<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________________ to
________________________
COMMISSION FILE NUMBER 0-9633
AMERICAN BANKERS INSURANCE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-1985922
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
11222 QUAIL ROOST DRIVE, MIAMI, FL 33157
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 253-2244
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF CLASS
COMMON STOCK, $1 PAR VALUE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIODS THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO
THIS FORM 10-K.[ X ]
THE AGGREGATE MARKET VALUE ON FEBRUARY 7, 1996, OF THE VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT WAS APPROXIMATELY $ 551,661,000. SHARES OF
COMMON STOCK HELD BY EXECUTIVE OFFICERS AND DIRECTORS WHO INDIVIDUALLY OWN 5%
OR MORE OF THE OUTSTANDING COMMON STOCK HAVE BEEN EXCLUDED IN THAT SUCH PERSONS
MAY BE DEEMED TO BE AFFILIATES; HOWEVER, THIS DETERMINATION OF AFFILIATE STATUS
IS NOT NECESSARILY DETERMINATIVE FOR OTHER PURPOSES.
THERE WERE 20,334,000 SHARES OUTSTANDING (EXCLUDING 88,000 SHARES HELD IN
TREASURY) OF THE REGISTRANT'S COMMON STOCK, $1 PAR VALUE, AS OF FEBRUARY 7,
1996.
DOCUMENTS INCORPORATED BY REFERENCE
(1) PORTIONS OF THE DEFINITIVE PROXY STATEMENT FOR THE ANNUAL SHAREHOLDERS
MEETING TO BE HELD MAY 22, 1996 TO BE FILED WITHIN 120 DAYS OF THE
REGISTRANT'S FISCAL YEAR-END ARE INCORPORATED BY REFERENCE IN PART III.
PORTIONS OF THE FORM S-3 REGISTRATION STATEMENT NUMBER 2-94359; THE
REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE YEARS ENDED 1988, 1990,
1991, 1993, AND 1994; THE REGISTRATION STATEMENT ON FORM 8-A FILED MARCH
11, 1988; THE REGISTRANT'S CURRENT REPORT ON FORM 10-Q DATED MARCH 31,
1994 AND JUNE 30,1995; THE 1987 ANNUAL MEETING PROXY STATEMENT; THE
REGISTRANT'S CURRENT REPORT ON FORM 8-K DATED NOVEMBER 14, 1990, ARE
ALSO INCORPORATED BY REFERENCE.
<PAGE> 2
AMERICAN BANKERS INSURANCE GROUP, INC.
AND SUBSIDIARIES
Table of Contents
PART I
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1 Business . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 4 Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . 22
PART II
Item 5 Market for the Registrant's Common Stock and Related Stockholder Matters . . . . . . . . 25
Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 8 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . 36
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 72
PART III
Item 10 Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 73
Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Item 12 Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 73
Item 13 Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 73
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . 74
</TABLE>
<PAGE> 3
PART I
ITEM 1
BUSINESS
a. DEVELOPMENT OF BUSINESS
American Bankers Insurance Group, Inc. ("American Bankers" or
the "Company") was incorporated in Florida on July 24, 1978.
ABIG became the holding company of American Bankers Insurance
Company of Florida ("ABIC") and American Bankers Life Assurance
Company of Florida ("ABLAC") as a result of their merger with
wholly-owned subsidiaries of ABIG after approval by their
respective stockholders on October 31, 1980. In addition to
ABIC and ABLAC, the Company's subsidiaries include Caribbean
American Life Assurance Company ("CALAC"), Caribbean American
Property Insurance Company ("CAPIC"), American Reliable
Insurance Company ("ARIC"), Bankers American Life Assurance
Company ("BALAC"), Bankers Insurance Company Limited ("BICL"),
Bankers Atlantic Reinsurance Company ("BARC"), and five
insurance companies referred to collectively as the Voyager
Insurance Companies.
ABIC was incorporated in the state of Florida on October 29,
1947 and ABLAC, a legal reserve life insurance company, was
incorporated in the state of Florida on February 6, 1952.
CALAC and CAPIC, wholly owned subsidiaries in Puerto Rico,
began operations in 1988 and 1992 respectively. ARIC, a wholly
owned subsidiary in Arizona, was acquired by the Company in
1984. BALAC, a wholly owned subsidiary in New York, began
operations in 1991. BICL, a wholly owned subsidiary in the
United Kingdom, began operations in 1990. BARC, a wholly owned
subsidiary in the Turks & Caicos islands, began operations in
1995. The Voyager Insurance Companies were acquired by the
Company in 1993 and consist of five companies incorporated in
Florida, Georgia and South Carolina.
The Company's credit-related insurance products consist
primarily of life, accidental death and dismemberment ("AD&D"),
credit unemployment, disability and property insurance issued
in connection with the financing of consumer purchases. The
Company also sells extended service contracts in connection
with consumer purchases. American Bankers also writes non
credit-related insurance in markets where it believes it has
less competition from other insurers. For example, the Company
sells group life and disability products through Blue Cross
Blue Shield plans.
For information on the growth of the Company's business for the
years ended December 31, 1995, 1994, 1993, 1992 and 1991, see
the Gross Collected Premium table set forth below in "Narrative
Description of Business."
b. BUSINESS SEGMENT DATA
See Note 12 to the Consolidated Financial Statements on page 61
in Part II Item 8 of this report.
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c. NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The Company is a specialty insurer providing primarily
credit-related insurance products in the U.S. and Canada as
well as in Latin America, the Caribbean and the United Kingdom.
During 1995, the Company incorporated a wholly owned insurance
subsidiary in Mexico, purchased an insurance company in
Argentina and opened branch operations in Jamaica and Bahrain.
The majority of the Company's gross collected premiums are
derived from credit-related insurance products sold through
financial institutions and other entities which provide
consumer financing as a regular part of their businesses.
The Company's credit-related insurance products consist
primarily of life, accidental death and dismemberment ("AD&D"),
credit unemployment, disability and property insurance issued
in connection with the financing of consumer purchases.
Credit-related insurance products generally offer a consumer a
convenient option to insure a credit card or loan balance so
that the amount of coverage purchased equals the amount of
outstanding debt. Coverage is generally available to all
consumers with few of the underwriting conditions that apply to
ordinary term insurance, such as medical examinations and
medical history reports. The Company's life and AD&D insurance
products generally provide payment in full of the outstanding
debt balance in the event of the insured's death. The
unemployment and disability products satisfy the minimum
monthly loan payment for a specified duration in the event of
unemployment or disability. The Company's property insurance
products pay the loan balance or the cost of repairing or
replacing the insured's merchandise in the event of a loss due
to a covered event. The Company's extended service contracts
products pay the cost of repairing or replacing the insured's
merchandise in the event of damages due to a covered event. The
Company avoids lines of insurance characterized by long loss
payout periods, such as workers' compensation and most general
liability coverages.
The Company markets its products on a wholesale basis through a
network of clients that consist primarily of major financial
institutions, retailers and other entities which provide
consumer financing as a regular part of their businesses.
American Bankers enters into contracts, typically with terms of
three to five years, with its corporate clients pursuant to
which such clients market the Company's insurance products to
their customers. In return, these clients receive expense
reimbursements or commissions and are thus able to recover
costs associated with the marketing of the insurance and
generate incremental revenues. The Company's clients typically
share in the profitability of business written through them.
American Bankers also writes non credit-related insurance in
markets where it believes it has less competition from other
insurers. For example, the Company sells group life and
disability products through Blue Cross Blue Shield plans. In
addition, the Company acts as an administrator for the National
Flood Insurance Program, for which it earns a fee for
collecting premiums and processing claims. The Company does
not assume any underwriting risk with respect to this program.
The Company's business strategy is to continue developing
distribution channels which provide access to large numbers of
potential insureds in markets not traditionally served by other
insurance companies. In pursuing this strategy, the Company
emphasizes long-term relationships and the development of
insurance programs designed to meet individual client needs.
An essential part of the Company's strategy is to invest in
technology which enables American Bankers to accommodate a
large group of clients and their customers while simultaneously
offering customized insurance programs.
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<PAGE> 5
American Bankers has been able to develop a diverse client
base. In 1995, no single client accounted for more than 6% of
the Company's total premiums. The Company distributes its
products through nine markets or distribution channels
involving over one thousand clients. Its business is generally
not concentrated and the ten largest unrelated clients
represent 26% of the Company's gross collected premiums.
ABIC and ABLAC jointly market products and programs within each
distribution channel, and the Company believes that such
cross-marketing achieves economies of scale thus lowering
administrative costs. By combining its service and marketing
activities, the Company centralizes the processing of its
products and avoids duplication of administrative functions.
The Company also provides management services and marketing
support to its clients. Management services include
administration of captive insurance companies and other
participating programs for clients. American Bankers provides
comprehensive administrative support in claims, accounting,
tax, data processing and actuarial matters. The Company also
packages credit-related insurance programs to meet a client's
particular needs and provides the marketing assistance to
implement these programs. Marketing support includes a full
range of marketing materials, direct mail and telemarketing
services and personnel training programs.
The majority of the Company's business utilizes contracts which
afford the Company's clients the opportunity to participate in
the underwriting results of policies they market to their
customers. The "Retro Plan" contract links a client's overall
commission to the claims experience on policies marketed to its
customers, so that low loss ratios result in higher commissions
for the client and high loss ratios result in lower
commissions. Another form of participation is a profit sharing
contract under which the client participates in up to 50% of
the profits generated from its insurance business. The Company
also cedes premiums generated by clients to the clients' own
captive insurance companies or to reinsurance subsidiaries in
which clients have an equity interest. For the Company's
remaining business, the client's commission is not linked to
its claims experience.
Business Segments and Products
LIFE INSURANCE
<TABLE>
<CAPTION>
(in thousands) NET
TOTAL PREMIUMS TOTAL OPERATING
ASSETS EARNED REVENUES INCOME*
<S> <C> <C> <C> <C>
1995 $ 1,333,100 $ 377,100 $ 417,500 $ 44,700
1994 $ 1,023,600 $ 360,100 $ 394,500 $ 32,000
1993 $ 1,035,000 $ 305,100 $ 350,000 $ 28,200
</TABLE>
*Operating income consists of earnings before interest
expense and taxes.
Highlights
- Gross collected premiums increased 30% to $702.5 million in 1995 from
$542.1 million in 1994.
- Five products (Credit Life, Mortgage Life, Credit A&H, Group A&H, and
Mortgage A&H) contributed 91% of the segment's 1995 gross collected
premiums. These products are sold through various distribution
channels.
- Operating income increased 40% to $44.7 million in 1995 from $32.0
million in 1994.
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<PAGE> 6
Subsidiaries
- American Bankers Life Assurance Company of Florida (ABLAC)
- Bankers American Life Assurance Company (BALAC)
- Caribbean American Life Assurance Company (CALAC)
- Voyager Life Insurance Company (VLIC)
- Voyager Life and Health Insurance Company (VLHIC)
Major Products
- Credit Life
- Credit Accident & Health
- Mortgage Accident & Health
- Group Accident & Health
- Mortgage Life
Distribution Channels
- Retailers
- Financial Institutions
Commercial Banks
Consumer Finance Companies
Mortgage Bankers
Savings Institutions
- Manufactured Housing, Travel Trailer and Equipment
Manufacturers, Dealers and Lenders
- Blue Cross Blue Shield Plans
- Independent Agents
PROPERTY AND CASUALTY INSURANCE
<TABLE>
<CAPTION>
(in thousands)
NET
TOTAL PREMIUMS TOTAL OPERATING
ASSETS EARNED REVENUES INCOME*
<S> <C> <C> <C> <C>
1995 $ 1,602,200 $ 863,600 $ 934,200 $ 87,400
1994 $ 1,347,300 $ 734,200 $ 775,300 $ 66,700
1993 $ 1,072,700 $ 576,900 $ 611,000 $ 58,700
</TABLE>
*Operating income consists of earnings before interest
expense and taxes.
Highlights
- Gross collected premiums increased 33% to $1.6 billion in
1995 from $1.2 billion in 1994. Credit Unemployment and
Extended Service Contracts were the products representing
the largest premium increases in 1995.
- Operating income increased 31% to $87.4 million in 1995
from $66.7 million in 1994.
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Subsidiaries
- American Bankers Insurance Company of Florida (ABIC)
- American Reliable Insurance Company (ARIC)
- Bankers Insurance Company, Ltd. (BICL)
- Caribbean American Property Insurance Company (CAPIC)
- Voyager Indemnity Insurance Company (VIIC)
- Voyager Property and Casualty Insurance Company (VPCIC)
Warranty Companies
- Federal Warranty Service Corporation (FWSC)
- Voyager Service Warranties, Inc. (VSW)
Major Products
- Credit Unemployment
- Credit Property
- Mobilehome Physical Damage
- Extended Service Contracts
- Homeowners
Distribution Channels
- Retailers
- Financial Institutions
Commercial Banks
Consumer Finance Companies
Mortgage Bankers
Savings Institutions
- Manufactured Housing, Travel Trailer and Equipment
Manufacturers, Dealers and Lenders
- Independent Agents
For additional Business Segment Information see page 28 in Part
II Item 6 of this report.
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<PAGE> 8
Products
The following table sets forth the gross collected premiums of
the Company's major insurance products:
<TABLE>
<CAPTION>
GROSS COLLECTED PREMIUMS
MAJOR INSURANCE PRODUCTS
YEARS ENDED DECEMBER 31
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Credit Unemployment $ 410.8 $ 269.8 $ 172.9 $ 127.9 $ 110.3
Credit Property 367.7 354.2 268.6 187.2 174.2
Credit A & H 349.0 244.5 182.8 174.0 116.6
Credit Life 287.2 211.7 165.5 152.1 113.6
Mobilehome Physical Damage 137.3 121.4 100.1 41.6 47.5
Extended Service Contracts 129.5 19.3 12.0 10.7 10.9
Homeowners 101.1 87.0 85.6 91.5 91.8
Mortgage Disability 53.3 49.1 44.3 37.4 36.6
Livestock Mortality 40.8 48.6 51.9 29.6 22.9
Group A & H 39.6 26.4 27.7 22.4 22.7
All Other (1) 370.3 329.1 315.8 246.0 213.7
-------- -------- -------- -------- --------
Total $ 2,286.6 $ 1,761.1 $ 1,427.2 $ 1,120.4 $ 960.8
========= ========= ========= ========= =======
</TABLE>
____________
(1) "All Other" represents a large number of products, approximately 50 to
60 each year. The most significant in 1995 and 1994 are the flood and
surety products.
The Company's business can be divided into two principal types
of products: (1) Financial Market Products, consisting
primarily of credit-related insurance, and (2) Personal
Insurance lines, consisting of non credit-related products and
services.
Financial Market Products
Property Insurance. The Company's property insurance is
written primarily by ABIC, ARIC, CAPIC and certain of the
Voyager Companies. Through these subsidiaries, the Company
writes a variety of property insurance which includes
homeowners' and coverages for comprehensive physical damage of
mobilehomes, autos, furniture, fixtures and other consumer
goods. In the event of a loss due to a covered event, the
Company will either pay off the loan balance or replace or
repair the merchandise.
The terms of the Company's property policies range from 30 days
to multiple years. Multiple year policies generally coincide
with the term of the financing for the insured property. For
example, a consumer purchasing an automobile and financing the
purchase over a three-year period can purchase a three-year
physical damage policy at the inception of the loan for a
single premium. An increasing proportion of gross collected
premiums are monthly premiums received in connection with
credit card purchases. Such premiums are based on the average
outstanding credit card balance.
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Life and Disability Insurance. Through ABLAC, BALAC, CALAC and
certain of the Voyager Companies, the Company writes life, AD&D
and disability insurance primarily on consumer loans, mortgages
and credit card balances. This life insurance is a form of
decreasing term life insurance written generally without
medical examination of the borrower. Premiums are received
either in a single payment at the time the policy is written or
monthly along with the borrower's regular payment. It is
normally written for the term of the installment debt and
retires all or a portion of the indebtedness in the event of
the insured's death. Disability insurance covers a borrower
for payments coming due on an installment loan, mortgage loan
or revolving charge account while the borrower is disabled.
Credit Unemployment Insurance. Through ABIC and CAPIC, the
Company writes unemployment insurance on credit card balances
in conjunction with life, disability and property coverages.
This unemployment insurance provides for the payment of the
minimum monthly loan payment for a specified duration while the
insured is involuntarily out of work. Premiums for this
coverage are based on the average outstanding credit card
balance.
Extended Service Contracts. The Company's extended service
contract (ESC) business involves various arrangements
including the administration for and the insuring of
obligations for ESC's sold in conjunction with the sale of
consumer products by retailers. The ESC's typically provide
service guarantees through the retailers which go beyond any
manufacturers' warranties underlying the products.
Of the Company's "Premiums of Top Ten Products", eight are
associated with the Financial Market Products.
Personal Insurance Lines
The Company also derives revenues from non credit-related
insurance products and services. These products and services
principally consist of: (i) group life and group disability
sold through Blue Cross Blue Shield plans, (ii) individual life
and disability products sold through employer-sponsored payroll
deduction programs, (iii) administration fees earned in
connection with the National Flood Insurance Program, (iv)
livestock mortality insurance, (v) individual life insurance
and annuity products sold principally in Latin America and the
Caribbean, and (vi) surety coverages.
Underwriting
The Company has over 40 years of experience in providing credit
life and credit property insurance and therefore maintains an
extensive actuarial database for its major lines of business.
This database enables the Company to better identify and
quantify the expected loss experience and is employed in the
design of coverage and the establishment of premium rates.
American Bankers uses this information in monitoring the loss
experience of individual clients.
A distinct characteristic of the Company's credit-related
insurance products is that the majority of these products
represent relatively low policy values since policy size is
equal to the size of the installment purchase or credit card
balance. Thus, loss severity for most of the Company's
business is low relative to other insurance companies writing
more traditional lines of business. For those product lines
where exposure to catastrophe loss is higher (Homeowners and
Mobilehome Physical Damage) the Company closely monitors and
manages its aggregate risk by geographic area and has entered
into reinsurance treaties to control its exposure to
catastrophe losses.
With respect to the Company's non credit-related products, the
Company utilizes traditional underwriting techniques. The
Company seeks to ensure the quality of its business by
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maintaining strict underwriting standards. In underwriting
individual life policies, the Company employs medical
questionnaires, medical examinations, and current reports from
the Medical Information Bureau. Group underwriting takes into
account demographic factors such as age, gender and occupation
of members of the groups. The Company also seeks to reduce its
risk exposure by avoiding lines of insurance characterized by
long loss payout periods, such as workers' compensation and
most general liability coverages.
The Company previously furnished a letter of credit
(outstanding balance at December 31, 1995 - $50,800,000) to a
customer pursuant to an acquisition of a block of extended
services contracts, which the Company underwrites. The letter
was furnished to secure the Company's obligations under the
agreement and should continue to decrease as the underlying
business expires over an expected three year run-off period.
Marketing
American Bankers markets its credit-related insurance programs
as a wholesale distributor through several defined distribution
channels: Consumer Finance Companies, Mortgage Bankers and
Savings Institutions, Commercial Banks, Manufactured Housing,
Travel Trailer and Equipment Manufacturers, Dealers, Lenders,
and Retailers. These distribution channels constitute the
Company's Financial Market distribution channel. The
distribution channels for the Company's Personal Insurance
Lines include Blue Cross Blue Shield Plans, and Independent
Agents. The Company continually seeks to develop new
distribution channels for its products. It has recently
established relationships with several utility clients, and
continues to pursue opportunities with electric, gas and
telephone utilities.
At December 31, 1995, the Company had 88 salaried sales
representatives and 16 sales managers located in 15 regional
sales centers throughout the U.S., Canada, Puerto Rico and the
United Kingdom. Employees in the regional sales offices
solicit potential new clients and service existing clients.
These sales personnel typically have work experience in the
client's industry and have received extensive sales and product
training from the Company. The Company's sales personnel
provide ongoing service and advice to clients to assist them in
marketing the Company's insurance products and attempt to gain
new clients by illustrating how the client can provide a
value-added service to its customers and at the same time
enhance their profitability by marketing the Company's
products. Specifically, the Company's sales personnel approach
each potential client with a structured four-call process: (i)
initial contact, (ii) gathering information and analyzing the
prospect's needs, (iii) presenting a program tailored to those
needs, and (iv) agreeing to and implementing a program that is
satisfactory to both the client and the Company.
Products are individual programs underwritten by ABIC, ABLAC,
or any of the insurance subsidiaries or "packages" which are a
combination of products from various subsidiaries. These
products can also be sold through more than one distribution
channel. Product cross-over is commonplace within the
Company's system, which facilitates streamlined administration
and processing, as well as product development. For example,
the Company's "Chargegard" product is a combination of life,
accident and disability, unemployment and property insurance
coverage and is marketed through the Consumer Finance
Companies, Mortgage Bankers and Savings Institutions,
Commercial Banks and Retailers distribution channels.
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<PAGE> 11
DISTRIBUTION CHANNELS
The following is a discussion of the distribution channels for
the Financial Market Products:
Consumer Finance Companies
The customer base consists of consumer and commercial finance
companies, leasing and second mortgage institutions, and
mortgage brokers. Because many major consumer finance companies
have their own captive insurance companies, approximately half
of the premiums written historically have been ceded to these
captive insurance companies. Therefore, a substantial portion
of the income in this area is derived from the management fees
paid by clients' captive companies for processing and servicing
this insurance.
Mortgage Bankers and Savings Institutions
The client base consists of mortgage bankers, savings
institutions and home builders. Through these clients, the
Company markets life, AD&D, disability and property insurance
products to residential and consumer borrowers as well as to
depositors.
Commercial Banks
The Company markets its installment loan and credit card
related insurance products through commercial banks, bank
holding companies and their non-bank subsidiaries and other
issuers of general purpose credit cards. Increases in gross
collected premiums have resulted primarily from the marketing
of insurance programs in connection with credit cards.
American Bankers tries to expand the business written by its
clients in this area by assisting them in implementing direct
mail and telemarketing programs.
Manufactured Housing and Travel Trailer Manufacturers and
Lenders
The Company provides property insurance to purchasers of
mobilehomes and travel trailers. Products are distributed
primarily through manufactured housing, motor home and travel
trailer manufacturers, dealers and lenders.
Retailers
The Company is a major provider of credit-related insurance
products to the retail industry. This client base includes
department and specialty stores, home furnishings and home
improvement stores, appliance and electronic stores, general
merchandise and automotive chains, jewelry stores, catalogs and
rental companies. To further enhance its market position in
this area, the Company develops customized direct mail and
telemarketing programs for these clients. Premiums are
generated from mailings included in monthly credit card
statements or are generated at the point of sale.
Equipment Manufacturers and Dealers
Dealers and Manufacturers revenues are derived from credit
life, disability, physical damage and warranty insurance
products sold through agricultural and other equipment
manufacturers. The Company's policy is to deal exclusively
with large dealers and manufacturers.
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<PAGE> 12
The following is a discussion of the distribution channels for
the Personal Insurance Lines:
Blue Cross Blue Shield Plans
American Bankers utilizes the sales representatives of these
organizations to offer the Company's group life, AD&D,
short-term and long-term disability, and dependent life
coverages to employers that are providing group health benefits
to their employees. These organizations share in the
profitability of these product sales with the Company.
Independent Agents
The Company markets individual life insurance and annuity
policies to the public through a network of independent agents.
In the agency market, the Company competes with many large
nationwide companies. As a result, the Company has made the
decision to control the growth of this segment by
de-emphasizing the U.S. market and focusing on the Caribbean
and Latin American markets where loss experience has been
favorable and the competition is less vigorous.
Another product sold through agents is livestock insurance
which primarily covers animal mortality.
Agents also produce the flood premium that the Company
administers on behalf of the National Flood Insurance Program.
The Company acts as administrator and does not assume any
underwriting risk with respect to this program.
Investments
The functions of the investment department are an integral part
of any insurance company's operations. The Company's investment
department is guided by strategic objectives established by the
Finance Committee of the Board of Directors. The major
investment objectives are:
- To ensure adequate safety of investments and to protect
and enhance capital.
- To maximize risk-adjusted, after-tax return on
investments.
- To make prudent investment decisions based on the current
market environment.
- To provide sufficient liquidity to meet cash requirements
with minimum sacrifice of investment returns.
In seeking to achieve these objectives, the Company invests
predominantly in fixed income securities of the U.S.
Government or its agencies, collateralized mortgage obligations
and investment grade corporate bonds. Protection against
default risk is a primary consideration.
Interest rate risk is controlled by matching the average
duration of invested assets with the average duration of the
policy liabilities. Investment department personnel work
closely with the Company's actuaries to ensure that this
balance is maintained.
Private investments are made selectively to support the
insurance business. These investments comprise about 3% of the
fixed maturities portfolio. While these Company underwritten
investments are non-rated, a careful evaluation of
creditworthiness is performed before an investment is made.
This analysis helps to ensure that prudent investment standards
are maintained, even in the non-rated portfolio holdings.
-11-
<PAGE> 13
The Company's equity portfolio is managed by outside investment
advisors who are monitored on a regular basis against
established performance benchmarks.
<TABLE>
<CAPTION>
Quality of Fixed Maturities Maturity of Fixed Maturities
----------------------------------- ------------------------------------
<S> <C> <C> <C>
AAA 68% 0-1 Years 10%
AA 5% 1-5 Years 69%
A 14% 5-10 Years 17%
BBB 9% 10-20 Years 3%
BB/NR 1% Over 20 Years 1%
----
Private Placement 3% 100%
----
100%
</TABLE>
At December 31 (in thousands):
<TABLE>
<CAPTION>
AT CARRYING VALUE: 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fixed Maturities
----------------
Corporate - Fixed Rate $346,000 $229,900 $169,200 $195,400 $212,800
Corporate - Adjustable Rate 15,000 14,400 4,900 10,800 11,500
Corporate - Convertible 6,000 1,400 5,500 5,300
State and Municipal 123,500 109,800 79,800 60,600 48,200
U.S. Government 817,900 631,400 567,800 455,100 419,400
Foreign Government and Jurisdiction 61,900 36,200 30,100 26,700 27,700
Installment Loans 17,300 22,200 22,200 24,900 20,800
------------------------------------------------------------------------------------------------------------
1,387,600 1,043,900 875,400 779,000 745,700
------------------------------------------------------------------------------------------------------------
Equity Securities
-----------------
Preferred - Fixed Rate 38,400 16,600 15,000 11,000 10,000
Preferred - Convertible 700 600 5,900 5,800 5,500
Common 73,900 48,200 52,600 42,800 37,900
------------------------------------------------------------------------------------------------------------
113,000 65,400 73,500 59,600 53,400
------------------------------------------------------------------------------------------------------------
Mortgage Loans 11,800 13,800 15,500 17,600 21,100
Policy Loans 7,800 6,800 6,700 5,900 5,600
Real Estate 3,100 3,800 4,200 5,800 8,400
Short-Term and Other Investments
(principally invested cash) 165,100 131,200 135,600 114,200 78,400
------------------------------------------------------------------------------------------------------------
187,800 155,600 162,000 143,500 113,500
------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $1,688,400 $1,264,900 $1,110,900 $982,100 $912,600
===============================================================================================================
</TABLE>
The amounts for 1994 and forward are reported in accordance with FASB
Statement 115.
<TABLE>
<CAPTION>
Net Investment Income
(in millions of dollars)
<S> <C>
1991
1991 $ 69
1992 68
1993 70
1994 74
1995 99
</TABLE>
Other information with respect to investments is included in
Note 3 to the Consolidated Financial Statements on page 45 in
Part II Item 8 of this report.
-12-
<PAGE> 14
Reinsurance
The Company's insurance subsidiaries reinsure that portion of
risk in excess of $250,000 under an ordinary life policy,
$150,000 on a group life policy and $500,000 under a property
policy. In addition, excess of loss coverage is obtained for
the Company's property business as protection against
catastrophic losses. This coverage is mainly related to the
Company's homeowner, mobilehome physical damage and credit
property products. Following Hurricane Andrew in 1992, there
has been a significant increase in the cost of catastrophe
reinsurance. As a result, the Company restructured its
catastrophe coverage, into three parts. First, the Company
reinsures 50% of most of its homeowners coverage on a
proportional basis. In addition, the Company has excess of
loss catastrophe reinsurance providing coverage per catastrophe
on property losses of $20 million excess of a $20 million
retention exclusive of any recoveries from the proportional
reinsurance described above. Finally, additional coverage is
provided through excess of loss coverage if the net loss ratio
(after deducting all other reinsurance) exceeds 36.1%. The
Company believes that its catastrophe reinsurance coverage
continues to be adequate. The reinsurance market showed signs
of stabilization in 1995.
The Company's reinsurance receivable and prepaid reinsurance
premiums at December 31, 1995 totalled $670.4 million. The
Company's reinsurance was placed with numerous reinsurers
including the following significant reinsurers: (i) Triton
Insurance Company, (ii) Caterpillar Insurance Company, Limited,
and (iii) ITT Lyndon Life & Property Insurance Company. The
Company historically has not experienced any material losses in
collection of reinsurance receivables.
Certain Factors Common to the Operations of Insurance Companies
Government Regulation
The Company and its insurance subsidiaries are subject to
regulation and supervision by the states in which the Company's
insurance subsidiaries transact business. The laws of the
various states establish regulatory agencies with broad
administrative powers to grant and revoke licenses to transact
business, regulate trade practices, establish guaranty
associations, license agents, require approval of policy forms
and premium rates on certain business prior to use, establish
reserve requirements, determine the form and content of
required financial statements, determine reasonableness and
adequacy of capital and surplus and prescribe the types of
permitted investments and the maximum concentrations of certain
classes of investments. As part of their routine regulatory
oversight process, approximately once every three to five years
state insurance departments conduct periodic detailed
examinations of the books, records and accounts of insurance
companies domiciled in their states. This state regulation and
supervision is designed primarily to ensure the financial
stability of insurance companies and to protect policyholders,
rather than stockholders or creditors.
A substantial portion of the business written by the Company's
insurance subsidiaries is credit-related insurance. Most
states have enacted laws which regulate credit-related
insurance to a greater extent than they regulate other forms of
insurance including maximum premiums which may be charged and
commissions which may be paid. In addition, certain states
have enacted or are considering regulations which similarly
attempt to limit profitability based upon underwriting
experience. The NAIC is currently developing a model law and
regulation relating to creditor placed property insurance which
is insurance purchased by a creditor in the event that a
borrower fails to provide the insurance required under the loan
agreement. The Company does issue this type of insurance
coverage on mobile homes and residential real property.
-13-
<PAGE> 15
The NAIC also took action in 1995 on credit life insurance by
adopting an alternative approach to strict loss ratio based
ratemaking which allows state regulators to take into account
factors other than losses in determining the reasonableness of
credit insurance rates.
The investments of the insurance subsidiaries are limited as to
type and amount by the insurance laws of the state of domicile
however, the NAIC is developing a Model Investment Law which
would standardize these limitations. Additionally, investment
policies are reviewed by the Board of Directors.
In the property insurance industry, large catastrophe losses in
recent years have led to federal initiatives that could affect
purchasers of catastrophe insurance and reinsurance, such as
the Company. The federal government, commercial companies, and
the insurance industry continue to work together toward
Superfund reform and dealing with the cleanup of pollution
sites. Among issues pending are the determination of
retroactive liability and a proposed insurer specific tax.
Other federal initiatives may also affect various segments of
the insurance industry. No prediction can be made as to whether
any such initiative's will ultimately result in legislation, or
the form that any such legislation might take.
Insurance companies are required to file detailed annual and
quarterly statements with the state insurance regulators in
each of the states in which they do business, and their
business and accounts are subject to examination by such
agencies at any time. Applicable state insurance laws, rather
than federal bankruptcy laws, apply to the liquidation or the
reorganization of insurance companies.
Financial Regulation
The Company's insurance subsidiaries are required to comply
with a minimum risk-based capital (RBC Standards), developed by
the NAIC. Under the RBC standards - risk specific for each
company - areas such as asset risk, insurance risk, interest
risk, and business risk are evaluated and compared to the
Company's capital and surplus to determine relative solvency
margins. Standards for the RBC formula were approved by
regulators and effective for 1993 statutory financial
statements for life companies and in 1994 for property and
casualty companies. The industry is still gaining experience in
the use of the RBC standards, which have experienced formula
adjustments each year since adoption. All of the Company's
insurance subsidiaries meet the minimum risk-based capital
requirements and requires no action based on the criteria
described above.
Dividend Regulation
The Company is a legal entity separate and distinct from its
subsidiaries. As a holding company with no other business
operations, its primary sources of cash needed to meet its
obligations are dividends and other payments from its insurance
subsidiaries.
The Company's insurance subsidiaries are subject to various
regulatory restrictions on the maximum amount of payments,
including loans or cash advances, that they may make to the
Company without obtaining prior regulatory approval. As
Florida domiciled insurance companies, ABIC and ABLAC are
subject to Florida requirements that insurance company
dividends must receive prior regulatory approval unless, either
(i) such dividends do not exceed the larger of: (a) the lesser
of 10% of surplus or net gain from operations (ABLAC) or net
income (ABIC), not including realized capital gains, plus a
2-year carryforward for ABIC; (b) 10% of surplus, with
dividends payable constrained to unassigned funds minus 25% of
unrealized capital gains; or (c) the lesser of 10% of surplus
or net investment income (net gain before capital gains for
ABLAC) plus a 3-year carryforward (2-year carryforward for
ABLAC) with dividends payable constrained to unassigned funds
minus 25% of unrealized capital gains;
-14-
<PAGE> 16
or (ii) the dividend is equal to or less than the greater of:
(a) 10% of the insurer's surplus as to policyholders derived
from realized net operating profits on its business and net
realized capital gains; or the insurer's entire net operating
profits and realized net capital gains derived during the
immediately preceding calendar year; and (b) the insurer will
have surplus as to policyholders equal to or exceeding 115% of
the minimum required statutory surplus as to policyholders
after the dividend is made. As an Arizona domiciled insurance
company, ARIC must receive prior regulatory approval unless,
such dividends do not exceed the lesser of either 10% of
surplus as regards policyholders or the net investment income.
As Puerto Rico domiciled companies, CALAC and CAPIC shall not
pay any cash dividend to stockholders except out of that part
of its unassigned surplus funds which is derived from any
realized net profits on its business. BALAC, a New York
domiciled company, requires that notice of its intention to
declare dividends and the amount of the dividend be filed with
the superintendent. The Voyager Insurance Companies are
domiciled in Georgia and South Carolina. Georgia and South
Carolina require prior regulatory approval for dividends in
excess of the greater of (i) 10% of a company's surplus as
regards policyholders or (ii) net gain from operations for life
companies, or net income, not including realized capital gains,
for non-life companies, as of the preceding year end.
In 1986, the NAIC adopted a Model Insurance Holding Company
Systems Regulatory Act which contains dividend payment
restrictions like those currently in place in Georgia and South
Carolina, except that the NAIC model statute only allows an
insurer to pay dividends without prior regulatory approval up
to the "lesser of", instead of the "greater of", the two
benchmarks. In connection with its accreditation of states to
conduct periodic company examinations, the NAIC has encouraged
states to adopt the model NAIC law on the payment of dividends.
No prediction can be made as to whether any legislative
proposals relating to a change in dividend limits will be
enacted in the future.
If insurance regulators determine that payment of a dividend or
any other payment to an affiliate (such as a payment under a
tax allocation agreement or for employee or other services or
pursuant to a surplus debenture) would, because of the
financial condition of the paying insurance company or
otherwise, be hazardous to such insurance company's
policyholders or creditors, the regulators may block payment of
such dividends or such other payment to the affiliates that
would otherwise be permitted without prior approval.
See other information with respect to dividend regulation in
Note 8 to the Consolidated Financial Statements on page 55 in
Part II Item 8 of this report.
Change of Control Regulation
The states in which the Company's insurance subsidiaries are
domiciled have enacted legislation or adopted administrative
regulations affecting the acquisition of control of insurance
companies as well as transactions between insurance companies
and persons controlling them. Most states require
administrative approval of the acquisition of control of an
insurance company incorporated in the state or the acquisition
of control of an insurance holding company whose insurance
subsidiary is incorporated in the state. In Florida, the
acquisition of 5% of such shares is generally deemed to be the
acquisition of "control" for the purpose of the holding company
statutes and requires not only the filing of detailed
information concerning the acquiring parties and the plan of
acquisition, but also administrative approval prior to the
acquisition. In the other states in which the Company's
insurance subsidiaries are domiciled, however, an acquisition
of 10% of such shares is generally deemed to be the acquisition
of control. In many states, the insurance authority may find
that "control" in fact does or does not exist in circumstances
in which a person owns or controls either a lesser or a greater
amount of securities.
-15-
<PAGE> 17
Competition
The competitors of the Company consist of both stock and mutual
insurance companies. Some competing companies, both stock and
mutual, have been in business for a longer time, are more
widely known by reason of such factors as age and size, and
have greater financial resources than the Company. However,
due to the specialized nature of the markets served and
products offered, the Company's competitors differ among the
different geographic locations and market segments in which the
Company conducts business.
The Company's strategy is to establish profitable insurance
underwriting and to service business in distribution channels
that are relatively free of competition. In keeping with this
strategy, the Company markets non-traditional insurance
products through non-traditional distribution channels.
Reserves
Life insurance companies are required to establish and maintain
policy liabilities to meet their obligations on life policies.
These liabilities are amounts which, with additions from
premiums to be received on outstanding policies and with
interest on such benefits compounded annually at certain
assumed rates, are calculated to be sufficient to meet policy
obligations at death or maturity in accordance with the
mortality tables employed when the policies were issued.
Liabilities for losses and loss adjustment expenses for
property and casualty insurance represent estimates of unpaid
claims related to known losses and of claims which have been
incurred but not reported. These liabilities are based upon
past experience of ultimate claim settlements and of unreported
losses and loss adjustment expenses. The length of time for
which such costs must be estimated varies depending upon the
coverage involved. Since actual claim costs are dependent upon
such complex factors as inflation, changes in doctrines of
legal liability and damage awards, the process used in
computing reserves cannot be exact, particularly for liability
coverages. The majority of the Company's property and casualty
insurance business is represented by property coverage in which
the ultimate loss experience develops relatively quicker than
that for insurers concentrated more heavily in liability
coverages.
In the ordinary course of business, the Company reinsures risks
with other insurance companies; nonetheless, the Company is
contingently liable with respect to risks reinsured, should the
reinsuring companies fail to meet the obligations assumed in
the reinsurance agreements.
Information on the Company's Reserves appears in Note 4 to the
Consolidated Financial Statements on page 49 in Part II Item 8
of this report.
Property and Casualty Losses and Loss Adjustment Expenses
The consolidated financial statements include estimated
provisions for unpaid losses and loss adjustment expenses (LAE)
applicable to the Company's property and casualty insurance
subsidiaries. Currently, these subsidiaries write principally
credit property, unemployment, extended service contracts,
homeowners, mobilehome physical damage and livestock lines of
business throughout the United States, Canada, the Caribbean,
and the United Kingdom. Such liabilities are established using
a combination of case basis estimates and statistical
projections and include provisions for claims incurred but not
yet reported as of the balance sheet date.
Overall claims experience is principally dependent on the
frequency and severity of claims. With the exception of
discontinued lines, the Company writes primarily property
coverages which are characterized by relatively short
settlement periods and quick development of
-16-
<PAGE> 18
ultimate losses. The discontinued reinsurance assumed pools
involve liability coverages where development of the ultimate
loss is more difficult to predict because of the settlement
duration and the relative absence of homogeneity of claims as
compared to the Company's property coverages. The Company's
estimating and reserving practices are reviewed continuously.
Subsequent adjustments to the original estimates are made when
determinable and are reflected in current year operations.
The following table shows the development of the estimated
liability for the ten years prior to 1995.
-17-
<PAGE> 19
AMERICAN BANKERS INSURANCE GROUP, INC.
DOMESTIC PROPERTY AND CASUALTY SUBSIDIARIES
ANALYSIS OF REPORTED BALANCE SHEET LOSS AND LAE DEVELOPMENT
GAAP BASIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989
<S> <C> <C> <C> <C> <C> <C>
Liability
for Unpaid
Losses & LAE $49,506 $63,804 $79,915 $83,873 $83,328
Liability Re-estimated as of:
----------------------------
1 Year Later 56,024 75,086 89,495 79,857* 88,054*
2 Years Later 62,659 80,793 87,088* 84,156* 84,112*
3 Years Later 68,121 81,023* 92,783* 83,415* 88,843*
4 Years Later 70,433* 86,138* 93,414* 87,017* 90,476*
5 Years Later 75,954* 88,035* 96,420* 89,180* 96,419*
6 Years Later 78,038* 90,248* 99,029* 94,541* 111,122*
7 Years Later 79,915* 93,079* 104,150* 109,473*
8 Years Later 82,713* 98,186* 119,273*
9 Years Later 86,723* 113,338*
10 Years Later 94,089*
Cumulative
(Deficiency)
Redundancy ($44,583) ($49,534) ($39,358) ($25,600) ($27,794)
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Liability
for Unpaid
Losses & LAE $87,262 $89,626 $94,531 $117,080 $137,936 $163,918
Liability Re-estimated as of:
----------------------------
1 Year Later 79,291* 83,107* 106,007* 119,810* 144,123*
2 Years Later 83,882* 85,203* 110,226* 136,905*
3 Years Later 86,954* 89,697* 122,481*
4 Years Later 91,670* 104,249*
5 Years Later 106,458*
6 Years Later
7 Years Later
8 Years Later
9 Years Later
10 Years Later
Cumulative
(Deficiency)
Redundancy ($19,196) ($14,623) ($27,950) ($19,825) ($6,187)
</TABLE>
Cumulative Amount of Liability Paid Through:
--------------------------------------------
<TABLE>
<CAPTION> 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year Later 34,870 44,862 53,374 45,460* 52,144* 49,983* 48,399* 63,922* 65,901* 71,654*
2 Years Later 44,198 57,549 63,779* 59,865* 64,778* 61,736* 60,540* 85,500* 92,249*
3 Years Later 50,631 61,867* 72,704* 67,232* 71,287* 68,174* 68,190* 101,603*
4 Years Later 53,634* 68,841* 78,370* 71,444* 74,210* 73,273* 80,932*
5 Years Later 59,378* 73,678* 81,840* 73,394* 78,292* 84,642*
6 Years Later 63,781* 76,208* 83,604* 76,938* 89,410*
7 Years Later 65,972* 77,862* 86,856* 87,886*
8 Years Later 67,563* 80,973* 97,766*
9 Years Later 69,554* 91,870*
10 Years Later 72,636*
</TABLE>
<TABLE>
<CAPTION> 1993 1994 1995
--------- ------- --------
<S> <C> <C> <C>
Gross Liability - end of year ** $158,359 $187,999 239,357
Reinsurance Recoverable (41,279) (50,063) (75,439)
--------- -------- ---------
Net Liability - end of year ** $117,080 $137,936 163,918
Gross Re-estimated Liability ** $183,022 $193,506
Re-estimated Reinsurance Recoverable (46,117) (49,383)
------- ---------
Net Re-estimated Liability ** $136,905 $144,123
Gross Cumulative (Deficiency) (24,663) (5,507)
</TABLE>
*Indicates amounts are net of collected salvage and subrogation
to conform with the presentation of Schedule P in the 1995
Statutory Reports filed with the state regulatory authorities.
**Amounts do not include issued but unpresented claim drafts as
of December 31; $1,546 (1992), $2,411 (1993), $1,322 (1994), and
$1,576 (1995).
-18-
<PAGE> 20
The table in the preceding page presents the development of balance sheet
liabilities for 1985 through 1995. The top line of the table shows the
estimated liability for unpaid losses and LAE recorded at the balance
sheet date for each of the indicated years. This liability represents the
estimated amount of losses and LAE for claims arising in all prior years
that are unpaid at the balance sheet date, including losses that had been
incurred but not yet reported to the Company. The upper portion of the
table shows the re-estimated amount of the previously recorded liability
based on the experience as of the end of each succeeding year. The
estimate is increased or decreased as more information becomes known about
the frequency and severity of claims.
The lower section of the table shows the cumulative amount paid with
respect to the previously recorded liability as of the end of each
succeeding year.
Note that each amount includes the effects of all changes in amounts for
prior periods. Conditions and trends that have affected development of the
liabilities in the past may not necessarily occur in the future.
Accordingly, it may not be appropriate to extrapolate future redundancies
or deficiencies based on this table.
In the most recent years, actual loss development of the estimated
liabilities for unpaid claims and LAE amounts demonstrated that the
original estimates have generally been adequate except for those relating
to the line "financial guarantees" (1985-1986), reinsurance pools, and for
1992 due to Hurricane Andrew. For the Company, the Financial Guarantee line
is represented by its credit bond insurance where litigation and certain
related legal issues have historically served to complicate the reserving
process. Effective with 1995 settlements, Credit Bond insurance is not
expected to produce any future impact.
The "cumulative (deficiency) redundancy" represents the aggregate change
in the estimates over all prior years. Such amounts have been reflected
in income over the years indicated.
The effect on income of the past three years of changes in estimates of
the liabilities for losses and LAE is shown in Note 4 to the Consolidated
Financial Statements on page 49 in Part II Item 8 of this report.
The Company's reserve development includes the effects from losses
experienced from reinsurance pools in which the Company discontinued
participation effective on or prior to 1981. The Company reported pre-tax
losses in its discontinued reinsurance pools of $7.3 million in 1995, $4.2
million in 1994 and $3.0 million in 1993. The business is long tail in
nature, and losses have exceeded both Company and industry expectations,
primarily as a result of evolving legal theory and application which
exceeded the intended scope of coverage when the policies were written.
The Company's insurance liability, which is secondary and excess in
nature, does not surface until the underlying primary coverages and other
reinsurance coverages if any, are exhausted. Loss experience has
developed in excess of historical experience because of the legal
development of cases, including asbestos, environmental and pollution
cases. The Company's experience can differ significantly from that of
other insurers which wrote the primary coverages directly. The reserves
are reviewed, at a minimum annually, by both the reinsurance
intermediaries, where the claim liabilities are initially established, and
by the Company's actuaries. Lack of historical development indicative of
ultimate claim cost and a changing legal definition of what the ultimate
liability will be, has created significant uncertainty and has
consequently led to underreserving. The Company continues to evaluate and
review reserve adequacy in this area using, among other analyses, studies
supplied by the Reinsurance Association of America and any adjustments
made are reflected in current year results. Federal government Superfund
proposals which would change or define the liability for pollution claims
add to the uncertainty. Given the inconsistencies of court coverage
decisions, plaintiffs' expanded theories of liability, the risks inherent
in major litigation and other uncertainties, it is not presently possible
to quantify the ultimate exposure. As a result, the Company expects that
future earnings may be adversely affected by environmental and asbestos
claims, although the amounts cannot be reasonably estimated. However,
based on its actuarial studies and analysis, the Company believes it is
not likely these claims will have a material adverse effect on the
Company's financial condition. At December 31, 1995, the Company holds
$21.1 million of reserves related to the reinsurance pools.
No specific formula adjustment is made to the reserves in connection with
anticipated inflation; however, most coverages relate to property
settlements which occur relatively quickly. The Company establishes full
reserves on all lines (net of anticipated salvage and subrogation) and
does not employ discounting in its reserving process.
-19-
<PAGE> 21
The differences between the December 31, 1995 liability for losses and LAE
reported in the accompanying consolidated financial statements in
accordance with generally accepted accounting principles (GAAP) and that
reported in the annual statement filed with state insurance departments in
accordance with statutory accounting practices (SAP) are as follows:
<TABLE>
<S> <C>
Liability reported on a SAP basis, net of intercompany
elimination for reinsured claim liabilities with affiliated
life and health companies $174,901,000
Reverse reserves in SAP that are not recognized for GAAP purposes (7,535,000)
Deduct estimated salvage and subrogation recoveries
recorded on a cash basis for SAP purposes and on an
accrual basis for GAAP purposes (3,448,000)
----------
Liability reported on a GAAP basis for the domestic Property and
Casualty subsidiaries before unpresented claim drafts and
translation of foreign branch operations 163,918,000
Deduct unpresented claim drafts reported as other liabilities for
SAP purposes, but reported as claim liabilities for GAAP
purposes, and translation of foreign branch operations (1,576,000)
----------
Liability reported on a GAAP basis - domestic Property and
Casualty subsidiaries only 162,342,000
Add reserves of foreign subsidiaries not included in
consolidated statutory liability 3,403,000
------------
Liability reported on a GAAP basis (net) 165,745,000
Add Reinsurance Recoverable for ceded unpaid losses
(domestic of $75,439,000 and foreign of $1,635,000) 77,074,000
----------
Liability reported on a GAAP basis (gross) $242,819,000
============
</TABLE>
Employees
As of December 31, 1995, the Company employed 2,498 people.
d. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
For financial information about foreign and domestic operations
see Note 12 to the Consolidated Financial Statements on page 61
in Part II Item 8 of this report.
-20-
<PAGE> 22
ITEM 2
PROPERTIES
The headquarters building is located at 11222 Quail Roost Drive,
Miami, Florida 33157-6596, and is approximately 415,000 square feet
in size. The building is used exclusively for general office use,
except for a portion which functions as the Company's warehouse. The
building's book value is approximately $34.2 million, which includes
the cost of acquiring titles and all permanent improvements through
December 31, 1995, net of accumulated depreciation. Certain other
properties are infrequently acquired through foreclosures of mortgage
loans in which ABLAC has invested. ABLAC holds and operates such
properties until sale can be effected.
