably approved this Agreement and
the Option for the purposes of (S) 203 of the Delaware General Corporation Law
and any other applicable state or federal law that the Parent has identified, or
that is known after reasonable inquiry, to the Company requiring prior approval
of this Agreement or the consummation of any transaction contemplated by this
Agreement.
8.4. Board of Directors. Effective upon any exercise of the Option, the
------------------
Parent will be entitled to designate that number of directors of the Company
rounded up to the next whole number (but not 50% or more by virtue of this
Section 8.4 or any other similar section in any other shareholder agreement
- -----------
executed on the date of this Agreement), that equals the product of (x) the
total number of directors on the Board of Directors (giving effect to the
election or appointment of any additional directors pursuant to this Section
-------
8.4) and (y) the percentage that the number of Option Shares as to which the
- ---
Option is then being exercised on a fully diluted basis bears to the total
number of outstanding shares of Common Stock. The Company will at such time
cause the designees of the Parent to be elected to or appointed by the Board of
Directors, including, without limitation, increasing the number of directors,
amending its bylaws, using its reasonable best efforts to obtain resignations of
incumbent directors, and, to the extent necessary, filing with the Securities
and Exchange Commission and mailing to its stockholders the information required
by (S) 14(f) of the Exchange Act and the rules promulgated thereunder, as
promptly as possible. The Parent and the Subsidiary will supply any information
with respect to themselves and their respective nominees, officers, directors,
and affiliates required by (S) 14(f) of the Exchange Act and such rules to the
Company. Upon written request by the Parent, the Company will use its best
efforts to cause the designees of the Parent to constitute the same percentage
of representation as is on the Board of Directors after giving effect to this
Section 8.4 on (a) each committee of the Board of Directors (other than the
- -----------
special committee of the Board of Directors charged with oversight of the
transactions contemplated by the Merger Agreement); (b) the board of directors
of each subsidiary of the Company; and (c) each committee of such subsidiaries'
boards of directors.
9. Indemnification. In connection with any registration under Section 8,
--------------- ---------
each holder of Registrable Securities will enter into an agreement to indemnify
the seller of the Registrable Securities and, if any underwriter is involved in
such offering, into an underwriting agreement
11
<PAGE>
providing for indemnification of the seller of such Registrable Securities and
such underwriters, and the Parent agrees to enter into an agreement to indemnify
the Company and such underwriters, if any, all in the manner and to the extent
as is customary in underwritten secondary offerings (whether such offering is
underwritten or not).
10. Transfer of Registration Rights. The rights under Section 8 may be
------------------------------- ---------
assigned by the Parent to a transferee or assignee (other than a transferee or
assignee in open market transactions) of any of the Registrable Securities or to
an assignee of part or all of the Option. The Parent will give written notice
of any such assignment. To the extent the Parent transfers a portion, but not
all, of the Registrable Securities and its rights pursuant to this Section 10,
----------
the Parent will cause all transferees of the Registrable Securities and any
rights transferred under this Agreement to execute a participation or other
agreement that will require the Parent and all such direct or indirect
transferees to act as a single unit in exercising any and all rights granted
under this Agreement. Any notice provided to the Company shareholders by the
Parent or its assigns will be signed by the Parent, or a person designated by
the Parent in a notification delivered pursuant to Section 10.1 (or any
------------
subsequent designee), and the Shareholder will be entitled to rely upon such
notice.
11. Legal Remedies Inadequate. The parties to this Agreement acknowledges
-------------------------
that irreparable harm would occur and that money damages would be inadequate in
the event that any of the covenants or agreements, including, without
limitation, those set forth in Sections 7.4, 7.5, 8.1, and 8.2 in this Agreement
------------ --- --- ---
were not performed in accordance with the terms of this Agreement and therefore
the Shareholder and the Company agree that the Parent will be entitled to
specific enforcement of such covenants or agreements and to injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
12. Miscellaneous.
-------------
12.1. Assignment. This Agreement is not assignable, by operation of
----------
law or otherwise, by any party except pursuant to the laws of descent and
distribution (except that any such transferee will be bound by the terms of this
Agreement) and except that the Parent may assign this Agreement and its rights
under this Agreement to a subsidiary of the Parent as provided in this
Agreement.
12.2. Amendments; Termination. This Agreement may not be modified,
-----------------------
amended, altered, or supplemented, except upon the execution and delivery of a
written agreement executed by each party. The rights and obligations of the
parties under Sections 1, 2, 3, 4, 7.1, 7.2, 7.3, 7.4, and 7.5
--------------------------------------- ---
12
<PAGE>
of this Agreement will immediately cease and be without further force and effect
on the earlier of the Outside Date and termination of the Merger Agreement
pursuant to Section 7.1(f) of the Merger Agreement except, if the Option has
--------------
been exercised, with respect to the obligations of the Purchaser to pay the
Exercise Price and the Adjustment Amount and of the Shareholder to deliver the
Option Shares at the Closing and except for the obligations of the Shareholder
under Section 7.4.
-----------
12.3. Notices. All notices, requests, claims, demands, and other
-------
communications under this Agreement will be in writing and will be given (and
will be deemed to have been duly received when so given) by delivery, by cable,
facsimile, telegram or telex, or by registered mail, postage prepaid, return
receipt requested, to the respective parties as follows:
If to the Company:
American Income Holding, Inc.