ITEM 3
LEGAL PROCEEDINGS
Except as discussed in the following paragraph, there are no material
legal proceedings, other than ordinary routine litigation incidental
to the business, to which the Registrant or any of its subsidiaries
is a party or of which any of their property is the subject.
LITIGATION
Following is a description of material legal proceedings:
Other: Alabama litigation:
The Company and certain of its insurance subsidiaries are presently
parties to a number of individual consumer and class action lawsuits
pending in Alabama involving premium, rate and policy coverage
issues. As has been widely reported in the news media, the insurance
and finance industries have been targeted in Alabama by plaintiffs'
lawyers who enjoy a favorable judicial climate. The Company typically
has been named as a co-defendant with one or several retailer or
finance companies who have sold the Company's product to a consumer.
A number of other credit insurers are named as co-defendants in many
of the suits.
Although these lawsuits generally involve relatively small amounts of
actual or compensatory damages, they typically assert claims
requesting substantial punitive awards. The Company denies any
wrongdoing in any of these suits and believes that it has not engaged
in any conduct that would warrant an award of punitive damages. The
Company has been advised by legal counsel that it has meritorious
defenses to all claims being asserted against it.
While no one case is necessarily significant in terms of financial
risk to the Company, the judicial climate in Alabama is such that the
outcome of these cases is extremely unpredictable. Without admitting
any wrongdoing, the Company has settled a number of these suits, but
there are still a significant number of cases pending, and it is
expected that more suits alleging essentially the same causes of
action are likely to continue to be filed during 1996. The Company
intends to continue to defend itself vigorously against all such
suits and believes, based on information currently available, that
any liabilities that could result are not expected to have a material
effect on the Company's financial position.
The Company is involved with a number of cases in the ordinary course
of business relating to insurance matters or, more infrequently,
certain corporate matters. Generally, the Company's liability is
limited to specific amounts relating to insurance or policy coverage
for which provision has been made in the financial statements. Other
cases involve general corporate matters which generally do not
represent significant contingencies for the Company.
-21-
<PAGE> 23
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of the year ended December 31, 1995.
-22-
<PAGE> 24
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information concerning each of the Executive Officers
of the Company and the Executive Officers of the Company's subsidiaries:
<TABLE>
<CAPTION>
POSITION AND OFFICES WITH THE COMPANY;
PRINCIPAL OCCUPATION FOR PAST FIVE YEARS
NAME AGE AND OTHER DIRECTORSHIPS, IF ANY
---- --- -------------------------------
<S> <C> <C>
R. Kirk Landon 66 Chairman of the Board
(1990-Present); Chief
International Marketing Officer
(1996-Present); Chief Executive
Officer of the Company
(1990-1995); Chief International
Marketing Officer (1996-Present)
of ABIC and ABLAC; Chief
Executive Officer (1990-1995) of
ABIC and ABLAC; Director of
BALAC (1990-1995); Director of
BICL (1990- Present); Director
of CALAC and CAPIC
(1992-Present); Director of VGI,
VLIC, and VLHIC (1993-1995);
Director of Mayor's Jewelers
(1987-Present).
Gerald N. Gaston 63 Chief Executive Officer
(1996-Present); President and Vice
Chairman of the Board
(1990-Present); Chief Operating
Officer of the Company
(1990-1995); Chief Executive
Officer (1996-Present) of ABIC &
ABLAC; Chairman of the Board
(1991-Present); Vice Chairman of
the Board (1990-1991) and Chief
Operating Officer (1990-1995) of
ABIC and ABLAC; Chairman of the
Board, ARIC (1990-present);
Director of BALAC (1990-Present);
Chairman of the Board and
President of BARC (1995-
Present); Chairman of the Board
and Chief Executive Officer of
VGI, VLHIC, and VLIC
(1993-present); Director of
InterContinental Bank
(1993-1995).
Eugene E. Becker 46 Executive Vice President
(1991-Present) and Chief
Marketing Officer of the
Company (1991-1995); President
of ABIC (1990-Present);
Executive Vice President of
ABLAC (1996-Present); Director,
Financial Markets of ABIC and
ABLAC (1990-1995); President,
ARIC (1992-Present); Chairman of
the Board (1991-Present) of
BALAC; Director of BARC
(1995-Present); President
(1993-Present) and Chief
Operating Officer (1993-1995) of
VGI, VLHIC, and VLIC.
Floyd G. Denison 52 Executive Vice President and
Director, Corporate Asset
Management of the Company
(1991-Present); Treasurer of the
Company (1990-1991); Senior Vice
President, Investments, of
ABIC and ABLAC (1990- Present);
Vice President of BALAC
(1991-Present); Chairman of the
Board of BARC (1996-Present);
Director of BICL
(1995-Present); Director of VLHIC
(1996-Present)
</TABLE>
-23-
<PAGE> 25
<TABLE>
<CAPTION>
POSITION AND OFFICES WITH THE COMPANY;
PRINCIPAL OCCUPATION FOR PAST FIVE YEARS
NAME AGE AND OTHER DIRECTORSHIPS, IF ANY
---- --- -------------------------------
<S> <C> <C>
Jay R. Fuchs 40 President of ABLAC
(1991-Present); Executive Vice
President of ABIC (1996-Present);
Director, Personal Markets and
Financial Sales of ABIC and
ABLAC (1991-1995); Executive
Vice President, Financial
Markets of ABIC and ABLAC
(1990-1991); Director (1991-1994
and 1995- Present) and President
(1996-Present) of BALAC; Director
of VLIC and VLHIC (1993-Present).
Leonardo F.Garcia 44 Secretary of the Company
(1994-Present); Senior Vice
President and Secretary,
Corporate Planning and
Acquisitions of ABIC and ABLAC
(1994-present); Vice President of
Investments (1990-1995); Secretary
of VGI (1994-present). Assistant
Secretary of ARIC (1995-Present);
Director (1995-Present) and
Secretary (1994-Present) of
BALAC; Secretary of CALAC and
CAPIC (1994-Present); Director
and Secretary of BARC
(1995-Present); Assistant
Secretary of VLIC and VLHIC (1994-
Present).
Arthur W. Heggen 50 Vice President and Treasurer of
the Company (1991-Present); Vice
President and Principal
Accounting Officer of the
Company (1990- 1991); Senior Vice
President (1990-Present) and
Treasurer (1990) of ABIC and
ABLAC; Vice President of BALAC
(1995-Present)
Jason Israel 43 Executive Vice President,
Administration (1996-Present);
Executive Vice President,
Operations, of ABIC and ABLAC
(1993-1995); Senior Vice
President, Financial Operations,
of ABIC and ABLAC (1992);
Senior Vice President, Profits,
of ABIC and ABLAC (1990-1992);
Vice President of BALAC
(1995-Present); Executive Vice
President of CALAC and CAPIC
(1995-Present)
Michael T. Ray 42 Executive Vice President,
Information Services, of ABIC
and ABLAC (1996-Present); First
Senior Vice President, Personal
and Financial Sales, of ABIC and
ABLAC (1994-1995); First Senior
Vice President, Marketing
Director, of ABIC and ABLAC
(1992-1994); Senior Vice
President, Financial Insurance
Processing, of ABIC and ABLAC
(1990- 1992).
Stephen T. Williams 44 Executive Vice President,
Marketing Director, of ABIC
and ABLAC (1996-Present); First
Senior Vice President, Marketing
Director of ABIC and ABLAC
(1994-1995); Senior Vice
President, Regional Sales, of
ABIC and ABLAC (1988-1993).
Director of BALAC
(1990-Present); President
(1991-1995) and Executive Vice
President of BALAC (1996-
Present).
</TABLE>
None of the Executive Officers named above are involved in legal
proceedings as defined in Regulation S-K, Item 401(f). Information with
respect to promoters and control persons is not applicable.
-24-
<PAGE> 26
PART II
ITEM 5
MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
a. MARKET FOR COMMON STOCK
Common Share Prices and Dividend Data
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995
----
High $30.63 $32.25 $37.25 $39.00
Low $23.50 $26.63 $30.88 $34.88
Dividend $.18 $.19 $.19 $.19
1994
----
High $26.75 $23.75 $24.50 $25.38
Low $22.25 $21.13 $20.38 $19.00
Dividend $.17 $.18 $.18 $.18
</TABLE>
The last sale price per share of the Company's stock on the last
trading day of 1995, as reported by NASDAQ, was $39.00.
COMMON SHARES
American Bankers Insurance Group, Inc. is traded
over-the-counter under the NASDAQ symbol ABIG. The stock appears
in the NASDAQ National Market stock table. This table presents
the high, low and closing sales prices for the stock under the
abbreviation AmBkrsIns.
The ending market price as of March 22, 1996 was $33-7/8.
b. APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
At December 31, 1995, there were 1,915 registered shareholders.
c. DIVIDENDS PER SHARE OF COMMON STOCK
For information of the dividends paid per common share see the
Table of data in Item 5 a. above.
The Company expects to continue its policy of paying regular
cash dividends; however, future dividends are dependent on
future earnings, capital requirements and financial condition.
For more information regarding liquidity and capital resources
see page Part II Item 7 page 34.
-25-
<PAGE> 27
ITEM 6
SELECTED FINANCIAL DATA
At December 31 (in thousands except book value per common share):
<TABLE>
<CAPTION>
MAJOR BALANCE SHEET ITEMS 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Assets
------
Investments $1,688,400 $1,264,900 $1,110,900 $982,100 $912,600
Cash 23,300 89,500 39,800 10,400 11,600
Reinsurance receivable 168,100 130,900 174,200
Deferred policy acquisition costs 310,900 229,600 198,800 174,900 156,400
Prepaid reinsurance premiums 502,300 396,800 310,600
Other assets 294,700 320,800 326,200 236,900 216,800
---------------------------------------------------------------------------------------------------------
Total assets $2,987,700 $2,432,500 $2,160,500 $1,404,300 $1,297,400
---------------------------------------------------------------------------------------------------------
Liabilities
-----------
Policy and claim liabilities $1,858,900 $1,502,600 $1,395,900 $802,800 $732,100
Notes payable 236,000 197,800 158,900 139,600 177,000
Deferred income taxes 29,500 5,000 10,800 12,200
Accrued expenses 136,200 98,800 87,000 77,200 68,700
Other liabilities 214,100 227,400 114,400 105,500 91,300
---------------------------------------------------------------------------------------------------------
Total liabilities 2,474,700 2,026,600 1,761,200 1,135,900 1,081,300
---------------------------------------------------------------------------------------------------------
Stockholders' equity
--------------------
Common stock 20,400 20,200 20,100 16,400 14,900
Additional paid-in capital 215,100 212,100 210,900 128,400 109,000
Net unrealized investment and foreign
exchange gains (losses) 7,300 (38,500) 400 (2,600) 500
Retained earnings 282,700 225,400 183,000 143,100 110,700
Treasury stock at cost (2,500) (1,600) (400) (400) (400)
Unamortized restricted stock (3,600) (3,200) (4,100) (3,800) (3,700)
Collateralization of loan to Leveraged
Employee Stock Ownership Plan (6,400) (8,500) (10,600) (12,700) (14,900)
---------------------------------------------------------------------------------------------------------
Total stockholders' equity 513,000 405,900 399,300 268,400 216,100
---------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $2,987,700 $2,432,500 $2,160,500 $1,404,300 $1,297,400
---------------------------------------------------------------------------------------------------------
Book value per common share $25.34 $20.15 $19.87 $16.38 $14.50
=========================================================================================================
</TABLE>
The amounts for 1993 and forward are reported in accordance with FASB
Statement 113.
-26-
<PAGE> 28
For the Years ended December 31 (in thousands except per common share
data):
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues
Net premiums earned $1,240,700 $1,094,300 $882,000 $733,000 $691,400
Net investment income 99,400 74,400 70,400 67,500 68,900
Realized investment gains (losses) 700 2,700 5,400 2,800 (900)
Gain on insurance settlement 5,400
Other income 20,100 15,400 10,100 8,800 9,000
-------------------------------------------------------------------------------------------------------
Total revenues 1,360,900 1,186,800 973,300 812,100 768,400
----------------------------------------------------------------------------------------------------------
Benefits and expenses
Benefits, claims, losses, and
settlement expenses 454,800 434,400 349,500 296,200 277,200
Credit bond losses and expenses 11,500 6,600 3,000 7,400 11,700
Commissions 526,400 437,600 357,900 289,300 279,000
Operating expenses 248,400 217,200 179,100 150,100 137,900
Interest expense 15,600 11,200 8,100 9,600 10,400
-------------------------------------------------------------------------------------------------------
Total benefits and expenses 1,256,700 1,107,000 897,600 752,600 716,200
----------------------------------------------------------------------------------------------------------
Pre-tax income from operations 104,200 79,800 75,700 59,500 52,200
Income tax (expense) benefit
Current (25,200) (14,800) (24,400) (19,000) (21,600)
Deferred (6,700) (8,500) 2,000 1,800 6,800
-------------------------------------------------------------------------------------------------------
(31,900) (23,300) (22,400) (17,200) (14,800)
----------------------------------------------------------------------------------------------------------
Net income before cumulative
effect of change in accounting 72,300 56,500 53,300 42,300 37,400
Cumulative effect of change in
accounting for income taxes (1,000)
--------------------------------------------------------------------------------------------------------
Net income $72,300 $56,500 $52,300 $42,300 $37,400
----------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Primary
Net income before cumulative
effect of change in accounting $3.48 $2.74 $2.85 $2.57 $2.55
Cumulative effect of change in
accounting for income taxes (.05)
-------------------------------------------------------------------------------------------------------
Net income $3.48 $2.74 $2.80 $2.57 $2.55
----------------------------------------------------------------------------------------------------------
Weighted average number of
shares outstanding 20,746 20,596 18,670 16,432 14,693
----------------------------------------------------------------------------------------------------------
Fully diluted
Net income before cumulative
effect of change in accounting $3.48 $2.74 $2.78 $2.39 $2.22
Cumulative effect of change in
accounting for income taxes (.05)
-------------------------------------------------------------------------------------------------------
Net income $3.48 $2.74 $2.73 $2.39 $2.22
----------------------------------------------------------------------------------------------------------
Weighted average number of
shares outstanding 20,823 20,613 19,317 18,433 18,629
----------------------------------------------------------------------------------------------------------
Dividends per common share $.75 $.71 $.68 $.60 $.60
==========================================================================================================
</TABLE>
-27-
<PAGE> 29
For the Years ended December 31 (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS PREMIUMS CEDED PREMIUMS NET PREMIUMS
COLLECTED PREMIUMS EARNED EARNED EARNED
1995 1994 1995 1994 1995 1994 1995 1994
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unemployment $410,800 $269,800 $367,500 $263,100 $125,300 $76,300 $242,200 $186,800
Credit Property 367,700 354,200 320,800 296,500 157,000 124,000 163,800 172,500
Credit A&H 349,000 244,500 320,200 247,800 136,600 101,700 183,600 146,100
Credit Life 287,200 211,700 242,700 204,300 105,800 86,000 136,900 118,300
Mobilehome
Physical Damage 137,300 121,400 109,600 105,100 27,800 31,600 81,800 73,500
Extended Svc.
Contracts 129,500 19,300 31,000 27,700 1,000 5,500 30,000 22,200
Homeowners 101,100 87,000 100,300 83,000 40,900 34,600 59,400 48,400
Mortgage A&H 53,300 49,100 52,900 47,200 5,000 4,600 47,900 42,600
Livestock Mortality 40,800 48,600 41,300 53,500 12,500 19,000 28,800 34,500
Group A&H 39,600 26,400 38,800 34,200 9,500 5,200 29,300 29,000
-----------------------------------------------------------------------------------------------------------------
Subtotal 1,916,300 1,432,000 1,625,100 1,362,400 621,400 488,500 1,003,700 873,900
-----------------------------------------------------------------------------------------------------------------
All Other 370,300 329,100 383,000 313,700 146,000 93,300 237,000 220,400
-----------------------------------------------------------------------------------------------------------------
Total $2,286,600 $1,761,100 $2,008,100 $1,676,100 $767,400 $581,800 $1,240,700 $1,094,300
=================================================================================================================
</TABLE>
Five-Year Selected Financial Data
At December 31:
<TABLE>
<CAPTION>
LIFE INSURANCE SUBSIDIARIES 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statutory capital and surplus
(in thousands)* $188,900 $174,100 $175,900 $116,400 $111,000
Ratio of statutory capital and
surplus to liabilities 28.6% 32.2% 35.5% 24.8% 24.4%
Ratio of net investment income to average
invested assets (statutory basis) 7.6% 7.1% 7.7% 7.8% 9.0%
PROPERTY AND CASUALTY SUBSIDIARIES
Statutory capital and surplus
(in thousands)* $271,500 $224,900 $215,900 $156,200 $150,800
Ratio of net premiums written to
statutory capital and surplus 3.1 2.6 2.3 2.6 2.2
Ratio of loss and loss expense reserves to
statutory capital and surplus 65.5% 58.2% 55.6% 65.7% 55.0%
Combined loss and expense ratio
(statutory basis) 93.8% 96.0% 94.1% 95.7% 99.9%
----------------------------------------------------------------------------------------------------------
</TABLE>
*See Note 8 to Consolidated Financial Statements.
-28-
<PAGE> 30
For the Years ended December 31:
<TABLE>
<CAPTION>
OPERATING RATIOS 1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
As a percent of net premiums earned:
Benefits, claims, losses, and
settlement expenses 37.6% 40.3% 40.0% 41.4% 41.8%
Commissions 42.4 40.0 40.6 39.5 40.3
Operating expenses 20.0 19.8 20.3 20.5 20.0
--------------------------------------------------------------------------------------------------------
Total benefits and expenses as a percent
of total revenues 92.3 93.3 92.2 92.7 93.2
Net income as a percent of
total revenues (profit margin) 5.3 4.8 5.4 5.2 4.9
Net income as a percent of
average assets (return on assets) 2.7 2.5 3.4 3.1 2.9
Net income as a percent of
average stockholders equity (return
on equity) 15.7 14.1 15.7 17.4 19.0
------------------------------------------------------------------------------------------------------------
At December 31:
Debt as a percent of
total capitalization 31.5 32.8 28.5 34.2 45.0
Price/Earnings Ratio 11.2 8.8 9.4 9.3 8.0
Price/Book Value Ratio 1.5 1.2 1.3 1.5 1.4
----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Life Insurance in Force Gross Collected Premiums
(in millions of dollars) (in millions of dollars)
<S> <C> <C>
1991 $29,168 $ 961
1992 27,878 1,120
1993 30,848 1,427
1994 32,129 1,761
1995 42,708 2,287
</TABLE>
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Industry
The property and casualty industry is expected to reflect higher
earnings in 1995, as a result of fewer major catastrophes, reductions
in loss costs and an increase in investment income. Standard & Poor's
is projecting a 5.3% return on operating revenue compared with 4.3%
in 1994.
The reinsurance market has witnessed some softening in prices, so
insurance companies can expect to renew their coverages at prior year
levels without incurring additional cost.
Unprecedented catastrophe losses in recent years have prompted
insurers to more aggressively limit their exposures to catastrophes.
Such actions have in turn created insurance availability problems in
certain areas.
In response to this environment, some activity at the state level has
occurred. During 1995, the California legislature authorized the
establishment of the California Earthquake Authority, which will
-29-
<PAGE> 31
provide an alternative facility to California consumers for obtaining
insurance to cover the earthquake peril. A similar situation exists
in Florida where a state-sponsored insurance facility has accepted a
significant number of insureds as insurance companies have continued
to limit the amount of their Florida business.
Litigation concerns continue to lead the industry's list of concerns.
In Alabama, the insurance industry has been targeted in litigation.
The legal environment in Alabama has received national news coverage
and the Alabama legislature is considering tort reform. Changes, if
any, in the current environment cannot be predicted. In the meantime,
Alabama litigation represents a significant issue to the industry.
The federal government, commercial companies and the insurance
industry continue to work together toward Superfund reform and
dealing with the cleanup of pollution sites. Among issues pending are
the determination of retroactive liability and a proposed
insurer-specific tax.
American Bankers
Net income for 1995 increased to $72.3 million from $56.5 million in
1994, representing an increase of 28%. The Company's largest
financial distribution channels continue to produce strong overall
premium growth contributing to the increase in net income. The 1995
results include, on an after-tax basis, an increase of $16.2 million
in net investment income, net investment gains of $.5 million and a
$3.8 million charge on the settlement of the final portion of the
credit bond litigation. The 1994 results included, on an after-tax
basis, $1.7 million in net investment gains and a $2.9 million charge
on the final settlement of the credit bond litigation initiated by
bondholders. The 1993 results included, on an after-tax basis, $4.6
million in net losses attributable to adverse development of claims
from Hurricane Andrew and losses incurred from a March winter storm
which affected the Northeastern United States.
Pre-tax operating income before realized gains (losses) by industry
segment was as follows:
<TABLE>
<CAPTION>
(in thousands)
INCOME REALIZED INCOME
EXCLUDING GAINS BEFORE
GAINS (LOSSES) (LOSSES) TAXES
<S> <C> <C> <C>
Life
----
1995 $43,469 $1,262 $44,731
1994 $30,434 $1,586 $32,020
1993 $21,767 $6,397 $28,164
Property and Casualty
---------------------
1995 $83,971 $3,386 $87,357
1994 $66,023 $670 $66,693
1993 $60,531 $(1,839) $58,692
</TABLE>
These segment results exclude interest and other corporate activity.
The 1993 winter storm and credit bond losses are included in the
property and casualty segment. (See Note 12 to the Consolidated
Financial Statements on page 61 in Part II Item 8 of this report.)
-30-
<PAGE> 32
REVENUES
The Company's total revenues in 1995 increased by 15%, primarily due
to the increases in net earned premiums of $146.4 million and
investment income of $25.0 million. The Company continues to show its
biggest growth in the property and casualty segment where revenues
increased by $158.9 million compared to the life segment increase of
$23.0 million. A significant portion of the increase in the property
and casualty segment is from net earned premiums on the credit
unemployment product.
Gross collected premiums increased more than $500 million or
approximately 30% from $1.8 billion in 1994 to $2.3 billion in 1995.
The majority of the increase was generated from three of the
Company's products.
Gross collected premiums for the selected three products were:
<TABLE>
<CAPTION>
(in thousands)
PRODUCT 1995 1994 INCREASE
<S> <C> <C> <C>
Credit Unemployment $410,800 $269,800 $141,000
Credit A&H 349,000 244,500 104,500
Extended Service 129,500 19,300 110,200
----------------------------------------------------------------------------
Total $889,300 $533,600 $355,700
</TABLE>
The Company expects its premium growth to continue at recent historic
rates depending on the acquisition of new clients, introduction of
new products to its existing accounts and pursuit of opportunities as
other insurance companies withdraw from the credit insurance market.
The cost of reinsurance to cover catastrophe losses increased by $3.1
million to $9.5 million in 1995. The Company continuously reviews its
exposure to catastrophe losses and, in 1995, increased its coverage
which accounted for the majority of the increase in cost. The cost
had remained relatively flat from 1993 to 1994 at $6.7 million and
$6.4 million, respectively. The unusually large number of major
catastrophe losses recently experienced by the industry had caused
the reinsurance market capacity to be limited and more costly;
however, the reinsurance market showed signs of stabilizing in 1995,
and, consequently, costs for similar coverages are expected to remain
at current levels in the foreseeable future.
Investment income increased significantly to $99.4 million in 1995
from $74.4 million in 1994, representing a 34% increase. The increase
is mainly due to the higher interest rate environment experienced
during the early part of 1995 and the overall increase in invested
assets of $423.5 million due primarily to premium growth. The
increase in 1994 from 1993 was 6%. The Company's investment yield was
6.7% in 1995, 6.3% in 1994 and 6.7% in 1993. The Company's tax
strategy of investing in tax-favored investments, such as low-income
housing tax credit investments, also affects the overall pre-tax
investment returns.
Gross collected premiums increased 23% in 1994 and 27% in 1993. Net
earned premiums increased 24% in 1994 and 20% in 1993.
Total net premiums earned by industry segment were as follows:
<TABLE>
<CAPTION>
(in millions)
1995 1994 1993
<S> <C> <C> <C>
Life $377.1 $360.1 $305.1
Property and Casualty 863.6 734.2 576.9
-----------------------------------------------------------------------------
Total $1,240.7 $1,094.3 $882.0
</TABLE>
-31-
<PAGE> 33
CLAIMS AND COMMISSIONS
The Company enjoyed continuing improvement of its underwriting
results in 1995. Through our extensive use of adjustable commission
arrangements based on claims experience, we have been able to
generate business with improved underwriting results. The overall
loss ratio for the Company (excluding credit bond losses) was 36.7%
in 1995 compared to 39.7% in 1994 and 39.6% in 1993. The commission
expense ratios for the same periods were 42.4% for 1995, 40.0% for
1994 and 40.6% for 1993, resulting in combined claims and commissions
ratio of 79.1%, 79.7% and 80.2% for 1995, 1994 and 1993,
respectively.
The net retained underwriting profit (premiums less benefits, claims
including credit bond and commissions) was 20% in 1995, 19.7% in 1994
and 19.5% in 1993.
A few of the Company's products such as Mobilehome Physical Damage
and Homeowners are affected by seasonal changes during the year,
causing the profitability in those lines and for the Company to
fluctuate throughout the year.
The Company's experience in the property and casualty segment has
been better than industry experience for the last three years, as
demonstrated by the following combined statutory ratios:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
ABIG 94 96 94
Industry 105* 108 107
*A.M. Best estimates
</TABLE>
The Company completed a settlement of the only remaining lawsuit
related to its discontinued credit bond insurance product line which
resulted in an after-tax charge of $3.8 million. Credit bond pre-tax
losses and expenses amounted to $11.5, $6.6 and $3.0 million in 1995,
1994 and 1993, respectively. The losses include reserves and partial
litigation settlements of $5.8 million in 1995 and $4.5 million in
1994. There were no credit bond settlements in 1993. The Company
anticipates no significant future expenses or losses associated with
the remaining policies in force.
The Company's adverse loss reserve development includes the effects
from losses experienced from excess casualty reinsurance pools in
which the Company discontinued participation effective in or prior to
1981. The Company reported pre-tax losses from these pools of $7.3
million in 1995, $4.2 million in 1994 and $3.0 million in 1993. 1995
results include reserve additions of $3.0 million, made throughout
the year to existing claims. The business is long-tail in nature and
losses continue to exceed both Company and industry expectations.
Most of these losses result from asbestos related and environmental
pollution claims. The Company's exposure is only through
participation in excess casualty pools. These pools typically
involve high layer coverages that are applicable only after primary
insurance coverage and, in many cases, reinsurance coverages have
been exhausted. Its experience can differ significantly from that of
other insurers which wrote the primary coverages directly. The
Company establishes loss reserves on known claims as recommended by
the various pool managers. Additional reserves to compensate for
those claims that have not yet been reported are established which,
when added to reported claim reserves, produce a total survival ratio
of approximately 8.5 years.
Management expects that reinsurance pool losses will continue in the
current environment but will not have a material adverse effect on
the Company's operations. It is difficult, however, to make a
reasonable estimate of the Company's ultimate liability due to a
general absence of reliable predictive data and of a generally
accepted actuarial methodology for these exposures, significant
unresolved legal issues including coverage issues, policy definitions
and evolving theories and arguments. Additionally, the determination
of ultimate damages and the final allocation of such damages to
financially responsible parties is complex and uncertain.
-32-
<PAGE> 34
OPERATING AND INTEREST EXPENSES
Operating expenses (excluding interest expense) were $248.4 million
in 1995, $217.2 million in 1994 and $179.2 million in 1993. Operating
expenses as a percentage of net earned premiums have remained
constant at 20%. Included in the expense is the cost of a new
processing system being implemented for the property and casualty
segment, which totaled $4.9 million in 1995 and $3.6 million in 1994.
Similar expense levels are expected to continue through 1997. New
processing systems are also being implemented for certain products in
the life segment; however, the costs are not significant.
Interest expense was $15.6 million, $11.2 million and $8.1 million in
1995, 1994 and 1993, respectively. The increase in interest expense
is due in part to an increase in interest rates and increases in debt
($38.2 million in 1995 and $38.9 million in 1994). The increase in
the interest rate environment, which benefits the Company in
additional investment income, is partly offset by the increase in
interest expense. Debt financing was utilized principally to support
the continued growth of the Company's insurance subsidiaries.
Interest expense in 1993 included $.6 million for the 5 3/4%
convertible subordinated debentures, which were converted into the
Company s common stock during the year.
TAXES AND OTHER
The effective tax rate was 31% in 1995, 29% in 1994 and 31% in 1993.
The majority of the increase in 1995 from 1994 was caused by
operating losses from our United Kingdom insurance subsidiary, which
did not provide any current tax benefit to the Company. In 1993,
adoption of Financial Accounting Standards Board (FASB) Statement 109
- Accounting for Income Taxes - resulted in an additional tax charge
of $1 million. The Company continues to take advantage of investing
in tax exempt securities and tax credit investments to minimize its
income tax expense.
The Company is subject to various consumer initiatives including
Proposition 103, passed in California in 1988, which are directed
toward companies writing certain insurance coverages in that state.
Proposition 103 required the Company to refund or roll back premiums
to California policyholders if favorable underwriting experience
exceeded certain guidelines. In 1995, the Company reached an
agreement with the California Insurance Department whereby the
Company rebated $4.1 million to affected policyholders. Previously
established reserves satisfied this settlement. The Company is not
aware of any other consumer initiatives which will have a material
effect on results.
FINANCIAL CONDITION
Total assets at December 31, 1995, 1994 and 1993 were $3.0 billion,
$2.4 billion and $2.2 billion, respectively. The 23% increase from
1994 to 1995 resulted from strong cash flows, the assumption of a
block of business and additional debt financing. Invested assets at
the same dates were $1.7 billion, $1.3 billion and $1.1 billion,
respectively. At December 31, 1995, investments in fixed maturities
represented 82% of the total investment portfolio while short-term
and other investments (principally invested cash) represented another
10%. The Company does not hold significant investments in equity
securities. Cash balances decreased to $23.3 million at December 31,
1995 from $89.5 million at December 31, 1994, which included $70.7
million received in late 1994 from an assumption of Extended Service
Contract obligations. Non-invested assets, including policy
acquisition costs, were $1.3 billion in 1995, $1.2 billion in 1994
and $1.0 billion in 1993.
The Company does not have a large concentration of investments in
mortgage loans or real estate. At December 31, 1995, there were $10.3
million in such investments pertaining to Florida properties.
Liabilities were $2.5, $2.0 and $1.8 billion at December 31, 1995,
1994 and 1993, respectively. The increase came mainly from policy and
claims liabilities plus unearned premium reserves consistent
-33-
<PAGE> 35
with the overall growth in certain lines of business and assumption
of certain blocks of business in 1995 and 1994.
Notes payable were $236.0 million at December 31, 1995, $197.8
million at December 31, 1994 and $158.9 million at December 31, 1993.
In 1994, the Company registered $200 million of medium-term notes
with the Securities and Exchange Commission. During 1995 and 1994,
the Company issued $50.0 million and $75.0 million of these notes,
respectively. The debt issuance proceeds were used to refinance
outstanding debt and to support the Company's continued growth and
expansion into new markets. In 1995, the Company replaced its
short-term financing facility and borrowed $87 million, mainly used
to pay off its former facility.
Although the debt related to the Leveraged Employees Stock Ownership
Plan (LESOP) ($6.4 million at December 31, 1995) is not a direct
obligation of the Company, it is nevertheless reported as part of the
Company's debt with an offsetting balance reflected as a reduction of
stockholders equity. As contributions to the LESOP are made by the
Company, the debt is repaid to the bank by the LESOP, and the
balances on the Company's balance sheet are reduced accordingly. (See
Note 9 to the Consolidated Financial Statements.)
Stockholder's equity increased by $113.7 million to $513.0 million in
1995 from $399.3 million in 1993. In 1994, the Company adopted FASB
Statement 115 - Accounting for Certain Investments in Debt ad Equity
Securities - which requires certain investments in debt and equity
securities to be carried in the balance sheet at fair value. The
difference between amortized cost and fair value of securities
available-for-sale (unrealized gain or loss, net of tax) is included
as a component of equity. At December 31, 1995, the fixed maturity
portfolio reflects an unrealized gain of $22.9 million, net of tax,
reflecting a decrease in interest rates during the last half of 1995.
Stockholders' equity grew approximately $244.6 million from January
1, 1993 to December 31, 1995, primarily from accumulated earnings of
$181.1 million reduced by $41.8 million in dividends paid on the
Company's common stock. During 1993, conversion of debentures added
$32.4 million to total equity, and the issuance of an additional two
million shares of the Company's common stock added $51.8 million.
Under the 1990 authority to repurchase up to one million shares of
the Company's stock granted by the Board of Directors, approximately
136,400 shares have been purchased to date (30,000 in 1995) as
treasury stock. In February 1996, the Board of Directors revoked the
1990 authority and authorized a repurchase of up to one million
shares of the Company's stock in the open market from time to time
subject to certain conditions.
LIQUIDITY AND CAPITAL RESOURCES
The interest rate for U.S. Treasury Bonds closed at 5.21% at December
31, 1995 compared to 7.75% at December 31, 1994. The lower interest
rates improved the market value of the Company's fixed maturity
portfolio which had been depressed in 1994. Unrealized gains or
losses on fixed maturity investments changed from a $60.9 million
loss at December 31, 1994 to a $35.2 million gain at December 31,
1995.
At December 31, 1995, $1.6 billion or 55% of the Company's total
assets were comprised of securities, short-term investments and cash.
The securities were principally readily marketable, and none of the
securities were part of highly leveraged transactions. In the bond
portfolio, 79% of bonds have maturities of under five years and 87%
have a rating of "A" or better.
Liabilities representing current cash requirements include claim
liabilities, accrued commissions and other liabilities totaling
$748.0 million at December 31, 1995, an increase of $101.9 million.
In addition, the Company's other significant cash commitments in 1996
include shareholder dividends ($15.5 million under the current
capital structure). The Company's investment portfolio has been
structured to match cash requirements. Also, cash flow from
operations which generated $266.0 million in 1995, $235.2 million in
1994 and $61.0 million in 1993, is expected to help meet operating
requirements, as well as anticipated debt service. Cash provided by
operating activities in excess of such needs is, in turn, used in
investing activities.
-34-
<PAGE> 36
Capital expenditures planned for 1996 are not expected to be
significant compared to the Company's overall liquidity and cash
flow. The headquarters will be expanded at a cost of approximately
$4.5 million. The one million share stock buyback program is not
expected to significantly impact the Company's liquidity or cash flow
in any one financial reporting period. While the impact, if any, from
the resolution of pending litigation cannot presently be identified,
the Company does not expect any unfavorable outcome to have a
material effect on liquidity or financial condition.
In 1995, the Company executed a $250 million financing program with a
group of banks, which features a bid loan and revolving line of
credit facility to replace the $130 million financing program. In
1994, the Company registered $200 million of medium-term notes with
maturities ranging from nine months to thirty years, with the
Securities and Exchange Commission. In 1994 and 1995, the Company
issued a $75 million fixed rate note and a $50 million floating rate
note, respectively. The interest rat on the floating rate note is
determined quarterly and interest under the short-term facility is
determined at the time amounts are borrowed. Accordingly, interest
rate changes may impact the Company's interest expense. Under these
arrangements, approximately $238 million is available for short-term
liquidity needs as of year end.
The Company does not commit a significant portion of its investment
portfolio to equity securities, which were 7% of total invested
assets at December 31, 1995; consequently, liquidity is not
significantly affected by changes in the equity securities markets.
The Company's preferred stock portfolio is exposed to market value
fluctuations which result primarily, but not exclusively, from the
sensitivity of the preferred stocks to interest rate changes. To
mitigate the interest rate sensitivity of this portfolio, the Company
has established a limited cross-hedging program utilizing U.S.
Treasury futures contracts.
Realized losses totaling $3.5 million in 1995 resulted from
terminated and expired option contracts. The net fair value of the
preferred stock portfolio being managed is $23.8 million ($24.4
million book value less $.6 million unrealized loss). There were no
open futures positions existing at December 31, 1995.
The Company does not concentrate in policy coverages under which
policyholders may control, on a discretionary basis, access to cash
benefits through policy surrender and withdrawals.
The Company expects to continue its policy of paying regular cash
dividends; however, future dividends are dependent on the Company's
future earnings, capital requirements and financial condition.
Additionally, based on the current dividend-paying abilities of the
insurance subsidiaries, the Company does not foresee any difficulty
in servicing its outstanding indebtedness or its dividend-paying
abilities.
Payment of dividends to ABIG by its insurance subsidiaries is
dependent on regulations dictated by statutory authorities in each
state in which they are domiciled. The National Association of
Insurance Commissioners has introduced standards which would treat
dividends in excess of the lesser of 10% of surplus or net income as
extraordinary dividends requiring insurance department approval.
While some states have adopted the standards, others have not. The
payment of dividends by the subsidiaries is discussed further in Note
8 to the Consolidated Financial Statements on page 55.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 - SAFE HARBOR
CAUTIONARY STATEMENT
Except for historical information provided in this Annual Report,
statements made throughout this document, including in this
Management's Discussion and Analysis, are forward-looking and, as
such, actual results could differ materially from those expected by
the Company. The actual results of the Company may be affected by (i)
adverse catastrophe experience in certain of the Company's property
and casualty products; (ii) significant changes in interest rates;
(iii) increased competition causing reduction in product margin or
loss of a significant client; (iv) adverse loss development on
property and casualty prior years claims or the excess casualty
reinsurance pools; (v) premium growth expectation not met because of
the loss of a significant client; (vi) outcome of litigation and
other state regulatory issues; and (vii) general economic conditions.
In addition, the actual results of forward-looking statements are
also subject to the specific factors which may be included with a
particular forward-looking statement.
-35-
<PAGE> 37
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AMERICAN BANKERS INSURANCE GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants 37
Consolidated Balance Sheets at
December 31, 1995 and 1994 38
Consolidated Statements of Income for the
years ended December 31, 1995, 1994
and 1993 39
Consolidated Statements of Common Stock and Other Stockholders' Equity
for the years ended December 31, 1995
1994 and 1993 40
Consolidated Statements of Cash Flows for
the years ended December 31, 1995,
1994 and 1993 41
Notes to Consolidated Financial Statements
for the year ended December 31, 1995 42
SCHEDULES: *
I - Summary of Investments - Other Than Investments
in Related Parties 63
II - Condensed Financial Information of
Registrant 64 - 68
III - Supplementary Insurance Information 69
IV - Reinsurance 70
VI - Supplemental Information Concerning Property -
Casualty Insurance Operations 71
</TABLE>
* Note : All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements or notes
thereto.
-36-
<PAGE> 38
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Director and Stockholders of
American Bankers Insurance Group, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of American Bankers Insurance Group, Inc. and its subsidiaries at
December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Miami, Florida
March 8, 1996
-37-
<PAGE> 39
CONSOLIDATED BALANCE SHEETS
At December 31 (in thousands except par value of common stock):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
Investments
Held-to-maturity securities, at amortized cost
(fair value: $613,749 in 1995 and $537,227 in 1994) $594,277 $555,576
Available-for-sale securities, at fair value
(amortized cost: $777,540 in 1995 and $530,827 in 1994) 793,277 488,266
Equity securities, at approximate market value
(cost: $98,612 in 1995 and $64,028 in 1994) 113,028 65,432
Mortgage loans on real estate 11,793 13,787
Policy loans 7,819 6,841
Short-term and other investments 168,216 134,968
----------------------------------------------------------------------------------------------------
Total investments 1,688,410 1,264,870
-------------------------------------------------------------------------------------------------------
Cash 23,257 89,536
Accounts receivable, net of allowance
for doubtful accounts of $5,024 in 1995 and $5,861 in 1994 130,970 105,556
Reinsurance receivable 168,128 130,938
Accrued investment income 20,943 16,062
Deferred policy acquisition costs 310,879 229,581
Prepaid reinsurance premiums 502,312 396,796
Other assets 142,835 199,160
----------------------------------------------------------------------------------------------------
Total assets $2,987,734 $2,432,499
=======================================================================================================
LIABILITIES, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
Policy liabilities $275,250 $266,221
Unearned premiums 1,178,867 903,279
Claim liabilities 404,745 333,113
----------------------------------------------------------------------------------------------------
1,858,862 1,502,613
----------------------------------------------------------------------------------------------------
Other policyholders' funds 7,113 13,221
Notes payable 235,981 197,789
Deferred income taxes 29,549
Accrued commissions and other expenses 136,174 98,819
Other liabilities 207,058 214,182
----------------------------------------------------------------------------------------------------
Total liabilities 2,474,737 2,026,624
-------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 11)
Common Stock and Other Stockholders' Equity
Common stock of $1 par value. Authorized 35,000 shares;
issued and outstanding 20,384 shares in
1995 and 20,244 shares in 1994 20,384 20,244
Additional paid-in capital 215,121 212,139
Net unrealized investment and foreign exchange gains (losses) 7,255 (38,554)
Retained earnings 282,748 225,374
Treasury stock at cost - 136 shares in 1995 and 106 shares in 1994 (2,516) (1,623)
Unamortized restricted stock (3,620) (3,205)
Collateralization of loan to Leveraged Employee Stock Ownership
Plan (6,375) (8,500)
----------------------------------------------------------------------------------------------------
Total common stock and other stockholders' equity 512,997 405,875
-------------------------------------------------------------------------------------------------------
Total liabilities, common stock and other stockholders' equity $2,987,734 $2,432,499
=======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-38-
<PAGE> 40
CONSOLIDATED STATEMENTS OF INCOME
For the Years ended December 31 (in thousands except per common share
data):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Gross collected premiums $2,286,573 $1,761,080 $1,427,235
======================================================================================================
PREMIUMS AND OTHER REVENUES
Net premiums earned $1,240,713 $1,094,317 $881,994
Net investment income 99,400 74,442 70,353
Realized investment gains 721 2,679 5,454
Gain on insurance settlement 5,412
Other income 20,014 15,397 10,111
----------------------------------------------------------------------------------------------------
Total revenues 1,360,848 1,186,835 973,324
--------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Benefits, claims, losses, and settlement expenses 454,797 434,408 349,505
Credit bond losses and expenses 11,467 6,599 2,974
Commissions 526,400 437,642 357,894
Operating expenses 248,410 217,202 179,162
Interest expense 15,579 11,168 8,109
----------------------------------------------------------------------------------------------------
Total benefits and expenses 1,256,653 1,107,019 897,644
--------------------------------------------------------------------------------------------------
Income before income taxes and cumulative
effect of change in accounting 104,195 79,816 75,680
------------------------------------------------------------------------------------------------------
Income tax (expense) benefit
Current (25,205) (14,830) (24,420)
Deferred (6,730) (8,442) 2,040
----------------------------------------------------------------------------------------------------
(31,935) (23,272) (22,380)
----------------------------------------------------------------------------------------------------
Net income before cumulative effect of change in
accounting 72,260 56,544 53,300
Cumulative effect of change in accounting for
income taxes (1,005)
----------------------------------------------------------------------------------------------------
Net income $72,260 $56,544 $52,295
==================================================================================================
PER COMMON SHARE DATA
Primary:
Net income before cumulative effect of change in
accounting $3.48 $2.74 $2.85
Cumulative effect of change in accounting for income
taxes (.05)
--------------------------------------------------------------------------------------------------
Net income $3.48 $2.74 $2.80
--------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 20,746 20,596 18,670
------------------------------------------------------------------------------------------------------
Fully diluted:
Net income before cumulative effect of change in
accounting $3.48 $2.74 $2.78
Cumulative effect of change in accounting for income
taxes (.05)
--------------------------------------------------------------------------------------------------
Net income $3.48 $2.74 $2.73
--------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 20,823 20,613 19,317
------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
-39-
<PAGE> 41
CONSOLIDATED STATEMENTS OF COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
For the Years ended December 31 (in thousands except per common share data):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
COMMON STOCK:
Balance at beginning of year $20,244 $20,140 $16,432
Exercise/forfeitures of options 140 104 118
Conversion of debentures 1,590
Proceeds from sale of stock 2,000
Balance at end of year $20,384 $20,244 $20,140
------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year $212,139 $210,878 $128,382
Exercise/forfeitures of options 2,982 1,261 1,869
Expiration of put and conversion of debentures 30,794
Proceeds from sale of stock 49,833
Balance at end of year $215,121 $212,139 $210,878
------------------------------------------------------------------------------------------------------
NET UNREALIZED INVESTMENT AND FOREIGN EXCHANGE GAINS (LOSSES):
Balance at beginning of year $(38,554) $356 $(2,554)
Change in net unrealized investment gains (losses) 71,310 (52,588) 6,272
Taxes on net unrealized investments gains (losses) (23,628) 17,094 (1,912)
Equity adjustment from foreign currency translation (1,873) (3,416) (1,450)
Balance at end of year $7,255 $(38,554) $356
------------------------------------------------------------------------------------------------------
RETAINED EARNINGS:
Balance at beginning of year $225,374 $182,975 $143,115
Net income 72,260 56,544 52,295
Cash dividends ($.75, $.71 and $.68 per share),
net of tax benefit on unallocated LESOP shares (14,886) (14,145) (12,435)
Balance at end of year $282,748 $225,374 $182,975
------------------------------------------------------------------------------------------------------
TREASURY STOCK:
Balance at beginning of year $(1,623) $(416) $(416)
Purchase of treasury stock (893) (1,207)
Balance at end of year $(2,516) $(1,623) $(416)
-------------------------------------------------------------------------------------------------------
UNAMORTIZED RESTRICTED STOCK:
Balance at beginning of year $(3,205) $(4,053) $(3,795)
Exercise/forfeitures of options (1,822) (116) (1,412)
Amortization expense 1,407 964 1,154
Balance at end of year $(3,620) $(3,205) $(4,053)
------------------------------------------------------------------------------------------------------
COLLATERALIZATION OF LOAN TO LESOP:
Balance at beginning of year $(8,500) $(10,625) $(12,750)
Reduction of LESOP loan 2,125 2,125 2,125
Balance at end of year $(6,375) $(8,500) $(10,625)
-------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
-40-
<PAGE> 42
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $72,260 $56,544 $52,295
Adjustments to reconcile net income to net cash provided by operating
activities:
Increase in policy liabilities, unearned premiums and
claim liabilities (net of reinsurance) 213,544 66,219 23,304
Change in other assets and other liabilities 39,170 76,031 8,220
(Increase) decrease in accounts receivable (25,414) 26,895 (28,139)
(Increase) decrease in accrued investment income (4,881) (2,264) 2,430
Increase in accrued commission and expenses 37,355 11,862 36
(Decrease) increase in other policyholders' funds (6,108) 6,855 (101)
Increase in policy loans (978) (119) (816)
Amortization of deferred policy acquisition costs 449,749 345,505 266,845
Amortization of cost of insurance acquired 2,447 6,109 14,233
Policy acquisition costs deferred (531,048) (376,327) (274,442)
Provision for amortization and depreciation 16,521 13,089 8,113
Deferred income taxes 6,730 8,442 (1,035)
Net gain on sale of investments and debt repurchases (721) (2,679) (5,454)
Compensation on option plans shares exercised 1,407 965 1,094
Gain on insurance settlement (5,412)
Net cash flow from purchases and sales of trading securities (4,019) (1,887)
------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 266,014 235,240 61,171
------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of investments
Held-to-maturity securities (159,185) (164,825)
Available-for-sale securities (346,237) (430,475)
Fixed maturities (759,741)
Equity securities (80,224)
Mortgage loans (263) (1,517) (1,822)
Real estate (563) (460)
Payment for acquisition, net of cash acquired (107,679)
Proceeds from sale of investments
Held-to-maturity securities 158
Available-for-sale securities 94,267 218,914
Fixed maturities 528,491
Equity securities 79,833
Mortgage loans 2,654 3,286 3,926
Real estate 87 2,992
Proceeds from maturities of investments
Held-to-maturity securities 71,395 104,226
Available-for-sale securities 27,244 57,535
Fixed maturities 220,017
(Increase) decrease in short-term investments (38,345) 5,919 6,264
Transactions related to capital assets
Capital expenditures (9,770) (5,784) (30,158)
Sales of capital assets 302 282 321
Proceeds from insurance claims 11,712
------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (358,414) (212,281) (126,528)
---------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 131,000 96,723 182,250
Repayment of notes payable (90,683) (55,683) (127,257)
Dividends paid to shareholders (14,824) (14,304) (12,639)
Proceeds from sale of stock 1,248 1,238 52,539
Purchase of treasury stock (893) (1,208)
----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 25,848 26,766 94,893
----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 273 (15) (150)
-----------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash (66,279) 49,710 29,386
Cash at beginning of year 89,536 39,826 10,440
----------------------------------------------------------------------------------------------------------------------
Cash at end of year $23,257 $89,536 $39,826
======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-41-
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of Business
American Bankers Insurance Group, Inc. provides credit-related
insurance programs in the United States, Canada and the
Caribbean. The Company also conducts business in Latin America
and the United Kingdom. ABIG, as an international wholesaler and
marketer of insurance products, services and programs,
concentrates on marketing through financial institutions,
retailers and other entities which provide consumer financing as
a regular part of their business.
(2) Summary of Significant Accounting Policies
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles which
vary in certain respects from reporting practices prescribed or
permitted by state insurance departments and include the
following significant accounting policies:
(a) Consolidation Policy
The accompanying consolidated financial statements include
the accounts of American Bankers Insurance Group, Inc.