1100 N. Market Street
Suite 1300
Wilmington, Delaware 19899
Attention: Bernard Rapoport
With copies to:
Ford Lacy, P.C.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Fax: (214) 969-4343
If to the Parent:
Torchmark Corporation
2001 Third Avenue, South
Birmingham, Alabama 35233-2186
Attention: R.K. Richey
Fax: (205) 325-4198
and
6300 Lamar
Shawnee Mission, Kansas 66201
Attention: Keith A. Tucker
Fax: (913) 236-1939
13
<PAGE>
With copies to:
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: Alan Bogdanow
Fax: (214) 939-6100
If to the Shareholder:
----------------------------
----------------------------
----------------------------
----------------------------
With copies to:
----------------------------
----------------------------
----------------------------
----------------------------
12.4. Governing Law. This Agreement will be governed by and
-------------
construed in accordance with the substantive law of the State of Delaware
without giving effect to the principles of conflicts of law.
12.5. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
12.6. Effect of Headings. The section headings in this Agreement are
------------------
for convenience only and will not affect the construction of this Agreement.
12.7. Parties in Interest. This Agreement will inure to the benefit
-------------------
of and be binding upon the parties to this Agreement and their respective
permitted successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties to this
Agreement, and their respective permitted successors and assigns, any rights or
remedies under or by reason of this Agreement.
12.8. Severability. If any term, provision, covenant, or
------------
restriction, or any portion thereof, contained in this Agreement, including,
without limitation, the provisions of Section 7.4, is held by a court of
-----------
competent jurisdiction to be invalid, void, voidable, or unenforceable, such
term, provision, covenant, restriction, or portion will be curtailed whether as
to time, area, or otherwise, to the minimum extent
14
<PAGE>
required by applicable law and the remaining terms, provisions, covenants, and
restrictions will remain in full force and effect and will in no way be
affected, impaired, or invalidated.
12.9. Section References. References in this Agreement to Sections
------------------
are references to Sections of this Agreement unless otherwise stated.
12.10. Certain Definitions; Interpretation. The word "person" when
-----------------------------------
used in this Agreement will be broadly construed to include any individual,
company, corporation, partnership, joint venture, trust, firm, or other entity,
and the word "affiliate" has the meaning given in Rule 144(a)(1) under the
Securities Act.
12.11 Expenses. Except as provided in Section 8.1, each party to
-------- -----------
this Agreement will pay all of its expenses in connection with the transactions
contemplated by this Agreement, including, without limitations, the fees and
expenses of its counsel and other advisers.
15
<PAGE>
IN WITNESS WHEREOF, each party to this Agreement has caused this Agreement
to be duly executed as of the date first above written.
SHAREHOLDER:
-------------------------------
(Name)
PARENT:
By:
--------------------------
Its:
--------------------------
COMPANY:
By:
--------------------------
Its:
--------------------------
16
<PAGE>
Schedule 1
to Shareholder Agreement
Common Stock Beneficially Owned
- -------------------------------
Options
- -------
17
<PAGE>
EXHIBIT (c)(3)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (the "Agreement"), dated as of September 15, 1994 by
and between TORCHMARK CORPORATION, a Delaware corporation (the "Parent"),
AMERICAN INCOME HOLDING, INC., a Delaware corporation (the "Company"), and [*]
(the "Shareholder").
RECITALS
Simultaneous with the execution and delivery of this Agreement, the Parent
is entering into an Agreement and Plan of Merger (as amended from time to time,
the "Merger Agreement") with the Company and TMK ACQUISITION CORPORATION, a
Delaware corporation and wholly owned subsidiary of the Parent (together with
any person succeeding to the rights and obligations of the Subsidiary pursuant
to Sections 2.1 and 8.3 of the Merger Agreement, the "Subsidiary").
------------ ---
As an inducement to the Parent and the Subsidiary to enter into and perform
the Merger Agreement, the Shareholder has agreed to grant to the Parent an
option on the terms set forth in this Agreement and to tender all of his or its
shares of Company Stock on the terms set forth below, and the Company has agreed
to join in this Agreement for the purposes of granting certain rights pursuant
to Sections 4 and 8.
---------- -
THEREFORE, in consideration of the foregoing, the mutual covenants and
promises set forth below, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Grant of Option. Subject to the terms and conditions of this
---------------
Agreement, the Shareholder hereby irrevocably grants to the Parent an option
(the "Option") to purchase all shares of common stock, par value $.01 per share
(the "Common Stock"), of the Company now owned or hereafter acquired by the
Shareholder (the "Option Shares") at a price per share (the "Exercise Price")
equal to the sum of (x) the Per Share Amount (as defined in the Merger
Agreement) plus (y) the Adjustment Amount (as defined below). The amount of the
Exercise Price constituting the Adjustment Amount will be paid by the Parent to
the Shareholder within three business days after the later of actual receipt of
the consideration by the Parent from any Adjustment Event (as defined below) or
the receipt of the opinion as to the value of such consideration referred to
below. Attached as Schedule 1 to this Agreement is an accurate and complete
----------
list of all shares of Common Stock beneficially owned by the Shareholder and a
list of each option of the Shareholder to acquire shares of Common Stock. The
Shareholder agrees that all shares currently beneficially
1
<PAGE>
owned by the Shareholder are Option Shares and that any shares of Common Stock
subsequently acquired by the Shareholder upon exercise of the options listed on
Schedule 1 or otherwise will also be Option Shares subject to the terms of this
- ----------
Agreement, except that the Shareholder will be under no obligation to exercise
such options under this Agreement. The Parent agrees to use reasonable efforts
to exercise the Option granted by this Agreement on a pro rata basis with other
options granted by other stockholders of the Company contemporaneously with this
Agreement. As used in this Agreement, the term "Adjustment Amount" means the
excess, if any, of (x) the value per share of the consideration actually
received by the Parent as a result of any agreement, letter of intent, or
binding arrangement entered into within nine months of the exercise of the
Option or any sale or disposition of Option Shares that occurs within nine
months of the exercise of the Option (an "Adjustment Event") over (y) the Per
Share Amount of the Offer (as defined in the Merger Agreement), including any
increase contemplated by Section 1.1 of the Merger Agreement, last in effect
-----------
prior to the consummation of an Adjustment Event. In the event that the
consideration paid to the Parent in an Adjustment Event is other than cash, the
value of such consideration will be conclusively determined in a written opinion
by an investment banking firm of recognized national standing selected by the
Parent with the consent of the Shareholder, which consent will not be
unreasonably withheld or delayed.
2. Exercise of Option.
------------------
2.1. Exercise. Subject to the conditions set forth in Section 2.3,
-------- -----------
the Option may be exercised in its entirety or in part from time to time by the
Parent at any time prior to the Outside Date (as defined below). As used in
this Agreement, the term "Outside Date" will mean March 31, 1995 unless the
Company terminates the Merger Agreement pursuant to Section 7.1(d)(i)(C) of the
--------------------
Merger Agreement, in which case it will mean December 29, 1994; provided, that
any written notice by the Parent of its election to exercise all or part of the
Option will extend the Outside Date for all purposes under this Agreement until
such time as any proceedings before any court or governmental instrumentality
necessary for the exercise of the Option are final and nonappealable and until
such time as any waiting period prescribed or approval required by any
applicable law, statute, regulation, order, or decree for the exercise of the
Option has passed or been obtained, as the case may be, but in no case later
than March 31, 1995 (unless the proceeding is between the Shareholder and the
Parent, in which case such March 31, 1995 date will not apply). If such
exercise by the Parent is delayed because of such proceedings, waiting period,
or necessity for approval, the Parent will have five business days after such
proceedings become final and nonappealable, such waiting period has passed, or
approval has been obtained to withdraw its exercise of the Option.
2
<PAGE>
2.2. Closing. In the event that the Parent wishes to exercise some or
-------
all of the Option, the Parent will give a written notice signed by an executive
officer of the Parent to the Shareholder of his or its intention to exercise the
Option, stating that the conditions set forth in Section 2.3 have been
-----------
fulfilled, and specifying the number of Option Shares to be purchased, the place
and date for the closing (the "Closing") of such purchase (which date will not
be later than ten business days from the date that such notice is mailed or
delivered); provided, however, that such date will be extended until such time
as any proceedings before any court or governmental instrumentality necessary
for the consummation of the purchase of the Option Shares is final and
nonappealable and until such time as any waiting period prescribed or approval
required by any applicable law, statute, regulation, order, or decree for the
consummation of the purchase of the Option Shares has passed or been obtained,
as the case may be, but in no event later than March 31, 1995 (unless the
proceeding is between the Shareholder and the Parent, in which case such March
31, 1995 date will not apply).
2.3. Conditions. The Parent will not have the right to exercise the
----------
Option and purchase the Option Shares unless:
(a) no preliminary or permanent injunction or other order issued
by any federal or state court of competent jurisdiction against the delivery of
the Option Shares is in effect;
(b) any applicable waiting period or extension under the Hart-
Scott-Rodino Anti-trust Improvements Act of 1976, as amended (the "HSR Act"),
has expired or been terminated, and all necessary approvals, consents, permits,
and requirements under all applicable laws, regulations, and rules, including,
without limitation, approvals under the insurance holding company statutes and
regulations of the States of Indiana and Texas, have been obtained or fulfilled;
and
(c) one or more of the following events has occurred: (i) the
Company or any of its subsidiaries (as defined in the Merger Agreement) enters
into a reorganization agreement, merger agreement, or other similar agreement or
plan, including, without limitation, an agreement in principle or letter of
intent, other than with the Parent or the Subsidiary or their affiliates; (ii)
any person or "group" (as used in (S) 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), other than the Parent or the Subsidiary
or their affiliates, (A) commences a tender offer or exchange offer for, or
other transaction involving, more than 20% of the outstanding Common Stock or
(B) publicly proposes any dissolution, recapitalization, merger, consolidation,
business combination, acquisition, or similar transaction involving the Company
or any of its subsidiaries
3
<PAGE>
that, in either case the Parent reasonably and in good faith concludes (after
the earlier of a public announcement by the Board of Directors of the Company of
its position with respect to such occurrence or the expiration of 10 days from
the date of such occurrence) is likely to be consummated; (iii) any person or
group, other than the Parent or the Subsidiary or their affiliates, acquires
more than 10% of the total assets of the Company and its subsidiaries, taken as
a whole; (iv) any person or group, other than the Parent or the Subsidiary or
their affiliates, acquires after the date of this Agreement more than 20% of the
outstanding Common Stock or any option or similar right to acquire more than 20%
of the Common Stock (other than for bona fide arbitrage purposes); (v) the
Company adopts a plan of liquidation relating to more than 10% of the total
assets of the Company and its subsidiaries, taken as a whole, or declares a
distribution to its stockholders of more than 10% of the total assets of the
Company and its subsidiaries, taken as a whole; or (vi) any person or group,
other than the Purchaser or the Subsidiary or their affiliates, commences a
proxy solicitation with respect to the Common Stock that the Parent reasonably
and in good faith concludes (after the earlier of a public announcement by the
Board of Directors of the Company of its position with respect to such
occurrence or the expiration of 10 days from the date of such occurrence) is
adverse to the Offer, the Merger, this Agreement, or the transactions
contemplated by this Agreement and is likely to succeed.