(ABIG) and its subsidiaries (the Company):
- American Bankers Insurance Company of Florida (ABIC)
and subsidiaries
- American Bankers Life Assurance Company of Florida
(ABLAC) and subsidiaries, including Caribbean
American Life Assurance Company (CALAC)
- American Reliable Insurance Company (ARIC)
- Bankers American Life Assurance Company (BALAC)
- Bankers Insurance Company, Ltd. (BICL)
- Caribbean American Property Insurance Company (CAPIC)
- Voyager Insurance Companies
All significant intercompany transactions and accounts
have been eliminated in consolidation.
(b) Investments
In 1994, the Company adopted FASB Statement 115 -
Accounting for Certain Investments in Debt and Equity
Securities (FASB Statement 115). Under the Statement,
investments in debt and equity securities are classified
as either held-to-maturity, available-for-sale or trading.
Investments in debt securities are classified as
held-to-maturity and measured at amortized cost if the
Company has the positive intent and ability to hold these
securities to maturity. Investments in debt securities not
classified as held-to-maturity and equity securities with
readily determinable fair values are classified as either
available-for-sale or trading securities and measured at
fair value. Securities that are purchased and held
principally for the purpose of selling them in the near
term shall be classified as trading securities and
reported at fair value with subsequent changes in value
reflected as unrealized investment gains and losses in the
Consolidated Statements of Income. Investments not
classified as either trading securities or
held-to-maturity securities are classified as
available-for-sale securities and reported at fair value
with subsequent changes
-42-
<PAGE> 44
in value reflected as unrealized investment gains and
losses in the Consolidated Statements of Common Stock and
Other Stockholders' Equity.
Prior to 1994, fixed maturities, including preferred
stocks with sinking fund provisions, were carried at
amortized cost.
Equity securities are carried at market value. Mortgage
loans and policy loans are stated at the unpaid principal
balance of such loans net of unamortized discount.
Investments with impairment in value, which is other than
temporary, are written down to estimated realizable value.
The writedowns are included in realized investment gains
in the Consolidated Statements of Income. Premiums and
discounts on mortgage-backed securities are amortized
using the simple interest method over the expected life of
each security - generally 2 to 7 years. In addition, a pro
rata portion of premiums and discounts is recognized when
principal payments are received and is included in net
investment income in the Consolidated Statements of
Income. Unrealized gains and losses on equity securities
are reflected in Stockholders' Equity. The cost of
securities sold is based on the specific identification
method.
(c) Premium Revenues
Life insurance and annuity premiums, including single
premiums for accidental death and dismemberment policies,
are reported as earned when due. Credit life insurance
premiums and accident and health premiums are earned over
the terms of the contracts in relation to anticipated
benefits to the policyholders. Property insurance premiums
are recognized as income principally on a pro rata basis
over the life of the policies.
(d) Policy Acquisition Costs
For life business, the costs of acquiring new business
(principally commissions and certain variable
underwriting, agency and policy issue expenses) are
deferred and amortized over the term of the contracts as
follows:
Acquisition costs relating to ordinary life contracts are
amortized over the estimated term of the contracts in
proportion to the ratio of the annual premium revenue to
total premium revenue expected. Acquisition costs for
universal life and annuities are amortized over the lives
of the policies in relation to the present value of
estimated gross profits from surrender charges and
investment, mortality, and expense margins. The
assumptions used for the estimates are consistent with
those used in computing the policy liabilities.
Acquisition costs relating to credit life and accident and
health insurance are amortized over the term of the
contracts in relation to premiums earned.
The method of computing the deferred policy acquisition
costs for property business (commissions and other
acquisition expenses) limits the amount deferred to the
lower of (1) unearned premiums which remain after
deducting the expected amount of losses, loss adjustment
expenses, and servicing costs estimated to be incurred as
the premiums are earned; or (2) the costs applicable to
the unearned premiums.
Deferred acquisition costs are reviewed quarterly to
assure their recoverability. The recoverability of the
deferral is calculated without considering investment
income.
(e) Policy Liabilities and Unearned Premiums
Policy liabilities on life and annuity business are
computed principally by the net level premium method based
upon assumptions as to future investment yield, mortality,
morbidity, and withdrawals consistent with those used to
develop the gross premiums on the policies in force.
Universal life and annuity policyholders' liabilities are
based on full
-43-
<PAGE> 45
account values. Unearned premiums for credit insurance and
property business represent the unexpired portion of the
premiums.
(f) Claim Liabilities
Claim liabilities net of salvage and subrogation are based
primarily upon past experience and may be more or less
than the amounts ultimately paid or recovered when the
claims are settled. Changes in the estimated liability are
charged or credited to operations as the estimates are
revised.
(g) Income Taxes
Deferred taxes are provided for temporary differences in
the bases of assets and liabilities for financial
reporting and tax purposes.
(h) Property and Equipment
Depreciation of property and equipment is provided
primarily on the accelerated method. Buildings are
depreciated on the straight-line method.
Depreciation expense for the years ended December 31,
1995, 1994 and 1993 was $8,607,000, $8,550,000 and
$5,956,000, respectively, and is a component of operating
expenses.
Estimated useful lives range from 10 to 40 years for
buildings and 3 to 10 years for furniture and equipment.
(i) Earnings Per Common Share
Primary earnings per common share are based on net income
using the weighted average number of such shares
outstanding during the year after giving effect to common
stock equivalents and treasury shares.
Fully diluted earnings per share also assume conversion,
if dilutive, of the Company's convertible debt and options
into common shares after appropriate adjustments for
interest.
(j) Pension Plan
Pension costs are comprised of service costs applicable to
benefits earned during the year, net interest cost or
credit applicable to interest on plan liabilities and plan
assets, and amortization of certain charges and credits
including prior service costs.
(k) Translation of Foreign Currencies
For those foreign affiliates where the foreign currency is
the functional currency, unrealized foreign exchange
losses net of taxes have been reflected in Common Stock
and Other Stockholders' Equity under the caption Net
unrealized investment and foreign exchange gains (losses).
(l) Fair Values of Financial Instruments
The Company has used the following methods and assumptions
in estimating its fair value disclosures:
- Investment securities: Fair values for fixed maturity
securities are based on quoted market prices when
available. If quoted market prices are not available,
fair values are based on quoted market prices of
comparable instruments or values obtained from
-44-
<PAGE> 46
independent pricing services. The fair values for
equity securities are based on quoted market prices.
- Mortgage loans and policy loans: The fair values for
mortgage loans are estimated using discounted cash
flow analysis, using interest rates currently being
offered for loans with similar terms. The carrying
amounts for policy loans approximate their fair
values at the reporting date.
- Cash and short-term investments: The carrying amounts
reported in the balance sheet for these instruments
approximate their fair values.
- Trade receivables and payables: The carrying amounts
reported in the balance sheet for these instruments
approximate their fair values.
- Notes payable: The carrying amount of the Company's
short-term financing program approximates its fair
value. The carrying amount of the Company's
convertible subordinated debentures approximates
their fair values. Fair values for the Company's
promissory notes and the note payable guaranteed by
the Company for the LESOP are based on a discounted
cash flow calculation using the Company's current
borrowing rate for similar debts. Fair values for the
Company's medium-term notes are based on a discounted
cash flow calculation using the current market rate
for notes with a similar term.
(m) Reinsurance
The Company recognizes the income (ceding fees) on
reinsurance contracts principally on a pro rata basis over
the life of the policies covered under the reinsurance
agreements.
(n) Segment Information
Operating results and other financial data for each
segment are presented in Note 12. Industry segments are
primarily composed of the companies business in the life
and property and casualty insurance industries. The
geographic segments include the companies or branches
located in the United States and its possessions as
domestic and all other as foreign. Included in the
domestic segments, is one foreign insurance subsidiary
which writes no direct business, reinsures only affiliated
U.S. risks transacted in U.S. dollars and has elected to
be taxed as a U.S. corporation.
(o) Estimates
Generally accepted accounting principles require
management to make estimates and assumptions that affect
the reported amounts. Certain significant estimates,
including those used in determining property and casualty
loss reserves, life insurance policy liabilities,
valuation allowances for investment assets, and
unrecoverable reinsurance, are discussed throughout the
notes to consolidated financial statements.
(3) Investments and Fair Values
Investments
The cumulative effect as of January 1, 1994 of adopting FASB
Statement 115 on the opening balance of Stockholders' Equity was
an increase of $1,471,000 (net of $792,000 in deferred income
taxes) to reflect the net unrealized holding gains on securities
classified as available-for-sale previously carried at amortized
cost. The Company periodically purchases securities for trading
purposes generally not to exceed $30,000,000. At December 31,
1995 and 1994, there were no securities in the trading
portfolio.
-45-
<PAGE> 47
At December 31, 1995 and 1994, the fair value, amortized cost,
and gross unrealized gains and losses of investments in
held-to-maturity and available-for-sale securities consisted of
the following:
December 31, 1995 (in thousands)
<TABLE>
<CAPTION>
FAIR AMORTIZED GROSS UNREALIZED
HELD-TO-MATURITY VALUE COST GAINS LOSSES
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies $189,138 $184,463 $4,799 $(124)
Obligations of states and political subdivisions 111,219 108,793 2,573 (147)
Debt securities issued by foreign governments 17,748 17,373 825 (450)
Corporate securities 267,514 255,518 12,087 (91)
Other debt securities 28,130 28,130
--------------------------------------------------------------------------------------------------------
Subtotal 613,749 594,277 20,284 (812)
Collateralized mortgage obligations
--------------------------------------------------------------------------------------------------------
Total $613,749 $594,277 $20,284 $(812)
---------------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies $51,917 $52,199 $8 $(290)
Obligations of states and political subdivisions 14,676 14,364 613 (301)
Debt securities issued by foreign governments 44,514 41,260 3,305 (51)
Corporate securities 64,555 62,593 3,587 (1,625)
Other debt securities 12,637 12,607 329 (299)
---------------------------------------------------------------------------------------------------------
Subtotal 188,299 183,023 7,842 (2,566)
Collateralized mortgage obligations 604,978 594,517 12,343 (1,882)
---------------------------------------------------------------------------------------------------------
Total $793,277 $777,540 $20,185 $(4,448)
=========================================================================================================
<CAPTION>
December 31, 1994 (in thousands)
FAIR AMORTIZED GROSS UNREALIZED
HELD-TO-MATURITY VALUE COST GAINS LOSSES
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies $199,699 $208,224 $169 $(8,694)
Obligations of states and political subdivisions 104,472 108,519 306 (4,353)
Debt securities issued by foreign governments 10,572 11,202 33 (663)
Corporate securities 188,561 193,508 979 (5,926)
Other debt securities 32,113 32,113
--------------------------------------------------------------------------------------------------------
Subtotal 535,417 553,566 1,487 (19,636)
Collateralized mortgage obligations 1,810 2,010 (200)
--------------------------------------------------------------------------------------------------------
Total $537,227 $555,576 $1,487 $(19,836)
--------------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies $50,645 $55,729 $(5,084)
Obligations of states and political subdivisions 1,275 1,500 (225)
Debt securities issued by foreign governments 25,011 25,907 $403 (1,299)
Corporate securities 10,170 10,289 87 (206)
Other debt securities 19,049 19,554 225 (730)
--------------------------------------------------------------------------------------------------------
Subtotal 106,150 112,979 715 (7,544)
Collateralized mortgage obligations 382,116 417,848 45 (35,777)
--------------------------------------------------------------------------------------------------------
Total $488,266 $530,827 $760 $(43,321)
========================================================================================================
</TABLE>
-46-
<PAGE> 48
At December 31, 1995 and 1994, fixed maturities with an amortized
cost of $58,356,000 and $57,141,000, respectively, were on deposit
with insurance regulatory authorities to meet statutory
requirements. In addition, fixed maturities with an amortized cost
of $46,325,000 and $48,655,000 were being held in trust under
reinsurance agreements at December 31, 1995 and 1994, respectively.
The approximate market value and amortized cost of fixed maturity
investments at December 31, 1995, are shown below by contractual or
expected maturity periods. Expected maturities may differ from
contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
During 1995, the Company transferred securities from the held-to
maturity category to the available-for-sale category, as allowed
under the FASB 115 Guide to Implementation. The amortized cost of
the transferred securities was $61,193,000 and the related
unrealized gain was $2,678,000.
<TABLE>
<CAPTION>
HELD TO MATURITY AVAILABLE-FOR-SALE
FAIR AMORTIZED FAIR AMORTIZED
(IN THOUSANDS): VALUE COST VALUE COST
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 89,626 $89,098 $7,295 $7,508
Due after one year through five years 348,066 338,320 69,333 68,149
Due after five years through ten years 140,543 132,978 94,720 90,961
Due after ten years 35,514 33,881 16,951 16,405
----------------------------------------------------------------------------------------------------------
Subtotal 613,749 594,277 188,299 183,023
Collateralized mortgage obligations 604,978 594,517
----------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $613,749 $594,277 $793,277 $777,540
==========================================================================================================
</TABLE>
Foreign exchange gains and losses due to the translation of foreign
currency are combined with net unrealized investment gains and losses
in the Stockholders' Equity section of the Balance Sheet. Following
is a reconciliation of the "Net unrealized investment and foreign
exchange gains (losses) account:
<TABLE>
<CAPTION>
CHANGE CHANGE
DECEMBER 31 (IN THOUSANDS): 1995 FOR 1995 1994 FOR 1994 1993
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed Maturities Available-for-Sale:
Gross unrealized gains $20,185 $19,425 $760 $760
Gross unrealized losses (4,448) 38,873 (43,321) (43,321)
Equity Securities:
Gross unrealized gains 17,764 11,782 5,982 (7,545) $13,527
Gross unrealized losses (3,348) 1,230 (4,578) (2,482) (2,096)
-------------------------------------------------------------------------------------------------------
Subtotal 30,153 71,310 (41,157) (52,588) 11,431
Taxes (10,230) (23,628) 13,398 17,094 (3,696)
Foreign Exchange Translation (12,668) (1,873) (10,795) (3,416) (7,379)
-------------------------------------------------------------------------------------------------------
Total $7,255 $45,809 $(38,554) $(38,910) $356
=======================================================================================================
</TABLE>
Investments by the Company in investment grade corporate debt
securities may be affected by a rating decline subsequent to
acquisition. However, the percentage of the portfolio affected by
such developments is generally not significant due to the
diversification of the aggregate portfolio. The Company has no
significant investment concentration of credit risk by issuer,
industry or geographic region.
The Company engages in a limited hedging program. A cross hedge has
been established using U.S.Treasury Securities futures contracts to
minimize the effects of interest rate fluctuations on a certain
portion of the Company's preferred stock portfolio. Realized losses
totaling $3.5 million in 1995 resulted from terminated and expired
option contracts. These contracts were hedged against preferred
stock which generated $1.3 million in realized gains. There were no
open futures positions existing at December 31,1995.
-47-
<PAGE> 49
An analysis of net realized gains and losses applicable to investments
is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31 (IN THOUSANDS): 1995 1994 1993
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed Maturities Held-to-Maturity:
Gross realized gains $ 2
Gross realized losses (168) $ (234)
Fixed Maturities Available-for-Sale:
Gross realized gains 712 828
Gross realized losses (266) (512)
Fixed Maturities Trading:
Gross realized gains 218 272
Gross realized losses (282) (2,159)
Fixed Maturities:
Gross realized gains $ 4,734
Gross realized losses (3,825)
Equity Securities:
Gross realized gains 6,734 6,086 5,245
Gross realized losses (1,653) (1,783) (1,257)
Other Invested Assets:
Gross realized gains 1,285 2,393 2,524
Gross realized losses (5,861) (2,212) (1,967)
-----------------------------------------------------------------------------------------------------
Total $ 721 $ 2,679 $ 5,454
=====================================================================================================
</TABLE>
The Company disposed of certain held-to-maturity securities due to
deteriorating credit or mandatory redemption. The components of
investment income for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
(in thousands): 1995 1994 1993
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on fixed maturities $ 83,724 $ 63,347 $ 62,612
Dividends on preferred stocks 3,169 2,365 2,254
Dividends on common stocks 1,509 1,326 2,764
Interest on mortgage loans 1,228 1,293 1,697
Interest on policy loans 475 305 401
Short-term and other investment income 14,777 11,085 5,712
------------------------------------------------------------------------------------------------------
Total 104,882 79,721 75,440
Less: Investment expenses (5,482) (5,279) (5,087)
------------------------------------------------------------------------------------------------------
Net investment income $ 99,400 $ 74,442 $ 70,353
======================================================================================================
</TABLE>
FAIR VALUES
The fair value of the Company's financial instruments other than
investments and those where fair values approximate carrying value
(See Note 2(l)) are as follows:
<TABLE>
<CAPTION>
1995 1994
(IN THOUSANDS): FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Loans $ 12,200 $ 11,800 $ 13,500 $ 13,800
Notes Payable $ 238,800 $ 236,000 $ 193,700 $ 197,800
==================================================================================================
</TABLE>
-48-
<PAGE> 50
(4) Policy Liabilities, Unearned Premiums and Liabilities for
Losses and Loss Adjustment Expenses
The composition of the liability at December 31, 1995 and 1994,
and related significant assumptions used are as follows.
<TABLE>
<CAPTION>
BASES OF ASSUMPTIONS (B)
---------------------------------
LINE OF BUSINESS LIFE INSURANCE IN AMOUNT OF FUTURE INTEREST RATES MORTALITY
FORCE (A) POLICY BENEFITS (A) AND METHODS
(IN MILLIONS) (IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Life:
Ordinary $ 279 $ 328 $ 30,425 $32,074 Rates range from 8% 110% 55-60
graded to 4% for most Select and
recent issues and 4% Ultimate
graded to 3% for
earliest issues.
Annuity
Fixed Premium 12,241 13,310 Same as above. Same as above.
Flexible Premium 35,243 36,597 Full Account Value.
Single and Other 19,248 20,096 Full Account Value
Paid Up
Credit 19,601 10,224 109,432 88,930 Unearned premiums
based principally on
the "Rule of 78's"
method.
Group 8,697 9,451 1,603 184 130% 60 CSG
7 1/2% Net Lev.
Universal Life 2,635 2,175 85,846 70,817 Full Account Value
All Other 973 1,265 7,048 9,462 2.5%-6% Net Lev. Various
Accident and Health:
Group 7,939 1,789 Unearned premiums
based on the pro rata
method.
Credit 98,021 84,117 Unearned premiums
based on the average
of the pro rata and
"Rule of 78's"
methods.
Individual 50,046 55,237 3% 105% 1959 ADB
Table
Property: 457,969 324,763 Unearned premiums
based on pro rata
method.
- ---------------------------------------------------------------------------------------------------------
Totals - Net 32,185 23,443 915,061 737,376
Reinsurance Ceded 10,523 8,686 539,056 432,124
Totals - Gross 42,708 32,129 1,454,117 1,169,500
=========================================================================================================
</TABLE>
(A) Life insurance in force and future policy benefits are
stated individually net of reinsurance ceded to other
companies. Reinsurance ceded to other companies has been
added back to policy liabilities and unearned premiums for
balance sheet presentation.
(B) All withdrawal assumptions are based on the Company's
experience.
-49-
<PAGE> 51
PROPERTY AND CASUALTY LOSSES AND LOSS ADJUSTMENT EXPENSES
The consolidated financial statements include estimated provisions
for unpaid losses and loss adjustment expenses (LAE) applicable to
the Company's property and casualty insurance subsidiaries. These
subsidiaries write principally credit property, unemployment,
homeowners, mobilehome physical damage and livestock lines of
business throughout the United States, Canada, the Caribbean and the
United Kingdom. Such liabilities are established using a combination
of case basis estimates and actuarial projections and include
provisions for claims incurred but not yet reported as of the
balance sheet date.
Overall claims experience is principally dependent on the frequency
and severity of claims as well as trends in litigation and loss cost
inflation. With the exception of discontinued lines, the Company
writes primarily property coverages which are characterized by
relatively short settlement periods and quick development of
ultimate losses. Discontinued business includes the Company's
participation in excess casualty reinsurance assumed pools. The
business is long-tail in nature and losses continue to exceed both
Company and industry expectations. Most of these losses result from
asbestos-related and environmental pollution claims. Management is
unable to make a reasonable estimate of the Company's ultimate
liability from these pools due to a general absence of reliable
predictive data and of a generally accepted actuarial methodology
for these exposures, significant unresolved legal issues including
coverage issues, policy definitions and evolving theories and
arguments. Additionally, the determination of ultimate damages and
the final allocation of such damages to financially responsible
parties is complex and uncertain. The Company establishes loss
reserves on known claims as recommended by the various pool managers
and additional reserves to compensate for those claims that have not
yet been reported. Losses from its discontinued reinsurance pools
included in the accompanying table are $7.3 million, $4.2 million
and $3.0 million in 1995, 1994 and 1993, respectively. Reinsurance
pool reserves represent approximately 11.4% o the gross liability
for property and casualty losses and LAE at December 31, 1995. The
Company's estimating and reserving practices are reviewed
continuously. Subsequent adjustments to the original estimates are
made when determinable and are reflected in current year operations.
The accompanying tables present an analysis of losses and LAE for
the Company's property and casualty domestic subsidiaries. The
following table provides a reconciliation of beginning and ending
liability balances for 1995, 1994 and 1993.
Reconciliation of Liability for Losses and Loss Adjustment Expenses
for Domestic Property and Casualty Subsidiaries
<TABLE>
<CAPTION>
(in thousands): 1995 1994 1993
<S> <C> <C> <C>
Liability for losses and LAE at beginning
of year (net) $137,978 $119,491 $96,077
Beginning liability of subsidiaries purchased
during 1993 10,282
------------------------------------------------------------------------------------------
Losses and LAE incurred related to:
Current year 269,623 235,857 182,129
Prior years 332 2,612 10,905
------------------------------------------------------------------------------------------
Total incurred 269,955 238,469 193,034
------------------------------------------------------------------------------------------
Losses and LAE paid related to:
Current year (173,937) (154,498) (107,779)
Prior years (71,654) (65,484) (72,123)
------------------------------------------------------------------------------------------
Total paid (245,591) (219,982) (179,902)
------------------------------------------------------------------------------------------
Liability for losses and LAE at end of year (net) 162,342 137,978 119,491
Reinsurance receivable for unpaid losses 75,439 50,063 41,279
Liability for losses and LAE at end of year (gross) $237,781 $188,041 $160,770
==========================================================================================
</TABLE>
Accident and health net claim liabilities reported in the Company's
life subsidiaries were $57,049,000, $55,875,000 and $57,789,000 at
December 31, 1995, 1994 and 1993, respectively. There was no
significant development during the past three years.
-50-
<PAGE> 52
(5) Reinsurance
The Company's insurance subsidiaries follow the policy of
reinsuring risk in excess of $250,000 under an ordinary life
policy, $150,000 on a group life policy, and $500,000 under a
property policy. In addition, aggregate excess of loss coverage
is obtained for the Company's property and casualty business as
protection against catastrophic losses. Ceded claim and policy
liabilities are recorded as assets on the balance sheet under
the caption Reinsurance Receivable. The Company's insurance
subsidiaries are liable for these amounts in the event
reinsurers are unable to pay their portion of the claims. The
Company evaluates the financial condition of its reinsurers and
monitors concentration of credit risk arising from similar
geographic regions, activities or economic attributes of the
reinsurers to lessen its exposure to significant losses from
reinsurer insolvencies. Reinsurance ceded incurred losses for
1995 and 1994 were $268,820,000 and $203,667,000, respectively.
Liabilities for ceded claim reserves and recoverables on paid
losses at December 31, 1995 and 1994 are shown below.
<TABLE>
<CAPTION>
At December 31 (in thousands): 1995 1994
---------------------------------------------------------------------------------
<S> <C> <C>
Ceded Claim Liabilities:
Life and health business $51,169 $45,393
Property and casualty business $80,215 $50,216
---------------------------------------------------------------------------------
Reinsurance Recoverable on Paid Losses:
Life and health business $12,784 $10,254
Property and casualty business $16,435 $16,612
---------------------------------------------------------------------------------
</TABLE>
The effect of reinsurance on premiums written and earned for the years
ended December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(IN THOUSANDS): WRITTEN EARNED WRITTEN EARNED WRITTEN EARNED
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Life and Health:
Direct premiums $653,256 $562,360 $499,140 $495,066 $410,816 $420,587
Assumed premiums $49,209 $57,058 $42,998 $41,146 $39,365 $39,591
Ceded premiums $277,893 $242,311 $188,568 $176,112 $168,862 $155,035
--------------------------------------------------------------------------------------------------------
Property and Casualty:
Direct premiums $1,474,399 $1,309,557 $1,136,660 $1,060,463 $909,776 $791,663
Assumed premiums $109,709 $79,158 $82,276 $79,450 $67,278 $82,234
Ceded premiums $601,123 $525,109 $482,525 $405,696 $353,132 $297,046
--------------------------------------------------------------------------------------------------------
</TABLE>
(6) Income Taxes
Prior to 1984, ABLAC was taxed at regular corporate rates in
accordance with the Life Insurance Company Income Tax Act of
1959, whereby a portion of its statutory income was not subject
to current income taxation, but was accumulated in an account
designated "policyholders' surplus." The aggregate balance in
this account ($17,000,000, at December 31, 1995) would be taxed
at applicable current rates only if distributed to stockholders
or if the account exceeded a prescribed maximum. The Deficit
Reduction Act of 1984 eliminated additions to the account for
1984 and thereafter. ABLAC does not anticipate any transactions
that would cause any part of this amount to become taxable.
Deferred taxes in the amount of $5,950,000 have not been
provided since the Company does not anticipate any transactions
that would cause any part of the account balance to become
taxable. As of December 31, 1995, ABLAC has a shareholders'
surplus account balance (on a tax basis) of approximately
$105,800,000 from which it could pay dividends to stockholders
without incurring any federal income tax liability, subject to
regulatory requirements and the availability of funds. The
other life insurance subsidiaries do not have policyholders'
surplus account balances.
-51-
<PAGE> 53
Under current Internal Revenue Code provisions, the life
insurance subsidiaries are taxed under a single-phase structure
incorporating tax rules comparable to other corporate
taxpayers. The life insurance subsidiaries are included in the
Company's consolidated tax return.
ABIG and all other subsidiaries are taxed at regular corporate
rates applied to taxable income as determined in accordance
with the Internal Revenue Code.
Pre-tax income is derived from the following sources:
<TABLE>
<CAPTION>
(in thousands): 1995 1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic (including U.S. possessions) $107,772 $78,459 $74,939
Foreign (3,577) 1,357 741
----------------------------------------------------------------------------------------------------
Total $104,195 $79,816 $75,680
====================================================================================================
</TABLE>
Pre-tax income from foreign sources excludes the results of Canadian
branches of domestic companies.
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability
method as required by FASB Statement 109 - Accounting for Income
Taxes. The cumulative effect of adopting FASB Statement 109 as of
January 1, 1993, was to decrease net income for the year by
$1,005,000.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. The net deferred tax asset at December 31, 1994 is included
under the caption "Other Assets." Significant components of the
Company's net deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
At December 31, (in thousands): 1995 1994
----------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs $87,519 $72,021
Net unrealized investment gains 10,230
Depreciation and amortization 5,442 5,725
Prepaid pension costs 913 1,774
Others - net 5,298 2,280
--------------------------------------------------------------------------------------
Total deferred tax liabilities 109,402 81,800
--------------------------------------------------------------------------------------
Deferred tax assets:
Insurance policy liabilities (53,138) (44,716)
Difference between book and tax bases of investments (5,195) (5,316)
Accrued expenses and other amounts not currently
deductible for tax purposes (15,583) (14,496)
Net unrealized investment losses (13,398)
Others - net (5,937) (4,960)
---------------------------------------------------------------------------------------
Total deferred tax assets (79,853) (82,886)
---------------------------------------------------------------------------------------
Net deferred tax liability (asset) $29,549 $(1,086)
=======================================================================================
</TABLE>
-52-
<PAGE> 54
Significant components of the provision for income taxes attributable
to continuing operations are as follows:
<TABLE>
<CAPTION>
For the Years ended December 31 (in thousands): 1995 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $19,608 $12,480 $19,508
Foreign 5,597 2,350 4,912
-----------------------------------------------------------------------------------------------
Total current 25,205 14,830 24,420
-----------------------------------------------------------------------------------------------
Deferred:
Federal 6,773 7,901 (1,276)
Foreign (43) 541 (764)
-----------------------------------------------------------------------------------------------
Total deferred 6,730 8,442 (2,040)
-----------------------------------------------------------------------------------------------
Total provision for income taxes $31,935 $23,272 $22,380
===============================================================================================
</TABLE>
The provision for foreign taxes includes amounts attributable to
income from U.S. possessions which are considered foreign under U.S.
tax laws.
Total income tax expense (benefit) varies from amounts computed by
applying current federal income tax rates to income before income
taxes. The reasons for these differences and the approximate tax
effects thereon for each year ended December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 35.0%
Rate differential - U.S. possessions (3.4) (1.1) (1.3)
Tax exempt investment income and dividends (2.4) (2.6) (2.2)
Tax settlement, refunds and other taxes ( .4) ( .8) (.6)
Tax credits, other - net 1.9 (1.3) (1.3)
-----------------------------------------------------------------------------------------------------
Effective tax rate 30.7% 29.2% 29.6%
=====================================================================================================
</TABLE>
Deferred income taxes (benefits) of $10,230,000, ($13,398,000) and
$3,695,000 in 1995, 1994 and 1993, respectively, have been provided
on net unrealized investment gains (losses).
The Company intends to indefinitely reinvest the undistributed
earnings of its wholly owned foreign subsidiaries. The cumulative
amount of undistributed earnings for which the Company has not
provided deferred income taxes is approximately $45,048,000 as of
December 31, 1995. Upon distribution of such earnings in a taxable
transaction, the Company would incur additional U.S. income taxes in
the amount of approximately $8,881,000 net of anticipated foreign tax
credits.
The Company made federal income tax payments (net of refunds) of
$13,448,000, $16,550,000 and $20,450,000 for the years 1995, 1994 and
1993, respectively. The Company has a consolidated net capital loss
carryforward of $2,471,000 for tax purposes expiring in 1998.
-53-
<PAGE> 55
(7) Notes Payable
Following is a summary of outstanding debt at December 31:
<TABLE>
<CAPTION>
(in thousands): 1995 1994
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-term credit facility $87,000 $92,000
$200,000,000 medium-term note program 125,000 75,000
10.2% promissory notes due September 12, 1998,
annual prepayments of $4.6 million commenced September 12, 1995.
Interest is payable quarterly. 13,800 18,400
Note payable guaranteed by the Company for LESOP. (See Note 9.) 6,375 8,500
Convertible debenture bonds due to officers on May 24, 1999
(convertible into 150,000 shares of the Company's Common Stock).
Interest is payable quarterly at 1% above prime. 3,723 3,723
Other notes payable. 83 166
-------------------------------------------------------------------------------------------------------
Total $235,981 $197,789
=======================================================================================================
</TABLE>
On December 1, 1995, the Company replaced its short-term credit
facility with a $250,000,000 five year competitive advance and
revolving credit agreement with a group of banks. The agreement
features a revolving line of credit, commercial paper and/or bid loan
facilities. Interest rates vary according to the credit instrument
exercised and the market rates then prevailing. Quarterly fees payable
under this credit facility are: (a) fees payable to each lender, based
upon the Company's Moody's and Standard & Poor's ratings at every
quarter end; (b) utilization fees; and (c) administrative fee. The
fees incurred in 1995 were $1,482,000 for these facilities. Fees were
$906,000 and $1,355,000 for 1994 and 1993 respectively. The credit
agreement contains various covenants pertaining to minimum
stockholders equity, maximum funded debt ratio and insurance
statutory surplus and other ratios.
On April 11, 1994, the Company filed with the Securities and Exchange
Commission a shelf registration statement for $200,000,000 medium-term
notes which provides for maturities ranging from nine months to thirty
years. Under this shelf registration, the Company issued a $75,000,000
fixed rate note in May 1994 at 7.6% that is due May 1999 and interest
is payable semi-annually. In addition, the Company issued a five year
$50,000,000 floating rate note in April 1995. Interest is payable and
the rate is established on a quarterly basis. At December 31, 1995,
the interest rate was 6.5875%.
Interest paid was $14,328,000 in 1995, $10,719,000 in 1994 and
$8,748,000 in 1993.
An interest rate swap agreement which expired in June 1994 increased
interest expense by $608,000 in 1994 and $1,405,000 in 1993.
The following information is furnished with respect to the Company's
short-term borrowings (commercial paper and revolving line of credit):
<TABLE>
<CAPTION>
At December 31 (in thousands): 1995 1994
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Amount outstanding $87,000 $92,000
Weighted average interest rate on outstanding debt 6.15% 6.26%
-------------------------------------------------------------------------------------------------------
<CAPTION>
For the year ended December 31 (in thousands): 1995 1994
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Average amount outstanding $83,417 $102,917
Maximum amount outstanding $97,000 $133,000
Average interest rate 6.23% 4.30%
-------------------------------------------------------------------------------------------------------
</TABLE>
-54-
<PAGE> 56
(8) Common Stock and Other Stockholders' Equity
The Company has authorized 3,500,000 shares of no par preferred
stock. At December 31, 1995, no shares had been issued.
On February 24, 1988, the Board of Directors adopted a "Rights
Plan" (amended November 14, 1990) creating certain rights which
attach to and trade with each share of common stock outstanding
on or after March 11, 1988. Upon the acquisition of, or the
announcement of a tender offer for, specified amounts of the
Company's common stock, the rights will separate from the common
stock, at which time holders of the rights will be entitled to
purchase units of the Company's Series A Participating Preferred
Stock. Thereafter, under certain circumstances (including
acquisitions of specified amounts of the Company's common stock,
mergers involving the Company, and certain self-dealing
transactions by an acquisitor), holders of the rights will be
entitled to purchase common stock (or other property) of the
Company (or of the acquiring entity) at prescribed levels. The
rights are redeemable at the Company s option and expire on
March 10, 1998.
Stock insurance companies are subject to various states
insurance laws and regulations whereby amounts available for
dividends are restricted. Net consolidated assets restricted as
to distribution to the Company are $444,800,000. The maximum
statutory allowed dividends in 1996 are $68,200,000.
A summary of statutory financial information for the domestic
insurance companies is presented below:
<TABLE>
<CAPTION>
For the Years ended December 31 (in thousands) 1995 1994 1993
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Net Income (including net realized capital
gains/losses)
Life insurance subsidiaries $21,000 $15,700 $29,300
Property and casualty insurance subsidiaries $29,400 $40,400 $31,200
========================================================================================================
<CAPTION>
At December 31 (in thousands) 1995 1994
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Statutory Capital and Surplus
Life insurance subsidiaries $188,900 $174,100
Property and casualty insurance subsidiaries $271,500 $224,900
=======================================================================================================
</TABLE>
Statutory capital and surplus at December 31, 1995, included
$34,730,000 for life insurance subsidiaries of undistributed
earnings from downstream insurance subsidiaries, which are also
included in the surplus of the parent insurance companies.
Statutory Permitted Practices
The Company's insurance subsidiaries prepare their statutory
financial statements in accordance with accounting principles and
practices prescribed or permitted by the insurance department of
their state of domicile. Prescribed statutory accounting practices
include state laws, regulations and general administrative rules as
well as a variety of publications of the National Association of
Insurance Commissioners (NAIC). Permitted statutory accounting
practices encompass all accounting practices that are not
prescribed; such practices differ from state to state and may change
in the future. The NAIC has a project to codify statutory accounting
practices, the result of which is expected to constitute the only
source of prescribed statutory accounting practices. The
codification, when completed, will likely change the definitions of
what comprises prescribed as opposed to
-55-
<PAGE> 57
permitted statutory accounting practices, and may result in changes
to the accounting policies that insurance companies use to prepare
their statutory financial statements.
(9) Compensation and Other Plans
Stock Option Plans
Senior Management Plan
On May 25, 1994, stockholders approved the adoption of the 1994
Senior Management Stock Option Plan (Senior Plan). Under the
terms of the Senior Plan, certain key employees may be granted
options at prices equivalent to the fair market value of ABIG's
common stock on the grant date. Each option further entitles
the employee to be awarded two additional shares of restricted
common stock. Options are not exercisable before the six-month
anniversary nor after the third anniversary from the date of
grant. During a three-year vesting period, the restricted
shares are subject to forfeiture in the event the related
primary shares are disposed, or if employment with the Company
is terminated except by death, disability or retirement.
Dividends and voting rights on the restricted shares remain
with the employee during the vesting period. Full vesting
occurs on the third anniversary after the date the options are
exercised. Grants may be made under this plan until February
18, 2004.
Non-Employee Directors' Stock Option Plan
On May 25, 1994, stockholders approved the adoption of the 1994
Non-Employee Directors' Stock Option Plan (Director's Plan).
Under the terms of the plan, each non-employee director will
receive 1,000 options annually at prices equivalent to the fair
market value of ABIG's common stock on the grant date. Options
granted are not exercisable before the six-month anniversary
nor after the fifth anniversary from the date of the grant. As
of December 31, 1995 there were 50,000 shares authorized,
26,000 issued and 2,000 were exercised. Grants may be made
under this plan until March 24, 2004.
Award and Incentive Plans
On May 22, 1991, stockholders approved two stock option plans:
(1) 1991 Stock Option/Restricted Stock Award Plan (Award Plan)
and (2) 1991 Stock Incentive Compensation Plan (Incentive
Plan). Under the terms of the Award Plan, certain key employees
may be granted options at prices equivalent to the fair market
value of ABIG's common stock on the grant date. Each option
further entitles the employee to be awarded three additional
shares of restricted common stock. Options are not exercisable
before the six-month anniversary nor after the third annual
anniversary from the date of grant. During the vesting period,
the restricted shares are subject to forfeiture in the event
the related primary shares are disposed, or if employment with
the Company's terminated except by death, disability or
retirement. Dividends and voting rights on the restricted
shares remain with the employee during the vesting period.
Full vesting occurs on the fifth annual anniversary after the
date the options are exercised. The Company amended the Plan's
vesting period provision, originally five years, to allow
certain restricted shareholders to elect an additional one, two
or three year vesting period for their shares. In 1994, the
stockholders approved the Senior Management Stock Option Plan,
and as a result, no new grants will be made under the Award
Plan.
Under the terms of the Incentive Plan, certain other management
employees may be granted options at prices equivalent to fifty
percent of the fair market value of the Company's common stock
on the grant date. Shares obtained by exercise are subject to
restrictions. Non-vested shares are subject to forfeiture if
employment is terminated except by death, disability or
retirement. Vesting occurs ratably over a five-year period.
Grants may be made under the Incentive Plan until November 14,
2000.
-56-
<PAGE> 58
A summary of the status and activity for options and shares granted
and exercised under the Plans at December 31, 1995, is as follows:
<TABLE>
<CAPTION>
AWARD/SENIOR PLAN INCENTIVE PLAN
AUTHORIZED GRANTED EXERCISED AUTHORIZED GRANTED EXERCISED
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1992 109,000 76,800 414,200 242,041 47,545
1993
Grants (33,000) 33,000 (25,150) 25,150
Exercises (principally $18.13 Award Plan
and $13.25 Incentive Plan) (66,400) 66,400 (16,300) 16,300
Forfeitures/Reacquisitions 10,122 (10,122) 3,380 (3,380)
Lapses 5,000 (5,000) 8,850 (8,850)
1994
Authorized Grants 608,878
Grants (89,500) 89,500 (75,100) 75,100
Exercises (Award Plan $14.63 - $23.13,
Senior Plan $22.13, and
principally $11.06 Incentive Plan) (49,400) 49,400 (51,100) 51,100
Forfeitures/Reacquisitions 56,400 (56,400) 4,360 (4,360)
Lapses 3,900 (3,900) 24,000 (24,000)
1995
Grants (74,400) 74,400 (65,500) 65,500
Exercises (Award Plan $18.13 - $26.50,
Senior Plan $23.13 - $30.25, and
$15.13 - $17.00 Incentive Plan) (66,500) 66,500 (41,200) 41,200
Forfeitures/Reacquisitions 7,500 (7,500) 5,390 (5,390)
Lapses 19,500 (19,500) 24,300 (24,300)
--------------------------------------------------------------------------------------------------------
Authorized - Remaining at December 31 623,400 146,571
========================================================================================================
Grants Outstanding
(ranging from $22.13 to $30.25) 63,000
========================================================================================================
Exercised -Net 522,478 143,015
========================================================================================================
</TABLE>
Shares issued under the plans are recorded at fair market value at
the effective date of the grant. The unamortized difference
($3,620,000 as of December 31, 1995, and $3,204,000 as of December
31, 1994) between the fair market value and option price on shares
which are restricted is reported as part of stockholders' equity.
Amortization of the restricted stock is recorded as compensation
expense ratably over the vesting period ($1,407,000 in 1995, $965,000
in 1994 and $1,110,000 in 1993). Furthermore, any difference between
the fair market value and the option price on the unrestricted shares
in the Award Plan and Senior Plan is recorded as compensation
expense. Forfeitures are included as credits in the income statement
during the period in which the forfeiting event occurs.
ESODAP
The Executive Stock Option/Dividend Accrual Plan (ESODAP) authorizes
stock options for key management employees of the Company. As of
December 31, 1995, options representing 710,414 shares had been
issued under the plan, of which 211,052 had been exercised and 65,938
had been terminated. A key feature of the plan is the Dividend
Accrual Account which allows for the crediting of dividends in order
to assist the executive in the exercise of the options. The Company
discontinued making grants under this plan effective with the
approval and adoption of the 1991 Incentive and Award plans.
-57-
<PAGE> 59
Other Plans
KEDP
Under the 1994 Key Executive Debenture Plan (KEDP), the Board may
select certain Company officers to be eligible to purchase
convertible debentures. As of December 31, 1995, two debentures in
the aggregate amount of $3.7 million had been issued which are
convertible into all the 150,000 shares as currently reserved under
the plan.
LESOP
The Leveraged Employee Stock Ownership Plan (LESOP) through its trust
was funded by a loan from a bank which was collateralized with newly
issued shares of the Company's stock purchased by the LESOP at market
price.
Although the debt is not a direct obligation of the Company, it is
nevertheless reported as part of the Company's debt with an
offsetting balance reflected as a reduction of stockholders' equity.
As contributions to the LESOP are made by the Company, the debt is
repaid to the bank by the LESOP and the balances on the Company's
balance sheet are reduced accordingly. The Company has guaranteed the
Trust's loan obligation. It intends to make contributions to the
LESOP in amounts sufficient to enable the Trust to repay the loan on
a quarterly basis over ten years, including interest equal to 6%. The
shares held by the bank as collateral are released proportionately as
loan repayments are made. Upon such release, the shares are available
for allocation to employees based upon years of service. Employees
are entitled to vote the shares allocated to them. Unallocated shares
are voted by the LESOP's Trustee.
At December 31, 1995 and 1994, the loan balance was $6.4 million and
$8.5 million respectively. The interest portion of the LESOP pension
expense was $.6 million in 1995 and in 1994, and $.7 million in 1993.
As a result of the promulgation of Statement of Position (SOP) 93-6 -
Employers' Accounting for Employee Stock Ownership Plans - by the
American Institute of Certified Public Accountants in late 1993, new
reporting rules became effective in 1994. These changes are mandated
for shares acquired in 1993 and later, and are optional for
previously acquired shares. The Company has no shares subject to the
mandated provisions and, as permitted by the SOP, is not electing to
change its accounting for previously acquired shares. The following
disclosures are made to supplement previously disclosed plan
information:
- Dividends paid on all shares held by the LESOP are used to service
the existing debt of the LESOP.
- Compensation expense for the years ended December 31, 1995, 1994
and 1993 was $1,430,000, $1,480,000 and $1,660,000, respectively.
The compensation expense represents the Company's contributions to
the LESOP necessary to meet its periodic debt service, after
applying dividend payments received on the shares held by the
LESOP. All dividends paid on such shares retain their character as
distributions made from the Company's retained earnings.
- All shares held by the LESOP are treated as issued and outstanding
and, accordingly, are included in the Company's earnings per share
calculations.
- Shares held by the LESOP as of December 31, 1995 include the
following:
<TABLE>
<S> <C>
Allocated 1,065,515
Allocated in 1995 171,716
Suspense shares 515,156
Distribution (72)
-------------
Total 1,752,315
==========
</TABLE>
-58-
<PAGE> 60
Directors' Deferred Compensation Plan
The 1994 Amended and Restated Directors' Deferred Compensation Plan
(Deferred Plan) allows the directors to defer their fees in cash or
in common stock equivalents. The fees that are deferred in common
stock equivalents will accumulate and earn interest from the time
the fees are deferred until the last day of each quarter when they
are converted to common stock equivalents. Upon termination from the
board, the director will receive, as elected, either cash or actual
shares of the Company's common stock. The Deferred Plan provides for
the issuance of up to 100,000 shares of the Company's common stock.
At December 31, 1995 there were 68,133 shares allocated under this
plan.
(10) Pension Plan
The Company has a non-contributory pension plan covering
substantially all of its domestic employees. Benefits under the
Plan are based on years of service and compensation levels near
retirement. The Company's funding policy is to contribute
amounts that meet minimum funding requirements but which do not
exceed the maximum funding limits as currently determined under
applicable tax regulations. The Plan previously reached the
full funding limitation and, accordingly, no contributions were
made.
The pension plan expense included the following components for the
years ended December 31:
<TABLE>
<CAPTION>
(in thousands): 1995 1994 1993
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $1,903 $2,534 $1,917
Interest cost 1,988 1,924 1,659
Actual return on plan assets (9,228) 1,354 (3,701)
Net amortization and deferral 6,862 (3,426) 571
-------------------------------------------------------------------------------------------------
Pension plan expense $1,525 $2,386 $446
=================================================================================================
</TABLE>
The following sets forth the funded status of the Plan and the
amount of prepaid pension cost included in the Company's balance
sheet at December 31:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
---------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
A. Vested benefit obligation $(24,119) $(17,847)
==========================
B. Accumulated benefit obligation $(27,648) $(18,169)
==========================
C. Projected benefit obligation $(38,777) $(27,114)
Plan assets at fair value, primarily listed stocks and bonds 37,747 28,983
------------------------
(Deficit) excess of Plan assets over projected benefit obligation (1,030) 1,869
Unrecognized net loss from past experience different from
that assumed 4,884 3,552
Prior service cost not yet recognized in net periodic pension costs (249) (291)
-----------------------
Prepaid pension cost included in other assets $3,605 $5,130
=======================
</TABLE>
<TABLE>
<CAPTION>
Assumptions used were as follows: 1995 1994
---------------------
<S> <C> <C>
Plan discount rate for benefit obligation 6.5% 8%
Rate of increase in compensation 6% 6%
Expected long-term rate of return on assets 9% 9%
</TABLE>
-59-
<PAGE> 61
The Board of Directors previously approved a non-qualified
supplemental benefit plan. This unfunded deferred compensation plan
is intended to provide pension benefits which would otherwise be
provided under the benefit accrual formula applicable to all
employees in the Company's qualified Plan, but which are in excess
of an annual amount permitted under current tax regulations. Expense
($.1 million in 1995, $.3 million in 1994 and $.9 million in 1993)
is being recognized over the remaining service period for the
officers presently covered.
(11) Commitments and Contingencies
A summary of the approximate future minimum rental payments
required under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year at December
31, 1995, is as follows:
<TABLE>
<CAPTION>
For the Years ending December 31 (in thousands): REAL PROPERTY EQUIPMENT TOTAL
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1996 $2,032 $4,288 $6,320
1997 1,963 4,123 6,086
1998 1,370 1,167 2,537
1999 1,013 265 1,278
2000 454 54 508
---------------------------------------------------------------------------------------
$6,832 $9,897 $16,729
=======================================================================================
</TABLE>
Total rental expense for the years ended December 31, 1995, 1994 and
1993 was $7,661,000, $5,716,000 and $6,233,000 respectively.
Financial Instruments with Off-balance-sheet Risk
The Company has issued insurance contracts which constitute
financial instruments with off-balance-sheet risk. These financial
guarantee contracts extend credit insurance coverage to installment
contracts originated by mobilehome dealers and lenders pursuant to
retail sales of mobilehomes (credit bond insurance). The coverage
extends for the duration of the loan, generally 12-15 years. The
Company discontinued accepting any additional credit bond business
in 1986. These financial instruments entail elements of credit risk
in excess of the amount recognized in the financial statements.
The Company's exposure to credit loss in the event of
non-performance by the debtor under the financial guarantee is
represented by the unamortized contract balance at the time of
default. The Company currently has coverage outstanding on
approximately 2,100 individual loans. Based on historical
information, between 10% and 15% of the loans are expected to
default during their existence. Losses could range from $2,000,000
to $3,000,000 but are expected to be matched by related insurance
premiums collected during the same period.
There are no cash requirements related to these instruments unless
the mobilehome owner defaults on the loan, at which time the Company
will be liable for the unamortized loan balance.
Contingencies
During 1995, the Company completed a settlement with the Federal
Deposit Insurance Corporation (FDIC) of the only remaining lawsuit
against the Company relating to its relationship with a former
credit bond client. This settlement included the entry of orders by
the Court dismissing all claims between the Company and the FDIC
with prejudice. The settlement, net of previously established
reserves, resulted in a charge of $5.8 million. Effective with this
settlement, the Company concluded all litigation ever initiated
against it in connection with its discontinued credit bond insurance
business.