3. Payment and Delivery of Certificate(s). At the Closing, the Parent
--------------------------------------
will pay the aggregate purchase price for the number of Option Shares to be
purchased by delivery of a certified or bank cashier's check payable to the
order of the Shareholder in the amount equal to the product of (x) the Per Share
Amount times (y) the number of Option Shares to be purchased. At the Closing,
the Shareholder will deliver to the Parent a certificate or certificates in the
name of the Parent or its designee representing the Option Shares so purchased
free and clear of any adverse claim. The balance of the Exercise Price, if any,
referred to in clause (y) of Section 1, will be paid in accordance with
---------- ---------
Section 1.
- ------- -
4. Notification of Record Date. At any time from and after the date of
---------------------------
this Agreement until the time that the Purchaser purchases Shares pursuant to
the Offer, the Shareholder and the Company will give the Parent fifteen days'
prior written notice of any record date for determining the holders of record of
the Common Stock entitled to vote on any matter, to receive any dividend or
distribution, or to participate in any rights offering or other matters, or to
receive any other benefit or right with respect to the Common Stock.
4
<PAGE>
5. Representations and Warranties of the Shareholder. The Shareholder
-------------------------------------------------
hereby represents and warrants to the Parent as follows:
5.1. Binding Agreement. This Agreement constitutes the legal, valid,
-----------------
and binding agreement of the Shareholder, enforceable against the Shareholder in
accordance with its terms.
5.2. Option Shares. The Shareholder has all required authority and
-------------
has taken all necessary action to permit the Shareholder at all times from the
date of this Agreement to the Outside Date to deliver and sell the Option Shares
free and clear of all claims, liens, encumbrances, and security interests
whatsoever.
5.3. No Conflicts. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated by this
Agreement will violate or result in any violation of or be in conflict with, or
constitute a default under, any terms of any statute, regulation, agreement,
instrument, judgment, decree, rule, or order applicable to the Shareholder.
5.4. No Approvals or Notices Required. The execution, delivery, and
--------------------------------
performance of this Agreement by the Shareholder and the consummation by the
Shareholder of the transactions contemplated by this Agreement will not violate
(with or without the giving of notice or the lapse of time or both) or require
any consent, approval, filing, or notice by the Shareholder under any provision
of law applicable to the Shareholder except for filings required by the HSR Act,
filings on Schedule 13D under the Exchange Act, and any approvals required to be
obtained from state insurance regulatory authorities.
5.5. Title. The Option Shares, when delivered by the Shareholder to
-----
the Parent upon exercise of the Option, will be free and clear of any claims,
liens, charges, encumbrances, security interests, and charges of any nature
whatsoever other than restrictions on transfer under applicable federal and
state securities laws. On the date of this Agreement the Shareholder has (and
the Shareholder will have at all times up to the Outside Date or the earlier
purchase by the Parent or the Subsidiary of the Option Shares) good and
marketable title to the Option Shares, free and clear of all claims, liens,
charges, encumbrances, and security interests other than restrictions on
transfer under applicable federal and state securities laws; provided, however,
that notwithstanding the foregoing, the Shareholder will validly tender, and not
withdraw, all the Option Shares pursuant to the Offer.
5
<PAGE>
6. Representations and Warranties of the Parent. The Parent hereby
--------------------------------------------
represents and warrants to the Shareholder as follows:
6.1. Due Authorization. This Agreement has been duly authorized by
-----------------
all necessary action on the part of the Parent and has been duly executed and
delivered by the Parent.
6.2. Distribution. The shares of Common Stock to be acquired upon
------------
exercise of the Option will not be taken by the Shareholder with a view to
distribution in violation of the Securities Act of 1933, as amended (the
"Securities Act").
6.3. No Conflicts. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated by this
Agreement will violate or result in any violation of or be in conflict with or
constitute a default under any terms of the Certificate of Incorporation or
Bylaws of the Shareholder or any statute, regulation, agreement, instrument,
judgment, decree, rule, or order applicable to the Shareholder.
6.4. No Approvals or Notices Required. The execution, delivery, and
--------------------------------
performance of this Agreement by the Parent and the consummation by the Parent
of the transactions contemplated by this Agreement will not violate (with or
without the giving of notice or the lapse of time or both) or require any
consent, approval, filing or notice by the Shareholder under any provision of
law applicable to the Shareholder except for filings required by the HSR Act,
filings on Schedule 13D under the Exchange Act, and any approvals required to be
obtained from state insurance regulatory authorities.