-60-
<PAGE> 62
The Company and certain of its insurance subsidiaries are presently
parties to a number of individual consumer and class action lawsuits
pending in Alabama involving premium, rate and policy coverage
issues. As has been widely reported in the news media, the insurance
and finance industries have been targeted in Alabama by plaintiffs'
lawyers who enjoy a favorable judicial climate. The Company
typically has been named as a co-defendant with one or several
retail or finance companies who have sold the Company's product to a
consumer. A number of other credit insurers are named as
co-defendants in many of the suits.
Although these lawsuits generally involve relatively small amounts
of actual or compensatory damages, they typically assert claims
requesting substantial punitive awards. The Company denies any
wrongdoing in any of these suits and believes that it has not
engaged in any conduct that would warrant an award of punitive
damages. The Company has been advised by legal counsel that it has
meritorious defenses to all claims being asserted against it.
While no one case is necessarily significant in terms of financial
risk to the Company, the judicial climate in Alabama is such that
the outcome of these cases is extremely unpredictable. Without
admitting any wrongdoing, the Company has settled a number of these
suits, but there are still a significant number of cases pending,
and it is expected that more suits alleging essentially the same
causes of action are likely to continue to be filed during 1996. The
Company intends to continue to defend itself vigorously against all
such suits and believes, based on information currently available,
that any liabilities that could result are not expected to have a
material effect on the Company's financial position.
The Company is involved with a number of cases in the ordinary
course of business relating to insurance matters or, more
infrequently, certain corporate matters. Generally, the Company's
liability is limited to specific amounts relating to insurance or
policy coverage for which provision has been made in the financial
statements. Other cases involve general corporate matters which
generally do not represent significant contingencies for the
Company.
(12) Segment Information
<TABLE>
<CAPTION>
Industry Segments (in thousands): 1995 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net premiums earned:
Life $377,108 $360,100 $305,143
Property and Casualty 863,605 734,217 576,851
---------------------------------------------------------------------------------------------
Total $1,240,713 $1,094,317 $881,994
=============================================================================================
Income before interest and income taxes:
Life $44,731 $32,020 $28,164
Property and Casualty 87,357 66,693 58,692
Other (12,314) (7,729) (3,067)
---------------------------------------------------------------------------------------------
Subtotal 119,774 90,984 83,789
Interest expense (15,579) (11,168) (8,109)
---------------------------------------------------------------------------------------------
Total $104,195 $79,816 $75,680
=============================================================================================
Identifiable assets:
Life $1,333,076 $1,023,634 $1,034,959
Property and Casualty 1,602,160 1,347,262 1,072,723
Other 52,498 61,603 52,793
---------------------------------------------------------------------------------------------
Total $2,987,734 $2,432,499 $2,160,475
=============================================================================================
</TABLE>
-61-
<PAGE> 63
Summarized data for the Company's foreign operations (principally
in Canada and the United Kingdom) and domestic operations are as
follows:
Geographic Segments
<TABLE>
<CAPTION>
For the Years ended December 31 (in thousands): 1995 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net premiums earned:
Domestic (including U.S. possessions) $1,190,084 $1,048,603 $850,559
Foreign 50,629 45,714 31,435
---------------------------------------------------------------------------------------------
Total $1,240,713 $1,094,317 $881,994
=============================================================================================
Income before income taxes:
Domestic (including U.S. possessions) $100,616 $76,305 $74,835
Foreign 3,579 3,511 845
---------------------------------------------------------------------------------------------
Total $104,195 $79,816 $75,680
=============================================================================================
Identifiable assets:
Domestic (including U.S. possessions) $2,871,773 $2,326,076 $2,072,938
Foreign 115,961 106,423 87,537
---------------------------------------------------------------------------------------------
Total $2,987,734 $2,432,499 $2,160,475
=============================================================================================
</TABLE>
The Company distributes its products through eight markets or
distribution channels involving over one thousand clients. Its
business is generally not concentrated, and no single customer
accounted for 10% or more of the Company's consolidated revenue in
1995.
(13) Quarterly Financial Information (Unaudited)
Quarterly financial information for the years ended December 31,
1995 and 1994, is presented below:
<TABLE>
<CAPTION>
(in thousands except per common share data):
FIRST SECOND THIRD FOURTH
1995 QUARTER QUARTER QUARTER QUARTER
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $309,775 $326,207 $357,245 $367,621
Total benefits and expenses $288,143 $303,791 $332,158 $332,561
Net income $14,871 $16,048 $18,684 $22,657
Net income per common share - primary $.72 $.77 $.90 $1.09
-------------------------------------------------------------------------------------------------
<CAPTION>
1994
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $284,304 $298,079 $302,367 $302,085
Total benefits and expenses $271,883 $277,635 $284,430 $273,071
Net income $9,179 $14,150 $12,639 $20,576
Net income per common share - primary $.45 $.68 $.61 $1.00
-------------------------------------------------------------------------------------------------
</TABLE>
The sum of the quarterly earnings per share amounts may not equal
the comparable amounts for the full year because the computations
are done independently.
-62-
<PAGE> 64
Schedule I
AMERICAN BANKERS INSURANCE GROUP, INC.
SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1995
(IN THOUSANDS)
Information on Summary of Investments - Other Than Investments in Related
Parties is included on page 11 in Part I Item 1 c. of this report, and in
Note 3 on page 45 in Part II Item 8 of this report, with the exception of
the Information on Equity Securities which is included below.
<TABLE>
<CAPTION>
AMOUNT
AT WHICH
MARKET SHOWN IN THE
COST VALUE BALANCE SHEET
---- ----- -------------
<S> <C> <C> <C>
Equity Securities:
Common Stocks:
Public Utilities $ 770 $ 732 $ 732
Banks, Trust and
Insurance Companies 4,914 6,303 6,303
Industrial, Miscellaneous
and All Other 54,902 66,881 66,881
Non-Redeemable
Preferred Stock 38,026 39,112 39,112
---------- ---------- ----------
Total Equity Securities $ 98,612 $ 113,028 $ 113,028
========== ========== ==========
</TABLE>
-63-
<PAGE> 65
Schedule II
AMERICAN BANKERS INSURANCE GROUP, INC. (PARENT)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
AT DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Assets
------
Investments in subsidiaries* $ 730,501 $ 582,224
Amounts due from subsidiaries* 19,988 11,655
Other investments 2,613 3,112
Cash 459 697
Other 9,310 12,531
---------- ----------
Total assets $ 762,871 $ 610,219
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Short-term debt $ 87,000 $ 92,000
Long-term debt 148,981 105,789
Accrued expenses and other liabilities 13,893 6,555
---------- ----------
Total liabilities 249,874 204,344
---------- ----------
Stockholders' Equity
--------------------
Common stock 20,384 20,244
Additional paid-in capital 215,121 212,139
Net unrealized investment and foreign
exchange gains (losses) 7,255 (38,554)
Retained earnings 282,748 225,374
Treasury stock, at cost (2,516) (1,623)
Unamortized restricted stock (3,620) (3,205)
Collaterization of loan to Leveraged Employee
Stock Ownership Plan (6,375) (8,500)
---------- ----------
Total stockholders' equity 512,997 405,875
---------- ----------
Total liabilities and stockholders' equity $ 762,871 $ 610,219
========== ==========
</TABLE>
*Eliminated in consolidated financial statements.
See accompanying note to condensed financial statements.
-64-
<PAGE> 66
Schedule II
AMERICAN BANKERS INSURANCE GROUP, INC. (PARENT)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
---------
Net investment income $ 2,744 $ 2,547 $ 624
Net realized investment (losses) gains (194) 891 106
Dividends from subsidiaries* 8,775 22,539 24,312
---------- ---------- ---------
Total revenues 11,325 25,977 25,042
---------- ---------- ---------
Expenses:
---------
Credit bond losses and expenses 6 3,455 (143)
Operating expenses 13,208 6,723 3,537
Interest 15,565 11,158 8,112
---------- ---------- ---------
Total expenses 28,779 21,336 11,506
---------- ---------- ---------
(Loss) income before income taxes and
equity in undistributed income of subsidiaries (17,454) 4,641 13,536
Income tax (benefit) expense:
-----------------------------
Current (8,853) (7,235) (3,785)
Deferred 27 1,178 (5,066)
---------- ---------- ---------
(8,826) (6,057) (8,851)
---------- ---------- ---------
(Loss) income before equity in
undistributed income of subsidiaries (8,628) 10,698 22,387
Equity in undistributed income of
subsidiaries* 80,888 45,846 29,908
---------- ---------- ---------
Net income $ 72,260 $ 56,544 $ 52,295
========== ========== =========
</TABLE>
*Eliminated in consolidated financial statements.
See accompanying note to condensed financial statements.
-65-
<PAGE> 67
Schedule II
AMERICAN BANKERS INSURANCE GROUP, INC. (PARENT)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Operating Activities:
Net income $ 72,260 $ 56,544 $ 52,295
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of
subsidiaries (79,523) (47,926) (29,908)
(Increase) in amounts due from
subsidiaries (8,654) (13,544) (2,368)
Decrease (increase) in other assets 2,289 12,912 4,894
Increase (decrease) in accrued liabilities 7,932 (1,000) (16,257)
Amortization of convertible debentures 346
Other 1,397 1,066 145
Deferred income taxes 27 1,178 (5,066)
---------- --------- ----------
Net cash (used in) provided by operating activities (4,272) 9,230 4,081
---------- --------- ----------
Investing activities:
Increase in investment in subsidiaries (4,587) (565) (500)
(Increase) decrease in other investments (193) (3,046) 6,769
Payment for purchase of subsidiaries, net of
cash acquired (17,034) (32,284) (107,679)
---------- --------- ----------
Net cash used in investing activities (21,814) (35,895) (101,410)
---------- --------- ----------
Financing activities:
Purchase of treasury stock (893) (1,208)
Proceeds from issuance of common stock 1,248 1,238 53,633
Proceeds from issuance of short-term debt - other 50,000 18,000 182,250
Proceeds from issuance of long-term debt - other 81,000 78,723
Repayment of long-term debt - other (4,683) (4,683)
Repayment of short-term debt - other (86,000) (51,000) (127,157)
Cash dividends paid to stockholders (14,824) (14,304) (12,639)
---------- --------- ----------
Net cash provided by financing activities 25,848 26,766 96,087
---------- --------- ----------
Net (decrease) increase in cash (238) 101 (1,242)
Cash at beginning of year 697 596 1,838
---------- --------- ----------
Cash at end of year $ 459 $ 697 $ 596
========== ========= ==========
</TABLE>
See accompanying note to condensed financial statements
-66-
<PAGE> 68
Schedule II
AMERICAN BANKERS INSURANCE GROUP, INC. (PARENT)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995* 1994* 1993
----- ----- ----
<S> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of 5 3/4% convertible subordinated debentures $ 31,513
Conversion of convertible subordinated debentures from officers $ 2,585
Detail of Acquisitions:
Fair value of assets acquired $ 222,361
Liabilities assumed 111,872
-----------
Cash paid 110,489
Less cash acquired 2,810
-----------
Net cash paid for acquisitions $ 107,679
============
</TABLE>
* Note : No amounts applicable for 1995 and 1994.
See accompanying note to condensed financial statements.
-67-
<PAGE> 69
Schedule II
AMERICAN BANKERS INSURANCE GROUP, INC. (PARENT)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
DECEMBER 31, 1995
NOTE TO CONDENSED FINANCIAL STATEMENTS
The accompanying condensed financial statements should be read in
conjunction with the Consolidated Financial Statements and notes thereto
of American Bankers Insurance Group, Inc. (Parent).
The Company is scheduled to repay the LESOP note at a yearly amount of
$2,125,000 plus interest. For a description of a short- term and
long-term debt payable to others and related information see Note 7 to the
Consolidated Financial Statements on page 54 in Part II Item 8 of this
report. For a description of the Company's commitments and contingencies,
see Note 11 to the Consolidated Financial Statements on page 60 in Part II
Item 8 of this report.
-68-
<PAGE> 70
Schedule III
AMERICAN BANKERS INSURANCE GROUP, INC.
SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
Deferred Other Benefits
Policy Future Policy Net Claims
Acquisition Policy Unearned Claim Premium Investment and Loss Amortization
Costs Benefits Premiums Benefits Revenue Income* Expenses* of DAC
----------- --------- ----------- --------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995
- ----
Life & Health $ 146,548 $ 275,250 $ 399,500 $ 161,926 $ 377,108 $ 40,249 $ 168,899 $ 91,953
Property & Casualty 164,331 779,367 242,819 863,605 58,415 285,898 357,796
Other 736
--------- --------- ----------- ---------- ----------- --------- --------- --------
Total $ 310,879 $ 275,250 $ 1,178,867 $ 404,745 $ 1,240,713 $ 99,400 $ 454,797 $449,749
========= ========= =========== ========== =========== ========= ========= ========
1994
- ----
Life & Health $ 128,606 $ 266,221 $ 330,986 $ 141,587 $ 360,100 $ 34,022 $ 180,513 $ 73,140
Property & Casualty 100,975 572,293 191,526 734,217 39,225 253,895 272,365
Other 1,195
--------- --------- ----------- ---------- ----------- --------- --------- --------
Total $ 229,581 $ 266,221 $ 903,279 $ 333,113 $ 1,094,317 $ 74,442 $ 434,408 $345,505
========= ========= =========== ========== =========== ========= ========= ========
1993
- ----
Life & Health $ 109,701 $ 266,057 $ 330,713 $ 144,385 $ 305,143 $ 33,335 $ 148,601 $ 71,080
Property & Casualty 89,058 490,875 163,885 576,851 34,481 200,904 195,765
Other 2,537
--------- --------- ----------- ---------- ----------- --------- --------- --------
Total $ 198,759 $ 266,057 $ 821,588 $ 308,270 $ 881,994 $ 70,353 $ 349,505 $266,845
========= ========= =========== ========== =========== ========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
Other Net
Operating Premiums
Expenses Written**
--------- -----------
<S> <C> <C>
1995
- ----
Life & Health $ 96,105 $ 196,596
Property & Casualty 203,056 982,985
Other 25,900
--------- -----------
Total $ 325,061 $ 1,179,581
========= ===========
1994
- ----
Life & Health $ 106,225 $ 191,997
Property & Casualty 178,377 736,411
Other 24,737
--------- -----------
Total $ 309,339 $ 928,408
========= ===========
1993
- ----
Life & Health $ 97,547 $ 123,058
Property & Casualty 157,219 623,922
Other 15,445
--------- -----------
Total $ 270,211 $ 746,980
========= ===========
</TABLE>
*Excluding net realized investment gains of $721, $2,679 and $5,454 for
1995, 1994 and 1993, respectively.
**Excluding Credit Bond losses and expenses of $11,467, $6,599 and $2,974
for 1995, 1994 and 1993, respectively.
***Excluding Life and Annuity premiums.
-69-
<PAGE> 71
Schedule IV
AMERICAN BANKERS INSURANCE GROUP, INC.
REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
Assumed Percentage
Ceded to from of amount
Gross other other Net assumed
amount companies companies amount to net
------ --------- --------- ------ ------
<S> <C> <C> <C> <C> <C>
1995
----
Life insurance in force $ 41,916,797 $ 10,522,839 $ 791,405 $ 32,185,363 2.4%
============== ============= ============= ============= =======
Premiums:
Life insurance $ 285,100 $ 123,004 $ 40,329 $ 202,425 19.9%
Accident & health
insurance* 376,010 151,155 35,870 260,725 13.8%
Property & liability
insurance 1,169,333 493,268 101,498 777,563 13.1%
-------------- ------------- ------------- ------------- -------
Total premiums $ 1,830,443 $ 767,427 $ 177,697 $ 1,240,713 14.3%
============== ============= ============= ============= =======
1994
----
Life insurance in force $ 30,685,770 $ 8,686,424 $ 1,443,472 $ 23,442,818 5.9%
============== ============= ============= ============= =======
Premiums:
Life insurance $ 262,340 $ 83,411 $ 25,808 $ 204,737 12.6%
Accident & health
insurance* 313,839 111,634 15,415 217,620 7.1%
Property & liability
insurance 979,350 386,763 79,373 671,960 11.8%
-------------- ------------- ------------- ------------- -------
Total premiums $ 1,555,529 $ 581,808 $ 120,596 $ 1,094,317 11.0%
============== ============= ============= ============= =======
1993
----
Life insurance in force $ 29,316,560 $ 10,665,242 $ 1,531,338 $ 20,182,656 7.6%
============== ============= ============= ============= =======
Premiums:
Life insurance $ 219,654 $ 65,466 $ 21,446 $ 175,634 12.2%
Accident & health
insurance* 260,279 102,075 18,384 176,588 10.4%
Property & liability
insurance 732,317 284,540 81,995 529,772 15.5%
-------------- ------------- ------------- ------------- -------
Total premiums $ 1,212,250 $ 452,081 $ 121,825 $ 881,994 13.8%
============== ============= ============= ============= =======
</TABLE>
*Includes premiums from both the life and property and casualty segments.
-70-
<PAGE> 72
Schedule VI
AMERICAN BANKERS INSURANCE GROUP, INC.
SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND CASUALTY
INSURANCE OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
Claims and Claim
Adjustment Expenses
Incurred Related To
Paid Claims
and Claim
Current Prior Adjustment
Year Years Expenses
----------------------------------------------
<S> <C> <C> <C>
1995
----
Consolidated Property and Casualty Entities $ 285,119
$ 779 $ 261,463
1994
----
Consolidated Property and Casualty Entities $ 252,403 $ 1,492 $ 234,292
1993
----
Consolidated Property and Casualty Entities $ 189,686 $ 11,218 $ 186,834
</TABLE>
Information otherwise required in the Schedule is provided in Schedule III.
-71-
<PAGE> 73
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
-72-
<PAGE> 74
PART III
ITEM 10
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Directors of the Company is included in
the Definitive Proxy Statement for the annual shareholders meeting,
to be filed within 120 days of the registrant's fiscal year-end.
Information regarding the Executive Officers of the Company is
included in Part I of this report.
There are no failures by directors, officers, beneficial owners of
more than ten percent of the Company's stock or other persons
subject to reporting under Section 16(a) of the Exchange Act of 1934
to timely file reports thereunder is included in the aforementioned
Definitive Proxy Statements.
ITEM 11
EXECUTIVE COMPENSATION
Information regarding Executive Compensation is included in the
Definitive Proxy Statement for the annual shareholders meeting, to
be filed within 120 days of the registrant's fiscal year-end.
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding Security Ownership of Certain Beneficial
Owners and Management is included in the Definitive Proxy Statement
for the annual shareholders meeting, to be filed within 120 days of
the registrant's fiscal year-end.
The registrant has no knowledge of any contractual arrangement that
may result in a change of control at a subsequent date.
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding Certain Relationships and Related Transactions
is included in the Definitive Proxy Statement for the annual
shareholders meeting, to be filed within 120 days of the
registrant's fiscal year-end.
-73-
<PAGE> 75
PART IV
ITEM 14
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a.)
(1) and (2) - The response to this portion of Item 14 is listed on
page 36 of this report.
(3) Exhibits
3(a)(4) - Second Amended and Restated Articles of
Incorporation and Articles of Amendment
filed July 8, 1986 with Certificate of the
Designation, preferences and relative,
participating, optional or other special
rights of the Series A Participating
Preferred Stock, and the qualifications,
limitations, or restrictions thereof which
have not been set forth in the Second
Amended and Restated Articles of
Incorporation of American Bankers Insurance
Group, Inc., as amended.
3(b) - Corporate By-Laws, Amended and Restated
November 11, 1995.
4(a)(2) - Rights to Purchase Series A Participating
Preferred Stock.
4(b)(5) - Amendment to the Rights to Purchase Series A
Participating Preferred Stock
10(a)(1) - Form of Executive Compensation Agreement.
10(b)(3) - 1987 Executive Stock Option/Dividend Accrual
Plan.
10(c)(6) - Form of Executive Severance Benefits
Agreement.
10(d) - 5 Year Competitive Advance and Revolving
Credit Facility Agreement dated as of
December 1, 1995 among the Company, certain
banks and Barclays Bank PLC.
10(e) - Issuance and Paying Agent Agreement (For
Commercial Paper) dated as of 21st day of
November 1995 by and between the Company and
Chemical Bank.
10(f)(7) - $23,000,000, 10.2% Promissory Notes.
10(g)(7) - Nonqualified Supplemental Benefit Plan.
10(h)(8) - Master License Agreement between Policy
Management Systems Corporation ("PMSC"), a
South Carolina Corporation and American
Bankers Insurance Group, Inc. ("customer").
10(i)(9) - Trust Indenture and Selling Agency Agreement
for shelf filing of $200,000,000 medium-term
notes.
10(j)(10) - 1991 Stock Incentive Compensation Plan, as
amended February 18, 1994.
10(k)(10) - 1991 Stock Option/Restricted Stock Award
Plan, as amended February 18, 1994.
10(l)(10) - Director's Deferred Compensation Plan,
amended and restated May 25, 1994.
-74-
<PAGE> 76
10(m)(10) - Retirement Plan, as amended December 30,
1994.
10(n)(10) - Management Incentive Plan, as amended May
25, 1994.
10(o)(10) - 1994 Key Executive Convertible Subordinated
Debenture Plan.
10(p)(10) - 1994 Non-Employee Directors' Stock Option
Plan.
10(q)(10) - 1994 Senior Management Stock Option Plan.
10(r)(10) - $75,000,000, 7.60% Medium-term Note dated
May 2,1994.
10(s)(10) - Irrevocable Stand-by Letter of Credit in
favor of Tandy Corporation dated January 31,
1995;
10(t)(10) - Reimbursement Agreement with certain banks
dated January 31, 1995.
10(u)(11) - $50,000,000, Floating Rate, Medium-term Note
dated April 12, 1995.
10(v) - Form of Executive Compensation Agreement.
10(w) - Amendment to the 1991 Stock
Option/Restricted Stock Award Plan.
11 - Statement regarding computation of earnings
per share.
21 - Subsidiaries of the registrant.
23 - Consent of Independent Accountants.
27 - Financial Data Schedule
99 - Additional Exhibits
- Information from Reports furnished to
Insurance Regulatory Authorities.
Documents relating to American Bankers
Insurance Group, Inc. Leverage Employee
Stock Ownership Plan (LESOP).
99(a)(4) Note
99(b)(4) Guaranty Agreement from American
Bankers Insurance Group, Inc.,
American Bankers Insurance
Company of Florida and American
Bankers Life Assurance Company
of Florida in favor of Sun
Bank/Miami, N.A.
99(c)(6) Modified ESOP Note.
99(d)(7) Second Amendment to Trust
Agreement among American Bankers
Insurance Group and Barnett
Banks Trust Company, N.A.
(Successor to Southeast Bank,
N.A., original trustee).
99(e)(10) American Bankers Insurance
Group, Inc. Leveraged Employee
Stock Ownership Plan, as amended
December 30, 1994.
-75-
<PAGE> 77
Footnotes
(1) Exhibit incorporated herein by reference from Form S-3
Registration Statement Number 2-94359.
(2) Exhibit incorporated herein by reference from
Registrant's Statement on Form 8-A filed on March 11,
1988.
(3) Exhibit incorporated herein by reference from 1987
Annual Meeting Proxy Statement (Exhibit "A," pages 14
through 19).
(4) Exhibit incorporated herein by reference from
Registrant's Annual Report on Form 10-K for 1988.
(5) Exhibit incorporated herein by reference from
Registrant's Current Report on Form 8-K dated November
14, 1990.
(6) Exhibit incorporated herein by reference from
Registrant's Annual Report on Form 10-K for 1990.
(7) Exhibit incorporated herein by reference from
Registrant's Annual Report on Form 10-K for 1991.
(8) Exhibit incorporated herein by reference from
Registrant's Annual Report on Form 10-K for 1993.
(9) Exhibit incorporated herein by reference from
Registrant's Current Report on Form 10-Q for March 31,
1994.
(10) Exhibit incorporated herein by reference from
Registrant's Annual Report on Form 10-K for 1994.
(11) Exhibit incorporated herein by reference from
Registrant's Current Report on Form 10-Q for June 30,
1995.
(b.) REPORTS ON FORM 8-K
No report on Form 8-K was filed during the fourth quarter
1995.
(c.) EXHIBITS
The response to this portion of Item 14 is submitted as a
separate section of this report.
(d.) FINANCIAL STATEMENT SCHEDULES
The response to this portion of Item 14 is submitted as part
of Part II Item 8 of this report.
-76-
<PAGE> 78
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
American Bankers Insurance Group, Inc.
<TABLE>
<S> <C> <C>
By: /S/ Gerald N. Gaston Chief Executive Officer, March 29 , 1996
--------------------------------------- President, and ----
Gerald N. Gaston Vice Chairman of the Board
By: /S/ Arthur W. Heggen Vice President and March 29 , 1996
--------------------------------------- Treasurer ----
Arthur W. Heggen
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report signed below by the following persons on behalf of the Registrant
and in the capacities and on March 29, 1996.
American Bankers Insurance Group, Inc.
<TABLE>
<S> <C> <C>
/S/ R. Kirk Landon Chairman of the Board, March 29 , 1996
-----------------------------------------------and Director ----
R. Kirk Landon
/S/ Gerald N. Gaston Chief Executive Officer, March 29 , 1996
-----------------------------------------------President, ----
Gerald N. Gaston Vice Chairman of the Board
and Director
/S/ William H. Allen, Jr. Director March 29 , 1996
----------------------------------------------- ----
William H. Allen, Jr.
/S/ Nicholas A. Buoniconti Director March 29 , 1996
----------------------------------------------- ----
Nicholas A. Buoniconti
/S/ Armando M. Codina Director March 29 , 1996
----------------------------------------------- ----
Armando M. Codina
</TABLE>
-77-
<PAGE> 79
<TABLE>
<S> <C> <C>
/S/ Peter J. Dolara Director March 29 , 1996
----------------------------------------------- ----
Peter J. Dolara
/S/ Jack F. Kemp Director March 29 , 1996
----------------------------------------------- ----
Jack F. Kemp
/S/ James F. Jorden Director March 29 , 1996
----------------------------------------------- ----
James F. Jorden
/S/ Daryl L. Jones Director March 29 , 1996
----------------------------------------------- ----
Daryl L. Jones
/S/ Malcolm G. MacNeill Director March 29 , 1996
----------------------------------------------- ----
Malcolm G. MacNeill
/S/ Eugene M. Matalene, Jr. Director March 29 , 1996
----------------------------------------------- ----
Eugene M. Matalene, Jr.
/S/ Albert H. Nahmad Director March 29 , 1996
----------------------------------------------- ----
Albert H. Nahmad
/S/ Nicholas J. St. George Director March 29 , 1996
----------------------------------------------- ----
Nicholas J. St. George
/S/ Robert C. Strauss Director March 29 , 1996
----------------------------------------------- ----
Robert C. Strauss
/S/ George E. Williamson, II Director March 29 , 1996
----------------------------------------------- ----
George E. Williamson, II
</TABLE>
-78-
<PAGE> 80
ITEM 14 (c)
EXHIBIT INDEX
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Exhibit 10 - Material contracts: E-2
3(b) - Corporate By-Laws, Amended and Restated November
11, 1995.
10(d) - 5 Year Competitive Advance and Revolving Credit
Facility Agreement dated December 1, 1995.
10(e) - Issuance and Paying Agent Agreement (For Commercial
Paper) dated as of November 21, 1995.
10(v) - Form of Executive Compensation Agreement.
10(w) - Amendment to the 1991 Stock Option/Restricted Stock
Award Plan.
Exhibit 11 - Statement regarding computation of earnings per share E-3
Exhibit 21 - Subsidiaries of the registrant E-4
Exhibit 23 - Consent of Independent Certified Public Accountants E-5
Exhibit 27 - Financial Data Schedule E-6
Exhibit 99 - Information from Reports furnished to Insurance
Regulatory Authorities for American Bankers Insurance
Group, Inc., Domestic Property and Casualty
Subsidiaries. E-7
</TABLE>
Other exhibits have been incorporated by reference. See Item 14, Part
IV of this Annual Report on Form 10-K.
E - 1
<PAGE> 81
EXHIBIT 10
Material Contracts
E - 2
<PAGE> 1
EXHIBIT 3(b)
ARTICLE I
MEETINGS
SECTION 1. ANNUAL MEETINGS
The Annual Meeting of the stockholders of the Corporation shall be held at the
principal office of the Corporation in the state of Florida or at such other
place within or without the state of Florida as may be determined by the Board
of Directors and as may be designated in the notice of such meeting. The
meeting shall be held during the month of May in each year on such date as the
Board of Directors may designate at a meeting held not less than 60 days prior
to the date so designated for the Annual Meeting. The business to be
transacted at such meeting shall be the election of Directors and such other
business as may be properly brought before the meeting.
SECTION 2. SPECIAL MEETINGS
Special Meetings of the stockholders may be held any place within or
without the state of Florida upon call of the Board of Directors, the Executive
Committee, the Chief Executive Officer, or when requested in writing by the
holders of not less than 75% of all the Voting Shares, as defined in Article
VII of the Articles of Incorporation of the Corporation entitled to vote at the
meeting (such meeting, if requested by the stockholders, to be held at the
office of the Corporation), at such time as may be fixed by the Board of
Directors or the Executive Committee or the Chief Executive Officer or such
stockholders, as may be stated in the call and notice.
SECTION 3. NOTICE OF MEETINGS
Written notice of the time, place and purpose, or purposes of every
meeting of shareholders shall be delivered not less than ten (10) nor more than
sixty (60) days before the meeting, either personally or by mail (the act of
mailing being deemed completed service), by or at the direction of the
President, the Secretary, or the officer or persons calling the meeting to each
stockholder of record entitled to vote at such meeting, and upon any
stockholder who, by reason of any action proposed at such meeting, would be
entitled to have his shares of stock appraised if such action be taken. If
mailed, such notice shall be directed to such stockholder at his last address
as its appears on the stock books of the Corporation unless he shall have filed
with the Secretary of Corporation a written request that notices intended for
him be mailed to the address designated in such request. Such further notice
shall be given by mail, publication or otherwise, as may be required by the
Articles of Incorporation of the Corporation, by resolution of the Board of
Directors or Executive Committee or by law.
SECTION 4. QUORUM
A majority of the shares entitled to vote represented in person or by
proxy shall constitute a quorum at the meeting of stockholders. If a quorum is
present, the affirmative vote of the majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of all
stockholders unless otherwise provided by statute or the Articles of
Incorporation of the Corporation. If at any meeting of stockholders, there
should be less than a full quorum present, the stockholders of the majority of
the shares of stock entitled to vote so
-1-
<PAGE> 2
present or represented may adjourn the meeting from time to time without notice
other than announcement at the meeting until a quorum shall have been obtained,
when any business may be transacted which might have been transacted at the
meeting as first convened had there been a full quorum.
SECTION 5. VOTING
At all meetings of the stockholders, each holder of record of
outstanding shares of the stock of the Corporation entitled to vote thereat may
so vote either in person or by proxy appointed by instrument in writing
executed by such holder or his duly authorized attorney. No proxy shall be
valid after the expiration of eleven (11) months from the date thereof, unless
the stockholder executing it shall have specified therein a longer time during
which it is to continue in force.
SECTION 6. RECORD OF SHAREHOLDERS
For the purpose of determining stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof, or entitled
to receive payment of any dividend or in order to make a determination of
stockholders for any other purpose, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period but not to exceed, in
any case, sixty (60) days. if the stock transfer book shall be closed for the
purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten (10) days
immediately preceding the meeting.
In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any determination of
stockholders, such date in any case not more than sixty (60) days and, in case
of a meeting, not less than ten (10) days prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
If the stock transfer books are not closed and no record date is fixed
for the determination of stockholders entitled to notice of or to vote at a
meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date of such determination of
stockholders.
When the determination of stockholders entitled to vote at any meeting
of stockholders has been made as provided in this section, such determination
shall apply to any new record date for the adjourned meeting.
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ARTICLE II
BOARD OF DIRECTORS
SECTION 1. NUMBER AND QUALIFICATIONS
The number of Directors constituting the entire Board of the
Corporation shall be not less or more than as authorized by the Articles of
Incorporation of the Corporation, and shall be fifteen (15) until otherwise
determined by the resolution adopted by affirmative vote of a majority of the
entire Board of Directors.
SECTION 2. MEETINGS OF THE BOARD
The Board of Directors shall hold its Annual Meeting as set forth in
Section 3 hereafter. Special Meetings of the Board may be held at any time and
at any place within or without the continental United States upon the call of
the Chairman of the Board, the Chief Executive Officer of the Corporation, or
any two Directors. Except with respect to the Annual Meeting of Directors,
notice of all Directors' Meetings, whether regular or special, shall be given
to each Director by either personal delivery, mail, facsimile, telegram or
cablegram at least two (2) days before the meeting unless waived pursuant to
Section 8 hereafter.
SECTION 3. ANNUAL MEETING OF DIRECTORS
The Annual Meeting of the Board of Directors shall be held on the same
date and in the same place as the Annual Stockholders' meeting and shall
convene immediately after the conclusion of the Annual Meeting of the
Stockholders. No notice of such meeting shall be required.
SECTION 4. QUORUM
The attendance of not less than a majority of the number of Directors
at the time constituting the full Board of Directors in accordance with the
Articles of Incorporation of the Corporation and these By-Laws shall be
necessary to constitute a regular quorum for the transaction of business;
provided; however, that if the attendance at such meeting is less than that
required for a regular quorum as aforesaid but is one-third (1/3) or more of
the full Board of Directors, the number so present shall constitute a special
quorum which may proceed to adopt resolutions or take other action which;
however, shall not be binding upon the Corporation until such resolutions or
actions respectively have been approved in writing by a sufficient number of
Directors (in addition to those voting therefore at the meeting) to constitute
a total of not less than a majority of the full Board. When such resolutions
or other action has been presented in writing to any absent Director or
Directors, such resolutions, or other actions shall be deemed approved by said
absent Director unless his disapproval is received in writing by the Secretary
within fifteen (15) days after receipt by such Director of such resolutions or
other action. Any action taken at a meeting at which a quorum is present shall
require consent and approval of at least a majority of the full Board. If at
any meeting of the Board, there shall be less than a full quorum present, a
majority of the Directors present may adjourn the meeting from time to time
without notice other than
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announcement at the meeting until a quorum shall have been obtained, when any
business may be transacted which might have been transacted at the meeting as
first convened had there been a full quorum.
SECTION 5. VACANCIES AND REMOVAL
Vacancies in the Board of Directors shall be filled as prescribed by
the Articles of Incorporation of the Corporation. The Directors so chosen
shall hold office until the next election of the class for which such directors
shall have been chosen and until their successors shall be elected and
qualified. Directors may be removed and vacancies caused by their removal may
be filled as prescribed by the Articles of Incorporation of the Corporation,
and new Directors so chosen shall hold office until the next election of the
class for which such Directors shall have been chosen and until their
successors shall be elected and qualified.
SECTION 6. COMPENSATION
Each Director of the Corporation and each member of the Executive
Committee, the Building Committee, the Compensation and Nominating Committee,
the Audit Committee, the Planning Committee, the Audit Committee, or any
special committee shall receive such compensation as the Board may by
resolution determine to be proper and reasonable. Nothing herein shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor. Directors residing outside the county in
which any meeting of the Board of Directors is held shall be entitled to
reimbursement for reasonable expenses of attending such meeting or meetings.
SECTION 7. INDEMNITY
The Corporation shall indemnify each Director and Officer and may, by
action of the Board of Directors, indemnify other employees, and agents to the
fullest extent permitted under Florida Statutes now or hereafter in force.
SECTION 8. WAIVER OF NOTICE
A Director may waive in writing notice of a special meeting of the
Board either before or after the meeting; and his waiver shall be deemed the
equivalent of his having been given notice. Attendance of a Director at a
meeting shall constitute waiver of notice at that meeting unless he attends for
the express purpose of objecting to the transaction of business because the
meeting has not been lawfully called or convened.
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ARTICLE III
OFFICER
SECTION 1. OFFICERS AND AGENTS
The Board of Directors, at its Annual Meeting, shall elect from its
members a Chief Executive Officer of the Corporation, a President, a Chairman
of the Board of Directors, and a chairman for each committee of the Board. The
Board of Directors shall also elect at such meeting Vice Presidents, the
Secretary, the Treasurer, and such other officers as it may deem appropriate.
Any two or more offices may be held by the same person provided; however, that
the office of President and Secretary or Assistant Secretary may not be held by
the same person.
SECTION 2. TERM OF OFFICE
The term of office of all officers shall be one (1) year and until their
respective successors are chosen and qualified, but any officer or agent
elected or appointed by the Board of Directors may be removed, with or without
cause, at any time by the affirmative vote of the majority of the full Board of
Directors.
SECTION 3. GENERAL POWERS AND DUTIES
The officers, agents, and employees of the Corporation shall each have such
powers and duties in the management of the property and affairs of the
corporation, subject to the control of the Board of Directors, as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be prescribed by the Board of Directors. The Board of
Directors may require any such officer, agent, or employee to give security for
the faithful performance of his duties.
SECTION 4. SPECIAL POWERS AND DUTIES OF OFFICERS
Without modifying or limiting the general powers and the duties authorized
and assigned by Section 3 above, the following named officers shall have the
following special powers and duties, provided; however, that the Board of
Directors or Executive Committee may, by resolution, shift, consolidate, change
or eliminate any of said powers or duties, except where such duties or powers
are set by the laws of the state of Florida.
CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside as Chairman at all meetings of the
Board of Directors and shall perform such other duties as may be assigned him
by the Board of Directors, the Executive Committee, or the Chief Executive
Officer of the Corporation. In the absence of the Chairman, the Vice Chairman,
if there be one, shall preside over meetings of the Board of Directors, and
shall have such other duties as may be assigned to him by the Board of
Directors, the Executive Committee, or the Chief Executive Officer of the
Corporation.
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<PAGE> 6
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall preside at all meetings of the
stockholders, shall be charged with supervision of the offices of the
Corporation and of its personnel, shall have responsibility for the general and
active management of the business of the Corporation, and shall see that all
the orders and resolutions of the Board are carried into effect, subject;
however, to the right of the Board to delegate any specific powers to any other
officer or officers of the Corporation.
PRESIDENT
The President, in the absence or disability of the Chief Executive Officer,
shall act in his stead and place and shall discharge the duties of Chief
Executive Officer and possess his powers. At the direction of the Board of
Directors or the Executive Committee, he may assume charge and supervision of
the offices of the Corporation and of its personnel and may actively supervise
and direct the conduct of its business. He shall also perform such other
duties as may be assigned to him by the Board, the Executive Committee or the
Chief Executive Officer. The President may also execute contracts in the name
of the Corporation and appoint and discharge agents and employees. The
President shall be responsible to the Chief Executive Officer.
EXECUTIVE VICE PRESIDENT AND OTHER VICE PRESIDENTS.
The Board may designate and appoint an Executive Vice President, who, in the
absence or disability of the President, shall act in the stead and place, and
shall discharge the duties of the President and possess his powers. At the
direction of the Board of Directors or the Executive Committee, he may assume
charge and supervision of the offices of the Corporation and of its personnel,
and may actively supervise and direct the conduct of its business. He shall
also perform such other duties as may be assigned to him by the Board, the
Executive Committee, the Chief Executive Officer, or the President as shall any
other Vice Presidents of the Corporation.
The Board may designate and appoint such other Vice presidents as it may, in
its discretion, choose to do.
In the absence or disability of the Chief Executive Officer, the President
and of the Executive Vice President, any other Vice President designated by the
Board of Directors or the Executive Committee may discharge the duties of the
Chief Executive Officer and shall possess his powers.
TREASURER
The Treasurer shall have custody of all funds and securities of the
Corporation which may come into his hands; shall be charged with the
maintenance and supervision of the accounts and financial records and reports;
and shall be charged with the preparation and filing of all tax returns. When
necessary or proper, he shall endorse on behalf of the corporation for
collection, checks, notes and other obligations, and shall deposit same to the
credit of the Corporation. He shall see that all balances due to the
Corporation by its agents and brokers, or otherwise, are promptly paid and
shall promptly report to the Chief Executive Officer any unusual delay in such
payments, as well as any default in the payment of rent or of interest
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<PAGE> 7
or principal on any and all investments belonging to the Corporation. He shall
keep faithful and accurate account of all receipts and expenditures and of all
other items which enter into the accounting requirements of the Corporation,
and when requested, shall render, furnish and submit such financial statements,
balance sheets, profit and loss statements or other accounting reports and
schedules as the Board, the Executive Committee, or the Chief Executive Officer
may direct. He shall also supervise the statistical work and records of the
Corporation. He shall also perform such other duties as may be assigned to him
by the Board or Executive Committee. In the absence or disability of the
Treasurer or when specifically authorized by the Board of Directors of the
Executive Committee, an Assistant Treasurer may perform all or any of the
duties of the Treasurer herein set forth and such other duties as may be
assigned by the Board or the Executive Committee.
SECRETARY
The Secretary shall have immediate charge of the minute books of the
Corporation. He shall have charge of the stock certificate books, the transfer
book and stock ledgers. He shall keep accurate minutes of all proceedings of
the regular and special meetings of the shareholders and of Directors; he,
shall attend to the giving and serving of all notices; and when so ordered, he
shall affix the corporate seal to all documents requiring such seal and shall
make the necessary attestation or certification; and shall have such other
duties as may from time to time be assigned to him by the Board or the
Executive Committee. In the absence or disability of the Secretary or when
specifically authorized by the Board of Directors or the Executive Committee,
an Assistant Secretary may perform all or any of the administrative duties of
the Secretary herein set forth.
SECTION 5. EXECUTION OF DOCUMENTS
The Board of Directors or the Executive Committee may, by appropriate
resolution, designate such officers of the Corporation, or of American Bankers
Insurance Company of Florida or American Bankers Life Assurance Company of
Florida as are authorized and empowered to make and execute all deeds,
releases, leases, agreements, contracts, bills of sale, assignments, Power of
Attorney or of substitution, and other instruments of writing which may be
needful to sell, assign, transfer, convey, release and assure or lease to any
party, whether purchaser, lessee or transferee, any estate or property, real or
personal, stocks, bonds, loans, storage receipts, certificates of deposit,
scrip or evidences of debt or demand standing in the name of the Corporation or
any officer on behalf of the Corporation, or held or controlled by it; and to
affix the corporate seal of the Corporation to any and all such instruments of
writing and to acknowledge or prove the said instruments or any of them and the
proper execution, sealing and delivery thereof. The Board of Directors or the
Executive Committee from time to time may authorize other officers or agents of
the Corporation or of American Bankers Insurance Company of Florida or American
Bankers Life Assurance Company of Florida to perform any or all of said duties.
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<PAGE> 8
ARTICLE IV
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE
The Board of Directors shall designate an Executive Committee to consist of
not less than three (3) Directors of the Corporation and by resolution shall
designate the Chairman of said Committee. The Executive Committee shall have
and exercise, when the Board is not in session, so far as the Board of
Directors may lawfully delegate to it, all of the powers of the Board in the
management of the business and affairs of the Corporation and any and all
subsidiaries of the Corporation and shall have power to authorize the seal of
the Corporation and any subsidiary of the Corporation to be affixed to all
papers which may require it; but the Executive Committee shall not have power
to fill vacancies in the Board, or to change the membership of, or to fill
vacancies in the Executive Committee, the Compensation and Nominating
Committee, the Audit Committee, the Building Committee or the Planning
Committee, or to make or amend By-Laws of the Corporation, or any subsidiary
thereof. The Board shall have the power at any time to fill vacancies in, to
change the membership of, to change the number of members of, or to dissolve
the Executive Committee. Such number of the members of the Executive Committee
as the Board of Directors may by resolution determine shall constitute a
quorum. All action taken by the Executive Committee shall be reported to the
Board at its meeting next succeeding such action.
SECTION 2. COMPENSATION AND NOMINATING COMMITTEE
The Board of Directors shall designate a Compensation and Nominating
Committee to consist of not less than three (3) directors of the Corporation,
none of whom shall be inside directors, and by resolution shall designate the
Chairman of said Committee. Subject to the control of the Board of Directors
or the Executive Committee, the Compensation and Nominating Committee shall
review and recommend to the Board of Directors the compensation package of the
Chairman of the Board of Directors, the Chief Executive officer, and the
President of the Corporation and its major subsidiaries; shall review and
approve the compensation package suggested by Management for all other
officers; shall be responsible for the control and administration of all
perquisites offered officers of the Corporation and its major subsidiaries,
including, but not necessarily limited to, pension, retirement or profit
sharing plans, management incentive plans, restricted or qualified stock plans,
and insurance benefits; shall assist the Chairman of the Board and the Chief
Executive Officer in the development of a management succession plan for the
corporation; and shall recommend and implement criteria regarding the
composition of the Board, including but not limited to seeking out possible
candidates to fill Board positions, determining the desirable balance of
expertise and composition of the Board members, aiding in attracting such
qualified candidates to the Board, reviewing the management slate of directors
to be elected by the shareholders at the Annual Meeting and recommending to the
Board the inclusion of the slate in the proxy statement, receiving and
reviewing the qualifications of candidates for election to corporate
officership and recommending the officers for approval by the Board, as well as
evaluating performance of current directors in order to maintain the quality of
the Board. The Compensation and Nominating Committee shall fix its own rules
and procedures and shall meet, at least once quarterly, with its annual meeting
prior to the annual Board of
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<PAGE> 9
Directors meeting, and at any other time at the request of the Board of
Directors, the Chairman of the Compensation and Nominating Committee or the
Chief Executive Officer of the Corporation. The Chairman may request any
members of management of the corporation or any of its subsidiaries to attend
meetings as he deems necessary. The Board of Directors shall have the power at
any time to fill vacancies in, to change the membership of, to change the
number of members of, or to dissolve, the Compensation and Nominating
Committee. Such number of members of the Committee as the Board of Directors
may by resolution determine shall constitute a quorum. All action taken by the
Compensation and Nominating Committee shall be reported to the Board at its
meeting next succeeding such action.
SECTION 3. AUDIT COMMITTEE
The Board of Directors shall designate an Audit Committee to consist of not
less than three (3) Directors of the Corporation, none of whom shall be inside
Directors, and by resolution shall designate the Chairman of said Committee.
Subject to the control of the Board of Directors or the Executive Committee,
the Audit Committee shall as to the Corporation and each of its subsidiaries:
recommend the selection of the independent auditors to the Board of Directors
and review the arrangements and scope of the independent audit; review all
financial statements before publication, and review matters of concern to the
Audit Committee, the auditors or management relating to these statements or the
results of any audit thereof; consider the comments from the independent
auditors with respect to any weakness in internal controls and the
consideration given corrective action taken by management; review the internal
accounting procedures and controls with the Corporation's and the respective
subsidiary's financial and accounting staff; review the activities, reports and
recommendations of the Corporation's and respective subsidiary's internal
auditors and management's supervision and control of that department; and
complete any other requests made by the Board of Directors. The Audit
Committee shall fix its own rules and procedures and shall meet, at least once
annually, on sufficient occasions to fulfill its duties, at the request of the
Board of Directors, the Chairman of the Audit Committee, or the chief financial
officer. During any meeting of the Committee at which financial statements are
to be reviewed, the chief financial officer of the Corporation or the
respective subsidiary or his representative shall be present. The internal
auditor and/or a representative of the Corporation's or the respective
subsidiary's auditors may be invited to any meeting of the Committee by the
Chairman of the Committee. The Board of Directors shall have the power at any
time to fill vacancies in, to change the number of members of, or to dissolve
the Audit Committee. Such number of the members of the Committee as the Board
of Directors may by resolution determine shall constitute a quorum. All action
taken by the Audit Committee shall be reported to the Board at its meeting next
succeeding such action.
SECTION 4. BUILDING COMMITTEE
The Board of Directors shall designate a Building Committee to consist of
not less than three (3) directors and by resolution shall designate the
Chairman of said Committee. Subject to the control of the Board of Directors
or the Executive Committee, the Building Committee shall formulate the building
plans of the Corporation to include liaison with architects, engineers, general
contractors, governmental agencies, lending institutions, planners, and
consultants as necessary. The Building Committee shall recommend to the Board
of Directors comprehensive plans for construction, design, financing,
decorating, furnishing, and equipping of office space necessary to accommodate
the growth objectives of the Corporation and shall perform the same functions
with respect to and shall oversee the
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<PAGE> 10
management of the Corporation's real properties held for investment. The
Building Committee shall fix its own rules and procedures and shall meet as
frequently as necessary to fulfill its duties. The Board of Directors shall
have the power at any time to fill vacancies in, to choose the number of
members of, or to dissolve the Building Committee. Such number of the members
of the Building Committee as the Board of Directors may by resolution determine
shall constitute a quorum. All action taken by the Building Committee shall be
reported to the Board at its meeting next succeeding such action.
SECTION 5. PLANNING COMMITTEE
The Board of Directors shall designate a Planning Committee to consist of
not less than three (3) Directors of the Corporation and by resolution shall
designate the Chairman of said Committee. Subject to the control of the Board
of Directors or the Executive Committee, the Planning Committee shall
periodically review and recommend to the Board of Directors the plans, goals,
and objectives of the Corporation and its major subsidiaries; shall review the
Consolidated Profit Plan, the Capital Plan and the Business Plans for each
business segment of the Corporation annually; and shall monitor, throughout the
year, the operating results of each such business segment and the consolidated
profit results. The Planning Committee shall fix its own rules and procedures
and shall meet at least once annually, or on sufficient occasions to fulfill
its duties, and at any other time at the request of the Board of Directors, the
Chairman of the Planning Committee or the Chief Executive Officer of the
Corporation. The Chairman may request any members of management of the
corporation or any of its subsidiaries to attend meetings as he deems
necessary. The Board of Directors shall have the power at any time to fill
vacancies in, to change the membership of, to change the number of members of,
or to dissolve, the Planning Committee. Such number of members of the
Committee as the Board of Directors may by resolution determine shall
constitute a quorum. All action taken by the Planning Committee shall be
reported to the Board at its meeting next succeeding such action.
SECTION 6. COMMITTEES
The Board of Directors may, in its discretion, by resolution, appoint other
committees which shall have and may exercise such powers as shall be conferred
or authorized by the resolution appointing them. A majority of any such
committee, composed of more than two members may determine its actions and fix
the time and place of its meetings, unless the Board of Directors shall
otherwise provide. The Board shall have power at any time to change the
members of such committee, to fill vacancies and to discharge any such
committee.
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ARTICLE V
COMMON STOCK
SECTION 1. CERTIFICATE OF SHARES
The interest of each stockholder shall be evidenced by certificates for
shares of stock of the Corporation in such form as the Board of Directors may
from time to time prescribe. The certificates of stock shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary and
sealed with the seal of the Corporation, and shall be countersigned and
registered in such manner, if any, as the Board may by resolution prescribe;
provided that, in case such certificates are required by such resolution to be
signed by a Transfer Agent or Transfer Clerk or by a Registrar, the signatures
of the President or a Vice President and the Secretary or any Assistant
Secretary, and the seal of the Corporation upon such certificates may be
facsimiles, engraved, or printed. In case such officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such before such certificate is issued, it may be issued by the corporation
with the same effect as if such officer had not ceased to be such at the date
of its issue.
SECTION 2. TRANSFERS
Shares in the capital stock of the Corporation shall be transferred only on
the books of the Corporation by the holder thereof in person or by his attorney
or in case of death by his personal representative, upon surrender for
cancellation of certificates for the same number of shares with an assignment
and power of transfer endorsed thereon or attached thereto, duly executed, with
such proof of the authenticity of the signature as the Corporation or its
agents may reasonably require.
SECTION 3. LOST OR DESTROYED STOCK CERTIFICATE
No certificate for shares of stock of the Corporation shall be issued in
place of any certificates alleged to have been lost, stolen or destroyed,
except upon production of such evidence of the loss, theft or destruction and
upon indemnification of the Corporation and its agents, to such extent and in
such manner as the Board of Directors may from time to time prescribe.
SECTION 4. CONTROL-SHARE ACQUISITIONS STAT DOES NOT APPLY
Florida Statutes Section 607.0902 (1990), and any amendments thereto (the
"Statute"), does not apply to control-share acquisitions (as defined in the
Statute) of shares of stock of the Corporation occurring on or after November
14, 1990.
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ARTICLE VI
CHECKS, NOTES, ETC.
All checks and drafts on the Corporation bank accounts and all bills of
exchange, and promissory notes and all acceptances, obligations, and other
instruments for payment of money shall be signed by such officers of the
Corporation or such officers of American Bankers Insurance Company of Florida
or American Bankers Life Assurance Company of Florida or such agents as shall
be thereunto authorized from time to time by the Board of Directors or the
Executive Committee. No bills or notes shall be signed by or on behalf of the
Corporation unless the Board of Directors or the Executive Committee shall
expressly authorize the same and shall designate the officers who shall execute
same.
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ARTICLE VII
INSPECTORS OF ELECTION
In advance of any meeting of the shareholders, the Board of Directors may
appoint Inspectors of Election who need not be shareholders to act at such
meetings or any adjournment thereof. If Inspectors of Election are not so
appointed by the Board of Directors, the Chairman of any such meeting may
appoint such Inspectors of Election. If neither the Board of Directors or the
Chairman of the meeting appoint Inspectors of Election, any shareholder or
proxy thereof may request the election thereof and those individuals appointed
shall be by majority vote of the shares present and entitled to vote. In no
event shall there be more than three (3) Inspectors of Election and no person
who is a candidate for office shall act as an Inspector. In case any person
appointed an Inspector fails to appear or refuses to act, the vacancy may be
filled by appointment made by the Board of Directors in advance of the
convening of the meeting or at the meeting by the person or officer acting as
Chairman.
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ARTICLE VIII
AMENDMENTS
The By-Laws of the Corporation may be repealed or amended and new By-Laws
may be adopted by either the majority vote of the full Board of Directors or at
any meeting of the shareholders of record of a majority of the outstanding
stock entitled to vote thereat, provided notice of the meeting is given in
accordance with these By-Laws and provided further that notice may be waived as
provided by Section 3 of Article I hereof, but the Board of Directors may not
amend or repeal any By-Law adopted by shareholders if the shareholders
specifically provide such By-Law is not subject to amendment or repeal by the
Directors.
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<PAGE> 1
EXHIBIT 10(d)
===============================================================================
5-YEAR COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT
Dated as of December 1, 1995
among
AMERICAN BANKERS INSURANCE GROUP, INC.
THE LENDERS NAMED HEREIN,
CHEMICAL BANK, as Administrative Agent
and
BARCLAYS BANK PLC, NEW YORK BRANCH,
as Co-Agent
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION> Page
<S> <C> <C>
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE II
THE CREDITS
2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.3 Competitive Bid Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.4 Standby Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.5 Conversion and Continuation of Standby Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.6 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.7 Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.8 Interest on Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.9 Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.10 Alternate Rate of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.11 Termination and Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.12 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.13 Reserve Requirements; Change in Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.14 Change in Legality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.15 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.16 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.17 Sharing of Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.18 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.19 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.20 Duty to Mitigate; Assignment of Commitments Under Certain Circumstances . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Organization; Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.4 Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.6 Ownership of Properties; Possession under Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.7 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.8 Litigation, Compliance with Laws, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.9 Federal Reserve Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.10 Investment Company Act; Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.11 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.12 No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.16 Absence of Certain Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.17 Reinsurance Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.18 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.19 Obligations as Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE IV
CONDITIONS OF LENDING
4.1 All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.2 Closing Dat. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE V
COVENANTS
A. Affirmative Covenants
5.1 Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.2 Business and Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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<TABLE>
<S> <C> <C>
5.3 Financial Statements, Reports, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.4 Insurance Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.6 Obligations and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.7 Litigation and Other Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.8 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.9 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.10 Maintaining Records; Access to Properties and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.11 Ownership of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.12 Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.13 Preparation of Environmental Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
B. Negative Covenants
5.14 Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.15 Prohibition of Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.16 Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.17 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.18 Stockholder's Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.19 Consolidated Total Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.20 Interest Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.21 Statutory Surplus of ABIC and ABLAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.22 Risk-Based Capital Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.23 Limitations of Subsidiary Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VI
EVENTS OF DEFAULT
ARTICLE VII
THE ADMINISTRATIVE AGENT
ARTICLE VIII
MISCELLANEOUS
8.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.2 Survival of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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<TABLE>
<S> <C> <C>
8.3 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.5 Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.6 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.7 Waivers; Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.8 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.12 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.13 Jurisdiction: Consent to Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.14 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
* * *
EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Competitive Bid Request
Exhibit A-2 Form of Notice of Competitive Bid Request
Exhibit A-3 Form of Competitive Bid
Exhibit A-4 Form of Competitive Bid Accept/Reject Letter
Exhibit A-5 Form of Standby Borrowing Request
Exhibit B Administrative Questionnaire
Exhibit C Form of Assignment and Acceptance
Exhibit D Form of Opinion of Counsel for American Bankers Insurance Group, Inc.
Schedule 2.1 Commitments
Schedule 3.6 Capital Leases
Schedule 3.7 Subsidiaries
Schedule 3.8 Litigation
Schedule 3.15 Environmental Matters
Schedule 3.16 Certain Restrictions
</TABLE>
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<PAGE> 6
5-YEAR COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY
AGREEMENT (the "AGREEMENT") dated as of December 1, 1995, among
AMERICAN BANKERS INSURANCE GROUP, INC., a Florida corporation
(the "COMPANY"), the lenders listed in Schedule 2.1 (the
"LENDERS"), CHEMICAL BANK, a New York banking corporation, as
administrative agent for the Lenders (in such capacity, the
"ADMINISTRATIVE AGENT"), and BARCLAYS BANK PLC, NEW YORK BRANCH,
as Co-Agent.
BACKGROUND
A. The Lenders have been requested to extend credit to the Company
to enable it to borrow on a standby revolving credit basis on and after the
date hereof and at any time and from time to time prior to the Maturity Date
(such term and each other capitalized term used but not defined shall have the
meaning assigned to it in Article I) a principal amount not in excess of
$250,000,000 at any time outstanding.
B. The Lenders have also been requested to provide a procedure
pursuant to which the Company may invite the Lenders to bid on an uncommitted
basis on short-term borrowings by the Company. The proceeds of such borrowings
are to be used for working capital and other general corporate purposes,
including commercial paper back-up.
C. The Lenders are willing to extend credit on the terms and subject
to the conditions herein set forth. This Agreement will replace the Existing
Credit Facility.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the meanings specified below:
ABR BORROWING: a Borrowing comprised of ABR Loans.
ABR LOAN: any Standby Loan bearing interest at a rate determined by
reference to the Alternate Base Rate in accordance with the provisions of
Article II.
<PAGE> 7
ADJUSTED LIBO RATE: with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in effect for
such Interest Period and (b) Statutory Reserves.
ADMINISTRATIVE FEES: as defined in Section 2.6(c).
ADMINISTRATIVE QUESTIONNAIRE: an Administrative Questionnaire in the
form of Exhibit B hereto.
AFFILIATE: with respect to a specified person, another person that
directly or indirectly controls or is controlled by or is under common control
with the person specified.
ABIC: American Bankers Insurance Company of Florida, a property and
casualty insurance company and wholly-owned Subsidiary of the Company.
ABLAC: American Bankers Life Assurance Company of Florida, a life
insurance company and wholly-owned Subsidiary of the Company.
ALTERNATE BASE RATE: for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime
Rate in effect on such day and (b) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. For purposes hereof, "PRIME RATE" shall mean the
rate of interest per annum publicly announced from time to time by the
Administrative Agent as its prime rate in effect at its principal office in New
York City; each change in the Prime Rate shall be effective on the date such
change is publicly announced as effective. "FEDERAL FUNDS EFFECTIVE RATE"
shall mean, for any day, the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as released on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so released for any
day which is a Business Day, the arithmetic average (rounded upwards to the
next 1/100th of 1%), as determined by the Administrative Agent, of the
quotations for the day of such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
If for any reason the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate for any reason, including the
inability or failure of the Administrative Agent to obtain sufficient
quotations in accordance with the terms thereof, the Alternate Base Rate shall
be determined without regard to clause (b) of the first sentence of this
definition until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime Rate
or the
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<PAGE> 8
Federal Funds Effective Rate shall be effective on the effective date
of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
APPLICABLE INSURANCE REGULATORY AUTHORITY: with respect to any
Insurance Subsidiary, the insurance commissioner or similar Governmental
Authority located in the state in which such Insurance Subsidiary is domiciled
and any Federal insurance Governmental Authority and any successor to any of
the foregoing.
APPLICABLE MARGIN: on any date, with respect to Eurodollar Loans,
the lowest applicable percentage set forth below based upon the Ratings in
effect on such date:
<TABLE>
<S> <C>
Category 1
- ----------
A3 or higher by Moody's; or 0.200%
A- or higher by S&P
Category 2
- ----------
Baa1 by Moody's; or 0.250%
BBB+ by S&P
Category 3
- ----------
Baa2 by Moody's; or 0.350%
BBB by S&P
Category 4
- ----------
Baa3 or lower by Moody's; or 0.625%
BBB- or lower by S&P
</TABLE>
For purposes of the foregoing, (i) if no Ratings exist, the Applicable Margin
shall be based upon Category 4, and (ii) if any Rating shall be changed (other
than as a result of a change in the rating system of the applicable Rating
Agency), such change shall be effective as of the date on which it is first
announced by the Rating Agency making such change. Each such change in the
Applicable Margin shall apply to all outstanding Eurodollar Loans during the
period commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the
rating system of any Rating Agency shall change, the parties hereto shall
negotiate in good faith to amend the references to specific ratings in this
definition to reflect such changed rating system.
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<PAGE> 9
ASSIGNMENT AND ACCEPTANCE: an assignment and acceptance entered into
by a Lender and an assignee in the form of Exhibit C.
BOARD: the Board of Governors of the Federal Reserve System of the
United States.
BOARD OF DIRECTORS: the Board of Directors of the Company or any
duly authorized committee thereof.
BORROWING: a group of Loans of a single Type made by the Lenders
(or, in the case of a Competitive Borrowing, by the Lender or Lenders whose
Competitive Bids have been accepted pursuant to Section 2.3) on a single date
and as to which a single Interest Period is in effect.
BUSINESS DAY: any day (other than a day which is a Saturday, Sunday
or legal holiday in the State of New York) on which banks are open for business
in New York City, provided that, when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.
CAPITAL LEASE: a lease which has been or should be, in accordance
with GAAP, treated as a capital lease.
CAPITAL LEASE OBLIGATIONS: with respect to any person, the
obligations of such person and its consolidated subsidiaries to pay rent or
other amounts under any lease of (or other arrangement conveying the right to
use) real and/or personal property, which obligations are accounted for as a
Capital Lease on the consolidated balance sheet of such person, and the amount
of such obligations shall be the capitalized amount thereof determined in
accordance with GAAP.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
CHANGE IN CONTROL: shall be deemed to have occurred if either (a)
any person or group of persons shall have acquired beneficial ownership of more
than 30% of the outstanding Voting Shares of the Company (within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, and
the applicable rules and regulations thereunder), or (b) during any period of
12 consecutive months, commencing before or after the date of this Agreement,
individuals who on the first day of such period were directors of the Company
(together with any replacement or additional
4
<PAGE> 10
directors who were nominated or elected by a majority of directors then in
office) cease to constitute a majority of the Board of Directors of the
Company.
CLOSING DATE: the date hereof.
CODE: the Internal Revenue Code of 1986, as the same may be amended
from time to time.
COMMITMENT: with respect to each Lender, the commitment of such
Lender hereunder as set forth as of the Closing Date in Schedule 2.1 hereto, or
as set forth in the Register, as such Lender's Commitment may be permanently
terminated or reduced from time to time pursuant to Section 2.11. The
Commitment of each Lender shall automatically and permanently terminate on the
Maturity Date if not terminated earlier pursuant to the terms hereof.
COMPANY ACTION LEVEL RBC: the greater of the standard (i) as
defined in the Risk-Based Capital (RBC) for Insurers Model Act adopted by the
NAIC and (ii) as determined in accordance with the laws and regulations of the
state of domicile of ABIC or ABLAC, as the case may be.
COMPETITIVE BID: an offer by a Lender to make a Competitive Loan
pursuant to Section 2.3.
COMPETITIVE BID ACCEPT/REJECT LETTER: a notification made by the
Company pursuant to Section 2.3(d) in the form of Exhibit A-4.
COMPETITIVE BID RATE: as to any Competitive Bid, (i) in the case of
a Eurodollar Loan, the Margin, and (ii) in the case of a Fixed Rate Loan, the
fixed rate of interest offered by the Lender making such Competitive Bid.
COMPETITIVE BID REQUEST: a request made pursuant to Section 2.3 in
the form of Exhibit A-1.
COMPETITIVE BORROWING: a Borrowing consisting of a Competitive Loan
or concurrent Competitive Loans from the Lender or Lenders whose Competitive
Bids for such Borrowing have been accepted under the bidding procedure
described in Section 2.3.
COMPETITIVE LOAN: a Loan made pursuant to the bidding procedure
described in Section 2.3. Each Competitive Loan shall be a Eurodollar
Competitive Loan or a Fixed Rate Loan.
5
<PAGE> 11
CONSOLIDATED INCOME AVAILABLE FOR INTEREST CHARGES: with respect to
any period, Consolidated Net Income for such period plus all amounts deducted
in the computation thereof on account of (a) Interest Charges and (b) taxes
imposed on or measured by income or excess profits.
CONSOLIDATED NET INCOME: with reference to any period, the net
income (or loss) of the Company and its Subsidiaries for such period (taken as
a cumulative whole), as determined in accordance with GAAP, after eliminating
all offsetting debits and credits between the Company and its Subsidiaries and
all other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP, provided that there shall be excluded:
(a) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary or is merged into or consolidated with the Company or
a Subsidiary, and the income (or loss) of any Person, substantially all of
the assets of which have been acquired in any manner by the Company or a
Subsidiary, realized by such other Person prior to the date of
acquisition;
(b) the income (or loss) of any Person (other than a Subsidiary) in
which the Company or any Subsidiary has an ownership interest, except to
the extent that any such income has been actually received by the Company
or such Subsidiary in the form of cash dividends or similar cash
distributions;
(c) any restoration to income of any contingency reserve in excess
of $2,000,000 as to any one item or in excess of $4,000,000 in the
aggregate as to any two or more items, except to the extent that provision
for such reserve was made out of income accrued during such period;
(d) any aggregate net gain (but not any aggregate net loss) during
such period arising from the sale, conversion, exchange or other
disposition of capital assets other than securities (such capital assets
to include, (i) all non-current assets and, without duplication, (ii) the
following, whether or not current: all fixed assets, whether tangible or
intangible, and all inventory sold in conjunction with the disposition of
fixed assets);
(e) any unrealized holding gains and losses on securities;
(f) any gains resulting from any write-up of any assets, but not any
loss resulting from any write-down of any assets;
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<PAGE> 12
(g) any net gain from the collection of the proceeds of life
insurance policies;
(h) any gain arising from the acquisition of any security, or the
extinguishment, under GAAP, of any Indebtedness, of the Company or any
Subsidiary;
(i) any net income or gain (but not any net loss) during such period
from (i) any change in accounting principles in accordance with GAAP, (ii)
any prior period adjustments resulting from any change in accounting
principles in accordance with GAAP, (iii) any extraordinary items, or (iv)
any discontinued operations or the disposition thereof;
(j) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the investment in
such Subsidiary;
(k) in the case of a successor to the Company by consolidation or
merger or as a transferee of its assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets; and
(l) any portion of such net income that cannot be freely converted
into United States Dollars, it being understood that the imposition of
taxes by any foreign Governmental Authority on the repatriation of income
shall not be deemed to be a restriction on convertibility.
CONSOLIDATED NET WORTH: as at any date of determination, the
consolidated stockholder's equity of the Company and its Subsidiaries, as
determined on a consolidated basis in accordance with GAAP, provided that for
purposes of computing Consolidated Net Worth, the ongoing effect of Statement
of Financial Accounting Standards No. 115 (Accounting for Certain Investments
in Debt and Equity Securities) ("FASB 115") will be excluded.
CONSOLIDATED TANGIBLE NET WORTH: as at any date of determination,
Consolidated Net Worth less the net book value of all assets, after deducting
any reserves applicable thereto, which would be treated as intangible under
GAAP, including, good will, trademarks, trade names, service marks, brand
names, copyrights, patents and unamortized debt discount and expense,
organizational expenses and the excess of the equity in any subsidiary over the
cost of the investment in such Subsidiary.
CONSOLIDATED TOTAL DEBT: as at any date of determination, all
Indebtedness of the Company and its Subsidiaries determined on a consolidated
basis in accordance with GAAP (excluding in the case of Subsidiaries, (i) any
undrawn amount of a letter of credit issued in connection with insurance
agreements entered into in the ordinary course of
7
<PAGE> 13
business and (ii) any obligation to reimburse an amount drawn under any such
letter of credit which is reimbursed within five Business Days immediately
following the drawing thereunder).
CONVENTION STATEMENT: with respect to any Insurance Subsidiary, any
annual or quarterly statutory financial statement of such Insurance Subsidiary
required to be filed with the Applicable Insurance Regulatory Authority in
accordance with state law, together with all exhibits, schedules, certificates
or actuarial opinions filed or delivered therewith.
DEFAULT: any event or condition which upon notice, lapse of time or
both would constitute an Event of Default.
DOLLARS or $: lawful money of the United States of America.
ENVIRONMENT: ambient air, surface water and groundwater (including
potable water, navigable water and wetlands), the land surface or subsurface
strata, the workplace or as otherwise defined in any Environmental Law.
ENVIRONMENTAL CLAIM: any written accusation, allegation, notice of
violation, claim, demand, order, directive, cost recovery action or other cause
of action by, or on behalf of, any Governmental Authority or any person for
damages, injunctive or equitable relief, personal injury (including sickness,
disease or death), Remedial Action costs, tangible or intangible property
damage, natural resource damages, nuisance, pollution, any adverse effect on
the environment caused by any Hazardous Material, or for fines, penalties or
restrictions, resulting from or based upon: (a) the existence, or the
continuation of the existence, of a Release (including sudden or non-sudden,
accidental or non-accidental Releases); (b) exposure to any Hazardous Material;
(c) the presence, use, handling, transportation, storage, treatment or disposal
of any Hazardous Material; or (d) the violation or alleged violation of any
Environmental Law or Environmental Permit.
ENVIRONMENTAL LAW: any and all applicable present and future
treaties, laws, statutes, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, Release or threatened Release of any Hazardous Material or to
health and safety matters.
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<PAGE> 14
ENVIRONMENTAL PERMIT: any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
ERISA: the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time.
ERISA AFFILIATE: any trade or business (whether or not incorporated)
that, together with the Company is treated as a single employer under Section
414 of the Code.
ERISA EVENT: (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the
adoption of any amendment to a Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA;
(c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the incurrence of any liability under
Title IV of ERISA with respect to the termination of any Plan or the withdrawal
or partial withdrawal of the Company or any of its ERISA Affiliates from any
Plan or Multiemployer Plan; (f) the receipt by the Company or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to the
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (g) the receipt by the Company or any ERISA Affiliate of any notice
that Withdrawal Liability is being imposed or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA; and (h) the occurrence of a
"prohibited transaction" with respect to which the Company or any of its
Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of
the Code), or with respect to which the Company or any such Subsidiary could
otherwise be liable.
EURODOLLAR BORROWING: a Borrowing comprised of Eurodollar Loans.
EURODOLLAR COMPETITIVE LOAN: any Competitive Loan bearing interest
at a rate determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.
EURODOLLAR LOAN: any Eurodollar Competitive Loan or Eurodollar
Standby Loan.
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<PAGE> 15
EURODOLLAR STANDBY LOAN: any Standby Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
EVENT OF DEFAULT: as defined in Article VI.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
EXISTING CREDIT FACILITY: Amended and Restated Revolving Credit and
Reimbursement Agreement, dated as of March 20, 1990, as amended and restated as
of February 10, 1993 and as amended as of April 4, 1994, among the Company,
Barclays Bank PLC, New York Branch, as issuing bank and agent and the lenders
party thereto.
FACILITY FEE: as defined in Section 2.6(a).
FACILITY FEE PERCENTAGE: on any date the lowest applicable
percentage set forth below based upon the Ratings in effect on such date:
<TABLE>
<CAPTION>
Facility Fee
Percentage
------------
<S> <C>
Category 1
- ----------
A3 or higher by Moody's; or 0.100%
A- or higher by S&P
Category 2
- ----------
Baal by Moody's; or 0.125%
BBB+ by S&P
Category 3
- ----------
Baa2 by Moody's; or 0.150%
BBB by S&P
Category 4
- ----------
Baa3 or lower by Moody's; or 0.250%
BBB- or lower by S&P
</TABLE>
10
<PAGE> 16
For purposes of the foregoing, (i) if no Ratings exist, the Facility Fee
Percentage shall be based upon Category 4, and (ii) if any Rating shall be
changed (other than as a result of a change in the rating system of the
applicable Rating Agency), such change shall be effective as of the date on
which it is first announced by the Rating Agency making such change. Each such
change with respect to the Company shall apply at any time during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the
rating system of any Rating Agency shall change, the parties hereto shall
negotiate in good faith to amend the references to specific ratings in this
definition to reflect such changed rating system.
FAIR VALUE: when used with respect to property, the fair value as
determined in good faith by the board of directors of the Company.
FEES: the Facility Fee, the Utilization Fee and the Administrative Fees.
FINANCIAL OFFICER: with respect to any corporation, the chief
financial officer, principal accounting officer, treasurer, associate or
assistant treasurer or director of treasury services of such corporation.
FIXED RATE BORROWING: a Borrowing comprised of Fixed Rate Loans.
FIXED RATE LOAN: any Competitive Loan bearing interest at a fixed
percentage rate per annum (the "FIXED RATE") (expressed in the form of a
decimal to no more than four decimal places) specified by the Lender making
such Loan in its Competitive Bid.
GAAP: generally accepted accounting principles, applied on a
consistent basis.
GOVERNMENTAL AUTHORITY: any Federal, state, local or foreign court
or governmental agency, authority, instrumentality or regulatory body.
HAZARDOUS MATERIALS: all explosive or radioactive substances or
wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBS") or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
INDEBTEDNESS: with respect to any person, without duplication, (i)
all liabilities for money borrowed or for the deferred purchase price of
property or services, (ii) all liabilities in respect of letters of credit
issued for the account of such person and all
11
<PAGE> 17
drafts drawn thereunder (whether or not representing borrowed money); (iii)
Swaps and (iv) Capital Lease Obligations, which, in each case, are created,
assumed, incurred or guaranteed in any manner by such person or for which such
person is responsible or liable (whether by agreement to purchase indebtedness
of, or to supply funds to or invest in, others or otherwise).
INSURANCE BUSINESS: one or more aspects of the business of selling,
issuing, underwriting, reinsuring, producing, administering, managing or
servicing life and health insurance and property and casualty insurance and
activities reasonably incidental thereto.
INSURANCE REGULATORY INFORMATION SYSTEM: the Insurance Regulatory
Information System promulgated by the NAIC, or any successor system promulgated
by the NAIC.
INSURANCE SUBSIDIARIES: ABIC, ABLAC and any other Subsidiary,
whether now owned or hereafter acquired, that is regulated, in accordance with
applicable state law or any Federal law, as an insurer by an insurance
commission or similar Governmental Authority located in the state in which such
Subsidiary is domiciled or by any Federal insurance Governmental Authority.
INTEREST CHARGES: with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP): (a) all interest in respect of Indebtedness of the Company and its
Subsidiaries (including imputed interest on Capital Lease Obligations) deducted
in determining Consolidated Net Income for such period, and (b) all debt
discount and expense amortized or required to be amortized in the determination
of Consolidated Net Income for such period.
INTEREST PAYMENT DATE: with respect to any Loan, the last day of
each Interest Period applicable thereto and, in the case of a Eurodollar Loan
with an Interest Period of more than three months' duration or a Fixed Rate
Loan with an Interest Period of more than 90 days' duration, each day that
would have been an Interest Payment Date for such Loan had successive Interest
Periods of three months' duration or 90 days' duration, as the case may be,
been applicable to such Loan and, in addition, the date of any prepayment of
each Loan or conversion of such Loan to a Loan of a different Type.
INTEREST PERIOD: (a) as to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing or on the last day of the immediately
preceding Interest Period applicable to such Borrowing, as the case may be, and
ending on the numerically
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<PAGE> 18
corresponding day (or, if there is no numerically corresponding day, on the
last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
Company may elect, (b) as to any ABR Borrowing, the period commencing on the
date of such Borrowing or on the last day of the immediately preceding Interest
Period applicable to such Borrowing, as the case may be, and ending on the
earliest of (i) the next succeeding March 31, June 30, September 30 or December
31, (ii) the Maturity Date, and (iii) the date such Borrowing is converted to a
Borrowing of a different Type in accordance with Section 2.5 or repaid or
prepaid in accordance with Section 2.7 or Section 2.12 and (c) as to any Fixed
Rate Borrowing, the period commencing on the date of such Borrowing and ending
on the date specified in the Competitive Bids in which the offer to make the
Fixed Rate Loans comprising such Borrowing were extended, which shall not be
earlier than seven days after the date of such Borrowing or later than 360 days
after the date of such Borrowing, provided that if any Interest Period would
end on a day other than a Business Day, such Interest Period shall be extended
to the next succeeding Business Day unless, in the case of Eurodollar Loans
only, such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business
Day. Interest shall accrue from and including the first day of an Interest
Period to but excluding the last day of such Interest Period.
LIBO RATE: with respect to any Eurodollar Borrowing for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next
1/16 of 1%) equal to the rate at which dollar deposits approximately equal in
principal amount to (i) in the case of a Standby Borrowing, the Administrative
Agent's portion of such Eurodollar Borrowing and (ii) in the case of a
Competitive Borrowing, a principal amount that would have been the
Administrative Agent's portion of such Competitive Borrowing had such
Competitive Borrowing been a Standby Borrowing, and for a maturity comparable
to such Interest Period as are offered to the principal London offices of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
LICENSE: as defined in Section 3.8(d).
LIEN: with respect to any asset of any person, (a) any mortgage,
deed of trust, lien, pledge, encumbrance, charge or security interest in or on
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, Capital Lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities that constitute assets of such
person, any purchase option, call or similar right of a third party with
respect to such securities.
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<PAGE> 19
LOAN: a Competitive Loan or a Standby Loan, whether made as a
Eurodollar Loan, an ABR Loan or a Fixed Rate Loan, as permitted hereby.
MARGIN: as to any Eurodollar Competitive Loan, the margin (expressed
as a percentage rate per annum in the form of a decimal to no more than four
decimal places) to be added to or subtracted from the Adjusted LIBO Rate in
order to determine the interest rate applicable to such Loan, as specified in
the Competitive Bid relating to such Loan.
MARGIN REGULATIONS: Regulations G, T, U and X of the Board as from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
MARGIN STOCK: as defined under Regulation U of the Board.
MATERIAL ADVERSE EFFECT: (a) material impairment of the ability of
the Company or any Subsidiary to perform any of its obligations under the
Agreement or (b) material impairment of the rights of or benefits available to
the Lenders under this Agreement.
MATERIAL SUBSIDIARY: any Subsidiary representing 5% or more of the
Consolidated Net Worth or the Consolidated Net Income.
MATURITY DATE: December 1, 2000.
MOODY'S: Moody's Investors Service, Inc., or any successor thereto.
MULTIEMPLOYER PLAN: a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code
Section 414) is making or accruing an obligation to make contributions, or has
within any of the preceding five plan years made or accrued an obligation to
make contributions.
NAIC: the National Association of Insurance Commissioners or any
successor thereto, or in lieu thereof, any other association, agency or other
organization performing advisory, coordination or other like functions among
insurance departments, insurance commissions and similar Governmental
Authorities of the various states of the United States of America toward the
promotion of uniformity in the practices of such Governmental Authorities.
NOTICE OF COMPETITIVE BID REQUEST: a notification made pursuant to
Section 2.3 in the form of Exhibit A-2.
14
<PAGE> 20
PBGC: the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
PERSON: any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
PLAN: any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
that is maintained for current or former employees, or any beneficiary thereof,
of the Company or any ERISA Affiliate.
RATING AGENCIES: Moody's and S&P.
RATINGS: the ratings from time to time established by the Rating
Agencies for senior, unsecured, non-credit-enhanced long-term debt of the
Company.
REGISTER: as defined in Section 8.4(d).
REINSURANCE AGREEMENTS: all agreements, contracts, treaties,
certificates and other arrangements whereby an insurance company agrees to
transfer or cede to another insurer all or part of the liability assumed by
such insurance company under a policy or policies of insurance reinsured by
such insurance company.
RELEASE: any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
REMEDIAL ACTION: (a) "remedial action" as such term is defined in
CERCLA, and (b) all other actions required by any Governmental Authority or
voluntarily undertaken to: (i) cleanup, remove, treat, abate or in any other
way address any Hazardous Material in the environment; (ii) prevent the Release
or threat of Release, or minimize the further Release of any Hazardous Material
so it does not migrate or endanger or threaten to endanger public health,
welfare or the environment; or (iii) perform studies and investigations in
connection with, or as a precondition to, (i) or (ii) above.
15
<PAGE> 21
REQUIRED LENDERS: at any time, Lenders having Commitments
representing at least 51% of the Total Commitment or, for purposes of
acceleration pursuant to clause (ii) of Article VI, Lenders holding Loans
representing at least 51% of the aggregate principal amount of the Loans
outstanding.
RESERVE LIABILITIES: shall have the meaning assigned to such term in
Section 3.18.
RESPONSIBLE OFFICER: of any corporation, any executive officer or
Financial Officer of such corporation and any other officer or similar official
thereof responsible for the administration or the obligations of such
corporation in respect of this Agreement.
S&P: Standard and Poor's Ratings Group, a division of McGraw Hill,
Inc., or any successor thereto.
SAP: as to any Insurance Subsidiary, the statutory accounting
practices prescribed or permitted by the Applicable Insurance Regulatory
Authority, applied on a basis consistent with Section 1.2.
SEC: the Securities and Exchange Commission.
SIGNIFICANT INSURANCE SUBSIDIARIES: ABIC and ABLAC, including any
successor or successors to such Subsidiaries.
STANDBY BORROWING: a Borrowing consisting of simultaneous Standby
Loans from each of the Lenders.
STANDBY BORROWING REQUEST: a request made pursuant to Section 2.4 in
the form of Exhibit A-5.
STANDBY LOANS: the revolving loans made pursuant to Section 2.4.
Each Standby Loan shall be a Eurodollar Standby Loan or an ABR Loan.
STATEMENT OF ACTUARIAL OPINION: with respect to any Insurance
Subsidiary, the Statement of Actuarial Opinion required to be filed with the
Applicable Insurance Regulatory Authority in accordance with state law or, if
such Applicable Insurance Regulatory Authority shall no longer require such a
statement, information equivalent to that required to be included in the
Statement of Actuarial Opinion that was filed immediately prior to the time
such statement was no longer required.
16
<PAGE> 22
STATUTORY RESERVES: a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which the Administrative Agent or any Lender (including any branch,
Affiliate or other fronting office making or holding a Loan) is subject for
Eurocurrency Liabilities (as defined in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and to
be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
STATUTORY SURPLUS: In the case of ABIC, "surplus as regards
policyholders" included in the Convention Statement of ABIC, and in the case of
ABLAC, the sum of surplus, common capital stock and preferred capital stock
included in the Convention Statement of ABLAC.
SUBSIDIARY: with respect to any person (the "PARENT"), any
corporation, association or other business entity of which securities or other
ownership interests representing more than 50% of the ordinary voting power
are, at the time as of which any determination is being made, owned or
controlled by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.
SUBSIDIARY: a subsidiary of the Company.
SWAPS: with respect to any person, payment obligations with respect
to interest rate swaps, currency swaps and similar obligations designed to
protect such person against fluctuations in interest rates or currency exchange
rates (other than any such agreement entered into by an Insurance Subsidiary in
the ordinary course of business for the purpose of asset liability management)
obligating such person to make payments, whether periodically or upon the
happening of a contingency. For purposes of this Agreement, the amount of the
obligation under any Swap as of any date of determination shall be the amount
payable, if any, in respect thereof assuming that such Swap had terminated on
such date of determination, provided that if any agreement relating to such
Swap provides for the netting of amounts payable by and to such person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such person, then, in each case, the amount of such
obligations shall be the net amount so determined.
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<PAGE> 23
TOTAL ADJUSTED CAPITAL: the lesser of the standard as defined (i) in
the Risk-Based Capital ("RBC") for Insurers Model Act adopted by the NAIC and
(ii) as determined in accordance with the laws and regulations of the state of
domicile of ABIC or ABLAC, as the case may be.
TOTAL COMMITMENT: at any time, the aggregate amount of Commitments
of all the Lenders, as in effect at such time.
TRANSACTIONS: as defined in Section 3.2.
TYPE: with respect of any Loan or Borrowing, the Rate by reference
to which interest on such Loan or on the Loans comprising such Borrowing is
determined. For purposes hereof, "Rate" shall include the Adjusted LIBO Rate,
the Alternate Base Rate and the Fixed Rate.
UTILIZATION FEE: as defined in Section 2.6(b).
VOTING SHARES: as to shares of a particular corporation, outstanding
shares of stock of any class of such corporation entitled to vote in the
election of directors, excluding shares entitled so to vote only upon the
happening of some contingency.
WITHDRAWAL LIABILITY: liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
1.2 TERMS GENERALLY. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including"
shall be deemed to be followed by the phrase "without limitation." All
references herein to Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and Schedules to, this
Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference to this Agreement shall mean such
document as amended, restated, supplemented or otherwise modified from time to
time and (b) all terms of an accounting or financial nature shall be construed
in accordance with GAAP or SAP, as the case may be, as in effect from time to
time applied on a basis consistent with those used in preparing the financial
statements referred to in Section 5.3 (including only such changes thereto as
are approved or concurred in from time to time by the Company's independent
public accountants); provided, however, that for purposes of determining
compliance with the covenants contained in Article V, all accounting terms
herein shall be interpreted and all accounting determinations hereunder shall
be
18
<PAGE> 24
made in accordance with GAAP or SAP, as the case may be, as in effect on
the date of this Agreement and applied on a basis consistent with the
application used in the financial statements referred to in Section 3.5.
ARTICLE II
THE CREDITS
2.1 COMMITMENTS. Subject to the terms and conditions and relying
upon the representations and warranties herein set forth, each Lender agrees,
severally and not jointly, to make Standby Loans to the Company, at any time
and from time to time on and after the date hereof and until the earlier of the
Maturity Date and the termination of the Commitment of such Lender, in an
aggregate principal amount at any time outstanding not to exceed such Lender's
Commitment minus the amount by which the Competitive Loans outstanding at such
time shall be deemed to have used such Commitment pursuant to Section 2.16,
subject, however, to the conditions that (i) at no time shall (A) the sum of
(x) the outstanding aggregate principal amount of all Standby Loans made by all
Lenders plus (y) the outstanding aggregate principal amount of all Competitive
Loans made by all Lenders exceed (B) the Total Commitment and (ii) at all
times, the outstanding aggregate principal amount of all Standby Loans made by
each Lender shall equal the product of (A) the percentage which its Commitment
represents of the Total Commitment times (B) the outstanding aggregate
principal amount of all Standby Loans. Each Lender's Commitment is set forth
opposite its name in Schedule 2.1 under the heading "Commitment". Such
Commitments may be terminated or reduced from time to time pursuant to Section
2.11.
Within the foregoing limits, the Company may borrow, pay or prepay
and reborrow Standby Loans hereunder, on and after the Closing Date and prior
to the Maturity Date, subject to the terms, conditions and limitations set
forth herein.
2.2 LOANS. (a) Each Standby Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Commitments, provided that the failure of any Lender to make
any Standby Loan shall not in itself relieve any other Lender of its obligation
to lend hereunder (it being understood, however, that no Lender shall be
responsible for the failure of any other Lender to make any Loan required to be
made by such other Lender). Each Competitive Loan shall be made in accordance
with the procedures set forth in Section 2.3. The Standby Loans or Competitive
Loans comprising any Borrowing shall be (i) in the case of Competitive Loans,
in an aggregate principal amount which is an integral multiple of $1,000,000
and not less than $5,000,000 and (ii) in the case of Standby Loans, in an
aggregate principal amount which is an integral multiple of $1,000,000 and not
less than
19
<PAGE> 25
$5,000,000 (or an aggregate principal amount equal to the remaining balance of
the available Commitments).
(b) Each Competitive Borrowing shall be comprised entirely of
Eurodollar Competitive Loans or Fixed Rate Loans, and each Standby Borrowing
shall be comprised entirely of Eurodollar Standby Loans or ABR Loans, as the
Company may request pursuant to Section 2.3 or 2.4, as applicable. Each Lender
may at its option make any Eurodollar Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan, provided that any
exercise of such option shall not affect the obligation of the Company to repay
such Loan in accordance with the terms of this Agreement. Borrowings of more
than one Type may be outstanding at the same time. For purposes of the
foregoing, Loans having different Interest Periods, regardless of whether they
commence on the same date, shall be considered separate Loans.
(c) Subject to Section 2.5, each Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to the Administrative Agent in New York, New York,
not later than 12:00 noon, New York City time, and the Administrative Agent
shall by 3:00 p.m., New York City time, credit the amounts so received to the
account or accounts specified from time to time in one or more notices
delivered by the Company to the Administrative Agent or, if a Borrowing shall
not occur on such date because any condition precedent herein specified shall
not have been met, return the amounts so received to the respective Lenders.
Competitive Loans shall be made by the Lender or Lenders whose Competitive Bids
therefor are accepted pursuant to Section 2.3 in the amounts so accepted.
Standby Loans shall be made by the Lenders pro rata in accordance with Section
2.16. Unless the Administrative Agent shall have received notice from a Lender
prior to the date of any Borrowing that such Lender will not make available to
the Administrative Agent such Lender's portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with this paragraph (c) and the Administrative Agent may, in
reliance upon such assumption, make available to the Company on such date a
corresponding amount. If and to the extent that such Lender shall not have
made such portion available to the Administrative Agent, such Lender and the
Company severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Company until the date such
amount is repaid to the Administrative Agent at (i) in the case of the Company,
the interest rate applicable at the time to the Loans comprising such Borrowing
and (ii) in the case of such Lender, the Federal Funds Effective Rate. If such
Lender shall repay to the Administrative Agent such corresponding amount, such
amount shall constitute such Lender's Loan as part of such Borrowing for
purposes of this Agreement.
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<PAGE> 26
2.3 COMPETITIVE BID PROCEDURE. (a) In order to request Competitive
Bids, the Company shall hand deliver or telecopy to the Administrative Agent a
duly completed Competitive Bid Request in the form of Exhibit A-1 hereto, to be
received by the Administrative Agent (i) in the case of a Eurodollar
Competitive Borrowing, not later than 10:00 a.m., New York City time, four
Business Days before a proposed Competitive Borrowing and (ii) in the case of a
Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, one
Business Day before a proposed Competitive Borrowing. No ABR Loan shall be
requested in, or made pursuant to, a Competitive Bid Request. A Competitive
Bid Request that does not conform substantially to the format of Exhibit A-1
may be rejected in the Administrative Agent's sole discretion, and the
Administrative Agent shall promptly notify the Company of such rejection by
telecopy. Each Competitive Bid Request shall refer to this Agreement and
specify (w) whether the Borrowing then being requested is to be a Eurodollar
Borrowing or a Fixed Rate Borrowing, (x) the date of such Borrowing (which
shall be a Business Day) and the aggregate principal amount thereof which shall
be in a minimum principal amount of $5,000,000 and in an integral multiple of
$1,000,000, and (y) the Interest Period with respect thereto (which may not end
after the Maturity Date). Promptly after its receipt of a Competitive Bid
Request that is not rejected as aforesaid, the Administrative Agent shall
telecopy to the Lenders a Notice of Competitive Bid Request in the form of
Exhibit A-2 inviting the Lenders to bid, on the terms and conditions of this
Agreement, to make Competitive Loans.
(b) Each Lender invited to bid may, in its sole discretion, make one
or more Competitive Bids to the Company responsive to such Competitive Bid
Request. Each Competitive Bid by a Lender must be received by the
Administrative Agent by telecopy, in the form of Exhibit A-3 hereto, (i) in the
case of a Eurodollar Competitive Borrowing, not later than 9:30 a.m., New York
City time, three Business Days before a proposed Competitive Borrowing and (ii)
in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., New York City
time, on the day of a proposed Competitive Borrowing. Multiple bids will be
accepted by the Administrative Agent. Competitive Bids that do not conform
substantially to the format of Exhibit A-3 may be rejected by the
Administrative Agent, and the Administrative Agent shall notify the Lender
making such nonconforming bid of such rejection as soon as practicable. Each
Competitive Bid shall refer to this Agreement and specify (x) the principal
amount (which shall be in a minimum principal amount of $5,000,000 and in an
integral multiple of $1,000,000 and which may equal the entire principal amount
of the Competitive Borrowing requested) of the Competitive Loan or Loans that
the Lender is willing to make, (y) the Competitive Bid Rate or Rates at which
the Lender is prepared to make the Competitive Loan or Loans and (z) the
Interest Period and the last day thereof. If any Lender invited to bid shall
elect not to make a Competitive Bid, such Lender shall so notify the
Administrative Agent by telecopy (I) in the case of Eurodollar Competitive
Loans, not later than 9:30 a.m., New York City time, three Business Days before
a proposed Competitive Borrowing, and (II) in the case of Fixed Rate Loans, not
later than 9:30
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a.m., New York City time, on the day of a proposed Competitive Borrowing,
provided that failure by any Lender to give such notice shall not cause such
Lender to be obligated to make any Competitive Loan as part of such Competitive
Borrowing. A Competitive Bid submitted by a Lender pursuant to this paragraph
(b) shall be irrevocable.
(c) The Administrative Agent shall as promptly as practicable notify
the Company, by telecopy, of all the Competitive Bids made, the Competitive Bid
Rate and the principal amount of each Competitive Loan in respect of which a
Competitive Bid was made and the identity of the Lender that made each bid.
The Administrative Agent shall send a copy of all Competitive Bids to the
Company for its records as soon as practicable after completion of the bidding
process set forth in this Section 2.3.
(d) The Company may in its sole and absolute discretion, subject
only to the provisions of this paragraph (d), accept or reject any Competitive
Bid referred to in paragraph (c) above. The Company shall notify the
Administrative Agent by telephone, confirmed by telecopy in the form of a
Competitive Bid Accept/Reject Letter in the form of Exhibit A-4, whether and to
what extent it has decided to accept or reject any of or all the bids referred
to in paragraph (c) above not more than one hour after it shall have been
notified of such bids by the Administrative Agent pursuant to such paragraph
(c) provided that (i) the failure of the Company to give such notice shall be
deemed to be a rejection of all the bids referred to in paragraph (c) above,
(ii) the Company shall not accept a bid made at a particular Competitive Bid
Rate if it has decided to reject a bid made at a lower Competitive Bid Rate,
(iii) the aggregate amount of the Competitive Bids accepted by the Company
shall not exceed the principal amount specified in the Competitive Bid Request,
(iv) if the Company shall accept a bid or bids made at a particular Competitive
Bid Rate but the amount of such bid or bids shall cause the total amount of
bids to be accepted to exceed the amount specified in the Competitive Bid
Request, then the Company shall accept a portion of such bid or bids in an
amount equal to the amount specified in the Competitive Bid Request less the
amount of all other Competitive Bids accepted with respect to such Competitive
Bid Request, which acceptance, in the case of multiple bids at such Competitive
Bid Rate, shall be made pro rata in accordance with the amount of each such bid
at such Competitive Bid Rate, and (v) except pursuant to clause (iv) above, no
bid shall be accepted for a Competitive Loan unless such Competitive Loan is in
a minimum principal amount of $5,000,000 and an integral multiple of
$1,000,000, provided further that if a Competitive Loan must be in an amount
less than $5,000,000 because of the provisions of clause (iv) above, such
Competitive Loan may be for a minimum of $1,000,000 or any integral multiple
thereof, and in calculating the pro rata allocation of acceptances of portions
of multiple bids at a particular Competitive Bid Rate pursuant to clause (iv)
the amounts shall be rounded
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to integral multiples of $1,000,000 in a manner which shall be in the
discretion of the Company. A notice given pursuant to this paragraph (d) shall
be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding
Lender whether or not its Competitive Bid has been accepted (and if so, in what
amount and at what Competitive Bid Rate) by telecopy, and each successful
bidder will thereupon become bound, subject to the other applicable conditions
hereof, to make the Competitive Loan in respect of which its bid has been
accepted.
(f) No Competitive Borrowing shall be requested or made hereunder if
after giving effect thereto any of the conditions set forth in paragraph (i) or
(ii) of Section 2.1 would not be met.
(g) If the Administrative Agent shall elect to submit a Competitive
Bid in its capacity as a Lender, it shall submit such bid directly to the
Company one quarter of an hour earlier than the latest time at which the other
Lenders are required to submit their bids to the Administrative Agent pursuant
to paragraph (b) above.
(h) All notices required by this Section 2.3 shall be given in
accordance with Section 8.1.
2.4 STANDBY BORROWING PROCEDURE. In order to request a Standby
Borrowing, the Company shall hand deliver or telecopy to the Administrative
Agent a duly completed Standby Borrowing Request in the form of Exhibit A-5 (a)
in the case of a Eurodollar Standby Borrowing, not later than 10:30 a.m., New
York City time, three Business Days before such Borrowing, and (b) in the case
of an ABR Borrowing, not later than 10:30 a.m., New York City time, on the day
of such Borrowing. No Fixed Rate Loan shall be requested or made pursuant to a
Standby Borrowing Request. Such notice shall be irrevocable and shall in each
case specify (i) whether the Borrowing then being requested is to be a
Eurodollar Standby Borrowing or an ABR Borrowing; (ii) the date of such Standby
Borrowing (which shall be a Business Day) and the amount thereof; and (iii) if
such Borrowing is to be a Eurodollar Standby Borrowing, the Interest Period
with respect thereto, which shall not end after the Maturity Date. If no
election as to the Type of Standby Borrowing is specified in any such notice,
then the requested Standby Borrowing shall be an ABR Borrowing. If no Interest
Period with respect to any Eurodollar Standby Borrowing is specified in any
such notice, then the Company shall be deemed to have selected an Interest
Period of one month's duration, in the case of a Eurodollar Borrowing.
Notwithstanding any other provision of this Agreement to the contrary, no
Standby Borrowing shall be requested if the Interest Period with respect
thereto would end after the Maturity Date. The Administrative Agent shall
promptly advise the
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Lenders of any notice given pursuant to this Section 2.4 and of each Lender's
portion of the requested Borrowing.