7. Agreements of the Shareholder.
-----------------------------
7.1. Proxy. The Shareholder hereby irrevocably appoints R.K. Richey
-----
and Keith A. Tucker and each of them, with full power of substitution and
resubstitution (or any other designees of the Parent), as proxies for the
Shareholder to vote, and the Shareholder personally agrees to vote, all shares
of Common Stock that the Shareholder is entitled to vote (together with any
other shares of Common Stock that the Shareholder may become entitled to vote,
other than shares held in trust for the benefit of Company employees), for and
in the name, place, and stead of the Shareholder at any meeting of the holders
of shares of Common Stock or any adjournments or postponements thereof or
pursuant to any consent in lieu of a meeting, or otherwise, with respect only to
the approval of the Merger Agreement, the Offer, the transactions contemplated
by the Merger Agreement, any matters related to or in connection with the
Merger, and any corporate action the consummation of which would violate,
frustrate the purposes of, prevent, or delay the consummation of the
6
<PAGE>
transactions contemplated by the Merger Agreement (including, without
limitation, any proposal to amend the Certificate of Incorporation or Bylaws of
the Company or approve any merger, consolidation, sale or purchase of any
assets, issuance of Common Stock or any other equity security of the Company (or
a security convertible into an equity security of the Company), reorganization,
recapitalization, liquidation, winding up of or by the Company, or any similar
transaction). The Shareholder agrees that the foregoing proxy is coupled with
an interest. The Shareholder and the Parent agree that the provisions of this
Section 7.1 will be subject to the receipt of any necessary approval by or
- -----------
consent of insurance regulatory authorities having jurisdiction over the subject
matter of this Section 7.1, including, without limitation, the insurance
-----------
regulatory authorities of the States of Indiana and Texas. The Shareholder
covenants to use his or its reasonable best efforts to secure any such approval
or consent as promptly as practicable and, during the time until such approval
or consent is being obtained, not to take any action that is inconsistent with,
that would violate the provisions of, or that would hinder or delay the rights
of the Parent under, this Section 7.1.
-----------
7.2. Exclusivity. Except as permitted by Section 8.8 of the Merger
-----------
Agreement if the Shareholder is a director or officer of the Company and solely
in his capacity as such, from the date of this Agreement, the Shareholder will
negotiate exclusively with the Parent and the Subsidiary with regard to the
acquisition of the Company and will not directly or indirectly: (i) solicit any
other buyers for all or any part of the capital stock or assets of the Company
or any of its subsidiaries; (ii) encourage any third parties to bid for any of
the assets of the Company or any of its subsidiaries or to purchase shares of
its capital stock, or participate in any negotiations or discussions with any
such third parties with respect to such matters; (iii) provide business or
financial information (not otherwise publicly available) concerning the Company
or any of its subsidiaries to any third parties (except as required for the
making of necessary regulatory filings or in any judicial or administrative
proceeding); (iv) purchase or otherwise acquire shares of or any beneficial
interest in any of the capital stock of the Company or any of its subsidiaries
except upon exercise of options listed on Schedule 1; (v) make, or assist or
----------
cooperate with anyone else to make, any proposal to purchase all or any part of
the assets or capital stock of the Company or any of its subsidiaries; or (vi)
enter into any arrangements by himself or itself or with others to directly or
indirectly acquire or obtain control of the Company or any of its subsidiaries.
The Shareholder will immediately notify the Parent if he or it becomes aware of
any efforts by any person or group, directly or indirectly in any manner
whatsoever, to acquire or obtain control of the Company. The Shareholder will
direct his and its financial and other advisers and representatives to comply
with each of the foregoing covenants.
7
<PAGE>
7.3. Certain Option Adjustments. In the event of any change in the
--------------------------
number of issued and outstanding shares of Common Stock by reason of any stock
dividend, split-up reclassification, recapitalization, merger, or other change
in the corporate or capital structure of the Company, the Parent will receive,
upon exercise of the Option, the stock or other securities, cash, or property to
which the Parent would have been entitled if the Parent had exercised the Option
and had been a holder of record of Option Shares on the record date fixed for
determination of holders of shares of Common Stock entitled to receive such
stock or other securities, cash, or property at the same aggregate price as the
Exercise Price.
7.4 Noncompetition; Confidentiality; Employment. [INTENTIONALLY
-------------------------------------------
OMITTED.]
8
<PAGE>
7.5 Agreement to Tender. The Shareholder hereby agrees validly to tender,
-------------------
and not withdraw, all the Option Shares pursuant to the Offer.
8. Obligations of the Company.
--------------------------
8.1. Demand Registration. In the event that within five years after
-------------------
the date of the Closing the Parent so requests in writing, the Company agrees to
use its reasonable best efforts to effect as soon as practicable up to two
registrations under the Securities Act and any applicable state securities laws
covering any part or all of the Option Shares owned by the Parent or its
permitted assigns pursuant to the terms of this Agreement (the "Registrable
Securities"). Notwithstanding the foregoing, the Company may delay complying
with any registration request by the Parent (a) if such registration would
require a special audit of the Company (unless the Parent bears the cost of such
audit) or (b) for not more than ninety days if the Company determines in good
faith that such registration would materially interfere with any material
financing, acquisition, corporate reorganization, or other similar transaction
proposed by the Company. Any registration effected under this Section 8 will be
---------
effected at the expense of the Company except for any
9
<PAGE>
underwriting or brokerage commissions or fees applicable to the sale of the
Registrable Securities and the fees, expenses, and disbursements of the counsel
for the Parent and its permitted assigns.
8.2. Offering by the Company. If at any time within five years after
-----------------------
the date of the Closing under Section 2.2 the Company proposes to register for
-----------
sale for cash in an offering to the public any of its equity securities under
the Securities Act on Form S-1, S-2, or S-3 (or any successor forms) under which
the Registrable Securities could be registered for sale, it will at such time
give written notice to the Parent of the intention of the Company to do so.