2.5 CONVERSION AND CONTINUATION OF STANDBY LOANS. The Company shall
have the right at any time upon prior irrevocable notice to the Administrative
Agent (i) not later than 10:30 a.m., New York City time, on the day of the
conversion, to convert all or any part of any Eurodollar Standby Borrowing into
an ABR Borrowing, and (ii) not later than 10:30 a.m., New York City time, three
Business Days prior to conversion or continuation, to convert any ABR Borrowing
into a Eurodollar Standby Borrowing or to continue any Eurodollar Standby
Borrowing as a Eurodollar Standby Borrowing for an additional Interest Period,
subject in each case to the following:
(a) if less than all the outstanding principal amount of any Standby
Borrowing shall be converted or continued, the aggregate principal amount
of the Standby Borrowing converted or continued shall be an integral
multiple of $1,000,000 and not less than $5,000,000;
(b) accrued interest on a Standby Borrowing (or portion thereof)
being converted shall be paid by the Company at the time of conversion;
(c) if any Eurodollar Standby Borrowing is converted at a time other
than the end of the Interest Period applicable thereto, the Company shall
pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15;
(d) any portion of a Standby Borrowing maturing or required to be
repaid in less than one month may not be converted into or continued as a
Eurodollar Standby Borrowing;
(e) any portion of a Eurodollar Standby Borrowing which cannot be
continued as a Eurodollar Standby Borrowing by reason of clause (d) above
shall be automatically converted at the end of the Interest Period in
effect for such Eurodollar Standby Borrowing into an ABR Borrowing; and
(f) no Interest Period may be selected for any Eurodollar Standby
Borrowing that would end later than the Maturity Date.
Each notice pursuant to this Section 2.5 shall be irrevocable and
shall refer to this Agreement and specify (i) the identity and amount of the
Standby Borrowing to be converted or continued, (ii) whether such Standby
Borrowing is to be converted to or continued as a Eurodollar Standby Borrowing
or an ABR Borrowing, (iii) if such notice requests a conversion, the date of
such conversion (which shall be a Business Day) and
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(iv) if such Standby Borrowing is to be converted to or continued as a
Eurodollar Standby Borrowing, the Interest Period with respect thereto. If no
Interest Period is specified in any such notice with respect to any conversion
to or continuation as a Eurodollar Standby Borrowing, the Company shall be
deemed to have selected an Interest Period of one month's duration. If no
notice shall have been given in accordance with this Section 2.5 to convert or
continue any Standby Borrowing, such Standby Borrowing shall, at the end of the
Interest Period applicable thereto (unless repaid pursuant to the terms
hereof), automatically be continued into a new Interest Period as an ABR
Borrowing.
2.6 FEES. (a) The Company agrees to pay to each Lender, through
the Administrative Agent, on each March 31, June 30, September 30 and December
31 (with the first payment being due on December 31, 1995) and on each date on
which the Commitment of such Lender shall be terminated as provided herein, a
facility fee (a "FACILITY FEE"), at a rate per annum equal to the Facility Fee
Percentage from time to time in effect on the amount of the Commitment of such
Lender, whether used or unused, during the preceding quarter (or other period
commencing on the date of this Agreement, or ending with the Maturity Date or
any date on which the Commitment of such Lender shall be terminated). All
Facility Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days. The Facility Fee due to each Lender shall
commence to accrue on the date of this Agreement, and shall cease to accrue on
the earlier of the Maturity Date and the termination of the Commitment of such
Lender as provided herein.
(b) The Company agrees to pay to each Lender, through the
Administrative Agent, on each March 31, June 30, September 30 and December 31
and on each date on which the Commitment of such Lender shall be terminated or
reduced as provided herein, a utilization fee (a "UTILIZATION FEE") at a rate
per annum of 0.0625% on the aggregate outstanding Loans of such Lender for each
day on which the aggregate outstanding Loans of all Lenders exceed 50% of the
Total Commitment. All Utilization Fees shall be computed on the basis of the
actual number of days elapsed in a year of 360 days.
(c) The Company agrees to pay the Administrative Agent, for its own
account, the administrative and other fees separately agreed to by the Company
and the Administrative Agent (the "ADMINISTRATIVE FEES").
(d) All Fees shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, if and as
appropriate, among the Lenders. Once paid, none of the Fees shall be
refundable under any circumstances.
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2.7 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Company hereby
agrees that the outstanding principal balance of each Standby Loan shall be
payable on the Maturity Date and that the outstanding principal balance of each
Competitive Loan shall be payable on the last day of the Interest Period
applicable thereto. Each Loan shall bear interest on the outstanding principal
balance thereof as set forth in Section 2.8.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness to such Lender resulting
from each Loan made by such Lender from time to time, including the amounts of
principal and interest payable and paid such Lender from time to time under
this Agreement.
(c) The Administrative Agent shall maintain accounts in which it
will record (i) the amount of each Loan made hereunder, the Type of each Loan
made and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Company to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder from the Company and each Lender's share
thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) of this Section 2.7 shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations therein recorded, provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not
in any manner affect the obligations of the Company to repay the Loans in
accordance with their terms.
2.8 INTEREST ON LOANS. (a) Subject to the provisions of Section
2.9, the Loans comprising each Eurodollar Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) at a rate per annum equal to (i) in the case of each Eurodollar Standby
Loan, the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Margin from time to time in effect and (ii) in
the case of each Eurodollar Competitive Loan, the Adjusted LIBO Rate for the
Interest Period in effect for such Borrowing plus the Margin offered by the
Lender making such Loan and accepted by the Company pursuant to Section 2.3.
(b) Subject to the provisions of Section 2.9, the Loans comprising
each ABR Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 365 or 366 days, as the case may be, for
periods during which the Alternate Base Rate is determined by reference to the
Prime Rate and 360 days for other periods) at a rate per annum equal to the
Alternate Base Rate.
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(c) Subject to the provisions of Section 2.9, each Fixed Rate Loan
shall bear interest at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to the fixed rate of
interest offered by the Lender making such Loan and accepted by the Company
pursuant to Section 2.3.
(d) Interest on each Loan shall be payable on each Interest Payment
Date applicable to such Loan except as otherwise provided in this Agreement.
The applicable Adjusted LIBO Rate or Alternate Base Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
2.9 DEFAULT INTEREST. If the Company shall default in the payment
of the principal of or interest on any Loan or any other amount becoming due
hereunder, whether by scheduled maturity, notice of prepayment, acceleration or
otherwise, the Company shall on demand from time to time from the
Administrative Agent pay interest, to the extent permitted by law, on such
defaulted amount up to (but not including) the date of actual payment (after as
well as before judgment) at a rate per annum (computed as provided in Section
2.8(b)) equal to the Alternate Base Rate plus 2%.
2.10 ALTERNATE RATE OF INTEREST. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined (i) that dollar deposits in the principal amounts of the Eurodollar
Loans comprising such Borrowing are not generally available in the London
interbank market or (ii) that reasonable means do not exist for ascertaining
the LIBO Rate, the Administrative Agent shall, as soon as practicable
thereafter, give telecopy notice of such determination to the Company and the
Lenders. In the event of any such determination under clause (i) or (ii)
above, until the Administrative Agent shall have advised the Company and the
Lenders that the circumstances giving rise to such notice no longer exist, (x)
any request by the Company for a Eurodollar Competitive Borrowing pursuant to
Section 2.3 shall be of no force and effect and shall be denied by the
Administrative Agent and (y) any request by the Company for a Eurodollar
Standby Borrowing pursuant to Section 2.4 shall be deemed to be a request for
an ABR Borrowing. In the event the Required Lenders notify the Administrative
Agent that the rates at which dollar deposits are being offered will not
adequately and fairly reflect the cost to such Lenders of making or maintaining
Eurodollar Loans during such Interest Period, the Administrative Agent shall
notify the Company of such notice and until the Required Lenders shall have
advised the Administrative Agent that the circumstances giving rise to such
notice no longer exist, any request by the Company for a Eurodollar Standby
Borrowing shall be deemed a request for an ABR Borrowing. Each determination
by the Administrative Agent hereunder shall be made in good faith and shall be
conclusive absent manifest error.
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2.11 TERMINATION AND REDUCTION OF COMMITMENTS. (a) The Commitments
shall be automatically terminated on the Maturity Date.
(b) Upon at least three Business Days' prior irrevocable telecopy
notice to the Administrative Agent, the Company may at any time in whole
permanently terminate, or from time to time in part permanently reduce, the
Total Commitment, provided that (i) each partial reduction of the Total
Commitment shall be in an integral multiple of $1,000,000 and in a minimum
principal amount of $5,000,000 and (ii) no such termination or reduction shall
be made which would reduce the Total Commitment to an amount less than the
aggregate outstanding principal amount of the Competitive Loans.
(c) Each reduction in the Total Commitment hereunder shall be made
ratably among the Lenders in accordance with their respective Commitments. The
Company shall pay to the Administrative Agent for the account of the Lenders,
on the date of each termination of the Total Commitment, the Facility Fees on
the amount of the Commitments so terminated accrued through the date of such
termination or reduction.
2.12 PREPAYMENT. (a) The Company shall have the right at any time
and from time to time to prepay any Standby Borrowing, in whole or in part,
upon giving telecopy notice (or telephone notice promptly confirmed by
telecopy) to the Administrative Agent: (i) before 10:00 a.m., New York City
time, three Business Days prior to prepayment, in the case of Eurodollar Loans,
and (ii) before 10:00 a.m., New York City time, one Business Day prior to
prepayment, in the case of ABR Loans, provided that each partial prepayment
shall be in an amount which is an integral multiple of $1,000,000 and not less
than $5,000,000. No prepayment may be made in respect of any Competitive
Borrowing.
(b) On the date of any termination or reduction of the Commitments
pursuant to Section 2.11, the Company shall pay or prepay so much of the
Standby Borrowings as shall be necessary in order that the aggregate principal
amount of the Competitive Loans and Standby Loans outstanding will not exceed
the Total Commitment, after giving effect to such termination or reduction.
(c) Each notice of prepayment shall specify the prepayment date and
the principal amount of each Borrowing (or portion thereof) to be prepaid,
shall be irrevocable and shall commit the Company to prepay such Borrowing (or
portion thereof) by the amount stated therein on the date stated therein. All
prepayments under this Section 2.12 shall be subject to Section 2.15 but
otherwise without premium or penalty. All prepayments under this Section 2.12
shall be accompanied by accrued interest on the principal amount being prepaid
to the date of payment.
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2.13 RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or the
principal of or interest on any Eurodollar Loan made by such Lender, Fees or
other amounts payable hereunder (other than changes in respect of taxes imposed
on the overall net income of such lender by the jurisdiction in which such
Lender has its principal office or by any political subdivision or taxing
authority therein) or shall result in the imposition, modification or
applicability of any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of or credit extended by any Lender
(except any such reserve requirement which is reflected in the Adjusted LIBO
Rate), or shall result in the imposition on any Lender or the London interbank
market of any other condition affecting this Agreement, such Lender's
Commitment or any Eurodollar Loan or Fixed Rate Loan made by such Lender, and
the result of any of the foregoing shall be to increase the cost to such Lender
of making or maintaining any Eurodollar Loan or Fixed Rate Loan or to reduce
the amount of any sum received or receivable by such Lender hereunder (whether
of principal, interest or otherwise) by an amount deemed by such Lender to be
material, then such additional amount or amounts as will compensate such Lender
for such additional costs or reduction will be paid by the Company to such
Lender upon demand. Notwithstanding the foregoing, no Lender shall be entitled
to request compensation under this paragraph with respect to any Competitive
Loan if the change giving rise to such request was applicable to such Lender at
the time of submission of the Competitive Bid pursuant to which such
Competitive Loan was made.
(b) If any Lender shall have determined that the adoption after the
date hereof of any law, rule, regulation, agreement or guideline regarding
capital adequacy, or any change in any of the foregoing or in the
interpretation or administration of any of the foregoing by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or any lending office of
such Lender) or any Lender's holding company with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
Governmental Authority, central bank or comparable agency, has or would have
the effect of reducing the rate of return on such Lender's capital or on the
capital of such Lender's holding company, if any, as a consequence of this
Agreement, such Lender's Commitment or the Loans made by such Lender pursuant
hereto to a level below that which such Lender or such Lender's holding company
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's policies and the policies of such Lender's holding
company with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time such additional
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amount or amounts as will compensate such Lender for such reduction will be
paid by the Company to such Lender.
(c) A certificate of each Lender setting forth such amount or
amounts as shall be necessary to compensate such Lender or its holding company
as specified in paragraph (a) or (b) above, as the case may be, shall be
delivered to the Company and shall be conclusive absent manifest error. The
Company shall pay each Lender the amount shown as due on any such certificate
delivered by it within 10 days after its receipt of the same.
(d) Failure on the part of any Lender to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
return on capital with respect to any period shall not constitute a waiver of
such Lender's right to demand compensation with respect to such period or any
other period, provided that no Lender shall be entitled to compensation under
this Section 2.13 for any costs incurred or reductions suffered with respect to
any date unless it shall have notified the Company that it will demand
compensation for such costs or reductions under paragraph (c) above not more
than 90 days after the later of (i) such date and (ii) the date on which it
shall have become aware of such costs or reductions. The protection of this
Section 2.13 shall be available to each Lender regardless of any possible
contention of the invalidity or inapplicability of the law, rule, regulation,
guideline or other change or condition which shall have occurred or been
imposed.
(e) The agreements in this Section 2.13 shall survive termination of
this Agreement.
2.14 CHANGE IN LEGALITY. (a) Notwithstanding any other provision
herein, if any change in any law or regulation or in the interpretation thereof
by any Governmental Authority charged with the administration or interpretation
thereof shall make it unlawful for any Lender to make or maintain any
Eurodollar Loan or to give effect to its obligations as contemplated hereby
with respect to any Eurodollar Loan, then, by written notice to the Company and
to the Administrative Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made by
such Lender hereunder, whereupon such Lender shall not submit a
Competitive Bid in response to a request for Eurodollar Competitive Loans
and any request for a Eurodollar Standby Borrowing shall, as to such
Lender only, be deemed a request for an ABR Loan unless such declaration
shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall be
automatically
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converted to ABR Loans as of the effective date of such notice as provided
in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied
to repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice by any Lender shall
be effective as to each Eurodollar Loan, if lawful, on the last day of the
Interest Period currently applicable to such Eurodollar Loan; in all other
cases such notice shall be effective on the date of receipt.
2.15 INDEMNITY. The Company shall indemnify each Lender against any
out-of-pocket loss or expense which such Lender may sustain or incur as a
consequence of (a) any failure to borrow or to refinance, convert or continue
any Loan hereunder after irrevocable notice of such borrowing, refinancing,
conversion or continuation has been given pursuant to Section 2.3, 2.4 or 2.5,
(b) any payment, prepayment or conversion, or assignment required under Section
2.20, of a Eurodollar Loan required by any other provision of this Agreement or
otherwise made or deemed made on a date other than the last day of the Interest
Period, if any, applicable thereto, (c) any default in payment or prepayment of
the principal amount of any Loan or any part thereof or interest accrued
thereon, as and when due and payable (at the due date thereof, whether by
scheduled maturity, acceleration, irrevocable notice of prepayment or
otherwise) or (d) the occurrence of any Event of Default, including, in each
such case, any loss or reasonable expense sustained or incurred or to be
sustained or incurred in liquidating or employing deposits from third parties
acquired to effect or maintain such Loan or any part thereof as a Eurodollar
Loan. Such loss or reasonable expense shall include an amount equal to the
excess, if any, as reasonably determined by such Lender, of (i) its cost of
obtaining the funds for the Loan being paid, prepaid, refinanced or not
borrowed (assumed to be the Adjusted LIBO Rate applicable thereto) for the
period from the date of such payment, prepayment, refinancing or failure to
borrow or refinance to the last day of the Interest Period for such Loan (or,
in the case of a failure to borrow or refinance the Interest Period for such
Loan which would have commenced on the date of such failure) over (ii) the
amount of interest (as reasonably determined by such Lender) that would be
realized by such Lender in reemploying the funds so paid, prepaid or not
borrowed or refinanced for such period or Interest Period, as the case may be.
A certificate of any Lender setting forth any amount or amounts which such
Lender is entitled to receive pursuant to this Section shall be delivered to
the Company and shall be conclusive absent manifest error.
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2.16 PRO RATA TREATMENT. Except as required under Sections 2.14 and
2.20, each payment or prepayment of principal of any Standby Borrowing, each
payment of interest on the Standby Loans, each payment of the Facility Fees and
Utilization Fees, each reduction of the Commitments and each refinancing or
conversion of any Borrowing with a Standby Borrowing of any Type, shall be
allocated pro rata among the Lenders in accordance with their respective
Commitments (or, if such Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of their outstanding Standby
Loans). Each payment of principal of any Competitive Borrowing shall be
allocated pro rata among the Lenders participating in such Borrowing in
accordance with the respective principal amounts of their outstanding
Competitive Loans comprising such Borrowing. Each payment of interest on any
Competitive Borrowing shall be allocated pro rata among the Lenders
participating in such Borrowing in accordance with the respective amounts of
accrued and unpaid interest on their outstanding Competitive Loans comprising
such Borrowing. For purposes of determining the available Commitments of the
Lenders at any time, each outstanding Competitive Borrowing shall be deemed to
have utilized the Commitments of the Lenders (including those Lenders which
shall not have made Loans as part of such Competitive Borrowing) pro rata in
accordance with such respective Commitments. Each Lender agrees that in
computing such Lender's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round each Lender's percentage of
such Borrowing to the next higher or lower whole dollar amount.
2.17 SHARING OF SETOFFS. Each Lender agrees that if it shall, through
the exercise of a right of banker's lien, setoff or counterclaim, or pursuant
to a secured claim under Section 506 of Title 11 of the United States Code or
other security or interest arising from, or in lieu of, such secured claim,
received by such Lender under any applicable bankruptcy, insolvency or other
similar law or otherwise, or by any other means, obtain payment (voluntary or
involuntary) in respect of any Standby Loan or Loans as a result of which the
unpaid principal portion of its Standby Loans shall be proportionately less
than the unpaid principal portion of the Standby Loans of any other Lender, it
shall be deemed simultaneously to have purchased from such other Lender at face
value, and shall promptly pay to such other Lender the purchase price for, a
participation in the Standby Loans of such other Lender, so that the aggregate
unpaid principal amount of the Standby Loans and participations in the Standby
Loans held by each Lender shall be in the same proportion to the aggregate
unpaid principal amount of all Standby Loans then outstanding as the principal
amount of its Standby Loans prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the principal amount of all Standby Loans
outstanding prior to such exercise of banker's lien, setoff or counterclaim or
other event, provided that, if any such purchase or purchases or adjustments
shall be made pursuant to this Section 2.17 and the payment giving rise thereto
shall thereafter be recovered, such purchase or purchases or adjustments shall
be
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rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. Any Lender holding a participation in a
Standby Loan deemed to have been so purchased may exercise any and all rights
of banker's lien, setoff or counterclaim with respect to any and all moneys
owing to such Lender by reason thereof as fully as if such Lender had made a
Standby Loan in the amount of such participation.
2.18 PAYMENTS. (a) The Company shall make each payment (including
principal of or interest on any Borrowing and any Fees or other amounts)
hereunder from an account in the United States not later than 12:00 noon, New
York City time, on the date when due in dollars to the Administrative Agent at
its offices at 270 Park Avenue, New York, New York, in immediately available
funds.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or Fees, if applicable.
2.19 TAXES. (a) Any and all payments to the Lenders hereunder shall
be made, in accordance with Section 2.18, free and clear of and without
deduction for any and all current or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
(i) income taxes imposed on the income of the Administrative Agent or any
Lender (or any transferee or assignee thereof, including a participation holder
(any such entity a "TRANSFEREE")) and (ii) franchise taxes imposed on the
income, assets or net worth of the Administrative Agent or any Lender (or
Transferee), in each case by the jurisdiction under the laws of which the
Administrative Agent or such Lender (or Transferee) is organized or doing
business (other than as a result of entering into this Agreement, performing
any obligations hereunder, receiving any payments hereunder or enforcing any
rights hereunder), or any political subdivision thereof (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities,
collectively or individually, "TAXES"). If the Company shall be required to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
(or any Transferee) or the Administrative Agent, (i) the sum payable shall be
increased by the amount (an "ADDITIONAL AMOUNT") necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.19) such Lender (or Transferee) or the
Administrative Agent (as the case may be) shall receive an amount equal to the
sum it would have received had no such deductions been made, (ii) the Company
shall make such deductions and (iii) the Company shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.
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(b) In addition, the Company shall pay to the relevant Governmental
Authority in accordance with applicable law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or
any other document contemplated by this Agreement ("OTHER TAXES").
(c) The Company shall indemnify each Lender (or Transferee) and the
Administrative Agent for the full amount of Taxes and Other Taxes paid by such
Lender (or Transferee) or the Administrative Agent, as the case may be, and any
liability (including penalties, interest and expenses (including reasonable
attorney's fees and expenses)) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted by
the relevant Governmental Authority. A certificate as to the amount of such
payment or liability prepared by a Lender or the Administrative Agent on its
behalf, absent manifest error, shall be final, conclusive and binding for all
purposes. Such indemnification shall be made within 30 days after the date the
Lender (or Transferee) or the Administrative Agent, as the case may be, makes
written demand therefor, which written demand shall be made within 60 days of
the date such Lender (or Transferee) or Administrative Agent receives written
demand for payment of such Taxes or Other Taxes from the relevant Governmental
Authority.
(d) If a Lender (or Transferee) or the Administrative Agent shall
become aware that it is entitled to claim a refund from a Governmental
Authority in respect of Taxes or Other Taxes as to which it has been
indemnified by the Company, or with respect to which the Company has paid
additional amounts, pursuant to this Section 2.19, it shall promptly notify the
Company of the availability of such refund claim and shall, within 30 days
after receipt of a request by the Company, make a claim to such Governmental
Authority for such refund at the Company' expense. If a Lender (or Transferee)
or the Administrative Agent receives a refund (including pursuant to a claim
for refund made pursuant to the preceding sentence) in respect of any Taxes or
Other Taxes as to which it has been indemnified by the Company or with respect
to which the Company has paid additional amounts pursuant to this Section 2.19,
it shall within 30 days from the date of such receipt pay over such refund to
the Company (but only to the extent of indemnity payments made, or additional
amounts paid, by the Company under this Section 2.19 with respect to the Taxes
or Other Taxes giving rise to such refund), net of all out-of-pocket expenses
of such Lender (or Transferee) or the Administrative Agent and without interest
(other than interest paid by the relevant Governmental Authority with respect
to such refund), provided that the Company, upon the request of such Lender (or
Transferee) or the Administrative Agent, agree to repay the amount paid over to
the Company (plus penalties, interest or other charges) to such Lender (or
Transferee) or the Administrative Agent in the event such Lender (or
Transferee) or the
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Administrative Agent is required to repay such refund to such Governmental
Authority.
(e) As soon as practicable after the date of any payment of Taxes or
Other Taxes by the Company to the relevant Governmental Authority, the Company
will deliver to the Administrative Agent, at its address referred to in Section
8.1, the original or a certified copy of a receipt issued by such Governmental
Authority evidencing payment thereof.
(f) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.19
shall survive the payment in full of the principal of and interest on all Loans
made hereunder.
(g) Each Lender (or Transferee) that is organized under the laws of
a jurisdiction other than the United States, any State thereof or the District
of Columbia (a "NON-U.S. LENDER") shall deliver to the Company and the
Administrative Agent two copies of either United States Internal Revenue
Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming
exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of
the Code with respect to payments of "portfolio interest", a Form W-8, or any
subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender
delivers a Form W-8, a certificate representing that such Non-U.S. Lender is
not a bank for purposes of Section 881(c) of the Code, is not a 10 percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Company and is not a controlled foreign corporation related to the Company
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from, or
reduced rate of, U.S. Federal withholding tax on payments by the Company under
this Agreement. Such forms shall be delivered by each Non-U.S. Lender on or
before the date it becomes a party to this Agreement (or, in the case of a
Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "NEW LENDING OFFICE"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding any other provision of this Section 2.19(g), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.19(g) that
such Non-U.S. Lender is not legally able to deliver.
(h) The Company shall not be required to indemnify any Non-U.S.
Lender, or to pay any additional amounts to any Non-U.S. Lender, in respect of
United States Federal withholding tax pursuant to paragraph (a) or (c) above to
the extent that (i) the obligation to withhold amounts with respect to United
States Federal withholding tax
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existed on the date such Non-U.S. Lender became a party to this Agreement (or,
in the case of a Transferee that is a participation holder, on the date such
participation holder became a Transferee hereunder) or, with respect to
payments to a New Lending Office, the date such Non-U.S. Lender designated such
New Lending Office with respect to a Loan, provided that this clause (i) shall
not apply to any Transferee or New Lending Office that becomes a Transferee or
New Lending Office as a result of an assignment, participation, transfer or
designation made at the request of the Company; and provided further that this
clause (i) shall not apply to the extent the indemnity payment or additional
amounts any Transferee, or Lender (or Transferee) through a New Lending Office,
would be entitled to receive (without regard to this clause (i)) do not exceed
the indemnity payment or additional amounts that the person making the
assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (g) above.
(i) Any Lender (or Transferee) claiming any indemnity payment or
additional amounts payable pursuant to this Section 2.19 shall use reasonable
efforts (consistent with legal and regulatory restrictions) to file any
certificate or document reasonably requested in writing by the Company or to
change the jurisdiction of its applicable lending office if the making of such
a filing or change would avoid the need for or reduce the amount of any such
indemnity payment or additional amounts that may thereafter accrue and would
not, in the sole determination of such Lender (or Transferee), be otherwise
disadvantageous to such Lender (or Transferee).
(j) Nothing contained in this Section 2.19 shall require any Lender
(or Transferee) or the Administrative Agent to make available any of its tax
returns (or any other information that it deems to be confidential or
proprietary).
2.20 DUTY TO MITIGATE; ASSIGNMENT OF COMMITMENTS UNDER CERTAIN
CIRCUMSTANCES. (a) Any Lender (or Transferee) claiming any additional amounts
payable pursuant to Section 2.13 or Section 2.19 or exercising its rights under
Section 2.14 shall use reasonable efforts (consistent with legal and regulatory
restrictions) to file any certificate or document requested by the Company or
to change the jurisdiction of its applicable lending office if the making of
such a filing or change would avoid the need for or reduce the amount of any
such additional amounts which may thereafter accrue or avoid the circumstances
giving rise to such exercise and would not, in the sole determination of such
Lender (or Transferee), be otherwise disadvantageous to such Lender (or
Transferee).
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(b) In the event that any Lender shall have delivered a notice or
certificate pursuant to Section 2.13 or 2.14, or the Company shall be required
to make additional payments to any Lender under Section 2.19, the Company shall
have the right, at its own expense, upon notice to such Lender and the
Administrative Agent, to require such Lender to transfer and assign without
recourse (in accordance with and subject to the restrictions contained in
Section 8.4) all interests, rights and obligations contained hereunder to
another financial institution approved by the Administrative Agent (which
approval shall not be unreasonably withheld) which shall assume such
obligations, provided that (i) no such assignment shall conflict with any law,
rule or regulation or order of any Governmental Authority and (ii) the assignee
or the Company, as the case may be, shall pay to the affected Lender in
immediately available funds on the date of such assignment the principal of and
interest accrued to the date of payment on the Loans made by it hereunder and
all other amounts accrued for its account or owed to it hereunder (including
any payments owed to it pursuant to Section 2.15).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each of the Lenders that:
3.1 ORGANIZATION; POWERS. The Company and each of the Subsidiaries
(a) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has all requisite
power and authority to own its property and assets and to carry on its business
as now conducted and as proposed to be conducted, (c) is qualified to do
business in every jurisdiction where such qualification is required, except
where the failure so to qualify would not result in a Material Adverse Effect,
and (d) in the case of the Company, has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to borrow
hereunder.
3.2 AUTHORIZATION. The execution, delivery and performance by the
Company of this Agreement, and the Borrowings hereunder (collectively, the
"TRANSACTIONS") (a) have been duly authorized by all requisite corporate action
and (b) will not (i) violate (A) any provision of any law, statute, rule or
regulation (including the Margin Regulations) or of the certificate of
incorporation or other constitutive documents or by-laws of the Company or any
Subsidiary, (B) any judgment, writ, injunction, decree or order of any
Governmental Authority or (C) any provision of any indenture, agreement or
other instrument to which the Company or any Subsidiary is a party or by which
any of them or any of their property is or may be bound, (ii) be in conflict
with, result in a breach of or constitute (alone or with notice or lapse of
time or both) a default under any such
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indenture, agreement or other instrument or (iii) result in the creation or
imposition of any Lien upon any property or assets of the Company or any
Subsidiary.
3.3 ENFORCEABILITY. This Agreement constitutes a legal, valid and
binding obligation of the Company enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
rehabilitation, reorganization, moratorium or similar laws affecting creditors
generally and by general equity principles.
3.4 GOVERNMENTAL APPROVALS. No action, consent or approval of,
registration or filing with or other action by any Governmental Authority is or
will be required with respect to the Company in connection with the
Transactions.
3.5 FINANCIAL STATEMENTS. (a) The Company has heretofore furnished
to the Administrative Agent and the Lenders copies of (i) its consolidated
financial statements for the year ended December 31, 1994, which were included
in its annual report on Form 10-K dated , March 31, 1995, filed with the SEC
under the Exchange Act and (ii) its consolidated financial statements for the
six months ended June 30, 1995, which were included in its Quarterly Report on
Form 10-Q dated August 14, 1995 filed with the SEC under the Exchange Act.
Such financial statements present fairly, in all material respects, the
financial condition and the results of operations of the Company and its
Subsidiaries as of such dates in accordance with GAAP. All of the foregoing
financial statements disclose all material liabilities, direct or contingent,
of the Company and its Subsidiaries as of the dates thereof.
(b) As of the date hereof, there has been no material adverse change
in the business, assets, operations, prospects or conditions, financial or
otherwise, of the Company and the Subsidiaries taken as a whole from December
31, 1994.
(c) The Company has heretofore furnished to the Administrative Agent
and the Lenders copies of the (i) annual and (ii) quarterly Convention
Statements of each Insurance Subsidiary, as filed with their respective
Applicable Insurance Regulatory Authority, as of and for the years ended
December 31, 1992, 1993 and 1994 and as of and for the periods ending March 31,
June 30, and September 30, 1995 (collectively, the "STATUTORY FINANCIAL
STATEMENTS"). Each such Statutory Financial Statement is complete and correct
and fairly present the statutory assets, liabilities, capital and surplus,
results of operations and cash flows of the Insurance Subsidiary presented
therein as of and for the respective dates and periods indicated therein in
conformity with SAP and was in compliance with applicable law when filed. Each
such Statutory Financial Statement discloses all material liabilities, direct
or contingent, of the related Insurance Subsidiary as of the dates thereof.
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(d) As of the date hereof, there has been no material adverse change
in the financial condition of the Insurance Subsidiaries from the financial
condition reported in the Statutory Financial Statements referenced in
paragraph (c) of this Section 3.5.
3.6 OWNERSHIP OF PROPERTIES; POSSESSION UNDER LEASES. The Company
and the Subsidiaries have good and sufficient title to their respective
properties and assets, including the properties and assets reflected in the
Company's consolidated financial statements referred to in Section 3.5(a) free
and clear of any Lien, except (i) such properties and assets disposed of since
such date in the ordinary course of business, (ii) such properties and assets
held under Capital Leases referred to in Schedule 3.6, and (iii) such
properties and assets the failure to have good and sufficient title to would
not, individually or in the aggregate, result in a Material Adverse Effect.
The Company and the Subsidiaries enjoy peaceful and undisturbed possession
under all leases necessary in any material respect for the operation of their
respective properties and assets, and all such leases are valid and subsisting
and are in full force and effect. The Company and the Subsidiaries own, or are
licensed to use, all patents, trademarks, service marks, trade names,
copyrights, licenses, technology, know-how and processes, permits and
authorizations, and all rights with respect to the foregoing, necessary for the
conduct of their respective businesses as now conducted (the "INTELLECTUAL
PROPERTY"), without any known material conflict with the rights of others,
except such Intellectual Property the failure so to own, possess or be licensed
to use would not, individually or in the aggregate, result in a Material
Adverse Effect.
3.7 SUBSIDIARIES. Schedule 3.7 sets forth as of the date hereof a
list of all Subsidiaries of the Company and the percentage ownership interest
of the Company therein.
3.8 LITIGATION, COMPLIANCE WITH LAWS, ETC. (a) Except as set forth
in Schedule 3.8, there are no actions, suits or proceedings at law or in equity
or by or before any Governmental Authority now pending or, to the knowledge of
the Company, threatened against or affecting the Company or any Subsidiary or
any business, property or rights of any such person (i) which involve this
Agreement or the Transactions or (ii) as to which there is a reasonable
probability of an adverse determination and which, if adversely determined,
could, individually or in the aggregate, result in a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is (i) in violation of,
nor will the continued operation of their material properties and assets as
currently operated violate, (A) any law, statute, rule or regulation (including
the Margin Regulations and Environmental Laws) or of their respective
certificates of incorporation or other constitutive documents or by-laws, (B)
any judgment, writ, injunction, decree or order of any
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Governmental Authority, including any Applicable Insurance Regulatory Authority
of any Insurance Subsidiary, or (C) any provision of any indenture, agreement
or other instrument to which it is a party or any of its property is or may be
bound or (ii) in conflict with, breach of, or in default under, any provision
of any such indenture, agreement or other instrument, where such violation,
conflict, breach or default, individually or in the aggregate, would be
reasonably likely to result in a Material Adverse Effect.
(c) No Insurance Subsidiary is subject to (i) any order of
liquidation, rehabilitation, conservation, supervision or any other order of
like effect issued by any Applicable Insurance Regulatory Authority with
respect to any Insurance Subsidiary or (ii) any plan of action of any
Applicable Insurance Regulatory Authority which would result in the control or
direction by such Applicable Insurance Regulatory Authority of the management,
policies or ongoing business activities of such Insurance Subsidiary.
(d) No license (including, without limitation, any license or
certificate of authority from any Applicable Insurance Regulatory Authority of
an Insurance Subsidiary), permit or authorization to engage in the business of
insurance or reinsurance of any Insurance Subsidiary, other than licenses,
permits or authorizations to perform services as an agent or broker
(individually, a "LICENSE" and collectively, the "LICENSES") is the subject of,
or threatened to be the subject of, a proceeding for suspension, revocation,
restriction on License authority or limitation on premiums written or any
similar proceedings, and to the best of the Company's knowledge there exists no
sustainable basis for any such suspension, revocation, restriction on License
authority or limitation on premiums written, except where such suspension,
revocation, restriction, or limitation would not individually or in the
aggregate result in a Material Adverse Effect.
3.9 FEDERAL RESERVE REGULATIONS. (d) Neither the Company nor any
Subsidiary that will receive proceeds of the Loans hereunder is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase or carry Margin Stock or to refund indebtedness originally incurred
for such purpose, or for any other purpose which entails a violation of, or
which is inconsistent with, the provisions of the Margin Regulations.
3.10 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
Neither the Company nor any Subsidiary is (a) an "investment company" or a
company
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"controlled" by an "investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940, as amended or (b) a "holding
company" as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935, as amended.
3.11 USE OF PROCEEDS. All proceeds of the Loans shall be used for
the purposes referred to in the recitals to this Agreement or, in the case of
the first Borrowing hereunder, to pay in full the principal of and accrued and
unpaid interest on any outstanding loans under, and all other amounts in
respect of, the Existing Credit Facility.
3.12 NO MATERIAL MISSTATEMENTS. No report, financial statement or
other information furnished by or on behalf of the Company or any Subsidiary to
the Administrative Agent or any Lender pursuant to or in connection with this
Agreement or the credit facilities established hereby contains or will contain
any material misstatement of fact or omits or will omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were or will be made, not misleading.
3.13 TAXES. The Company and each of the Subsidiaries have filed or
caused to be filed all Federal, state andlocal tax returns which are required
to be filed by them, and have paid or caused to be paid all taxes shown to be
due and payable on such returns or on any assessments received by any of them,
other than any taxes or assessments the validity of which is being contested in
good faith by appropriate proceedings, and with respect to which appropriate
accounting reserves have to the extent required by GAAP been set aside.
3.14 EMPLOYEE BENEFIT PLANS. Each of the Company and its ERISA
Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events,
could reasonably be expected to result in a Material Adverse Effect. The
present value of all benefit liabilities under each Plan (based on those
assumptions used to fund such Plan) did not, as of the last annual valuation
date applicable thereto before the Closing Date, exceed by more than $1,000,000
the fair market value of the assets of such Plan, and the present value of all
benefit liabilities of all underfunded Plans (based on those assumptions used
to fund each such Plan) did not, as of the last annual valuation dates
applicable thereto, exceed by more than $2,000,000 the fair market value of the
assets of all such underfunded Plans.
3.15 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.15:
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(a) To the best of the Company's or any Subsidiary's knowledge after
reasonable investigation, the properties owned or operated by the Company and
the Subsidiaries (the "PROPERTIES") do not contain any Hazardous Materials in
amounts or concentrations which (i) constitute, or constituted a violation of,
or (ii) could give rise to liability under, Environmental Laws, which
violations and liabilities, in the aggregate, could result in a Material
Adverse Effect;
(b) The Properties and all operations of the Company and the
Subsidiaries are in compliance, and in the last three years have been in
compliance, with all Environmental Laws and all necessary Environmental Permits
have been obtained and are in effect, except to the extent that such
non-compliance or failure to obtain any necessary Environmental Permits, in the
aggregate, could not result in a Material Adverse Effect;
(c) To the best of the Company's or any Subsidiary's knowledge after
reasonable investigation, there have been no Releases or threatened Releases
at, from, under or proximate to the Properties or otherwise in connection with
the operations of the Company or the Subsidiaries, which Releases or threatened
Releases, in the aggregate, could result in a Material Adverse Effect;
(d) Neither the Company nor any of the Subsidiaries has received any
notice of an Environmental Claim in connection with the Properties or the
operations of the Company or the Subsidiaries or with regard to any person
whose liabilities for environmental matters the Company or the Subsidiaries has
retained or assumed, in whole or in part, contractually, by operation of law or
otherwise, which, in the aggregate, could result in a Material Adverse Effect,
nor do the Company or the Subsidiaries have reason to believe that any such
notice will be received or is being threatened;
(e) To the best of the Company's or any Subsidiary's knowledge after
reasonable investigation, Hazardous Materials have not been transported from
the Properties, nor have Hazardous Materials been generated, treated, stored or
disposed of at, on or under any of the Properties in a manner that could give
rise to liability under any Environmental Law, nor have the Company or the
Subsidiaries retained or assumed any liability, contractually, by operation of
law or otherwise, with respect to the generation, treatment, storage or
disposal of Hazardous Materials, which transportation, generation, treatment,
storage or disposal, or retained or assumed liabilities, in the aggregate,
could result in a Material Adverse Effect.
3.16 ABSENCE OF CERTAIN RESTRICTIONS. Except as set forth in
Schedule 3.16 and as required by law, rule or regulation or by any Governmental
Authority, including any Applicable Insurance Regulatory Authority, no
indenture, certificate of designation
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for preferred stock, agreement or instrument to which any Subsidiary is a party
will, directly or indirectly, prohibit or restrain the payment of dividends by
such Subsidiary. As of the Closing Date, no such indenture, certificate,
agreement or instrument to which the Company or any Subsidiary is a party will
require the repayment of any amounts owed by the Company or such Subsidiary as
a result of the consummation of the Transactions.
3.17 REINSURANCE AGREEMENTS. The Company has delivered to the
Administrative Agent copies of each Reinsurance Agreement with respect to which
the Administrative Agent has requested copies. On the Closing Date, each such
Reinsurance Agreement is in full force and effect and none of the Company, any
Subsidiary or, to the best of the knowledge of the Company, any other person
party thereto is in default in respect of any material provision thereof.
3.18 RESERVES. All reserves and other liabilities with respect to
insurance contracts reflected in each annual or quarterly Convention Statement
of each Insurance Subsidiary filed with an Applicable Insurance Regulatory
Authority since December 31, 1994 or September 30, 1995 or delivered to any
Lender or the Administrative Agent ("RESERVE LIABILITIES"), (a) were determined
in accordance with generally accepted actuarial standards consistently applied,
or in the absence of a generally accepted actuarial standard for determining
reserves and other liabilities with respect to a particular type of insurance
contract, in accordance with an actuarial standard consistently applied that
has been deemed reasonable in a Statement of Actuarial Opinion from a member of
the American Academy of Actuaries, (b) were fairly stated in accordance with
sound actuarial principles, (c) were based on actuarial assumptions that were
in accordance with or more conservative than those appropriate (in the
reasonable determination of the applicable Insurance Subsidiary) for the
related insurance policies, (d) met the requirements of the applicable
insurance laws, rules and regulations of their respective states of domicile
and met in all material respects the requirements of the applicable insurance
laws, rules and regulations of each other jurisdiction in which they are
licensed to write insurance contracts and (e) reflected (on a net basis) the
related reinsurance, coinsurance and other similar agreements of such Insurance
Subsidiary. Adequate provision for all such Reserve Liabilities has been made
(under generally accepted actuarial principles consistently applied) to cover
the total amount of matured and unmatured benefits, claims and other
liabilities of such Insurance Subsidiary under all insurance policies under
which such Insurance Subsidiary has any liability (including any liability
arising under or as a result of any reinsurance, coinsurance or other similar
agreement) on the respective dates of the annual or quarterly Convention
Statements based on commonly accepted actuarial assumptions as to future
contingencies that are reasonable and appropriate under the circumstances.
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3.19 OBLIGATIONS AS SENIOR INDEBTEDNESS. The obligations created
hereby will constitute direct, unconditional and general obligations of the
Company and rank not less than pari passu with all other loans, indebtedness,
guarantees and other obligations of the Company for borrowed money and will
constitute "senior indebtedness" as that or any similar term is or may be
defined in any instrument or agreement evidencing or relating to any
subordinated debt or obligations of the Company now or hereafter existing, and
the Administrative Agent and the Lenders will be entitled to the benefits of
any such subordination provisions.
ARTICLE IV
CONDITIONS OF LENDING
The obligations of the Lenders to make Loans hereunder are subject to
the satisfaction of the following conditions:
4.1 ALL BORROWINGS. On the date of each Borrowing:
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.3 or Section 2.4, as applicable.
(b) The representations and warranties set forth in Article III
hereof shall be true and correct in all material respects on and as of the
date of such Borrowing with the same effect as though made on and as of
such date, except to the extent such representations and warranties
expressly relate to an earlier date.
(c) The Company shall be in compliance with all of the terms and
provisions set forth herein, and at the time of and immediately after such
Borrowing no Event of Default or Default shall have occurred and be
continuing.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Company on the date of such Borrowing as to the matters specified in
paragraphs (b) and (c) of this Section 4.1.
4.2 CLOSING DATE. On the Closing Date:
(a) The Administrative Agent shall have received a favorable written
opinion of Jorden Burt Berenson & Johnson LLP, dated the Closing Date and
addressed to the Lenders and satisfactory to Debevoise & Plimpton, counsel
for the Administrative Agent, to the effect set forth in Exhibit D hereto.
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(b) All legal matters incident to this Agreement, the Borrowings and
extensions of credit hereunder shall be satisfactory to the Lenders and to
Debevoise & Plimpton, counsel for the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of the
certificate of incorporation, including all amendments thereto, of the
Company, certified as of a recent date by the Secretary of State of its
state of incorporation, and a certificate as to the good standing of
the Company as of a recent date from such Secretary of State; (ii) a
certificate of the Secretary or an Assistant Secretary of the Company
dated the Closing Date and certifying (A) that attached thereto is
a true and complete copy of the by-laws of the Company as in effect on
the Closing Date and at all times since a date prior to the date of the
resolutions described in clause (B) below, (B) that attached thereto is
a true and complete copy of resolutions duly adopted by the Board of
Directors of the Company authorizing the execution, delivery and
performance of this Agreement and the Borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full
force and effect, (C) that the certificate of incorporation referred to in
clause (i) above has not been amended since the date of the last amendment
thereto shown on the certificate of good standing furnished pursuant to
such clause (i) and (D) as to the incumbency and specimen signature of
each officer executing this Agreement or any other document delivered in
connection herewith on behalf of the Company; (iii) a certificate of
another officer of the Company as to the incumbency and specimen
signature of the Secretary or Assistant Secretary executing the
certificate pursuant to (ii) above; and (iv) such other documents as the
Lenders or Debevoise & Plimpton, counsel for the Administrative Agent,
may reasonably request.
(d) The Administrative Agent shall have received a certificate,
dated the Closing Date and signed by a Responsible Officer of the Company,
confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.1.
(e) On or before the Closing Date, (i) the principal of and accrued
and unpaid interest on any loans outstanding under the Existing Credit
Facility shall have been paid in full, (ii) all other amounts due in
respect of the Existing Credit Facility shall have been paid in full and
(iii) the commitments to lend under the Existing Credit Facility shall
have been permanently terminated.
(f) The Administrative Agent shall have received any Fees or other
amounts due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Company hereunder.
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ARTICLE V
COVENANTS
A. AFFIRMATIVE COVENANTS. The Company covenants and agrees with
each Lender and the Administrative Agent that so long as this Agreement shall
remain in effect or the principal of or interest on any Loan, any Fees or any
other amounts payable hereunder shall be unpaid, unless the Required Lenders
shall otherwise consent in writing, it will, and will cause each of the
Subsidiaries to:
5.1 EXISTENCE. Do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, Licenses,
rights, franchises, patents, copyrights, trademarks and trade names, except as
expressly permitted under Section 5.15, provided that nothing in this Section
shall prevent the abandonment or termination of the existence, in the case of
any Subsidiary, or rights, franchises, patents, copyrights, trademarks or trade
names of any Subsidiary or the Company if such abandonment or termination is in
the best interests of the Company and is not disadvantageous in any material
respect to the Lenders.
5.2 BUSINESS AND PROPERTIES. Comply in all material respects with
all applicable laws, statutes, rules, regulations (including Margin Regulations
and Environmental Laws) and orders of any Governmental Authority, whether now
in effect or hereafter enacted; and at all times maintain and preserve all
property material to the conduct of its business and keep such property in good
repair, working order and condition and from time to time make, or cause to be
made, all needful and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times.
5.3 FINANCIAL STATEMENTS, REPORTS, ETC. In the case of the Company,
furnish to the Administrative Agent and each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year, its consolidated balance sheet and the related
statements of operations, stockholders' equity and cash flows showing the
consolidated financial condition of the Company and its Subsidiaries as of
the close of such fiscal year and the results of its operations and the
operations of such Subsidiaries during such year, all audited by Price
Waterhouse LLP or other independent certified public accountants of
recognized national standing and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to the
effect that such consolidated financial statements fairly present its
financial condition and results of
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operations on a consolidated basis in accordance with GAAP (it being
agreed that the requirements of this paragraph may be satisfied by the
delivery pursuant to paragraph (f) below of an annual report on Form 10-K
containing the foregoing);
(b) as soon as available but in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year, its
consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows, showing the financial condition of
the Company and its Consolidated Subsidiaries as of the close of such
fiscal quarter and the results of its operations and the operations of
such Subsidiaries during such fiscal quarter and the then elapsed portion
of the fiscal year, all certified by one of its Financial Officers as
fairly presenting its financial condition and results of operations on a
consolidated basis in accordance with GAAP, subject to normal year-end
audit adjustments (it being agreed that the requirements of this paragraph
may be satisfied by the delivery pursuant to paragraph (f) below of a
quarterly report on Form 10-Q containing the foregoing);
(c) as soon as available but in any event within 90 days after the
close of each fiscal year, (i) a copy of the annual Convention Statement
of each Insurance Subsidiary for such fiscal year and as filed with the
Applicable Insurance Regulatory Authority certified by a Responsible
Officer of such Insurance Subsidiary to the effect that such statements
present fairly the statutory assets, liabilities, capital and surplus,
results of operations and cash flows of such Insurance Subsidiary in
accordance with SAP consistently applied, (ii) the Statement of Actuarial
Opinion and Management Discussion and Analysis of each Insurance
Subsidiary for such fiscal year and as filed with the Applicable Insurance
Regulatory Authority; provided that, if such statements are required by
any Applicable Insurance Regulatory Authority having jurisdiction over
such Insurance Subsidiary to be certified by accountants or actuaries,
such statements shall be delivered to the Administrative Agent and the
Lenders so certified promptly after the filing date required by such
Applicable Insurance Regulatory Authority with respect thereto;
(d) as soon as available but in any event within 60 days after
the close of each of the first three fiscal quarters of each fiscal year, a
copy of the quarterly Convention Statement of each Insurance Subsidiary for
such fiscal quarter and as filed with the Applicable Insurance Regulatory
Authority, certified by a Responsible Officer of the Company as fairly
presenting the statutory assets, liabilities, capital and surplus, results
of operations and cash flows of such Insurance Subsidiary;
(e) concurrently with any delivery of financial statements under
paragraph (a) or (b) above, a certificate of a Financial Officer (i)
opining on or certifying such statements (which certificate, when
furnished by such Financial Officer, may be
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limited to accounting matters and disclaim liability for legal
interpretations), (ii) certifying that no Event of Default or Default has
occurred or, if such an Event of Default or Default has occurred,
specifying the nature and extent thereof and any corrective action taken
or proposed to be taken with respect thereto; and (iii) setting forth
computations in reasonable detail satisfactory to the Administrative Agent
demonstrating compliance with the covenants referred to in Sections 5.18
through 5.23 (inclusive).
(f) promptly after the same become publicly available, copies of all
reports on Forms 10-K, 10-Q and 8-K filed by it with the SEC, or any
Governmental Authority succeeding to any of or all the functions of the
SEC, or, in the case of the Company, copies of all reports distributed to
its shareholders, as the case may be;
(g) as soon as practicable, copies of all regular or periodic
financial and other reports, if any, which the Company or any of its
Subsidiaries shall provide to any Governmental Authority, including any
Applicable Insurance Regulatory Authority;
(h) promptly after delivery to a Insurance Subsidiary, final copies
of all regular and periodic reports of examinations of such Insurance
Subsidiary, delivered to such Insurance Subsidiary by the Applicable
Insurance Regulatory Authority; and
(i) promptly, from time to time, such other information as any
Lender shall reasonably request through the Administrative Agent.
5.4 INSURANCE LICENSES. Furnish to the Administrative Agent and
each Lender prompt notice of the actual suspension, termination or revocation
of any License, or any restriction on License authority or limitation on
premiums written, of any Insurance Subsidiary by any relevant Governmental
Authority or of receipt of notice from any relevant Governmental Authority
notifying any Insurance Subsidiary of a hearing relating to such a suspension,
termination, revocation, restriction or limitation, including any request by a
relevant Governmental Authority that commits any Insurance Subsidiary to take,
or refrain from taking, any action, which materially and adversely affects the
authority of any Insurance Subsidiary to conduct its Insurance Business.
5.5 INSURANCE. Keep its insurable properties adequately insured at
all times by financially sound and reputable insurers, and maintain such other
insurance, to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies
similarly situated and in the same or similar businesses, including public
liability insurance against claims for personal injury or death or property
damage occurring upon, in, about or in connection with the use of any
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properties owned, occupied or controlled by it; and maintain such other
insurance as may be required by law.
5.6 OBLIGATIONS AND TAXES. Pay its Indebtedness and other
obligations promptly and in accordance with their terms and pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become delinquent or in default as well as all lawful
claims for labor, materials and supplies or otherwise which, if unpaid, might
give rise to a Lien upon such properties or any part thereof; provided,
however, that such payment or discharge shall not be required with respect to
any such tax, assessment charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
adequate reserves with respect thereto shall, to the extent required by GAAP,
have been set aside.
5.7 LITIGATION AND OTHER NOTICES. Give the Administrative Agent
prompt written notice of the following:
(a) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit, proceeding
or inquiry by or before any Governmental Authority or arbitrator against
the Company or any Subsidiary which could reasonably be expected to result
in a Material Adverse Effect;
(b) any Event of Default or Default, specifying the nature and
extent thereof and the action (if any) that is proposed to be taken with
respect thereto;
(c) any default or event of default by the Company or any of its
Subsidiaries under any contract, agreement, lease or other instrument of,
or binding on, the Company or any of its Subsidiaries which could
reasonably be expected to result in a Material Adverse Effect;
(d) any change in any of the Ratings;
(e) any actual or proposed material change in any insurance code
which might reasonably be expected to result in a Material Adverse Effect;
and
(f) any development that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect and the action (if any)
that is proposed to be taken with respect thereto.
5.8 EMPLOYEE BENEFITS. (a) Comply in all material respects with the
applicable provisions of ERISA and the Code and the regulations and published
interpretations
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thereunder and (b) furnish to the Administrative Agent and each Lender as soon
as possible after, and in any event within 30 days after any Responsible
Officer of the Company or any ERISA Affiliate knows that, any ERISA Event has
occurred that, alone or together with any other ERISA Event known to have
occurred, could reasonably be expected to result in liability of the Company in
an aggregate amount exceeding $1,000,000 in any year, a statement of a
Responsible Officer of the Company setting forth details as to such ERISA Event
and the action, if any, that the Company proposes to take with respect thereto.
5.9 USE OF PROCEEDS. Use the proceeds of the Loans only for the
purposes set forth in the recitals to this Agreement or, in the case of the
first Borrowing hereunder, to pay in full the principal of and accrued and
unpaid interest on any loans outstanding under, and all other amounts due in
respect of, the Existing Credit Facility.
5.10 MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS.
Maintain financial records in accordance with GAAP and, with respect to any
Insurance Subsidiary, SAP, and, upon reasonable notice, at all reasonable
times, permit any authorized representative designated by the Administrative
Agent to visit and inspect the properties of the Company and of any Subsidiary
and to discuss the affairs, finances and condition of the Company and the
Subsidiaries with a Financial Officer of the Company and such other officers as
the Company shall deem appropriate.
5.11 OWNERSHIP OF SUBSIDIARIES. In the case of the Company, own
directly and beneficially and of record 100% of the capital stock of ABIC,
ABLAC and any other Material Subsidiary or any of their respective successors.
5.12 COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply, and cause all
lessees and other persons occupying its properties to comply, in all material
respects with all Environmental Laws and Environmental Permits applicable to
its operations and Properties; obtain and renew all material Environmental
Permits necessary for its operations and Properties; and conduct any Remedial
Action in accordance with Environmental Laws.
5.13 PREPARATION OF ENVIRONMENTAL REPORTS. If a default caused by
reason of a breach of Section 3.15 or 5.12 shall have occurred and be
continuing, at the request of the Required Lenders through the Administrative
Agent, provide to the Lenders within 45 days after such request, at the expense
of the Company, an environmental site assessment report for the properties that
are the subject of such default prepared by an environmental consulting firm
acceptable to the Administrative Agent, indicating the presence or absence of
Hazardous Materials and the estimated cost of any compliance or Remedial Action
in connection with such Properties.
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B. NEGATIVE COVENANTS. The Company covenants and agrees with each
Lender and the Administrative Agent that so long as this Agreement shall remain
in effect or the principal of or interest on any Loan, any Fees or any other
amounts payable hereunder shall be unpaid, unless the Required Lenders shall
otherwise consent in writing, it will not, and will not cause or permit any of
the Subsidiaries to:
5.14 LIMITATIONS ON LIENS. Directly or indirectly, create, incur,
assume or permit to exist any Lien on any asset or property owned by the
Company, except for Liens on assets or property (other than the capital stock
of any Subsidiary, any investment by the Company in any Subsidiary or any
promissory note, indebtedness or other similar instrument of any Subsidiary
evidencing indebtedness owed by such Subsidiary to the Company) the value of
which in the aggregate does not exceed $5,000,000.
5.15 PROHIBITION OF FUNDAMENTAL CHANGES. Enter directly or
indirectly into any merger or consolidation or amalgamation, or liquidate, wind
up or dissolve itself (or suffer any liquidation or dissolution), or directly
or indirectly convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or a substantial part of its
business or assets or any stock of any Subsidiary, except that:
(a) the Company may dispose of any Subsidiary or its assets, other
than a Significant Insurance Subsidiary or its assets, either through (i)
the merger of such Subsidiary (provided that the surviving person
resulting from such merger is not a Subsidiary), (ii) the sale of all or
substantially all of the assets of such Subsidiary or (iii) the sale of
the capital stock of such Subsidiary; provided that no Default or Event of
Default has occurred and is continuing or would occur as a result of any
disposition pursuant to the foregoing clauses (i), (ii) or (iii);
(b) any Subsidiary may sell, lease, transfer or otherwise dispose of
any or all of its assets (upon voluntary liquidation or otherwise) to the
Company or another wholly-owned Subsidiary; provided that a Significant
Insurance Subsidiary may only sell, lease, transfer or otherwise dispose
of a substantial part of its assets (upon voluntary liquidation or
otherwise), other than in the ordinary course of business consistent with
past practice, to another Significant Insurance Subsidiary; and
(c) subject to Section 5.17, provided that no Default or Event of
Default has occurred and is continuing or would occur as a result thereof,
any person may be merged or consolidated with or into the Company
(provided that the Company shall be the continuing or surviving
corporation) or with any one or more Subsidiaries (provided that the
Subsidiary shall be the continuing or surviving corporation).
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5.16 DIVIDENDS AND DISTRIBUTIONS. (a) In the case of the Company,
declare or pay, directly or indirectly, any dividend or make any other
distribution (by reduction of capital or otherwise), whether in cash, property,
securities or a combination thereof, with respect to any shares of its capital
stock or directly or indirectly redeem, purchase, retire or otherwise acquire
for value (or permit any Subsidiary to purchase or acquire) any shares of any
class of its capital stock or set aside any amount for any such purpose if
there is then continuing any Default or Event of Default (or a Default or Event
of Default would result therefrom or exist after giving effect thereto).
(b) In the case of any Subsidiary, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
on the ability of any Subsidiary to (i) pay dividends or make any other
distribution on its capital stock or (ii) pay any Indebtedness owed to the
Company or a Subsidiary.
5.17 NATURE OF BUSINESS. (a) Permit any Significant Insurance
Subsidiary to engage at any time in any business or business activity other
than the Insurance Business, other businesses currently conducted by such
Significant Insurance Subsidiaries and financial service businesses reasonably
related thereto, including the provision of asset management services.
(b) In the case of the Company, engage at any time in any business
or business activity other than owning all the capital stock of its
Subsidiaries and business activities reasonably incidental thereto.
5.18 STOCKHOLDER'S EQUITY. Permit Consolidated Net Worth to be less
than the sum of (i) $350,000,000 plus (ii) 25% of the positive Consolidated Net
Income of the Company and its Subsidiaries for all periods commencing after
December 31, 1995 plus (iii) any additions to Consolidated Net Worth other than
from earnings for all periods commencing after December 31, 1995.
5.19 CONSOLIDATED TOTAL DEBT. Permit the ratio of (i) Consolidated
Total Debt to (ii) the sum of (a) Consolidated Total Debt plus (b) Consolidated
Tangible Net Worth, to exceed 0.5 to 1.
5.20 INTEREST CHARGE COVERAGE. As of the end of each fiscal
quarter, permit the ratio of (i) Consolidated Income Available for Interest
Charges for the four fiscal quarters then ended to (ii) Interest Charges for
such period to be less than 2.5 to 1.
5.21 STATUTORY SURPLUS OF ABIC AND ABLAC. Permit the Statutory
Surplus of ABIC and ABLAC to be less than $115,000,000 and $70,000,000,
respectively.
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5.22 RISK-BASED CAPITAL RATIO. (a) As of the end of each fiscal
year, permit ABLAC's Total Adjusted Capital to be less than 150% of its Company
Action Level RBC; and
(b) as of the end of each fiscal year, permit ABIC's Total Adjusted
Capital to be less than 125% of its Company Action Level RBC.
5.23 LIMITATIONS OF SUBSIDIARY INDEBTEDNESS. Permit at any time the
aggregate amount of Indebtedness of all Subsidiaries (excluding, for purposes
of this Section 5.23 only, (i) any undrawn amount of a letter of credit issued
in connection with insurance agreements entered into in the ordinary course of
business, (ii) any obligation to reimburse an amount drawn under any such
letter of credit which is reimbursed within five Business Days immediately
following the drawing thereunder, and (iii) Indebtedness owing to the Company)
to exceed $10,000,000.
ARTICLE VI
EVENTS OF DEFAULT
In case of the happening of any of the following events (each an
"EVENT OF DEFAULT"):
(a) any representation or warranty made or deemed made in or in
connection with the execution and delivery of this Agreement, the
Borrowings hereunder or any certificate, financial statement, report,
notice or other instrument prepared by the Company or any Subsidiary, in
each case furnished by the Company to the Administrative Agent or any
Lender pursuant hereto, shall prove to have been false or misleading in
any material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any
Loan when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or any Fee or any other amount (other than an amount referred to in
paragraph (b) above) due hereunder, when and as the same shall become due
and payable, and such default shall continue unremedied for a period of
three days;
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(d) default shall be made in the due observance or performance of
any covenant, condition or agreement contained in Sections 5.1, 5.11, or
5.14 through 5.23 (inclusive);
(e) default shall be made in the due observance or performance of
any covenant, condition or agreement contained herein (other than those
specified in (b), (c) or (d) above) and such default shall continue
unremedied for a period of 5 days after notice thereof from the
Administrative Agent or any Lender to the Company;
(f) the Company or any Subsidiary shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of (A) any
single obligation of Indebtedness in a principal amount in excess of
$5,000,000, or (B) any Indebtedness in an aggregate principal amount in
excess of $15,000,000, in each case when and as the same shall
become due and payable, or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any such Indebtedness if the
effect of any failure referred to in this clause (ii) is to cause, or
to permit the holder or holders of such Indebtedness or a trustee on
its or their behalf (with or without the giving of notice, the lapse
of time or both) to cause, such Indebtedness to become due prior to
its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Company or any Subsidiary, or of a substantial
part of the property or assets of the Company or any Subsidiary, under
Title 11 of the United States Code, as now constituted or hereafter
amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator, rehabilitator or similar official
for the Company or a Subsidiary or for a substantial part of the property
or assets of the Company or any Subsidiary or (iii) the winding up or
liquidation of the Company or any Subsidiary; and such proceeding or
petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(h) the Company or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency, receivership, rehabilitation or
similar law, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or the filing of any
petition described in (g) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Company or any Subsidiary or for a substantial
part of the property or assets of the Company or any Subsidiary, (iv) file
an answer admitting the
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material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or fail generally to
pay its debts as they become due or (vii) take any action for the purpose
of effecting any of the foregoing;
(i) (i) one or more judgments for the payment of money in an
aggregate amount (not paid or fully covered by insurance) of $5,000,000 or
more entered against the Company or any Subsidiary shall not have been
vacated, satisfied, discharged or stayed pending appeal within 30 days
from the entry thereof, or, in the event of such a stay, such judgments
shall not be discharged within 30 days after such stay expires; or (ii)
the judgment creditor shall have legally commenced execution proceedings
upon such judgment;
(j) an ERISA Event shall have occurred that, in the reasonable
opinion of the Required Lenders, when taken together with all other such
ERISA Events that have occurred could reasonably be expected to result in
a Material Adverse Effect;
(k) any Applicable Insurance Regulatory Authority shall issue with
respect to any Insurance Subsidiary (i) any order of liquidation,
rehabilitation, conservation, supervision or any other order of like
effect or (ii) any plan of action that would result in the control or
direction by such Applicable Insurance Regulatory Authority of the
management, policies or ongoing business activities of such Insurance
Subsidiary, or (iii) any other order that is reasonably likely to result
in a Material Adverse Effect or an impairment of the rights of or benefits
available to the Administrative Agent or any of the other Lenders under
this Agreement;
(l) (i) any party to any Reinsurance Agreement (whether entered into
as of the date hereof or hereafter entered into) to which any Insurance
Subsidiary is a party shall fail to comply with any material provision
thereof or (ii) any reinsurer under any Reinsurance Agreement shall become
or shall be declared insolvent or any order of liquidation,
rehabilitation, conservation or supervision or other order of like effect
shall be entered against any such reinsurer, or any other kind of
delinquency proceeding shall be commenced against any such reinsurer, if
any event contemplated by clause (i) or (ii) could reasonably be expected
to result in a Material Adverse Effect;
(m) the actual or asserted invalidity of this Agreement or any
related loan documentation or of any material agreement hereunder;
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(n) any default under any other material agreement of the Company or
any Subsidiary that, in the reasonable judgment of the Required Lenders,
would result in a Material Adverse Effect; or
(o) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Company
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent, at the request of the
Required Lenders, shall, by notice to the Company, take either or both of the
following actions, at the same or different times: (i) terminate forthwith the
Commitments and (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared
to be due and payable, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of the Company accrued hereunder, shall
become forthwith due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, anything
contained herein to the contrary notwithstanding; and, in any event with
respect to the Company described in paragraph (g) or (h) above, the Commitments
shall automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and any unpaid accrued Fees and all
other liabilities of the Company accrued hereunder shall automatically become
due and payable, without presentment, demand, protest or any other notice of
any kind, all of which are hereby expressly waived, anything contained herein
to the contrary notwithstanding.
ARTICLE VII
THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this Agreement,
Chemical Bank is hereby appointed to act as Administrative Agent on behalf of
the Lenders. Each of the Lenders hereby irrevocably authorizes the
Administrative Agent to take such actions on behalf of such Lender or holder
and to exercise such powers as are specifically delegated to the Administrative
Agent by the terms and provisions hereof, together with such actions and powers
as are reasonably incidental thereto. The Administrative Agent is hereby
expressly authorized by the Lenders, without hereby limiting any implied
authority, (a) to receive on behalf of the Lenders all payments of principal of
and interest on the Loans and all other amounts due to the Lenders hereunder,
and promptly to distribute to each Lender its proper share of each payment so
received; (b) to give notice on behalf of each of the Lenders to the Company of
any Event of Default of which the Administrative Agent has actual knowledge
acquired in connection with its agency hereunder, and (c) to distribute to each
Lender copies of all
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notices, financial statements and other materials delivered by the Company
pursuant to this Agreement as received by the Administrative Agent.
Neither the Administrative Agent nor any of its directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his or her own gross negligence or willful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith, or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Company of any of the terms, conditions, covenants or
agreements contained in this Agreement. The Administrative Agent shall not be
responsible to the Lenders for the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement or other instruments or
agreements. The Administrative Agent may deem and treat the Lender which makes
any Loan as the holder of the indebtedness resulting therefrom for all purposes
hereof until it shall have received notice from such Lender, given as provided
herein, of the transfer thereof. The Administrative Agent shall in all cases
be fully protected in acting, or refraining from acting, in accordance with
written instructions signed by the Required Lenders and, except as otherwise
specifically provided herein, such instructions and any action or inaction
pursuant thereto shall be binding on all the Lenders. The Administrative Agent
shall, in the absence of knowledge to the contrary, be entitled to rely on any
instrument or document believed by it in good faith to be genuine and correct
and to have been signed or sent by the proper person or persons. Neither the
Administrative Agent nor any of its directors, officers, employees or agents
shall have any responsibility to the Company on account of the failure of or
delay in performance or breach by any Lender of any of its obligations
hereunder or to any Lender on account of the failure of or delay in performance
or breach by any other Lender or the Company of any of their respective
obligations hereunder or in connection herewith. The Administrative Agent may
execute any and all duties hereunder by or through agents or employees and
shall be entitled to rely upon the advice of legal counsel selected by it with
respect to all matters arising hereunder and shall not be liable for any action
taken or suffered in good faith by it in accordance with the advice of such
counsel.
The Lenders hereby acknowledge that the Administrative Agent shall be
under no duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement unless it shall be requested in
writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agent may resign at
any time by notifying the Lenders and the Company. Upon any such resignation,
the Required Lenders shall have the right to appoint a successor Administrative
Agent acceptable to the Company. If no
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successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent
may, on behalf of the Lenders, appoint a successor Administrative Agent which
shall be a bank with an office in New York, New York, having a combined capital
and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon
the acceptance of any appointment as Administrative Agent hereunder by a
successor bank, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After the Administrative Agent's resignation hereunder,
the provisions of this Article and Section 8.5 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Administrative Agent.
With respect to the Loans made by it hereunder, the Administrative
Agent in its individual capacity and not as Administrative Agent shall have the
same rights and powers as any other Lender and may exercise the same as though
it were not the Administrative Agent, and the Administrative Agent and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Company or any Subsidiary or other Affiliate thereof
as if it were not the Administrative Agent.
Each Lender agrees (i) to reimburse the Administrative Agent, on
demand, in the amount of its pro rata share (based on its Commitment hereunder
or, if the Commitments shall have been terminated, the amount of its
outstanding Loans) of any expenses incurred for the benefit of the Lenders by
the Administrative Agent, including counsel fees and compensation of agents and
employees paid for services rendered on behalf of the Lenders, which shall not
have been reimbursed by the Company and (ii) to indemnify and hold harmless the
Administrative Agent and any of its directors, officers, employees or agents,
on demand, in the amount of such pro rata share, from and against any and all
liabilities, taxes, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against it in its
capacity as the Administrative Agent in any way relating to or arising out of
this Agreement or any action taken or omitted by it under this Agreement to the
extent the same shall not have been reimbursed by the Company, provided that no
Lender shall be liable to the Administrative Agent for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence or
willful misconduct of the Administrative Agent or any of its directors,
officers, employees or agents.
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Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement or any related agreement or any document furnished hereunder or
thereunder.
ARTICLE VIII
MISCELLANEOUS
8.1 NOTICES. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier
service, mailed or sent by telecopy, as follows:
(a) if to the Company, to American Bankers Insurance Group, Inc.,
11222 Quail Roost Drive, Miami FL 33157-6987, Attention of Floyd G.
Denison, (Telecopy No. (305) 252-7068);
(b) if to the Administrative Agent, to Chemical Bank Agency Services
Corp., 140 East 45th Street, 29th Floor, New York, New York 10017,
Attention of Janet Beldon, (Telecopy No. (212) 662-0002), with a copy to
Chemical Bank at 270 Park Avenue, New York, New York 10017, Re: American
Bankers Insurance Group, Inc.; and
(c) if to a Lender, to it at its address (or telecopy number) set
forth in Schedule 2.1 or in the Assignment and Acceptance pursuant to
which such Lender became a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy to such party as provided in this Section or in accordance with the
latest unrevoked direction from such party given in accordance with this
Section.
8.2 SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by the Company herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Lenders and shall survive the making by the
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Lenders of the Loans regardless of any investigation made by the Lenders or on
their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any Fee or any other amount
payable under this Agreement is outstanding and unpaid or the Commitments have
not been terminated.
8.3 BINDING EFFECT. This Agreement shall become effective when it
shall have been executed by the Company and the Administrative Agent and when
the Administrative Agent shall have received copies hereof (telecopied or
otherwise) which, when taken together, bear the signature of each Lender, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Company shall not
have the right to assign any rights hereunder or any interest herein without
the prior consent of all the Lenders.
8.4 SUCCESSORS AND ASSIGNS. (a) Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any party that are contained in this Agreement
shall bind and inure to the benefit of its successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion
of its interests, rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans at the time owing to it), provided
that (i) the Company must give its prior written consent to such assignment,
which consent shall not to be unreasonably withheld, (ii) the parties to each
such assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance, and a processing and recordation fee of $3,000, and
(iii) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire. Upon acceptance and
recording pursuant to paragraph (e) of this Section, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall be at least five Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of
a Lender under this Agreement and (B) the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease
to be a party hereto (but shall continue to be entitled to the benefits of
Sections 2.13, 2.15, 2.19 and 8.5, as well as to any Fees accrued for its
account hereunder and not yet paid)). Notwithstanding the foregoing, any
Lender assigning its rights and obligations under this Agreement may retain any
Competitive Loans made by it outstanding at such time, and
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in such case shall retain its rights hereunder in respect of any Loans so
retained until such Loans have been repaid in full in accordance with this
Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender represents and warrants that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of any
adverse claim, (ii) except as set forth in (i) above, such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Agreement, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto or the financial condition of the Company or
the performance or observance by the Company of any obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance; (iv) such assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements delivered pursuant to Sections 5.3 and 5.4 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (v) such
assignee will independently and without reliance upon the Administrative Agent,
such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (vi) such
assignee appoints and authorizes the Administrative Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at one of its offices in
The City of New York a copy of each Assignment and Acceptance delivered to it
and a register for the recordation of the names and addresses of the Lenders,
and the Commitment of, and the principal amount of the Loans owing to, each
Lender pursuant to the terms hereof from time to time (the "REGISTER"). The
entries in the Register shall be conclusive in the absence of manifest error
and the Company, the Administrative Agent and the Lenders may treat each person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by each party hereto, at any reasonable time and from time to
time upon reasonable prior notice.
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(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee together with an Administrative
Questionnaire completed in respect of the assignee (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in paragraph (b) above and, if required, the written consent of the Company to
such assignment, the Administrative Agent shall (i) accept such Assignment and
Acceptance and (ii) record the information contained therein in the Register.
(f) Each Lender may sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it), provided that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) each
participating bank or other entity shall be entitled to the benefit of the cost
protection provisions contained in Sections 2.13, 2.15 and 2.19 to the same
extent as if it were the selling Lender (and limited to the amount that could
have been claimed by the selling Lender had it continued to hold the interest
of such participating bank or other entity), except that all claims made
pursuant to such Sections shall be made through such selling Lender, and (iv)
the Company, the Administrative Agent and the other Lenders shall continue to
deal solely and directly with such selling Lender in connection with such
Lender's rights and obligations under this Agreement.
(g) Any Lender or participant may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Company furnished to such Lender,
provided that prior to any such disclosure, each such assignee or participant
or proposed assignee or participant shall execute an agreement whereby such
assignee or participant shall agree (subject to customary exceptions) to
preserve the confidentiality of any such information.
(h) The Company shall not assign or delegate any rights and duties
hereunder without the prior written consent of all Lenders.
(i) Any Lender may at any time pledge all or any portion of its
rights under this Agreement to a Federal Reserve Bank, provided that no such
pledge shall release any Lender from its obligations hereunder or substitute
any such Bank for such Lender as a party hereto. In order to facilitate such
an assignment to a Federal Reserve Bank, the Company shall, at the request of
the assigning Lender, duly execute and deliver to the assigning Lender a
promissory note or notes evidencing the Loans made to the Company by the
assigning Lender hereunder.
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8.5 EXPENSES; INDEMNITY. (a) The Company agrees to pay all
reasonable out-of-pocket expenses incurred by the Administrative Agent in
connection with entering into this Agreement or in connection with any
amendments, modifications or waivers of the provisions hereof, or incurred by
the Administrative Agent or any Lender in connection with the enforcement of
their rights in connection with this Agreement or in connection with the Loans
made hereunder, including the fees and disbursements of counsel for the
Administrative Agent or, in the case of enforcement, the Lenders.
(b) The Company agrees to indemnify the Administrative Agent, each
Lender, each of their Affiliates and the directors, officers, employees and
agents of the foregoing (each such person being called an "INDEMNITEE")
against, and to hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including reasonable counsel fees
and expenses, incurred by or asserted against any Indemnitee arising out of (i)
the consummation of the transactions contemplated by this Agreement, (ii) the
use of the proceeds of the Loans or (iii) any claim, litigation, investigation
or proceeding relating to any of the foregoing, whether or not any Indemnitee
is a party thereto, provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a final judgment of a court
of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of such Indemnitee.
(c) The provisions of this Section shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term
or provision of this Agreement or any investigation made by or on behalf of the
Administrative Agent or any Lender. All amounts due under this Section shall
be payable on written demand therefor.
8.6 APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
8.7 WAIVERS; AMENDMENT. (a) No failure or delay of the
Administrative Agent or any Lender in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof
or the exercise of any other right or power. The rights and remedies of the
Administrative Agent and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies which they would otherwise have. No waiver
of any provision of this Agreement or consent to any departure therefrom shall
in any event be effective unless the same shall be permitted by paragraph (b)
below, and then
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such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the Company or any
Subsidiary in any case shall entitle such party to any other or further notice
or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Company and the Required Lenders, provided that no such
agreement shall (i) decrease the principal amount of, or extend the maturity of
or any scheduled principal payment date or date for the payment of any interest
on any Loan, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan, without the prior written consent of
each Lender affected thereby, (ii) increase the Commitment or decrease the
Facility Fee or Utilization Fee of any Lender without the prior written consent
of such Lender, or (iii) amend or modify the provisions of Section 2.16 or
Section 8.4(h), the provisions of this Section or the definition of the
"Required Lenders", without the prior written consent of each Lender, provided
further, that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Administrative Agent hereunder without the prior
written consent of the Administrative Agent. Each Lender shall be bound by any
waiver, amendment or modification authorized by this Section and any consent by
any Lender pursuant to this Section shall bind any assignee of its rights and
interests hereunder.
8.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
contract among the parties relative to the subject matter hereof. Any previous
agreement among the parties with respect to the subject matter hereof is
superseded by this Agreement. Nothing in this Agreement, expressed or implied,
is intended to confer upon any party other than the parties hereto any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
8.9 SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
8.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective as
provided in Section 8.3.
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8.11 HEADINGS. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
8.12 RIGHT OF SETOFF. If an Event of Default shall have occurred and
be continuing, each Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or obligations of the Company now or hereafter existing under this
Agreement held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Company after such setoff
and application made by such Lender, but the failure to give such notice shall
not affect the validity of such setoff and application. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
8.13 JURISDICTION: CONSENT TO SERVICE OF PROCESS. (a) The Company
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in The City of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Subject to the foregoing and to paragraph (b) below, nothing in this Agreement
shall affect any right that any party hereto may otherwise have to bring any
action or proceeding relating to this Agreement against any other party hereto
in the courts of any jurisdiction.
(b) The Company hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or thereafter 0have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any New York State
or Federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
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(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
8.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND OTHER PARTIES
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATION IN THIS SECTION.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
AMERICAN BANKERS INSURANCE GROUP, INC.,
as Borrower,
By /s/ Floyd G. Denison
-------------------------------
Name: Floyd G. Denison
Title: Executive Vice President
CHEMICAL BANK, individually and as Administrative
Agent,
By /s/ Heather Lindstrom
-------------------------------
Name: Heather Lindstrom
Title: Vice President
BARCLAYS BANK PLC, NEW YORK BRANCH
individually and as Co-Agent
By /s/ C. Cathcart
-------------------------------
Name: C. Cathcart
Title: Vice President
ABN AMRO BANK N.V.
By /s/ Andres von Dincklage
-------------------------------
Name: Andres von Dicklage
Title: Group Vice President
By /s/ Richard Lavina
-------------------------------
Name: Richard Lavina
Title: Vice President
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AMSOUTH BANK OF ALABAMA
By /s/ Robert B. DeHaven
-------------------------------
Name: Robert B. DeHaven
Title: Vice President
THE BANK OF NEW YORK
By /s/ Frederick E. Ball II
-------------------------------
Name: Frederick E. Ball II
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ Carolyn A. Lopez
-------------------------------
Name: Carolyn A. Lopez
Title: Relationship Manager
THE BANK OF TOKYO TRUST COMPANY
By /s/ Joseph P. Devoe
--------------------------------
Name: Joseph P. Devoe
Title: Vice President
BARNETT BANK OF SOUTH FLORIDA, N.A.
By /s/ Gene Schaefer
--------------------------------
Name: Gene Schaefer
Title: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By /s/ Renand Herbes
--------------------------------
Name: Renand Herbes
Title: Senior Vice President
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DEUTSCHE BANK AG, NEW YORK BRANCH
and/or CAYMAN ISLANDS BRANCHES
By /s/ Louis Caltavuturo
--------------------------------
Name: Louis Caltavuturo
Title: Associate
By /s/ Cynthia A. Gavenda
--------------------------------
Name: Cynthia A. Gavenda
Title: Associate
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ J. J. Winn Jr.
---------------------------------
Name: J. J. Winn Jr.
Title: Senior Vice President
THE FUJI BANK, LIMITED, NEW YORK BRANCH
By /s/ Gina Kearns
----------------------------------
Name: Gina Kearns
Title: Vice President & Manager
SHAWMUT BANK CONNECTICUT, N.A.
By /s/ Jeffrey A. Simpson
----------------------------------
Name: Jeffrey A. Simpson
Title: Assistant Vice President
STATE STREET BANK AND TRUST COMPANY
By /s/ Edward M. Anderson
----------------------------------
Name: Edward M. Anderson
Title: Vice President
SUNTRUST BANK, MIAMI, N.A.
By: /s/ J. Kevin Tinny
---------------------------------
Name: J. Kevin Tinny
Title: Senior Vice President
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EXHIBIT A-1
FORM OF COMPETITIVE BID REQUEST
Chemical Bank, as Administrative Agent
for the Lenders referred to below,
270 Park Avenue
New York, NY 10017
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, American Bankers Insurance Group, Inc. (the
"BORROWER"), refers to the 5-Year Competitive Advance and Revolving Credit
Facility Agreement dated as of ___________, 1995 (as it may hereafter be
amended, modified, extended or restated from time to time, the "CREDIT
AGREEMENT"), among the Company, the Lenders named therein and Chemical Bank, as
Administrative Agent and Barclays Bank PLC, New York Branch, as Co-Agent.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement. The Company hereby
gives you notice pursuant to Section 2.3(a) of the Credit Agreement that it
requests a Competitive Borrowing under the Credit Agreement, and in that
connection sets forth below the terms on which such Competitive Borrowing is
requested to be made:
(A) Date of Competitive Borrowing
(which is a Business Day)
-------------
(B) Principal amount of
Competitive Borrowing(1) -------------
(C) Interest rate basis(2) -------------
(D) Interest Period and the
last day thereof(3) -------------
- ------------------------------
(1) Not less than $5,000,000 (and in integral multiples of $1,000,000) or
greater than the Total Commitment then available.
(2) Eurodollar Loan or Fixed Rate Loan.
(3) Which shall be subject to the definition of "Interest Period" and end
not later than the Maturity Date.
<PAGE> 76
Upon acceptance of any or all of the Loans offered by the Lenders in
response to this request, the Company shall be deemed to have represented and
warranted that the conditions to lending specified in Section 4.1(b) and (c) of
the Credit Agreement have been satisfied.
Very truly yours,
AMERICAN BANKERS INSURANCE GROUP, INC.
By:
-------------------------
Name:
Title: [Financial Officer]
2
<PAGE> 77
EXHIBIT A-2
FORM OF NOTICE OF COMPETITIVE BID REQUEST
[Name of Lender]
[Address]
New York, New York
[Date]
Attention: [ ]
Dear Ladies and Gentlemen:
Reference is made to the 5-Year Competitive Advance and Revolving
Credit Facility Agreement dated as of [___________], 1995 (as it may hereafter
be amended, modified, extended or restated from time to time, the "CREDIT
AGREEMENT"), among American Bankers Insurance Group, Inc. (the "BORROWER"), the
Lenders named therein and Chemical Bank, as Administrative Agent, and Barclays
Bank PLC, New York Branch, as Co-Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement. The Company made a Competitive Bid Request on ____________,
19[ ], pursuant to Section 2.03(a) of the Credit Agreement, and in that
connection you are invited to submit a Competitive Bid by [Date]/[Time].1 Your
Competitive Bid must comply with Section 2.03(b) of the Credit Agreement and
the terms set forth below on which the Competitive Bid Request was made:
(A) Date of Competitive Borrowing
-------------
(B) Principal amount of
Competitive Borrowing
-------------
- ------------------------
(1) The Competitive Bid must be received by the Administrative Agent (i) in
the case of Eurodollar Loands, not later than 9:30 a.m., New York City
time, three Business Days before a proposed Competitive Borrowing, and
(ii) in the case of Fixed Rate Loans, not later than 9:30 a.m., New York
City time, on the Business Day of a proposed Competitive Borrowing.
<PAGE> 78
(C) Interest rate basis
-------------
(D) Interest Period and the
last day thereof.
-------------
Very truly yours,
CHEMICAL BANK,
as Administrative Agent,
By:
-------------------------
Name:
Title:
2
<PAGE> 79
EXHIBIT A-3
FORM OF COMPETITIVE BID
Chemical Bank, as Administrative Agent
for the Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, [Name of Lender], refers to the 5-Year Competitive
Advance and Revolving Credit Facility Agreement dated as of [________], 1995
(as it may hereafter be amended, modified, extended or restated from time to
time, the "CREDIT AGREEMENT"), among American Bankers Insurance Group, Inc.
(the "BORROWER"), the Lenders named therein and Chemical Bank, as
Administrative Agent Agent, and Barclays Bank PLC, New York Branch, as
Co-Agent. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The
undersigned hereby makes a Competitive Bid pursuant to Section 2.3(b) of the
Credit Agreement, in response to the Competitive Bid Request made by the
Company on __________, 19[ ], and in that connection sets forth below the
terms on which such Competitive-Bid is made:
(A) Principal Amount(1)
-------------
(B) Competitive Bid Rate(2)
-------------
(C) Interest Period and
last day thereof -------------
- ----------------------------
(1) Not less than $5,000,000 or greater than the requested Competitive
Borrowing and in integral multiples of $1,000,000. Multiple bids will be
accepted by the Administrative Agent.
(2) i.e., Adjusted LIBO Rate + or - __%, in the case of Eurodollar Loans or
__%, in the case of Fixed Rate Loans.
<PAGE> 80
The undersigned hereby confirms that it is prepared, subject to the
conditions set forth in the Credit Agreement, to extend credit to the Company
upon acceptance by the Company of this bid in accordance with Section 2.3(d) of
the Credit Agreement.
Very truly yours,
[NAME OF LENDER],
By:
-------------------------
Name:
Title:
<PAGE> 81
EXHIBIT A-4
FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER
[Date]
Chemical Bank, as Administrative Agent
for the Lenders referred to below
270 Park Avenue
New York, N.Y. 10017
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, American Bankers Insurance Group, Inc. (the
"BORROWER"), refers to the 5-Year Competitive Advance and Revolving Credit
Facility Agreement dated as of [________], 1995 (as it may hereafter be
amended, modified, extended or restated from time to time, the "CREDIT
AGREEMENT"), among the Company, the Lenders named therein and Chemical Bank, as
Administrative Agent for the Lenders, and Barclays Bank PLC, New York Branch,
as Co-Agent. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Credit Agreement.
In accordance with Section 2.3(c) of the Credit Agreement, we have
received a summary of bids in connection with our Competitive Bid Request dated
___________, 19[ ], and in accordance with Section 2.3(d) of the Credit
Agreement, we hereby accept the following bids for maturity on [date]:
<TABLE>
<CAPTION>
Principal Amount Fixed Rate/Margin Lender
- ---------------- ----------------- ------
<S> <C>
$ [%]/[+/-. %]
$
</TABLE>
We hereby reject the following bids:
<TABLE>
<CAPTION>
Principal Amount Fixed Rate/Margin Lender
- ---------------- ----------------- ------
<S> <C>
$ [%]/[+/-. %]
$
</TABLE>
<PAGE> 82
The $__________ should be deposited in Chemical Bank account number [
] on [date].
We hereby represent and certify that this Competitive Bid
Accept/Reject Letter has been executed on behalf of the Borrower by its duly
authorized representative at a location outside the State of Florida.
Very truly yours,
AMERICAN BANKERS INSURANCE
GROUP, INC.
By:
--------------------------
Name:
Title:
2
<PAGE> 83
EXHIBIT A-5
FORM OF STANDBY BORROWING REQUEST
Chemical Bank, as Administrative Agent
for the Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, AMERICAN BANKERS INSURANCE GROUP, INC. (the
"BORROWER"), refers to the 5-Year Competitive Advance and Revolving Credit
Facility Agreement dated as of [__________], 1995 (as it may hereafter be
amended, modified, extended or restated from time to time, the "CREDIT
AGREEMENT"), among the Company, the Lenders named therein and Chemical Bank, as
Administrative Agent and Barclays Bank PLC, New York Branch, as Co-Agent.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement. The Company hereby
gives you notice pursuant to Section 2.4 of the Credit Agreement that it
requests a Standby Borrowing under the Credit Agreement, and in that connection
sets forth below the terms on which such Standby Borrowing is requested to be
made:
(A) Date of Standby Borrowing
(which is a Business Day)
-------------
(B) Principal amount of Standby
Borrowing(1)
-------------
(C) Interest rate basis(2)
-------------
- -------------------------------
(1) Not less than $5,000,000 (and in integral multiples of $1,000,000) or
greater than the Total Commitment then available.
(2) Eurodollar Loan or ABR Loan.
<PAGE> 84
EXHIBIT A-5
(D) Interest Period and the
last day thereof(1)
-------------
Upon acceptance of any or all of the Loans made by the Lenders in
response to this request, the Company shall be deemed to have represented and
warranted that the conditions to lending specified in Sections 4.1(b) and (c)
of the Credit Agreement have been satisfied.
Very truly yours,
AMERICAN BANKERS INSURANCE
GROUP, INC.
By:
---------------------------
Name:
Title: [Financial Officer]
- ---------------------------
(1) Which shall be subject to the definition of "Interest Period" and end not
later than the Maturity Date.
2
<PAGE> 85
EXHIBIT B
[CHEMICAL BANK LOGO]
CHEMICAL BANK
140 East 45th Street
New York, NY 10017-3162
212 622-0001
Fax 212/622-0002
Telex 353006 ABSC AMERICAN BANKERS INSURANCE GROUP, INC.
ADMINISTRATIVE QUESTIONNAIRE
Please accurately complete the following information and return via FAX to the
attention of Janet Belden at Chemical Bank as soon as possible.
FAX Number: 212-622-0122
LEGAL NAME TO APPEAR IN DOCUMENTATION:
- --------------------------------------
________________________________________________________________
GENERAL INFORMATION - DOMESTIC LENDING OFFICE:
- ----------------------------------------------
Institution Name: ______________________________________________
Street Address: ______________________________________________
City, State, Zip Code: _________________________________________
GENERAL INFORMATION - EURODOLLAR LENDING OFFICE:
- -----------------------------------------------
Institution Name: ______________________________________________
Street Address: ______________________________________________
City, State, Zip Code: _________________________________________
CONTACTS/NOTIFICATION METHODS:
- -----------------------------
CREDIT CONTACTS:
Primary Contact: ______________________________________________
Street Address: ______________________________________________
City, State, Zip Code: _________________________________________
Phone Number: ________________________________________________
FAX Number: ______________________________________________
Backup Contact: ______________________________________________
Street Address: ______________________________________________
City, State, Zip Code: _________________________________________
Phone Number: _________________________________________________
FAX Number: ___________________________________________________
<PAGE> 86
TAX WITHHOLDING:
Non Resident Alien ______ Y* ______ N
* Form 4224 Enclosed
Tax ID Number _______________________
CONTACTS/NOTIFICATION METHODS:
ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, INTEREST, FEES, ETC.
Contact: ___________________________________________________________
Street Address: ____________________________________________________
City, State, Zip Code: _____________________________________________
Phone Number: ______________________________________________________
FAX Number: ________________________________________________________
BID LOAN NOTIFICATION
Contact: ___________________________________________________________
Street Address: ____________________________________________________
City, State, Zip Code:______________________________________________
Phone Number: ______________________________________________________
Fax Number: ______________________________________________________
PAYMENT INSTRUCTIONS:
Name of Bank where funds are to be transferred:
__________________________________________________________________
Routing Transit/ABA number of Bank where funds are to be transferred:
___________________________________________________________________
Name of Account, if applicable:
____________________________________________________________________
Account Number: ______________________________________________________
Additional Information: ______________________________________________
______________________________________________
It is very important that ALL of the above information is accurately filled
in and returned promptly. If there is someone other than yourself who should
receive this questionnaire, please notify us of their name and FAX number and
we will FAX them a copy of the questionnaire. If you have any questions, please
call me on 212-622-0011.
<PAGE> 87
EXHIBIT C
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Dated: _____________, 19__
Reference is made to the 5-Year Competitive Advance and Revolving
Credit Facility Agreement dated as of ____________, 1995 (the "CREDIT
AGREEMENT"), among American Bankers Insurance Group, Inc. (the "BORROWER"), the
Lenders named therein and Chemical Bank, as Administrative Agent for the
Lenders, and Barclays Bank PLC, New York Branch, as Co- Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of the Effective Date set forth below, the interests
set forth below (the "ASSIGNED INTEREST") in the Assignor's [right, title,
interest and obligations in, to and under the Credit Agreement, including,
without limitation, the interests set forth below in the Commitment of the
Assignor on the Effective Date and the Competitive Loans and Standby Loans
owing to the Assignor which are outstanding on the Effective Date. Each of the
Assignor and the Assignee hereby makes and agrees to be bound by all the
representations, warranties and agreements set forth in Section 8.4 of the
Credit Agreement, a copy of which has been received by each such party. From
and after the Effective Date, (i) the Assignee shall be a party to and be bound
by the provisions of the Credit Agreement and, to the extent of the interests
assigned by this Assignment and Acceptance, have the rights and obligations of
a Lender thereunder and (ii) the Assignor shall, to the extent of the interests
assigned by this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
2. This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is organized under the
laws of a jurisdiction outside the United States, the forms specified in
Section 2.19(g) of the Credit Agreement, duly completed and executed by such
Assignee, (ii) if the Assignee is not already a Lender under the Credit
Agreement, an Administrative Questionnaire in the form of Exhibit B to the
Credit Agreement and (iii) a processing and recordation fee of $________.
3. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.
<PAGE> 88
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
2
<PAGE> 89
Effective Date of Assignment
(may not be fewer than 5 Business
Days after the Date of Assignment):
<TABLE>
<CAPTION>
Percentage Assigned of
Facility/Commitment (set forth,
to at least 8 decimals, as a
Principal Amount Assigned (and percentage of the Facility and
identifying information as to the aggregate Commitments of all
Facility individual Competitive Loans) Lenders thereunder)
-------- ------------------------------- ---------------------------------
<S> <C> <C>
Commitment Assigned: $ %
----------- -----------
Standby Loans: $ %
----------- -----------
Competitive Loans: $ %
----------- -----------
The terms set forth and on the reverse ACCEPTED:
side hereof are hereby agreed to:
AMERICAN BANKERS INSURANCE GROUP, INC.
- ----------------------------, as By:------------------------------------
Assignor, Name:
Title:
By:-------------------------
Name:
Title:
- ----------------------------, as
Assignee,
By:-------------------------
Name:
Title:
</TABLE>
3
<PAGE> 90
EXHIBIT D
[FORM OF]
OPINION OF COUNSEL FOR
AMERICAN BANKERS INSURANCE GROUP, INC.1
1. American Bankers Insurance Group, Inc. and each of its Material
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of Florida, (ii) has all requisite power and authority
to own its property and assets and to carry on its business as now conducted,
(iii) is qualified to do business in every jurisdiction within the United
States where such qualification is required, except where the failure so to
qualify would not result in a Material Adverse Effect on American Bankers
Insurance Group, Inc., and (iv) has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Agreement and to
borrow funds thereunder.
2. The execution, delivery and performance by American Bankers
Insurance Group, Inc. of the Agreement and the borrowings of American Bankers
Insurance Group, Inc. thereunder (collectively, the "TRANSACTIONS") (i) have
been duly authorized by all requisite corporate action and (ii) will not (a)
violate (1) any provision of law, statute, rule or regulation (including,
without limitation, the Margin Regulations), or of the certificate of
incorporation or other constitutive documents or by-laws of American Bankers
Insurance Group, Inc. or any Material Subsidiary, (2) any order of any
Governmental Authority or (3) any provision of any indenture, agreement or
other instrument to which American Bankers Insurance Group, Inc. or any
Material Subsidiary is a party or by which any of their property is bound, (b)
be in conflict with, result in a breach of or constitute (alone or with notice
or lapse of time or both) a default under any such indenture, agreement or
other instrument or (c) result in the creation or imposition of any Lien upon
any property or assets of American Bankers Insurance Group, Inc. or any
Subsidiary.
3. The Agreement has been duly executed and delivered by American
Bankers Insurance Group, Inc. and constitutes a legal, valid and binding
obligation of American Bankers Insurance Group, Inc. enforceable against
American Bankers Insurance Group,
_________________________________
(1) Capitalized terms used but not otherwise defined herein shall have
the meanings assigned to such terms in the Competitive Advance and
Revolving Credit Facility Agreement (the "AGREEMENT") dated as of
[________], 1995, among American Bankers Insurance Group, Inc., the
lenders listed in Schedule 2.1 thereto, and Chemical Bank, as
Administrative Agent and Barclays Bank PLC, as Co-Agent.
1
<PAGE> 91
Inc. in accordance with its terms, subject as to the enforceability of rights
and remedies to any applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws of general application relating to or
affecting the enforcement of creditors' rights from time to time in effect.
4. No action, consent or approval of, registration or filing with,
or any other action by, any Government Authority is or will be required in
connection with the Transactions, except such as have been made or obtained and
are in full force and effect.
5. Neither American Bankers Insurance Group, Inc. nor any of its
Material Subsidiaries is (a) an "investment company" or a company "controlled"
by an "investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended or (b) a "holding company" as
defined in, or subject to regulation under, the Public Utility Holding Company
Act of 1935, as amended.
6. Except as set forth in Schedule 3.8 of the Agreement, there are
no actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to the best of our knowledge, threatened
against or affecting the Company or any Material Subsidiary or any business,
property or rights of any such person (i) which involve this Agreement or the
Transactions or (ii) as to which there is a reasonable probability of an
adverse determination and which, if adversely determined, could, individually
or in the aggregate, result in a Material Adverse Effect.
7. No Insurance Subsidiary is subject to (i) any order of
liquidation, rehabilitation, conservation, supervision or any other order of
like effect issued by any Applicable Insurance Regulatory Authority or (ii) any
plan of action of any Applicable Insurance Regulatory Authority which would
result in the control or direction by such Applicable Insurance Regulatory
Authority of the management, policies or ongoing business activities of such
Insurance Subsidiary.
8. No License is the subject of, or to the best of our knowledge
threatened to be the subject of, a proceeding for suspension, revocation,
restriction on License authority or limitation on premiums written or any
similar proceedings, and to the best of the our knowledge there exists no
sustainable basis for any such suspension, revocation, restriction on License
authority or limitation on premiums written, except where such suspension,
revocation, restriction, or limitation would not individually or in the
aggregate result in a Material Adverse Effect.