Upon written request of the Parent or its permitted assigns, given within
fifteen days after the giving of any such notice by the Company (which request
will state the intended method of disposition of such Registrable Securities by
the prospective seller), the Company will use its reasonable best efforts to
cause the Registrable Securities as to which the holders have so requested
registration to be registered under the Securities Act and any applicable state
securities laws as part of the offering being registered by the Company and
under the same registration statement proposed to be filed by the Company, all
to the extent necessary to permit the sale or other disposition (in accordance
with the written request of the prospective sellers) by the prospective seller
or sellers of the Registrable Securities so registered, except to the extent, in
the case of an underwritten offering, the proposed managing underwriter of the
securities covered by the registration statement advises the Parent or its
assigns, as the case may be, in writing that the inclusion of such shares on the
basis requested by the Parent would, in the opinion of such underwriter,
materially adversely affect the marketing of the securities to be sold by the
Company pursuant to the proposed offering. Any reduction in the number of
Registrable Securities as a result of such opinion will be pro rata with all
other persons other than the Company proposing to register shares in such
offering based on the number of shares that such persons in good faith intended
to have registered for sale.
8.3. Representations of the Company. The Company represents and
------------------------------
warrants to the Parent that: (a) the execution, delivery, and performance by the
Company of this Agreement has been duly authorized by all requisite corporate
actions; (b) this Agreement constitutes the legal, valid, and binding obligation
of the Company, enforceable in accordance with its terms; (c) neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement will violate or result in any
violation of, or be in conflict with, or constitute a default under, any terms
of any statute, regulation, agreement, instrument, judgment, decree, rule, or
order applicable to the Company; (d) the execution, delivery, and performance of
this
10
<PAGE>
Agreement by the Company and the consummation of the transactions contemplated
by this Agreement will not violate (with or without the giving of notice or
lapse of time or both) or require any consent, approval, filing, or notice by
the Company under any provision of law applicable to the Company and; (e) the
Board of Directors of the Company has irrevocably approved this Agreement and
the Option for the purposes of (S) 203 of the Delaware General Corporation Law
and any other applicable state or federal law that the Parent has identified, or
that is known after reasonable inquiry, to the Company requiring prior approval
of this Agreement or the consummation of any transaction contemplated by this
Agreement.
8.4. Board of Directors. Effective upon any exercise of the Option, the
------------------
Parent will be entitled to designate that number of directors of the Company
rounded up to the next whole number (but not 50% or more by virtue of this
Section 8.4 or any other similar section in any other shareholder agreement
- -----------
executed on the date of this Agreement), that equals the product of (x) the
total number of directors on the Board of Directors (giving effect to the
election or appointment of any additional directors pursuant to this Section
-------
8.4) and (y) the percentage that the number of Option Shares as to which the
- ---
Option is then being exercised on a fully diluted basis bears to the total
number of outstanding shares of Common Stock. The Company will at such time
cause the designees of the Parent to be elected to or appointed by the Board of
Directors, including, without limitation, increasing the number of directors,
amending its bylaws, using its reasonable best efforts to obtain resignations of
incumbent directors, and, to the extent necessary, filing with the Securities
and Exchange Commission and mailing to its stockholders the information required
by (S) 14(f) of the Exchange Act and the rules promulgated thereunder, as
promptly as possible. The Parent and the Subsidiary will supply any information
with respect to themselves and their respective nominees, officers, directors,
and affiliates required by (S) 14(f) of the Exchange Act and such rules to the
Company. Upon written request by the Parent, the Company will use its best
efforts to cause the designees of the Parent to constitute the same percentage
of representation as is on the Board of Directors after giving effect to this
Section 8.4 on (a) each committee of the Board of Directors (other than the
- -----------
special committee of the Board of Directors charged with oversight of the
transactions contemplated by the Merger Agreement); (b) the board of directors
of each subsidiary of the Company; and (c) each committee of such subsidiaries'
boards of directors.
9. Indemnification. In connection with any registration under Section 8,
--------------- ---------
each holder of Registrable Securities will enter into an agreement to indemnify
the seller of the Registrable Securities and, if any underwriter is involved in
such offering, into an underwriting agreement
11
<PAGE>
providing for indemnification of the seller of such Registrable Securities and
such underwriters, and the Parent agrees to enter into an agreement to indemnify
the Company and such underwriters, if any, all in the manner and to the extent
as is customary in underwritten secondary offerings (whether such offering is
underwritten or not).
10. Transfer of Registration Rights. The rights under Section 8 may be
------------------------------- ---------
assigned by the Parent to a transferee or assignee (other than a transferee or
assignee in open market transactions) of any of the Registrable Securities or to
an assignee of part or all of the Option. The Parent will give written notice
of any such assignment. To the extent the Parent transfers a portion, but not
all, of the Registrable Securities and its rights pursuant to this Section 10,
----------
the Parent will cause all transferees of the Registrable Securities and any
rights transferred under this Agreement to execute a participation or other
agreement that will require the Parent and all such direct or indirect
transferees to act as a single unit in exercising any and all rights granted
under this Agreement. Any notice provided to the Company shareholders by the
Parent or its assigns will be signed by the Parent, or a person designated by
the Parent in a notification delivered pursuant to Section 10.1 (or any
------------
subsequent designee), and the Shareholder will be entitled to rely upon such
notice.