9. The common stock of each of the Material Subsidiaries listed on
Schedule 3.7 of the Agreement has been duly authorized and validly issued, is
fully paid and
2
<PAGE> 92
nonassessable, constitutes all of the issued and outstanding shares of the
capital stock of such corporation, and is owned, of record and beneficially, by
the Company.
10. Except as set forth in Schedule 3.16 of the Agreement and as
required by law, rule or regulation or by any Governmental Authority, including
any Applicable Insurance Regulatory Authority, to the best of our knowledge no
indenture, certificate of designation for preferred stock, agreement or
instrument to which any Material Subsidiary is a party will, directly or
indirectly, prohibit or restrain the payment of dividends by such Material
Subsidiary. As of the Closing Date, no such indenture, certificate, agreement
or instrument to which the Company or any Material Subsidiary is a party will
require the repayment of any amounts owed by the Company or such Material
Subsidiary as a result of the consummation of the Transactions.
3
<PAGE> 93
SCHEDULE 2.1
<TABLE>
<CAPTION>
Name and Address of Lender Contact Person, Fax and Commitment
-------------------------- ----------------------- ----------
Telephone Nos.
--------------
<S> <C> <C>
Chemical Bank Heather Lindstrom $ 22,000,000
270 Park Avenue Fax: (212) 270-1789
New York, New York 10017 Tel: (212) 270-9839
Barclays Bank PLC, New York Branch Chris Cathcart $ 21,000,000
222 Broadway, 12th Floor Fax: (212) 412-5610
New York, New York 10038 Tel: (212) 412-7622
ABN AMRO Bank, N.V. Rick Lavina $ 11,000,000
200 South Biscayne Blvd. Fax: (305) 372-2397
Suite 2200 Tel: (305) 579-9760
Miami, Florida 33131
AmSouth Bank of Alabama Judy Fry $ 11,000,000
1900 Fifth Avenue, North Fax: (205) 326-5601
Birmingham, Alabama 35203 Tel: (205) 581-7015
The Bank of New York Frederick E. Ball, II $ 19,000,000
1 Wall Street, 17th Floor Fax: (212) 809-9520
New York, New York 10286 Tel: (212) 635-6466
The Bank of Nova Scotia Frank Sandler $ 19,000,000
600 Peachtree Street, N.E. Fax: (404) 888-8998
Suite 2700 Tel: (404) 877-1505
Atlanta, Georgia 30308
The Bank of Tokyo Trust Company Joe Devoe $ 19,000,000
1251 Avenue of the Americas Fax: (212) 782-6440
12th Floor Tel: (212) 782-4318
New York, New York 10005
Barnett Bank of South Florida, N.A. Gene Schaefer $ 19,000,000
701 Brickell Avenue Fax: (305) 350-7005
Miami, Florida 33131 Tel: (305) 789-3054
</TABLE>
1
<PAGE> 94
<TABLE>
<S> <C> <C>
Credit Lyonnais Peter Rasmussen $ 11,000,000
1301 Avenue of the Americas Fax: (212) 261-3401
17th Floor Tel: (212) 261-7718
New York, New York 10019
Deutsche Bank AG, New York Branch Susan Maros $ 19,000,000
31 West 52nd Street Fax: (212) 474-8108
New York, New York 10019 Tel: (212) 474-8104
The First National Bank of Chicago Paul Schultz $ 19,000,000
One First National Plaza Fax: (312) 732-4033
Suite 0085 Tel: (312) 732-7074
Chicago, Illinois 60670-0085
The Fuji Bank, Limited Mike Imperiale $ 19,000,000
2 World Trade Center Fax: (212) 912-0516
79th Floor Tel: (212) 898-2080
New York, New York 10048
with copy to:
The Fuji Bank, Limited Ray Juncosa
200 S. Biscayne Blvd. Fax: (305) 381-8338
Suite 3440 Tel: (305) 374-2226
Miami, Florida 33131
Shawmut Bank Connecticut, N.A. Jeff Simpson $ 11,000,000
777 Main Street Fax: (860) 986-1264
Hartford, CT 06115 Tel: (860) 986-2688
State Street Bank & Trust Company Edward M. Anderson $ 11,000,000
108 Myrtle Street Fax: (617) 985-5082
North Quincy, MA 02171 Tel: (617) 985-5301
SunTrust Bank, Miami N.A. J. Kevin Tinny $ 19,000,000
777 Brickell Avenue Fax: (305) 579-7133
4th Floor Tel: (305) 579-7340
Miami, Florida 33131
</TABLE>
2
<PAGE> 95
SCHEDULE 3.6
Capital Leases
None.
<PAGE> 96
SCHEDULE 3.7
Subsidiaries
See attached.
<PAGE> 97
AMERICAN BANKERS INSURANCE GROUP, INC.
ORGANIZATIONAL STRUCTURE
NOVEMBER, 1995
AMERICAN BANKERS INSURANCE GROUP, INC.
ABIG Servicios de Mexico, S.A.
AB Warranty Company
AB Warranty Company of Florida
American Bankers Capital, Inc.
American Bankers Financial Services (50%)
AFBS Insurance Agency, Inc. (50%)
Grand General Insurance Agency (50%)
American Bankers Insurance Company of Florida
American Bankers General Agency, Inc.
Caydeaux Group, Ltd. (54%)
Caydeaux Life Assurance Company, Ltd. (54%)
Caydeaux Insurance Company, Ltd. (54%)
Roadgard Motor Club, Inc. (Canada)
American Bankers Life Assurance Company of Florida
ABL Agents' Services, Inc.
Caribbean American Life Assurance Company
Condeaux Life Insurance Company (79%)
American Bankers Management Company, Inc.
Consumer Assist Network Association, Inc.
American Reliable Insurance Company
American Summit General Agency, Inc.
Caravanner Insurance, Inc.
Aseguradora Maya, S.A. de C.V.
Associated Insurance Agency
Bankers Atlantic Reinsurance Company
Bankers American Life Assurance Company
Bankers Insurance Company, Ltd.
Bankers Insurance Group Mgmt. (IOM) Ltd.
Bankers Insurance Service Company, Ltd.
Caribbean American Property Insurance Co.
Caribbean American Insurance Agency Company
Federal Warranty Service Corporation
Federal Warranty Service Corporation (Canada)
Financial Exchange, Inc.
Attorney-in-Fact for
Financial Insurance Exchange
Green Streak Incorporated
Guardian Investment Services, Inc.
H&D Graphics, Inc.
National Insurance Agency
Roadgard Motor Club, Inc,.
Sureway, Inc.
Guardian Travel, Inc.
Voyager Group, Inc.
Voyager American Insurance Company, Ltd.
Voyager Indemnity Insurance Company
Voyager Service Programs, Inc.
Voyager Service Warranties, Inc.
Voyager Life and Health Insurance Company
Voyager Life Insurance Company
Voyager Property & Casualty Insurance Company
ownership is 100% unless otherwise noted.
<PAGE> 98
SCHEDULE 3.8
None.
<PAGE> 99
SCHEDULE 3.15
Environmental Matters
None.
<PAGE> 100
SCHEDULE 3.16
Certain Restrictions
None.
<PAGE> 1
EXHIBIT 10(e)
CORPORATE COMMERCIAL PAPER MASTER NOTE
December 1, 1995
----------------------------------
(Date of Issuance)
American Bankers Insurance Group ("Issuer"), for value received, hereby
promises to pay to Cede & Co., as nominee of The Depository Trust Company, or
to registered assigns: (i) the principal amount, together with unpaid accrued
interest thereon, if any, on the maturity date of each obligation identified on
the records of Issuer (the "Underlying Records") as being evidenced by this
Master Note, which Underlying Records are maintained by Chemical Bank ("Paying
Agent"); (ii) interest on the principal amount of each such obligation that is
payable in installments, if any, on the due date of each installment, as
specified on the Underlying Records; and (iii) the principal amount of each such
obligation that is payable in installments, if any, on the due date of each
installment, as specified on the Underlying Records. Interest shall be
calculated at the rate and according to the calculation convention specified on
the Underlying Records. Payments shall be made by wire transfer to the
registered owner from Paying Agent without the necessity of presentation and
surrender of this Master Note.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS MASTER NOTE
SET FORTH ON THE REVERSE HEREOF.
This Master Note is a valid and binding obligation of Issuer. Not Valid
Unless Countersigned for Authentication by Paying Agent.
/s/ Chemical Bank American Bankers Insurance Group
------------------------------ -----------------------------------
(Paying Agent) (Issuer)
By: /s/ Floyd Denison
------------------------------ -----------------------------------
(Authorized Countersignature) (Authorized Signature)
Floyd Denison, Exec. Vice President
-----------------------------------
(Guarantor)
By:
--------------------------------
(Authorized Signature)
8
<PAGE> 2
ISSUANCE AND PAYING AGENT AGREEMENT
(FOR COMMERCIAL PAPER)
AGREEMENT dated as of 21st day of November 1995 by and between American
Bankers Insurance Group (the "Corporation") and CHEMICAL BANK ("Chemical").
WHEREAS, the Corporation has authorized the establishment of a
commercial paper note program pursuant to which the Corporation proposes from
time to time to issue its short term commercial paper notes (having maturities
of 270 days or less) (the "Notes"); and
WHEREAS, the Corporation wishes to designate Chemical as depository for
the safekeeping of the Notes and agent with respect to the issuance, delivery
and payment of the Notes.
NOW THEREFORE, the parties hereto agree as follows:
1. Appointment. The Corporation hereby designates and appoints
Chemical as depository for the safekeeping of the Notes and agent with respect
to the issuance, delivery and payment of the Notes.
2. Authorized Officers. Attached hereto as Exhibit A is a
certified copy of a duly adopted corporate resolution from the Board of
Directors of the Corporation and a certificate of incumbency with specimen
signatures attached marked Exhibit B hereto, of those officers of the
Corporation authorized to take such action with respect to the Notes as is
provided herein (each such officer hereinafter referred to as an "Authorized
Officer"). Also attached and marked as Exhibit C is the form of the Note.
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<PAGE> 3
3. Certificated Notes. (a) The Corporation will forward or cause to
be forwarded to Chemical from time to time a supply of certificated Notes,
serially numbered, with the order party, amount, date of issuance and maturity
date left blank. Each certificated Note will have been presigned by one or more
manual or facsimile signatures of Authorized Officers on behalf of the
Corporation as authorized by the resolution. These certificated Notes shall be
accompanied by two copies of a transmittal letter. When the certificated Notes
are delivered to Chemical, Chemical will inspect and count them. If the
certificated Notes meet Chemical's specifications and conform in number to the
transmittal letter, Chemical shall acknowledge receipt by having one of its
officers or employees designated for that purpose sign in the space provided
and, as hereinafter provided, return a copy of such transmittal letter to the
Corporation or such other party delivering the certificated Notes to Chemical.
(b) Chemical, upon receipt of instructions given as
hereinafter provided, will withdraw the necessary certificated Notes from
safekeeping and, in accordance with such instructions, will:
(1) complete each certificated Note as to the amount
(including interest, if Notes are interest bearing),
date of issue, and maturity date;
(2) countersign each certificated Note (by at least one
officer or employee designated for that purpose); and
(3) deliver each certificated Note as instructed.
All certificated Notes will be issued to the order of "Bearer" unless
an order party is provided in the Corporation's instructions to
Chemical.
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<PAGE> 4
(c) Each of the certificated Notes shall be countersigned for
authentication by such officers or employees of Chemical as Chemical may from
time to time designate. Should any certificated Notes have been countersigned
by one of Chemical's authorized officers or employees, and said officer or
employee not be designated at the time said certificated Note is to be paid,
Chemical is authorized to pay the certificated Note notwithstanding that the
authority of said officer or employee has been terminated between the time of
authentication and the time of payment.
(d) When Chemical is instructed to deliver a certificated Note
against payment, it will be understood to mean delivery against a receipt.
Pursuant to the customary commercial practice prevailing in the commercial paper
market, the delivery and receipt of payment are not completed simultaneously.
Therefore, Chemical will deliver the certificated Note(s) to the office of the
purchaser or the designated consignee for the account of the purchaser (provided
such office is located in the Borough of Manhattan in the City of New York below
Chambers Street) and take back the purchaser's or the consignee's receipt signed
or stamped acknowledging receipt for the delivery. Later the same day and after
the purchaser or the consignee has verified the delivery against its contracts,
payment by such purchaser or consignee is then effected by wire transfer of
funds to Chemical's account at the Federal Reserve Bank of New York. Pursuant
to customary commercial practice, the Corporation shall bear any risk of
non-payment by a purchaser to whom or for whose account a certificated Note is
delivered.
(e) All spoiled or voided certificated Notes will be cancelled
and returned to the Corporation against a signed receipt.
4. Instructions. (a) Chemical is authorized to act with respect
to the Notes and to other duties provided for herein upon instructions it may
receive from an Authorized Officer of the Corporation or by any employee,
commercial paper dealer or other agent designated by the Corporation in a letter
signed by one of the Authorized Officers. These instructions may be in written
form
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<PAGE> 5
(including instructions given by telecopier, through CPMS (hereinafter defined)
or through a CPU to CPU link between Chemical and selected commercial paper
dealers) or may be given orally by telephone except where this Agreement
specifically provides for written instructions.
(b) Should the Corporation or its designated agent use
Chemical's Commercial Paper Management Service ("CPMS") or a CPU to CPU link
with Chemical for the transmission to Chemical of the Corporation's instructions
for the issuance of Notes, the Corporation understands that such transmission
shall effect automated preparation of the Notes for issuance and shall be
equivalent to the giving of a duly authorized written and signed instruction
which Chemical may act upon without liability.
5. Book Entry Notes. (a) Should the Corporation elect to
make its commercial paper program eligible for the book entry commercial paper
program of The Depository Trust Company ("DTC"), Chemical may be instructed to
issue book entry Notes through DTC instead of, or in addition to, certificated
Notes as hereinbefore provided. Chemical is authorized and directed to issue
and settle through DTC book entry Notes in accordance with the procedures
established by DTC and Chemical for such Notes, and all references in this
Agreement to "Notes" shall apply to and shall include any book entry Notes
issued hereunder by the Corporation, except to the extent that DTC's and
Chemical's procedures for the issuance and payment of book entry Notes differs
from the procedures described herein for certificated Notes.
(b) In accordance with DTC's book entry commercial paper
program, Chemical shall obtain from the CUSIP Service Bureau a written list of
CUSIP numbers for the book entry Notes that will be issued through DTC, and
Chemical shall deliver such list to DTC. Chemical shall instruct the CUSIP
Service Bureau to bill the Corporation for the fee or fees payable to the CUSIP
Service Bureau for the list of CUSIP numbers for book entry Notes, and Chemical
will include such fees in its billing to the Corporation for services provided
herein. The CUSIP numbers, as required by DTC's commercial paper program will
be assigned to the Corporation's book entry Notes upon issuance and
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<PAGE> 6
used to identify the Corporation's outstanding book entry Notes in DTC's system.
(c) Whenever the Corporation's Note program becomes eligible
for DTC's book entry commercial paper program, Chemical shall commence executing
all Note issuance instructions from the Corporation by issuing and delivering
only book entry Notes through DTC, except where Chemical has been specifically
instructed by the Corporation to complete and deliver one or more certificated
Notes.
(d) Should the Corporation agree with a book entry Note-holder
to prepay such holder's book entry Note(s) on deposit with DTC prior to their
scheduled maturity, the Corporation shall make arrangements with the holder and
Chemical for the delivery through the DTC system of such Note(s) by the DTC
participant holding the Note(s) to Chemical's designated account at DTC for
payment.
(e) In the event the Corporation for any reason shall
discontinue its participation in DTC's book entry commercial paper program the
Corporation and Chemical shall cooperate in taking appropriate action,
including, if necessary, making one or more certificated Notes available to any
DTC participant having book entry Notes credited to its DTC account.
Discontinuance of the Corporation's participation in DTC's book entry program
with respect to the Notes shall not constitute notice of termination of
Chemical's duties as issuing and paying agent for certificated Notes under this
Agreement.
6. Proceeds of Sale of Notes. Funds received by Chemical in
payment for Notes on each settlement date shall be credited to the Corporation's
account number 144-056329 at Chemical (or to such other account of the
Corporation on Chemical's books as the Corporation and Chemical may agree) (the
"Account"). If Chemical, in its sole discretion, permits the Corporation to
have use of the funds payable on the Notes issued prior to Chemical having
collected from purchasers the proceeds of
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<PAGE> 7
sale of the Notes, it is understood that such use of funds by the Corporation
shall constitute an advance to be promptly repaid to Chemical from the proceeds
of sale of the Notes. If the amount of the advance is not repaid in full on the
same day as it is used, the unpaid balance of such advance shall be repaid by
the Corporation to Chemical on the next business day together with interest
thereon (computed on the basis of the actual number of days elapsed in a year of
360 days) at Chemical's prime lending rate (the "Prime Rate") in effect from
time to time from and including the date of the advance to the date of
repayment, and if another rate has been agreed to with Chemical such other rate
shall be applied to such advance.
7. Payment of Notes. (a) The Corporation shall provide Chemical
with immediately available funds sufficient to pay the principal, and interest
if any, due on maturing Notes by 2:30 p.m. (New York time) on the maturity date
for such Notes. If by such time Chemical has not received such funding or if
the Corporation has not made other arrangements to the satisfaction of Chemical
for the payment of such Notes Chemical may without liability to the Corporation
refuse to settle and pay for such Notes.
(b) Should Chemical, at its sole discretion, advance funds for
the Corporation's account in payment of any Notes payable at maturity to
purchasers and, if payment is not received by Chemical either from the sale of
new Notes, or directly from the Corporation, on the same day as payment is made
by Chemical to purchasers, the Corporation shall repay the amount of such
advance to Chemical on the next business day together with interest thereon
(computed on the basis of the actual number of days elapsed in a year of 360
days) at the Prime Rate in effect from time to time, from and including the date
of any such advance to the date of repayment by the Corporation, and if another
rate has been agreed to with Chemical such other rate shall be applied to such
advance.
(c) No prior action or course of dealing on the part of
Chemical with respect to the payment of Notes shall be used by or give rise to
any claim or action by the Corporation against
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<PAGE> 8
Chemical for Chemical's refusal to pay or settle for Notes the Corporation
has not timely funded as provided for herein.
8. Representations and Warranties. (a) The Corporation represents
and warrants that it has the right, capacity and authority: (i) to enter into
this Agreement; (ii) if its Notes become eligible for deposit as book-entry
only in DTC's program, to issue its Notes in book entry form through DTC; and
(iii) to comply with all of its obligations and duties under this Agreement.
The Corporation further represents and agrees that each Note issued and
distributed upon its instruction as provided for herein shall constitute the
Corporation's representation and warranty that such Note is a legal, valid and
binding obligation of the Corporation, and that such Note is being issued in a
transaction which is exempt from registration under the Securities Act of 1933,
as amended.
(b) Chemical represents and warrants that it has the right,
capacity and authority to be an issuing and paying agent for the Corporation's
Notes and that Chemical can perform issuance and paying agency activities
provided for herein for such Notes.
9. Liability and Indemnity. Neither Chemical nor any of its
officers, employees or agents shall be liable for any action or omission to act
taken or made in connection with this Agreement, except for Chemical's or their
gross negligence or wilful misconduct. The Corporation agrees to indemnify and
hold harmless Chemical, its officers, employees and agents from and against any
and all losses, liabilities, claims, penalties, charges and expenses (including
counsel fees) suffered or incurred by or asserted or assessed against Chemical
or any of them arising out of Chemical or any of them acting as the
Corporation's agent for the Notes under this Agreement, except for such loss,
liability claim, penalty, charge or expense resulting from Chemical's or their
gross negligence or wilful misconduct. This indemnity includes, but is not
limited to, any action taken or omitted upon, electronic, written or telephone
instructions received or purported to have been received from any authorized
person for the Corporation. ANYTHING IN THIS AGREEMENT TO THE CONTRARY
NOTWITHSTANDING,
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<PAGE> 9
IN NO EVENT SHALL CHEMICAL, ITS OFFICERS, EMPLOYEES AND AGENTS BE LIABLE UNDER
THIS AGREEMENT TO THE CORPORATION OR ANY THIRD PARTY FOR INDIRECT, SPECIAL,
PUNITIVE, INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGE OF ANY KIND WHATSOEVER,
INCLUDING LOST PROFITS WHETHER OR NOT THE LIKELIHOOD OF SUCH LOSS OR DAMAGE WAS
KNOWN TO CHEMICAL, OR ANY OF THEM.
10. Termination of Agreement. Either the Corporation or Chemical
may terminate this Agreement on not less than ten (10) days written notice to
the other. With respect to any Notes outstanding at the time of termination of
this Agreement, this Agreement shall remain in effect until all such Notes are
paid or other arrangements for the payment of such Notes have been provided to
the satisfaction of the Corporation and Chemical.
11. Use of CPMS. The following additional terms shall be
applicable hereunder when the Corporation uses CPMS.
(a) The Corporation will use CPMS (i) to initiate Note
issuance instructions (ii) to receive reports concerning Note issuances, (iii)
to receive electronic messages from Chemical, and (iv) for other incidental
services Chemical may make available from time to time through CPMS.
(b) Chemical will deliver or disclose confidential security
procedures materials for accessing CPMS to an Authorized Officer or to any
employee or agent designated as authorized by an Authorized Officer or the
Corporation. The Corporation shall be responsible for any unauthorized use or
disclosure of the security materials delivered to it. All access through CPMS
is subject to verification by Chemical pursuant to the security procedures.
Chemical will allow access to CPMS reports and act upon instructions received
through the service if verified pursuant to the security procedures.
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<PAGE> 10
(c) If CPMS is unavailable for any reason the Chemical
customer service representative should be notified, and until CPMS is made
available for use the Corporation should follow the alternate procedures for
issuance of the Corporation's Notes as provided for herein and in the CPMS
service materials. The Corporation should not issue and Chemical will not act
upon cancellation or override instruction transmitted through CPMS.
(d) The liability of the Corporation and Chemical for any act
or omission in connection with CPMS shall be determined or limited in
accordance with the terms of this Agreement.
12. Corporation Fees. Chemical shall be entitled to such
compensation as may be agreed upon with the Corporation for all services
rendered hereunder, and the Corporation agrees to pay such compensation within
30 days from the date of Chemical's invoice.
13. Reliance. (a) Chemical shall not incur any liability to the
Corporation for acting upon instructions which Chemical believes in good faith
to have been properly given.
(b) Chemical may act pursuant to instructions of the
Corporation's Authorized Officers, designated employees and agents, until
Chemical has been notified by the Corporation in writing signed by an
Authorized Officer that the authority of any such person or entity has been
terminated or withdrawn. If while Notes signed by any such person are in
Chemical's possession or have been delivered, then with respect to these Notes
the authority of any such person shall be deemed to remain in full force and
effect.
14. Amendments. No amendment, modification or wavier of any
provision of this Agreement shall be effective unless the same shall be in
writing and signed by the Corporation and Chemical. Any such amendment,
modification or wavier shall be effective only in the specific instance and for
the purpose for which given.
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<PAGE> 11
15. Governing Law. This Agreement shall be governed by the laws of
the State of New York without regard to its principles of conflict of laws.
16. Assignment. This Agreement may not be assigned by either party
without the express written consent of the other party.
17. Merger or Consolidation. Any corporation or association into
which Chemical may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its commercial paper agency
business as a whole or substantially as a whole, or any corporation or
association resulting from any such conversion, sale, merger, consolidation or
transfer to which it is a party, shall be and become successor to Chemical
hereunder vested with all of the rights, powers, trusts, duties and obligations
of Chemical hereunder, without the execution or filing of any instrument or any
further act.
18. Survival. Chemical's rights to compensation, reimbursement and
indemnification shall survive the termination of this Agreement.
19. Advice of Counsel. Chemical may consult with counsel
(including Chemical's in-house counsel) and the advice of such counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith in reliance thereon.
20. Ownership of Notes. Chemical, in its individual or any other
capacity, may become the owner or pledgee of Notes.
21. Recording. Chemical is authorized but not obligated to record
electronically and to retain telephone conversations between the Corporation's
officers, employees and agents and Chemical.
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<PAGE> 12
22. Business Day. Whenever any payment to be made hereunder shall
be due on a day which is not a business day for Chemical, then such payment
shall be made on the next succeeding business day.
23. Force Majeure. Chemical shall not be responsible for liability,
loss or damage of any kind resulting from any delay in the performance of or
failure to perform responsibilities hereunder which is caused by an act of God,
any catastrophe, electrical, computer or mechanical failure, delay or failure
to act of any carrier, correspondent or agent or, without limiting the
generality of the foregoing, any other cause beyond Chemical's direct control.
24. Rules and Procedures. This Agreement shall be subject to such
administrative rules as Chemical may establish and disseminate from time to
time governing its commercial paper services such as time limits by which
issuance instructions and requests for same day funds transfers must be
received, specific telephone numbers for various types of transfer requests and
other rules.
25. Notices. All notices, confirmations and other communication
required or permitted shall be in writing (except as otherwise provided
herein), and all other documents required to be furnished under the terms and
provisions hereof, shall be sent by first-class mail (postage prepaid), by
telecopier or delivered to the addresses specified below:
If to Corporation:
American Bankers Insurance Group
11222 Quail Roost Drive
Miami, Fla. 33157
Attn: Floyd Denison/Manola Gutierrez
Telephone No.: (305) 253-2244
Telecopier No.: (305) 252-7068
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<PAGE> 13
If to Chemical:
Chemical Bank-
ATT: Money Market Operations
450 West 33rd Street - 8th Floor
Telephone No.: (212) 613-7934
Telecopier No.: (212) 613-7904
or to such other address as the same may designate from time to time by
notice duly given to the other party hereto. Each party will advise
the other party from time to time of their current telephone and
telecopier numbers.
26. Entire Agreement. The parties hereto acknowledge that each has
read this Agreement, understands it, and agrees to be bound by its terms. The
parties further agree that this Agreement and any modifications made pursuant
to it constitute the complete and exclusive expression of the terms of this
Agreement between the parties, and supersedes all prior or contemporaneous
proposals, oral or written, understandings, representations, conditions,
warranties, covenants, and all other communications between the parties
relating to the subject matter of this Agreement.
27. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and such counterparts together shall
constitute but one instrument.
28. Headings. The headings in this Agreement are for purposes of
reference only and shall not in any way limit or otherwise effect the meaning
or interpretation of any of the terms hereof.
Accepted and agreed to as of the date first above written.
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<PAGE> 14
By: Manola Gutierrez
---------------------------------
Title: Assistant Secretary, American
Bankers Insurance Group
------------------------------
CHEMICAL BANK
By:
---------------------------------
Title:
------------------------------
13
<PAGE> 15
3(a)(3) COMMERCIAL PAPER AGREEMENT
This will confirm our arrangement whereby CS First Boston Corporation
("CS First Boston") will act as dealer in sales of commercial paper of American
Bankers Insurance Group, Inc., a Florida corporation (the "Company"). In that
connection, CS First Boston may purchase such commercial paper from the Company
as principal.
It is understood that the commercial paper will have a maturity at the
time of issuance not to exceed nine months (exclusive of days of grace) and be
denominated in notes (either in separate physical form or in global form
("book-entry notes") held through the facilities of The Depository Trust
Company ("DTC")) not less than $100,000 each. Book-entry Notes will be
represented by master notes registered in the name of a nominee of DTC and
recorded in the book-entry system maintained by DTC. CS First Boston
understands that, in connection with any issuance and sale of commercial paper
by the Company, the Company will obtain the prior advice of its counsel that
all action required by any regulatory body or bodies has been duly taken.
The Company has authorized the use of a Commercial Paper Memorandum
("Memorandum") prepared by CS First Boston on the basis of information
furnished by the Company. Such Memorandum may be used in connection with the
sale of the Company's commercial paper until the Company advises CS First
Boston that an updated or revised Memorandum in a form approved by the Company
should be substituted. The Company will promptly advise CS First Boston of any
change in its ratings, its financial condition or the results of its operations
which may make such updating or revision advisable, in which case the Company
will cooperate in preparing such updated or revised Memorandum.
With respect to the original Memorandum, and each updated or revised
Memorandum approved by the Company, the Company will indemnify CS First Boston
and hold CS First Boston harmless against any loss, claim, liability or expense
(including reasonable costs of defense) arising out of or based upon any
allegation that such Memorandum includes an untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The foregoing indemnity shall survive any termination of this
Agreement.
Each acceptance by the Company of an offer to purchase commercial paper
notes pursuant to this Letter Agreement shall be deemed to constitute a
representation and warranty to CS First Boston that (a) such notes, when
issued, will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, (b) the Memorandum (including any
documents incorporated therein by reference) at such time does not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, (c) the Company is not an open-end
investment company, unit investment trust or face-amount certificate company
that is or is required to be registered under Section 8 of the Investment
Company Act of 1940, as amended, and (d) the Notes will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Act"), by reason of Section 3(a)(3) thereof. The representations, warranties
and understandings set forth in this paragraph and in the second paragraph of
this Agreement shall survive any termination of this Agreement.
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<PAGE> 16
No commercial paper shall be issued until the Company and CS First
Boston have received an opinion of Jorden Burt Berenson & Johnson LLP to the
effect that the commercial paper will be exempt from the registration
requirements of the Act by reason of Section 3(a)(3) thereunder and
qualification of an indenture in respect thereof under the Trust Indenture Act
of 1939, as amended, is not required, and covering such additional matters as
CS First Boston may reasonably request.
The Company agrees promptly from time to time to take such action as CS
First Boston may reasonably request to qualify the commercial paper for
offering and sale under the securities laws of such jurisdictions as CS First
Boston may designate and to comply with such laws as long as may be necessary
for the offer and sale of commercial paper as contemplated by this Agreement;
provided, however, that the Company shall not be required in connection
therewith to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction. The Company agrees to reimburse CS
First Boston for all of its costs and expenses (including reasonable attorneys'
fees) incurred in connection with the foregoing.
In addition, the Company agrees to furnish promptly to CS First Boston
(mailed directly to the attention of its Short-Term Finance Department) the
following information:
1. All reports filed by the Company and its parent (if applicable) with the
Securities and Exchange Commission pursuant to Section 13(a) of the
Exchange Act (or reasonably comparable information if the Company and
its parent (if applicable) is not subject to such filing requirements;
2. All reports mailed to the Company's public stockholders (if any);
3. All information generally provided to securities analysts; and
4. Copies of reports submitted by the Company to the rating agencies
showing the amounts of commercial paper outstanding and the bank lines
and other liquidity sources supporting such commercial paper.
The information described above shall be in addition to information
provided to other individuals at CS First Boston or its affiliates. The
Company also agrees to provide such other information as CS First Boston's
Short-Term Finance Department may reasonably request.
The Company will notify CS First Boston promptly, to the attention of its
Short-Term Finance Department, of any change (or any advice from a rating
agency of a contemplated change) in any of its debt ratings, any change in the
aggregate size of its commercial paper program and any other development in its
affairs or in the industry or industries in which it is engaged which has or
may be expected to have a material impact on the results of its operations, its
financial condition or the marketability of its commercial paper.
This Agreement shall be governed by and construed in accordance with the
law of the State of New York.
All communications and notices pursuant to this Agreement shall be in
writing or confirmed in writing and shall be addressed (i) if to the Company,
to the Company at American Bankers Insurance Group, Inc., 11222 Quail Roost
Drive, Miami, FL 33157-6596, Attention: Floyd G. Denison, or at such other
address as may from time to time be designated by notice by the Company in
writing; and (ii) if to CS First Boston, to CS First Boston at Park Avenue
Plaza, New York, New York 10055, Attention: Short-Term Finance Department, or
at such other address as many from time to time be designated by notice by CS
First Boston in writing.
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<PAGE> 17
This Agreement may be terminated by the Company or by CS First Boston
upon one business day's written notice to the other party hereto; provided,
however, that any such termination shall not affect any provisions that this
Agreement provides shall survive any termination, and such provisions shall
continue in effect following any such termination.
AMERICAN BANKERS INSURANCE GROUP, INC.
By:
---------------------------------
Title: Assistant Secretary
------------------------------
Date:
------------------------------
CS FIRST BOSTON CORPORATION
By:
---------------------------------
Title:
------------------------------
Date:
------------------------------
16
<PAGE> 1
EXHIBIT 10(v)
AMERICAN BANKERS INSURANCE GROUP
EXECUTIVE COMPENSATION AGREEMENT
This agreement is hereby entered into between American Bankers Insurance Group,
Inc., a corporation organized under the laws of Florida (hereinafter the
"Corporation") and (hereinafter "Employee").
In consideration of the mutual covenants set forth herein, the parties to this
contract agree as follows:
1. Definitions
As used herein, the term:
(a) "Merged" or "Sold" shall mean the consummation of
any transaction or series of transactions in which a person
or group of related or affiliated persons obtains ownership
of stock of the Corporation sufficient to exercise control
over the operations of the Corporation and such person or
group does not presently have the ability to exercise such
control. Such a merger or sale shall be deemed to have taken
place if:
(i) a tender offer or series of offers has been
made to and accepted by 50 percent or more of the
Corporation's stockholders; or
(ii) a transfer of stock has occurred which is
sufficient to allow the new purchaser (or group of
related or affiliated purchasers) to elect a majority
of directors other those proposed by the management of
the Corporation.
(ii) a majority of the Board of Directors of the
Corporation is replaced in any one year; or
(iv) a merger or reorganization is consummated
which results in existing shareholders of the
Corporation owning less than 50 percent of the voting
stock of the corporation acquiring the Corporation (or,
if the Corporation is the acquiring corporation,
results in existing shareholders of the Corporation
owning less than 50 percent of the voting stock of the
Corporation); or
(v) more than 50 percent of the assets of the
Corporation are sold.
While a merger or sale shall be deemed to have taken place in the circumstances
described in (i) through (v) above, these circumstances shall not be construed
to be exclusive but rather as examples of circumstances described in the first
sentence of this subparagraph 1. (a).
<PAGE> 2
(b) "Current Annual Salary" shall mean the total amount of
salary (excluding any bonus or deferred compensation) to
which Employee was entitled during the last twelve months
prior to the Triggering Event, as defined in paragraph 3. If
Employee was not employed full-time by the Corporation for
the full twelve months before the Triggering Event, then his
Current Annual Salary shall be the total amount of salary to
which Employee was entitled in the last consecutive or
nonconsecutive twelve months of full time employment by the
Corporation prior to the Triggering Event.
(c) "Retirement" shall mean termination of employment
with the Corporation at or after attainment of age 65.
(d) "Termination for convenience of the Corporation" shall
mean termination of employment at the behest of the
Corporation, whether by dismissal or by requested
resignation, but shall not include termination for cause or
an unsolicited voluntary resignation. A decrease in
Employee's salary for any year to a level which is less than
eighty (80) percent of his salary for any prior year shall,
if Employee resigns after such decrease, be deemed a
termination for the convenience of the Corporation.
(e) "Termination for cause" shall, as defined herein and
solely for purposes of this agreement, mean termination of
employment for reasons of abuse of alcohol or drugs, or the
like; or such illness, disability, or personal family
problems as preclude Employee from rendering satisfactory
services for a period of three months or more.
(f) "Termination for malfeasance" shall mean termination of
employment for reasons of fraud, misappropriation,
embezzlement, or other malfeasance.
(g) "Net Portfolio Rate" of the Corporation shall mean the
rate of return on new investments of American Bankers Life,
Assurance Company for the year in which the Triggering Event
with respect to the Employee occurs, net of all federal,
state or local taxes applicable to income from such
investments.
(h) "He" or "his" shall include "she" or "her," respectively.
2. Obligations of Employee
Employee agrees to continue to serve the Corporation in the capacity held
by him on the date of this agreement, or in such capacity as may from
time to time be mutually agreed, until the first occurrence of a
Triggering Event, devoting his full time and best efforts to the needs
and interests of the Corporation.
<PAGE> 3
3. Obligations of Corporation
Upon the first occurrence of any of the following conditions (hereinafter
called "Triggering Events", the Corporation agrees to pay the amount
specified in this paragraph (hereinafter called the "Designated Amount"),
in addition to any other compensation otherwise owing, in accordance with
the provisions of paragraphs 4 and 5 hereof:
(a) If, while the Employee is employed by the Corporation, the
Corporation is Merged or Sold, the Designated Amount shall be an
amount equal to twice the Employee's Current Annual Salary. In any
such merger or sale, the Corporation agrees to ensure that the
surviving company or the purchaser assumes the obligation to pay
such amount to the extent that it has not otherwise been paid.
(b) If the Employee dies while still employed by the Corporation,
the Designated Amount (to be paid to his Designated Beneficiary
described in paragraph 8 below) shall be an amount equal to one and
one-half the Employee's Current Annual Salary.
(c) Upon the Retirement of the Employee, the Designated Amount
shall be an amount equal to the Employee's Current Annual Salary.
(d) If the Employee is terminated for the convenience of the
Corporation but not for cause, the Designated Amount shall be an
amount equal to the Employee's Current Annual Salary.
(e) If the Employee is terminated for cause, the Designated Amount
shall be an amount equal to the Employee's Current Annual Salary.
(f) If the Employee is terminated for malfeasance or voluntarily
terminates employment in circumstances other than those described
in subparagraphs l(c) or (d), the Designated Amount shall be zero.
4. Method of Payment
The Designated Amount shall, upon the occurrence of a Triggering Event,
be credited to an account on the books of the Corporation. Such account
shall be for bookkeeping purposes only, and neither Employee nor his
Designated Beneficiary shall have any right, title, interest or priority
therein. Such account shall also be credited not less than annually with
interest on the unpaid amount credited thereto at the Corporation's Net
Portfolio Rate. Except as provided below, the amounts credited to such
account shall be paid to Employee ore upon his death to his Designated
Beneficiary, in monthly installments. Such installments, the
precise amounts of which shall be determined in accordance with this
agreement by the Planning and Compensation Committee of the Board of
Directors of the Corporation (hereinafter "the Committee"), shall be as
nearly
<PAGE> 4
equal in amount as is feasible, and shall commence on February 1
of the calendar year immediately following the year in which the
Triggering Event occurs.
At the time of entering into this agreement, Employee may, by executing
the election contained in paragraph 11 hereof, elect to have any amount
to which he or his Designated Beneficiary may become entitled under this
agreement paid as a lump sum (rather than in
monthly installments) either as soon as practical after the occurrence
of the Triggering Event or on February 1 of the calendar year
immediately following the year in which the Triggering Event occurs.
If at any time, the Internal Revenue Service determines that Employee or
his Designated Beneficiary are subject to federal income tax an unpaid
amounts to which Employee or his Designated Beneficiary have become
entitled under this agreement, and Employee or his Designated Beneficiary
agree to such determination, then all such unpaid amounts shall be paid
forthwith to Employee or his Designated Beneficiary.
5. Right to Request Modification of Method of Payment
Employee, or in the event of his death his Designated Beneficiary, may at
any time request that the Corporation alter the method of payment
applicable under paragraph 4 of this agreement with respect to the
payment of any amounts not yet due. Any such request should be in
writing, addressed to the Committee, and should specify the alteration in
the otherwise applicable method of payment requested. The Committee
shall have absolute discretion to determine whether to grant or deny any
such request.
6. Source of Payment
All amounts paid hereunder shall be paid in cash from the general funds
of the Corporation and no special or separate fund shall be established
and no segregation of assets shall be made to assure the payment of such
amounts, nor shall the existence of any bookkeeping account with respect
to such amounts be construed to imply the existence of any such separate
fund or segregation of assets. Employee and his Designated Beneficiary
shall have no right, title, interest, or priority whatever in or to any
investments which the Corporation may make to aid it in meeting its
obligations hereunder. Nothing contained in this agreement, and no
action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the
Corporation and Employee or any other person. To time extent that any
person acquires a right to receive payments from the Company, such right
shall be no greater than the right of an unsecured creditor.
7. Employment by Subsidiary
For purposes of this agreement, employment with any corporation or other
entity more than one-half of the ownership interest in which is held by
the Corporation shall be treated as employment with the Corporation.
<PAGE> 5
8. Designated Beneficiary
(a) Employee shall designate in a written statement delivered to
the Committee the person (or persons), herein referred to as his
Designated Beneficiary, entitled to receive any amounts due under
this agreement in the event of Employee's death. Employee shall
have the right to change his Designated Beneficiary at any time.
(b) Employee may name more than one person as Designated
Beneficiary to share in such proportion as Employee elects.
(c) Employee may name a hierarchy of persons as Designated
Beneficiary, each level becoming entitled to the rights of a
Designated Beneficiary only if all persons on higher levels shall
predecease Employee.
(d) If Employee fails to name a Designated Beneficiary or if all
such persons predecease Employee, then upon the death of the
Employee any amounts payable under this agreement shall be paid to
Employee's estate in a lump sum.
(e) If the Designated Beneficiary dies while receiving payments
under an annuity payout option, then such payments shall continue
to the next living level of the hierarchy described in subparagraph
(c) of this paragraph, if any. If no such person or persons are
alive, then payments shall continue to any person the Designated
Beneficiary may have designated while alive. If none exists, then
the balance of the account shall be paid to the estate of the
Designated Beneficiary.
9. This agreement is a personal agreement, and the rights of Employee or his
Designated Beneficiary hereunder may not be sold, transferred, assigned,
pledged, hypothecated, or otherwise encumbered. This agreement shall be
binding on and inure to the benefit of the successors and assigns of the
Corporation. During Employee's lifetime the parties hereto by mutual
agreement may amend, modify, or rescind this agreement without the consent
of any other person.
10. If Employee voluntarily terminates his employment with the Corporation in
circumstances other than those described in paragraph 1.(d) before the
occurrence of a Triggering Event, all his rights hereunder shall be
forfeited.
11. [Optional Election] I hereby elect in accordance with paragraph 4 of this
agreement to have any amount to which I may become entitled under this
agreement paid to me or to any Designated Beneficiary as a lump sum.
<PAGE> 6
as soon as feasible after the occurrence of the
- ------------------- Triggering Event or
(Employee initials)
on February I of the calendar year immediately
- ------------------- following the year in which the Triggering
(Employee initials) Event occurs.
In witness whereof, the parties hereto have executed
this agreement on this day of , Nineteen
Hundred and Eighty-eight.
American Bankers Insurance Group, Inc.
By:
---------------------------------------------
(Title)
- ------------------------------------------------
Employee
<PAGE> 1
EXHIBIT 10(w)
AMENDMENT TO 1991 STOCK OPTION/RESTRICTED STOCK AWARD PLAN
WHEREAS, that with respect to the American Bankers Insurance Group, Inc. 1991
Stock Option/Restricted Stock Award Plan, as amended May 25, 1993 (the "Plan"),
employees entitled to receive Restricted Shares, as defined therein, shall be
given the right, during a limited period of time, to defer the vesting of such
Restricted Shares under each Option granted under the Plan for an additional
one, two or three year period, at the employee's election; and
WHEREAS, Section XIV of the Plan permits the Committee to amend the Plan
without shareholder approval because the amendments set forth below will not
(a) increase the aggregate number of shares which may be issued in connection
with Options; (b) change the Option exercise price; (c) increase the maximum
period during which Options may be exercised; (d) extend the term of the Plan;
or (e) materially modify the requirements as to eligibility for participation
in the Plan;
NOW, THEREFORE, IT IS HEREBY
RESOLVED, that the definition of "Restricted Period" appearing in
Section II of the Plan is hereby amended to read as follows:
"Restricted Period" means a five-year period from
the date an Option is exercised and Restricted Shares
are issued until the date that the restrictions lapse
and the full ownership rights of the Restricted Shares
are transferred to the Employee, provided, however, in
the case where the Committee has granted the right to
elect a longer Restricted Period of six, seven or
eight years to a grantee and where the grantee has so
elected, the Restricted Period shall be such six,
seven or eight year period.
RESOLVED FURTHER, that Section VII.(e) of the Plan is hereby
amended to read as follows:
(e) Release of Transfer Restrictions During the
Restricted Period in the Events of Death, Long-Term
Disability or Retirement. In the events of Death,
Long-Term Disability, or Retirement of the Employee
during the Restricted Period, the Transfer
Restrictions with respect to the Restricted Shares
shall lapse with respect to 20% of the Restricted
Shares for each year in the Restricted Period
commencing on the first day of the Restricted
<PAGE> 2
Period (i.e., if one of the events occurs during the
second year of the Restricted Period, 40% of the
Restricted Shares shall have no restrictions and the
employee or his or her designated beneficiaries shall
have the right to receive such shares without restrictions);
provided, however, that where the grantee has elected
a Restricted Period other than five years, then with
respect to retirement, the Transfer Restrictions for
the Restricted Shares shall lapse as to 16.67% of the
Restricted Shares if a six year Restricted Period is
elected, 14.29% of the Restricted Shares if a seven
year Restricted Period is elected, or 12.5% of the
Restricted Shares if an eight year Restricted Period
is elected. All remaining Restricted Shares shall be
forfeited.
RESOLVED FURTHER, that the employees listed on Schedule A attached shall
have the right to elect to defer vesting of Restricted Shares under the
Plan for a limited time ending November 17, 1995.
RESOLVED, that the officers of the Company are hereby authorized
to do or cause to be done any and all such further acts or things
and to exercise and deliver any and all such documents and papers
that are necessary or desirable in order to carry into effect the
purposes and intent of the foregoing resolutions.
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Primary:
Weighted average shares outstanding 20,746 20,596 18,670
======== ======== ========
Net income before cumulative effect of
change in accounting $ 72,260 $ 56,544 $ 53,300
Cumulative effect of change in accounting
for income taxes -- -- (1,005)
-------- -------- --------
Net income $ 72,260 $ 56,544 $ 52,295
======== ======== ========
Per share amount:
Net income before cumulative effect of
change in accounting $ 3.48 $ 2.74 $ 2.85
Cumulative effect of change in accounting
for income taxes (.05)
-------- -------- --------
Net income $ 3.48 $ 2.74 $ 2.80
======== ======== ========
Fully diluted:
Weighted average shares outstanding 20,746 20,596 18,670
Assumed conversion of convertible
subordinated debentures and stock options 77 17 647
-------- -------- --------
Total 20,823 20,613 19,317
======== ======== ========
Net income before cumulative effect of
change in accounting $ 72,260 $ 56,544 $ 53,300
Add convertible debenture interest, net of
federal income tax effect 260 470
-------- -------- --------
Total before cumulative effect of
change in accounting 72,520 56,544 53,770
Cumulative effect of change in accounting
for income taxes (1,005)
-------- -------- --------
Total $ 72,520 $ 56,544 $ 52,765
======== ======== ========
Per share amount:
Net income before cumulative effect of
change in accounting $ 3.48 $ 2.74 $ 2.78
Cumulative effect of change in accounting
for income taxes (.05)
-------- -------- --------
Net income $ 3.48 $ 2.74 $ 2.73
======== ======== ========
</TABLE>
E - 3
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OF PERCENT OF VOTING
SIGNIFICANT SUBSIDIARIES INCORPORATION SECURITIES OWNED
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
American Bankers Insurance Company of Florida Florida 100%
American Bankers Life Assurance Company of Florida 100%
Florida
American Reliable Insurance Company Arizona 100%
Bankers American Life Assurance Company New York 100%
Bankers American Reinsurance Company Turks & Caicos 100%
Bankers Insurance Company Limited United Kingdom 100%
Caribbean American Life Assurance Company Puerto Rico 100%
Caribbean American Property Insurance Company Puerto Rico 100%
Voyager Group, Inc. Florida 100%
Voyager Life and Health Insurance Company Georgia 100%
Voyager Life Insurance Company Georgia 100%
</TABLE>
E - 4
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No.33-77564)
and in the Registration Statements on Form S-8 (No. 33-28936, No. 33-40802
and No. 33-82342) of American Bankers Insurance Group, Inc. of our report
dated March 8, 1996 appearing on page 37 of this Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Miami, Florida
March 29, 1996
E - 5
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 793,277
<DEBT-CARRYING-VALUE> 594,277
<DEBT-MARKET-VALUE> 613,749
<EQUITIES> 113,028
<MORTGAGE> 11,793
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,688,410
<CASH> 23,257
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 310,879
<TOTAL-ASSETS> 2,987,734
<POLICY-LOSSES> 275,250
<UNEARNED-PREMIUMS> 1,178,867
<POLICY-OTHER> 404,745
<POLICY-HOLDER-FUNDS> 7,113
<NOTES-PAYABLE> 235,981
0
0
<COMMON> 20,384
<OTHER-SE> 492,613
<TOTAL-LIABILITY-AND-EQUITY> 2,987,734
1,240,713
<INVESTMENT-INCOME> 99,400
<INVESTMENT-GAINS> 721
<OTHER-INCOME> 20,014
<BENEFITS> 1,256,653
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 104,195
<INCOME-TAX> 31,935
<INCOME-CONTINUING> 72,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,260
<EPS-PRIMARY> 3.48
<EPS-DILUTED> 3.48
<RESERVE-OPEN> 137,978
<PROVISION-CURRENT> 269,623
<PROVISION-PRIOR> 332
<PAYMENTS-CURRENT> 173,937
<PAYMENTS-PRIOR> 71,654
<RESERVE-CLOSE> 162,342
<CUMULATIVE-DEFICIENCY> (5,507)
</TABLE>
<PAGE> 1
EXHIBIT 99
Information from Reports furnished to Insurance Regulatory Authorities
for American Bankers Insurance Group, Inc., Domestic Property and Casualty
Subsidiaries.
Note: This Exhibit has been submitted in Paper Format on Form SE.
(pursuant to Rule 311(c) of Regulation S-T)
E - 7