11. Legal Remedies Inadequate. The parties to this Agreement acknowledges
-------------------------
that irreparable harm would occur and that money damages would be inadequate in
the event that any of the covenants or agreements, including, without
limitation, those set forth in Sections 7.4, 7.5, 8.1, and 8.2 in this Agreement
------------ --- --- ---
were not performed in accordance with the terms of this Agreement and therefore
the Shareholder and the Company agree that the Parent will be entitled to
specific enforcement of such covenants or agreements and to injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
12. Miscellaneous.
-------------
12.1. Assignment. This Agreement is not assignable, by operation of
----------
law or otherwise, by any party except pursuant to the laws of descent and
distribution (except that any such transferee will be bound by the terms of this
Agreement) and except that the Parent may assign this Agreement and its rights
under this Agreement to a subsidiary of the Parent as provided in this
Agreement.
12.2. Amendments; Termination. This Agreement may not be modified,
-----------------------
amended, altered, or supplemented, except upon the execution and delivery of a
written agreement executed by each party. The rights and obligations of the
parties under Sections 1, 2, 3, 4, 7.1, 7.2, 7.3, 7.4, and 7.5
--------------------------------------- ---
12
<PAGE>
of this Agreement will immediately cease and be without further force and effect
on the earlier of the Outside Date and termination of the Merger Agreement
pursuant to Section 7.1(f) of the Merger Agreement except, if the Option has
--------------
been exercised, with respect to the obligations of the Purchaser to pay the
Exercise Price and the Adjustment Amount and of the Shareholder to deliver the
Option Shares at the Closing and except for the obligations of the Shareholder
under Section 7.4.
-----------
12.3. Notices. All notices, requests, claims, demands, and other
-------
communications under this Agreement will be in writing and will be given (and
will be deemed to have been duly received when so given) by delivery, by cable,
facsimile, telegram or telex, or by registered mail, postage prepaid, return
receipt requested, to the respective parties as follows:
If to the Company:
American Income Holding, Inc.
1100 N. Market Street
Suite 1300
Wilmington, Delaware 19899
Attention: Bernard Rapoport
With copies to:
Ford Lacy, P.C.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Fax: (214) 969-4343
If to the Parent:
Torchmark Corporation
2001 Third Avenue, South
Birmingham, Alabama 35233-2186
Attention: R.K. Richey
Fax: (205) 325-4198
and
6300 Lamar
Shawnee Mission, Kansas 66201
Attention: Keith A. Tucker
Fax: (913) 236-1939
13
<PAGE>
With copies to:
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: Alan Bogdanow
Fax: (214) 939-6100
If to the Shareholder:
----------------------------
----------------------------
----------------------------
----------------------------
With copies to:
----------------------------
----------------------------
----------------------------
----------------------------
12.4. Governing Law. This Agreement will be governed by and
-------------
construed in accordance with the substantive law of the State of Delaware
without giving effect to the principles of conflicts of law.
12.5. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
12.6. Effect of Headings. The section headings in this Agreement are
------------------
for convenience only and will not affect the construction of this Agreement.
12.7. Parties in Interest. This Agreement will inure to the benefit
-------------------
of and be binding upon the parties to this Agreement and their respective
permitted successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties to this
Agreement, and their respective permitted successors and assigns, any rights or
remedies under or by reason of this Agreement.
12.8. Severability. If any term, provision, covenant, or
------------
restriction, or any portion thereof, contained in this Agreement, including,
without limitation, the provisions of Section 7.4, is held by a court of
-----------
competent jurisdiction to be invalid, void, voidable, or unenforceable, such
term, provision, covenant, restriction, or portion will be curtailed whether as
to time, area, or otherwise, to the minimum extent
14
<PAGE>
required by applicable law and the remaining terms, provisions, covenants, and
restrictions will remain in full force and effect and will in no way be
affected, impaired, or invalidated.
12.9. Section References. References in this Agreement to Sections
------------------
are references to Sections of this Agreement unless otherwise stated.
12.10. Certain Definitions; Interpretation. The word "person" when
-----------------------------------
used in this Agreement will be broadly construed to include any individual,
company, corporation, partnership, joint venture, trust, firm, or other entity,
and the word "affiliate" has the meaning given in Rule 144(a)(1) under the
Securities Act.
12.11 Expenses. Except as provided in Section 8.1, each party to
-------- -----------
this Agreement will pay all of its expenses in connection with the transactions
contemplated by this Agreement, including, without limitations, the fees and
expenses of its counsel and other advisers.
15
<PAGE>
IN WITNESS WHEREOF, each party to this Agreement has caused this Agreement
to be duly executed as of the date first above written.
SHAREHOLDER:
-------------------------------
(Name)
PARENT:
By:
--------------------------
Its:
--------------------------
COMPANY:
By:
--------------------------
Its:
--------------------------
16
<PAGE>
Schedule 1
to Shareholder Agreement
Common Stock Beneficially Owned
- -------------------------------
Options
- -------
17
<PAGE>
EXHIBIT (c)(4)
American Income Holding, Inc.
1100 N. Market Street, Suite 1300
P.O. Box 8985
Wilmington, Delaware 19899
August 29, 1994
Torchmark Corporation
2001 Third Avenue, South
Birmingham, Alabama 35233
Attention: Keith A. Tucker
Vice Chairman of the Board
Re: Proposed Acquisition of American Income Holding, Inc.
Ladies and Gentlemen:
You have requested information from us in connection with a possible
transaction between us or our shareholders and you. You agree to use the
Evaluation Material (as defined below) only with respect to evaluating the
possible above referenced transaction and to use the same degree of care to
protect the confidentiality of the material we furnish to you (the "Evaluation
Material") as you use to protect your own information of similar character and
to prevent its disclosure to any person, except to your agents, advisors,
financing sources, representatives, and employees who in your judgement need to
know the information in connection with the proposed transaction and who are
directed by you to treat the Evaluation Material in accordance with this
agreement. You will be responsible for any breach of this agreement by your
agents, advisors, financing sources, representatives, or employees.
You hereby acknowledge that you are aware, and that you will advise such
directors, officers, employees and representatives whom you inform as to the
matters which are the subject of this letter, that the United States securities
laws prohibit any person who has received from an issuer material, non-public
information concerning the matters which are the subject of this letter from
purchasing or selling securities of such issuer or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
<PAGE>
In the event that you are requested in any proceeding to disclose any
Evaluation Material, you will give us prompt notice of such request so that we
may seek an appropriate protective order. It is further agreed that, if in the
absence of a protective order you are nonetheless compelled to disclose
Evaluation Material, you may disclose such information without liability
hereunder; provided, however, that you give us written notice of the information
to be disclosed as far in advance of its disclosure as is practicable and, upon
our request, use your reasonable best efforts to obtain assurances that
confidential treatment will be accorded to such information.
You agree except for the possible transaction referred to above and any
transaction arising out of your involvement with such proposed transaction that
for a period of two years from the date hereof you and your affiliates and
subsidiaries will not (and you and they will not assist or encourage others to),
directly or indirectly, unless specifically requested in writing in advance by
our Board of Directors: (i) acquire or offer, seek, propose or agree to acquire,
ownership (including, but not limited to, beneficial ownership as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of any voting
securities issued by us, or any rights or options to acquire such ownership,
(ii) seek or propose to influence or control our management or our policies or
(iii) make any public disclosure with respect to any of the foregoing.
You agree that upon our request you will promptly redeliver to us all
copies of the Evaluation Material and will destroy all memoranda, notes and
other writings prepared by you or your directors, officers, employees or agents
based on the Evaluation Material.
To term "Evaluation Material" does not include information which was or is
available to you prior to its delivery to you by us or was or becomes generally
available to you on a non-confidential basis; provided that you in good faith
believe that the source of such information was not bound by a confidentiality
agreement.
You agree not to make any public disclosure that you are having or have had
discussions with us; provided that you may make such disclosure if you have
received the written opinion of your outside counsel that such disclosure must
be made by you in order that you not commit a violation of law.
You agree that money damages would not be a sufficient remedy for any
breach of this agreement by you or your directors, officers, employees or
agents, and that in addition to all other remedies we shall be entitled to
specific performance and injunctive or other equitable relief as a remedy for
any such breach, and you further agree to waive and to use your best efforts to
cause your directors, officers, employees or agents to waive, any requirement
for the securing or posting of any bond in connection with such remedy.
-2-
<PAGE>
This agreement shall be governed and construed in accordance with the
laws of the State of Delaware, without giving effect to its conflict of laws,
principles or rules.
If you are in agreement with the foregoing, please so indicate by
signing, dating and returning one copy of this agreement, which will constitute
our agreement with respect to the matters set forth herein.
Very truly yours,
American Income Holding, Inc.
By:_____________________________
Name:___________________________
Title:__________________________
Confirmed and Agreed to:
Torchmark Corporation
By: /s/ Keith A. Tucker
--------------------
Name: Keith A. Tucker
------------------
Title: Vice Chairman
-----------------
Date: 8/29/94
-----------------
-3-
<PAGE>
EXHIBIT (f)(1)
MEMORANDUM
In the event that Torchmark Corporation acquires control of American Income
Holding Company, I agree to enter an employment contract with you for my present
position and responsibilities through January 1, 1997, under the following
agreements:
Beginning with the pay period following any acquisition of American Income
Holding Company by Torchmark Corporation, and until January 1, 1997, 50% of my
salary will be deferred with interest.
If I should voluntarily resign or be terminated for good cause prior to
January 1, 1997, then such deferred compensation and interest will be forfeited.
The interest to be credited will be the same as that credited on deferred
compensation within the other major subsidiaries of Torchmark.
My present salary and benefits shall continue.
In the event of permanent disability or death, the deferred compensation
and accrued interest shall be payable within 30 days.
/s/ Bernard Rapoport
--------------------
Bernard Rapoport
Dated: September 1, 1994
<PAGE>
EXHIBIT (f)(2)
MEMORANDUM
In the event that Torchmark Corporation acquires control of American Income
Holding Company, I agree to enter an employment contract with you for my present
position and responsibilities through January 1, 1997, under the following
agreements:
Beginning with the pay period following any acquisition of American Income
Holding Company by Torchmark Corporation, and until January 1, 1997, 50% of my
salary will be deferred with interest.
If I should voluntarily resign or be terminated for good cause prior to
January 1, 1997, then such deferred compensation and interest will be forfeited.
The interest to be credited will be the same as that credited on deferred
compensation within the other major subsidiaries of Torchmark.
All prior agreements with respect to termination pay shall remain in full
force and effect.
My present salary and benefits shall continue.
In the event of permanent disability or death, the deferred compensation
and accrued interest shall be payable within 30 days.
/s/ Charles B. Cooper
---------------------
Charles B. Cooper
Dated: September 1, 1994
